<PAGE>
LETTER FROM THE PRESIDENT
Dear Shareholder:
The following is Colonial High Yield Municipal Fund's semiannual report for
the six months ended May 31, 1995. The Fund rewarded investors with a steady
stream of tax-free income and capital appreciation over the past six months.
FUND PERFORMANCE (12/1/94 - 5/31/95)(1)
<TABLE>
<CAPTION>
CLASS A CLASS B
INCEPTION 9/1/94 6/8/92
- ---------------------------------------------------
<S> <C> <C>
Distributions declared
per share $0.336 $0.300
- --------------------------------------------------
SEC yield on 5/31/95 6.16% 5.72%
- --------------------------------------------------
Taxable-equivalent yield
on 5/31/95 10.20% 9.47%
- --------------------------------------------------
Six-month total return, assuming
reinvestment of all distributions
and no sales charge or CDSC 10.82% 10.41%
- --------------------------------------------------
Net asset value per share
on 5/31/95 $9.99 $9.99
- --------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 5/31/95
CLASS A CLASS B
NAV MOP NAV W/CDSC
----- ----- ----- ------
<S> <C> <C> <C> <C>
1 year -- -- 8.65% 3.65%
Since inception 7.33% 2.23% 6.25% 5.35%
</TABLE>
ECONOMIC/MARKET OVERVIEW
Municipal bond investors benefited from favorable bond market conditions
during the six months ended May 31, 1995. The Federal Reserve Board raised
interest rates only once during the period in an effort to moderate growth and
control inflation. Over the six month period, the economy shifted from a period
of rising interest rates to a period of declining rates and a slowing economy.
U.S. interest rates peaked in mid-November and began moving lower by the
beginning of 1995. It is important to note that your Fund performed well in both
markets. This is due in part to the high coupon rates many of the Fund's
investments carry. The performance of these securities depends more on the
strength of their issuers than on current economic conditions. They may provide
a relatively steady level of performance during periods of economic uncertainty.
[PHOTO OF JOHN A. MCNEICE, JR. PRESIDENT]
INVESTMENT STRATEGY
On May 31, 1995, the Fund owned 130 individual issues in 29 public sectors.
As the economy has slowed, Lead Portfolio Manager Bonny Boatman has taken steps
to improve the quality of the portfolio while still maintaining a strong
position in nonrated issues. The Fund increased investments in AAA rated
holdings from 4.66% to 9.60%. Nonrated investments were decreased from 60% to
52% of total investments. In addition, the Fund's duration is currently 8.17
years. Duration is a measure that helps determine a portfolio's exposure to
changes in interest rates. Portfolios with longer durations generally provide
greater returns over time, but with more risk and price volatility.
During the period, Bonny maintained a significant position in revenue bonds
issued to fund public improvements, hospitals, and nursing homes. In addition,
the Fund continues to emphasize selected utilities and healthcare bonds, to take
advantage of consolidation in both of these sectors.
For further information about this or any other fund we manage, please
contact your full-service financial adviser or call Colonial at 1-800-426-3750.
Sincerely,
John A. McNeice, Jr.
President
July 15, 1995
(1) A portion of the Fund's income may be subject to the alternative minimum
tax. SEC yield reflects the portfolio's earning power, net of expenses, and does
not include changes in Fund price. Taxable-equivalent yields are based on the
maximum 39.6% federal income tax rate. Past performance cannot guarantee 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 contingent deferred sales
charges (CDSC). Maximum offering price (MOP) return includes the maximum sales
charge of 4.75%. The CDSC return reflects the applicable sales charge (5.00% for
one year; 3.00% since inception). Performance for different share classes will
vary based on differences in sales charges and fees associated with each class.
