<PAGE>
[Graphic of Capital House]
COLONIAL TAX-EXEMPT INSURED FUND Semiannual report
May 31, 1998
-----------------------------
Not FDIC May Lose Value
Insured No Bank Guarantee
-----------------------------
<PAGE>
COLONIAL TAX-EXEMPT INSURED FUND HIGHLIGHTS
DECEMBER 1, 1997 - MAY 31, 1998
INVESTMENT OBJECTIVE: Colonial Tax-Exempt Insured Fund seeks as high a level of
after-tax total return as is consistent with prudent risk, by pursuing current
income exempt from federal income tax and opportunities for long-term
appreciation from a portfolio primarily invested in insured municipal bonds.
PORTFOLIO MANAGER COMMENTARY: "The Fund was positioned to take advantage of the
declining interest rates that prevailed during the early and late parts of the
period. During an interval of rising rates, we took advantage of lower prices to
purchase bonds with favorable investment characteristics. These bonds performed
well later in the period as interest rates fell once again." -- Gary Swayze
COLONIAL TAX-EXEMPT INSURED FUND PERFORMANCE
CLASS A CLASS B CLASS C
Inception dates 11/20/85 5/5/92 8/1/97
- ------------------------------------------------------------------------------
Six-month distributions declared per share(1) $0.248 $0.216 $0.229
- ------------------------------------------------------------------------------
SEC yields on 5/31/98(2) 3.71% 3.14% 3.43%
- ------------------------------------------------------------------------------
Taxable-equivalent SEC yields(3) 6.14% 5.20% 5.68%
- ------------------------------------------------------------------------------
Six-month total returns, assuming 3.68% 3.30% 3.45%(4)
reinvestment of all distributions and no
sales charge or contingent deferred
sales charge (CDSC)
- ------------------------------------------------------------------------------
Net asset value per share on 5/31/98 $8.53 $8.53 $8.53
MATURITY BREAKDOWN(5) (as of 5/31/98)
- ------------------------------------------------------------------------------
1 - 3 years................... 4.1% 15 - 20 years................ 28.7%
3 - 5 years................... 6.1% 20 - 25 years................ 22.4%
5 - 7 years....................1.3% 25+ years.....................10.2%
7 - 10 years.................. 2.9% Cash and equivalents...........0.3%
10 - 15 years................ 24.0%
(1) A portion of the Fund's income may be subject to the alternative minimum
tax.
(2) The 30-day SEC yields on 5/31/98 reflect the portfolio's earning power, net
of expenses, expressed as an annualized percentage of the public offering
price at the end of the period. If the Distributor had not waived certain
Fund expenses, the SEC yield for Class C shares would have been 3.11%.
(3) 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. Some or all of this discount may be included in the Fund's
ordinary income, and is taxable when distributed.
(4) Performance results reflect any voluntary waiver of Fund expenses by the
Distributor. Absent this waiver, performance results would have been lower.
(5) Maturity breakdown is calculated as a percentage of 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 maturity breakdowns in the future.
<PAGE>
PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
[Photo of Stephen E. Gibson]
In June 1998, Harold Cogger retired as president of Colonial Tax-Exempt Insured
Fund's Board of Trustees. I would like to take this opportunity to thank him for
his guidance over the past few years and wish him well. As the new president of
the Fund, I am pleased to present the semiannual report for Colonial Tax-Exempt
Insured Fund for the six-month period ending May 31, 1998.
A variety of factors caused bond prices to seesaw during the period, as
different sectors of the economy provided mixed signals to fixed-income
investors. The economic turmoil in Southeast Asia, its potential to slow U.S.
economic growth, and the possibility of interest rate increases by the Federal
Reserve Board were strong contributors to price volatility. By the end of the
period, fixed-income investors saw improving economic conditions. With hints
that growth might slow, investors' fear of inflation was reduced. As interest
rates dropped, bond prices finished on a positive note.
The tax-exempt market in which the Fund invests followed a similar pattern of
movement. In addition to the trends mentioned above, supply and demand factors
contributed to the rising and declining prices during the period. While the
environment was a challenging one for municipal bond fund managers, the Fund
posted favorable returns relative to its peers over the six-month period. The
following portfolio management report expands on these issues, provides details
on the Fund's strategies and performance, and offers some insight for the
investment period ahead.
For investors seeking competitive levels of tax-free income and the potential
for long-term price appreciation, Colonial Tax-Exempt Insured Fund remains a
sensible option for their investment portfolio.
Thank you for choosing Colonial Tax-Exempt Insured Fund and for giving us the
opportunity to serve your investment needs.
Respectfully,
/s/ Stephen E. Gibson
Stephen E. Gibson
President
July 10, 1998
Because market and economic conditions change, there can be no assurance that
the trends described above or on the following pages will continue.
<PAGE>
PORTFOLIO MANAGEMENT REPORT
GARY SWAYZE is portfolio manager of Colonial Tax-Exempt Insured Fund and is vice
president of Colonial Management Associates, Inc. Mr. Swayze assumed management
of the Fund in October 1997.
ECONOMIC AND MARKET FACTORS VARIED DURING THE PERIOD
Conditions for fixed-income investments varied during the period as the market's
expectations about the economy shifted. Early on, investors focused on the
economic crisis in Southeast Asia and its potential effect on the U.S. economy.
Anticipation of reduced export volume to the Pacific Rim generated a widespread
belief that the U.S. economy would slow down. As a result, interest rates
declined and bond prices moved up. During the middle part of the period the
trend was reversed, as mild winter weather resulted in earlier than typical
demand for construction in the United States. Continued strength in the stock
market helped create additional investor wealth, positive consumer sentiment,
strong job growth, and ultimately, higher levels of economic growth. However, by
the end of the period, growth once again settled back to more modest levels, as
certain measures of industrial production declined. This, in combination with
continued low inflation, reduced investors' fears that the Federal Reserve Board
would raise rates to keep economic growth in check. In response, bond prices
recovered nicely.
