COLONIAL TAX-EXEMPT FUND ANNUAL REPORT
NOVEMBER 30, 1997
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Not FDIC May Lose Value
Insured No Bank Guarantee
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COLONIAL TAX-EXEMPT FUND HIGHLIGHTS
DECEMBER 1, 1996 - NOVEMBER 30, 1997
INVESTMENT OBJECTIVE: Colonial Tax-Exempt 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 investment-grade municipal
bonds.
PORTFOLIO MANAGER COMMENTARY: "The investment environment for bonds improved
during the second half of the period as interest rates fell and bond prices
rose. The Fund was well positioned to take advantage of these conditions and
generated attractive after-tax total returns."
- William Loring, Brian Hartford and Bonny Boatman
COLONIAL TAX-EXEMPT FUND PERFORMANCE
CLASS A CLASS B CLASS C(1)
Inception dates 11/21/78 5/5/92 8/1/97
Twelve-month distributions declared per share(2) $0.737 $0.636 $0.214
SEC yields on 11/30/97(3) 5.03% 4.53% 4.68%
Taxable-equivalent SEC yields(4) 8.33% 7.50% 7.75%
Twelve-month total returns, assuming 7.16% 6.37% 0.77%
reinvestment of all distributions and no
sales charge or contingent deferred
sales charge (CDSC)
Net asset value per share on 11/30/97 $13.75 $13.75 $13.75
(1) Class C share total returns are cumulative since inception on August 1,
1997.
(2) A portion of the Fund's income may be subject to the alternative minimum
tax.
(3) The 30-day SEC yields on November 30, 1997 reflect the portfolio's earning
power, net of expenses, expressed as an annualized percentage of the public
offering price per share at the end of the period.
(4) Taxable-equivalent SEC yields are based on the maximum federal income tax
rate of 39.6%.
The Fund may at times purchase tax-exempt securities at a discount, and some or
all of this discount may be included in the Fund's ordinary income which will be
taxable when distributed.
QUALITY BREAKDOWN MATURITY BREAKDOWN (as of 11/30/97)
(as of 11/30/97)
AAA.............. 60.5% 0-1 year....... 0.0% 10-15 years.... 15.0%
AA............... 10.1% 1-3 years...... 0.4% 15-20 years.... 28.3%
A................ 6.3% 3-5 years...... 2.4% 20-25 years.... 31.1%
BBB.............. 5.2% 5-7 years...... 0.4% 25+ years...... 18.8%
BB............... 0.5% 7-10 years..... 2.3% Cash &
B................ 0.3% Equiv.......... 1.3%
Non-rated........ 15.8%
Cash & Equiv..... 1.3%
Quality and maturity breakdowns are calculated as a percentage of unaudited
total investments, including short-term obligations. Maturity breakdown is based
on each security's effective maturity, which reflects pre-refundings, mandatory
puts and other conditions that affect a bond's maturity. Because the Fund is
actively managed, there can be no guarantee the Fund will continue to maintain
these quality and maturity breakdowns in the future.
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PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
I am pleased to present the annual report for Colonial
Tax-Exempt Fund. This report reflects on the investment
environment for the 12 months ended November
30, 1997.
The economy grew at a healthy pace during the past year.
The strength of the economy during the first quarter of [PHOTO]
1997 led the Federal Reserve Board to raise short-term
interest rates in March for the first time in two years.
This action was a response to growing concern about
future wage and price inflation. As interest rates rose,
bond prices declined. However, by mid-April, economic
growth appeared to slow while inflation remained under control. During the
second half of the period, interest rates declined and bond prices rose. At this
point, evidence suggests that moderate economic growth will continue in 1998 and
that inflation will remain subdued despite low levels of unemployment.
Investments in municipal bonds outperformed most alternative fixed-income
investments, including Treasury bonds, during the first half of the period.
However, during the second half, a seasonal surge in municipal supply combined
with increased refundings caused the tax-exempt market to fall behind. This
surge offered attractive relative yields and positioned the market for positive
performance in the months ahead as the supply is absorbed.
During the year, the yield spreads between high and low quality municipal bonds
decreased. Investors did not receive much benefit for taking on additional risk
associated with lower quality bonds, particularly in the non-rated sector, as
spreads narrowed. As interest rates declined during the last months of the
period, investors increasingly "reached" for yield, despite a decrease in
yields. This resulted in rising prices for lower quality municipal bonds. While
these conditions made identifying attractive new investments more difficult, the
Fund's lower quality holdings benefited from this trend.
The long-term benefits of investing in any municipal bond fund include
tax-free income as well as the opportunity to diversify your fixed-income
portfolio. Colonial Tax-Exempt Fund continues to offer you competitive
tax-free income and potential for long-term total return.
Respectfully,
/s/ Harold W. Cogger
Harold W. Cogger
President
January 9, 1998
Because market conditions change frequently, there can be no assurance that the
trends described here will continue.
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3
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PORTFOLIO MANAGEMENT REPORT
BONNY BOATMAN, WILLIAM LORING AND BRIAN HARTFORD are co-portfolio managers of
Colonial Tax-Exempt Fund. Ms. Boatman is senior vice president of Colonial
Management Associates, Inc. and Director of the Municipal Bond Department. Mr.
Loring and Mr. Hartford are vice presidents of the Advisor.
FUND WAS WELL POSITIONED TO BENEFIT FROM IMPROVING INVESTMENT ENVIRONMENT
During the first half of the period, interest rates were rising in response to
unanticipated strength in the auto, housing and manufacturing sectors. However,
by mid-April we saw signs of improving conditions for bond prices - economic
growth was slowing and inflation continued to be low. In addition, Congress had
agreed to a balanced budget plan which further calmed fixed-income markets.
Because many signs suggested that the rising interest rate environment was
behind us, we shifted the Fund's focus to investments that we expected would
outperform during periods of declining interest rates.
For example, we increased our holdings of non-callable bonds. Callable bonds are
likely to be redeemed when interest rates decline because issuers want to reduce
their borrowing costs. Non-callable bonds, on the other hand, are attractive in
a falling interest rate environment because their issuers cannot "call", or
redeem, the bonds before they mature. As a result of their longer lifespans,
non-callable bonds are more sensitive to changes in interest rates and
experience greater price increases when interest rates decline.
ATTRACTIVE VALUE FOUND IN CALIFORNIA AND NEW YORK CITY
We maintained our investments in California and New York City bonds.
California's economy has continued to expand and has diversified significantly
since the State's 1992 recession. Increased tax revenues and financial
flexibility are only a few visible signs of California's economic revival. We
also believe that selected California utility bonds offer good potential price
gains. Deregulation and competition in the utility industry have created
uncertainty nationwide. In California, however, utilities are on the leading
edge of the deregulatory wave. Several of the State's utilities have already
diversified their businesses, cut costs and made other strategic changes that
position them well for the more competitive environment ahead.
New York City is another economic revival story. Mayor Guiliani's administration
has improved budgetary management and has instituted dramatic reforms of City
government and social services. City tax receipts have increased and other
revenues are strong, fueled in part by strength in the financial services
industry, a major component of the City's tax base. If these trends continue, we
believe there is a possibility that the City's bond rating may be upgraded.
FUND GENERATED ABOVE AVERAGE ANNUAL TOTAL RETURNS
The Fund's 12-month total return of 7.16% for Class A shares, based on net asset
value, outperformed the Fund's Lipper competitive peer group average of 6.88%
for the same period. Our above average performance was due primarily to a higher
than average concentration in bonds that have relatively high sensitivity to
interest rates. In addition, the Fund's higher than average investment in lower
quality bonds in a strong economy increased investors' willingness to accept
greater levels of risk.
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4
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POSITIVE OUTLOOK FOR MUNICIPAL BONDS IN THE MONTHS AHEAD
We remain optimistic. We expect that economic growth will continue at a moderate
pace and that inflation will remain under control. Municipal market dynamics are
positive as tax-exempt bonds continue to offer compelling after-tax total
returns. Furthermore, economic strength has translated into generally improving
municipal credit quality as tax receipts exceed expectations and declining
interest rates have lowered municipalities' borrowing costs. As municipal bond
rating upgrades outpace downgrades, investments in tax-exempt bonds offer an
attractive combination of risk and reward.
COLONIAL TAX-EXEMPT FUND'S INVESTMENT PERFORMANCE VS.
THE LEHMAN BROTHERS MUNICIPAL BOND INDEX
Change in Value of $10,000 from 11/30/87 - 11/30/97
Based on NAV and POP for Class A Shares
CTEF NAV POP LEHMAN MUNI BOND
11/30/87 10000 9525 10000
10522.8 10022.96 10618
10501.74 10002.91 10543
10753.86 10243.05 10777
11002.88 10480.25 11063
11214.54 10681.85 11277
11554.17 11005.35 11757
11702.61 11146.73 11960
11919.33 11353.16 12282
12075.22 11501.65 12434
12225.66 11644.94 12617
12376.19 11788.32 12728
12747.14 12141.65 13227
13055.98 12435.82 13580
13380.85 12745.26 13888
13722.64 13070.81 14229
14037.32 13370.55 14584
14352.21 13670.48 14936
14641.46 13945.99 15252
15143.13 14423.83 15817
15341.11 14612.41 16047
16118.18 15352.56 16992
16185.74 15416.92 17077
16774.92 15978.11 17747
16844.55 16044.43 17826
16913.08 16109.71 17933
16398.13 15619.22 17499
16609.09 15820.16 17772
15651.34 14907.91 16889
17139.07 16324.96 18271
17849.7 17001.84 19093
17826.89 16980.12 19348
18678.73 17791.49 20081
18788.22 17895.78 20289
18412 17537.43 19966
18707.5 17818.89 20361
19514.29 18587.36 21261
19588.62 18658.16 21407
19744.03 18806.19 21619
20384.23 19415.98 22243
11/30/97 20912.35 19919.02 22786
A $10,000 investment in Class B shares made on May 5, 1992 (inception), at net
asset value (NAV) would have been valued at $13,846 on November 30, 1997. The
same investment after deducting the applicable contingent deferred sales charge
(CDSC) would have grown to $13,746 on November 30, 1997. A $10,000 investment in
Class C shares made on August 1, 1997 (inception), at NAV, would have grown to
$10,077 on November 30, 1997. The same investment after deducting the applicable
CDSC would have been valued at $9,977. 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 it is not possible to invest in an index.
AVERAGE ANNUAL TOTAL RETURNS
As of 11/30/97
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CLASS A SHARES CLASS B SHARES CLASS C SHARES(1)
INCEPTION 11/21/78 5/5/92 8/1/97
NAV POP NAV w/CDSC NAV w/CDSC
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1 YEAR 7.16% 2.07% 6.37% 1.37% - -
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5 YEARS 6.39 5.36 5.60 5.28 - -
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10 YEARS 7.66 7.13 - - - -
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SINCE INCEPTION 8.82(2) 8.42(2) 6.01 5.87 0.77% (0.23)%
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(1) Class C share total returns are cumulative since inception on August 1,
1997.
