COLONIAL SHORT-TERM TAX-EXEMPT FUND
COLONIAL INTERMEDIATE TAX-EXEMPT FUND
SEMIANNUAL REPORT
MAY 31, 1996
[GRAPHIC]
NOT FDIC-
INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
COLONIAL SHORT-TERM TAX-EXEMPT FUND
COLONIAL INTERMEDIATE TAX-EXEMPT FUND
DECEMBER 1, 1995 - MAY 31, 1996
INVESTMENT OBJECTIVE: Colonial Short-Term Tax-Exempt Fund seeks as high a level
of current income exempt from federal income tax as is consistent with
relatively low volatility by investing primarily in investment-grade, short-term
municipal securities.
Colonial Intermediate Tax-Exempt Fund seeks as high a level of after-tax total
return as is consistent with moderate volatility, by pursuing current income
exempt from federal income tax and opportunities for appreciation from a
portfolio primarily invested in investment-grade, intermediate-term municipal
bonds.
FUND PERFORMANCE
<TABLE>
<CAPTION>
SHORT-TERM INTERMEDIATE
CLASS A CLASS A CLASS B
<S> <C> <C> <C>
Inception dates 2/1/93 2/1/93 2/1/93
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions declared per share* $0.153 $0.182 $0.156
- -----------------------------------------------------------------------------------------------------------------------------------
SEC yields on 5/31/96** 3.63% 4.65% 4.15%
Taxable-equivalent SEC yields*** 6.01% 7.70% 6.87%
Total returns, assuming reinvestment of
all distributions and no sales charge or
contingent deferred sales charge (CDSC) --
6 months 1.37% (0.11)% (0.44)%
Net asset value per share at 5/31/96 $7.48 $7.66 $7.66
</TABLE>
*A portion of the Fund's income may be subject to the alternative minimum tax.
**The 30-day SEC yields on May 31, 1996, reflect the portfolio's earning power,
net of expenses, expressed as an annualized percentage of the maximum offering
price per share at the end of the period.
***Taxable-equivalent SEC yields are based on the maximum federal income tax
rate of 39.6%. 2
<TABLE>
<CAPTION>
SHORT-TERM TAX-EXEMPT FUND
MATURITY BREAKDOWN
(as of 5/31/96)
- --------------------------------------------------------------------------------
<S> <C>
0-1 year..........................................................25.2%
1-3 years.........................................................66.4%
Cash and equivalents...............................................8.4%
<CAPTION>
INTERMEDIATE TAX-EXEMPT FUND
MATURITY BREAKDOWN
(as of 5/31/96)
- --------------------------------------------------------------------------------
<S> <C>
1-3 years..........................................................1.4%
3-5 years..........................................................6.7%
5-7 years.........................................................25.8%
7-10 years........................................................37.5%
10-15 years.......................................................17.0%
15-20 years........................................................4.3%
20-25 years........................................................1.8%
Cash and equivalents...............................................5.5%
</TABLE>
Because the funds are actively managed, maturity weightings will change.
2
PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
I am pleased to present your Fund's semiannual report for the period ended May
31, 1996. First, however, I would like to extend my thanks to President John A.
McNeice, Jr., who has retired after a career with Colonial that spanned 40
years. We look forward to his continued involvement on the executive committee
of the board of directors at our parent company, Liberty Financial Companies,
Inc.
[PHOTO OF HAROLD W. COGGER]
In my new position, I am directing Colonial's focus on the delivery of superior
investment performance over the long term. To achieve this mission, we will
continue to seek the optimal combination of talented people and effective
investment disciplines.
The receipt of your semiannual report is a good time to reflect on market
conditions and the performance of your Fund during the past 6 months. Falling
interest rates and minimal inflation helped the economy grow at a comfortable
pace throughout 1995 and created a positive environment for fixed income
investments. After a difficult 1994, investors who stayed the course during 1995
were amply rewarded.
While there may be some current market volatility, we expect slow growth and low
inflation to continue. In the following pages you'll find detailed information
on your Fund's performance as well as an in-depth discussion with the portfolio
manager.
With over 12 years of service at Colonial and more than 25 years in the
industry, I am enthusiastic about-- and dedicated to achieving-- Colonial's
mission of providing you with competitive investment returns. In my new role, I
look forward to communicating with you regarding your Colonial investment. We
appreciate the opportunity to help you meet your investment goals.
Respectfully,
/s/ Harold W. Cogger
Harold W. Cogger
President
July 11, 1996
Because market conditions change frequently, there can be no assurance that the
trends described here will continue, come to pass, or affect Fund performance.
3
PORTFOLIO MANAGEMENT REPORT
WILLIAM LORING is vice president of Colonial Management Associates, Inc. and
portfolio manager of the Colonial Short-Term Tax-Exempt Fund, the Colonial
Intermediate Tax-Exempt Fund, and three other Colonial tax-exempt funds.
Q: WHAT WAS YOUR INVESTMENT STRATEGY DURING THE PAST SIX MONTHS?
A: At the beginning of the period, the Funds' maturities were managed to take
advantage of a declining interest rate environment. However, in mid-February,
interest rates reversed direction sharply upwards in response to indications of
stronger than expected economic activity. As a result, we shifted the Funds'
investment strategy mid-way through the period to reflect this change in
economic conditions. We shortened the average maturity to stem potential losses
from further increases in interest rates as well as to recover some of the
ground given up when interest rates changed direction.
Q: WHAT FACTORS CONTRIBUTED TO PERFORMANCE DURING THIS PERIOD?
A: Well, as we've discussed, the reversal in the direction of interest rates
clearly had the biggest effect on performance, although the effect was less
severe than was felt by funds with longer average maturities.
Q: HOW DID THE FUNDS' SIX MONTH PERFORMANCE COMPARE TO THE LEHMAN BROTHERS
MUNICIPAL BOND INDEX?
A: Both Funds outperformed the Lehman Brothers Municipal Bond Index, a
broad-based, unmanaged index that tracks the performance of the municipal bond
market. For Class A shares, based on net asset value, the Short-Term Fund posted
a total return of 1.37% and the Intermediate Fund posted was down 0.11%. The
Lehman Brothers Municipal Bond Index was down 0.58%.
This outperformance is due to the shorter average maturities of the securities
in each Fund's portfolio relative to the Index. Our strategic shift mid-way
through the period to shorten the average maturities of the Funds also enhanced
performance.
Q: WHAT IS YOUR OUTLOOK FOR THE TAX-EXEMPT BOND MARKET?
A: A number of recent economic releases indicate stronger economic growth than
we previously expected, instilling fears of inflation, which is negative for
bond prices. We believe that the tax-exempt bond market may continue to
experience lower prices and higher yields in the months ahead. Therefore, the
Funds are positioned defensively. Tax reform may still present a source of some
concern, although the market has already felt most of the negative effect of
proposed changes. As a result, we believe municipal bonds are still slightly
undervalued and may present a buying opportunity.
