<PAGE>
LETTER FROM THE PRESIDENT
Dear Shareholder:
Following is Colonial Michigan Tax-Exempt Fund's semiannual report for
the six months ended July 31, 1995. The Fund seeks as high a level of
after-tax total return, as is consistent with prudent risk, by pursuing
current income exempt from federal and Michigan personal income tax, and
opportunities for long-term appreciation from a portfolio primarily invested
in investment grade Michigan municipal bonds. Fund shares are also intended
to be exempt from the Michigan intangibles tax.
<TABLE>
FUND PERFORMANCE (2/1/95 - 7/31/95)
<CAPTION>
CLASS A CLASS B
INCEPTION 9/26/86 8/4/92
- ----------------------------------------------------------
<S> <C> <C>
Distributions declared
per share $0.195 $0.169
- ----------------------------------------------------------
SEC yield on 7/31/95 5.21% 4.72%
- ----------------------------------------------------------
Taxable-equivalent yield
on 7/31/95, based on the
maximum offering price 9.04% 8.19%
- ----------------------------------------------------------
Six-month total return, assuming
reinvestment of all distributions
and no sales charge or contingent
deferred sales charge (CDSC) 3.82% 3.43%
- ----------------------------------------------------------
Net asset value per share
on 7/31/95 $6.72 $6.72
- ----------------------------------------------------------
</TABLE>
<TABLE>
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/95
<CAPTION>
CLASS A CLASS B
NAV MOP NAV W/CDSC
<S> <C> <C> <C> <C>
1 year 5.69% 0.67% 4.91% (0.07)%
5 years 6.95% 5.91% - -
Since inception 5.89% 5.30% 3.97% 3.03%
</TABLE>
ECONOMIC/MARKET OVERVIEW
Although tax reform discussions in Washington have had a negative
impact on the municipal bond market, in other respects the economic climate
was quite favorable for these securities. One factor that had a positive
influence on performance was the relatively low supply of Michigan municipal
bonds. Also, the U.S. economy has gradually slowed during 1995. Real gross
domestic product (GDP) for the first two quarters of 1995 grew at an
annualized rate of 2.8% and 1.1%, respectively, down significantly from the
annualized GDP growth rate of 5.1% for the final quarter of 1994. This
translated into lower interest rates, a development that was reflected in
higher prices in the municipal bond market.
Michigan benefited from the prominent role played by the automotive
industry in its economy during the semiannual period. As the state's economy
has recovered, tax revenues have increased. In fact, Michigan has been able
to build its reserve fund to $780 million. The state's recent economic
stability has been recognized by Moody's Investors Services -- Moody's upgraded
the state's general obligation bond rating from A1 to AA.
INVESTMENT STRATEGY
The Fund remained fully invested in a diverse selection of Michigan
municipal bonds. On July 31, the Fund owned 61 individual issues in 15
public sectors. More than 95% of the securities in the portfolio were rated
investment grade, with approximately 50% rated AAA, the highest quality rating
available.
We remain cautiously optimistic about Michigan's municipal bond market.
Although we will continue to monitor the tax reform debate closely, we believe
the overall environment for these securities should continue to be favorable.
Sincerely,
/s/ John A. McNeice, Jr.
John A. McNeice, Jr.
President
September 13, 1995
A portion of the Fund's income may be subject to the alternative
minimum tax. The 30-day SEC yield on July 31, 1995, of 5.21% for Class A
shares and 4.72% for class b shares reflects the portfolio's earning power,
net of expenses, and does not include changes in Fund price.
If the adviser had not borne certain Fund expenses, total returns would
have been lower and the yield for Class A shares would have been 4.92%, and
the yield for Class B shares would have been 4.42%. Taxable-equivalent
yields are based on the maximum 42.37% combined federal and Michigan income
tax rate.