(2) Since 10/1/84 investment objective change.
Returns 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. Public offering price (POP) returns include the
maximum sales charge of 4.75%. The CDSC returns reflect the maximum charges of
5% for one year, 2% for five years and 1% since inception for Class B shares,
and 1% since inception for Class C shares. Past performance cannot predict
future results.
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5
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INVESTMENT PORTFOLIO
NOVEMBER 30, 1997 (IN THOUSANDS)
MUNICIPAL BONDS - 98.5% PAR VALUE
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OTHER - 0.2%
IN Indianapolis Local Public Improvement,
Series 1992 D,
6.750% 02/01/14 $ 5,000 $ 5,875
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EDUCATION - 6.8%
EDUCATION - 0.6%
AL State University Revenue,
Auburn University,
7.000% 06/01/11 1,000 1,099
IL Lake County School District No. 56,
9.000% 01/01/17 10,440 15,073
IN Purdue University,
Student Fee,
Series B,
6.700% 07/01/15 1,100 1,235
MA Health and Educational Facilities Authority,
Amherst College,
Series E,
6.750% 11/01/15 1,000 1,092
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18,499
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LOCAL GENERAL OBLIGATIONS - 6.1%
AK North Slope Borough:
Series A,
(a) 06/30/08 11,400 6,783
Series 1996 B,
(a) 06/30/07 (b) 45,000 28,237
AZ Apache County School District
Number 010 Round Valley
Project of 1987, Series 1990 C:
10.800% 07/01/98 1,000 1,036
10.800% 07/01/99 1,000 1,092
CA Los Angeles Unified School District,
Series A:
5.000% 07/01/21 20,000 19,275
6.000% 07/01/14 2,450 2,716
6.000% 07/01/15 1,500 1,665
CA Redwood City Elementary School District:
(a) 08/01/17 4,540 1,583
(a) 08/01/18 2,390 792
CO Douglas County School District No. RE-1,
Series 1996,
7.000% 12/15/12 6,000 7,342
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Investment Portfolio/November 30, 1997
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CO El Paso County School District No. 11:
7.125% 12/01/20 $ 7,350 $ 9,233
Series 1996,
7.100% 12/01/16 2,105 2,608
CO Larimer, Weld & Boulder Counties
School District,
Series 1996,
(a) 12/15/10 4,000 2,075
CT Bridgeport,
Series 1996 A,
6.500% 09/01/08 1,435 1,656
IL Chicago Board of Education,
Series 1996:
6.250% 12/01/11 3,330 3,734
6.250% 12/01/12 1,500 1,682
IL Chicago,
Series A,
5.375% 01/01/13 5,000 5,125
MA Boston,
Series 1992 A,
6.500% 07/01/12 4,400 4,785
MA Haverhill,
5.000% 06/15/17 2,200 2,134
MA Holyoke,
School Project Loan,
7.650% 08/01/09 1,250 1,369
MA Lawrence,
4.750% 02/15/14 6,250 5,883
MA Lowell:
8.000% 01/15/00 550 571
8.400% 01/15/09 1,000 1,133
MI Detroit,
Series 1990-B,
8.250% 04/01/10 5,000 5,500
MI Rochester Community School District,
5.000% 05/01/19 4,500 4,388
NV Clark County School District,
Series B,
5.625% 06/15/13 10,215 10,636
6.950% 08/15/12 3,950 4,533
NY New York City,
Series 1997 A:
7.000% 08/01/06 5,000 5,731
7.000% 08/01/07 4,725 5,428
OH Cleveland,
5.750% 08/01/12 2,000 2,170
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Investment Portfolio/November 30, 1997
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MUNICIPAL BONDS - CONT. PAR VALUE
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EDUCATION - CONT.
LOCAL GENERAL OBLIGATIONS - CONT.
PR Commonwealth of Puerto Rico Municipal
Finance Agency, Series A:
5.000% 07/01/09 $ 11,540 $ 11,713
5.250% 07/01/10 8,420 8,652
TX Harris County:
5.750% 10/01/14 (c) 2,600 2,772
Series 1996,
(a) 10/01/17 9,630 3,346
TX Houston Independent School District,
Series 1997,
(a) 08/15/15 6,355 2,494
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179,872
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STUDENT LOAN - 0.1%
LA State Public Facility Authority,
Series A,
6.750% 09/01/06 1,545 1,657
VT State Student Assistance Financing
Program, Series B,
6.700% 12/15/12 2,000 2,160
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3,817
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HEALTHCARE - 12.3%
HOSPITAL - 5.8%
AL Alabama Special Care Facilities Authority,
Montgomery Healthcare,
Series 1989,
11.000% 10/01/19 15,530 15,841
CA Eden Township Hospital District,
Eden Township Hospital,
Series 1989,
7.400% 11/01/19 5,000 5,319
CT State Health & Educational
Facilities Authority,
New Britain Hospital, Series 1991 A,
7.750% 07/01/22 905 1,044
FL St. Petersburg Health Facilities
Authority, Allegany Health System,
St. Joseph's Hospital, Inc., Series 1985 A,
7.000% 12/01/15 2,000 2,222
GA Clayton Hospital Authority,
The Woodlands Foundation, Inc.,
Series 1991 A,
9.750% 05/01/21 (d) 6,680 4,342
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Investment Portfolio/November 30, 1997
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IL Health Facility Authority,
Series 1992 B,
RIB (variable rate),
9.740% 05/01/21 $ 4,800 $ 5,682
IL State Health Facilities Authority,
Edgewater Medical Center,
Series A,
9.250% 07/01/24 8,345 10,181
IN State Health Facilities Financing Authority,
Sisters of St. Francis Health, Series A,
5.750% 11/01/12 (c) 10,080 10,584
MN Rochester,
Mayo Medical Center, Series F,
6.250% 11/15/21 5,900 6,342
MS Hospital Equipment & Facilities
Authority, Pooled Loan Program,
7.500% 08/01/16 18,900 19,916
MT State Health Facility Authority,
Hospital Facilities, Series 1994,
6.547% 02/15/25 6,000 5,805
NC Charlotte-Mecklenburg Hospital
Authority, North Carolina Healthcare Systems,
6.250% 01/01/20 845 896
NJ Health Care Facilities Financing
Authority, Raritan Bay Medical Center,
7.250% 07/01/14 4,300 4,655
NV Reno Hospital, St. Mary's Regional
Medical Center, Series 1991-A,
6.700% 07/01/21 1,700 1,832
OK Oklahoma City Industrial & Cultural
Facilities Trust, Hillcrest Health Center,
6.400% 08/01/14 4,320 4,644
TN Chattanooga Health Education
& Housing Facilities Board,
North Park Hospital Project, Series 1993,
8.500% 02/01/23 41,930 44,865
TX Bexar County Health Facilities
Development Corp., Baptist Health System:
6.000% 11/15/10 2,540 2,791
6.000% 11/15/11 1,780 1,956
6.000% 11/15/12 1,065 1,173
TX North Central State Health Facilities
Development Corp., Texas Health Resources,
5.000% 02/15/17 5,400 5,157
VA Henrico County Industrial Development
Authority, Bon Secours Health,
6.000% 08/15/16 5,000 5,481
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Investment Portfolio/November 30, 1997
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MUNICIPAL BONDS - CONT. PAR VALUE
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HEALTHCARE - CONT.
HOSPITAL - CONT.
VA Norfolk Industrial Development
Authority, Sentara Hospital,
Series A,
6.500% 11/01/13 $ 2,500 $ 2,744
VT State Educational & Health Buildings
Authority, Springfield Hospital,
Series A,
7.750% 01/01/13 1,890 2,114
WI State Health & Educational Facilities
Authority, St. Luke's Medical Center Project,
Series 1991,
7.100% 08/15/19 2,550 2,840
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168,426
--------------
INTERMEDIATE CARE FACILITIES - 0.6%
IL Champaign,
Hoosier Care, Inc.,
Series 1989 A,
9.750% 08/01/19 1,445 1,543
IN Wabash First Mortgage,
Hoosier Care, Inc.,
Series 1989-A,
9.750% 08/01/19 5,760 6,163
MA State Health & Educational
Facilities Authority, Corporation
for Independent Living,
8.100% 07/01/18 1,280 1,390
TN Shelby County, Health, Education,
& Housing Facilities Board, Open Arms
Development Center, Series 1992-A,
9.750% 08/01/19 4,190 4,934
TN Shelby County, Health, Education,
& Housing Facilities Board, Open Arms
Development Center, Series 1992-C,
9.750% 08/01/19 4,185 4,928
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18,958
--------------
NURSING HOME - 5.9%
CA San Diego Industrial Development,
8.750% 12/01/16 5,300 5,883
CO State Health Facilities Authority,
American Housing Foundation, Inc.,
Series 1990 A,
10.250% 12/01/20 2,500 2,500
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Investment Portfolio/November 30, 1997
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DE State Economic Development Authority,
Churchman Village Project, Series A,
10.000% 03/01/21 $ 7,170 $ 8,640
DE Sussex County, Healthcare Facility,
Delaware Health Corp., Series 1994 A,
7.600% 01/01/24 14,230 14,657
FL Collier County Industrial Development
Authority, Beverly Enterprises, Inc.,
Series 1991,
10.750% 03/01/03 990 1,131
FL Flagler County Industrial Development
Authority, South Florida Properties,
Series 1988,
10.500% 12/01/18 (d) 8,815 7,052
FL Gadsden County Industrial Development
Authority, Florida Properties, Inc.,
Series 1988 A,
10.450% 10/01/18 5,985 6,164
FL Palm Beach County,
Beverly Enterprises-Florida, Inc., Series 1984,
10.000% 06/01/11 2,630 2,903
IA Marion, Kentucky Iowa
Corp. Project, Series 1990,
10.250% 01/01/20 975 1,023
IN Gary Industrial Economic Development,
West Side Health Care Center,
Series 1987 A,
11.500% 10/01/17 1,955 2,023
MA Boston,
St. Joseph Nursing Care Center, Inc.,
Series 1990,
10.000% 01/01/20 (e) 305 332
MA State Industrial Finance Agency:
American Health Foundation, Inc.,
Series 1989,
10.125% 03/01/19 3,180 2,385
GF/Massachusetts, Inc.,
Series 1994,
8.300% 07/01/23 12,730 13,128
MA State Industrial Finance Agency,
Belmont Home Care Project:
Seacoast Nursing Home, Series 1991,
9.625% 12/01/21 4,945 5,495
Series A,
7.970% 01/01/99 290 296
Series 1995 A,
9.270% 01/01/25 10,405 11,771
11
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Investment Portfolio/November 30, 1997
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MUNICIPAL BONDS - CONT. PAR VALUE
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HEALTHCARE - CONT.
NURSING HOME - CONT.