4
COLONIAL SHORT-TERM TAX-EXEMPT FUND INVESTMENT PERFORMANCE
Change in Value of $10,000 from 2/93 - 5/96
Based on NAV and MOP for Class A Shares
AVERAGE ANNUAL TOTAL RETURNS*
<TABLE>
<CAPTION>
Inception 2/1/93 NAV MOP
---------------------------------------------------------------
<S> <C> <C> <C> <C>
1 YEAR 3.93% 2.89%
$12,000 SINCE INCEPTION 3.36% 3.06% Lehman -- $12,362
$11,000 NAV -- $11,158
$11,000 MOP -- $11,041
</TABLE>
[GRAPH]
COLONIAL INTERMEDIATE TAX-EXEMPT FUND INVESTMENT PERFORMANCE
Change in Value of $10,000 from 2/93 - 5/96
Based on NAV and MOP for Class A Shares
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS*
Inception 2/1/93 NAV MOP
------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 year 6.40% 2.94%
$12,000 Since inception 5.73% 4.71% Lehman -- $12,362
$11,000 NAV -- $11,999
$10,000 MOP -- $11,609
</TABLE>
[GRAPH]
COLONIAL INTERMEDIATE TAX-EXEMPT FUND INVESTMENT PERFORMANCE
Change in Value of $10,000 from 2/93 - 5/96
Based on NAV and Maximum CDSC for Class B Shares
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS*
Inception 2/1/93 NAV w/CDSC
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 year 5.71% 1.71%
$12,000 Since inception 5.05% 4.79% Lehman -- $12,362
$11,000 NAV -- $11,744
$10,000 w/CDSC -- $11,644
</TABLE>
[GRAPH]
The Lehman Brothers Municipal Bond Index is a broad-based, unmanaged index that
tracks the performance of the municipal bond market. Unlike mutual funds,
indexes are not investment, do not incur fees or expenses and are not
professionally managed. Return and value of an investment will vary, resulting
in a gain or loss on sale. All results shown assume reinvestment of
distributions. NAV returns do not include sales charges or CDSC. MOP returns
include the maximum sales charge of 1% for Colonial Short-Term Tax-Exempt Fund,
and 3.25% for Colonial Intermediate Tax-Exempt Fund. The CDSC returns reflect
the maximum charge of 4% for one year and 2% since inception. Past performance
cannot predict future results.
*As of 6/30/96 (most recent quarter end).
5
<TABLE>
<CAPTION>
Label A B C D E
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Label REVISED 6/25
1 WLK 6/14/96 CSTTEF CITEF-A
2 Lehman Muni Lo LEHMAN Pre-Load Post-load LEHMAN
3 Jan 31, 93 10000 10000 9900 10000
4 Feb 28, 93 10464.92 10079.96 9979.17 10464.92
5 Mar 31, 93 10338.93 10065.26 9964.61 10338.93
6 Apr 30, 93 10480.43 10087.98 9987.1 10480.43
7 May 31, 93 10567.1 10124.22 10022.98 10567.1
8 Jun 30, 93 10765.91 10174.03 10072.29 10765.91
9 Jul 31, 93 10776.99 10183.48 10081.64 10776.99
10 Aug 31, 93 11052.78 10234.1 10131.76 11052.78
11 Sep 30, 93 11197.05 10271.38 10168.66 11197.05
12 Oct 31, 93 11218.65 10282.34 10179.52 11218.65
13 Nov 30, 93 11082.69 10279.55 10176.76 11082.69
14 Dec 31, 93 11368.45 10345.8 10242.34 11368.45
15 Jan 31, 94 11502.19 10408.81 10304.72 11502.19
16 Feb 28, 94 11120.9 10338.25 10234.87 11120.9
17 Mar 31, 94 10456.61 10281.2 10178.38 10456.61
18 Apr 30, 94 10536.91 10320.51 10217.3 10536.91
19 May 31, 94 10659.85 10345.28 10241.82 10659.85
20 Jun 30, 94 10531.41 10356.36 10252.79 10531.41
21 Jul 31, 94 10802.5 10409.42 10305.33 10802.5
22 Aug 31, 94 10825.48 10435.2 10330.85 10825.48
23 Sep 30, 94 10574.61 10419.16 10314.97 10574.61
24 Oct 31, 94 10249.8 10418.49 10314.31 10249.8
25 Nov 30, 94 9979.27 10431.78 10327.46 9979.27
26 Dec 31, 94 10333.7 10473.25 10368.52 10333.7
27 Jan 31, 95 10788.1 10502.11 10397.09 10788.1
28 Feb 28, 95 11227.54 10573.53 10467.79 11227.54
29 Mar 31, 95 11362.67 10621.67 10515.46 11362.67
30 Apr 30, 95 11357.13 10641.54 10535.12 11357.13
31 May 31, 95 11840.6 10748.43 10640.94 11840.6
32 Jun 30, 95 11622.4 10771.18 10663.47 11622.4
33 Jul 31, 95 11681.93 10851.65 10743.14 11681.93
34 Aug 31, 95 11846.96 10889.07 10780.18 11846.96
35 Sep 30, 95 11939.72 10912.21 10803.09 11939.72
36 Oct 31, 95 12228.25 10949.94 10840.44 12228.25
37 Nov 30, 95 12821.1 11002.31 10892.28 12821.1
38 Dec 31, 95 12739.69 11039.57 10929.17 12739.69
39 Jan 31, 96 12793.96 11106.22 10995.16 12793.96
40 Feb 29, 96 12638.34 11129.02 11017.73 12638.34
41 Mar 31, 96 12406.57 11106.98 10995.91 12406.57
42 Apr 30, 96 12356.73 11129.25 11017.96 12356.73
43 May 31, 96 12362.27 11153.02 11041.49 12362.27
</TABLE>
<TABLE>
<CAPTION>
F G H I J
<S> <C> <C> <C> <C> <C>
Lable
1 CITEF-B
2 Pre-Load Post-Load LEHMAN NAV W/CDSC
3 10000 9675 10000 10000 10000
4 10307.89 9972.89 10464.92 10302.44 10302.44
5 10213.52 9881.58 10338.93 10202.49 10202.49
6 10320.25 9984.84 10480.43 10303.49 10303.49
7 10373.49 10036.35 10567.1 10350.99 10350.99
8 10535.27 10192.87 10765.91 10506.89 10506.89
9 10575.32 10231.62 10776.99 10541.28 10541.28
10 10765.27 10415.4 11052.78 10725.1 10725.1
11 10860.35 10507.39 11197.05 10814.25 10814.25
12 10887.68 10533.83 11218.65 10835.77 10835.77
13 10817.58 10466.01 11082.69 10760.44 10760.44
14 11011.5 10653.62 11368.45 10947.54 10947.54
15 11136.89 10774.94 11502.19 11066.36 11066.36
16 10886.34 10532.53 11120.9 10811.48 10811.48
17 10521.89 10179.93 10456.61 10443.72 10443.72
18 10634.65 10289.02 10536.91 10549.88 10549.88
19 10704.77 10356.86 10659.85 10613.77 10613.77
20 10718.94 10370.58 10531.41 10622.06 10622.06
21 10835.73 10483.57 10802.5 10732 10732
22 10881.54 10527.89 10825.48 10771.55 10771.55
23 10798.58 10447.63 10574.61 10683.57 10683.57
24 10658.19 10311.8 10249.8 10538.71 10538.71
25 10487.12 10146.29 9979.27 10363.86 10363.86
26 10650.09 10303.96 10333.7 10519.3 10519.3
27 10814.78 10463.3 10788.1 10676.39 10676.39
28 11039.49 10680.71 11227.54 10892.4 10892.4
29 11161.63 10798.88 11362.67 11006.97 11006.97
30 11165.94 10803.05 11357.13 11005.26 11005.26
31 11437.46 11065.74 11840.6 11266.93 11266.93
32 11366.7 10997.28 11622.4 11191.27 11191.27
33 11521.48 11147.04 11681.93 11337.57 11337.57
34 11674.17 11294.76 11846.96 11481.76 11481.76
35 11751.92 11369.98 11939.72 11552 11552
36 11890.15 11503.72 12228.25 11681.6 11681.6
37 12013.39 11622.95 12821.1 11796.42 11796.42
38 12075.43 11682.97 12739.69 11851.02 11851.02
39 12183.56 11787.59 12793.96 11950.68 11950.68
40 12138.06 11743.58 12638.34 11899.55 11899.55
41 12030.29 11639.31 12406.57 11787.29 11787.29
42 12015.18 11624.69 12356.73 11766.03 11766.03
