COLONIAL
TAX-EXEMPT INSURED FUND
SEMIANNUAL REPORT
MAY 31, 1996
NOT FDIC- MAY LOSE VALUE
INSURED NO BANK GUARANTEE
COLONIAL TAX-EXEMPT INSURED FUND HIGHLIGHTS
DECEMBER 1, 1995 - MAY 31, 1996
INVESTMENT OBJECTIVE: Colonial Tax-Exempt Insured Fund seeks as high a level of
after-tax total return, as is consistent with prudent risk, by pursuing current
income exempt from federal income tax and opportunities for long-term
appreciation from a portfolio primarily invested in insured municipal bonds.
THE FUND IS DESIGNED TO OFFER:
- High monthly tax-free income
- Long-term appreciation
- Diversification
- Insured "AAA" quality holdings
PORTFOLIO MANAGER COMMENTARY: "The past six months have been challenging for
fixed income investments and the municipal bond market was no exception. Reports
of stronger economic activity caused interest rates to reverse direction and
move sharply higher, depressing municipal bond prices."
COLONIAL TAX-EXEMPT INSURED FUND PERFORMANCE
<TABLE>
<CAPTION>
CLASS A CLASS B
<S> <C> <C>
Inception dates 11/20/85 5/5/92
Distributions declared per share* $0.203 $0.172
SEC yields on 5/31/96** 4.44% 3.90%
Taxable-equivalent SEC yields*** 7.35% 6.46%
Total returns, assuming reinvestment
of all distributions and no sales
charge or contingent deferred sales
charge (CDSC) --
6 months (2.03)% (2.39)%
Net asset value per share at 5/31/96 $8.01 $8.01
</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%.
MATURITY BREAKDOWN
(as of 5/31/96)
<TABLE>
<S> <C>
1 - 3 years ..................................................... 2.1%
3 - 5 years ..................................................... 7.4%
5 - 7 years ..................................................... 2.2%
7 - 10 years .................................................... 1.1%
10 - 15 years ................................................... 10.9%
15 - 20 years ................................................... 23.8%
20 - 25 years ................................................... 25.5%
25+ years ....................................................... 24.5%
Cash and equivalents ............................................ 2.5%
</TABLE>
Because the Fund is actively managed, maturity weightings will change.
2
PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
[PHOTOGRAPH OF HAROLD W. COGGER, PRESIDENT]
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.
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 Colonial Tax-Exempt Insured Fund and four other Colonial
tax-exempt funds.
Q: WHAT WAS YOUR INVESTMENT STRATEGY DURING THE PAST SIX MONTHS?
A: We maintained our emphasis on insured municipal bonds, which comprised over
90% of the Fund's holdings and are rated AAA by the major bond rating agencies
- -- the highest quality rating available. At the beginning of the period, the
Fund was positioned to take advantage of a declining interest rate environment.
Interest rates did, in fact, decline early in the period, as the 30-year
Treasury bond yield fell from 6.08% on December 1, 1995 to 6.03% on February 12,
1996. Conversely, interest rates rose to 6.99% by the end of the period. As a
result, the Fund shifted its investment strategy mid-way through the period to
reflect a change in expected economic conditions. We shortened the Fund's
duration to reduce its sensitivity to changes in interest rates and to stem
potential losses from further interest rate increases. This strategic shift
allowed the Fund to recover some of the ground it gave 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 was
clearly the biggest factor, one that had a negative effect on performance. On
the other hand, positive factors included a partial recovery from the fears
generated by tax reform proposals, which resulted in municipal bonds
appreciating relative to Treasury bonds, and a larger supply of municipal bonds
compared to 1995, which allowed the Fund to buy bonds at more attractive prices.
Q: HOW DID THE FUND'S SIX MONTH PERFORMANCE COMPARE TO THE LEHMAN BROTHERS
MUNICIPAL BOND INDEX?
A: The Fund underperformed the Lehman Brothers Municipal Bond Index, a
broad-based, unmanaged index that tracks the performance of the municipal bond
market. The total return for the Fund's Class A shares, based on net asset
value, was down 2.03% while the return on the Lehman Brothers Municipal Bond
Index was down 0.58%.
It is important to note that the Index contains lower quality bonds in addition
to AAA-rated insured municipal bonds. Because the Fund does not invest in these
lower quality bonds, which typically generate higher returns than AAA rated
bonds, it would be reasonable to expect the Fund to post somewhat lower returns
than the Index.
