[photo omitted]
Seeking new opportunities for
investors in a more competitive
utilities environment.
COLONIAL UTILITIES FUND SEMIANNUAL REPORT, MAY 31, 1997
<PAGE>
PRESIDENT'S MESSAGE TO FUND SHAREHOLDERS
[photo of Harold W. Cogger omitted]
Long-term Treasury rates had a big influence on many investment markets during
the first six months of your Fund's fiscal year. They began at 6.35% in December
and rose throughout most of the period. After the Federal Reserve Board raised
short-term interest rates in late March, as a preemptive strike against
inflation, rates topped 7% but returned to 6.91% as of May 31.
In this generally rising interest rate environment, utility stock performance
varied. Based on total return, electric utilities declined modestly and natural
gas issues rose slightly. Telephone stocks provided strong returns. Your Fund's
significant positions in telephone stocks helped it achieve a total return of
5.04% and outperform the Dow Jones Utilities Average for the six-month period.
In the coming months, the Fund will add investment flexibility that we believe
will help us better serve your financial interests and goals in a changing
environment for utilities. The portfolio managers' report on the following pages
will cover three important topics:
0 STRONG PERFORMANCE FROM TELEPHONE STOCKS HELPED THE FUND BEAT THE
AVERAGE DURING THE SIX-MONTH PERIOD
0 UNDERSTANDING THE CHANGING UTILITIES INDUSTRY
0 YOUR FUND'S HOLDINGS
We thank you for giving us the opportunity to help you meet your financial
goals, and we hope to continue serving you in the years to come.
Respectfully,
/s/ Harold W. Cogger
Harold W. Cogger
President
July 16, 1997
- --------------------------------
Not FDIC May Lose Value
Insured No Bank Guarantee
- --------------------------------
Because market conditions change frequently, there can be no assurance that the
trends described in this report will continue.
<PAGE>
PERFORMANCE REPORT
Telephone stocks were up during the period, getting a significant boost in the
last five weeks from two developments. In the first, the Justice Department
approved the merger of Bell Atlantic with NYNEX; Federal Communications
Commission (FCC) approval is still pending. The second involved FCC
decisions that eased investor concerns over access charges and universal
service reform.
The telephone sector's strong performance certainly paid off for Colonial
Utilities Fund. The Fund holds significant positions in telephone stocks --
currently about 30% of the portfolio -- and four of the top five holdings
are telecommunications companies. With their help, the Fund's Class A
shares had a total return of 5.04% for the six-month period. This return
beat that of the unmanaged Dow Jones Utilities Average, which does not
include telephone stocks, and was down 3.22%.
AVERAGE ANNUAL TOTAL RETURNS
As of 6/30/97
(Most Recent Quarter End)
Class A Shares Inception 3/4/92*
Class B Shares Inception 5/5/92
CLASS A CLASS B
NAV MOP NAV w/CDSC
1 year 12.42% 7.08% 11.59% 6.59%
- ------------------------------------------------
5 years 10.23 9.16 9.44 9.16
- ------------------------------------------------
10 years 9.95 9.42 - -
- ------------------------------------------------
Since
inception 10.69 9.68 9.66 9.53
- ------------------------------------------------
*Change in investment policies.
COLONIAL UTILITIES FUND PERFORMANCE
Colonial Utilities Fund Class A shares vs. the Dow Jones Utilities Average.
Change in value of $10,000 from 3/31/92 - 5/31/97. Based on performance for
Class A shares with and without sales charges.