43 11999.58 11609.59 12362.27 11744.33 11644.33
</TABLE>
COLONIAL INTERMEDIATE TAX-EXEMPT FUND
INVESTMENT PORTFOLIO
MAY 31, 1996 (UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
MUNICIPAL BONDS - 93.7% PAR VALUE
- ----------------------------------------------------------------------------
<S> <C> <C>
EDUCATION - 25.9%
EDUCATION - 9.9%
CT State Health and Educational Facilities
Authority, University of New Haven, Series D,
6.000% 07/01/06(a) $ 100 $ 98
MN State Higher Education Facilities
Authority, MacAlester College, Series 4-C,
6.000% 03/01/01 500 521
NY New York Dormitory Authority,
State University of New York, Series 1989-B,
7.100% 05/15/01 100 108
NY State Dormitory Authority, New York City
University, Series 1995-A:
5.500% 07/01/00 500 512
5.625% 07/01/16 500 462
OH State Higher Education Commission,
Series II-B,
5.750% 11/01/04 500 525
TX Brazos Higher Educational Facilities
Authority, Series 1992-A,
6.600% 03/01/00 330 341
------
2,567
------
SCHOOL DISTRICT GENERAL OBLIGATION - 10.6%
AZ Maricopa County Unified School District
N0. 69, Paradise Valley, Series 1995,
6.350% 07/01/10 500 535
MI Berkley, City School District,
7.000% 01/01/09(b) 500 561
MN West St. Paul, Independent School
District No. 197,
(c) 02/01/04 1,585 1,054
OH Olmstead Falls Local School District,
6.850% 12/15/11(d) 550 603
------
2,753
------
STUDENT LOAN - 5.4%
NM State Educational Assistance Foundation,
Series 1-A,
6.200% 12/01/01 500 522
</TABLE>
6
Investment Portfolio/May 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
- ----------------------------------------------------------------------------
<S> <C> <C>
OH State Student Loan Funding Corporation,
Series A,
5.750% 08/01/03 $ 800 $ 823
SC State Educational Assistance Authority
Student Loan Revenue Bonds, Series 1991,
6.200% 09/01/99 5 52
------
1,397
------
- --------------------------------------------------------------------------------
GENERAL OBLIGATION - 22.0%
AZ Phoenix,
6.125% 07/01/03 500 533
CT State,
6.250% 05/15/06 1,000 1,074
HI Honolulu City & County, Series 1995:
6.000% 11/01/01 500 523
6.000% 11/01/10 500 516
IL Joliet, Series 1993-A,
5.300% 01/01/02 65 66
LA State, Series 1993-A,
5.300% 08/01/04 145 146
MA Haverhill, Series A,
5.900% 06/15/02 200 210
MA New Bedford,
6.000% 10/15/02 625 663
NJ State, Series D,
(c) 02/15/04 90 60
OH Trumbull County,
5.100% 12/01/03 500 504
TX State, Series A,
5.800% 10/01/04 1,000 1,045
WI Racine, TIF Number 8,
5.400% 12/01/03 375 377
------
5,717
------
- --------------------------------------------------------------------------------
HEALTH CARE - 8.0%
HOSPITAL - 7.2%
AL East Health Care Authority,
Health Care Facilities and Tax Anticipation,
Series 1993,
5.625% 09/01/04 50 51
HI State Department Budget and Finance
Special Purpose Mortgage, Kapiolani
Health Care System, Series 1993,
5.500% 07/01/01 110 111
MI Dickinson County Memorial Hospital,
7.625% 11/01/05 300 321
</TABLE>
7
Investment Portfolio/May 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MUNICIPAL BONDS - CONT. PAR VALUE
- -----------------------------------------------------------------------------
<S> <C> <C>
HEALTH CARE - CONT.
HOSPITALS - CONT.
MN Brainerd Health Care Facilities,
St. Joseph Medical Center, Series 1993-D,
5.300% 02/15/02 $ 50 $ 51
NJ Health Care Facilities Financing Authority,
Raritan Bay Medical Center,
5.800% 07/01/97 70 70
OH Cuyahoga County, Meridia Health Systems,
6.300% 08/15/06 890 929
OH Green Springs, St. Francis Health Care Center,
Series 1994-A,
7.000% 05/15/04 100 104
PA Philadelphia Hospitals & Higher
Educational Facilities, Temple
University Hospital, Series 1993,
5.750% 11/15/99 100 100
TX Health Facilities Development Corporation
Hospital, All Saints Episcopal Hospitals,
Series 1993-A,
5.800% 08/15/04 80 82
TX Tarrant County Health Facilities
Development Corporation Hospital, Fort
Worth Osteopathic Hospital, Series 1993,
5.800% 05/15/04 50 52
------
1,871
------
NURSING HOME - 0.8%
KY Jefferson County Health Facilities,
Beverly Enterprises, Inc., Series 1985-B,
9.750% 08/01/07 95 104
MA State Industrial Finance Agency,
Belmont Home Care Project, Series A,
7.970% 01/01/99 100 102
------
206
------
- -----------------------------------------------------------------------------
HOUSING - 3.0%
MULTI-FAMILY - 1.2%
MA State Housing Finance Agency,
Series 1992-C,
6.350% 05/15/03 200 210
NJ State Housing & Mortgage Finance
Agency,
6.500% 05/01/03 85 90
------
300
------
</TABLE>
8
Investment Portfolio/May 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
- -----------------------------------------------------------------------------
<S> <C> <C>
SINGLE FAMILY - 1.8%
NH State Housing Finance Authority,
Single Family Mortgage, Series 1990-A,
6.850% 07/01/98 $165 $168
RI Housing and Mortgage Finance
Corporation, Homeownership
Opportunity, Series 6-B:
6.500% 04/01/03 100 104
6.500% 10/01/03 200 208
----
480
----
- -----------------------------------------------------------------------------
JUSTICE & PUBLIC ORDER - 2.3%
KS State Development Authority,
Lease Juvenile Detention Facility
Project, Series 1992-H,
5.750% 06/01/02 60 62
LA State Correctional Facilities
Corporation Lease, Series 1993,
5.400% 12/15/01 65 67
NY State Urban Development Corporation,
5.700% 04/01/09 500 478
----
607
----
- -----------------------------------------------------------------------------
OTHER REVENUE - 0.5%
MISCELLANEOUS RETAIL - 0.5%
IA State Financing Authority,
Mason City Shopping Center,
8.500% 12/01/04 50 52
VA Virginia Beach Development Authority,
SC Diamond Associates, Inc.,
8.000% 12/01/10 75 75
----
127
----
- -----------------------------------------------------------------------------
PAPER PRODUCTS - 0.4%
NY New York City Industrial Development,
Agency, Visy Paper Inc. Project,
7.550% 01/01/05 100 100
----
- -----------------------------------------------------------------------------
PUBLIC FACILITIES IMPROVEMENT - 7.4%
FL Homestead, Special Insurance Assessment,
5.125% 09/01/02 425 430
NY State Urban Development Corporation.,
6.250% 04/01/02 500 518
</TABLE>
9
<TABLE>
<CAPTION>
Investment Portfolio/May 31, 1996
- -----------------------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PUBLIC FACILITIES IMPROVEMENT - CONT.