Past performance cannot predict future results. Return and value of an
investment will vary, resulting in a gain or loss on sale. All results shown
assume reinvestment of distributions. Net asset value (NAV) return does not
include sales charges or CDSC. Maximum offering price (MOP) return includes
the maximum sales charge of 4.75%. The CDSC returns reflect charges of: one
year, 5.00%; since inception, 3.00%.
Performance for different share classes will vary based on differences
in sales charges and fees associated with each class.
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO (unaudited, in thousands) JULY 31, 1995
<CAPTION>
MUNICIPAL BONDS - 98.9% PAR VALUE
- -----------------------------------------------------------------------
<S> <C> <C>
EDUCATION - 8.4%
Brighton Area School District, Series 1,
5.250% 05/01/2014 . . . . . . . . . . . $ 500 $ 459
Central University,
5.500% 10/01/2015 . . . . . . . . . . . 1,300 1,225
Romulus Township School District,
Series 1993,
(a) 05/01/2021 . . . . . . . . . . . 2,075 423
University of Michigan,
Major Capital Projects, Series 1993-A ,
5.500% 04/01/2012 . . . . . . . . . . . 475 458
Western University, Series A,
5.000% 07/15/2021 . . . . . . . . . . . 2,500 2,131
-------
4,695
- -----------------------------------------------------------------------
GENERAL OBLIGATIONS - 33.5%
Calumet Laurium & Keweenah
Public Schools,
5.875% 05/01/20 (b). . . . . . . . . 1,000 986
Chippewa Valley Schools,
General Obligation, Series 1993,
5.000% 05/01/2021 . . . . . . . . . . . 2,500 2,156
Clintondale Community School:
5.250% 05/01/2015 . . . . . . . . . . . 2,000 1,815
5.750% 05/01/16(b). . . . . . . . . 1,000 959
Commonwealth of Puerto Rico,
5.650% 07/01/2015 . . . . . . . . . . . 500 494
Grand Rapids Community College,
5.625% 05/01/2024 . . . . . . . . . . . 770 670
Greenville Public Schools,
5.750% 05/01/2024 . . . . . . . . . . . 2,500 2,406
Herperia Community Schools,
5.650% 05/01/2024 . . . . . . . . . . . 2,255 2,125
Kalamazoo Hospital Finance Authority,
Borgess Medical Center, Series 1994-A,
5.250% 06/01/2017 . . . . . . . . . . . 1,400 1,272
Kent County, Series 1987,
8.400% 11/01/2010 . . . . . . . . . . . 750 807
Mona Shores School District,
5.500% 05/01/2014 . . . . . . . . . . . 2,615 2,488
Okemos Public School District,
Series 1993:
(a) 05/01/2012 . . . . . . . . . . . 500 182
(a) 05/01/2018 . . . . . . . . . . . 1,700 423
Pontiac, General Obligation,
Series 1987,
8.300% 06/01/99 . . . . . . . . . . . 250 267
Romulus Township School District:
(a) 05/01/2017 . . . . . . . . . . . 258 687
Series 1993,
(a) 05/01/2018 . . . . . . . . . . . 3,985 996
-------
18,733
- -----------------------------------------------------------------------
HEALTH - 17.3%
HOSPITALS - 15.6%
Dickinson County Memorial Hospital,
8.125% 11/01/2024 . . . . . . . . . . . . . $ 550 $ 564
Kalamazoo Hospital Finance Authority,
Bronson Methodist Hospital, Series 1992-A,
6.250% 05/15/2012 . . . . . . . . . . . . . 1,500 1,506
Royal Oak Hospital Finance Authority,
William Beaumont Hospital, Series 1993-G,
5.250% 11/15/2019 . . . . . . . . . . . . . 2,500 2,181
Saginaw Hospital Finance Authority,
Saginaw General Hospital, Series 1989,
7.625% 10/01/2019 . . . . . . . . . . . . . 175 184
State Hospital Finance Authority:
Central Michigan Community Hospital,
Series 1993-A,
6.000% 10/01/2008 . . . . . . . . . . . . . 500 494
Crittenton Hospital, Series 1992-A,
6.700% 03/01/2007 . . . . . . . . . . . . . 750 787
Daughters of Charity-Providence, Series 1991,
7.000% 11/01/2021 . . . . . . . . . . . . . 1,000 1,056
Detroit Medical Center, Series 1988-A,
8.125% 11/01/24 . . . . . . . 50 53
Henry Ford Health System, Series 1992-A,