[performance graph]
<TABLE>
<CAPTION>
DATE NAV MOP Dow Jones Util Av Tr
<S> <C> <C> <C>
3/31/92 10000 9525 $10,000
4/30/92 10204.22 9719.52 10,287
5/31/92 10443.32 9947.267 10,467
6/30/92 10531.86 10031.59 10,436
7/31/92 11084.16 10557.67 11,169
8/31/92 11064.8 10539.22 10,912
9/30/92 11130.52 10601.82 11,066
10/31/92 11136.96 10607.96 11,071
11/30/92 11126.12 10597.63 11,061
12/31/92 11406.7 10864.88 11,255
1/31/93 11618.48 11066.6 11,562
2/28/93 12212.87 11632.76 12,325
3/31/93 12306.49 11721.94 12,472
4/30/93 12277.77 11694.58 12,385
5/31/93 12257.98 11675.73 12,403
6/30/93 12607.63 12008.77 12,811
7/31/93 12835.03 12225.36 13,116
8/31/93 13160.97 12535.82 13,524
9/30/93 13043.3 12423.74 13,247
10/31/93 12856.21 12245.54 12,793
11/30/93 12261.09 11678.69 12,049
12/31/93 12468.06 11875.82 12,338
1/31/94 12265.85 11683.22 12,181
2/28/94 11697.22 11141.6 11,416
3/31/94 11382.07 10841.42 10,722
4/30/94 11635.14 11082.47 10,911
5/31/94 11141.66 10612.43 10,263
6/30/94 10886.62 10369.5 9,846
7/31/94 11290.28 10753.99 10,380
8/31/94 11324.41 10786.5 10,616
9/30/94 11038.97 10514.62 10,262
10/31/94 11185.84 10654.51 10,279
11/30/94 11152.65 10622.9 10,259
12/31/94 11182.39 10651.23 10,452
1/31/95 11911.96 11346.14 11,142
2/28/95 11982.83 11413.65 11,265
3/31/95 11887.67 11323.01 10,975
4/30/95 12132.18 11555.9 11,405
5/31/95 12679.49 12077.21 12,188
6/30/95 12720.92 12116.68 12,014
7/31/95 12801.62 12193.54 12,149
8/31/95 13099.66 12477.42 12,121
9/30/95 13824.13 13167.49 12,915
10/31/95 14124.4 13453.49 12,960
11/30/95 14375.16 13692.34 13,128
12/31/95 15068.47 14352.72 13,795
1/31/96 15359.15 14629.59 14,161
2/29/96 14986.23 14274.38 13,530
3/31/96 14834.72 14130.07 13,203
4/30/96 14673.3 13976.32 13,070
5/31/96 14693.51 13995.57 13,140
6/30/96 15246.09 14521.9 13,876
7/31/96 14650.6 13954.69 12,952
8/31/96 14723.26 14023.9 13,615
9/30/96 14753.01 14052.24 13,845
10/31/96 15352.45 14623.21 14,509
11/30/96 15851.18 15098.25 15,163
12/31/96 15975.5 15216.66 15,050
1/31/97 16310.54 15535.79 15,074
2/28/97 16594.38 15806.15 14,815
3/31/97 15974.39 15215.61 14,325
4/30/97 16099.5 15334.78 14,217
5/31/97 16650.28 15859.39 14,675
</TABLE>
A $10,000 investment in Class B shares made on May 5, 1992 (inception), at net
asset value (NAV) would have grown to $15,645 on May 31, 1997. The same
investment, after deducting the applicable contingent deferred sales charge
(CDSC), would have been valued at $15,445 on May 31, 1997. The Dow Jones
Utilities Average is an unmanaged index that tracks the performance of utility
stocks. Unlike mutual funds, indexes are not investments, do not incur fees or
charges, and it is not possible to invest in an index.
Returns and value of an investment will vary, resulting in a gain or a loss on
sale. All results shown assume reinvestment of distributions. NAV returns do not
include sales charges or CDSC. Maximum offering price (MOP) returns include the
maximum sales charge of 4.75%. The CDSC returns reflect the maximum charges of
5% for 1 year, 2% for 5 years and 1% since inception. Past performance cannot
predict future results.