SC Rock Hill, Tax Increment Revenue,
Manchester Redevelopment Project,
Series 1992-B,
5.500% 05/01/03 $450 $ 457
VA State Public Building Authority,
5.625% 08/01/02 500 516
---------
1,921
---------
- -----------------------------------------------------------------------------------------------
RESOURCE RECOVERY - 5.6%
CO-GENERATION - 1.9%
CA Sacramento Co-Generation Authority,
Procter & Gamble Project,
6.500% 07/01/14 500 503
--------
LAND FILL - 0.4%
MA State Industrial Finance Agency,
Peabody Monofill Associates, Inc.,
Series 1995,
9.000% 09/01/05 100 104
--------
MISCELLANEOUS DISPOSAL - 0.3%
OH Lake County, North Madison Properties,
Series 1993,
8.069% 09/01/01 90 91
--------
RESOURCE RECOVERY - 3.0%
FL Lake County Resources Industrial
Development, Recovery Group,
Series 1993-A,
5.400% 10/01/03 500 483
MA State Industrial Finance Agency,
Refusetech, Series 1993-A,
5.450% 07/01/01 300 306
--------
789
--------
- -----------------------------------------------------------------------------------------------
TAX-BACKED - 0.2%
SALES & EXCISE TAX - 0.2%
LA Sulphur Public Import Sales and Use Tax,
Series 1993-ST,
5.650% 04/01/04 50 51
--------
- -----------------------------------------------------------------------------------------------
TRANSPORTATION - 9.8%
AIRPORT - 2.2%
CO Denver City & County Airport,
Series 1992-C,
6.250% 11/15/00 50 51
</TABLE>
10
<TABLE>
<CAPTION>
Investment Portfolio/May 31, 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TX Dallas Fort Worth Airport, Series B,
6.000% 11/01/02 $ 500 $ 530
--------
581
--------
TURNPIKE/TOLLROAD/BRIDGE - 7.6%
CA Foothill, Eastern Transportation Corridor
Agency, State Toll Road, Senior Lien, Series A,
(c) 01/01/04 500 310
KY State Turnpike Authority Economic
Development Revitalization Projects:
6.500% 07/01/08 1,000 1,099
Series 1992,
5.500% 01/01/01 50 51
NV Clark County Highway Improvement,
5.700% 07/01/03 500 516
--------
1,976
--------
- ----------------------------------------------------------------------------------------------------
UTILITY - 8.6%
MUNICIPAL ELECTRIC - 0.2%
WA Grant County Public Utilities,
District Number 002,
Electric System, Series 1993-E,
5.300% 01/01/03 50 50
--------
WATER & SEWER - 8.4%
AZ Phoenix Civic Improvement Corporation,
Waste Water Lease, Series 1993,
5.750% 07/01/04 50 52
PA Center Township Sewer Authority,
Series A,
6.000% 04/15/03 (b) 1,035 1,084
TX Houston Water & Sewer System,
Series C,
5.900% 12/01/05 1,000 1,049
--------
2,185
--------
TOTAL MUNICIPAL BONDS (cost of $24,105) (e) $ 24,376
--------
SHORT TERM OBLIGATIONS - 5.5%
- ----------------------------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (f)
IL State Educational Facilities Authority,
3.700% 12/01/25 500 500
IL State Health Facilities Authority,
Franciscan Sisters Health Center,
3.800% 01/01/18 600 600
</TABLE>
11
<TABLE>
<CAPTION>
Investment Portfolio/May 31, 1996
- ---------------------------------------------------------------------------------------------------
SHORT TERM OBLIGATIONS - CONT.
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
VARIABLE RATE DEMAND NOTES - CONT.
IN Health Facilities Financing Authority,
3.750% 12/01/02 $ 220 $ 220
MI Flint Hospital Building Authority,
Hurley Medical Center, Series 1995-B,
3.750% 07/01/15 100 100
--------
TOTAL SHORT-TERM OBLIGATIONS 1,420
--------
OTHER ASSETS & LIABILITIES, NET - 0.8% 208
- ---------------------------------------------------------------------------------------------------
NET ASSETS - 100.0% $ 26,004
--------
</TABLE>
NOTES TO INVESTMENT PORTFOLIO:
- -------------------------------------------------------------------------------
(a) This security has been purchased on a delayed delivery basis for
settlement at a future date beyond the customary settlement time.
(b) These securities, with a total market value of $1,645, are being used to
collateralize open futures contracts.
(c) Zero coupon bond.
(d) This security, with a total market value of $603, is being used to
collateralize the delayed delivery purchase indicated in note (a) above.
(e) Cost for federal income tax purposes is the same.
(f) Variable rate demand notes are considered short-term obligations. Interest
rates change periodically on specified dates. These securities are payable
on demand and are secured by either letters of credit or other credit
support agreements from banks. The rates listed are as of May 31, 1996.
Short futures contracts open at May 31, 1996 are as follows:
<TABLE>
<CAPTION>
Par value Unrealized
covered by Expiration appreciation
Type contracts month at 5/31/96
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Treasury bonds $ 1,000 June $ 38
</TABLE>
See notes to financial statements.
12
<TABLE>
<CAPTION>
COLONIAL INTERMEDIATE TAX-EXEMPT FUND
STATEMENT OF ASSETS & LIABILITIES
MAY 31, 1996 (UNAUDITED)
(in thousands except for per share amounts and footnotes)
<S> <C> <C>
ASSETS
Investments at value (cost $24,105) $ 24,376
Short-term obligations 1,420
--------
25,796
Receivable for:
Interest 393
Variation margin on futures 10
Fund shares sold 9
Deferred organization expenses 25
Other 27 464
---- --------
Total Assets 26,260
LIABILITIES
Payable for:
Investments purchased 100
Distributions 95
Fund shares repurchased 52
Payable to Adviser 7
Accrued:
Deferred Trustees fees 1
Other 1
----
Total Liabilities 256
--------
NET ASSETS $ 26,004
---------
Net asset value & redemption price per share -
Class A ($12,480/1,629) $7.66
---------
Maximum offering price per share - Class A
($7.66/0.9675) $7.92(a)
---------
Net asset value & offering price per share -
Class B ($13,524/1,765) $7.66(b)
---------
COMPOSITION OF NET ASSETS
Capital paid in $ 26,269
Undistributed net investment income 40
Accumulated net realized loss (614)
Net unrealized appreciation on:
Investments 271
Open futures contracts 38
---------
$ 26,004
---------
</TABLE>
(a) On sales of $100,000 or more the offering price is reduced.
(b) Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
See notes to financial statements.
