[COLONIAL UTILITIES FUND LOGO]
----------------------
COLONIAL UTILITIES
FUND
----------------------
SEMIANNUAL REPORT
MAY 31, 1996
[COVER PHOTO]
- ---------- -----------------
NOT FDIC- MAY LOSE VALUE
INSURED NO BANK GUARANTEE
- ---------- -----------------
COLONIAL UTILITIES FUND HIGHLIGHTS
DECEMBER 1, 1995 - MAY 31, 1996
INVESTMENT OBJECTIVE: Colonial Utilities Fund seeks primarily current income and
secondarily long-term growth.
STRATEGY: The Fund pursues its objective by investing primarily in common and
preferred equity stocks of domestic utility companies.
THE FUND IS DESIGNED TO OFFER:
- Monthly income
- Long-term growth potential
- Diversification
PORTFOLIO MANAGER COMMENTARY: "The dramatic returns seen by the utilities market
in 1995 did not continue through the first part of 1996. All three sectors of
the utilities market in which the Fund invests -- telephone, electric power and
natural gas -- are very sensitive to changes in interest rates. As a result of
rising interest rates for the latter half of the period, these stocks gave back
much of their gains to end the period with modest total returns."
COLONIAL UTILITIES FUND PERFORMANCE
<TABLE>
<CAPTION>
CLASS A CLASS B
<S> <C> <C>
Inception dates 3/4/92* 5/5/92
Distributions declared per share $0.303 $0.247
30-day SEC yields on May 31, 1996** 4.05% 3.48%
Total returns, assuming reinvestment
of all distributions and no sales charge or
contingent deferred sales charge (CDSC) --
6 months 2.22% 1.83%
Net asset value per share at 5/31/96 $14.39 $14.39
</TABLE>
* Since adoption of the Fund's current investment policies on 3/4/92.
** Reflects the portfolio's earning power and net of expenses, expressed as an
annualized percentage of the maximum offering price per share at the end of the
period.
<TABLE>
<CAPTION>
SECTOR BREAKDOWN -
TOP FIVE HOLDINGS(+) UTILITY COMMON STOCKS(+)
(as of 5/31/96) (as of 5/31/96)
<S> <C>
1.NYNEX Corp. Electric ..................... 55%
2.FPL Group, Inc. Telephone .................... 33%
3.BellSouth Corp. Natural Gas .................. 12%
4.GTE Corp.
5.Ameritech Corp.
</TABLE>
(+) Because the Fund is actively managed, there can be no guarantee the Fund
will continue to hold these securities or maintain these sector weightings in
the future. Sector weightings are based on total common stocks.
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 HAROLD W. COGGER, PRESIDENT]
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 and believe that reductions in interest rates may take
place later in the year.
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 about your Colonial investment. We
appreciate the opportunity to help you meet your investment goals.
Respectfully,
/s/ Harold W. Cogger
Harold W. Cogger
President
June 14, 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
JOHN LENNON and JAMES HAYNIE are Co-portfolio Managers of the Colonial Utilities
Fund. Mr. Lennon and Mr. Haynie are Vice Presidents of Colonial Management
Associates, Inc.
Q: HOW HAVE UTILITY STOCKS PERFORMED DURING THE PAST SIX MONTHS?
A: "The investment environment for utility stocks fluctuated during the
reporting period, with utility stocks performing well from December through
mid-February, as the Dow Jones Utility Average rose 9.6%. This was followed by a
period of decline from mid-February through the end of May, with the Average
down 8.7%. This divergent performance was driven almost entirely by interest
rate movements, to which utility stock prices are very sensitive - falling
interest rates are positive for utility stocks while rising interest rates are
negative. Interest rates declined through the early period, with the 30-year
Treasury bond yield declining from 6.13% on November 30, 1995 to 6.03% on
February 12, 1996, which was also the recent peak for utility stock prices.
Subsequently, interest rates rose with the 30 year Treasury bond yield
increasing from 6.03% on February 12 to 6.99% at the end of the period."
Q: WHAT FACTORS CONTRIBUTED TO PERFORMANCE DURING THIS PERIOD?
A: "Well, as we've discussed, interest rates were clearly the biggest factor.