3
<PAGE>
PORTFOLIO MANAGERS' REPORT ON THE CHANGING UTILITIES INDUSTRY
All the major utility sectors -- electric, telephone and natural gas -- are
undergoing significant changes. We are beginning to see the emergence of
the competitive market places envisioned when the Energy Policy Act and the
Telecommunications Act were passed. Eventually we should see an end to
monopoly service territories and geographic boundaries under which utility
companies have historically operated.
As deregulation moves closer to implementation, companies are restructuring or
repositioning themselves to meet the challenges of a more competitive
marketplace. As competition for customer dollars increases, some companies
will benefit and some will not. In this environment, the ability to select
the best stocks will be an even bigger factor in long-term investment
success. Our years of experience investing in utilities markets have
provided solid long-term returns to our investors. We believe this
experience will continue to benefit you as we seek out new investment
opportunities.
SECTOR BREAKDOWN AT 5/31/97 TOP 10 HOLDINGS AT 5/31/97
Electric - 45.14% SBC Communications, Inc. 5.09%
Telephones - 30.56% NYNEX Corp. 5.08
Natural Gas - 13.34% Ameritech Corp. 5.00
Preferred Stock - 10.51% FPL Group, Inc. 4.74
Cash - 0.45% BellSouth Corp 4.65
Williams Companies, Inc. 4.51
[pie chart omitted] GTE Corp. 4.42
GPU, Inc. 3.94
Cinergy Corp. 3.76
DPL, Inc. 3.60
Sector classifications are based upon
Colonial's defined criteria as used in the
investment process and differ from those in
the following financial statements.
Holdings and sector breakdowns are calculated
as a percentage of net assets. Because the
Fund is actively managed, they will change
over time.
4
<PAGE>
Compared to the U.S., the rest of the world is under-powered and
under-telephoned. Utilities are part of the infrastructure necessary to
support the fast-paced economic growth of developing countries. Foreign
utilities also offer substantial diversification, because their markets
have not always moved in step with the United States. To take advantage of
these opportunities, your Trustees recently increased your Fund's
investment flexibility. Beginning August 1, 1997, management will be able
to invest up to 20% of the Fund's assets in foreign utility stocks. In
addition, 20% may be invested in non-utility stocks. We expect that this
wider range of investment selections will bring added diversification and
growth potential to your Fund.
The Fund's objective now equally weights the goals of current income and
long-term growth. Previously, current income was the Fund's primary
objective; long-term growth was secondary. We believe that as the utilities
industry undergoes this transformation, this revised objective is better
suited to the market environment and should benefit investors looking for
current income or long-term growth. The Fund also adopted a flexible
dividend policy, meaning the monthly dividend will fluctuate based on the
Fund's earnings.
YOUR FUND'S HOLDINGS
In this new era of deregulation, understanding the utilities markets is more
important than ever when selecting stocks. Here, our team of management experts
talks about a few of the stocks they owned during the period.
AT&T CORPORATION
LUCENT TECHNOLOGIES, INC.
During the period, the Fund eliminated the last of its
holdings in AT&T, which will be facing additional
competition from the regional Bell companies in its core
long-distance business. We retained most of Lucent
Technologies, the telecommunications equipment
manufacturing operation that was received in a spin-off
from AT&T last September. We believe Lucent has
strong growth potential.
SBC COMMUNICATIONS, INC.
PACIFIC TELESIS GROUP
Effective April 1, SBC Communications completed
its merger with Pacific Telesis. After a substantial
merger-related write-off this year, we expect the combined
operation to produce savings of approximately $1 billion
per year by 2000. We believe earnings will return to their
usual double digit growth rate in 1998. Entry into the
long distance market should be an added plus.
Because the Fund is actively managed, security holdings will change over time.
5
<PAGE>
PORTFOLIO MANAGERS' REPORT ON THE CHANGING UTILITIES INDUSTRY
The changes in the utilities industry bring opportunity to those who know where
to look. We have years of experience selecting utilities stocks and our
solid, long-term performance results speak for themselves. We look forward
to meeting the challenges of this new era and are optimistic that investing
in utilities will continue to provide current income and long-term growth
opportunities to our shareholders.