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 have positioned the fund defensively in anticipation of lower
prices and higher yields in the tax-exempt bond market. 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 TAX-EXEMPT INSURED FUND INVESTMENT PERFORMANCE
Change in Value of $10,000 from 5/86 - 5/96
Based on Net Asset Value (NAV) and Maximum Offering Price (MOP)
for Class A Shares
[GRAPH DEPICTING NET ASSET (NAV) AND MAXIMUM OFFERING PRICE (MOP)
FOR CLASS A SHARES]
<TABLE>
<CAPTION>
Label A B C
- ----------------------------------------------------------------
Label CTEIF Lehman NAV MOP
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
1 5/86 10000 10000 9525
2 10086.26 10110.67 9630.41
3 10166.17 10117.23 9636.66
4 10698.03 10572.01 10069.84
5 10673.69 10525.5 10025.54
6 10855.74 10772.3 10260.62
7 11116.11 10953.33 10433.05
8 11101.82 10899.37 10381.65
9 11475.44 11230.2 10696.76
10 11507.19 11300.56 10763.78
11 11337.84 11149.49 10619.89
12 10701.2 10398.22 9904.3
13 10583.71 10245.08 9758.44
14 10920.82 10542.5 10041.73
15 11021.9 10657.43 10151.21
16 11070.59 10688.43 10180.73
17 10618.64 10174.24 9690.96
18 10618.11 10264.22 9776.67
19 10957.86 10587.13 10084.24
20 11100.22 10649.66 10143.8
21 11543.7 11078.65 10552.41
22 11679.18 11170.76 10640.15
23 11511.95 11011.37 10488.33
24 11602.97 11059.86 10534.52
25 11615.14 11063.53 10538.01
26 11841.64 11218.15 10685.29
27 11921.02 11313.03 10775.66
28 11968.12 11332.02 10793.75
29 12239.08 11535.39 10987.46
30 12517.97 11740 11182.35
31 12383.55 11650.53 11097.13
32 12598.94 11826.4 11264.65
33 12895.3 12034.59 11462.95
34 12714.84 11912.28 11346.45
35 12725.42 11932.05 11365.27
36 13098.51 12175.82 11597.47
37 13401.75 12356.53 11769.59
38 13606.03 12522.09 11927.29
39 13785.96 12623.51 12023.89
40 13576.39 12529.61 11934.45
41 13534.58 12517.2 11922.63
42 13713.45 12620.41 12020.94
43 14005.05 12823.65 12214.52
44 14108.25 12911.31 12298.02
45 13965.89 12797.98 12190.07
46 14123.07 12937.46 12322.93
47 14137.89 12958.68 12343.14
48 13965.37 12809.29 12200.85
49 14359.63 13122.56 12499.24
50 14500.93 13230.47 12602.03
51 14756.54 13408.25 12771.36
52 14405.67 13203.11 12575.96
53 14382.91 13207.4 12580.05
54 14687.74 13423.6 12785.98
55 15059.78 13676.53 13026.89
56 15126.46 13732.77 13080.46
57 15329.68 13896.64 13236.55
58 15437.11 14007.73 13342.36
59 15474.15 14028.59 13362.23
60 15713.88 14232 13555.98
61 15898.57 14363.33 13681.07
62 15868.4 14329.22 13648.58
63 16113.95 14480.29 13792.48
64 16345.74 14632.18 13937.15
65 16582.83 14803.51 14100.34
66 16755.88 14938.07 14228.51
67 16776.52 14997.71 14285.32
68 17176.07 15340.77 14612.09
69 17166.01 15360 14630.4
70 17192.47 15379.22 14648.71
71 17235.87 15340.48 14611.81
72 17400.45 15437.58 14704.29
73 17655 15613.32 14871.69
74 17996.34 15868.31 15114.57
75 18656.27 16321.89 15546.6
76 18405.95 16123.71 15357.83
77 18487.45 16223.14 15452.54
78 18178.92 15963.09 15204.84
79 18690.67 16325.07 15549.63
80 18933.58 16484.27 15701.27
81 19111.92 16664.44 15872.88
82 20000.46 17273.79 16453.29
83 19759.67 17107.2 16294.61
84 20030.1 17269.12 16448.84
85 20195.74 17307.7 16485.58
86 20575.71 17592.26 16756.63
87 20596.88 17606.78 16770.45
88 21123.97 17935.67 17083.73
89 21399.69 18118.73 17258.09
90 21440.97 18133.99 17272.62
91 21181.13 17957.56 17104.57
92 21727.28 18290.35 17421.56
93 21982.89 18453.21 17576.69
94 21254.17 17972.59 17118.89
95 19984.59 17274.08 16453.56
96 20138.06 17374.21 16548.93
97 20373.03 17495.79 16664.74
98 20127.56 17421.34 16593.83
99 20645.66 17720.5 16878.77
100 20689.58 17755.75 16912.35
101 20210.11 17480.74 16650.41
102 19589.34 17116.14 16303.12
103 19072.3 16770.27 15973.68
104 19749.69 17166.56 16351.15
105 20618.13 17700.22 16859.46
106 21457.99 18236.05 17369.84
107 21716.25 18409.2 17534.77
108 21705.67 18376.27 17503.4
109 22629.68 18917.69 18019.1
110 22212.66 18606.63 17722.82
111 22326.44 18687.93 17800.26
112 22641.85 18931.25 18032.01
113 22819.14 19058.74 18153.45
114 23370.58 19444.94 18521.3
115 24503.63 19879.71 18935.42
116 24348.04 20150.53 19193.38
117 24451.77 20279.44 19316.16
118 24154.35 19953.52 19005.73
119 23711.4 19530.82 18603.11
120 23616.14 19467.91 18543.19
121 5/96 23626.72 19476.87 18551.72
</TABLE>
A $10,000 investment in Class B shares made on 5/5/92 at NAV would have been
valued at $12,233 on 5/31/96. The same investment based on contingent deferred
sales charge (CDSC) would have grown to $11,933 on 5/31/96.
AVERAGE ANNUAL TOTAL RETURNS
As of 6/30/96 (Most Recent Quarter End)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES
INCEPTION 11/20/85 5/5/92
NAV MOP NAV W/CDSC
- --------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
1 YEAR 5.77% 0.75% 4.99% (0.01)%
- --------------------------------------------------------------------------------
5 YEARS 6.55% 5.52% -- --
- --------------------------------------------------------------------------------
10 YEARS 6.89% 6.37% -- --
- --------------------------------------------------------------------------------
Since inception 7.66% 7.17% 5.21% 4.80%
- --------------------------------------------------------------------------------
</TABLE>
The Lehman Brothers Municipal Bond Index is a broad-based, unmanaged index that
tracks the performance of the municipal bond market. Unlike mutual funds,
indexes are not investments, 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
4.75%. The CDSC returns reflects the maximum charge of 5% for one year and 2%
since inception.