5.750% 09/01/17 . . . . . . . 2,000 1,883
-------
8,708
-------
NURSING HOMES - 1.7%
Cheboygan County Economic Development
Corp., Metro Health Foundation Project,
10.000% 11/01/2022 . . . . . . . . . . . . . 600 420
Warren Economic Development Corp.,
Autumn Woods Project, Series 1992,
6.900% 12/20/2022 . . . . . . . . . . . . . 500 528
-------
948
- -----------------------------------------------------------------------
HOUSING - 11.1%
MULTI-FAMILY - 9.5%
Grand Rapids Building Authority, Series 1993,
5.500% 04/01/2013 . . . . . . . . . . . . . 1,000 965
Grand Rapids Housing Finance Authority,
Multi-family Housing, Series A,
7.625% 09/01/2023 . . . . . . . . . . . . . 1,500 1,624
Redford Township Building Authority,
6.500% 11/01/2013 . . . . . . . . . . . . . 683
State Housing Development Authority, Series D,
6.850% 06/01/2026 . . . . . . . . . . . . . 2,000 2,025
-------
5,297
-------
SINGLE-FAMILY - 1.6%
State Housing Development Authority:
Rental Housing,
Series 1990-A,
7.700% 04/01/2023 . . . . . . . . . . . . . 500 518
Series 1991-B,
7.050% 10/01/2012 . . . . . . . 225 235
</TABLE>
See notes to investment portfolio.
2
<PAGE>
INVESTMENT PORTFOLIO - continued
<TABLE>
<CAPTION>
MUNICIPAL BONDS - CONT. PAR VALUE
- ----------------------------------------------------------------------------
<S> <C> <C>
Single-family Housing, Series 1989-B,
8.000% 06/01/2018 . . . . . . . . . . . $ 145 $ 149
--------
902
- ----------------------------------------------------------------------------
MANUFACTURING - 2.4%
PAPER PRODUCTS - 1.5%
State Strategic Fund,
Blue Water Fiber Project, Series 1994,
8.000% 01/01/2012 . . . . . . . . . . . 360 340
Great Lakes Pulp & Fibre Project,
10.250% 12/01/2016 . . . . . . . . . . . 500 519
--------
859
--------
PRIMARY SMELTING - 0.9%
Monroe County,
North Star Steel Co., Series A,
6.875% 07/01/2008 . . . . . . . . . . . 470 472
- ----------------------------------------------------------------------------
PUBLIC FACILITIES & IMPROVEMENT - 11.1%
Commonwealth of Puerto Rico
Public Building Authority:
Series A,
6.250% 07/01/2014 . . . . . . . . . . . 1,200 1,260
Series M,
3.750% 07/01/2016 . . . . . . . . . . . 750 667
Detroit Convention Facilities,
Cobo Hall Expansion Project,
5.250% 09/30/2012 . . . . . . . . . . . 1,000 893
State Municipal Bond Authority,
Local Government Loan Project,
Series 1992-D:
6.650% 05/01/2012 . . . . . . . . . . . 1,000 1,054
(a) 05/01/2019 . . . . . . . . . . . 2,000 468
(a) 05/01/2020 . . . . . . . . . . . 1,855 403
Wayne County, Detroit Metropolitan
Airport, Series 1993-B,
5.250% 12/01/2013 . . . . . . . . . . . 1,500 1,341
Virgin Islands Public Finance
Authority, Series 1992-A,
7.000% 10/01/2002 . . . . . . . . . . . 125 133
--------
6,219
- ----------------------------------------------------------------------------
PUBLIC INFRASTRUCTURE - 1.8%
AIRPORT - 1.8%
Wayne County, Detroit Metropolitan
Airport, Series 1994-B,
6.125% 12/01/2024 . . . . . . . . . . . 1,000 999
- ----------------------------------------------------------------------------
REFUNDED/ESCROW/PUBLIC OBLIGATIONS (c) - 2.5%
Rockford Public Schools, Series 1990,
7.375% 05/01/2019 . . . . . . . . . . . $ 250 $ 283
Western Townships Utilities
Authority, Sewer Systems & Disposal,
Series 1989,
8.200% 01/01/2018 . . . . . . . . . . . 1,000 1,103
--------
1,386
- ----------------------------------------------------------------------------
TAX ALLOCATION - 1.5%
Battle Creek,
7.650% 05/01/2022 . . . . . . . . . . . . . $ 750 $818
- ----------------------------------------------------------------------------
UTILITY - 7.4%
INVESTMENTS OWNED - 1.9%
St. Clair County Economic
Development Corp., Detroit Edison Co.,
Series 1993-AA,