/s/ John Lennon /s/ Richard Petrino
John Lennon is vice president of Colonial Management Associates, Inc. and
has served as lead portfolio manager of the Fund since 1984. Richard
Petrino has been associate portfolio manager of the Fund since 1995.
Together, they have more than 35 years experience in professional money
management.
YOUR FUND'S HOLDINGS
DUKE POWER CO.
PANENERGY CORP.
A number of electric utilities are responding to the
advent of competition by merging with other electric
or natural gas companies. Duke Power, a high quality
electric firm, recently merged with one of the Fund's
holdings, PanEnergy, a major gas transmission and
trading concern. The resulting company is called Duke
Energy Corp. Analysts expect this acquisition to double
Duke's future growth rate to about 8% annually.
MCN ENERGY GROUP INC.
Over the past five years, MCN has transformed itself
from a regulated Michigan natural gas utility into
an emerging energy concern. Its unregulated diversified
energy operations, the major growth area for this
company in recent years, accounted for 28% of last year's
earnings. Based on projected capital expenditures, we
expect this percentage to continue to expand in the next
four years, enabling earnings to continue their historic
double digit growth rate.
6
<PAGE>
INVESTMENT PORTFOLIO
May 31, 1997 (Unaudited, in Thousands)
<TABLE>
<CAPTION>
COMMON STOCKS AND CONVERTIBLES -- 89.1% SHARES VALUE
------------------------------------------------------------------------------------------------
Transportation, Communications, Electric, Gas and Sanitary Services
COMMUNICATIONS -- 30.6%
<S> <C> <C> <C>
Ameritech Corp. 746 $ 48,869
Bell Atlantic Corp. 325 22,791
BellSouth Corp. 1,001 45,425
Citizens Utilities Co., 5% Convertible Preferred 100 4,412
Frontier Corp. 435 7,989
GTE Corp. 979 43,181
Lucent Technologies, Inc. 50 3,181
NYNEX Corp. 925 49,719
SBC Communications, Inc. 850 49,730
360 Communications Co. 42 786
US West Communications Group 400 14,650
US West Media Group 400 7,950
--------
298,683
--------
ELECTRIC SERVICES -- 45.2%
American Electric Power Co., Inc. 450 18,337
Boston Edison Co. 550 14,162
Carolina Power & Light Co. 150 5,212
Cinergy Corp. 1,050 36,750
DPL, Inc. 1,475 35,216
DTE Energy Co. 773 20,769
Eastern Utilities Associates 125 2,201
Edison International 850 19,869
Entergy Corp. 150 3,956
FPL Group, Inc. 1,000 46,375
GPU, Inc. 1,100 38,500
Houston Industries, Inc. 679 14,098
IES Industries, Inc. 350 10,238
Kansas City Power & Light Co. 700 19,513
KU Energy Corp. 100 3,450
Long Island Lighting Co. 450 10,406
MidAmerican Energy Co. 100 1,688
Ohio Edison Co. 300 6,375
PacifiCorp 1,200 23,850
Portland General Corp. 425 17,000
Public Service Co. of Colorado 550 22,206
Public Service Enterprise Group, Inc. 200 4,950
Puget Sound Power & Light Co. 132 3,291
Rochester Gas & Electric Corp. 50 1,000
SCANA Corp. 250 6,250
Sierra Pacific Resources 275 8,147
Southern Co. 900 19,125
Texas Utilities Co. 750 25,781
Utilicorp United, Inc. 100 2,700
--------
441,415
--------
GAS SERVICES -- 13.3%
MCN Energy Group, Inc. 875 25,922
MCN Energy Group, Inc., PRIDES, 8.75% 35 976
MDU Resources Group, Inc. 175 4,244