However, the Fund benefited from increased investments in the natural gas
sector. The severe winter weather in many parts of the country resulted in an
increased demand for gas. This increased demand benefited holdings such as
Williams Companies, PanEnergy Corporation and UGI Corporation, which rose 28.8%,
13.2% and 10.1%, respectively, during the period."
"The Fund remained fully invested in utility stocks during the period. We
continued to increase our holdings in the telephone and natural gas sectors and
reduced our holdings in the electric utility sector. We believe that telephone
and gas stocks offer greater earnings growth and total return potential than
electric utility stocks, particularly in light of the increasingly competitive
environment expected for the electric utility companies."
Q: HOW DID THE FUND'S PERFORMANCE COMPARE TO THE DOW JONES UTILITY AVERAGE AND
THE STANDARD & POOR'S 500 INDEX?
A: "For the six-month period ended May 31, 1996, the Fund outperformed the Dow
Jones Utility Average and underperformed the Standard & Poor's 500 Index, two
broad-based, unmanaged indices that track the performance of utility stocks and
U.S. stocks, respectively. The total return for the Fund's Class A shares, based
on net asset value, was 2.2% while the return on the Dow Jones Utility Average
was 0.1% and the return on the Standard & Poor's 500 Index was 11.8%."
"The Fund was able to outperform the Dow Jones Utility Average because of
investments in a broader range of utility stocks. The Fund was invested in
electric, natural gas, and telephone stocks while the Average tracks only the
4
electric and gas sectors. The telephone stocks modestly outperformed the
Average, and the Fund benefited by having a significant portion of its assets in
this sector. The Fund underperformed the Standard & Poor's 500 Index, which
tracks the broader market and includes many industrial companies that benefited
from expectations of an improving economy."
COLONIAL UTILITIES FUND PERFORMANCE VS.
THE DOW JONES UTILITIES AVERAGE AND THE STANDARD & POOR'S 500 INDEX
Change in Value of $10,000 from 3/92 - 5/96
Based on NAV and MOP for Class A Shares
<TABLE>
<CAPTION>
Label A B C D
- --------------------------------------------------------------------------------
Label CUF Dow Jones Util S & P 500 Mnth Pre-Load Post Load
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Mar 31, 92 10000 10000 10000 9525
2 Apr 30, 92 10287 10293.29 10204.22 9719.52
3 May 31, 92 10467 10343.62 10443.32 9947.27
4 Jun 30, 92 10436 10189.79 10531.86 10031.59
5 Jul 31, 92 11169 10605.73 11084.16 10557.67
6 Aug 31, 92 10912 10389.07 11064.8 10539.22
7 Sep 30, 92 11066 10511.2 11130.52 10601.82
8 Oct 31, 92 11071 10547.28 11136.96 10607.96
9 Nov 30, 92 11061 10905.43 11126.12 10597.63
10 Dec 31, 92 11255 11039.22 11406.7 10864.88
11 Jan 31, 93 11562 11131.42 11618.48 11066.6
12 Feb 28, 93 12325 11283.08 12212.87 11632.76
13 Mar 31, 93 12472 11520.99 12306.49 11721.94
14 Apr 30, 93 12385 11242.52 12277.77 11694.58
15 May 31, 93 12403 11542.51 12257.98 11675.73
16 Jun 30, 93 12811 11576.2 12607.63 12008.77
17 Jul 31, 93 13116 11529.69 12835.03 12225.36
18 Aug 31, 93 13524 11966.1 13160.97 12535.82
19 Sep 30, 93 13247 11874.33 13043.3 12423.74
20 Oct 31, 93 12793 12119.8 12856.21 12245.54