<PAGE>
INVESTMENT PROTFOLIO (UNAUDITED, IN THOUSANDS) MAY 31, 1995
<TABLE>
<CAPTION>
MUNICIPAL BONDS - 94.2% PAR VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
AGRICULTURE, FORESTRY, & FISHING - 1.5%
CROPS
LA Port New Orleans Industrial Development,
Continental Grain Company, Series 1993,
7.500% 07/01/13................... $ 2,000 $ 2,078
- ---------------------------------------------------------------------
CERTIFICATES OF PARTICIPATION - 0.4%
MA Health and Educational Facilities,
Independent Living Bonds, Series 1993-A,
8.100% 07/01/18................... 600 600
- --------------------------------------------------------------------
CONSTRUCTION - 1.5%
BUILDING CONSTRUCTION
IN Hammond Sewer & Solid Waste Disposal,
American Maize Products Co.,
Series A,
8.000% 12/01/24................... 2,000 2,152
- --------------------------------------------------------------------
FINANCE, INSURANCE, & REAL ESTATE - 0.5%
MD Baltimore,
Economic Development,
Park Charles Project, Series 1986,
8.000% 01/01/10................... 710 749
- --------------------------------------------------------------------
GENERAL OBLIGATIONS - 2.7%
AZ Apache County School District
Number 010 Round Valley
Project of 1987, Series 1990-C,
9.875% 07/01/05................... 500 561
CA State of California,
5.750% 03/01/19................... 2,000 1,935
PR Commonwealth of Puerto Rico:
5.375% 07/01/22................... 1,250 1,191
Series 1993,
3.425% 07/01/08 (a)............... 415(b) 156
-------
3,843
- -------------------------------------------------------------------
HEALTH - 22.0%
HOSPITAL - 10.0%
AL Alabama Special Care Facilities Authority,
Montgomery Healthcare, Series 1989,
11.000% 10/01/19................... 295 291
DE State Economic Development,
Riverside Hospital, Series 1992 A,
9.500% 01/01/22................... 615 691
FL Tarpon Springs Health Facilities
Authority Hospital, Tarpon Springs
Hospital Foundation, Series 1988,
8.750% 05/01/12................... 1,000 1,068
GA Clayton Hospital Authority,
The Woodlands Foundation Inc.,
Series 1991 A,
9.800% 05/01/21 (c)............... 1,500 1,050
ID State Health Facilities Authority,
IHC Hospitals, Inc.,
7.920% 02/15/21................... 1,000 1,109
IL Health Facilities Authority,
Edgewater Medical Center,
Series A,
9.250% 07/01/24................... 2,000 2,022
MI State Hospital Finance Authority:
Detroit Osteopathic Hospital,
Series 1987-A,
7.500% 11/01/10................... 500 490
Sarotoga Community Hospital,
Series 1992,
8.750% 06/01/10................... 295 316
MO Hannibal Industrial Development,
Medical Systems of Northeast
Missouri, Series 1992,
9.500% 03/01/22................... 1,000 1,165
NC Lincoln County,
9.000% 05/01/07................... 350 389
NJ Health Care Facilities Financing
Authority, Raritan Bay Medical
Center,
7.250% 07/01/27................... 2,000 1,983
PA Cambria County Hospital Authority,
Conemaugh Valley Memorial Hospital,
Series 1988 A,
8.875% 07/01/18................... 165 180
TN Chattanooga Health Education
and Housing Facilities Board,
North Park Hospital Project, Series
1993,
8.500% 02/01/23................... 1,000 1,025
VA Dickenson County Industrial
Development, Volunteer Healthcare
Systems Inc., Series 1988 A,
10.750% 06/01/18 (c)............... 500 150
VT Educational & Health Buildings
Financing Agency,
7.750% 01/01/13................... 835 811
WA Washington State Health Care
Facility, Grays Harbor Community
Hospital, Series 1993
7.200% 07/01/03................... 210 223
8.025% 07/01/20................... 960 1,014
-------
13,977
- --------------------------------------------------------------------
HUMAN SERVICES PROVIDERS - 1.3%
IL Champaign First Mortgage,
Hoosier Care Inc., Series 1989-A,
9.750% 08/01/19................... 500 535
</TABLE>
See notes to investment portfolio.
2
<PAGE>
<TABLE>
INVESTMENT PROTFOLIO - CONTINUED
<CAPTION>
MUNICIPAL BONDS - CONT. PAR VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
HUMAN SERVICES PROVIDERS - CONT.