13
COLONIAL INTERMEDIATE TAX-EXEMPT FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MAY 31, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
(in thousands)
INVESTMENT INCOME
Interest $ 715
EXPENSES
Management fee $ 75
Service fee 27
Distribution fee - Class B 46
Transfer agent 22
Bookkeeping fee 13
Trustees fee 7
Custodian fee 7
Audit fee 7
Legal fee 4
Registration fee 1
Reports to shareholders 1
Amortization of deferred organization
expenses 8
Other 5
-----
223
Fees and expenses waived or borne by
the Adviser (98) 125
----- -----
Net Investment Income 590
-----
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain (loss) on:
Investments 216
Closed futures contracts (3)
-----
Net Realized Gain 213
Net unrealized appreciation (depreciation)
during the period on:
Investments (952)
Open futures contracts 99
-----
Net Unrealized Depreciation (853)
-----
Net Loss (640)
-----
Net Decrease in Net Assets from Operations $ (50)
-----
</TABLE>
See notes to financial statements.
14
COLONIAL INTERMEDIATE TAX-EXEMPT FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
(Unaudited)
Six months
ended Year ended
(in thousands) May 31 November 30
------------ -----------
INCREASE (DECREASE) IN NET ASSETS 1996 1995
------------ -----------
<S> <C> <C>
Operations:
Net investment income $ 590 $ 1,335
Net realized gain (loss) 213 (557)
Net unrealized appreciation
(depreciation) (853) 3,026
------------ -----------
Net Increase (Decrease) from
Operations (50) 3,804
Distributions:
From net investment income --
Class A (303) (707)
From net investment income --
Class B (283) (656)
------------ -----------
(636) 2,441
------------ -----------
Fund Share Transactions:
Receipts for shares sold --
Class A 683 3,913
Value of distributions reinvested --
Class A 199 478
Cost of shares repurchased --
Class A (1,862) (9,071)
------------ -----------
(530) (4,680)
------------ -----------
Receipts for shares sold --
Class B 576 2,057
Value of distributions reinvested
-- Class B 193 449
Cost of shares repurchased --
Class B (1,736) (3,059)
------------ -----------
(967) (553)
------------ -----------
Net Decrease from Fund Share
Transactions (1,497) (5,233)
------------ -----------
Total Decrease (2,183) (2,792)
NET ASSETS
Beginning of period $28,137 $30,929
------------ -----------
End of period (including
undistributed net investment
income of $40 and $26,
respectively) $26,004 $28,137
------------ -----------
NUMBER OF FUND SHARES
Sold -- Class A 81 524
Issue for distributions
reinvested -- Class A 26 63
Repurchased -- Class A (175) (1,219)
------------ -----------
(68) (632)
------------ -----------
Sold -- Class E 74 273
Issued for distributions
reinvested -- Class B 25 59
Repurchased -- Class B (222) (405)
------------ -----------
(123) (73)
------------ -----------
</TABLE>
See notes to financial statements.
15
COLONIAL INTERMEDIATE TAX-EXEMPT FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each
period are as follows:
<TABLE>
<CAPTION>
(Unaudited)
Six months ended Year ended
May 31 November 30
----------------------------------- ----------------------------
1996 1995
Class A Class B Class A Class B
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 7.850 $ 7.850 $ 7.210 $ 7.210
---------- -------- -------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.187 0.161 0.387 0.338
Net realized and
unrealized gain (loss) (0.195) (0.195) 0.641 0.641
---------- -------- -------- -------
Total from Investment
Operations (0.008) (0.034) 1.028 0.979
---------- -------- -------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.182) (0.156) (0.388) (0.339)
---------- -------- -------- -------
Net asset value -
End of period $ 7.660 $ 7.660 $ 7.850 $ 7.850
---------- -------- -------- -------
Total return (c) (d) (0.11)% (e) (0.44)% (e) 14.56% 13.82%
---------- -------- -------- -------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.60% (f)(g) 1.25% (f)(g) 0.36% (f) 1.01% (f)
Fees and expenses waived or
borne by the Adviser 0.72% (f)(g) 0.72% (f)(g) 0.96% 0.96%
Net investment income 4.69% (f)(g) 4.04% (f)(g) 5.03% (f) 4.38% (f)
Portfolio turnover 14% (g) 14% (g) 69% 69%
Net assets at end
of period (000) $ 12,480 $ 13,524 $ 13,317 $14,820
(a) Net of fees and expenses waived or borne by the Adviser which
amounted to $0.029 $0.029 $0.074 $0.074
(b) The Fund commenced investment operations on February 1, 1993.
(c) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(d) Had the Adviser not waived or reimbursed a portion of expenses, total
return would have been reduced.
(e) Not annualized.
(f) The benefits derived from custody credits and directed brokerage
arrangements had no impact on the Fund's gross expense ratio. Prior years'
ratios are net of benefits received, if any.
(g) Annualized.
</TABLE>
16
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS - CONT.
Year ended Period ended
November 30 November 30
- -------------------------- ----------------------------
1994 1993 (b)
Class A Class B Class A Class B
- ---------- ----------- ---------- ---------
<C> <C> <C> <C>
$ 7.810 $ 7.810 $ 7.500 $ 7.500
- ---------- ----------- ---------- ---------
0.366 0.317 0.305 0.263
(0.596) (0.596) 0.302 0.302
- ---------- ----------- ---------- ---------
(0.230) (0.279) 0.607 0.565
- ---------- ----------- ---------- ---------
(0.370) (0.321) (0.297) (0.255)
- ---------- ----------- ---------- ---------
$ 7.210 $ 7.210 $ 7.810 $ 7.810
- ---------- ----------- ---------- ---------
(3.05)% (3.68)% 8.18% (e) 7.61% (e)
- ---------- ----------- ---------- ---------
0.20% 0.85% 0.20% (g) 0.85% (g)
1.07% 1.07% 1.33% (g) 1.33% (g)
4.85% 4.20% 4.53% (g) 3.88% (g)
26% 26% 5% (g) 5% (g)
$ 16,791 $ 14,138 $ 14,700 $ 9,396
$0.080 $0.080 $0.090 $0.090
</TABLE>
17
<TABLE>
<CAPTION>
COLONIAL SHORT-TERM TAX-EXEMPT FUND
INVESTMENT PORTFOLIO
MAY 31, 1996 (UNAUDITED, IN THOUSANDS)
MUNICIPAL BONDS - 89.9% PAR VALUE
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EDUCATION - 27.1%
EDUCATION - 10.4%
NY State Dormitory Authority,
State University Educational Facilities,
Series A,
4.750% 05/15/98 $ 200 $ 200
OH State Public Facilities Commission,
Higher Education Facilities, Series II-A,
5.200% 05/01/97 200 202
SC Spartanburg County School District,
No. 005,
4.300% 07/01/98 100 100
--------
502
--------
SCHOOL DISTRICT GENERAL OBLIGATION - 16.7%
CO Adams County School District,
Series B,
4.200% 12/15/96 200 200
IL Cook County High School District 225,
Northfield Township,
5.200% 12/01/97 200 204
UT Washington County,
St. George School District,
6.250% 09/01/97 200 205
WI Milwaukee Area Technical College
District, Series A,
4.300% 06/01/98 200 200
--------
809
--------
- ----------------------------------------------------------------------------------------------
HEALTHCARE - 4.9%
HOSPITAL - 4.2%
OH Cuyahoga County,
Meridia Health System,
5.450% 08/15/97 200 202
--------
NURSING HOME - 0.7%
MA State Industrial Finance Agency,
Belmont Home Care Project,
Series A,
7.570% 01/01/97 35 35
--------
</TABLE>
18
<TABLE>
<CAPTION>
Investment Portfolio/May 31, 1996
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HOUSING - 4.7%
SINGLE FAMILY
WY Community Development Authority,
4.400% 06/01/98 $ 230 $ 229
--------
- ------------------------------------------------------------------------------------------