Pacific Enterprises 400 13,100
PanEnergy Corp. 425 19,869
Peoples Energy Corp. 200 7,100
UGI Corp. 500 11,250
Williams Cos., Inc. 1,000 44,125
Williams Cos., Inc., $3.50 Convertible Preferred 37 3,810
--------
130,396
--------
Total Common Stocks and Convertibles (cost of $719,923) 870,494
--------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT PORTFOLIO/MAY 31, 1997 PREFERRED STOCKS -- 8.8% SHARES VALUE
------------------------------------------------------------------------------------------------
Transportation, Communications, Electric, Gas and Sanitary Services
ELECTRIC SERVICES -- 7.7%
<S> <C> <C> <C>
Arizona Public Service Co., $1.8125, Series W 180 $ 4,567
Baltimore Gas & Electric Co., 6.75%, Series 1987 27 2,718
Boston Edison Co., 7.75% 100 2,537
Carolina Power & Light Co., 7.72% 30 3,060
Central Maine Power Co., 7.875% 16 1,435
Commonwealth Edison Co., 7.24% 52 5,026
Detroit Edison Co.:
7.74% 100 2,525
7.75% 100 2,575
Duke Power Co., 7.04% 20 2,134
Entergy Arkansas, Inc.:
7.80% 10 1,002
7.88% 9 895
Entergy Gulf States Utilities:
7.56% 18 1,751
8.80% 15 1,549
Entergy Louisiana, Inc., 8.00% 30 801
Jersey Central Power & Light Co., 7.88%, Series E 15 1,551
Montana Power Co., $6.875 30 3,095
Northern Indiana Public Service Co., 7.44% 9 911
Ohio Edison Co., 7.75% 240 5,970
PECO Energy Co., 7.48% 30 3,173
Pennsylvania Power Co., 7.75% 15 1,373
PSI Energy, Inc.:
6.875% 36 3,682
7.44% 235 5,993
TU Electric Capital, TOPRS, 8.25% 680 17,170
--------
75,493
--------
GAS SERVICES -- 1.1%
Enron Corp., MIPS, 8.00% 400 10,050
Pacific Enterprises, $4.50 4 270
--------
10,320
--------
Total Preferred Stocks (cost of $85,226) 85,813
--------
ADJUSTABLE RATE PREFERRED STOCKS -- 1.7%
------------------------------------------------------------------------------------------------
Transportation, Communications, Electric, Gas and Sanitary Services
NOTES TO ELECTRIC SERVICES -- 1.2%
INVESTMENT PORTFOLIO: Cleveland Electric Illuminating Co., Series L 65 5,720
- --------------------------------- Entergy Gulf States Utilities, Series A 18 1,732
(a) Cost for federal income tax Georgia Power Co., Series 1993 110 2,764
purposes is the same. Illinois Power Co., Series A 25 1,081
Toledo Edison Co., Series A 40 895
--------
12,192
--------
GAS SERVICES -- 0.5%
Enserch Corp., Series E 48 4,770
--------
ACRONYM NAME Total Adjustable Rate Preferred Stocks (cost of $16,992) 16,962
TOPRS Trust Originated --------
Preferred Total Investments -- 99.6% (cost of $822,141) (a) 973,269
Redeemable --------
Securities SHORT-TERM OBLIGATIONS -- 0.6% PAR
MIPS Monthly Income Repurchase agreement with Greenwich Capital Markets Corp.,
Preferred Stock dated 5/30/97, due 6/02/97 at 5.500% collateralized by
PRIDES Preferred U.S. Treasury notes with various maturities to 2026,
Redeemable market value $6,563 (repurchase proceeds $5,876) $5,873 5,873
Increased --------
Dividend Equity OTHER ASSETS & LIABILITIES, NET -- (0.2)% (2,481)
Securities ------------------------------------------------------------------------------------------------
Net Assets -- 100.0% $976,661
========
</TABLE>
See notes to financial statements.