IN Wabash First Mortgage, Hoosier
Care, Inc., Series 1989-A,
9.750% 08/01/19...................... $ 500 $ 535
TN Shelby County, Health, Education,
& Housing Facilities Board, Open Arms
Development Center:
Series 1992-A,
9.750% 08/01/19...................... 335 387
Series 1992-C,
9.750% 08/01/19...................... 330 381
------
1,838
- ---------------------------------------------------------------------
NURSING HOMES - 10.7%
AZ Tucson Industrial Development
Authority, Villa Maria Care Center,
10.125% 11/01/21...................... 350 333
CO Health Facilities
Authority:
Denver,
10.500% 05/01/19 (c). ................ 450 405
Liberty Heights Project, Series 1991 B,(d)
07/15/24 . . ........................... 6,850 942
DE State Economic Development Healthcare
Facility,
10.000% 03/01/21...................... 750 845
DE Sussex County, Healthcare Facility,
Delaware Health Corp., Series 1994-A
7.600% 01/01/24...................... 1,000 950
FL Broward County,
Beverly Enterprises,
9.800% 11/01/10...................... 615 686
FL Flagler County Industrial,
Redevelopment Authority,
South Florida Properties, Series 1988,
10.500% 12/01/18...................... 935 936
FL Gadsden County Industrial Development,
Florida Housing Properties, Inc.,
Series 1988-A,
10.450% 10/01/18...................... 340 351
FL Palm Beach County,
Hillcrest Manor Project,
10.250% 12/01/16...................... 680 714
IA Finance Authority Healthcare Facility,
Mercy Health Initiatives,
Series 1989,
9.950% 07/01/19...................... 500 490
KS Halstead Industrial Health Care
Project,
10.250% 08/01/13...................... 340 352
MA State Industrial Finance Agency:
Mary Ann Morse Nursing Home,
Series 1991 I,
10.000% 01/01/21...................... 500 637
GF/Massachusetts, Inc., Series 1994,
8.300% 07/01/23...................... 1,000 956
MI Cheboygan County Economic
Development Corp.,
Metro Health Foundation Project,
10.000% 11/01/22 (c).................. 600 420
MO Grove Industrial Development Authority,
First Mortgage Health Care Facility,
Heritage Mannor GR, Series 1988,
10.250% 11/01/13...................... 440 418
NJ Economic Development Authority,
Geriatric and Medical Service,Inc.,
Series A,
10.500% 05/01/04...................... 115 125
NM Espanola First Mortgage
Medical Facilities, Pilot Development,
Southwest Series 1988,
10.250% 05/01/13...................... 155 155
NM Silver City First Leasehold Mortgage
Medical Facilities, RC Development,
Series 1988,
10.250% 11/01/13...................... 660 660
OH Lucas County,
Villa North Nursing Home,
Series 1988-B,
10.500% 06/01/18...................... 300 270
PA Chartiers Valley
Industrial and Commercial Authority,
Beverly Enterprises, Inc., Series 1985,
10.000% 06/01/07...................... 1,790 1,960
PA Chester County Industrial Development,
Pennsylvania Nursing Home, Inc.,
Series 1989,
10.125% 05/01/19...................... 450 463
PA Delaware County Authority,
Main Line and Haverford Nursing Homes,
Series 1992,
9.000% 08/01/22...................... 50 53
PA Lackawanna County Industrial Authority,
10.500% 12/01/10...................... 205 216
PA Luzerna County Industrial
Development Authority,
First Mortgage,
10.500% 12/01/12...................... 235 242
</TABLE>
See notes to investment portfolio.
3
<PAGE>
<TABLE>
INVESTMENT PROTFOLIO - CONTINUED
<CAPTION>
MUNICIPAL BONDS - CONT. PAR VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
NURSING HOMES - CONT.