6.400% 08/01/2024 (b) . . . . . . . . . . . 1,000 1,039
MUNICIPAL ELECTRIC - 5.5% --------
Commonwealth of Puerto Rico,
Electric Power Authority, Series T,
5.500% 07/01/2020 . . . . . . . . . . . . . 1,000 911
Grand Haven, Series 1993,
5.250% 07/01/2013 . . . . . . . . . . . . . 1,355 1,236
State Strategic Fund, Pollution Control
Project, Series 1994-AA,
5.875% 04/01/2024 . . . . . . . . . . . . . 1,000 940
--------
3,087
- ----------------------------------------------------------------------------
WATER & SEWER - 0.5%
Oakland County,
Pebble Creek Drainage District,
5.000% 05/01/11 . . . . . . . . . . . . . 300 265
- ----------------------------------------------------------------------------
OTHER - 1.4%
Detroit Economic Development Corp.,
E.H. Associates Limited Partnership,
7.000% 06/01/2012 . . . . . . . . . . . . . $ 750 $ 792
- ----------------------------------------------------------------------------
Total investments (cost $54,324) (d) 55,220
- ----------------------------------------------------------------------------
OTHER ASSETS & LIABILITIES, NET - 1.1% 641
- ----------------------------------------------------------------------------
NET ASSETS - 100% $ 55,861
- ----------------------------------------------------------------------------
<FN>
Notes to investment portfolio:
(a) Zero coupon bond.
(b) These securities, or a portion thereof, with a total market value of
$2,984, are being used to collaterize open futures contracts.
(c) 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 interest and principal.
(d) Cost for federal income tax purposes is the same.
</TABLE>
<TABLE>
Short futures contracts open at July 31, 1995:
<CAPTION>
Par value Unrealized
covered Expiration appreciation
Type by contracts month at 7/31/95
- -------------------------------------------------------
<S> <C> <C> <C>
Treasury bond $500 September $6
- -------------------------------------------------------
</TABLE>
See notes to financial statments.
3
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
STATEMENT OF ASSETS & LIABILITIES (UNAUDITED)
July 31, 1995
(in thousands except for per share amounts and footnote)
- ---------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments at value (cost $54,324)....................... $ 55,220
Receivable for:
Interest........................ $ 784
Fund shares sold................ 64
Other ............................. 91 155
------- ----------
Total assets..................................... 56,159
LIABILITIES
Payable for:
Distributions................... 261
Fund shares repurchased......... 25
Variation margin on futures..... 3
Payable to adviser................. 3
Accrued:
Deferred Trustees fees.......... 4
Other........................... 2
-------
Total liabilities................................ 298
----------
Net assets................................................ $ 55,861
==========
Net asset value & redemption price per share -
Class A ($41,629/6,191)............................... $ 6.72
==========
Maximum offering price per share - Class A
($6.72/0.9525)......................................... $ 7.06 (a)
==========
Net asset value & offering price per share -
Class B ($14,232/2,116)............................... $ 6.72 (b)
==========
Composition of net assets
Capital paid in........................................ $ 57,517
Undistributed net investment income.................... 86
Accumulated net realized loss.......................... (2,644)
Net unrealized appreciation on:
Investments.......................................... 896
Open futures contracts............................... 6
----------
$ 55,861
==========
<FN>
(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.