MO St. Louis County Industrial Development
Authority, Nursing Home, Cardinal Carberry
Health Center, Series 1991,
7.125% 03/20/23 $ 2,000 $ 2,175
NM Albuquerque Industrial Development
Authority, Manor Nursing Home,
12.000% 05/15/14 3,097 3,426
OH Ashtabula County
First Mortgage, Village Square
Nursing Center, Inc., 1985,
12.000% 12/01/15 1,235 1,281
OH Lucas County,
Gericare, Inc., Series 1988 B,
10.500% 06/01/18 2,995 3,062
OH Montgomery County,
Grafton Oaks Limited Partners,
Series 1986,
9.750% 12/01/16 695 660
OH Trumbull County,
12.000% 12/01/15 2,150 2,222
PA Cambria County Industrial Development
Authority, Beverly Enterprises,
10.000% 06/18/12 1,800 2,342
PA Chester County Industrial Development,
Pennsylvania Nursing Home, Inc., Series 1989,
10.125% 05/01/19 10,480 10,166
PA Delaware County Authority,
Main Line and Haverford Nursing,
Series 1992,
9.000% 08/01/22 9,420 10,621
PA Lackawanna County Industrial Authority,
Greenridge Nursing Center,
10.500% 12/01/10 1,825 1,996
PA Luzerne County Industrial
Development Authority:
Beverly Enterprises, Pennsylvania,
Series 1983,
10.125% 11/01/08 805 878
Millville Nursing Center,
10.500% 12/01/12 3,680 3,496
PA Montgomery County Higher
Education & Health Authority,
Roslyn-Hatboro, Inc. Project,
9.000% 11/15/22 12,205 9,764
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Investment Portfolio/November 30, 1997
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PA Philadelphia Authority for
Industrial Development:
First Mortgage, The Care Pavilion,
Series 1988,
10.250% 02/01/18 $ 5,865 $ 5,872
RHA/Philadelphia Project,
10.250% 11/01/18 9,345 9,333
PA Washington County Industrial
Development Authority, Central
States, Series 1989,
10.250% 11/01/19 3,355 3,410
PA Wilkins Area Industrial Development
Authority, Oakmont Nursing Center,
Series 1984,
10.000% 07/01/11 1,050 1,188
TN Metropolitan Government, Nashville
& Davidson Counties Health & Education
Facilities, Central States, Series 1989,
10.250% 11/01/19 770 783
TX Whitehouse Health Facilities
Development Corp., Oak Brook
Health Care Center, Series 1989,
10.000% 12/01/19 1,775 1,857
VA Virginia Beach Development Authority,
Beverly Enterprises, Series 1985,
10.000% 04/01/10 905 994
WA Kitsap County Housing Authority,
Martha & Mary Nursing Home,
7.100% 02/20/36 10,000 11,300
--------------
172,209
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HOUSING - 13.4%
ASSISTED LIVING/SENIOR - 1.0%
FL Clearwater Housing Authority,
Hampton Apartments,
Series 1994,
8.250% 05/01/24 3,475 3,696
IL State Development Finance Authority,
Care Institute, Inc.,
8.250% 06/01/25 10,000 10,975
MN Roseville,
Care Institute, Inc., Series 1993,
7.750% 11/01/23 2,975 2,975
MS Lamar County Wesley Manor II:
8.750% 08/01/20 1,000 1,033
8.750% 02/01/29 1,610 1,663
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Investment Portfolio/November 30, 1997
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MUNICIPAL BONDS - CONT. PAR VALUE
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HOUSING - CONT.
ASSISTED LIVING/SENIOR - CONT.
PA Montgomery County Industrial
Development Authority, Assisted
Living Facility, Series 1993-A,
8.250% 05/01/23 $ 1,450 $ 1,539
TX Bell County Health Facilities
Development Corp., Care Institutions, Inc.,
9.000% 11/01/24 7,585 8,429
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30,310
--------------
MULTI-FAMILY - 5.8%
AZ Maricopa County Industrial
Development Authority,
Advantage Point, Series 1996 A,
6.625% 07/01/26 2,750 2,925
AZ Mohave County Industrial
Development Authority, Multifamily,
Kingman Station Apartments,
8.125% 10/01/26 2,825 3,091
AZ Phoenix Industrial Development
Authority, Chris Ridge Village Project,
Series 1992:
6.750% 11/01/12 650 687
6.800% 11/01/25 4,250 4,473
CO State Health Facilities Authority,
Birchwood Manor,
Series 1991 A,
7.625% 04/01/26 1,835 1,913
DE Quaker Hill Housing Corp.,
Multifamily Housing,
Quaker Hill Apartments,
Series A,
7.550% 08/01/21 6,225 6,754
FL Hialeah Housing Authority,
Series 1991,
9.500% 11/01/21 10,600 10,070
FL State Housing Finance Agency,
Windsong Apartments,
Series 1993 C,
9.250% 01/01/19 1,230 1,262
GA Augusta Housing Authority,
Mountain Ridge Holdings II Project,
Series A,
8.960% 09/01/24 (d) 3,620 2,353
14
<PAGE>
Investment Portfolio/November 30, 1997
- --------------------------------------------------------------------------------
GA Savannah Housing Authority,
Multifamily Housing, Plantation Oaks
Apartments Project, Series 1986,
9.625% 02/01/27 $ 2,890 $ 3,092
IL Carbondale,
Mill Street Apartments,
Series 1979,
7.375% 09/01/20 829 845
IL Charleston Non-Profit Corp.,
Cougills Manor Project,
6.875% 07/01/20 1,746 1,764
IL East Moline Housing Finance Corp.,
Deerfield Woods Apartments,
7.500% 08/01/21 (f) 2,349 2,398
IL State Housing Development Authority,
Series 1990 A,
8.000% 06/01/26 680 716
LA Jefferson Housing Development,
Corporation Multiple Family,
Concordia Project, Series A,
7.700% 08/01/22 2,570 2,785
LA New Orleans Housing Development
Corp., Multifamily Housing Mortgage,
Southwood Patio, Series 1990-A,
7.700% 02/01/22 2,375 2,515
MA State Housing Finance Agency,
Series 1988 A,
8.400% 08/01/21 740 767
MN Washington County Housing &
Redevelopment Authority,
Cottages of Aspen, Series 1992,
9.250% 06/01/22 1,925 2,130
MN White Bear Lake,
Birch Lake Townhomes Project:
Series 1989 A,
9.750% 07/15/19 (g) 2,185 2,207
Series 1989 B,
(h) 07/15/19 (g) 286 523
MO St. Louis Area Housing Finance
Corp., Wellington Arms III,
Series 1979,
7.500% 01/01/21 2,014 2,034
MS Biloxi Urban Renewal
Biloxi Apartments Project, Series 1985:
9.500% 12/01/05 1,100 1,158
9.500% 12/01/10 1,235 1,300
9.500% 12/01/15 1,970 2,073
15
<PAGE>
Investment Portfolio/November 30, 1997
- --------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- --------------------------------------------------------------------------------
HOUSING - CONT.
MULTI-FAMILY - CONT.
NC Eastern Carolina Regional Housing
Authority, New River Apartments -
Jacksonville, Series 1994,
8.250% 09/01/14 $ 2,770 $ 2,881
NE Omaha Housing Development Corp.,
Mortgage Notes, North Omaha Homes,
7.375% 03/01/21 1,371 1,399
NJ State Housing & Mortgage Finance Agency,
6.950% 11/01/13 3,500 3,771
NY Nyack Housing Assistance Corp.,
Nyack Plaza Apartments,
7.375% 06/01/21 (f) 2,850 2,857
PA Warren County Housing Finance Corp.,
Allegheny Manor,
7.500% 02/01/21 1,344 1,372
Resolution Trust Corp., Pass Through
Certificates, Series 1993-A,
8.500% 12/01/16 (f) 61,712 64,258
TN Franklin Industrial Board,
Landings Apartment Project,
Series 1996 B,
8.750% 04/01/27 3,600 3,649
TN Knoxville Community Development Corp.,
Maple Oak Apartment Project, Series 1992,
6.375% 10/15/08 2,510 2,657
TX Galveston Pass Health Facilities Center,
Pass Through Certificates,
8.000% 08/01/23 1,850 1,952
TX Laredo Housing Development Corp., No. 1,
7.375% 03/05/21 (f) 2,056 2,057
UT Salt Lake City Housing Authority,
Hartland Apartments Project, Series 1987 A,
8.875% 12/20/27 7,720 7,955
VA Alexandria Redevelopment
& Housing Authority, Courthouse
Commons Apartments:
Series 1990-A,
10.000% 01/01/21 760 774
Series 1990-B,
(h) 01/01/21 959 2,000
VA Fairfax County Redevelopment
& Housing Authority, Mt. Vernon
Apartments, Series A,
6.625% 09/20/20 1,500 1,626
16
<PAGE>
Investment Portfolio/November 30, 1997
- --------------------------------------------------------------------------------
VA Norfolk Redevelopment & Housing
Authority, Multifamily Housing,
Dockside, Series 1991-A:
7.300% 12/01/16 $ 1,315 $ 1,400
7.375% 12/01/28 1,940 2,069
WA Washington Housing Development Corp.,
Parkview Apartments Project,
7.500% 04/01/21 1,653 1,687
WA Washington State Housing Finance
Commission, Multifamily Housing,
Series 1988-A,
7.900% 07/01/30 1,445 1,489
WI Milwaukee Housing Authority
Mortgage, Windsor Court Project,
Series 1986,
8.700% 08/21/21 1,985 2,033
WY Rock Springs Housing Finance
Corp., Bicentennial Association II,
7.500% 05/01/20 1,123 1,145
--------------
168,866
--------------
SINGLE FAMILY - 6.6%
AK Alaska Housing Finance Corp.,
Series A-2,
5.750% 06/01/24 (c) 3,500 3,513
AK Housing Finance Corp.,
Series 1992-A,
6.600% 12/01/23 11,750 12,954
AL Alabama Housing Finance Authority,
Series 1990-C,
7.550% 04/01/16 585 618
CA State Housing Finance Authority,
Series 1984 B,
(a) 08/01/16 325 41
CO El Paso County Home Mortgage:
Series 1987 C,
8.300% 09/20/18 1,644 1,926
Series 1987 D,
8.150% 09/20/14 637 732
Series 1988 A,
8.375% 03/25/19 1,698 2,007
CO Housing Finance Authority,
Single Family Housing,
Series A,
7.150% 11/01/14 805 864
17
<PAGE>
Investment Portfolio/November 30, 1997
- --------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- --------------------------------------------------------------------------------
HOUSING - CONT.
SINGLE FAMILY - CONT.