PA Montgomery County Higher Education
& Health Authority, AHF/Roslyn-Hatboro,
Inc. Project,
9.000% 11/15/22..................... $ 300 $ 305
PA Philadelphia Authority for Industrial
Development, First Mortgage, RHA/PA Nursing
Home, Series 1988,
10.250% 11/01/18..................... 745 775
VA Beach Development Authority, Beverly
Enterprises, Series 1985,
10.000% 04/01/10..................... 240 270
-------
14,929
- ---------------------------------------------------------------------
HOUSING - 16.9%
ASSISTED LIVING & SENIOR - 1.9%
CT State Authority,
First Mortgage Gross Health Care,
Church-Avery Project, Series 1990,
9.000% 04/01/20..................... 500 536
MN Roseville, Care Institute, Inc.,
Series 1993
7.750% 11/01/23..................... 1,270 1,145
TX Bell County Health Facilities Development
Corp.,
Care Institutions, Inc.,
9.000% 11/01/24..................... 1,000 1,056
-------
2,737
- ---------------------------------------------------------------------
MULTI-FAMILY - 13.1%
AK State Housing Finance Corp.,
Veteran Mortgage Program,
Series 1992-A2,
6.750% 12/01/24 (e)................. 1,810 1,844
CT Church Street Housing Authority,
South Apartments,
Section 8, Series 1983,
11.000% 03/01/01 (c)................. 400 160
FL Clearwater Housing Authority,
Hampton Apartments,
8.250% 05/01/24..................... 2,000 2,102
FL Hialeah Housing Authority,
Series 1991,
9.500% 11/01/21..................... 2,000 2,085
FL Housing Finance Agency,
10.000% 10/01/20..................... 300 240
FL State Housing Finance Agency,
Windsong Apartments, Series 1993-C,
9.250% 01/01/19..................... 750 757
MN Lakeville, Southfork Apartment Project,
Series 1989 A,
9.875% 02/01/20..................... 700 712
MN White Bear Lake,
Birch Lake Townhomes Project,
Series 1988-A,
9.750% 07/15/19..................... 750 755
NC Eastern Carolina Regional Housing
Authority, Jacksonville New River
Apartments,
8.250% 09/01/14..................... 1,500 1,517
PA Montgomery County Industrial
Development Authority, Assisted
Living Facility,
Series 1993-A,
8.250% 05/01/23..................... 620 604
Pass Through Certificates, Series 1993-A,
8.500% 12/01/16 (f)................. 4,248 4,376
SC State Housing Finance and Development
Multi-Family Housing Finance Revenue,
Westbridge Apartments, Series A,
9.500% 09/01/20..................... 650 663
TN Memphis Center City Finance Corp.,
Multiple Family Housing Board, Riverset
Apartments-Phase II Project, Series
1989-A,
9.500% 10/01/19..................... 500 504
TX Galveston Pass Through Certificates,
Health Facilities Center,
8.000% 08/01/23..................... 1,000 1,024
VA Alexandria Redevelopment & Housing
Authority, Courthouse Commons Apartments,
Series 1990 A,
10.000% 01/01/21..................... 500 505
VA Roanoke Redevelopment & Housing
Authority, First Mortgage, Mountain Ridge,
9.250% 11/01/22..................... 500 511
-------
18,359
-------
SINGLE FAMILY - 1.9%
CA Orange County, Series 1983, Issue 1,
9.250% 09/01/16..................... 65 62
IL Development Finance Authority,
Retirement Housing Redevelopment,
Regency Park at Lincolnwood,
(d) 07/15/25..................... 17,000 2,104
MN Washington County Housing &
Redevelopment Authority, Cottages of
Aspen Project,
9.250% 06/01/22..................... 495 497
-------
2,663
-------
- ---------------------------------------------------------------------
</TABLE>
See notes to investment portfolio.
4
<PAGE>
<TABLE>
INVESTMENT PROTFOLIO - CONTINUED
<CAPTION>
MUNICIPAL BONDS - CONT. PAR VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
MANUFACTURING - 6.2%
FOOD & KINDRED PRODUCTS - 0.3%
IA Ellsworth Industrial Development,
Bagel Works Project, Series 1990,
7.500% 01/15/12...................... $ 470 $ 459
FURNITURE & FIXTURES - 0.4%
TN McKenzie Individual Development Board,
10.500% 05/01/16...................... 477 511
MEASURING & ANALYZING INSTRUMENTS - 0.4%
MN Brooklyn Park, TL Systems Corp., Series
1991,
10.000% 09/01/16...................... 540 555
PAPER PRODUCTS - 5.1%
GA Rockdale County Development
Authority, Solid Waste Disposal, Visy
Paper, Inc., Series 1993,
7.500% 01/01/26...................... 2,500 2,544
MI State Strategic Fund, Blue Water Fiber
Project, Series 1994,
8.000% 01/01/12...................... 2,000 1,910
MI Strategic Fund Limited, Great Lakes Pulp
& Fibre Project,
10.250% 12/01/16...................... 2,500 2,634