TAX-EXEMPT BOND MARKET SIMILAR TO TAXABLE BOND MARKET
The tax-exempt bond market experienced price volatility similar to the taxable
bond market. Early on, a manageable supply of new issues and heavy seasonal
demand created a favorable environment, helping municipal bonds to rise.
However, in the early months of 1998, the market found it difficult to absorb
unusually large increases in supply, and prices declined. During this period,
tax-exempt yields approached those of Treasury bonds, making investments in
municipal bonds relatively attractive on an after-tax basis. We sought to take
advantage of these conditions by purchasing bonds with favorable characteristics
for our long-term strategy. These bonds were in lower demand by the market and,
therefore, relatively inexpensive. Near the end of the period, the Long Island
Power Authority issued over $3.7 billion of municipal bonds -- the largest
issuance in history. While we did not participate in this issue, this noteworthy
event focused investors' attention on the municipal market and its relative
attractiveness to taxable bonds, increasing demand and prices for many
tax-exempt bonds.
FUND POSITIONED TO BENEFIT FROM DECLINING INTEREST RATES
Based on our long-term outlook for low inflation and modest economic growth, we
structured the portfolio to take advantage of a potential decline in interest
rates. As interest rates fell, our focus on bonds with good call protection had
a positive effect on the Fund's performance.
Non-callable bonds perform well when interest rates decline because issuers
cannot "call" them before they mature to refinance their debt at lower interest
rates. The longer life span of these bonds makes their prices more sensitive to
changes in interest rates. This can translate into relatively large price gains
when interest rates fall. This type of bond performed well for the Fund during
the early and late months of the period.
For the six-month period ended May 31, 1998, the Fund generated a total return
of 3.68% for Class A shares, based on net asset value. The Fund outperformed its
Lipper competitive peer group, which averaged 3.42% for the same period.(1)
OUTLOOK FOR A POSITIVE ECONOMIC AND MARKET ENVIRONMENT
Our long-term outlook remains positive. We expect that low inflation and modest
economic growth will continue. Sustained high levels of productivity and global
competition should keep inflation pressure low, and unresolved issues in Asia
ought to keep the U.S. economy from growing too fast. We believe that market
fundamentals are also positive. We expect the current budget surplus will
continue to reduce the U.S. government's need to borrow money and, therefore,
the need to issue Treasury securities. This may create higher demand for
alternative fixed-income investments, including municipal bonds which remain
attractive relative to taxable bonds.
(1) Source: Lipper Analytical Services, Inc. Lipper rankings are based on the
Lipper Insured Municipal Debt Funds category. The Fund's Class A share
ranking is in the first quartile for the six-month period (ranked 8 out of
52 funds), in the first quartile for the one-year period (ranked 6 out of
51 funds), in the third quartile for the five-year period (ranked 17 out of
28 funds) and in the third quartile for the ten-year period (ranked 12 out
of 17 funds).
COLONIAL TAX-EXEMPT INSURED FUND'S INVESTMENT PERFORMANCE VS.
THE LEHMAN BROTHERS MUNICIPAL BOND INDEX
Change in Value of $10,000 from 5/31/88 - 5/31/98
CLASS A SHARES
Based on NAV and POP
CTEIF NAV POP LEHMAN
- -------------------------------------------------------------------------------
5/31/88 $10,000 $10,000 $10,000
10,242 9,756 10,221
10,530 10,030 10,493
10,767 10,255 10,696
11,638 10,368 11,151
11,325 10,787 11,344
11,590 11,040 11,649
11,693 11,138 11,793
11,861 11,297 11,967
11,933 11,367 12,072
12,361 11,774 12,545
12,661 12,059 12,880
12,982 12,365 13,173
13,225 12,597 13,496
13,555 12,912 13,833
13,900 13,240 14,167
14,112 13,442 14,466
14,573 13,881 15,002
14,755 14,054 15,220
15,613 14,871 16,117
15,643 14,900 16,197
16,211 15,441 16,833
16,231 15,460 16,907
16,244 15,473 17,009
15,813 15,062 16,597
16,048 15,286 16,857
15,158 14,438 16,019
16,483 15,700 17,329
17,099 16,286 18,109
17,111 16,298 18,351
17,968 17,115 19,046
18,035 17,178 19,244
17,604 16,768 18,937
17,921 17,070 19,312
18,773 17,881 20,166
18,754 17,864 20,304
18,914 18,016 20,505
19,508 18,581 21,097
20,017 19,066 21,612
20,541 19,566 22,160
5/31/98 20,754 19,768 22,429
<PAGE>
VALUE OF A $10,000 INVESTMENT MADE ON 5/31/88
As of 5/31/98
- -------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
NAV POP NAV W/CDSC NAV W/CDSC
- -------------------------------------------------------------------------------
$20,754 $19,768 $19,842 $19,842 $20,676 $20,676
- -------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
As of 5/31/98
- -------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
INCEPTION 11/20/85 5/5/92 8/1/97
NAV POP NAV w/CDSC NAV w/CDSC
- -------------------------------------------------------------------------------
1 YEAR 9.72% 4.51% 8.91% 3.91% 9.31% 8.31%
5 YEARS 5.82 4.79 5.03 4.70 5.74 5.74
10 YEARS 7.57 7.05 7.09 7.09 7.53 7.53
- -------------------------------------------------------------------------------
Past performance cannot predict future results. Returns and value of an
investment will vary, resulting in a gain or loss on sale. All results shown
assume reinvestment of distributions. Net asset value (NAV) returns do not
include sales charges or contingent deferred sales charges (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 and 2% for five years for
Class B shares, and 1% for one year for Class C shares.
Performance results reflect any voluntary waivers or reimbursement of Fund
expenses by the Adviser or Distributor. Absent these waivers or reimbursement
arrangements, performance results would have been lower.