8
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
(In thousands except for per share amounts and footnotes)
ASSETS
<S> <C> <C> <C>
Investments at value (cost $822,141) $973,269
Short-term obligations 5,873
--------
979,142
Receivable for:
Dividends $3,747
Fund shares sold 167
Interest 2
Other 229 4,145
------- --------
Total Assets 983,287
LIABILITIES
Payable for:
Fund shares repurchased 3,593
Distributions 2,762
Accrued:
Service fee 203
Deferred Trustee fee 27
Other 41
------
Total Liabilities 6,626
--------
Net Assets $976,661
(a) On sales of $50,000 or more ========
the offering price is reduced. Net asset value & redemption price per share -- Class A ($316,759/20,211) $ 15.67
========
(b) Redemption price per share Maximum offering price per share -- Class A ($15.67/0.9525) $ 16.45(a)
is equal to net asset value less ========
any applicable contingent Net asset value & offering price per share -- Class B ($659,902/42,107) $ 15.67(b)
deferred sales charge. ========
COMPOSITION OF NET ASSETS
Capital paid in $911,649
Undistributed net investment income 1,156
Accumulated net realized loss (87,272)
Net unrealized appreciation 151,128
See notes to financial statements. --------
$976,661
========
STATEMENT OF OPERATIONS
For the Six Months Ended May 31, 1997 (Unaudited)
(In thousands)
INVESTMENT INCOME
Dividends $ 25,887
Interest 187
--------
26,074
EXPENSES
Management fee $3,311
Service fee 1,271
Distribution fee -- Class B 2,591
Transfer agent 1,288
Bookkeeping fee 182
Registration fee 20
Custodian fee 22
Audit fee 22
Trustees fee 36
Reports to shareholders 12
Legal fee 4
Other 43 8,802
------------------------
Net Investment Income 17,272
--------
NET REALIZED & UNREALIZED GAIN ON PORTFOLIO POSITIONS
Net realized gain 14,942
Net unrealized appreciation during the period 15,233
Net Gain ------- 30,175
--------
Net Increase in Net Assets from Operations $ 47,447
See notes to financial statements. ========
</TABLE>
9
<PAGE>
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
(Unaudited)
Six months
ended Year ended
(In thousands) May 31 November 30
---------- -----------
INCREASE (DECREASE) IN NET ASSETS 1997 1996
Operations:
<S> <C> <C> <C>
Net investment income $ 17,272 $ 42,162
Net realized gain 14,942 13,770
Net unrealized appreciation 15,233 48,040
---------- -----------
Net Increase from Operations 47,447 103,972
Distributions:
From net investment income -- Class A (6,462) (15,364)
From net investment income -- Class B (10,929) (26,326)
---------- -----------
30,056 62,282
---------- -----------
Fund Share Transactions:
Receipts for shares sold -- Class A 12,231 20,947
Value of distributions reinvested -- Class A 4,827 11,490
Cost of shares repurchased -- Class A (58,359) (104,735)
---------- -----------
(41,301) (72,298)
---------- -----------
Receipts for shares sold -- Class B 9,733 53,077
Value of distributions reinvested -- Class B 8,719 20,888
Cost of shares repurchased -- Class B (107,953) (207,844)
---------- -----------
(89,501) (133,879)
---------- -----------
Net Decrease from Fund
Share Transactions (130,802) (206,177)
---------- -----------
Total Decrease (100,746) (143,895)
NET ASSETS
Beginning of period 1,077,407 1,221,302
---------- -----------
End of period (including undistributed net investment
income of $1,156 and $1,273, respectively) $ 976,661 $ 1,077,407
========== ===========
NUMBER OF FUND SHARES
Sold -- Class A 794 1,421
Issued for distributions reinvested -- Class A 314 784
Repurchased -- Class A (3,806) (7,147)
---------- -----------
(2,698) (4,942)
---------- -----------
Sold -- Class B 635 3,596
Issued for distributions reinvested -- Class B 567 1,425
Repurchased -- Class B (7,035) (14,191)
---------- -----------
(5,833) (9,170)
---------- -----------
</TABLE>
See notes to financial statements.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS
May 31, 1997 (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, 1997, 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 investment objective is to seek
primarily current income and secondarily 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 consistently followed by the Fund in the
preparation of 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 and 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.