21 Nov 30, 93 12049 12004.28 12261.09 11678.69
22 Dec 31, 93 12338 12149.41 12468.06 11875.82
23 Jan 31, 94 12181 12562.07 12265.85 12683.22
24 Feb 28, 94 11416 12221.29 11697.22 11141.6
25 Mar 31, 94 10722 11689.5 11382.07 10841.42
26 Apr 30, 94 10911 11839.26 11635.14 11082.47
27 May 31, 94 10263 12032.8 11141.66 10612.43
28 Jun 30, 94 9846 11738.35 10886.62 10369.5
29 Jul 31, 94 10380 12123.52 11290.28 10753.99
30 Aug 31, 94 10616 12619.43 11324.41 10786.5
31 Sep 30, 94 10262 12311.09 11038.97 10514.62
32 Oct 31, 94 10279 12587.28 11185.84 10654.51
33 Nov 30, 94 10259 12129.44 11152.65 10622.9
34 Dec 31, 94 10452 12309.02 11182.39 10651.23
35 Jan 31, 95 11142 12628.01 11911.96 11346.14
36 Feb 28, 95 11265 13119.66 11982.83 11413.65
37 Mar 31, 95 10975 13506.18 11887.67 11323.01
38 Apr 30, 95 11405 13903.59 12132.18 11555.9
39 May 31, 95 12188 14458.45 12679.49 12077.21
40 Jun 30, 95 12014 14793.69 12720.92 12116.68
41 Jul 31, 95 12149 15284.06 12801.62 12193.54
42 Aug 31, 95 12121 15322.21 13099.66 12477.42
43 Sep 30, 95 12915 15968.47 13824.13 13167.49
44 Oct 31, 95 12960 15911.42 14124.4 13453.49
45 Nov 30, 95 13128 16609.11 14375.16 13692.34
46 Dec 31, 95 13795 16929.04 15068.47 14352.72
47 Jan 31, 96 14161 17504.56 15359.15 14629.59
48 Feb 29, 96 13530 17667.41 14986.23 14274.38
49 Mar 31, 96 13203 17837.51 14834.72 14130.07
50 Apr 30, 96 13070 18100.25 14673.3 13976.32
51 May 31, 96 13140 18566.25 14693.65 13995.7
</TABLE>
A $10,000 investment in Class B shares made on May 5, 1992, at net asset value
would have been valued at $13,909 on May 31, 1995. The same investment after
deducting the applicable CDSC would have grown to $13,609 on May 31, 1996.
AVERAGE ANNUAL TOTAL RETURNS
As of 6/30/96 (Most Recent Quarter End)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
Inception 3/4/92* Inception 5/5/92
NAV MOP NAV w/CDSC
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 YEAR 19.84% 14.15% 18.96% 13.96%
- -----------------------------------------------------------------------------
5 YEARS 12.23% 11.14% -- --
- -----------------------------------------------------------------------------
10 YEARS 9.50% 8.96% -- --
- -----------------------------------------------------------------------------
SINCE INCEPTION 10.29% 9.06% 9.20% 8.84%
- -----------------------------------------------------------------------------
</TABLE>
*Change in investment objective on 3/4/92.
The Dow Jones Utilities Average and the Standard & Poor's 500 Index are two
broad based, unmanaged indexes that track the performance of utility stocks and
U.S. stocks, respectively. The performance of each Index does not reflect fees
or expenses associated with an actual investment.
Past performance cannot predict future results. Return and value of an
investment will vary, resulting in a gain or loss on sale. All results shown
assume reinvestment of distributions. Net asset value (NAV) return does not
include sales charges or CDSC. Maximum offering price (MOP) return includes the
maximum sales charge of 4.75%. The CDSC return reflects the maximum charge of
5.00% for one year and 3.00% since inception.
Performance for different share classes will vary based on differences in sales
charges and fees associated with each class.