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS (UNAUDITED)
Six months ended July 31, 1995
(in thousands)
- ---------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest................................................... $ 1,792
EXPENSES
Management fee........................ $ 155
Service fee........................... 33
Distribution fee - Class B............ 54
Transfer agent........................ 48
Bookkeeping fee....................... 15
Trustees fees......................... 8
Custodian fee......................... 7
Audit fee............................. 16
Legal fee............................. 3
Registration fees..................... 10
Reports to shareholders............... 3
Other................................. 6
358
-------
Fees waived by the adviser............ (99) 259
------- ----------
Net investment income.............................. 1,533
----------
Net realized and unrealized gain (loss)
on portfolio positions
Net realized gain (loss) on:
Investments......................... 557
Closed futures contracts............ (1,879)
-------
Net realized loss..................................... (1,322)
Net unrealized appreciation
during the period on:
Investments......................... 1,551
Open futures contracts.............. 365
-------
Net unrealized appreciation........................... 1,916
----------
Net gain........................................... 594
----------
Net increase in net assets from
operations.............................................. $ 2,127
==========
</TABLE>
See notes to financial statements.
4
<PAGE>
FINANCIAL STATEMENTS - continued
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(in thousands)
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
(unaudited)
Six months Year
ended ended
July 31 January 31
------------ ------------
1995 1995
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income........................................................................... $ 1,533 $ 3,384
Net realized gain (loss)........................................................................ (1,322) 404
Net unrealized appreciation (depreciation)...................................................... 1,916 (6,303)
-------- ----------
Net increase (decrease) from operations................................................... 2,127 (2,515)
Distributions
From net investment income - Class A............................................................ (1,226) (2,541)
From net investment income - Class B............................................................ (356) (770)
-------- ----------
545 (5,826)
-------- ----------
Fund share transactions
Receipts for shares sold - Class A.............................................................. 1,186 4,363
Value of distributions reinvested - Class A..................................................... 689 1,397
Cost of shares repurchased - Class A............................................................ (2,496) (5,158)
-------- ----------
(621) 602
-------- ----------
Receipts for shares sold - Class B.............................................................. 741 3,284
Value of distributions reinvested - Class B..................................................... 179 379
Cost of shares repurchased - Class B............................................................ (971) (3,051)
-------- ----------
(51) 612
-------- ----------
Net increase (decrease) from Fund share transactions...................................... (672) 1,214
-------- ----------
Total decrease..................................................................... (127) (4,612)
NET ASSETS
Beginning of period............................................................................. 55,988 60,600
-------- ----------
End of period (including undistributed
net investment income of $86 and $134, respectively)........................................... $ 55,861 $ 55,988
======== ==========
NUMBER OF FUND SHARES
Sold - Class A.................................................................................. 175 638
Issued for distributions reinvested - Class A................................................... 100 208
Repurchased - Class A........................................................................... (366) (773)
-------- ----------
(91) 73
-------- ----------
Sold - Class B.................................................................................. 109 480
Issued for distributions reinvested - Class B................................................... 26 56
Repurchased - Class B........................................................................... (142) (461)
-------- ----------
(7) 75
-------- ----------
</TABLE>
See notes to financial statements.
5
<PAGE>
NOTES TO FINANCIAL STATEMENTS (unaudited)
NOTE 1. INTERIM FINANCIAL STATEMENTS
In the opinion of management of Colonial Michigan Tax-Exempt Fund (the
Fund), a series of Colonial Trust V, the accompanying financial statements
contain all normal and recurring adjustments necessary for the fair presentation
of the financial position of the Fund at July 31, 1995, 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
The Fund is a non-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 may issue an unlimited number
of shares. The Fund offers Class A shares sold with a front-end sales charge
and Class B shares which are subject to an annual distribution fee and a
contingent deferred sales charge. Class B shares will convert to Class A shares
when they have been outstanding approximately eight years. The following
significant accounting policies are consistently followed by the Fund in the
preparation of its financial statements and conform to generally accepted
accounting principles.