CO State Housing Finance Authority:
Series 1991 A,
7.500% 05/01/29 $ 4,745 $ 5,018
Series 1996 B-1,
7.650% 11/01/26 2,750 3,132
Series 1997 A-2,
7.250% 05/01/27 3,200 3,624
FL Brevard County,
Housing Finance Authority,
Single Family Mortgage, Series 1985,
(a) 04/01/17 4,145 601
FL Lee County Housing Finance Authority,
Series 1996 A-1,
7.350% 03/01/27 6,680 7,573
GA Atlanta, Urban Residential
Finance Authority, Single Family
Housing Mortgage, Series 1988,
8.250% 10/01/21 970 995
IA Finance Authority Single Family,
Series 1992 B,
6.950% 07/01/24 9,915 10,597
ID State Housing Agency,
Senior Series,
6.700% 07/01/27 6,000 6,495
IL Chicago:
Series 1996 B,
7.625% 09/01/27 4,010 4,576
Series 1997 A,
7.250% 09/01/28 4,000 4,530
IL State Housing Development Authority:
Series B,
7.250% 08/01/17 1,290 1,371
Series C,
7.500% 08/01/17 220 231
IN State Housing Finance Authority,
Single Family Housing, Series 1987 C,
9.125% 07/01/18 2,260 2,319
IN State Housing Finance Authority,
GNMA Collateral Mortgage Program,
Series A-1,
7.850% 07/01/16 15 16
KY Louisville Residential,
Series 1984,
(a) 07/01/16 170 21
18
<PAGE>
Investment Portfolio/November 30, 1997
- --------------------------------------------------------------------------------
LA Calcasieu Parish:
Series 1987-A,
8.125% 12/01/12 $ 1,194 $ 1,204
Series 1988-B,
8.250% 06/01/12 2,812 2,839
LA Jefferson Parish Home Mortgage,
Authority Single Family, Series 1988 A,
8.300% 04/01/20 2,070 2,158
MA State Housing Finance Agency:
Series 21,
7.125% 06/01/25 6,000 6,480
Series 1987 A,
9.000% 12/01/18 1,595 1,627
Series 1988 B,
8.100% 08/01/23 840 879
MD State Community Development Administration,
Department of Housing and Community
Development Single Family Program:
1st Series,
7.300% 04/01/17 450 477
3rd Series,
7.250% 04/01/27 960 1,014
MN State Housing Finance Agency:
Series C,
7.100% 07/01/11 675 720
Series 1988 D,
8.250% 08/01/20 1,950 2,052
MO State Housing Development Commission,
Series C,
7.250% 09/01/26 4,590 5,192
MO State Housing Development Commission:
Homeownership Loan Program, Series 1996 A,
7.200% 09/01/26 7,690 8,728
Series 1996 B,
7.550% 09/01/27 8,395 9,654
Series C,
6.900% 07/01/18 845 897
NE Investment Finance Authority:
Series 1990-2, RIB (variable rate),
11.328% 09/10/30 3,000 3,394
Series 1990 B, RIB (variable rate),
11.155% 03/15/22 6,100 6,817
NH State Housing Finance Authority,
Single Family Resources Mortgage,
Series 1989-B,
7.700% 07/01/29 2,380 2,508
19
<PAGE>
Investment Portfolio/November 30, 1997
- --------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- --------------------------------------------------------------------------------
HOUSING - CONT.
SINGLE FAMILY - CONT.
NY State Mortgage Agency:
Home Owner Mortgage, Series HH-2,
7.850% 04/01/22 $ 1,500 $ 1,573
Series BB 2,
7.950% 10/01/15 1,395 1,450
OH Housing Finance Agency:
Series A2, RIB (variable rate),
9.588% 03/24/31 5,800 6,554
Series 1988 C,
8.125% 03/01/20 730 765
TX Bexar County Housing Finance Corp.,
GNMA Collateralized Mortgage, Series 1989-A,
8.200% 04/01/22 3,365 3,542
TX Corpus Christi Housing Finance Corp.,
Single Family Mortgage, Lomas and Nettleton,
Series C,
10.000% 10/01/07 375 382
TX Harris County Housing Finance Corp.,
Single Family,
Series 1987,
8.875% 12/01/17 2,070 2,125
TX Lubbock Housing Finance Corp.:
Single Family Series, Series 1988 C,
8.375% 12/01/20 4,755 4,830
Series 1988 D,
8.375% 12/01/20 835 848
TX State Department Housing & Community
Affairs, Collateralized Home Mortgage,
Series 1992-B2, RIB (variable rate),
9.531% 06/18/23 9,000 10,080
TX State Housing Agency Mortgage,
Single Family, Series A,
7.150% 09/01/12 625 669
UT State Housing Finance Agency,
Single Family Mortgage:
Senior A-1,
6.900% 07/01/12 705 756
Senior Issue B-1,
7.500% 07/01/16 105 112
Senior Issue B-2:
7.000% 07/01/16 295 314
7.700% 07/01/15 20 21
Series 1990-C2,
7.950% 07/01/10 210 223
20
<PAGE>
Investment Portfolio/November 30, 1997
- --------------------------------------------------------------------------------
UT State Housing Finance Agency,
Single Family Mortgage - cont.:
Senior Issue D-2,
7.250% 07/01/11 $ 350 $ 374
Series E-1,
6.950% 07/01/11 1,185 1,264
Senior Series F-1,
7.400% 07/01/09 260 269
VA State Housing Authority
Commonwealth Mortgage:
Series A,
7.100% 01/01/17 1,000 1,069
Series B, Sub Series B-4,
6.850% 07/01/17 5,180 5,413
VT State Housing Finance Agency,
Series 1989 A,
7.850% 12/01/29 3,920 4,087
WI State Housing & Economic
Development Authority, Series A,
7.000% 09/01/09 985 1,058
WV State Housing Development Fund,
Series 1992-B,
7.200% 11/01/20 10,000 10,712
WY Community Development Authority,
Single Family Mortgage, Series 1988-G,
7.250% 06/01/21 4,500 4,866
--------------
193,750
--------------
- --------------------------------------------------------------------------------
OTHER - 15.3%
LOCAL APPROPRIATED - 5.1%
CA Los Angeles Convention & Exhibition
Authority, Series 1993 A,
6.125% 08/15/11 5,000 5,575
CA Sacramento City Financing Authority,
Series A,
5.375% 11/01/14 5,000 5,150
CA San Bernardino County,
Medical Center Financing Project,
5.500% 08/01/17 2,500 2,609
CA San Diego County,
Central Jail Project,
5.000% 10/01/25 5,000 4,812
CA Santa Clara County Financing Authority,
Series A,
5.000% 11/15/17 14,245 13,818
21
<PAGE>
Investment Portfolio/November 30, 1997
- --------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- --------------------------------------------------------------------------------
OTHER - CONT.
LOCAL APPROPRIATED - CONT.
IL Chicago Board of Education,
General Obligation Leases Certificates,
Series 1992-A,
6.000% 01/01/20 $ 4,000 $ 4,385
IL Chicago Board of Education,
Series 1992 A,
6.250% 01/01/15 4,400 4,945
IN Beech Grove School Building Corp.,
6.250% 07/05/16 (b) 2,265 2,548
NJ Hudson County, Series 1992,
6.600% 12/01/21 16,665 17,957
NY State Dormitory Authority,
Judicial Facilities, Series 1991 A,
9.500% 04/15/14 9,000 10,508
OH Cleveland,
Cleveland Stadium Project,
5.250% 11/15/22 12,500 12,453
PA Philadelphia Municipal Authority,
Series B,
6.400% 11/15/16 39,925 43,269
SC Charleston County,
Charleston Public Facilities Corp.,
Series 1995:
6.000% 12/01/07 3,110 3,405
6.000% 12/01/09 3,495 3,796
6.000% 12/01/10 3,710 4,007
VA Chesapeake Industrial Development
Authority,
5.250% 06/01/17 2,445 2,448
WA King County,
King Street Center Project:
5.125% 06/01/17 3,000 2,925
5.250% 06/01/26 5,000 4,906
--------------
149,516
--------------
POOL/BOND BANK - 0.9%
CA San Diego County, Series 1993,
5.625% 09/01/12 13,000 13,829
IN Indianapolis Local Public
Improvement Bond Bank, Series A:
5.000% 01/01/17 5,000 4,831
6.500% 01/01/13 6,700 7,722
--------------
26,382
--------------
22
<PAGE>
Investment Portfolio/November 30, 1997
- --------------------------------------------------------------------------------
REFUNDED/ESCROWED (I) - 9.3%
AZ Apache County School District
Number 010 Round Valley
Project of 1987, Series 1990-C,
9.875% 07/01/05 $ 1,500 $ 1,650
AZ Pima County Industrial Development
Authority,
8.200% 09/01/21 12,370 16,715
CA Palmdale Community Redevelopment Agency,
Series D,
8.000% 04/01/16 7,000 9,301
CA Perris Community Facilities District,
Series 2-90,
8.750% 10/01/21 6,165 8,947
CA Pomona, Series A,
7.600% 05/01/23 10,000 12,987
CA Riverside County,
8.300% 11/01/12 10,000 13,250
CO Denver City and County Airport:
Series A:
8.500% 11/15/23 430 486
8.750% 11/15/23 1,455 1,706
Series B:
7.250% 11/15/23 1,125 1,277
7.250% 11/15/23 1,595 1,812
CO Mesa County,
(a) 12/01/11 5,905 2,871
DC District Columbia Hospital,
Washington Hospital Center Corp.,
Series 1990-A,
9.000% 01/01/08 1,690 1,935
DC Hospital,
Washington Hospital Center,
Series 1990 A,
8.750% 01/01/15 10,000 11,387
DE State Economic Development Authority,
Riverside Hospital, Series 1992 A,
9.500% 01/01/22 1,140 1,478
FL State Mid-Bay Bridge Authority,
Series A,
6.875% 10/01/22 2,000 2,412
GA Burke County Development Authority,
Oglethorpe Power Corp., Series 1992,
8.000% 01/01/22 11,000 13,049
IL Chicago Public Building Commission,
Series 1990 A,
7.125% 01/01/15 4,010 4,306
23
<PAGE>
Investment Portfolio/November 30, 1997
- --------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- --------------------------------------------------------------------------------
OTHER - CONT.
REFUNDED/ESCROWED (I) - CONT.