5
INVESTMENT PORTFOLIO
MAY 31, 1996 (UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCKS - 87.7% SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 87.7%
COMMUNICATIONS - 28.7%
360 Communications Co. 42 $ 964
AT&T Corp. 200 12,475
Ameritech Corp. 750 42,375
Bell Atlantic Corp. 500 31,188
BellSouth Corp. 1,075 43,672
Frontier Corp. 450 14,400
GTE Corp. 1,000 42,750
MCI Communications Corp. 300 8,738
NYNEX Corp. 1,000 46,125
Pacific Telesis Group, Inc. 300 10,013
Southwestern Bell Corp. 725 35,797
Sprint Corp. 125 5,297
US West, Inc. 700 22,838
US West Media Group 500 9,438
--------
326,070
--------
ELECTRIC SERVICES - 48.3%
American Electric Power Co., Inc. 450 18,056
Boston Edison Co. 725 17,762
Carolina Power & Light Co. 150 5,419
Cincinnati Gas & Electric Co. 1,100 32,588
DPL, Inc. 1,500 33,750
Detroit Edison Co. 940 27,495
Duke Power Co. 100 4,825
Eastern Utilities Association 125 2,373
Edison International 850 14,025
Entergy Corp. 207 5,431
FPL Group, Inc. 1,050 44,888
Florida Progress Corp. 274 9,035
General Public Utilities Corp. 1,200 40,200
Hawaiian Electric Industries, Inc. 150 5,100
Houston Industries, Inc. 679 14,862
IES Industries, Inc. 525 14,897
KU Energy Corp. 200 5,650
Kansas City Power & Light Co. 675 17,634
Long Island Lighting Co. 450 7,706
New York State Electric & Gas Corp. 200 4,575
Northeast Utilities 175 2,538
Ohio Edison Co. 300 6,563
PacifiCorp 1,500 30,188
Peco Energy Co. 350 8,619
Pinnacle West Capital Corp. 100 2,650
Portland General Corp. 600 17,700
</TABLE>
6
Investment Portfolio/May 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Public Service Co. of Colorado 550 $ 18,218
Public Service Enterprise Group, Inc. 200 5,300
Puget Sound Power & Light Co. 132 3,109
Rochester Gas & Electric Corp. 75 1,509
Scana Corp. 325 8,490
Sierra Pacific Resources 250 5,938
Southern Co. 1,775 41,047
Texas Utilities Co. 775 31,678
Union Electric Co. 100 3,938
UtiliCorp United, Inc. 505 13,827
Western Resources, Inc. 700 20,212
--------
547,795
--------
GAS SERVICES - 10.7%
Consolidated Natural Gas Co. 100 4,838
Energen Corp. 150 3,525
KN Energy, Inc. 100 3,375
MCN Corp. 875 20,781
MDU Resources Group, Inc. 225 4,725
Pacific Enterprises 400 10,550
Panhandle Eastern Corp. 500 16,063
People's Energy Corp. 200 6,421
UGI Corp. 650 15,031
Williams Companies, Inc. 725 36,431
--------
121,740
--------
TOTAL COMMON STOCKS(cost of $910,267) 995,605
--------
PREFERRED STOCKS - 11.6%
- --------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATIONS, ELECTRIC,
GAS & SANITARY SERVICES - 11.6%
ELECTRIC SERVICES - 10.0%
Appalachian Power Co., 7.40% 13 1,267
Arizona Public Service Co., $1.8125 Series W 180 4,365
Arkansas Power & Light Co.:
7.80% 10 909
7.88% 9 817
Baltimore Gas & Electric Co.,
6.75% Sinking Fund 28 2,854
Boston Edison Co., 7.75% 100 2,388
Carolina Power & Light Co., 7.72% 30 3,030
Central Maine Power Co., 7.875% 16 1,532
Central Power & Light Co., 7.12% 16 1,509
Citizens Utilities Co.
5% Convertible 100 4,825
Cleveland Electric Illuminating Co., A.R.P.,
Series L 65 4,623
Commonwealth Edison Co., 7.24% 52 4,823
Detroit Edison Co.:
7.40% 100 2,463
7.75% 100 2,575
Duke Power Co., 7.04% 20 1,990
</TABLE>
7
Investment Portfolio/May 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PREFERRED STOCKS - CONT. SHARES VALUE
- --------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - CONT.
<S> <C> <C>
ELECTRIC SERVICES - CONT.