5
INVESTMENT PORTFOLIO
MAY 31, 1996 (UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
MUNICIPAL BONDS - 96.1% PAR VALUE
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EDUCATION - 9.8%
EDUCATION
IL Chicago Board Education,
General Obligation Lease Certificates,
Series 1992-A:
6.250% 01/01/15 $ 6,000 $ 6,187
6.000% 01/01/20 2,000 1,970
IN Whitko Middle School Building
Corp. First Mortgage, Series 1991,
6.750% 07/15/12 1,000 1,052
MA Health and Educational Facilities:
Harvard University,
Series N,
6.250% 04/01/20 6,760 7,106
Northeastern University:
Series 1988-B,
7.600% 10/01/10 1,000 1,080
Series E,
6.550% 10/01/22 1,500 1,571
NH Higher Educational and Health Facilities
University Systems of New Hampshire,
Series 1992,
6.250% 07/01/20 2,000 2,045
NY State Dormitory Authority,
Series 1993-A,
6.000% 07/01/20 3,000 3,045
PA State Higher Educational Facilities
Authority, Temple University, Series 1,
6.500% 04/01/21 250 257
UT State Municipal Finance Co-Operative
Local Government, Pooled Capital
Improvement,
6.800% 05/01/12 1,000 1,067
WV School Building Authority, Capital
Import Revenue Bonds, Series 1990-B,
6.750% 07/01/17 75 79
-------
25,459
-------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GENERAL OBLIGATION - 10.6%
AZ Maricopa County School District,
Number 8 Osborn,
7.500% 07/01/08 (a) 1,235 1,448
AZ Mohave County Unified High School
District, Series B,
8.500% 07/01/06 250 313
</TABLE>
6
<TABLE>
<CAPTION>
Investment Portfolio/May 31, 1996
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
CA State,
Series 1995,
10.000% 10/01/06 $ 1,000 $ 1,361
CO Highlands Ranch Metropolitan District 2
6.500% 06/15/12 1,000 1,069
DC District of Columbia,
Series 1993-B1,
5.500% 06/01/09 1,000 961
GA Columbia County School District,
Series A,
6.750% 04/01/08(a) 1,695 1,894
IL Chicago Series A-2,
6.250% 01/01/14 4,000 4,140
LA State, Series 1991,
(b) 09/01/16 2,000 575
MD Baltimore:
7.000% 10/15/08 300 341
7.000% 10/15/09(a) 1,055 1,195
Series A,
7.500% 06/01/07 350 406
MI Big Rapids Public School District,
Series 1995,
5.625% 05/01/25 2,725 2,531
MI Brighton Area School District,
Series II,
(b) 05/01/17 10,340 2,856
MI Mona Shores School District,
Series 1995,
5.500% 05/01/14 2,000 1,912
NV Las Vegas-Clark
County Library District,
7.500% 02/01/02 (a) 1,000 1,116
PA Philadelphia School District, Series B,
5.500% 09/01/25 5,000 4,637
WA Bellevue Convention Center Authority,
(b) 02/01/24 5,000 913
-------
27,668
-------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HEALTHCARE - 7.9%
HOSPITALS - 7.0%
AZ Scottsdale Industrial Development
Authority, Scottsdale Memorial Hospital,
Series 1987-A,
8.500% 09/01/17 500 533
FL Dunedin,
Mease Health Care Center,
Series 1991,
6.750% 11/15/11 100 111
</TABLE>
7
<TABLE>
<CAPTION>
Investment Portfolio/May 31, 1996
- ----------------------------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HEALTHCARE - CONT
HOSPITALS - CONT.
IL Health Facilities Authority:
Methodist Health Services Corp.:
Series 1985-G,
8.000% 08/01/15 $ 965 $ 1,047
Series 1992-B, RIB (variable rate),
9.618% 05/01/21 500 556
Rockford Memorial Hospital, Series B,
6.750% 08/15/18 50 52
MA Health and Educational Facilities:
McLean Hospital, Series C,
6.625% 07/01/15 500 524
New England Deaconess Hospital,
Series D,
6.875% 04/01/22 2,500 2,666
Valley Regional Health System,
Series C,
7.000% 07/01/08(a) 1,585 1,755
MS State Hospital Equipment and
Facilities Authority,
Rush Medical Foundation Project,
6.700% 01/01/18 250 259
NV Reno Hospital, St. Mary's Regional
Medical Center, Series 1991-A,
6.700% 07/01/21 1,000 1,059
OK State Industrial Authority,
Baptist Medical Center,
Series C,
7.000% 08/15/04(a) 1,500 1,661
TN Knox City Health, Education and
Housing Facilities,
5.250% 01/01/15 5,000 4,675
TX Harris County Health Facilities
Development Corp.,
Texas Children's Hospital, Series A,
7.000% 10/01/19 50 55
WI State Health & Educational
Facilities Authority:
Bellin Memorial Hospital,
6.625% 02/15/08(a) 1,000 1,089
Milwaukee Regional Medical Center,
Series 1990,
7.500% 08/01/11 1,000 1,082
</TABLE>
8
<TABLE>
<CAPTION>
Investment Portfolio/May 31, 1996
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Waukesha Memorial Hospital:
Series B,
7.250% 08/15/19 $ 940 $ 1,046
Series 1990-B,
7.250% 08/15/19 60 66
-------
18,236
-------
NURSING HOMES - 0.9%
WA Health & Educational Facilities
Authority, Fransican Eldercare,
6.875% 01/01/21 2,171 2,402
-------
- --------------------------------------------------------------------------------------------------------------
HOUSING - 5.2%
MULTI-FAMILY - 1.1%
IL Onterie Center Housing Finance Corp.,
Onterie Center Project,
Series 1992-A,
7.050% 07/01/27 2,000 2,093
KY Housing Corp.,
Multi-Family Mortgage, Series 1985-A,
8.875% 07/01/19 235 239
MD Howard County Medical Mortgage
Heartlands Elderly Apartments,
Series 1985,
8.875% 12/01/10 495 517
-------
2,849
-------
SINGLE-FAMILY - 4.1%
AK State Housing Finance Corp.,
Series 1990-A2,
7.000% 12/01/11 230 241
CA Delta County Home Mortgage Finance
Authority,
Series 1992-A,
6.750% 12/01/25 3,000 3,015
FL Brevard County Housing Finance Authority:
Series 1991,
7.350% 07/01/24 860 898
Series C,
7.000% 09/01/23 40 41
MA State Housing Finance Agency:
Series 21,
7.125% 06/01/25 1,310 1,369
Series A,
6.400% 01/01/09 (a) 2,000 2,075
MS Housing Finance Corp.,
8.250% 10/15/18 2,995 3,126
-------
10,765
-------
</TABLE>
9
<TABLE>
<CAPTION>
Investment Portfolio/May 31, 1996
---------------------------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
JUSTICE & PUBLIC ORDER - 3.2%
IN State Office Building Commission,
Women's Prison,
Series B,
6.250% 07/01/16 $ 8,000 $ 8,210