IL Health Facility Authority,
United Medical Center:
Series 1991,
8.125% 07/01/06 $ 2,780 $ 3,131
Series 1991,
8.375% 07/01/12 1,500 1,789
IN St. Joseph County Hospital Authority,
South Bend Memorial Hospital,
9.400% 06/01/10 3,085 3,980
KY Trimble County,
Louisville Gas & Electric Co.,
Series B,
6.550% 11/01/20 130 143
MA Bay Transportation Authority,
General Transportation System,
Series A,
7.000% 03/01/11 1,000 1,101
MA General Obligation Bonds,
Series 1991 A,
7.625% 06/01/08 5,000 5,637
MA State Health & Educational
Facilities Authority,
Lowell General Hospital, Series 1991 A,
8.400% 06/01/11 2,500 2,878
MA State Industrial Finance Agency,
Mary Ann Morse Nursing Home, Inc.,
Series 1991 I,
10.000% 01/01/21 1,715 2,039
MA State Turnpike Authority:
Series A,
5.000% 01/01/20 12,665 12,380
Series 1993 A,
5.125% 01/01/23 5,000 4,962
MA State,
Series 1991 C,
6.750% 08/01/09 1,000 1,102
MN Mille Lacs Capital Improvement Authority,
Mille Lacs Bond of Chippewa, Series 1992 A,
9.250% 11/01/12 1,400 1,727
MO Hannibal Industrial Development Authority,
Regional Healthcare Systems, Series 1992,
9.500% 03/01/22 4,250 5,196
NC Lincoln County, Lincoln Country Hospital,
9.000% 05/01/07 475 572
24
<PAGE>
Investment Portfolio/November 30, 1997
- --------------------------------------------------------------------------------
NY New York City General Obligation,
Series 1991-D,
8.000% 08/01/18 $ 5,085 $ 5,803
NY New York City,
Series B-1,
6.950% 08/15/12 50 58
NY State Urban Development
Corp., State Facilities, Series 1991,
7.500% 04/01/20 4,950 5,544
NY Triborough Bridge & Tunnel Authority:
Series L,
8.000% 01/01/07 300 307
Series T,
7.000% 01/01/11 750 824
PA Convention Center Authority, Series 1989-A,
6.000% 09/01/19 11,650 12,931
PA Philadelphia Hospitals & Higher
Educational Facilities Authority,
Presbyterian Medical Center, Series 1993,
6.500% 12/01/11 5,155 5,935
PA State Industrial Development
Authority, Economic Development,
Series A,
7.000% 01/01/11 5,595 6,189
PA Westmoreland County Municipal
Authority, Special Obligation, Series 1985,
9.125% 07/01/10 4,435 5,361
SC Piedmont Municipal Power Agency:
Series 1988,
(a) 01/01/13 18,570 8,612
Series 1993,
5.375% 01/01/25 3,960 4,059
TN Shelby County, Public Improvement,
Series 1992-A:
(a) 05/01/10 15,750 8,348
(a) 05/01/12 15,130 6,960
TX Austin Utilities System Revenue,
6.750% 05/15/12 3,500 3,833
TX Hidalgo County Health Services,
Mission Hospital Incorporated, Series A,
10.250% 02/01/25 4,785 5,575
TX State Research Laboratory
Commission Finance Authority,
Superconducting Super Collider, Series 1991,
6.950% 12/01/12 10,000 11,850
25
<PAGE>
Investment Portfolio/November 30, 1997
- --------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- --------------------------------------------------------------------------------
OTHER - CONT.
REFUNDED/ESCROWED (I) - CONT.
UT Uintah County Pollution Control,
Series 1984-F2,
10.500% 06/15/14 $ 6,900 $ 8,280
WA State Health Care Facilities Authority,
Grays Harbor Community Hospital,
Series 1993:
7.200% 07/01/03 930 1,017
8.025% 07/01/20 6,380 7,146
WA Tacoma Electric System,
Series 1991 C, RIB (variable rate),
8.891% 01/02/15 10,000 11,713
--------------
272,551
--------------
- --------------------------------------------------------------------------------
OTHER REVENUE - 9.0%
CHEMICALS - 0.5%
IL Southwestern Illinois Development
Authority, Sewer Facilities, Monsanto
Company, Series 1991,
7.300% 07/15/15 3,000 3,443
TN Humphreys County Industrial
Development Board,
E.I. duPont de Nemours & Co., Series 1994
6.700% 05/01/24 9,000 9,911
--------------
13,354
--------------
HOTELS - 0.0%
MN Burnsville Commercial Development,
Holiday Inn Project, Series 1989,
10.600% 06/01/06 1,400 1,415
--------------
INDUSTRIAL - 0.6%
CO Mesa County Industrial Development
Joy Technologies, Inc., Series 1992,
8.500% 09/15/06 1,000 1,134
CT State Development Authority,
Pfizer Inc. Project, Series 1994,
7.000% 07/01/25 3,000 3,442
GA Wayne County Development Authority,
Solid Waste Disposal, ITT Royonier, Inc.,
Series 1990,
8.000% 07/01/15 2,500 2,731
IL Rockford,
9.250% 02/01/00 705 710
26
<PAGE>
Investment Portfolio/November 30, 1997
- --------------------------------------------------------------------------------
IN State Development Finance Authority,
Inland Steel, Series A,
5.750% 10/01/11 $ 1,000 $ 1,015
MN Brooklyn Park,
TL Systems Corp., Series 1991,
10.000% 09/01/16 315 388
MN Buffalo,
Von Ruden Manufacturing, Inc.,
Series 1989,
10.500% 09/01/14 1,380 1,508
OH Cuyahoga County,
Joy Technologies, Inc., Series 1992,
8.750% 09/15/07 1,340 1,533
PA Bucks County
Industrial Development Jorgensen Steel,
9.000% 06/01/05 4,000 4,028
--------------
16,489
--------------
OIL AND GAS - 1.1%
CA Los Angeles Regional Airport
Improvement Corp., Los Angeles
International Airport,
6.800% 01/01/27 1,400 1,500
PA State Economic Development
Financing Authority,
Sun Co., Inc., Series 1994 A,
7.600% 12/01/24 27,500 31,453
--------------
32,953
--------------
OTHER - 0.1%
MD Baltimore,
Park Charles Project, Series 1986,
8.000% 01/01/10 1,530 1,658
--------------
PAPER PRODUCTS - 0.1%
IA Cedar Rapids,
Weyerhaeuser Company Project,
9.000% 08/01/14 1,000 1,432
LA De Soto Parish,
International Paper Company, Series A,
7.700% 11/01/18 1,250 1,461
--------------
2,893
--------------
RECREATION - 0.1%
NM Red River Sports Facility,
Red River Ski Area, Series 1985,
12.000% 06/01/07 2,865 2,896
--------------
27
<PAGE>
Investment Portfolio/November 30, 1997
- --------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- --------------------------------------------------------------------------------
OTHER REVENUE - CONT.
RETAIL - 0.4%
DE Sussex County, Economic Development,
Rehoboth Mall Project,
7.250% 10/15/12 $ 4,885 $ 5,111
PA Bucks County,
Industrial Development,
Hechinger Company, Series 1984,
11.375% 11/15/04 2,190 2,270
PA Philadelphia Authority for
Industrial Development, Hechinger
Company, Series 1983,
11.375% 12/01/04 3,510 3,582
--------------
10,963
--------------
STATE APPROPRIATED - 6.2%
CA State Public Works Board,
Various State Prisons Projects,
Series 1993 A,
5.250% 12/01/13 6,400 6,544
MA State College Building Authority Project,
Series A,
7.500% 05/01/11 1,500 1,873
NY Metropolitan Transportation Authority,
Transit Facilities, Series 5,
6.900% 07/01/06 3,015 3,294
NY State Dormitory Authority:
City University System:
Series 1990 C:
7.000% 07/01/14 2,050 2,211
7.500% 07/01/10 19,875 24,099
State University of New York,
Series 1990-B,
7.000% 05/15/16 1,000 1,069
NY State Dormitory Authority:
NY State Educational Facilities,
Series 1990-A,
7.500% 05/15/13 8,000 9,920
State University of New York,
Series B,
5.000% 05/15/18 11,500 10,853
NY State Dormitory Authority,
City University,
Series 1993 A:
6.000% 07/01/20 13,350 14,401
6.000% 07/01/20 6,140 6,869
28
<PAGE>
Investment Portfolio/November 30, 1997
- --------------------------------------------------------------------------------
NY State Dormitory Authority:
City University, Series A,
5.750% 07/01/13 $ 8,565 $ 9,336
State University Facilities:
Series A,
5.875% 05/15/17 33,240 36,356
Series 1993 A,
5.500% 05/15/13 12,000 12,765
NY State Urban Development Corp.:
Correctional Facility, Series A,
6.500% 01/01/11 8,500 9,711
University Facilities Grants,
5.500% 01/01/15 5,265 5,357
NY State Urban Development Corp.,
Series 1993 A,
5.500% 01/01/14 12,500 13,219
TX Hurst Euless Bedford
Independent School District, Series 1994,
6.500% 08/15/24 6,355 6,903
TX State Public Finance Authority,
General Services Commission Projects,
Series A,
5.500% 02/01/11 (c) 6,905 7,216
--------------
181,996
--------------
- --------------------------------------------------------------------------------
RESOURCE RECOVERY - 0.1%
DISPOSAL - 0.1%
MA Boston Industrial Development
Finance Authority, Jet-A-Way, Inc.,
10.500% 01/01/11 1,500 1,661
--------------
RESOURCE RECOVERY - 0.0%
VA Fairfax County Economic Development,
Ogden Martin Systems, Series 1987 A,
7.750% 02/01/11 1,000 1,066
--------------
- --------------------------------------------------------------------------------
TAX-BACKED - 7.9%
SPECIAL NON-PROPERTY TAX - 5.2%
FL Palm Beach County Criminal
Justice Facilities,
5.750% 06/01/13 5,000 5,500
IL Metropolitan Pier and Exposition
Authority, McCormick Place
Expansion Project,
(a) 06/15/14 4,330 1,808
29
<PAGE>
Investment Portfolio/November 30, 1997
- --------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- --------------------------------------------------------------------------------
TAX-BACKED - CONT.
SPECIAL NON-PROPERTY TAX - CONT.
IL State Development Finance Authority,
City of Marion Project, Series 1991,
9.625% 09/15/21 $ 5,645 $ 4,234
IL State Sales Tax, Series N,
6.900% 06/15/09 1,000 1,096
NJ State Transportation Trust Fund Authority:
5.000% 06/15/17 6,750 6,573
Series B,
7.000% 06/15/12 47,000 57,751
NY New York City Transitional
Finance Authority, Series A,
5.125% 08/15/21 6,000 5,865
NY State Local Assistance Corp.:
Series D,
5.000% 04/01/23 26,425 24,839
Series E,
5.250% 04/01/16 15,060 15,248
Series 1993 C,
5.500% 04/01/17 13,475 13,778
PA Convention Center Authority, Series A,
6.750% 09/01/19 5,000 5,638
PR Commonwealth of Puerto Rico Infrastructure
Financing Authority, Series A,
5.000% 07/01/21 (c) 9,400 9,130
--------------
151,460
--------------
SPECIAL PROPERTY TAX - 1.2%
CA Riverside County Public Financing Authority,
Redevelopment Projects, Series A,
5.500% 10/01/22 3,000 2,955
CA San Jose Redevelopment Agency,
Merged Area Redevelopment Project,
Series 1993,
5.000% 08/01/21 15,000 14,419
FL State,
Jacksonville Transportation System,
5.000% 07/01/22 17,575 16,960
--------------
34,334
--------------
STATE GENERAL OBLIGATIONS - 1.5%
FL State Board of Education,
Series 1993 D,
5.125% 06/01/22 7,750 7,547
30
<PAGE>
Investment Portfolio/November 30, 1997
- --------------------------------------------------------------------------------
MA General Obligation Bonds,
Series 1991 C,
6.750% 08/01/09 $ 2,865 $ 3,130
MA Massachusetts Bay
Transportation Authority:
5.250% 03/01/20 5,000 4,962
Series D:
5.750% 03/01/13 4,215 4,426
5.750% 03/01/14 6,575 6,879
NV State:
Colorado River Commission,
Hoover Dam Project, Series 1992,
6.600% 10/01/16 5,000 5,431
NV General Obligation Municipal Bonds,
Series A,
6.800% 07/01/12 60 66
NY State, General Obligation,
3.000% 03/15/01 405 389
PR Commonwealth of Puerto Rico,
Series B,
6.500% 07/01/15 3,000 3,499
WA State,
Series 1992 A,
6.250% 02/01/11 6,400 7,176
--------------
43,505
--------------
- --------------------------------------------------------------------------------
TRANSPORTATION - 7.3%
AIRPORT - 4.1%
CO Denver City & County Airport:
Series A:
8.500% 11/15/23 4,570 5,130
8.750% 11/15/23 4,030 4,720
Series B:
7.250% 11/15/23 4,375 4,867
7.250% 11/15/23 4,780 5,372
Series C,
6.500% 11/15/12 10,625 12,272
Series E,
6.000% 11/15/11 3,000 3,292
HI State,
Airport System Revenue:
Series 2,
7.000% 07/01/18 14,770 15,989
Series 1991,
6.900% 07/01/12 4,250 4,962
31
<PAGE>
Investment Portfolio/November 30, 1997
- --------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- --------------------------------------------------------------------------------
TRANSPORTATION - CONT.