TAX-BACKED - 29.2%
GENERAL OBLIGATION
MN Bloomington Highway,
4.650% 12/01/97 200 202
NM Albuquerque, Series A,
4.600% 07/01/97 200 201
OH Trumbull County,
4.600% 12/01/97 200 201
TX State Public Finance Authority,
Series A,
5.000% 10/01/97 200 203
VA Richmond,
5.250% 01/15/97 200 202
WA State, Series R-93B,
4.200% 10/01/97 200 200
WI State, Series 1994-B,
4.500% 05/01/97 200 201
--------
1,410
--------
- ------------------------------------------------------------------------------------------
TRANSPORTATION - 8.3%
TRANSPORTATION
AK Anchorage Port & Terminal Facilities,
4.300% 02/01/98 200 199
NJ State Transportation Trust Fund
Authority, Series B,
5.000% 06/15/98 200 202
--------
401
--------
- ------------------------------------------------------------------------------------------
UTILITY - 12.6%
WATER & SEWER
MO State Environmental Improvement and
Energy Resources Authority, Series A,
5.400% 07/01/97 200 203
OH Clyde Waterworks,
5.600% 05/01/97 200 202
OH Hamilton County Sewer System,
Series A,
4.100% 12/01/97 200 201
--------
606
--------
</TABLE>
19
<TABLE>
<CAPTION>
Investment Portfolio/May 31, 1996
- ----------------------------------------------------------------------------- ---------------
MUNICIPAL BONDS - CONT. PAR VALUE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OTHER REVENUE - 3.1%
MANUFACTURING - 2.1%
OH Air Quality Development Authority,
4.250% 08/01/96 $ 100 $ 100
--------
MISCELLANEOUS RETAIL - 1.0%
IA Economic Development Finance Authority,
Mason City Shopping Center,
6.250% 12/01/96 50 50
--------
TOTAL MUNICIPAL BONDS (cost of $4,325) (a) 4,344
--------
SHORT-TERM OBLIGATIONS - 8.3%
- ---------------------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (b)
MI Flint Hospital Building Authority,
Hurley Medical Center,
Series 1995 B,
3.750% 07/01/15 200 200
MS Perry County,
Leaf River Forest Project,
3.700% 03/01/02 200 200
--------
TOTAL SHORT-TERM OBLIGATIONS 400
--------
OTHER ASSETS & LIABILITIES - 1.8% 88
- ---------------------------------------------------------------------------------------------
NET ASSETS - 100.0% $ 4,832
--------
</TABLE>
NOTES TO INVESTMENT PORTFOLIO:
- -------------------------------------------------------------------------------
(a) Cost for federal income tax purposes is the same.
(b) Variable rate demand notes are considered short-term obligations. Interest
rates change periodically on specified dates. These securities are payable
on demand and are secured by either letters of credit or other credit
support agreements from banks. The rates listed are as of May 31, 1996.
See notes to financial statements.
20
<TABLE>
<CAPTION>
COLONIAL SHORT-TERM TAX-EXEMPT FUND
STATEMENT OF ASSETS & LIABILITIES
MAY 31, 1996 (UNAUDITED)
(in thousands except for per share amounts and footnote)
<S> <C> <C>
ASSETS
Investments at value (cost $4,325) $ 4,344
Short-term obligations 400
----------
4,744
Receivable for:
Interest $ 79
Expense reimbursement
due from Adviser 3
Fund shares sold 1
Deferred organization expenses 15
Other 9 107
--------- -----------
Total Assets 4,851
LIABILITIES
Payable for:
Distributions 18
Accrued deferred Trustees fees 1
---------
Total Liabilities 19
-----------
NET ASSETS $ 4,832
-----------
Net asset value & redemption price per share -
Class A ($4,832/646) $7.48
-----------
Maximum offering price per share - Class A
($7.480/0.9900) $7.56(a)
-----------
COMPOSITION OF NET ASSETS
Capital paid in $ 4,887
Undistributed net investment income 23
Accumulated net realized loss (97)
Net unrealized appreciation 19
-----------
$ 4,832
-----------
</TABLE>
(a) On sales of $1,000,000 or more the offering price is reduced.
See notes to financial statements.
21
<TABLE>
<CAPTION>
COLONIAL SHORT-TERM TAX-EXEMPT FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MAY 31, 1996 (UNAUDITED)
(in thousands)
<S> <C> <C> <C>
INVESTMENT INCOME
Interest $ 209
EXPENSES
Management fee $ 23
Service fee 5
Transfer agent 7
Bookkeeping fee 13
Trustees fee 6
Custodian fee 1
Audit fee 7
Legal fee 3
Registration fee 8
Reports to shareholders 2
Amortization of deferred
organization expenses 5
Other 2
-----------
82
Fees and expenses waived or
borne by the Adviser (60) 22
----------- -----
Net Investment Income 187
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain 43
Net unrealized depreciation during
the period (102)
-----------
Net Loss (59)
-----
Net Increase in Net Assets from Operations $ 128
-----
</TABLE>
See notes to financial statements.
22
COLONIAL SHORT-TERM TAX-EXEMPT FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
(Unaudited)
Six months
ended Year Ended
(in thousands) May 31 November 30
----------- -----------
INCREASE (DECREASE) IN NET ASSETS 1996 1995
----------- -----------
<S> <C> <C>
Operations:
Net investment income $ 187 $ 451
Net realized gain (loss) 43 (119)
Net unrealized appreciation
(depreciation) (102) 304
-------- --------
Net Increase from Operations 128 636
Distributions:
From net investment income - Class A (187) (465)
-------- --------
(59) 171
-------- --------
Fund Share Transactions:
Receipts for shares sold - Class A 381 2,047
Value of distributions reinvested -
Class A 176 390
Cost of shares repurchased - Class A (7,422) (4,615)
-------- --------
Net Decrease from Fund Share
Transactions (6,865) (2,178)
-------- --------
Total Decrease (6,924) (2,007)
NET ASSETS
Beginning of period 11,756 13,763
-------- --------
End of period (including undistributed net
investment income of $23 and $19,
respectively) $ 4,832 11,756
-------- --------
NUMBER OF FUND SHARES
Sold - Class A 51 273
Issued for distributions reinvested -
Class A 23 53
Repurchased - Class A (989) (619)
-------- --------
(915) (293)
-------- --------
</TABLE>
See notes to financial statements.
23
COLONIAL SHORT-TERM TAX-EXEMPT FUND
FINANCIAL HIGHLIGHTS
Selected data for a share outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
(Unaudited)
Six months Period
ended Year ended ended
May 31 November 30 November 30
----------- --------------------- -----------
1996 1995 1994 1993 (b)
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 7.530 $ 7.420 $ 7.530 $ 7.500
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.177 0.289 0.215 0.196
Net realized and
unrealized gain (loss) (0.074) 0.111 (0.105) 0.012
------- ------- ------- -------
Total from Investment
Operations 0.103 0.400 0.110 0.208
------- ------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.153) (0.290) (0.220) (0.178)
------- ------- ------- -------
Net asset value -
End of period $ 7.480 $ 7.530 $ 7.420 $ 7.530
------- ------- ------- -------
Total return (c)(d) 1.37%(e) 5.47% 1.48% 2.80%(e)
------- ------- ------- -------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.50%(f)(g) 0.50%(f) 0.50% 0.50%(g)
Fees and expenses waived or
borne by the Adviser 1.29%(f)(g) 0.98%(f) 0.85% 1.92%(g)
Net investment income 4.02%(f)(g) 3.74%(f) 2.97% 2.85%(g)
Portfolio turnover 0%(g) 123% 16% 22%(g)
Net assets at end
of period (000) $ 4,832 $11,756 $13,763 $ 4,961
</TABLE>
(a) Net of fees and expenses waived or borne by the Adviser which amounted to
<TABLE>
<S> <C> <C> <C> <C>
$ 0.057 $ 0.076 $ 0.063 $ 0.132
</TABLE>
(b) The Fund commenced investment operations on February 1, 1993.