-------
- ------------------------------------------------------------------------------------------------------
PUBLIC FACILITIES IMPROVEMENT - 0.6%
CA Fairs Financing Authority,
Series 1991,
6.500% 07/01/11 1,300 1,360
IL State Dedicated Tax Civic Center,
Series A,
7.000% 12/15/13 200 214
-------
1,574
-------
- ------------------------------------------------------------------------------------------------------
PUBLIC INFRASTRUCTURE - 1.0%
FL Gulf Breeze
Local Government Loan Program,
Series 1985-B,
8.000% 12/01/15 1,000 1,096
MI Municipal Bond Authority, Local
Government Loan Program:
Series 1991-C,
(b) 06/15/15 3,380 1,077
Series G,
(b) 05/01/18 2,000 530
-------
2,703
-------
- ------------------------------------------------------------------------------------------------------
REFUNDED/ESCROW/SPECIAL OBLIGATIONS (c) - 11.9%
CA Alameda County, Certificates of Participation,
Series 1985-1,
7.250% 12/01/08 (a) 1,300 1,459
CA East Bay Municipal Utilities District,
Water System Subordinated,
Series 1990,
7.500% 06/01/18 2,500 2,803
CA Los Angeles County Transport Commission
Sales Tax, Metropolitan Train,
Series 1991-A,
6.750% 07/01/18 1,000 1,107
FL Hollywood Water & Sewer Revenue,
6.750% 10/01/11 50 56
IL Chicago, General Obligation,
Central Public Library Project,
Series 1988-C,
6.850% 01/01/17 1,000 1,112
IL Decatur,
6.900% 10/01/14 250 275
</TABLE>
10
<TABLE>
<CAPTION>
Investment Portfolio/May 31, 1996
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LA New Orleans International Airport
General Purpose, Series 1987-A,
8.875% 08/01/17 $ 5,000 $ 5,363
MA Bay Transportation Authority:
Certificates of Participation,
Series 1990-A,
7.650% 08/01/15 1,000 1,131
General Transportation System,
Series 1990-A,
7.625% 03/01/15 2,000 2,235
MI Chippewa Valley Schools,
Series 1992,
6.375% 05/01/15 4,545 4,920
NY New York City Municipal Finance
Authority Water and Sewer Systems
Series 1991-C,
7.000% 06/15/16 1,500 1,671
NY State Dormitory Authority,
City University System, Series
1990-F,
7.500% 07/01/20 2,000 2,247
NY State Medical Care Facilities
Finance Agency, St. Luke's-Roosevelt
Hospital Center, Series 1989-B,
7.450% 02/15/29 500 556
OK State Industrial Authority,
Baptist Medical Center,
Series A,
7.000% 08/15/14 150 166
PA Pittsburgh Water & Sewer Authority,
Series A,
6.500% 09/01/14 270 295
SC Charleston County, Certificate
Of Participation, Series 1991,
7.100% 06/01/11 2,000 2,238
TN Chattanooga-Hamilton County
Series 1991-B, RIB (variable rate),
9.875% 05/25/21 1,000 1,194
TX Coastal Water Authority,
Water Conveyance System, Series 1991,
6.250% 12/15/17 1,750 1,794
TX Colorado River Municipal Water
District, Water Transmission Facilities,
Series 1991-A,
6.625% 01/01/21 250 268
-------
30,890
-------
</TABLE>
11
<TABLE>
<CAPTION>
Investment Portfolio/May 31, 1996
- ---------------------------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
RESOURCE RECOVERY - 1.0%
FL Palm Beach County Solid Waste Authority,
Series 1984,
8.375% 07/01/10 $1,000 $1,068
SC Charleston County Solid Waste User Fee,
6.500% 01/01/09(a) 1,405 1,479
------
2,547
------
...................................................................................................
STUDENT LOAN - 1.6%
AL State Higher Education Loan Corp.,
Series 1994-C,
5.850% 09/01/04(a) 1,000 1,026
MA Education Loan Authority,
Issue D, Series 1 , 7.250% 01/01/09 795 825
NM State Educational Assistance
Foundation, Series A,
6.700% 04/01/02 200 207
PA Student Loan RIB (variable rate), Series 1990-B,
10.924% 03/01/20 2,000 2,135
------
4,193
------
...................................................................................................
TAX ALLOCATION - 1.1%
NY State Local Government Assistance Corp.,
Series 1993-E,
5.000% 04/01/21 2,273 2,778
------
...................................................................................................
TRANSPORTATION - 11.1%
DC Metropolitan Area Transit Authority,
6.000% 07/01/10 1,000 1,035
GA Atlanta Airport Facilites Revenue,
Series A,
6.500% 01/01/07(a) 1,000 1,094
HI State Airport System Revenue,
Series 2,
6.750% 07/01/21 250 261
IL Chicago O'Hare International Airport
Special Facility, International Terminal,
6.750% 01/01/12(a) 300 315
IL Regional Transportation Authority,
Series C,
7.750% 06/01/20 5,000 6,138
MA Massachusetts Bay Transportation
Authority,
Series B,
5.375% 03/01/25 5,000 4,544
MA State Port Authority,
7.500% 07/01/20 1,000 1,083
</TABLE>
12
<TABLE>
<CAPTION>
Investment Portfolio/May 31, 1996
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NV Clark County Airport Improvement
McCarren International Airport Las Vegas
Series 1988,
8.250% 07/01/15 $ 3,500 $ 3,798
OR Portland International Airport,
Series 7-B,
7.100% 07/01/21 1,000 1,081
PA Allegheny Airport,
Greater Pittsburgh International:
Series 1988-C,
8.250% 01/01/16 3,250 3,469
Series 1992-B,
6.625% 01/01/22 1,000 1,030
SC State Ports Authority:
Series 1991:
6.500% 07/01/06 250 265
6.750% 07/01/21 3,000 3,158
TX Dallas-Fort Worth Regional Airport,
Series A,
7.375% 11/01/11 1,380 1,544
TX Houston Airport System Revenue,
Series A,
6.750% 07/01/21 200 209
-------
29,024
-------
.........................................................................................................
TURNPIKE/TOLLROAD/BRIDGE - 1.4%
NY Triborough Bridge & Tunnel Authority,
Series A,
6.625% 01/01/17 250 263
PR Commonwealth of Puerto Rico,
Highway & Transportation Authority,
6.250% 07/01/12 3,000 3,229
TX Harris County,
Toll Road Revenue,
6.500% 08/15/11 120 127
-------
3,619
-------
.........................................................................................................