AIRPORT - CONT.
IL Chicago,
O'Hare International Airport:
Series A,
5.000% 01/01/16 $ 15,000 $ 14,419
Series 1994 A,
6.375% 01/01/12 4,980 5,459
PA Allegheny County Airport,
Pittsburgh International Airport,
5.750% 01/01/14 (b) 4,500 4,770
TX Dallas-Fort Worth Regional Airport,
Series A,
7.375% 11/01/11 6,000 6,975
TX Houston Airport System,
5.125% 07/01/22 10,000 9,812
VA Capital Region Airport Commission,
Series B,
8.125% 07/01/14 (b) 17,200 20,963
--------------
119,002
--------------
TOLL FACILITIES - 2.3%
CA San Joaquin Hills Transportation
Corridor Agency, Series A,
(a) 01/15/14 14,450 6,141
CO State Public Highway Authority,
Arapahoe Co., E-470, Series B,
(a) 09/01/11 17,685 8,798
MA State Turnpike Authority:
Series A,
5.125% 01/01/23 15,000 14,719
Series C,
(a) 01/01/20 15,000 4,706
NJ State Turnpike Authority:
Series C,
6.500% 01/01/16 8,500 9,977
Series 1991 C,
6.500% 01/01/16 16,000 18,820
NY Triborough Bridge & Tunnel Authority,
6.125% 01/01/21 5,000 5,650
--------------
68,811
--------------
TRANSPORTATION - 0.9%
CA Long Beach,
Series 1993,
5.125% 05/15/13 4,500 4,438
32
<PAGE>
Investment Portfolio/November 30, 1997
- --------------------------------------------------------------------------------
NY Metropolitan Transportation Authority,
Commuter Facilities:
Series B,
5.000% 07/01/17 $ 8,000 $ 7,770
Series 1997 B-1,
5.000% 07/01/18 9,575 9,276
PA Erie-Western Port Authority,
Series 1990,
8.625% 06/15/10 1,850 2,074
SC State Port Authority,
Series 1991,
6.750% 07/01/21 2,050 2,211
--------------
25,769
--------------
- --------------------------------------------------------------------------------
UTILITY - 26.2%
INDIVIDUAL POWER PRODUCER - 1.0%
FL Martin County Industrial
Development Authority, Indiantown
Cogeneration Project, Series 1994 A,
7.875% 12/15/25 7,500 8,700
NY Port Authority of New York & New Jersey,
KIAC Partners, Series 1996 IV:
6.750% 10/01/11 1,500 1,631
6.750% 10/01/19 7,000 7,578
PA Economic Development Finance
Authority, Colver Project, Series D,
7.150% 12/01/18 10,000 11,025
--------------
28,934
--------------
INVESTOR OWNED - 7.1%
AZ Pima County Industrial Development
Authority, Tucson Electric Power Co.:
Series A,
6.100% 09/01/25 2,000 2,022
Series 1988 A,
7.250% 07/15/10 11,630 12,997
CA California Pollution Control Financing
Authority, Pacific Gas & Electric Co.,
Series 1992 A,
6.625% 06/01/09 3,000 3,270
DE State Economic Development Authority,
Delmarva Power & Light Co., Series 1990 A,
7.600% 03/01/20 5,000 5,406
FL Pinellas County,
Florida Power Corp.,
7.200% 12/01/14 1,000 1,097
33
<PAGE>
Investment Portfolio/November 30, 1997
- --------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- --------------------------------------------------------------------------------
UTILITY - CONT.
INVESTOR OWNED - CONT.
HI State Department Budget and Finance:
Series 1993 B, RIB (variable rate),
6.888% 12/15/23 $ 10,000 $ 10,038
Hawaiian Electric Co.,
Series 1990 C,
7.375% 12/01/20 5,965 6,532
IL Development Financial Authority,
Pollution Control, Series 1991,
7.250% 06/01/11 5,625 6,096
IL State Development Finance Authority,
Commonwealth Edison Co. Project,
Series D,
6.750% 03/01/15 3,400 3,817
IN Mt. Vernon,
Southern Indiana Gas & Electric Co.,
Series 1984 A,
7.250% 03/01/14 4,500 4,894
IN Petersburg,
Indiana Power & Light Co.,
Series B,
5.400% 08/01/17 5,000 5,100
IN Sullivan Pollution Control,
Merom Station Project,
Series 1991,
7.100% 04/01/19 10,000 10,800
KY Trimble County,
Louisville Gas & Electric Co.,
Series 1990 A,
7.625% 11/01/20 7,555 8,329
LA De Soto Parish,
Southwestern Electric Power Co.,
Series 1992,
7.600% 01/01/19 6,000 6,908
MI St. Clair County Economic Development
Corp., Detroit Edison Co.,
Series 1993 AA,
6.400% 08/01/24 7,000 7,726
NJ Cape May County Industrial Pollution
Control Financing Authority, Atlantic
City Electric Co., Series 1994 A,
7.200% 11/01/29 5,000 5,744
NM Farmington,
Southern California Edison Co.,
Series A,
7.200% 04/01/21 3,000 3,285
34
<PAGE>
Investment Portfolio/November 30, 1997
- --------------------------------------------------------------------------------
NV Clark County Industrial Development,
Nevada Power Co.:
Series 1990,
7.800% 06/01/20 $ 4,250 $ 4,659
Series 1992 A,
6.700% 06/01/22 (b) 25,895 28,226
NV Humboldt County Pollution Control
Revenue, Idaho Power Co. Project,
8.300% 12/20/14 1,875 2,245
NY State Energy Research & Development
Authority, Long Island Lighting Co.,
7.150% 12/01/20 11,075 11,989
NY State Energy Research & Development
Authority, Brooklyn Union Gas Co.,
Series 1993 B, RIB (variable rate),
8.700% 04/01/20 13,000 15,876
NY State Energy Research & Development
Authority, Consolidated Edison Co.,
Series 1994 A,
7.125% 12/01/29 5,000 5,756
OH Air Quality Development Authority,
JMG Funding Project,
5.625% 01/01/23 (c) 4,315 4,358
OH State Air Quality Development Authority,
The Cleveland Electric Illuminating Co.,
Series 1992,
8.000% 12/01/13 6,545 7,592
TX Brazos River Authority,
Houston Light & Power Co.,
Series A:
6.700% 03/01/17 (b) 13,015 14,268
7.625% 05/01/19 900 962
TX Matagorda County,
Houston Light & Power Co.,
6.700% 03/01/27 7,200 7,839
WV Mason County Pollution Control,
Appalachian Power Co.,
Series G,
7.400% 01/01/14 400 430
--------------
208,261
--------------
JOINT POWER AUTHORITY - 5.7%
AZ Salt River Project, Agricultural
Improvement & Power District
Electric System, Series A,
6.625% 01/01/12 1,500 1,627
35
<PAGE>
Investment Portfolio/November 30, 1997
- --------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- --------------------------------------------------------------------------------
UTILITY - CONT.
JOINT POWER AUTHORITY - CONT.
GA Municipal Electric Authority Power:
Series C,
5.700% 01/01/19 $ 6,000 $ 6,308
Series Z:
5.500% 01/01/20 24,000 24,960
5.500% 01/01/20 5,375 5,483
Series 1993 C,
5.700% 01/01/19 20,000 21,300
MA State Municipal Wholesale Electric Co.,
Series 1994 A, RIB (variable rate),
6.227% 07/01/16 22,900 20,868
MN Southern Minnesota Municipal
Power Agency, Series A,
5.000% 01/01/16 6,000 5,820
NC State Municipal Power Agency,
Catawba No. 1,
Series A,
5.125% 01/01/17 10,000 9,813
SC Piedmont Municipal Power Agency:
Series 1988,
(a) 01/01/13 25,885 11,745
Series 1993,
5.375% 01/01/25 5,095 5,165
SC State Public Service Authority:
5.125% 01/01/32 16,000 15,300
Series C,
5.125% 01/01/21 18,000 17,393
TX State Municipal Power Agency,
(a) 09/01/08 4,500 2,666
UT Intermountain Power Agency,
State Power Supply,
Series B,
7.625% 07/01/08 100 104
WA State,
Public Power Supply System
Nuclear Project No. 3,
Series 1993 C,
5.400% 07/01/12 14,000 14,105
WI Public Power, Inc.,
Series 1993 B,
5.440% 07/01/14 5,400 5,420
--------------
168,077
--------------
36
<PAGE>
Investment Portfolio/November 30, 1997
- --------------------------------------------------------------------------------
MUNICIPAL ELECTRIC - 5.5%
CA Sacramento Municipal Utilities District:
Series K:
5.750% 07/01/18 $ 7,670 $ 8,207
5.800% 07/01/19 6,000 6,472
Series L,
5.125% 07/01/22 18,300 17,911
FL Orlando Utilities Commission:
Series A,
5.000% 10/01/20 15,000 14,288
Series 1993-B, RIB (variable rate),
7.008% 10/06/13 5,000 5,325
Series 1989 D,
5.000% 10/01/23 6,200 5,890
LA De Soto Parish,
Southwestern Electric Power Co.,
7.600% 01/01/19 5,000 5,750
NC University of North Carolina
at Chapel Hill,
(a) 08/01/14 3,000 1,260
OH Cleveland Public Power System,
Series 1,
5.125% 11/15/18 15,000 14,794
PR Puerto Rico Electric Power Authority,
Series AA:
5.250% 07/01/16 3,500 3,544
6.000% 07/01/11 4,195 4,677
6.000% 07/01/12 6,680 7,415
6.250% 07/01/10 6,000 6,825
SD Heartland Consumers Power District,
Series 1992,
6.000% 01/01/12 3,650 4,042
TN Metropolitan Government,
Nashville & Davidson Counties,
Series 1996 A,
(a) 05/15/09 5,250 3,012
TX Austin,
5.000% 11/15/14 (b) 19,025 18,645
TX San Antonio:
Series 1989 B,
5.000% 02/01/16 10,000 9,625
Series 1992,
5.000% 02/01/17 9,000 8,640
WA Chelan County Public Utilities,
District Number 001 Consolidate,
Series 1989-A Division I,
7.750% 07/01/21 4,500 4,843
37
<PAGE>
Investment Portfolio/November 30, 1997
- --------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- --------------------------------------------------------------------------------
UTILITY - CONT.