Performance for different share classes will vary based on differences in sales
charges and fees associated with each class.
Class B and Class C share (newer class shares) performance information includes
returns of the Fund's Class A shares (the oldest existing fund class) for
periods prior to the inception of the newer class shares. These Class A share
returns are not restated to reflect any expense differential (e.g., Rule 12b-1
fees) between Class A shares and the newer class shares. Had the expense
differential been reflected, the returns for periods prior to the inception of
the newer class shares would have been lower.
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 and do not incur fees or expenses. It is not
possible to invest in an index.
<PAGE>
INVESTMENT PORTFOLIO
MAY 31, 1998 (UNAUDITED, IN THOUSANDS)
MUNICIPAL BONDS - 97.9% PAR VALUE
- --------------------------------------------------------------------------------
EDUCATION - 5.7%
EDUCATION - 4.1%
CT State Health & Educational
Facilities Authority,
Trinity College, Series 1998-F,
5.000% 07/01/28 $2,500 $ 2,450
MA Health and Educational Facilities Authorities:
Harvard University, Series N,
6.250% 04/01/20 3,000 3,544
Northeastern University, Series E,
6.550% 10/01/22 1,500 1,650
UT State Municipal Finance Co-Operative
Local Government, Pooled Capital
Improvement,
6.800% 05/01/12 1,000 1,100
--------
8,744
--------
STUDENT LOAN - 1.6%
AL State Higher Education Loan Corp.,
Series 1994-C,
5.850% 09/01/04 1,000 1,067
NM State Educational Assistance
Foundation, Series A,
6.700% 04/01/02 200 215
PA State Higher Education Assistance
Student Loan RIB (variable rate),
Series 1990-B,
10.717% 03/01/20 2,000 2,263
--------
3,545
--------
................................................................................
HEALTHCARE - 8.5%
HOSPITAL
IL Health Facilities Authority:
Methodist Health Services Corp.:
Series 1985-G,
8.000% 08/01/15 940 994
Series 1992-B, RIB (variable rate),
9.892% 05/01/21 500 594
Rockford Memorial Hospital, Series B,
6.750% 08/15/18 50 55
MA Health and Educational Facilities Authority:
McLean Hospital, Series C,
6.625% 07/01/15 500 547
New England Deaconess Hospital,
Series D,
6.875% 04/01/22 2,500 2,783
Valley Regional Health System,
Series C,
7.000% 07/01/08 1,585 1,874
MS State Hospital Equipment and
Facilities Authority,
Rush Medical Foundation Project,
6.700% 01/01/18 250 272
OK State Industrial Authority,
Baptist Medical Center,
Series C,
7.000% 08/15/04 1,500 1,713
TN Knox City Health, Education and
Housing Facilities,
5.250% 01/01/15 5,000 5,191
WA State Health Care Facilities Authority,
Swedish Health Services,
Series 1998,
5.125% 11/15/18 2,000 1,981
WI State Health & Educational
Facilities Authority:
Bellin Memorial Hospital,
6.625% 02/15/08 1,000 1,158
Waukesha Memorial Hospital,
7.250% 08/15/19 60 65
Milwaukee Regional Medical Center,
Series 1990,
7.500% 08/01/11 1,000 1,072
--------
18,299
--------
................................................................................
HOUSING - 4.5%
MULTI-FAMILY - 2.2%
IL Onterie Center Housing Finance Corp.,
Onterie Center Project,
Series 1992-A,
7.050% 07/01/27 2,000 2,132
MA State Housing Finance Agency,
Series A,
6.400% 01/01/09 1,910 2,053
MD Howard County Medical Mortgage
Heartlands Elderly Apartments,
Series 1985,
8.875% 12/01/10 490 531
--------
4,716
--------
SINGLE FAMILY - 2.3%
AK State Housing Finance Corp.,
Series 1990-A2,
7.000% 12/01/11 110 117
FL Brevard County Housing Finance Authority,
Series C,
7.000% 09/01/23 40 42
MA State Housing Finance Agency,
Series 21,
7.125% 06/01/25 1,310 1,407
MS Housing Finance Corporation Single
Family Mortgage,
8.250% 10/15/18 2,225 2,339
WV State Housing Development Fund,
Series C,
5.800% 05/01/17 1,000 1,045
--------
4,950
--------
................................................................................
OTHER - 8.9%
POOL/BOND BANK - 0.6%
MI Municipal Bond Authority, Local
Government Loan Program,
Series 1991-C,
(a) 06/15/15 3,380 1,426
--------
REFUNDED/ESCROWED (B) - 8.3%
CA Alameda County, Series 1985-1,
7.250% 12/01/08 1,300 1,425
CA East Bay Municipal Utilities District,
Series 1990,
7.500% 06/01/18 1,000 1,088
FL Dunedin, Mease Health Care Center,
Series 1991,
6.750% 11/15/11 100 110
FL Hollywood Water & Sewer Revenue,
6.750% 10/01/11 50 55
IL Chicago, Central Public Library Project,
Series 1988-C,
6.850% 01/01/17 1,000 1,115
IL Decatur,
6.900% 10/01/14 250 272
IN Whitko Middle School Building
Corporation First Mortgage, Series 1991,
6.750% 07/15/12 1,000 1,088
MA State Port Authority,
Series 1990-A,
7.500% 07/01/20 235 256
NV Reno Hospital, St. Mary's Regional
Medical Center, Series 1991-A,
6.700% 07/01/21 1,000 1,094
NY New York City Municipal Finance
Authority Water and Sewer Systems,
Series 1991-C,
7.000% 06/15/16 1,500 1,648
NY State Medical Care Facilities
Finance Agency, St. Luke's-Roosevelt
Hospital Center, Series 1989-B,
7.450% 02/15/29 500 538
OK State Industrial Authority,
Baptist Medical Center,
Series A,
7.000% 08/15/14 150 162
OR Portland International Airport,
7.100% 07/01/21 950 1,162
SC Charleston County Certificate
of Participation, Series 1991,
7.100% 06/01/11 2,000 2,208
SC Piedmont Municipal Power Agency,
Series 1991-A,
6.125% 01/01/07 75 85
TN Chattanooga-Hamilton County,
Series 1991-B, RIB (variable rate),
9.824% 05/25/21 1,000 1,186
TX Colorado River Municipal Water
District, Water Transmission Facilities,
Series 1991-A,
6.625% 01/01/21 250 266
TX Harris County Health Facilities
Development Corp.,
Texas Children's Hospital, Series A,
7.000% 10/01/19 50 53
WA Clark County Public Utilities
District Number 001 Electric System,
6.500% 01/01/11 200 216
WA State Housing Finance Commission,
Franciscan Eldercare Corp.:
Series 1991:
6.875% 01/01/21 910 989
6.875% 01/01/21 1,340 1,458
WA State Public Power Supply System,
Nuclear Project No. 2,
Series A,
6.500% 07/01/05 200 217
WI State Health & Educational
Facilities Authority,
Waukesha Memorial Hospital,
7.250% 08/15/19 940 1,022
WV School Building Authority, Capital
Import Revenue Bonds, Series 1990-B,
6.750% 07/01/17 75 81
--------
17,794
--------
................................................................................