UTILITY - 18.4%
INVESTOR OWNED - 4.6%
DE State Economic Development Authority,
New Castle County Gas System,
Series 1991-C,
7.150% 07/01/21 1,000 1,089
HI State Department of Budget & Finance,
Hawaiian Electric Co.,
Series A,
6.600% 01/01/25 4,000 4,135
</TABLE>
13
<TABLE>
<CAPTION>
Investment Portfolio/May 31, 1996
-------------------------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UTILITY - CONT
INVESTOR OWNED - CONT
MI St. Clair County Economic
Development Corp., Detroit Edison Co.,
Series 1933-AA,
6.400% 08/01/24 $ 1,000 $ 1,043
NV Clark County Pollution Control
Nevada Power Company, Series 1992-B,
6.600% 06/01/19 3,500 3,658
NY New York Energy Research & Development
Adjusted Gas Facilities,
Brooklyn Union Gas Company Series 1989-B
6.750% 02/01/24 2,000 2,130
-------
12,055
-------
JOINT POWER AUTHORITY - 7.8%
FL State Municipal Power Agency,
Series 1993,
5.100% 10/01/25 5,000 4,350
GA Municipal Electrical Authority,
Special Obligation, Project One,
Fifth Cross,
6.400% 01/01/13 1,000 1,066
MN Southern Minnesota Municipal
Power Agency:
5.000% 01/01/16 1,000 865
Series A,
(b) 01/01/24 21,000 3,938
SC Piedmont Municipal Power Agency,
Series A,
6.125% 01/01/07 500 530
TX State Municipal Power Agency:
(b) 09/01/10 (a) 5,000 2,181
(b) 09/01/11 7,900 3,219
(b) 09/01/12 3,000 1,144
(b) 09/01/15 8,975 2,771
WA State Public Power Supply System,
Nuclear Project No. 2, Series A,
6.500% 07/01/05 200 213
-------
20,277
-------
MUNICIPAL ELECTRIC - 6.0%
AK Anchorage Electric Utilities Revenue:
Series 1993,
8.000% 12/01/09 (a) 1,000 1,221
Series 1996,
6.500% 12/01/10 3,075 3,325
</TABLE>
14
<TABLE>
<CAPTION>
Investment Portfolio/May 31, 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SC State Public Service Authority:
Series A,
6.250% 01/01/22 $ 3,500 $ 3,574
Series C,
5.125% 01/01/32 5,000 4,313
SD Heartland Consumers Power District,
6.000% 01/01/09 300 303
TX Austin Utilities System Revenue,
7.000% 05/15/16 1,200 1,295
WA Clark County Public Utilities
District Number 001 Electric System,
6.500% 01/01/11 200 208
WA Snohomish County Public Utilities, 1993,
5.500% 01/01/20 1,500 1,382
-------
15,621
-------
......................................................................................................
WATER & SEWER - 11.3%
FL Reedy Creek Improvement District,
Series 1,
5.000% 10/01/19 5,000 4,381
FL Saint John's County Water and Sewer,
Saint Augustine Shores System,
Series 1991-A:
(b) 06/01/13 2,600 946
(b) 06/01/14 1,500 514
GA Fulton County Water and Sewer,
6.375% 01/01/14 6,000 6,443
IL Kankakee Sewer, Series 1991,
7.000% 05/01/16 1,000 1,075
MA Boston Water & Sewer Commission,
Series A,
5.250% 11/01/19 3,465 3,166
PA Pottstown Borough Authority Sewer,
Guaranteed Sewer Revenue, Series 1991,
(b) 11/01/16 1,000 294
VA Loudoun County Sanitation Water & Sewer,
6.250% 01/01/16 1,000 1,038
VA Prince William County Services
Authority,
5.000% 07/01/21 4,900 4,232
VA Roanoke County Water System,
5.000% 07/01/21 3,500 3,067
VA Virginia Beach Water and Sewer,
5.125% 02/01/19 4,880 4,410
-------
29,566
-------
TOTAL MUNICIPAL BONDS (cost of $239,624)(d) 250,436
-------
</TABLE>
15
<TABLE>
<CAPTION>
Investment Portfolio/May 31, 1996
----------------------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 2.3% PAR VALUE
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
VARIABLE RATE DEMAND NOTES (e)
ID State Health Facilities Authority,
St. Lukes Regional Medical Facility,
Series 1995,
3.700% 05/01/22 $ 1,565 $ 1,565
IL State Health Facilities Authority,
Franciscan Sisters Health Center,
3.800% 01/01/18 1,335 1,335
ND Grand Forks Healthcare Daily,
3.750% 12/01/25 1,200 1,200
NM Farmington,
Arizona Public Service Co.,
Four Corners Project, Series 1994-B,
3.700% 09/01/24 1,000 1,000
NY New York City,
Series 1994-B4,
3.800% 08/15/23 1,000 1,000
--------
TOTAL SHORT-TERM OBLIGATIONS 6,100
--------
OTHER ASSETS & LIABILITIES, NET - 1.6% 4,066
- -------------------------------------------------------------------------------------------------------
NET ASSETS - 100.0% $260,602
--------
</TABLE>
NOTES TO INVESTMENT PORTFOLIO:
---------------------------------------------------------------------------
(a) These securities, or a portion thereof, with a total market value of
$20,307, are being used to collateralize open futures contracts.
(b) Zero coupon bond.
(c) The Fund has been informed that the issuer has placed direct
obligations of the U.S. Government in an irrevocable trust, solely for
the payment of the interest and principal.
(d) Cost for federal income tax purposes is the same.
(e) Variable rate demand notes are considered short-term obligations.
Interest rates change periodically on 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.
16
Investment Portfolio/May 31, 1996
--------------------------------------------------------------------------
Short futures contracts open at May 31, 1996:
<TABLE>
<CAPTION>
Par value Unrealized
covered Expiration appreciation
Type by contracts month at 5/31/96
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Treasury bond $16,500 June $624
</TABLE>
ACRONYM NAME
---------------------------- ------------------------------
RIB Residual Interest Bond
SUMMARY OF SECURITIES BY INSURER
<TABLE>
<CAPTION>
% of
Insurer Net Assets
------- ----------
<S> <C>
Municipal Bond Insurance Agency 32.8
AMBAC Indemnity Corporation 28.0
Financial Guarantee Insurance Company 24.1
Uninsured Securities 7.6
Financial Security Assurance 3.1
Capital Guarantee Insurance Company 2.1
Bond Investment Guarantee Insurance 1.5
Connie Lee Insurance Company 0.8
--------
100.0
--------
</TABLE>
See notes to financial statements.