Georgia Power Co.:
A.R.P 110 $ 2,695
7.80% 11 1,141
Gulf States Utilities Co.:
8.80%, Series A 15 1,477
A.R.P., Series A 19 1,756
7.56% 18 1,585
8.52% 8 756
Illinois Power Co.:
A.R.P. Series A 25 1,091
7.75% 50 2,519
Jersey Central Power & Light Co., 7.88% 15 1,530
Louisiana Power and Light Co., 8.00%, Series 1992 90 2,239
Montana Power Co., $6.875 30 2,895
Niagara Mohawk Power Corp., 7.72% 26 1,763
Northern Indiana Public Service Co., 7.44% 9 900
Ohio Edison Co., 7.75% 240 6,000
PSI Energy, Inc.:
6.88% 36 3,470
7.44% 235 5,934
Peco Energy Co., 7.48% 30 3,053
Pennsylvania Power & Light Co., 6.75% 51 4,832
Pennsylvania Power Co., 7.75% 15 1,320
Southern California Edison Co., 7.36% 125 3,116
TU Electric Capital, 8.25% 680 17,000
Texas Utilities Co., 7.98% 35 3,640
Toledo Edison Co., A.R.P., Series A 40 725
Union Electric Co., $7.44 18 1,824
----------
113,231
----------
GAS SERVICES - 1.2%
Enron Corp., 8.00% 400 9,950
MCN Corp., 8.75% 23 620
Pacific Enterprises, $4.50 4 248
Williams Co., Inc., $3.50 37 2,979
----------
13,797
----------
PIPELINES - 0.4%
Enserch Corp., A.R.P 48 4,567
----------
TOTAL PREFERRED STOCKS (cost of $134,946) 131,595
----------
TOTAL INVESTMENTS - (cost of $1,045,213)(a) 1,127,200
----------
</TABLE>
8
Investment Portfolio/May 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHORT-TERM OBLIGATIONS - 0.2% PAR
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase agreement with Bankers Trust Securities
Corp., dated 05/31/96, due 06/03/96 at 5.310% collaterized
by U.S. Treasury notes with various maturities to 1997,
market value $1,826 (repurchase proceeds $1,788) $1,787 1,787
----------
OTHER ASSETS & LIABILITIES, NET - 0.5% 5,653
- -------------------------------------------------------------------------------------------
NET ASSETS - 100.0% $1,134,640
----------
NOTES TO INVESTMENT PORTFOLIO:
- --------------------------------------------------------------------------------
(a) Cost for federal income tax purposes is the same.
Acronym Name
------- ----
A.R.P. Adjustable Rate Preferred
</TABLE>
See notes to financial statements.
9
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 $1,045,213) $1,127,200
Short-term obligations 1,787
----------
1,128,987
Receivable for:
Investments sold $6,276
Dividends 5,296
Fund shares sold 416
Other 31 12,019
------ ----------
Total Assets 1,141,006
LIABILITIES
Payable for:
Distributions 3,499
Fund shares repurchased 2,789
Accrued:
Deferred Trustees fees 7
Other 71
------
Total Liabilities 6,366
----------
NET ASSETS $1,134,640
----------
Net asset value & redemption price per share -
Class A ($364,784/25,346) $ 14.39
----------
Maximum offering price per share - Class A
($14.39/0.9525) $ 15.11 (a)
----------
Net asset value & offering price per share -
Class B ($769,856/53,491) $ 14.39 (b)
----------
COMPOSITION OF NET ASSETS
Capital paid in $1,144,848
Undistributed net investment income 1,422
Accumulated net realized loss (93,617)
Net unrealized appreciation 81,987
----------
$1,134,640
----------
</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.
10
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MAY 31, 1996
(UNAUDITED)
(in thousands)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends $32,691
Interest 235
-------
32,926
EXPENSES
Management fee $ 3,910
Service fee 1,519
Distribution fee - Class B 3,093
Transfer agent 1,491
Bookkeeping fee 207
Registration fee 25
Custodian fee 25
Audit fee 24
Trustees fee 32
Reports to shareholders 10
Legal fee 8
Other 53 10,397
------- -------
Net Investment Income 22,529
-------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain 8,463
Net unrealized depreciation during
the period (5,868)
-------
Net Gain 2,595
-------
Net Increase in Net Assets from Operations $25,124
-------
</TABLE>
See notes to financial statements.