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.
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.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS CONT.
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:
Average Net Assets Annual Fee Rate
- ------------------ ---------------
First $1 billion 0.65%
Over $1 billion 0.60%
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:
Average Net Assets Annual Fee Rate
- ------------------ ---------------
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%
TRANSFER AGENT
Colonial Investors Service Center, Inc. (the Transfer Agent), an affiliate of
the Adviser, provides shareholder services for a monthly fee equal to 0.20%
annually of the Fund's average net assets and receives 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, 1997, the Fund has been advised that the Distributor retained net
underwriting discounts of $12,601 on sales of the Fund's Class A shares and
received contingent deferred sales charges (CDSC) of $1,442,400 on Class B share
redemptions.
The Fund has adopted a 12b-1 plan which requires the payment of a service fee to
the Distributor 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% annually of the average net assets attributable to
Class B shares only.
The CDSC and the fees received from the 12b-1 plan are used principally as
repayment to the Distributor for amounts paid by the Distributor to dealers
who sold such shares.
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, 1997, purchases and sales of investments,
other than short-term obligations, were $3,741,547 and $125,264,434,
respectively.
Unrealized appreciation (depreciation) at May 31, 1997, based on cost of
investments for both financial statement and federal income tax purposes was:
Gross unrealized appreciation $185,994,571
Gross unrealized depreciation (34,866,770)
------------
Net unrealized appreciation $151,127,801
============
CAPITAL LOSS CARRYFORWARD
At November 30, 1996, capital loss carryforwards available (to the extent
provided in regulations) to offset future realized gains were approximately
as follows:
Year of Capital loss
expiration carryforward
- ---------- ------------
1997 $ 22,439,000
1998 9,759,000
1999 3,592,000
2000 6,425,000
2001 6,391,000
2002 38,551,000
2003 21,504,000
-------------
$ 108,661,000
=============
Of the loss carryforwards expiring in 1997 and 1998, $1,158,000 and
$5,427,000, 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, 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, 1997.
12
<PAGE>
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 Year ended Year ended
May 31 November 30 November 30 November 30
------------------ ------------------ ------------------ ------------------
1997 1996 1995 1994
Class A Class B Class A Class B Class A Class B Class A Class B
------- ------- ------- ------- ------- ------- ------- -------
Net asset value --
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning of period $15.210 $15.210 $14.370 $14.370 $11.720 $11.720 $13.600 $13.600
------- ------- ------- ------- ------- ------- ------- -------
INCOME FROM
INVESTMENT OPERATIONS:
Net investment
income 0.301 0.243 0.612 0.502 0.640 0.544 0.681 0.587
Net realized and
unrealized gain (loss) 0.459 0.459 0.831 0.831 2.659 2.659 (1.896) (1.896)
------- ------- ------- ------- ------- ------- ------- -------
Total from Investment
Operations 0.760 0.702 1.443 1.333 3.299 3.203 (1.215) (1.309)
------- ------- ------- ------- ------- ------- ------- -------
DISTRIBUTIONS DECLARED
TO SHAREHOLDERS:
From net investment
income (0.300) (0.242) (0.603) (0.493) (0.649) (0.553) (0.665) (0.571)
------- ------- ------- ------- ------- ------- ------- -------
Net asset value --
End of period $15.670 $15.670 $15.210 $15.210 $14.370 $14.370 $11.720 $11.720
======= ======= ======= ======= ======= ======= ======= =======
Total return (a) 5.04%(b) 4.65%(b) 10.27% 9.45% 28.90% 27.96% (9.04)% (9.73)%
======= ======= ======= ======= ======= ======= ======= =======
RATIOS TO
AVERAGE NET ASSETS
Operating expenses 1.22%(c)(d) 1.97%(c)(d) 1.20%(c) 1.95%(c) 1.21%(c) 1.96%(c) 1.23% 1.98%
Interest expense -- -- -- -- -- -- -- --
Net investment
income 3.89%(c)(d) 3.14%(c)(d) 4.16%(c) 3.41%(c) 5.00%(c) 4.25%(c) 5.49% 4.74%
Portfolio turnover 0% 0% 8% 8% 7% 7% 16% 16%
Average commission
rate (e) $0.0470 $0.0470 $0.0484 $0.0484 -- -- -- --
Net assets at end of
period (in millions) $ 317 $ 660 $ 348 $ 729 $ 400 $ 821 $ 373 $ 744
</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.