17
STATEMENT OF ASSETS & LIABILITIES
MAY 31, 1996 (UNAUDITED)
(in thousands except for per share amounts and footnotes)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value (cost $239,624) $250,436
Short-term obligations 6,100
--------
256,536
Cash $ 538
Receivable for:
Interest 4,971
Variation margin on futures 160
Investments sold 25
Fund shares sold 9
Other 11 5,714
------ --------
Total Assets 262,250
LIABILITIES
Payable for:
Distributions 1,079
Fund shares repurchased 563
Accrued:
Deferred Trustees fees 3
Other 3
------
Total Liabilities 1,648
--------
NET ASSETS $260,602
--------
Net asset value & redemption price per share -
Class A ($214,961/26,841) $ 8.01
--------
Maximum offering price per share - Class A
($8.01/0.9525) $ 8.41 (a)
--------
Net asset value & offering price per share -
Class B ($45,641/5,699) $ 8.01 (b)
--------
COMPOSITION OF NET ASSETS
Capital paid in $254,074
Undistributed net investment income 179
Accumulated net realized loss (5,087)
Net unrealized appreciation (depreciation) on:
Investments 10,812
Open futures contracts 624
--------
$260,602
--------
</TABLE>
(a) On sales of $50,000 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.
18
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MAY 31, 1996
(UNAUDITED)
(in thousands)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest $ 8,296
EXPENSES
Management fee $ 768
Service fee 347
Distribution fee - Class B 181
Transfer agent 231
Bookkeeping fee 54
Trustees fee 13
Custodian fee 6
Audit fee 17
Legal fee 4
Registration fee 23
Reports to shareholders 5
Other 11 1,660
--------- ---------
Net Investment Income 6,636
---------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain on:
Investments 494
Closed futures contracts 16
---------
Net Realized Gain 510
Net unrealized appreciation (depreciation)
during the period on:
Investments (13,791)
Open futures contracts 910
---------
Net Unrealized Loss (12,881)
---------
Net Loss (12,371)
---------
Net Decrease in Net Assets from Operations $ (5,735)
---------
</TABLE>
See notes to financial statements.
19
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 $ 6,636 $ 14,218
Net realized gain 510 819
Net unrealized appreciation (depreciation) (12,881) 30,648
-------- --------
Net Increase (Decrease) from Operations (5,735) 45,685
Distributions:
From net investment income - Class A (5,681) (12,225)
From net investment income - Class B (1,010) (2,207)
-------- --------
(12,426) 31,253
-------- --------
Fund Share Transactions:
Receipts for shares sold - Class A 7,624 20,382
Receipts for shares issued in the acquisition
of Liberty Financial Insured Municipal Fund -- 42,751
Value of distributions reinvested - Class A 3,339 6,971
Cost of shares repurchased - Class A (26,626) (53,716)
-------- --------
(15,663) 16,388
-------- --------
Receipts for shares sold - Class B 2,150 5,062
Value of distributions reinvested - Class B 572 1,259
Cost of shares repurchased - Class B (4,941) (7,762)
-------- --------
(2,219) (1,441)
-------- --------
Net Increase (Decrease) from
Fund Share Transactions (17,882) 14,947
-------- --------
Total Increase (Decrease) (30,308) 46,200
NET ASSETS
Beginning of period 290,910 244,710
-------- --------
End of period (including undistributed net
investment income of $179 and $230,
respectively) $260,602 $290,910
-------- --------
NUMBER OF FUND SHARES
Sold - Class A 922 2,596
Issued in the acquisition of Liberty
Financial Insured Municipal Fund -- 5,319
Issued for distributions reinvested - Class A 402 873
Repurchased - Class A (3,233) (6,739)
-------- --------
(1,909) 2,049
-------- --------
Sold - Class B 261 639
Issued for distributions reinvested - Class B 69 158
Repurchased - Class B (600) (977)
-------- --------
(270) (180)
-------- --------
</TABLE>
See notes to financial statements.
20
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1996 (UNAUDITED)
NOTE 1. INTERIM FINANCIAL STATEMENTS
................................................................................
In the opinion of management of Colonial Tax-Exempt Insured Fund (the Fund), 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 Fund at May 31, 1996, and the results of its
operations, the changes in its net assets and the financial highlights for the
six months then ended.
NOTE 2. ACCOUNTING POLICIES
................................................................................
ORGANIZATION: The Fund is a diversified portfolio of a Massachusetts business
trust, registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company. The Fund's objective is to seek as high
a level of after-tax total return, as is consistent with prudent risk, by
pursuing current income exempt from federal income tax and opportunities for
long-term appreciation. The Fund may issue an unlimited number of shares. The
Fund 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.
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.
Options are valued at the last reported sale price, or in the absence of a sale,
the mean between the last quoted bid and asking price.
Futures contracts are valued based on the difference between the last sale price
and the opening price of the contract.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
Portfolio positions 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.
21
Notes to Financial Statements/May 31, 1996
- --------------------------------------------------------------------------------
NOTE 2. ACCOUNTING POLICIES - CONT.
................................................................................
Cost is determined and gains and losses are based upon the specific
identification method for both financial statement and federal income tax
purposes.
The Fund may trade securities on other than normal settlement terms. This may
increase the risk if the other party to the transaction fails to deliver and
causes the Fund to subsequently invest at less advantageous prices.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS: 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 distribution fee applicable to Class B shares only.
FEDERAL INCOME TAXES: Consistent with the 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.
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 Fund declares and records distributions daily
and pays monthly.
The character of income and gains to be distributed are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles. Reclassifications are made to the Fund's capital accounts to reflect
income and gains available for distribution (or available capital loss
carryforwards) under income tax regulations.
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES
................................................................................