11
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 $ 22,529 $ 52,382
Net realized gain (loss) 8,463 (21,504)
Net unrealized appreciation (depreciation) (5,868) 260,221
---------- ----------
Net Increase from Operations 25,124 291,099
Distributions:
From net investment income - Class A (8,100) (19,543)
From net investment income - Class B (13,805) (33,675)
---------- ----------
3,219 237,881
---------- ----------
Fund Share Transactions:
Receipts for shares sold - Class A 14,079 41,022
Value of distributions reinvested - Class A 6,071 14,696
Cost of shares repurchased - Class A (56,964) (106,875)
---------- ----------
(36,814) (51,157)
---------- ----------
Receipts for shares sold - Class B 37,158 62,927
Value of distributions reinvested - Class B 10,970 27,317
Cost of shares repurchased - Class B (101,195) (172,228)
---------- ----------
(53,067) (81,984)
---------- ----------
Net Decrease from Fund Share
Transactions (89,881) (133,141)
---------- ----------
Total Increase (Decrease) (86,662) 104,740
NET ASSETS
Beginning of period 1,221,302 1,116,562
---------- ----------
End of period (including undistributed
net investment income of $1,422 and
$796, respectively.) $1,134,640 $1,221,302
---------- ----------
NUMBER OF FUND SHARES
Sold - Class A 948 3,230
Issued for distributions reinvested - Class A 411 1,156
Repurchased - Class A (3,864) (8,370)
---------- ----------
(2,505) (3,984)
---------- ----------
Sold - Class B 2,505 4,945
Issued for distributions reinvested - Class B 743 2,147
Repurchased - Class B (6,867) (13,428)
---------- ----------
(3,619) (6,336)
---------- ----------
</TABLE>
See notes to financial statements.
12
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1996 (UNAUDITED)
NOTE 1. INTERIM FINANCIAL STATEMENTS
................................................................................
In the opinion of management of Colonial Utilities 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 current
income and long-term growth. 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
its financial statements.
SECURITY VALUATION AND TRANSACTIONS: Equity securities are valued at the last
sale price or, in the case of unlisted or listed securities for which there were
no sales during the day, at current quoted bid prices.
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.
Cost is determined and gains (losses) are based upon the specific identification
method for both financial statement and federal income tax purposes.
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.
13
Notes to Financial Statements/May 31, 1996
- --------------------------------------------------------------------------------
NOTE 2. ACCOUNTING POLICIES - CONT.
................................................................................
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 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.
DISTRIBUTIONS TO SHAREHOLDERS: The Fund declares and records distributions daily
and pays 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 Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforwards) under income tax regulations.
OTHER: Corporate actions are recorded on the ex-date. Interest income is
recorded on the accrual basis.
The Fund's custodian takes possession through the federal book-entry system of
securities collateralizing repurchase agreements. Collateral is marked-to-market
daily to ensure that the market value of the underlying assets remains
sufficient to protect the Fund. The Fund may experience costs and delays in
liquidating the collateral if the issuer defaults or enters bankruptcy.
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 the Fund's average net assets as
follows:
<TABLE>
<CAPTION>
Average Net Assets Annual Fee Rate
------------------ ---------------
<S> <C>
First $1 billion 0.65%
Over $1 billion 0.60%
</TABLE>
BOOKKEEPING FEE: The Adviser provides bookkeeping and pricing services for
$27,000 per year plus a percentage of the Fund's average net assets as follows:
<TABLE>
<CAPTION>
Average Net Assets Annual Fee Rate
------------------ ---------------
<S> <C>
First $50 million No charge
Next $950 million 0.035%
Next $1 billion 0.025%
Next $1 billion 0.015%
Over $3 billion 0.001%
</TABLE>
14
Notes to Financial Statements/May 31, 1996
- --------------------------------------------------------------------------------
TRANSFER AGENT: Colonial Investors Service Center, Inc. (the Transfer Agent), an
affiliate of the Adviser, provides shareholder services and receives a monthly
fee equal to 0.20% 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. For the six months ended May 31, 1996, the Fund has been
advised that the Distributor retained net underwriting discounts of $48,523 on
sales of the Fund's Class A shares and received contingent deferred sales
charges (CDSC) of $1,645,412 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 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.
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
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 $76,445,591 and
$159,819,718, 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 $130,458,311
Gross unrealized depreciation (48,470,866)
------------
Net unrealized appreciation $ 81,987,445
============
</TABLE>
15
Notes to Financial Statements/May 31, 1996
- --------------------------------------------------------------------------------
NOTE 4. PORTFOLIO INFORMATION - CONT.
................................................................................
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 $ 3,427,000
1997 32,911,000
1998 9,759,000
1999 3,592,000
2000 6,425,000
2001 6,391,000
2002 38,551,000
2003 21,504,000
------------
$122,560,000
============
</TABLE>
The loss carryforwards expiring in 1996, and $11,630,000 and $5,427,000 of the
loss carryforwards expiring in 1997 and 1998, respectively, were acquired in the
merger with Colonial Corporate Cash Trust II.