-------
7,088
- ---------------------------------------------------------------------
MINING - 0.3%
METAL MINING
OH Cuyahoga County, Joy Technologies, Inc.,
8.750% 09/15/07...................... 360 387
- ---------------------------------------------------------------------
POLLUTION CONTROL REVENUE - 5.0%
GA Wayne County Development Authority,
Solid Waste Disposal, ITT Royonier
Inc., Series 1990,
8.000% 07/01/15...................... 500 554
IL Bryant Pollution Control Revenue,
Central Illinois Light Co. Project,
5.900% 08/01/23...................... 1,750 1,728
OH State Water Development Pollution Control,
Pennsylvania Power Company,
8.100% 01/15/20...................... 500 540
SC York County Industrial Revenue, Hoechst
Celanese Corp.,
5.700% 01/01/24...................... 3,000 2,831
TX Matagorda County NAV Distribution #1
Collateralized Pollution Control, Houston
Lighting and Power Co., Series 1986-A,
7.875% 11/01/16...................... 800 842
WV Weirton Pollution Control, Weirton
Steel Corporate, Series 1989,
8.625% 11/01/14...................... 500 529
-------
7,024
- ---------------------------------------------------------------------
PUBLIC FACILITIES IMPROVEMENTS - 9.1%
CO Denver City and County
Special Facilities Airport, United Air
Lines, Series 1992-A,
6.875% 10/01/32...................... 5,000 5,000
IL Metropolitan Pier and Exposition
Authority, McCormick Place Expansion
Project, Series A,
(d) 06/15/13...................... 5,000 1,712
MN Mille Lacs Capital Improvement
Infrastructure, Band of Chippewa,
Series 1992-A,
9.250% 11/01/12...................... 670 755
TX Dallas-Fort Worth International
Airport, American Airlines, Inc.,
Series 1990,
7.500% 11/01/25...................... 5,000 5,237
-------
12,704
- ---------------------------------------------------------------------
PUBLIC INFRASTRUCTURE - 10.9%
AIRPORT - 7.1%
CO Denver City & County Airport,
Denver International Airport, Series
1991-D,
7.750% 11/15/21...................... 2,000 2,142
Series 1992-C,
6.750% 11/15/22...................... 1,250 1,270
Stapleton International Airport,
Series 1990 A,
8.500% 11/15/23...................... 250 281
IL Chicago O'Hare International Airport
Special Facility, United Airlines, Inc.,
Series 1988-A,
8.400% 05/01/18...................... 965 1,043
IN Airport Authority
7.100% 01/15/17...................... 2,000 2,112
TX Alliance Airport Authority,
American Airlines Project,
7.500% 12/01/29...................... 3,000 3,116
-------
9,964
- ---------------------------------------------------------------------
TURNPIKE/TOLL ROAD/BRIDGE - 3.8%
CA San Joaquin Hills Transcorridor
Agency:
Senior Lien Toll Road,, Series 1993,
CABS,
(d) 01/01/23...................... 5,250 774
Current Interest Bonds, Series 1993,
5.000% 01/01/33...................... 2,000 1,570
</TABLE>
See notes to investment portfolio.
5
<PAGE>
<TABLE>
INVESTMENT PROTFOLIO - CONTINUED
<CAPTION>
MUNICIPAL BONDS - CONT. PAR VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
TURNPIKE/TOLL ROAD/BRIDGE - CONT.
MA State Industrial Finance Agency,
Series1990,
9.000% 10/01/20..................... $ 950 $ 1,032
PR Commonwealth of Puerto Rico,
Highway & Transportation Authority,
3.680% 07/01/09 (a)................. 140 (b) 56
TX Harris County Industrial Development
Corporate, Continental Airlines,
7.950% 07/01/19..................... 2,000 1,845
-------
5,277
- ---------------------------------------------------------------------
REFUNDED, ESCROW, & SPECIAL OBLIGATIONS - 2.0%
AL Marshall County Health Care
Authority Hospital, Guntersville-Arab
Medical Center, Series 1988,
10.250% 10/01/13..................... 500 581
DC Hospital, Washington Hospital
Center Corp., Series 1990 A,
8.750% 01/01/15..................... 750 899
DE Wilmington, Riverside Hospital,
Series 1988 A,
10.000% 10/01/03..................... 150 180
MN St Louis Park Health Care Facilities,
Nicollet Medical Center, Series 1990-A,
9.250% 01/01/20..................... 200 240
PA York County Industrial Development
Authority, Fairview Village
Associates, Series 1986,
10.750% 06/01/16..................... 800 872
-------
2,772
- ---------------------------------------------------------------------
RETAIL TRADE - 1.5%
MISCELLANEOUS RETAIL
OH Lake County Economic Development,
North Madison Properties, Series
1993,
8.819% 09/01/11..................... 545 569