MANAGEMENT FEE: Colonial Management Associates, Inc. (the Adviser) is the
investment Adviser of the Fund and furnishes accounting and other services and
office facilities for a monthly fee based on each fund's pro rata portion of the
combined average net assets of the Fund, Colonial Tax-Exempt Fund, and Colonial
High Yield Municipal Fund as follows:
22
Notes to Financial Statements/May 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Average Net Assets Annual Fee Rate
------------------ ---------------
<S> <C>
First $1 billion 0.60%
Next $2 billion 0.55%
Next $1 billion 0.50%
Over $4 billion 0.45%
</TABLE>
BOOKKEEPING FEE: The Adviser provides bookkeeping and pricing services for
$27,000 per year plus 0.035% of the Fund's average net assets over $50 million.
TRANSFER AGENT FEE: 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 the Fund's 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 the Fund's
principal underwriter. During the six months ended May 31, 1996, the Fund has
been advised that the Distributor retained net underwriting discounts of $12,127
on sales of the Fund's Class A shares and received contingent deferred sales
charges (CDSC) of $75,848 on Class B share redemptions.
The Fund has adopted a 12b-1 plan which requires it to pay the Distributor a
service fee equal to 0.25% annually of the Fund's net assets as of the 20th of
each month. The plan also requires the payment of a distribution fee to the
Distributor equal to 0.75% of the average net assets attributable to Class B
shares.
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.
OTHER: The Fund pays no compensation to its officers, all of whom are employees
of the Adviser.
The Fund's Trustees may participate in a deferred compensation plan which may be
terminated at any time. Obligations of the plan will be paid solely out of the
the 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 $33,093,822 and
$54,710,235, respectively.
Unrealized appreciation (depreciation) at May 31, 1996, based on cost of
investments for both financial statement and federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation $12,629,319
Gross unrealized depreciation (1,817,976)
-----------
Net unrealized appreciation $10,811,343
-----------
</TABLE>
23
Notes to Financial Statements/May 31, 1996
- --------------------------------------------------------------------------------
NOTE 4. PORTFOLIO INFORMATION - CONT.
................................................................................
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:
<TABLE>
<CAPTION>
Year of Capital loss
expiration carryforward
---------- ------------
<S> <C>
1996 $ 414,000
1998 180,000
2000 171,000
2001 982,000
2002 3,313,000
----------
$5,060,000
----------
</TABLE>
Of the loss carryforwards expiring in 2001 and 2002, $982,000 and $620,000,
respectively, were acquired in the merger with Liberty Financial Insured
Municipal Fund. Their availability may be limited in a given year.
Expired capital loss carryforwards, if any, are recorded as a reduction of
capital paid in.
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: The Fund has greater than 10% of its net assets at May 31, 1996, invested
in Massachusetts, Illinois, and Texas.
There are certain risks arising from geographic concentration in any state.
Certain revenue or tax related events in a state may impair the ability of
certain issuers of municipal securities to pay principal and interest on their
obligations.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
The Fund may purchase or sell municipal and Treasury bond futures contracts and
purchase and write options on futures. The Fund will invest in these instruments
to hedge against the effects of changes in the value of portfolio securities due
to anticipated changes in interest rates and/or market conditions, for duration
management, or when the transactions are economically appropriate to the
reduction of risk inherent in the management of the Fund and not for trading
purposes. The use of futures contracts and options involves certain risks which
include (1) imperfect correlation between the price movement of the instruments
and the underlying securities, (2) inability to close out a position due to
different trading hours, or the temporary absence of a liquid market for either
the instrument or the underlying securities or (3) an inaccurate prediction by
the Adviser of the future direction of interest rates. Any of these risks may
involve amounts exceeding the variation margin recorded in the Fund's Statement
of Assets and Liabilities at any given time.
24
Notes to Financial Statements/May 31, 1996
- --------------------------------------------------------------------------------
NOTE 5. LINE OF CREDIT
................................................................................
The Fund 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.
NOTE 6. MERGER INFORMATION
................................................................................
On March 24, 1995, Liberty Financial Insured Municipal Fund (LFIMF) was merged
into the Fund by a non-taxable exchange of 5,318,858 Class A shares of the Fund
(valued at $42,750,988) for the 4,080,498 of LFIMF shares then outstanding. The
assets of LFIMF acquired included unrealized appreciation of $282,748. The
aggregate net assets of the Fund and LFIMF immediately after the merger were
$300,749,659.
25
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 $ 8.380 $ 8.380 $ 7.450 $ 7.450
-------- ------- -------- -------
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income 0.202 0.171 0.418 0.359
Net realized and
unrealized gain (loss) (0.369) (0.369) 0.935 0.935
-------- ------- -------- -------
Total from Investment
Operations (0.167) (0.198) 1.353 1.294
-------- ------- -------- -------
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net
investment income (0.203) (0.172) (0.423) (0.364)
-------- ------- -------- -------
Net asset value -
End of period $ 8.010 $ 8.010 $ 8.380 $ 8.380
-------- ------- -------- -------
Total return (a) (2.03)%(b) (2.39)%(b) 18.55% 17.68%
-------- ------- -------- -------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.06 %(c)(d) 1.81 %(c)(d) 1.05 %(c) 1.80 %(c)
Net investment income 4.89 %(c)(d) 4.14 %(c)(d) 5.20 %(c) 4.45 %(c)
Portfolio turnover 24 %(d) 24 %(d) 31 % 31 %
Net assets at end
of period (000) $214,961 $45,641 $240,894 $50,016
</TABLE>
(a) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(b) Not annualized.
(c) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
(d) Annualized.