OTHER REVENUE - 0.7%
RECREATION
CA Fairs Financing Authority,
Series 1991,
6.500% 07/01/11 1,300 1,406
--------
................................................................................
RESOURCE RECOVERY - 0.7%
RESOURCE RECOVERY
SC Charleston County Solid Waste User Fee,
6.500% 01/01/09 1,405 1,583
--------
................................................................................
TAX-BACKED - 31.2%
LOCAL APPROPRIATED - 4.4%
IL Chicago Board of Education,
Series 1992-A,
6.250% 01/01/15 6,000 6,897
OH Butler County Transportation Improvement
District, Series A,
6.000% 04/01/12 2,250 2,503
--------
9,400
--------
LOCAL GENERAL OBLIGATIONS - 12.0%
AZ Maricopa County School District,
Number 8 Osborn,
7.500% 07/01/08 1,235 1,536
AZ Mohave County Unified High School
District, Series B,
8.500% 07/01/06 250 319
AZ Tucson,
Series 1994-G,
7.625% 07/01/14 3,140 4,110
CO El Paso County School District No. 11,
Series 1996,
7.100% 12/01/18 4,420 5,622
CO Highlands Ranch Metropolitan
District No. 2,
Series 1996,
6.500% 06/15/12 1,000 1,180
GA Columbia County School District,
Series A,
6.750% 04/01/08 1,695 2,001
IL Chicago,
Series 1995-A2,
6.250% 01/01/14 4,000 4,603
MD Baltimore:
7.000% 10/15/08 300 362
7.000% 10/15/09 1,055 1,284
NV Clark County,
Series A,
7.500% 06/01/07 350 428
NV Las Vegas-Clark County Library District,
7.500% 02/01/02(c) 1,000 1,111
OH Greater Cleveland Regional
Transportation Authority:
Series 1996,
5.600% 12/01/11 2,000 2,141
Series 1998,
5.375% 12/01/14 1,040 1,080
--------
25,777
--------
SPECIAL NON-PROPERTY TAX - 6.2%
IL Metropolitan Pier & Exposition
Authority, McCormick Place Expansion
Project:
(a) 06/15/16 3,750 1,469
(a) 06/15/17 3,800 1,408
IL State Dedicated Tax,
Civic Center, Series A,
7.000% 12/15/13 200 217
NY New York City Transitional Finance
Authority, Series A,
5.125% 08/15/21 1,000 985
NY State Local Government Assistance Corp.,
Series 1993-E,
5.000% 04/01/21 3,175 3,158
NY Triborough Bridge & Tunnel Authority,
Series A,
6.625% 01/01/17 250 268
PR Commonwealth of Puerto Rico Highway
& Transportation Authority,
Series 1996-Y,
6.250% 07/01/12 3,000 3,475
PR Commonwealth of Puerto Rico,
Infrastructure Finance Authority, Series A,
5.000% 07/01/28 2,500 2,454
--------
13,434
--------
STATE APPROPRIATED - 4.3%
IN State Office Building Commission,
Women's Prison, Series B,
6.250% 07/01/16 8,000 9,199
--------
STATE GENERAL OBLIGATIONS - 4.3%
CA State,
Series 1995,
10.000% 10/01/06 1,000 1,380
DC District of Columbia
General Obligation, Series 1993-B1,
5.500% 06/01/09 1,000 1,061
MA Massachusetts Bay Transportation
Authority, Series C,
5.000% 03/01/24 1,500 1,458
MA State,
Series B,
5.500% 06/01/11 5,000 5,299
--------
9,198
--------
................................................................................
TRANSPORTATION - 8.6%
AIR TRANSPORTATION - 0.5%
NY Port Authority of New York & New Jersey,
JFK International Air Terminal, Series 6,
6.250% 12/01/08 1,000 1,133
--------
AIRPORT - 1.5%
HI State, Airport System Revenue,
Series 2,
6.750% 07/01/21 250 270
IL Chicago O'Hare International Airport
Special Facility, International Terminal,
6.750% 01/01/12 300 324
MA State Port Authority,
Series 1990-A,
7.500% 07/01/20 765 825
OR Portland International Airport,
7.100% 07/01/21 50 54
TX Dallas-Fort Worth Regional Airport,
Series A,
7.375% 11/01/11 1,380 1,604
TX Houston Airport System Revenue,
Series A,
6.750% 07/01/21 200 216
--------
3,293
--------
TOLL FACILITIES - 0.1%
TX Harris County,
Toll Road Revenue,
6.500% 08/15/11 120 131
--------
TRANSPORTATION - 6.5%
DC Metropolitan Area Transit Authority,
6.000% 07/01/10 1,000 1,130
IL Regional Transportation Authority,
Series C,
7.750% 06/01/20 5,000 6,808
NY Metropolitan Transportation Authority,
Commuter Facilities, Series 1997 B-1,
5.000% 07/01/18 2,500 2,453
SC State Ports Authority,
Series 1991:
6.500% 07/01/06 250 269
6.750% 07/01/21 3,000 3,238
--------
13,898
--------
................................................................................