- --------------------------------------------------------------------------------
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.
Futures contracts are valued based on the difference between the last
sale price and the opening price of the contract.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
Portfolio positions which cannot be valued as set forth above are valued
at fair value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased or sold.
Cost is determined and gains and losses are based upon the specific
identification method for both financial statement and federal income tax
purposes.
The Fund may trade securities on other than normal settlement terms.
This may increase the risk if the other party to the transaction fails to
deliver and causes the Fund to subsequently invest at less advantageous prices.
- --------------------------------------------------------------------------------
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS
All income, expenses (other than the Class B distribution fee), realized
and unrealized gains (losses) are allocated to each class proportionately on a
daily basis for purposes of determining the net asset value of each class.
Class B per share data and ratios are calculated by adjusting the
expense and net investment income per share data and ratios for the Fund for the
entire period by the distribution fee applicable to Class B shares only.
- --------------------------------------------------------------------------------
FEDERAL INCOME TAXES
Consistent with the Fund's policy to qualify as a regulated investment
company and to distribute all of its taxable 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
6
<PAGE>
gains to be distributed are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles.
- --------------------------------------------------------------------------------
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES
MANAGEMENT FEE
<TABLE>
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 Trust V as follows:
<CAPTION>
Average Net Assets Annual Fee Rate
------------------ ---------------
<S> <C>
First $1 billion 0.55%
Next $1 billion 0.50%
Over $2 billion 0.45%
</TABLE>
- --------------------------------------------------------------------------------
BOOKKEEPING FEE
The Adviser provides bookkeeping and pricing services for $27,000 per
year plus 0.035% of the Fund's average net assets over $50 million.
- --------------------------------------------------------------------------------
TRANSFER AGENT
Colonial Investors Service Center, Inc. (the Transfer Agent), an
affiliate of the Adviser, provides shareholder services for a monthly fee equal
to 0.14% annually of the Fund's average net assets and receives a reimbursement
for certain out of pocket expenses.
- --------------------------------------------------------------------------------
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES
Colonial Investment Services, Inc., (the Distributor), an affiliate of
the Adviser, is the Fund's principal underwriter. During the six months ended
July 31, 1995, the Distributor retained net underwriting discounts of $4,966 on
sales of the Fund's Class A shares and received contingent deferred sales
charges (CDSC) of $24,594 on Class B share redemptions.
<TABLE>
The Fund has adopted a 12b-1 plan which requires the payment of a
distribution fee to the Distributor equal to 0.75% annually of the average net
assets attributable to Class B shares. The plan also requires the payment of a
service fee to the Distributor as follows:
Valuation of shares Annual
outstanding on the 20th of Fee
each month which were issued Rate
- ------------------------------------- ------
<S> <C>
Prior to November 30, 1994........... 0.10%
On or after December 1, 1994......... 0.25%
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.
- --------------------------------------------------------------------------------
EXPENSE LIMITS
The Adviser has agreed, until further notice, to waive fees and bear
certain Fund expenses to the extent that total expenses (exclusive of service
and distribution fees, brokerage commissions, interest, taxes, and extraordinary
expenses, if any) exceed 0.60% annually of the Fund's average net assets.
Effective August 1, 1995, and until further notice, the expense limit
changed to 0.75% of the Fund's average net assets.
- --------------------------------------------------------------------------------
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
During the six months ended July 31, 1995, purchases and sales of
investments, other than short-term obligations, were $11,704,825 and
$13,674,857, respectively.