(c) Total return at net asset value assuming all distributions reinvested and no
initial sales charge.
(d) Had the Adviser not waived or reimbursed a portion of expenses, total return
would have been reduced.
(e) Not annualized.
(f) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
(g) Annualized.
24
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1996 (UNAUDITED)
NOTE 1. INTERIM FINANCIAL STATEMENTS
In the opinion of management of Colonial Intermediate Tax-Exempt Fund (CITEF)
and Colonial Short-Term Tax-Exempt Fund (CSTTEF) (the Funds), each a series of
Colonial Trust IV, the accompanying financial statements contain all normal and
recurring adjustments necessary for the fair presentation of the financial
position of the Funds at May 31, 1996, and the results of their operations, the
changes in their net assets and the financial highlights for the six months then
ended.
NOTE 2. ACCOUNTING POLICIES
ORGANIZATION: The Funds are diversified portfolios of a Masssachusetts business
trust, registered under the Investment Company Act of 1940, as amended, as
open-end management investment companies. CITEF's investment objective is to
seek as high a level of after-tax total return as is consistent with moderate
volatility. CSTTEF's investment objective is to seek as high a level of current
income exempt from federal income tax as is consistent with relatively low
volatility. The Funds may issue an unlimited number of shares. CITEF offers
Class A shares sold with a front-end sales charge and Class B shares which are
subject to an annual distribution fee and a contingent deferred sales charge.
Class B shares will convert to Class A shares when they have been outstanding
approximately eight years. CSTTEF offers Class A shares sold with a front-end
sales charge.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies that are consistently followed by the Fund in
the preparation of its financial statements.
SECURITY VALUATION AND TRANSACTIONS: Debt securities generally are valued by a
pricing service based upon market transactions for normal, institutional-size
trading units of similar securities. When management deems it appropriate, an
over-the-counter or exchange bid quotation is used.
Futures contracts are valued based on the difference between the last sale price
and the opening price of the contract.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
25
Notes to Financial Statements/May 31, 1996
NOTE 2. ACCOUNTING POLICIES - CONT.
Portfolio positions which cannot be valued as set forth above are valued at fair
value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains (losses) are based upon the specific identification
method for both financial statement and federal income tax purposes.
The Fund may trade securities on other than normal settlement terms. This may
increase the risk if the other party to the transaction fails to deliver and
causes the Fund to subsequently invest at less advantageous prices.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS FOR CITEF: All
income, expenses (other than the Class B distribution fee), realized and
unrealized gains (losses) are allocated to each class proportionately on a daily
basis for purposes of determining the net asset value of each class.
Class B per share data and ratios are calculated by adjusting the expense and
net investment income per share data and ratios for the Fund for the entire
period by the annualized distribution fee applicable to Class B shares only.
FEDERAL INCOME TAXES: Consistent with each Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
DEFERRED ORGANIZATION EXPENSES: CITEF and CSTTEF incurred expenses of $75,021
and $45,089, respectively, in connection with their organization, initial
registration with the Securities and Exchange Commission and with various
states, and the initial public offering of their shares. These expenses were
deferred and are being amortized on a straight-line basis over five years.
INTEREST INCOME, DEBT DISCOUNT AND PREMIUM: Interest income is recorded on the
accrual basis. Original issue discount is accreted to interest income over the
life of a security with a corresponding increase in the cost basis; market
discount is not accreted. Premium is amortized against interest income with a
corresponding decrease in the cost basis.
DISTRIBUTIONS TO SHAREHOLDERS: The Funds declare and record distributions daily
and pay monthly.
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. Reclassifications are made to the Funds' capital accounts
to reflect income and gains available for
26
Notes to Financial Statements/May 31, 1996
distribution (or available capital loss carryforwards) under income tax
regulations.
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES
MANAGEMENT FEE: Colonial Management Associates, Inc. (the Adviser) is the
investment Adviser of the Funds and furnishes accounting and other services and
office facilities for a monthly fee based on the average net assets of each Fund
as follows:
<TABLE>
<CAPTION>
Annual
Fund Fee Rate
---- --------
<S> <C>
Colonial Intermediate Tax-Exempt Fund 0.55%
Colonial Short-Term Tax-Exempt Fund 0.50%
</TABLE>
BOOKKEEPING FEE: The Adviser provides bookkeeping and pricing services for
$27,000 per year plus 0.035% of each Fund's average net assets over $50 million.
TRANSFER AGENT: Colonial Investors Service Center, Inc. (the Transfer Agent), an
affiliate of the Adviser, provides shareholder services for a monthly fee equal
to 0.14% annually of each Funds' average net assets and receives a reimbursement
for certain out of pocket expenses.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES: Colonial Investment
Services, Inc. (the Distributor), an affiliate of the Adviser, is each Fund's
principal underwriter. For the six months ended May 31, 1996, each Fund has been
advised that the Distributor retained net underwriting discounts on CITEF and
CSTTEF of $895 and $243, respectively, on sales of the Funds' Class A shares and
received contingent deferred sales charges (CDSC) of $20,824 on CITEF's Class B
share redemptions.
CITEF and CSTTEF have adopted a 12b-1 plan which requires the payment of a
service fee to the Distributor equal to 0.20% and 0.10%, respectively, annually
of each Fund's net assets as of the 20th of each month. CITEF's plan also
requires the payment of a distribution fee to the Distributor equal to 0.65%
annually of the average net assets attributable to Class B shares only.
The CDSC and the fees received from the 12b-1 plan are used principally as
repayment to the Distributor for amounts paid by the Distributor to dealers who
sold such shares.
EXPENSE LIMITS: The Adviser has agreed to waive fees and bear certain CITEF and
CSTTEF expenses to the extent that the total expenses exceed 0.40% annually of
CITEF and CSTTEF's average net assets, until further notice. Each Fund's expense
limit is exclusive of service fees, distribution fees, brokerage commissions,
interest, taxes, and extraordinary expenses, if any.
27
Notes to Financial Statements/May 31, 1996
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES - CONT.
OTHER: The Funds pay no compensation to their officers, all of whom are
employees of the Adviser.
The Funds' Trustees may participate in a deferred compensation plan which may be
terminated at any time. Obligations of the plan will be paid solely out of each
Fund's assets.