UTILITY - 29.1%
INVESTOR OWNED - 5.9%
DE State Economic Development Authority,
New Castle County Gas System,
Series 1991-C,
7.150% 07/01/21 1,000 1,092
HI State Department of Budget & Finance,
Hawaiian Electric Co.,
Series A,
6.600% 01/01/25 4,000 4,427
MI St. Clair County Economic
Development Corp.,
Detroit Edison Co., Series 1993-AA,
6.400% 08/01/24 1,000 1,118
NV Clark County Pollution Control
Nevada Power Company, Series 1992-B,
6.600% 06/01/19 3,500 3,829
NY New York Energy Research & Development
Adjusted Gas Facilities,
Brooklyn Union Gas Company, Series 1989-B
6.750% 02/01/24 2,000 2,182
--------
12,648
--------
JOINT POWER AUTHORITY - 11.1%
CA Southern California Power Authority,
Palo Vero Project,
Series 1989-A,
5.000% 07/01/15 5,500 5,487
GA Municipal Electric Authority Power,
Series 1997-Y,
6.400% 01/01/13 1,000 1,164
MN Southern Minnesota Municipal Power
Agency, Series A,
5.000% 01/01/16 750 741
SC Piedmont Municipal Power Agency,
Series 1991-A,
6.125% 01/01/07 425 472
SC State Public Service Authority,
Series A,
6.250% 01/01/22 3,500 3,911
TX State Municipal Power Agency:
(a) 09/01/10 5,000 2,779
(a) 09/01/11 7,900 4,132
(a) 09/01/12 3,000 1,474
(a) 09/01/15 8,975 3,713
--------
23,873
--------
MUNICIPAL ELECTRIC - 5.6%
AK Anchorage:
Series 1993,
8.000% 12/01/09 1,000 1,306
Series 1996,
6.500% 12/01/10(c) 3,075 3,629
OH Cleveland,
Series 1996-1,
5.000% 11/15/24 4,000 3,931
PR Puerto Rico Electric Power Authority,
Series 1989-O,
5.000% 07/01/12 2,900 2,901
SD Heartland Consumers Power District,
6.000% 01/01/09 300 334
--------
12,101
--------
WATER & SEWER - 6.4%
CA Central Coast Water Authority,
State Water Project Regional Facilities,
Series 1996-A,
5.000% 10/01/22 1,700 1,662
FL Saint John's County Water and Sewer
Saint Augustine Shores System,
Series 1991-A:
(a) 06/01/13 2,600 1,252
(a) 06/01/14 1,500 683
GA Fulton County Water and Sewer,
6.375% 01/01/14 6,000 7,007
IL Kankakee Sewer,
Series 1991,
7.000% 05/01/16 1,000 1,122
PA Pottstown Borough Authority Sewer,
Guaranteed Sewer Revenue, Series 1991,
(a) 11/01/16 1,000 387
TX Houston Water & Sewer System,
Series 1998-A,
(a) 12/01/19(d) 2,000 653
VA Loudoun County Sanitation Authority,
Series 1992,
6.250% 01/01/16 1,000 1,089
--------
13,855
--------
TOTAL MUNICIPAL BONDS (cost of $189,096) 210,403
--------
OPTIONS - 0.0% CONTRACTS
- --------------------------------------------------------------------------------
September 1998 Treasury Bonds Puts:
Strike Price 116, expiration 08/22/98
(cost $126) 15,800 44
--------
TOTAL INVESTMENTS - 97.9% (cost of $189,222)(e) 210,447
--------
SHORT-TERM OBLIGATIONS - 0.3% PAR
- --------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (f)
Fl Pinellas County Health Facilities
Authority, Series 1985,
4.000% 12/01/15 200 200
LA State Offshore Terminal Authority,
Loop, Inc.,
3.950% 09/01/06 200 200
MS Perry County,
Leaf River Forest Project,
3.950% 03/01/02 100 100
NM Farmington,
Arizona Public Service Co.,
Four Corners Project, Series 1994-B,
3.950% 09/01/24 200 200
--------
TOTAL SHORT-TERM OBLIGATIONS 700
--------
OTHER ASSETS & LIABILITIES, NET - 1.8% 3,911
- --------------------------------------------------------------------------------
NET ASSETS - 100.0% $215,058
========
NOTES TO INVESTMENT PORTFOLIO:
- --------------------------------------------------------------------------------
(a) Zero coupon bond.
(b) The Fund has been informed that the issuer has placed direct obligations of
the U.S. Government in an irrevocable trust, solely for the payment of the
interest and principal.
(c) These securities, or a portion thereof, with a total market value of $691
are being used to collateralize the delayed delivery purchase indicated in
note (d) below.
(d) This security has been purchased on a delayed delivery basis for settlement
at a future date beyond the customary settlement time.
(e) Cost for federal income tax purposes is the same.
(f) Variable rate demand notes are considered short-term obligations. Interest
rates change periodically on specified dates. These securities are payable
on demand and are secured by either letters of credit or other credit
support agreements from banks. The rates listed are as of May 31, 1998.
Acronym Name
------- ----
RIB Residual Interest Bond
Summary of securities by insurer
% of
Insurer Net Assets
------- ----------
Municipal Bond Insurance Agency 30.3
AMBAC Indemnity Corporation 28.0
Financial Guarantee Insurance Company 23.0
Uninsured Securities 12.1
Financial Security Assurance 3.3
Capital Guarantee Insurance Company 1.2
Bond Investment Guarantee Insurance 1.1
Connie Lee Insurance Company 1.0
----------
100.0
==========
See notes to financial statements.