7
<PAGE>
NOTES TO FINANCIAL STATEMENTS - continued
</TABLE>
<TABLE>
Unrealized appreciation (depreciation) at July 31, 1995, based on cost
of investments for both financial statement and federal income tax purposes was:
<S> <C>
Gross unrealized appreciation............ $1,865,294
Gross unrealized depreciation............ (969,535)
----------
Net unrealized appreciation........... $ 895,759
==========
</TABLE>
- --------------------------------------------------------------------------------
CAPITAL LOSS CARRYFORWARDS
<TABLE>
At January 31, 1995, capital loss carryforwards available (to the extent
provided in regulations) to offset future realized gains were approximately as
follows:
<CAPTION>
Year of Capital loss
expiration carryforward
---------- ------------
<S> <C>
1996....... $ 910,000
1997....... 131,000
1998....... 49,000
1999....... 98,000
2003....... 196,000
----------
$1,384,000
==========
</TABLE>
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
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 sells municipal and Treasury bond futures contracts to manage
overall portfolio interest rate exposure and not for trading purposes. The use
of futures contracts involves certain risks, which include (1) imperfect
correlation between the price movement of the contracts 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 contract 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 initial or variation margin recorded in the Fund's Statement of
Assets and Liabilities at any given time.
- --------------------------------------------------------------------------------
NOTE 5. RESULTS OF SPECIAL SHAREHOLDERS MEETING
On February 15, 1995, a special meeting of shareholders was held and a
new Management Agreement between the Trust and Colonial Management Associates,
Inc. was approved that became effective upon the completion of the merger of The
Colonial Group, Inc. and Apple Merger Corporation, a subsidiary of Liberty
Financial Companies, Inc. on March 24, 1995. Of the shares of beneficial
interest outstanding on December 9, 1994, 5,547,971 voted for the new Management
Agreement, 91,807 voted against and 449,854 abstained. Of the shares of
beneficial interest outstanding that abstained, there were no broker non-votes.
- --------------------------------------------------------------------------------
8
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are as follows:
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
(UNAUDITED)
SIX MONTHS
ENDED
JULY 31 YEAR ENDED JANUARY 31
----------------------- -------------------------------------------
1995 1995 1994
----------------------- ------------------- -------------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning
of period............................... $ 6.660 $ 6.660 $ 7.340 $ 7.340 $ 6.970 $ 6.970
------- ------- ------- ------- ------- -------
Income (loss) from investment
operations:
Net investment income (a)............... 0.189 0.164 0.410 0.359 0.404 0.351
Net realized and unrealized
gain (loss) on investments............. 0.066 0.066 (0.689) (0.689) 0.356 0.356
------- ------- ------- ------- ------- -------
Total from investment
operations............................. 0.255 0.230 (0.279) (0.330) 0.760 0.707
------- ------- ------- ------- ------- -------
Less distributions declared
to shareholders:
From net investment income.............. (0.195) (0.170) (0.401) (0.350) (0.390) (0.337)
------- ------- ------- ------- ------- -------
Net asset value - End of period.......... $ 6.720 $ 6.720 $ 6.660 $ 6.660 $ 7.340 $ 7.340
======= ======= ======= ======= ======= =======
Total return (b)(c)...................... 3.82%(d) 3.43%(d) (3.66)% (4.39)% 11.16% 10.36%
======= ======= ======= ======= ======= =======
Ratios to average net assets
Expenses................................ 0.72%(e)(f) 1.47%(e)(f) 0.62%(e) 1.37%(e) 0.66% 1.41%
Net investment income................... 5.54%(f) 4.79%(f) 6.08% 5.33% 5.61% 4.86%
Fees and expenses waived
or borne by the adviser................. 0.35%(f) 0.35%(f) 0.32% 0.32% 0.33% 0.33%
Portfolio turnover....................... 41%(f) 41%(f) 40% 40% 7% 7%
Net assets at end of period
(000)................................... $41,629 $14,232 $41,844 $14,144 $45,570 $15,030
<FN>
(a) Net of fees and expenses waived or
borne by the Adviser which
amounted to......................... $ 0.064 $ 0.064 $ 0.022 $ 0.022 $ 0.024 $ 0.024
(b) Total return at net asset value assuming all distributions reinvested and no initial sales charge
or contingent deferred sales charge.