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 concentrates its investments in utility securities and certain
other industries, subjecting it to greater risk than a fund that is more
diversified.
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.
16
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
(Unaudited)
Six
months ended
May 31 Year ended November 30
----------------------- ----------------------
1996 1995
Class A Class B Class A Class B
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $14.370 $14.370 $11.720 $11.720
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.312 0.256 0.640 0.544
Net realized and
unrealized gain 0.011 0.011 2.659 2.659
------- ------- ------- -------
Total from Investment
Operations 0.323 0.267 3.299 3.203
------- ------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment
income (0.303) (0.247) (0.649) (0.553)
------- ------- ------- -------
Net asset value -
End of period $14.390 $14.390 $14.370 $14.370
======= ======= ======= =======
Total return (a) 2.22%(b) 1.83% (b) 28.90% 27.96%
======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS
Expenses 1.20%(c)(d) 1.95% (c)(d) 1.21% (c) 1.96% (c)
Net investment income 4.20%(c)(d) 3.45% (c)(d) 5.00% (c) 4.25% (c)
Portfolio turnover 13%(d) 13% (d) 7% 7%
Average commission rate (e) $ 0.054 $ 0.054 -- --
Net assets at end
of period (in millions) $ 365 $ 770 $ 400 $ 821
</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.
(e) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for trades on which
commissions are charged.
17
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 $13.600 $13.600 $12.960 $12.960
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.681 0.587 0.713 0.612
Net realized and
unrealized gain (loss) (1.896) (1.896) 0.616 0.616
------- ------- ------- -------
Total from Investment
Operations (1.215) (1.309) 1.329 1.228
------- ------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.665) (0.571) (0.689) (0.588)
From capital paid in -- -- -- --
------- ------- ------- -------
Total Distributions
Declared to Shareholders (0.665) (0.571) (0.689) (0.588)
------- ------- ------- -------
Net asset value -
End of period $11.720 $11.720 $13.600 $13.600
------- ------- ------- -------
Total return (d) (9.04)% (9.73)% 10.20% 9.42%
------- ------- ------- -------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.23% 1.98% 1.19% 1.94%
Net investment income 5.49% 4.74% 4.92% 4.17%
Portfolio turnover 16% 16% 6% 6%
Net assets at end
of period (in millions) $ 373 $ 744 $ 503 $ 971
</TABLE>
(a) All per share amounts have been restated to reflect the 4-for-1 stock split
effective February 10, 1992.
(b) Class B shares were initially offered on May 5, 1992. Per share amounts
reflect activity from that date.
(c) The return of capital is for book purposes only and is a result of book-tax
differences from the merger of Colonial Utilities Fund (formerly Colonial
Corporate Cash Trust I) and Colonial Corporate Cash Trust II in a prior
year. The 1992 amount represents a reclassification for book purposes only
relating to that merger.
(d) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(e) Not annualized.
(f) Annualized.
18
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
Year ended November 30
-----------------------------------------
1992 (a) 1991 (a)
Class A Class B (b) Class A
------- ----------- -------
<S> <C> <C>
$11.440 $12.310 $10.090
------- ------- -------
0.741 0.296 0.917
1.517 0.691 1.377
------- ------- -------
2.258 0.987 2.294
------- ------- -------
(0.727) (0.337) (0.941)
(0.011) (c) -- (0.003) (c)
------- ------- -------
(0.738) (0.337) (0.944)
------- ------- -------
$12.960 $12.960 $11.440
======= ======= =======
20.21% 6.06% (e) 23.56%
======= ======= =======
1.16% 1.91% (f) 1.11%
5.52% 4.77% (f) 8.50%
35% 35% 1%
$ 232 $ 156 $ 135
</TABLE>
19
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.
20
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:
<TABLE>
<S> <C>
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 *
</TABLE>
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
21
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.)
22
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial Utilities Fund is:
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Colonial Utilities 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 Utilities 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.
23
[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. (C)1996
One Financial Center, Boston, Massachusetts 02111-2621, 617-426-3750
UF-03/306C-0596 M (6/96)