NOTE 4. PORTFOLIO INFORMATION
INVESTMENT ACTIVITY: During the six months ended May 31, 1996, purchases
and sales of investments, other than short-term obligations, were as
follows:
<TABLE>
<CAPTION>
Purchases Sales
<S> <C> <C>
Colonial Intermediate Tax-Exempt Fund $1,811,945 $4,897,912
---------- ----------
Colonial Short-Term Tax-Exempt Fund $ 0 $7,356,114
---------- ----------
</TABLE>
Unrealized appreciation (depreciation) at May 31, 1996, based on cost of
investments for both financial statement and federal income tax purposes were as
follows:
<TABLE>
<CAPTION>
Colonial Colonial
Intermediate Short-Term
Tax-Exempt Fund Tax-Exempt Fund
<S> <C> <C>
Gross unrealized appreciation $ 442,887 $ 22,735
Gross unrealized depreciation (134,229) (3,760)
--------- --------
Net unrealized appreciation $ 308,658 $ 18,975
--------- --------
</TABLE>
CAPITAL LOSS CARRYFORWARDS: At November 30, 1995, capital loss carryforwards
available (to the extent provided in regulations) to offset future realized
gains were approximately as follows:
Colonial Intermediate Tax-Exempt Fund:
<TABLE>
<CAPTION>
Year of Capital loss
expiration carryforward
---------- ------------
<S> <C>
2002 $151,000
2003 591,000
--------
$742,000
</TABLE>
Colonial Short-Term Tax-Exempt Fund:
<TABLE>
<CAPTION>
Year of Capital loss
expiration carryforward
---------- ------------
<S> <C>
2001 $ 1,000
2002 1,000
2003 137,000
--------
$139,000
</TABLE>
28
Notes to Financial Statements/May 31, 1996
Expired capital loss carryforwards, if any, are recorded as a reduction of
capital
To the extent loss carryforwards are used to offset any future realized gains,
it is unlikely that such gains would be distributed since they may be taxable to
shareholders as ordinary income.
OTHER: At May 31, 1996, CITEF had greater than 10% of its net assets invested in
Ohio and Texas. CSTTEF had greater than 10% of its net assets invested in Ohio.
There are certain risks arising from geographic concentration in any state.
Certain revenue or tax related events in a state may impair the ability of
certain issuers of municipal securities to pay principal and interest on their
obligations.
The Funds may focus their investments in certain industries, subjecting them to
greater risk than a fund that is more diversified.
CITEF may buy or sell municipal and Treasury bond futures contracts to manage
overall portfolio interest rate exposure and not for trading purposes. The use
of futures contracts involves certain risks, which include (1) imperfect
correlation between the price movement of the contracts and the underlying
securities, (2) inability to close out positions due to different trading hours,
or the temporary absence of a liquid market for either the contract or the
underlying securities, or (3) an inaccurate prediction by the Adviser of the
future direction of interest rates. Any of these risks may involve amounts
exceeding the variation margin recorded in CITEF's Statement of Assets and
Liabilities at any given time.
NOTE 5. OTHER RELATED PARTY TRANSACTIONS
At May 31, 1996, CSTTEF had one shareholder who owned greater than 5% of the
Fund's shares outstanding.
NOTE 6. LINE OF CREDIT
CITEF may borrow up to 10% of its net assets under a line of credit for
temporary or emergency purposes. Any borrowings bear interest at one of the
following options determined at the inception of the loan: (1) federal funds
rate plus 1/2 of 1%, (2) the lending bank's base rate or (3) IBOR offshore loan
rate plus 1/2 of 1%. There were no borrowings under the line of credit during
the six months ended May 31, 1996.
29
Shareholder Services
to Make Investing Easier
Colonial has one of the most extensive selections of shareholder services
available. Your financial adviser can help you arrange for any of these services
or you can call Colonial directly at 1-800-345-6611.
AFFORDABLE ADDITIONAL INVESTMENTS: Add to your account with as little as $50;
$25 for an IRA account.
FREE EXCHANGES*: Exchange all or part of your account into the same share class
of another Colonial fund, by phone or mail, as your needs change over time.
EASY ACCESS TO YOUR MONEY*: Make withdrawals from your account by phone, by mail
or for certain funds, by check.
ONE-YEAR REINSTATEMENT PRIVILEGE: If you need access to your money, but then
choose to return it to Colonial within one year, you can reinvest in any
Colonial fund of the same share class without any penalty or sales charge.
FUNDAMATIC: Make periodic investments as low as $50 from your checking account
to your Colonial account.
SYSTEMATIC WITHDRAWAL PLAN (SWP): Receive monthly, quarterly, or semiannual
payments via check or bank transmission. There is a $5,000 account value
required, but no minimum for the payment amount. The maximum annual withdrawal
is 12% of account balance at time SWP is established. SWPs by check are
processed on the 10th of each month.
AUTOMATED DOLLAR COST AVERAGING: Transfer money on a monthly basis from any
Colonial fund with a balance of $5,000 into the same share class of up to four
other Colonial funds. Minimum for each transfer is $100.
LOW COST IRAS: Choose from a broad range of retirement plans, including IRAs.
* Redemptions and exchanges are made at the next determined net asset value
after the request is received by Colonial. Proceeds may be more or less than
your original cost. The exchange privilege may be terminated at any time.
Investors who purchase Class B or Class D shares (for applicable funds), or $1
million or more of Class A shares, may be subject to a contingent deferred sales
charge.
30
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial Short-Term Tax-Exempt Fund and Colonial
Intermediate Tax-Exempt Fund is:
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Each fund mails one shareholder report to each shareholder address. If you would
like more than one report, please call our Literature Department at
1-800-248-2828 and additional reports will be sent to you.
This report has been prepared for shareholders of Colonial Short-Term Tax-Exempt
Fund and Colonial Intermediate Tax-Exempt Fund. This report may also be used as
sales literature when preceded or accompanied by the current prospectus which
provides details of sales charges, investment objectives and operating policies
of the Fund.
31
[COLONIAL MUTUAL FUNDS LOGO]
Mutual Funds for
Planned Portfolios
Trustees
ROBERT J. BIRNBAUM
Trustee (formerly Special Counsel, Dechert, Price & Rhoads; President and Chief
Operating Officer, New York Stock Exchange, Inc.)
TOM BLEASDALE
Trustee (formerly Chairman of the Board and Chief Executive Officer, Shore Bank
& Trust Company)
LORA S. COLLINS
Attorney, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
JAMES E. GRINNELL
Private Investor (formerly Senior Vice President-Operations, The Rockport
Company)
WILLIAM D. IRELAND, JR.
Trustee (formerly Chairman of the Board, Bank of New England-Worcester)
RICHARD W. LOWRY
Private Investor (formerly Chairman and Chief Executive Officer, U.S. Plywood
Corporation)
WILLIAM E. MAYER
Dean, College of Business and Management, University of Maryland (formerly Dean,
Simon Graduate School of Business, University of Rochester; Chairman and Chief
Executive Officer, C.S. First Boston Merchant Bank; and President and Chief
Executive Officer, The First Boston Corporation)
JAMES L. MOODY, JR.
Chairman of the Board, Hannaford Bros. Co. (formerly Chief Executive Officer,
Hannaford Bros. Co.)
JOHN J. NEUHAUSER
Dean, Boston College School of Management
GEORGE L. SHINN
Financial Consultant (formerly Chairman, Chief Executive Officer and Consultant,
The First Boston Corporation)
ROBERT L. SULLIVAN
Management Consultant (formerly Management Consultant, Saatchi and Saatchi
Consulting Ltd. and Principal and International Practice Director, Management
Consulting, Peat Marwick Main & Co.)
SINCLAIR WEEKS, JR.
Chairman of the Board, Reed & Barton Corporation
Colonial Investment Services, Inc., Distributor (C)1996
One Financial Center, Boston, Massachusetts 02111-2621, 617-426-3750
IS-03/367C-0596 M (7/96)