13
<PAGE>
FINANCIAL HIGHLIGHTS CONT.
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
Year ended Year ended
November 30 November 30
----------------------- -----------------------
1993 1992 (A)
Class A Class B Class A Class B(b)
------- ------- ------- ----------
<S> <C> <C> <C> <C>
Net asset value -- Beginning of period $12.960 $12.960 $11.440 $12.310
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.713 0.612 0.741 0.296
Net realized and unrealized gain 0.616 0.616 1.517 0.691
------- ------- ------- -------
Total from Investment Operations 1.329 1.228 2.258 0.987
------- ------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.689) (0.588) (0.727) (0.337)
From capital paid in -- -- (0.011)(c) --
------- ------- ------- -------
Total Distributions Declared to Shareholders (0.689) (0.588) (0.738) (0.337)
------- ------- ------- -------
Net asset value -- End of period $13.600 $13.600 $12.960 $12.960
======= ======= ======= =======
Total return (d) 10.20% 9.42% 20.21% 6.06%(e)
======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS
Operating expenses 1.19% 1.94% 1.16% 1.91%(f)
Net investment income 4.92% 4.17% 5.52% 4.77%(f)
Portfolio turnover 6% 6% 35% 35%
Net assets at end of period (in millions) $ 503 $ 971 $ 232 $ 156
</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 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.
14
<PAGE>
TRUSTEES OF THE COLONIAL UTILITIES FUND
ROBERT J. BIRNBAUM
Retired (formerly Special Counsel, Dechert, Price & Rhoads; President and
Chief Operating Officer, New York Stock Exchange, Inc.)
TOM BLEASDALE
Retired (formerly Chairman of the Board and Chief Executive Officer, Shore
Bank & Trust Company)
LORA S. COLLINS
Attorney (formerly Attorney, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel)
JAMES E. GRINNELL
Private Investor (formerly Senior Vice President-Operations, The Rockport
Company)
WILLIAM D. IRELAND, JR.
Retired (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
Partner, Development Capital, L.L.C. (formerly Dean, College of Business and
Management, University of Maryland; Dean, Simon Graduate School of Business,
University of Rochester; Chairman and Chief Executive Officer, CS First Boston
Merchant Bank; and President and Chief Executive Officer, The First Boston
Corporation)
JAMES L. MOODY, JR.
Retired (formerly Chairman of the Board and 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
Retired Partner, Peat Marwick Main & Co. (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
15
<PAGE>
-----------------
[FLAG LOGO] COLONIAL BULK RATE
MUTUAL FUNDS U.S. POSTAGE
PAID
N. READING, MA
PERMIT NO. 105
-----------------
COLONIAL UTILITIES FUND SEMIANNUAL REPORT, MAY 31, 1997
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 Colonial at
1-800-426-3750 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.
COLONIAL INVESTMENT SERVICES, INC., Distributor (C)1997, A Liberty Financial
Company (NYSE:L), One Financial Center, Boston, Massachusetts 02111-2621
UF-03/774D-0597 M (7/97)