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
MAY 31, 1998 (UNAUDITED)
(in thousands except for per share amounts and footnotes)
ASSETS
Investments at value (cost $189,222) $210,447
Short-term obligations 700
--------
211,147
Receivable for:
Interest $4,029
Investments sold 1,963
Fund shares sold 91
Other 6 6,089
------ --------
Total Assets 217,236
LIABILITIES
Payable for:
Distributions 796
Investments purchased 628
Fund shares repurchased 242
Accrued:
Deferred Trustees fees 5
Other 507
--------
Total Liabilities 2,178
--------
NET ASSETS $215,058
========
Net asset value & redemption price per share -
Class A ($177,191/20,784) $ 8.53
========
Maximum offering price per share - Class A
($8.53/0.9525) $ 8.96(a)
========
Net asset value & offering price per share -
Class B ($37,509/4,400) $ 8.53(b)
========
Net asset value & offering price per share -
Class C ($358/42) $ 8.53(b)
--------
COMPOSITION OF NET ASSETS
Capital paid in $195,204
Undistributed net investment income 44
Overdistributed net realized loss (1,415)
Net unrealized appreciation 21,225
--------
$215,058
========
(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.
<PAGE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MAY 31, 1998
(UNAUDITED)
(in thousands)
INVESTMENT INCOME
Interest $6,104
EXPENSES
Management fee $ 612
Service fee 273
Distribution fee - Class B 142
Distribution fee - Class C (a)
Transfer agent fee 166
Bookkeeping fee 43
Trustees fee 10
Audit fee 15
Legal fee 3
Custodian fee 4
Registration fee 18
Reports to shareholders 5
Other 7 1,298
----- ------
Net Investment Income 4,806
------
NET REALIZED & UNREALIZED GAIN ON PORTFOLIO POSITIONS
Net realized gain 877
Net unrealized appreciation
during the period 2,076
-----
Net Gain 2,953
------
Increase in Net Assets from Operations $7,759
======
(a) Rounds to less than one.
See notes to financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(Unaudited)
Six months
ended Year ended
(in thousands) May 31 November 30
---------- -----------
INCREASE (DECREASE) IN NET ASSETS 1998 1997(a)
Operations:
Net investment income $ 4,806 $ 10,736
Net realized gain 877 4,577
Net unrealized appreciation (depreciation) 2,076 (1,144)
-------- --------
Net Increase from Operations 7,759 14,169
Distributions:
From net investment income - Class A (4,186) (9,102)
In excess of net realized gains - Class A (1,079) --
From net investment income - Class B (741) (1,656)
In excess of net realized gains - Class B (230) --
From net investment income - Class C (3) (1)
In excess of net realized gains - Class C (1) --
-------- --------
1,519 3,410
-------- --------
Fund Share Transactions
Receipts for shares sold - Class A 3,575 8,069
Value of distributions reinvested - Class A 3,261 5,450
Cost of shares repurchased - Class A (12,438) (41,496)
-------- --------
(5,602) (27,977)
-------- --------
Receipts for shares sold - Class B 1,963 1,089
Value of distributions reinvested - Class B 610 962
Cost of shares repurchased - Class B (3,911) (8,696)
-------- --------
(1,338) (6,645)
-------- --------
Receipts for shares sold - Class C 253 100
Value of distributions reinvested - Class C 3 1
-------- --------
256 101
-------- --------
Net Decrease from Fund Share Transactions (6,684) (34,521)
-------- --------
Total Decrease (5,165) (31,111)
NET ASSETS
Beginning of period 220,223 251,334
-------- --------
End of period (including undistributed net
investment income of $44 and $168,
respectively) $215,058 $220,223
======== ========
(a) Class C shares were initially offered on August 1, 1997.
See notes to financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS - CONT.
(Unaudited)
Six months
ended Year ended
May 31 November 30
---------- -----------
1998 1997(a)
NUMBER OF FUND SHARES
Sold - Class A 421 974
Issued for distributions reinvested - Class A 383 659
Repurchased - Class A (1,460) (5,014)
-------- --------
(656) (3,381)
-------- --------
Sold - Class B 231 132
Issued for distributions reinvested - Class B 72 116
Repurchased - Class B (459) (1,050)
-------- --------
(156) (802)
-------- --------
Sold - Class C 30 12
Issued for distributions reinvested - Class C (b) (b)
-------- --------
30 12
-------- --------
(a) Class C shares were initially offered on August 1, 1997.
(b) Rounds to less than one.
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1998 (UNAUDITED)
NOTE 1. INTERIM FINANCIAL STATEMENTS
................................................................................
In the opinion of management of Colonial Tax-Exempt Insured Fund (the Fund), a
series of Colonial Trust IV, the accompanying financial statements contain all
normal and recurring adjustments necessary for the fair presentation of the
financial position of the Fund at May 31, 1998, and the results of its
operations, the changes in its net assets and the financial highlights for the
six months then ended.
NOTE 2. ACCOUNTING POLICIES
................................................................................
ORGANIZATION: The Fund is a diversified portfolio of a Massachusetts business
trust, registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company. The Fund's investment objective is to
seek as high a level of after-tax total return, as is consistent with prudent
risk, by pursuing current income exempt from federal income tax and
opportunities for long-term appreciation from a portfolio primarily invested in
insured municipal bonds. The Fund 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. Class C shares 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.
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 fee applicable to 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 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 3. FEES AND COMPENSATION PAID TO AFFILIATES
................................................................................