MUNICIPAL ELECTRIC - CONT.
WA Chelan County Public Utilities,
District No. 1, Columbia River
Rock Hydroelectric:
(a) 06/01/09 $ 5,000 $ 2,825
(a) 06/01/11 5,000 2,506
(a) 06/01/20 19,350 5,902
--------------
162,398
--------------
WATER & SEWER - 6.9%
FL Reedy Creek Improvement District,
Series 1994 1,
5.000% 10/01/19 9,000 8,730
ID State Water Resource Board,
Boise Water Corp., Series 1991,
7.250% 12/01/21 6,000 6,457
LA Public Facility Belmont Water Authority,
9.000% 03/15/24 (f) 1,350 1,215
MA State Water Resources Authority:
Series B,
5.000% 03/01/22 21,200 20,193
Series C:
4.750% 12/01/23 15,680 14,445
5.250% 12/01/15 10,450 10,646
MI Detroit Water Supply System,
Series A:
5.750% 07/01/12 5,500 5,954
6.000% 07/01/14 3,020 3,341
6.000% 07/01/15 3,000 3,311
MS V Lakes Utility District,
8.250% 07/15/24 760 608
NJ State Economic Development Authority,
American Water Co., Inc.:
6.500% 04/01/22 4,900 5,280
Series 1994 A,
6.875% 11/01/34 10,590 11,887
NY State Environmental Facilities
Corp., Pollution Control, New York
City Municipal Water Finance Authority,
5.750% 06/15/12 19,260 20,753
NY Suffolk County Water Authority,
7.375% 06/01/12 20 21
OH State Water Development Authority,
Water Control Loan Fund:
5.500% 12/01/11 3,940 4,127
5.500% 06/01/13 2,250 2,323
38
<PAGE>
Investment Portfolio/November 30, 1997
- --------------------------------------------------------------------------------
PA Philadelphia,
Water & Waste Water Revenue,
Series 1993,
5.000% 06/15/16 $ 14,000 $ 13,528
TN Jackson Water and Sewer Revenue,
Series 1984,
10.375% 07/01/12 1,090 1,213
TX Houston Water & Sewer System:
5.000% 12/01/18 24,755 23,981
Series C,
(a) 12/01/12 42,000 19,268
Series D,
5.000% 12/01/17 11,000 10,615
TX State Coastal Industrial Water
Authority, Bayport Water System,
Series 1978,
7.000% 12/15/03 1,990 1,990
VA Fairfax County Water Authority,
5.000% 04/01/21 1,500 1,470
VA Roanoke County,
Water System Revenue,
Series 1993,
5.000% 07/01/21 10,000 9,550
--------------
200,906
--------------
TOTAL MUNICIPAL BONDS (cost of $2,715,984 ) 2,887,832
--------------
OPTIONS - 0.0% CONTRACTS
- --------------------------------------------------------------------------------
March 1998 Treasury Bond Call,
Strike price 118, Expiration 02/21/98 450 1,174
--------------
(cost of $987)
TOTAL INVESTMENTS (cost of $2,716,971) (j) 2,889,006
--------------
SHORT-TERM OBLIGATIONS - 1.3% PAR
- --------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (k)
CA Irvine Ranch Water District,
3.750% 01/01/21 $ 2,400 2,400
CA Newport Beach Hoag Hospital,
3.800% 10/01/22 3,150 3,150
CA State Health Facilities Financing
Authority, Sutter Health, Series A,
3.750% 03/01/20 700 700
FL Pinellas County Health Facilities Authority,
Series 1985,
3.850% 12/01/15 4,200 4,200
39
<PAGE>
Investment Portfolio/November 30, 1997
- --------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS - CONT. PAR VALUE
- --------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (k) - CONT.
ID State Health Facilities Authority,
St. Lukes Regional Medical Facility,
Series 1995,
3.850% 05/01/22 $ 8,410 $ 8,410
IL State Educational Facilities Authority,
3.900% 12/01/25 400 400
IN Portage Economic Development Revision,
Pedcor Investments, Series A,
4.050% 08/01/30 600 600
IN State Health Facilities Financing
Authority, Series 1992,
3.900% 12/01/02 900 900
LA State Offshore Terminal Authority,
Loop, Inc.,
3.900% 09/01/06 3,400 3,400
MI Farmington Hills Hospital
Finance Authority, Botsford
General Hospital, Series 1991 B,
3.850% 02/15/16 3,500 3,500
MS Perry County,
Leaf River Forest Project,
3.900% 03/01/02 700 700
NM Farmington,
Arizona Public Service Co., Four
Corners Project, Series 1994 B,
3.900% 09/01/24 2,500 2,500
NY New York City Municipal
Water Finance Authority,
Series 1995 A,
4.000% 06/15/25 4,585 4,585
NY New York City,
Series 1994 B4,
3.650% 08/15/21 1,100 1,100
NY Niagara Mohawk, Series 1985-A,
4.000% 07/01/15 300 300
NY State Energy Research &
Development Authority, Niagara
Mohawk Project,
3.850% 12/01/23 200 200
--------------
TOTAL SHORT-TERM OBLIGATIONS 37,045
--------------
OTHER ASSETS & LIABILITIES, NET - 0.2% 5,003
- --------------------------------------------------------------------------------
NET ASSETS - 100.0% $ 2,931,054
==============
40
<PAGE>
Investment Portfolio/November 30, 1997
- --------------------------------------------------------------------------------
NOTES TO INVESTMENT PORTFOLIO:
- --------------------------------------------------------------------------------
(a) Zero coupon bond.
(b) These securities, or a portion thereof, with a total market value of
$93,147, are being used to collateralize the delayed delivery purchases
indicated in note (c) below and open futures contracts.
(c) This security has been purchased on a delayed delivery basis for
settlement at a future date beyond the customary settlement date.
(d) This issuer is in default of certain debt covenants. Income is not being
accrued.
(e) This is a restricted security which was acquired on April 2, 1990 at a
cost of $320. This security represents 0.0% of the Fund's net assets
at November 30, 1997.
(f) Securities exempt from registration under Rule 144-A of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers. At
November 30, 1997, the value of these securities amounted to
$72,785 or 2.5% of net assets.
(g) The value of this security represents fair value as determined under
procedures approved by the Trustees.
(h) Accrued interest accumulates in the value of the security and is
payable at redemption.
(i) The Fund has been informed that each issuer has placed direct
obligations of the U.S. Government in an irrevocable trust, solely
for the payment of the principal and interest.
(j) Cost for federal income tax purposes is $2,717,116.
(k) 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 November 30, 1997.
Acronym Name
------- ----
RIB Residual Interest Bond
Short futures contracts open at November 30, 1997:
Par value Unrealized
covered by Expiration appreciation
Type contracts month at 11/30/97
- --------------------------------------------------------------------------------
Treasury Bond $ 368 March $ 159
See notes to financial statements.
41
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
NOVEMBER 30, 1997
(in thousands except for per share amounts and footnotes)
ASSETS
Investments at value (cost $2,716,971) $ 2,889,006
Short-term obligations 37,045
--------------
2,926,051
Receivable for:
Interest 55,706
Investments sold 2,224
Fund shares sold 457
Variation margin on futures 46
Other 63 58,496
------------- --------------
Total Assets 2,984,547
LIABILITIES
Payable for:
Investments purchased 37,429
Distributions 12,647
Fund shares repurchased 3,091
Payable due to custodian bank 54
Accrued:
Deferred Trustees fees 36
Other 236
-------------
Total Liabilities 53,493
--------------
NET ASSETS $ 2,931,054
==============
Net asset value & redemption price per share -
Class A ($2,551,277/185,609) $13.75
==============
Maximum offering price per share - Class A
($13.75/0.9525) $14.44 (a)
==============
Net asset value & offering price per share -
Class B ($379,567/27,614) $13.75 (b)
==============
Net asset value & offering price per share -
Class C ($210/15) $13.75 (b)
==============
COMPOSITION OF NET ASSETS
Capital paid in $ 2,788,261
Undistributed net investment income 3,608
Accumulated net realized loss (33,009)
Net unrealized appreciation on:
Investments 172,035
Open futures contracts 159
--------------
$ 2,931,054
==============
(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.
42
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 1997
(in thousands)
INVESTMENT INCOME
Interest $ 194,809
EXPENSES
Management fee $ 15,212
Service fee 7,576
Distribution fee - Class B 2,984
Distribution fee - Class C (a)
Transfer agent 4,747
Bookkeeping fee 758
Registration fee 63
Custodian fee 79
Audit fee 71
Trustees fee 160
Reports to shareholders 50
Legal fee 619
Other 267 32,586
------------- --------------
Net Investment Income 162,223
--------------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain (loss) on:
Investments 20,871
Closed futures contracts (44)
-------------
Net Realized Gain 20,827
Change in net unrealized appreciation
during the period on:
Investments 18,239
Open futures contracts 159
-------------
Net change in unrealized appreciation 18,398
--------------
Net Gain 39,225
--------------
Net Increase in Net Assets from Operations $ 201,448
==============
(a) Rounds to less than one.
See notes to financial statements.
43
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(in thousands) Year ended November 30
-----------------------------
INCREASE (DECREASE) IN NET ASSETS 1997 (a) 1996
Operations:
Net investment income $ 162,223 $ 184,838
Net realized gain 20,827 36,263
Net unrealized appreciation (depreciation) 18,398 (82,294)
------------- --------------
Net Increase from Operations 201,448 138,807
Distributions:
From net investment income - Class A (144,382) (164,142)
From net investment income - Class B (18,821) (21,619)
From net investment income - Class C (3) ---
------------- --------------
38,242 (46,954)
------------- --------------
Fund Share Transactions :
Receipts for shares sold - Class A 362,985 420,494
Value of distributions reinvested - Class A 80,285 91,754
Cost of shares repurchased - Class A (743,604) (764,164)
------------- --------------
(300,334) (251,916)
------------- --------------
Receipts for shares sold - Class B 13,695 22,446
Value of distributions reinvested - Class B 10,327 11,854
Cost of shares repurchased - Class B (76,626) (69,907)
------------- --------------
(52,604) (35,607)
------------- --------------
Receipts for shares sold - Class C 250 ---
Value of distributions reinvested - Class C 2 ---
Cost of shares repurchased - Class C (42) ---
------------- --------------
210 ---
------------- --------------
Net Decrease from Fund Share
Transactions (352,728) (287,523)
------------- --------------
Total Decrease (314,486) (334,477)
NET ASSETS
Beginning of period 3,245,540 3,580,017
------------- --------------
End of period (including undistributed
net investment income of
$3,608 and $2,545, respectively.) $ 2,931,054 $ 3,245,540
============= ==============
(a) Class C shares were initially offered on August 1, 1997.