(c) Had the Adviser not waived or reimbursed a portion of expenses total return would have been reduced.
(d) Not annualized.
(e) Includes service fee of 0.12% (annualized) for the period ended July 31, 1995 and 0.02% (not annualized) for the year ended
January 31, 1995, respectively.
(f) Annualized.
</TABLE>
9
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS - CONTINUED
Selected data for a share of each class outstanding throughout each period are as follows:
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED JANUARY 31
---------------------------------------------------------
1993 1992 1991
---------------------- --------- ---------
CLASS A CLASS B (b) CLASS A CLASS A
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net asset value - Beginning
of period................................... $ 6.730 $ 6.950 $ 6.520 $ 6.520
------- ------- ------- -------
Income from investment
operations:
Net investment income (a)................... 0.405 0.167 0.432 0.441
Net realized and unrealized
gain (loss) on investments................ 0.250 0.029 0.208 (0.001)
------- ------- ------- -------
Total from investment
operations................................ 0.655 0.196 0.640 0.440
------- ------- ------- -------
Less distributions declared
to shareholders:
From net investment income.................. (0.407) (0.168) (0.430) (0.440)
In excess of
net investment income...................... (0.008) (0.008) -- --
------- ------- ------- -------
Total distributions
declared to shareholders.................. (0.415) (0.176) (0.430) (0.440)
------- ------- ------- -------
Net asset value - End of period............... $ 6.970 $ 6.970 $ 6.730 $ 6.520
======= ======= ======= =======
Total return (c)(d)........................... 10.04% 0.98%(e) 10.12% 7.01%
======= ======= ======= =======
Ratios to average net assets:
Expenses.................................... 0.88% 1.63%(f) 0.95% 1.00%
Net investment income....................... 5.86% 5.11%(f) 6.50% 6.79%
Fees and expenses waived
or borne by the adviser..................... 0.32% 0.32% 0.35% 0.40%
Portfolio turnover............................ 14% 14% 5% 18%
Net assets at end of period
(000)....................................... $36,024 $ 6,670 $28,608 $24,273
<FN>
(a) Net of fees and expenses waived or
borne by the Adviser which
amounted to.............................. $ 0.022 $ 0.009 $ 0.023 $ 0.026
(b) Class B shares were initially offered on August 4, 1992. Per share amounts reflect
activity from that date.
(c) Total return at net asset value assuming all distributions reinvested and no initial
sales charge or contingent deferred sales charge.
(d) Had the Adviser not waived or reimbursed a portion of expenses total return would
have been reduced.
(e) Not annualized.
(f) Annualized.
</TABLE>
10
<PAGE>
- ------------------------------------------------------------------
ABOUT OUR COVER...
[GRAPHIC]
The symbol on the cover of this Report
represents the Fund's primary investment focus on municipal bonds.
- ------------------------------------------------------------------
Colonial Michigan Tax-Exempt Fund mails one shareholder report
to each shareholder address. If you would like more than one
report, please call our Literature Department at 1-800-248-2828
and additional reports will be sent to you.
SHAREHOLDER SERVICES AND TRANSFER AGENT
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
This material has been prepared for shareholders of Colonial Michigan
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.
11
<PAGE>
[LOGO] COLONIAL
MUTUAL FUNDS
[GRAPHIC]
COLONIAL
MICHIGAN
TAX-EXEMPT FUND
========================================
SEMIANNUAL REPORT
JULY 31, 1995
[LOGO] COLONIAL
MUTUAL FUNDS
[LOGO] PRINTED ON RECYCLED PAPER.
MI-03/196B-0795
COLONIAL INVESTMENT SERVICES, INC. [Copyright]1995
One Financial Center, Boston, Massachusetts 02111-2621