MANAGEMENT FEE: Colonial Management Associates, Inc. (the Adviser)
is the investment Adviser of the Fund and furnishes accounting and other
services and office facilities for a monthly fee based on each fund's pro rata
portion of the combined average net assets of the Fund, Colonial Tax-Exempt
Fund, and Colonial High Yield Municipal Fund as follows:
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%
BOOKKEEPING FEE: The Adviser provides bookkeeping and pricing services for
$27,000 per year plus 0.035% of the Fund's average net assets over $50 million.
TRANSFER AGENT FEE: Colonial Investors Service Center, Inc., (the Transfer
Agent), an affiliate of the Adviser, provides shareholder services for a monthly
fee equal to 0.13% 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 was 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 Funds
Distributor, Inc., formerly Liberty Financial Investments, Inc. (the
Distributor), a subsidiary of the Adviser, is the Fund's principal underwriter.
For the six months ended May 31, 1998, the Fund has been advised that the
Distributor retained net underwriting discounts of $9,218 on sales of the Fund's
Class A shares and received contingent deferred sales charges (CDSC) of $46,387
on Class B share redemptions.
The Fund has adopted a 12b-1 plan which requires it to pay the Distributor a
service fee equal to 0.25% annually of the Fund's net assets as of the 20th of
each month. The plan also requires the payment of a distribution fee to the
Distributor equal to 0.75% of the average net assets attributable to Class B and
Class C shares. The Distributor has voluntarily agreed to waive a portion of the
Class C share distribution fee so that it will not exceed 0.45% 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 4. PORTFOLIO INFORMATION
................................................................................
INVESTMENT ACTIVITY: For the six months ended May 31, 1998, purchases and sales
of investments, other than short-term obligations were $7,538,750 and
$15,521,565, respectively.
Unrealized appreciation (depreciation) at May 31, 1998, based on cost of
investments for both financial statement and federal income tax purposes was:
Gross unrealized appreciation $21,308,942
Gross unrealized depreciation (84,103)
-----------
Net unrealized appreciation $21,224,839
===========
OTHER: The Fund has greater than 10% of its net assets at May 31, 1998
invested in both Illinois and Massachusetts.
There are certain risks arising from geographic concentration in any state.
Certain revenue or tax related events in a state may impair the ability of
certain issuers of municipal securities to pay principal and interest on their
obligations.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
The Fund may purchase or sell municipal and Treasury bond futures contracts and
purchase and write options on futures. The Fund will invest in these instruments
to hedge against the effects of changes in the value of portfolio securities due
to anticipated changes in interest rates and/or market conditions, for duration
management, or when the transactions are economically appropriate to the
reduction of risk inherent in the management of the Fund and not for trading
purposes. The use of futures contracts and options involves certain risks which
include (1) imperfect correlation between the price movement of the instruments
and the underlying securities, (2) inability to close out a position due to
different trading hours, or the temporary absence of a liquid market for either
the instrument or the underlying securities or (3) an inaccurate prediction by
the Adviser of the future direction of interest rates. Any of these risks may
involve amounts exceeding the variation margin recorded in the Fund's Statement
of Assets and Liabilities at any given time.
NOTE 5. LINE OF CREDIT
................................................................................
The Fund may borrow up to 10% of its net assets under a line of credit for
temporary or emergency purposes. Any borrowings bear interest at one of the
following options determined at the inception of the loan: (1) federal funds
rate plus 1/2 of 1%, (2) the lending bank's base rate or (3) IBOR offshore loan
rate plus 1/2 of 1%. There were no borrowings under the line of credit during
the six months ended May 31, 1998.
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are
as follows:
(Unaudited)
Six months ended
May 31
-------------------------------
1998
Class A Class B Class C
------- ------- -------
Net asset value -
Beginning of period $ 8.470 $ 8.470 $ 8.470
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.193 0.161 0.174(b)
Net realized and
unrealized gain (loss) 0.115 0.115 0.115
------- ------- -------
Total from Investment Operations 0.308 0.276 0.289
------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.198) (0.166) (0.179)
In excess of net realized gains (0.050) (0.050) (0.050)
------- ------- -------
Total Distributions
Declared to Shareholders (0.248) (0.216) (0.229)
------- ------- -------
Net asset value -
End of period $ 8.530 $ 8.530 $ 8.530
======= ======= =======
Total return (d) 3.68%(e) 3.30%(e) 3.45%(e)
======= ======= =======
RATIOS TO AVERAGE NET ASSETS
Expenses (f) 1.06%(g) 1.81%(g) 1.51%(b)(g)
Net investment income(f) 4.54%(g) 3.78%(g) 4.08%(b)(g)
Portfolio turnover 4%(e) 4%(e) 4%(e)
Net assets at end
of period (000) $177,191 $37,509 $ 358
(a) Class C shares were initially offered on August 1, 1997. Per share amounts
reflect activity from that date.
(b) Net of fees waived by the Distributor which amounted to $0.013 per share and
0.30%.
(c) 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.
(d) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(e) Not annualized.
(f) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
(g) Annualized.