See notes to financial statements.
44
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(continued)
Year ended November 30
-----------------------------
NUMBER OF FUND SHARES: 1997 (a) 1996
Sold - Class A 26,948 31,534
Issued for distributions reinvested - Class A 5,962 6,835
Repurchased - Class A (55,224) (57,191)
------------- --------------
(22,314) (18,822)
------------- --------------
Sold - Class B 1,017 1,673
Issued for distributions reinvested - Class B 767 883
Repurchased - Class B (5,691) (5,231)
------------- --------------
(3,907) (2,675)
------------- --------------
Sold - Class C 18 ---
Issued for distributions reinvested - Class C (b) ---
Repurchased - Class C (3) ---
------------- --------------
15 ---
------------- --------------
(a) Class C shares were initially offered on August 1, 1997.
(b) Rounds to less than one.
See notes to financial statements.
45
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1997
NOTE 1. ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
ORGANIZATION: Colonial Tax-Exempt Fund (the Fund), a series of
Colonial Trust IV, 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 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 investment-grade municipal bonds. The Fund may issue an
unlimited number of shares. The Fund offers three classes of shares:
Class A, Class B and Class C. Class A shares are sold with a front-end
sales charge and Class B shares 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. Effective August 1, 1997, the Fund began offering Class C shares
which are subject to a contingent deferred sales charge on redemptions
made within one year after purchase and an annual distribution fee.
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 for which market quotations are not readily available
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.
46
<PAGE>
Notes To Financial Statements/November 30, 1997
- --------------------------------------------------------------------------------
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 and Class C distribution fees),
and 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 and Class C 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 fees for Class B and Class C
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 and
tax-exempt 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 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.
NOTE 2. 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 Insured Fund and Colonial High Yield Municipal
Fund as follows:
Average Net Assets Annual Fee Rate
--------------------- ---------------------
First $1 billion 0.60%
Next $2 billion 0.55%
Next $1 billion 0.50%
Over $4 billion 0.45%
47
<PAGE>
Notes To Financial Statements/November 30, 1997
- --------------------------------------------------------------------------------
NOTE 2. FEES AND COMPENSATION PAID TO AFFILIATES - CONT.
- --------------------------------------------------------------------------------
Effective July 1, 1995 the management fee applicable to the Fund was
reduced by 0.05% annually of the average net assets of the Fund between
$2 billion and $3 billion.
In addition, a further reduction was made based on the following
schedule:
Cumulative Annualized
Effective Date Reduction
------------------- -------------------------
January 1, 1996 0.01%
April 1, 1996 0.02%
July 1, 1996 0.03%
October 1, 1996 0.04%
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 0.14% annually of the Fund's average net assets and
receives reimbursement for certain out of pocket expenses.
Effective January 1, 1997, and continuing through calendar year 1997,
the Transfer Agent fee will be reduced 0.01% in cumulative monthly
increments, resulting in a decrease in the fee from 0.14% to 0.13%
annually.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES: Liberty
Financial Investments, Inc. (formerly Colonial Investment Services, Inc.)
(the Distributor), an affiliate of the Adviser, is the Fund's principal
underwriter. During the year ended November 30, 1997, the Fund has
been advised that the Distributor retained net underwriting discounts of
$144,363 on sales of the Fund's Class A shares and received contingent
deferred sales charges (CDSC) of $1,116,174 and none, on Class B and
Class C share redemptions, respectively.
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% annually of the average net assets
attributable to Class B and Class C shares.
48
<PAGE>
Notes To Financial Statements/November 30, 1997
- --------------------------------------------------------------------------------
The Distributor has voluntarily agreed to waive a portion of the Class C
share distribution fee so that it will not exceed 0.60% annually.
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 3. PORTFOLIO INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT ACTIVITY: During the year ended November 30, 1997,
purchases and sales of investments, other than short-term obligations,
were $1,177,323,890 and $1,489,356,787, respectively.
Unrealized appreciation (depreciation) at November 30, 1997, based on cost
of investments for federal income tax purposes was approximately:
Gross unrealized appreciation $ 185,654,000
Gross unrealized depreciation (13,764,000)
--------------------
Net unrealized appreciation $ 171,890,000
====================
Capital loss carryforwards: At November 30, 1997, 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
------------ -----------------
2002 $ 12,565,000
2003 4,478,000
-----------------
$ 17,043,000
=================
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 November 30,
1997 invested in New York.
49
<PAGE>
Notes To Financial Statements/November 30, 1997
- --------------------------------------------------------------------------------
NOTE 3. PORTFOLIO INFORMATION - CONT.
- --------------------------------------------------------------------------------
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 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 positions 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 amount recognized in the Fund's
Statement of Assets and Liabilities at any given time.
NOTE 4. 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 year ended November 30, 1997.
50
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each
period are as follows:
Year ended November 30
----------------------------------------------
1997
Class A Class B Class C (a)
------------ ------------ ------------
Net asset value -
Beginning of period $ 13.550 $ 13.550 $ 13.860
------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.743 0.642 0.218
Net realized and
unrealized gain (loss) 0.194 0.194 (0.144) (b)
------------ ------------ ------------
Total from Investment
Operations 0.937 0.836 0.104
------------ ------------ ------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment
income (0.737) (0.636) (0.214)
------------ ------------ ------------
Net asset value -
End of period $ 13.750 $ 13.750 $ 13.750
------------ ------------ ------------
Total return (c) 7.16% 6.37% 0.77% (d)
------------ ------------ ------------
RATIOS TO AVERAGE NET ASSETS
Expenses (e) 0.98% 1.73% 1.59% (f)
Net investment income (e) 5.45% 4.70% 4.76% (f)
Portfolio turnover 39% 39% 39%
Net assets at end
of period (in millions) $ 2,551 $ 380 (g)
(a) Class C shares were initially offered on August 1, 1997. Per share
amounts reflect activity from that date.
(b) The amount shown for a share outstanding does not correspond with the
aggregate net gain on investments for the period due to the timing of sales
and repurchases of Fund shares in relation to fluctuating market values of
the investments of the Fund.
(c) Total return at net asset value assuming all distributions reinvested
and no initial sales charge or contingent deferred sales charge.
(d) Not annualized.
(e) The benefits derived from custody credits and directed brokerage arrange-
ments had no impact.
(f) Annualized.
(g) Rounds to less than one million.
51
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Selected data for a share of each class outstanding throughout each
period are as follows:
Year ended November 30
---------------------------------------------------
1996 1995
Class A Class B Class A Class B
----------- ---------- ---------- ----------
Net asset value -
Beginning of period $ 13.720 $ 13.720 $ 12.180 $ 12.180
----------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.756 0.656 0.771 0.673
Net realized and
unrealized gain (loss) (0.171) (0.171) 1.535 1.535
----------- ---------- ---------- ----------
Total from Investment
Operations 0.585 0.485 2.306 2.208
----------- ---------- ---------- ----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment
income (0.755) (0.655) (0.766) (0.668)
----------- ---------- ---------- ----------
Net asset value -
End of period $ 13.550 $ 13.550 $ 13.720 $ 13.720
----------- ---------- ---------- ----------
Total return (a) 4.47% 3.70% 19.35% 18.47%
----------- ---------- ---------- ----------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.99%(b) 1.74%(b) 1.01%(b) 1.76%(b)
Net investment income 5.61%(b) 4.86%(b) 5.82%(b) 5.07%(b)
Portfolio turnover 40% 40% 41% 41%
Net assets at end
of period (in millions) $ 2,818 $ 427 $ 3,111 $ 469
(a) Total return at net asset value assuming all distributions reinvested
and no initial sales charge or contingent deferred sales charge.
(b) The benefits derived from custody credits and directed brokerage arrange-
ments had no impact. Prior years' ratios are net of benefits received,
if any.
52
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Year ended November 30
------------------------------------------------------
1994 1993
Class A Class B Class A Class B
----------- ---------- ---------- ----------
$ 13.920 $ 13.920 $ 13.480 $ 13.480
----------- ---------- ---------- ----------
0.795 0.695 0.842 0.740
(1.744) (1.744) 0.451 0.451
----------- ---------- ---------- ----------
(0.949) (1.049) 1.293 1.191
----------- ---------- ---------- ----------
(0.791) (0.691) (0.853) (0.751)
----------- ---------- ---------- ----------
$ 12.180 $ 12.180 $ 13.920 $ 13.920
=========== ========== ========== ==========
(7.08%) (7.78%) 9.80% 9.00%
=========== ========== ========== ==========
1.01% 1.76% 1.02% 1.77%
6.00% 5.25% 6.06% 5.31%
56% 56% 28% 28%
$ 2,858 $ 440 $ 3,357 $ 430
---------------------------------------------------------
Federal income tax information (Unaudited)
Approximately 99.3% of the income distributions will be
treated as exempt income for federal income tax purposes.
53
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE TRUSTEES OF COLONIAL TRUST IV AND THE SHAREHOLDERS OF
COLONIAL TAX-EXEMPT FUND
In our opinion, the accompanying statement of assets and liabilities,
including the investment portfolio, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Colonial Tax-Exempt Fund
(a series of Colonial Trust IV) at November 30, 1997, the results of its
operations, the changes in its net assets and the financial highlights for the
periods indicated, in conformity with generally accepted accounting
principles. These financial statements and the financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of portfolio positions at November 30, 1997 by correspondence
with the custodian and brokers, and the application of alternative auditing
procedures where confirmations from brokers were not received, provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
January 9, 1998
54
<PAGE>
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial Tax-Exempt Fund is:
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Colonial Tax-Exempt Fund mails one shareholder report to each shareholder
address. If you would like more than one report, please call 1-800-426-3750 and
additional reports will be sent to you.
This report has been prepared for shareholders of Colonial Tax-Exempt Fund. This
report may also be used as sales literature when preceded or accompanied by the
current prospectus which provides details of sales charges, investment
objectives and operating policies of the Fund.
55
<PAGE>
- --------------------------------------------------------------------------------
TRUSTEES
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
[LOGO] LIBERTY FINANCIAL INVESTMENTS, INC. copyright 1998
Distributor for Colonial Funds, Stein Roe Advisor Funds and
Newport Funds
One Financial Center, Boston, MA 02111-2621
TE-02/548E-1197 (1/98)
- --------------------------------------------------------------------------------