26
FINANCIAL HIGHLIGHTS - CONTINUED
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
Year ended November 30
---------------------------------------------------
1994 1993
Class A Class B Class A Class B
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 8.420 $ 8.420 $ 8.080 $ 8.080
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income 0.439 0.378 0.456 0.395
Net realized and
unrealized gain (loss) (0.977) (0.977) 0.338 0.338
-------- ------- -------- -------
Total from Investment
Operations (0.538) (0.599) 0.794 0.733
-------- ------- -------- -------
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net
investment income (0.432) (0.371) (0.454) (0.393)
-------- ------- -------- -------
Net asset value -
End of period $ 7.450 $ 7.450 $ 8.420 $ 8.420
-------- ------- -------- -------
Total return (a) (6.61)% (7.31)% 10.00 % 9.20 %
-------- ------- -------- -------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.05 % 1.80 % 1.07 % 1.82 %
Net investment income 5.44 % 4.69 % 5.44 % 4.69 %
Portfolio turnover 36 % 36 % 12 % 12 %
Net assets at end
of period (000) $198,909 $45,801 $241,610 $46,035
</TABLE>
27
FINANCIAL HIGHLIGHTS - CONTINUED
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
Year ended November 30
----------------------------------------
1992 1991
Class A Class B(a) Class A
--------- ------- --------
<S> <C> <C> <C>
Net asset value -
Beginning of period $ 7.880 $ 7.910 $ 7.660
--------- ------- --------
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income 0.480 0.240 0.496
Net realized and
unrealized gain 0.200 0.170 0.222
--------- ------- --------
Total from Investment
Operations 0.680 0.410 0.718
--------- ------- --------
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net
investment income (0.480) (0.240) (0.498)
--------- ------- --------
Net asset value -
End of period $ 8.080 $ 8.080 $ 7.880
--------- ------- --------
Total return (b) 8.85 % 5.23 %(c) 9.66 %
--------- ------- --------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.10 % 1.85 %(d) 1.08 %
Net investment income 5.97 % 5.22 %(d) 6.35 %
Portfolio turnover 7 % 7 % 8 %
Net assets at end
of period (000) $217,782 $16,519 $189,483
</TABLE>
(a) Class B shares were initially offered on May 5, 1992. Per share amounts
reflect activity from that date.
(b) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(c) Not annualized.
(d) Annualized.
28
HOW TO REACH COLONIAL
BY PHONE OR BY MAIL
BY TELEPHONE
COLONIAL CUSTOMER CONNECTION - 1-800-345-6611
For 24-hour account information, call from your touch-tone phone. (Rotary
callers will be automatically connected to a representative during business
hours.) A recorded message will guide you through the menu:
For fund prices, dividends, and capital gains information ....... press 1
For account information ......................................... press 2
To speak to a Colonial representative ........................... press 3
For yield and total return information .......................... press 4
For duplicate statements or new supply of checks ................ press 5
To order duplicate tax forms and year-end statements ............ press 6
(February through May)
To review your options at any time during your call ............. press *
To speak with a shareholder services representative about your account, call
Monday to Friday, 8:00 am to 8:00 pm ET, and Saturdays from February through
mid-April, 10:00 am to 2:00 pm ET.
COLONIAL TELEPHONE TRANSACTION DEPARTMENT - 1-800-422-3737
To purchase, exchange, or sell shares by telephone, call Monday to Friday, 9:00
am to 8:00 pm ET. Transactions received after the close of the New York Stock
Exchange will receive the next business day's closing price.
COLONIAL LITERATURE DEPARTMENT - 1-800-248-2828
To request literature on any Colonial fund, call Monday to Friday, 8:30 am to
6:30 pm ET.
BY MAIL
COLONIAL INVESTORS SERVICE CENTER, INC.
P.O. BOX 1722
BOSTON, MA 02105-1722
29
SHAREHOLDER COMMUNICATIONS
TO KEEP YOU INFORMED
To make recordkeeping easy and keep you up-to-date on the performance of your
investments, you can expect to receive the following information about your
Colonial account:
TRANSACTION CONFIRMATIONS: Each time you make a purchase, sale, or exchange, you
receive a confirmation statement within just a few days.
QUARTERLY STATEMENTS: Every three months, if any transactions are made that
affect your share balance, this statement reports on your account activity
during the quarter (including any reinvestment of dividends). This statement
also provides year-to-date information.
COLONIAL SHAREHOLDER NEWS: Mailed with your quarterly account statements, this
newsletter highlights timely investment strategies, portfolio manager
commentary, and shareholder service updates.
TAX FORMS AND YEAR-END TAX GUIDE: Easy-to-use forms and timely information are
designed to make tax reporting simpler. (Usually mailed in January.)
AVERAGE COST BASIS STATEMENTS: If you sold or exchanged shares during the year,
this statement may help you calculate your gain/loss for tax purposes. (Usually
mailed in February.)
30
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial Tax-Exempt Insured Fund is:
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Colonial Tax-Exempt Insured 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 Tax-Exempt Insured
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 LOGO]
MUTUAL FUNDS
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
TI-03/369C-0596 M (7/96)
47 14137.89 12958.68 12343.14
48 13965.37 12809.29 12200.85
49 14359.63 13122.56 12499.24
50 14500.93 13230.47 12602.03
51 14756.54 13408.25 12771.36
52 14405.67 13203.11 12575.96
53 14382.91 13207.4 12580.05
54 14687.74 13423.6 12785.98
55 15059.78 13676.53 13026.89
56 15126.46 13732.77 13080.46
57 15329.68 13896.64 13236.55
58 15437.11 14007.73 13342.36
59 15474.15 14028.59 13362.23
60 15713.88 14232 13555.98
61 15898.57 14363.33 13681.07
62 15868.4 14329.22 13648.58
63 16113.95 14480.29 13792.48
64 16345.74 14632.18 13937.15
65 16582.83 14803.51 14100.34
66 16755.88 14938.07 14228.51
67 16776.52 14997.71 14285.32
68 17176.07 15340.77 14612.09
69 17166.01 15360 14630.4
70 17192.47 15379.22 14648.71
71 17235.87 15340.48 14611.81
72 17400.45 15437.58 14704.29
73 17655 15613.32 14871.69
74 17996.34 15868.31 15114.57
75 18656.27 16321.89 15546.6
76 18405.95 16123.71 15357.83
77 18487.45 16223.14 15452.54
78 18178.92 15963.09 15204.84
79 18690.67 16325.07 15549.63
80 18933.58 16484.27 15701.27
81 19111.92 16664.44 15872.88
82 20000.46 17273.79 16453.29
83 19759.67 17107.2 16294.61
84 20030.1 17269.12 16448.84
85 20195.74 17307.7 16485.58
86 20575.71 17592.26 16756.63
87 20596.88 17606.78 16770.45
88 21123.97 17935.67 17083.73
89 21399.69 18118.73 17258.09
90 21440.97 18133.99 17272.62
91 21181.13 17957.56 17104.57
92 21727.28 18290.35 17241.56
93 21982.89 18453.21 17576.69