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Selected data for a share of each class outstanding throughout each period are
as follows:
Year ended November 30
-------------------------------------------------------------------------
1997 1996
Class A Class B Class C(a) Class A Class B
-------- -------- -------- -------- --------
$ 8.330 $ 8.330 $ 8.530 $ 8.380 $ 8.380
-------- -------- -------- -------- --------
0.398 0.336 0.118 0.403 0.342
0.136 0.136 (0.061)(c) (0.045) (0.045)
-------- -------- -------- -------- --------
0.534 0.472 0.057 0.358 0.297
-------- -------- -------- -------- --------
(0.394) (0.332) (0.117) (0.408) (0.347)
-------- -------- -------- -------- --------
(0.394) (0.332) (0.117) (0.408) (0.347)
-------- -------- -------- -------- --------
$ 8.470 $ 8.470 $ 8.470 $ 8.330 $ 8.330
======== ======== ======== ======== ========
6.63% 5.83% 0.68%(e) 4.48% 3.70%
======== ======== ======== ======== ========
1.07% 1.82% 1.51%(g) 1.05% 1.80%
4.76% 4.01% 4.22%(g) 4.92% 4.17%
26% 26% 26% 25% 25%
$181,543 $ 33,580 $ 100 $206,713 $ 44,621
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Selected data for a share of each class outstanding throughout each period are
as follows:
Year ended November 30
----------------------------------------
1995 1994
Class A Class B Class A Class B
------- ------- ------- -------
Net asset value -
Beginning of period $ 7.450 $ 7.450 $ 8.420 $ 8.420
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.418 0.359 0.439 0.378
Net realized and unrealized
gain (loss) 0.935 0.935 (0.977) (0.977)
------- ------- ------- -------
Total from Investment
Operations 1.353 1.294 (0.538) (0.599)
------- ------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.423) (0.364) (0.432) (0.371)
------- ------- ------- -------
Net asset value -
End of period $ 8.380 $ 8.380 $ 7.450 $ 7.450
======= ======= ======= =======
Total return (a) 18.55% 17.68% (6.61)% (7.31)%
======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS
Expenses 1.05%(b) 1.80%(b) 1.05% 1.80%
Net investment income 5.20%(b) 4.45%(b) 5.44% 4.69%
Portfolio turnover 31% 31% 36% 36%
Net assets at end
of period (000) $240,894 $50,016 $198,909 $45,801
(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
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Selected data for a share of each class outstanding throughout each period are
as follows:
Year ended November 30
------------------------
1993
Class A Class B
-------- --------
Net asset value -
Beginning of period $ 8.080 $ 8.080
-------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income
0.456 0.395
Net realized and unrealized gain (loss)
0.338 0.338
-------- --------
Total from Investment Operations 0.794 0.733
-------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.454) (0.393)
-------- --------
Net asset value -
End of period $ 8.420 $ 8.420
======== ========
Total return (a) 10.00% 9.20%
======== ========
RATIOS TO AVERAGE NET ASSETS
Expenses 1.07% 1.82%
Net investment income 5.44% 4.69%
Portfolio turnover 12% 12%
Net assets at end of period (000) $241,610 $ 46,035
(a) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
<PAGE>
SHAREHOLDER SERVICES
TO MAKE INVESTING EASIER
Your Fund has one of the most extensive selections of shareholder services
available. Your financial advisor can help you arrange for any of these
services, or you can call Colonial Investors Service Center directly at
1-800-345-6611.
AFFORDABLE ADDITIONAL INVESTMENTS: Add to your account with as little as $50 on
most funds; $25 for an IRA account.
FREE EXCHANGES(1): Exchange all or part of your account into the same share
class of another fund distributed by Liberty Funds Distributor, Inc. by phone or
mail.
EASY ACCESS TO YOUR MONEY(1): Make withdrawals from your account by phone, by
mail or, for certain funds, by check.
ONE-YEAR REINSTATEMENT PRIVILEGE: If you need access to your money, but then
choose to return it within one year, you can reinvest in any fund distributed by
Liberty Funds Distributor of the same share class without any penalty or sales
charge.
FUNDAMATIC: Make periodic investments as low as $50 from your checking account
to your Fund account.
SYSTEMATIC WITHDRAWAL PLAN (SWP): Receive monthly, quarterly or semiannual
payments via check or bank transmission. There is a $5,000 account value
required, but no minimum for the payment amount. The maximum annual withdrawal
is 12% of account balance at time SWP is established. SWPs by check are
processed on the 10th calendar day of each month unless the 10th falls on a
non-business day or the first business day of the week. If this occurs, the
processing date will be the previous business day. Dividends and capital gains
must be reinvested.
AUTOMATED DOLLAR COST AVERAGING: Transfer money on a monthly basis from any fund
with a balance of $5,000 into the same share class of up to four other funds
distributed by Liberty Funds Distributor. Minimum for each transfer is $100.
RETIREMENT PLANS: Choose from a broad range of retirement plans, including IRAs.
(1) Redemptions and exchanges are made at the next determined net asset value
after the request is received by the Transfer Agent. Proceeds may be more
or less than your original cost. The exchange privilege may be terminated
at any time. Exchanges are not available on all funds. Investors who
purchase Class B or C shares, or $1 million or more of Class A shares, may
be subject to a contingent deferred sales charge.
<PAGE>
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial Tax-Exempt Insured Fund is:
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Colonial Tax-Exempt Insured Fund mails one shareholder report to each
shareholder address. If you would like more than one report, please call
1-800-426-3750 and additional reports will be sent to you.
This report has been prepared for shareholders of Colonial Tax-Exempt Insured
Fund. This report may also be used as sales literature when preceded or
accompanied by the current prospectus which provides details of sales charges,
investment objectives and operating policies of the Fund and the most recent
copy of our Performance Update.
<PAGE>
TRUSTEES
ROBERT J. BIRNBAUM
Consultant (formerly Special Counsel, Dechert, Price & Rhoads; President and
Chief Operating Officer, New York Stock Exchange, Inc.; President, American
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, & Frankel)
JAMES E. GRINNELL
Private Investor (formerly Senior Vice President-Operations, The Rockport
Company)
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, Chief Executive Officer and Director,
Hannaford Bros. Co.)
JOHN J. NEUHAUSER
Dean, Boston College School of Management
ROBERT L. SULLIVAN
Retired Partner, KPMG Peat Marwick LLP (formerly Management Consultant, Saatchi
and Saatchi Consulting Ltd. and Principal and International Practice Director,
Management Consulting, Peat Marwick Main & Co.)
[Logo] LIBERTY
COLONIAL FUNDS o STEIN ROE ADVISOR FUNDS o NEWPORT FUNDS
Liberty Funds Distributor, Inc. (C)1998
One Financial Center, Boston, MA 02111-2621, 1-800-426-3750
Visit us at www.libertyfunds.com
TI-03/370F-0598 (7/98) 98/665