VA Virginia Beach Development Authority,
SC Diamond Associates, Inc.,
8.000% 12/01/10..................... 1,500 1,517
-------
2,086
- ---------------------------------------------------------------------
SERVICES - 0.4%
HOTELS, CAMPS & LODGING
MN Burnsville Commercial Development,
Holiday Inn Project,
10.600% 06/01/06..................... 500 517
- ---------------------------------------------------------------------
SOLID WASTE - 0.8%
LAND FILL - 0.7%
MA State Industrial Finance
Agency, Peabody Monofill Associates,
Inc. Project,
9.000% 09/01/05..................... 950 1,000
- ---------------------------------------------------------------------
RECYCLING - 0.1%
GA Fulton County Industrial
Development Authority,
10.500% 12/01/07..................... 125 132
- ---------------------------------------------------------------------
TAX ALLOCATION - 3.0%
CA Carson Improvement, Series 1992,
7.375% 09/02/22..................... 985 1,042
CA Pleasanton Joint Powers Financing
Reassurement Subordinated Revenue,
Series 1993-B,
6.750% 09/02/17..................... 1,955 1,957
IL Development Finance Authority,
City of Marion Project, Series
1991,
9.625% 09/15/21..................... 1,200 1,222
-------
4,221
- ---------------------------------------------------------------------
TRANSPORTATION - 1.5%
NY New York City Industrial
Development Agency, American Airlines,
6.900% 08/01/24..................... 2,000 2,068
- ---------------------------------------------------------------------
UTILITY - 5.6%
CO-GENERATOR - 0.8%
FL Martin County Industrial
Development Authority, Indiantown
Cogeneration Project,
7.875% 12/15/25..................... 1,000 1,097
INDIVIDUAL POWER PRODUCER - 2.1%
PA Economic Development Finance
Authority, Colver Project, Series D,
7.150% 12/01/18..................... 2,900 2,991
MUNICIPAL ELECTRIC - 2.7%
MN Southern Minnesota Municipal
Power Agency, Series 1994 A,
(d) 01/01/25..................... 12,660 2,231
SC State Public Service Authority,
Series A,
6.250% 01/01/22 (g)................. 1,500 1,532
-------
3,763
- ---------------------------------------------------------------------
WATER & SEWER - 2.0%
LA Public Facility Authority,
Belmont Water,
9.000% 03/15/24..................... 630 654
MA State Industrial Finance Agency,
Environmental Service Project,
Series 1994 A,
8.750% 11/01/21..................... 1,000 1,015
MS V Lakes Utility District,
8.250% 07/15/24..................... 400 407
</TABLE>
See notes to investment portfolio.
6
<PAGE>
<TABLE>
INVESTMENT PROTFOLIO - CONTINUED
<CAPTION>
MUNICIPAL BONDS - CONT. PAR VALUE
- ---------------------------------------------------------------------
<S> <C> <C>
WATER & SEWER - CONT.
NJ Economic Development Authority,
Hills Development Company-1987,
Series 1988,
10.500% 09/01/08..................... $ 400 $ 415
OH State Water Development Pollution
Collateralized Control, The Cleveland
Electric Illumination, Series 1987
A-2
9.750% 11/01/22..................... 250 268
--------
2,759
- ---------------------------------------------------------------------
OTHER - 0.4%
MN Buffalo, Ruden Manufacturing Inc.,
10.500% 09/01/14..................... 485 517
- ---------------------------------------------------------------------
Total investments (cost $129,293) (h) 131,817
- ---------------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 4.3%
- ---------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (I)
GA Hospital Equipment Finance Authority,
4.100% 12/01/95..................... 300 300
MS Perry County PCR Forest,
4.450% 03/01/02..................... 600 600
NY New York City Water and Sewer,
Series G,
4.400% 06/15/24..................... 5,100 5,100
- ---------------------------------------------------------------------
Total short-term obligations 6,000
- ---------------------------------------------------------------------
OTHER ASSETS & LIABILITIES, NET-1.5% 2,193
- ---------------------------------------------------------------------
NET ASSETS - 100.0% $ 140,010
- ---------------------------------------------------------------------
<FN>
Notes to investment portfolio:
(a) This security is a variable rate instrument. In five years it will change
to a fixed rate instrument. Interest income is accrued daily on the
notional amount at the applicable interest rates.
(b) Notional amount.
(c) This issuer is in default of certain debt covenants. Income is not being
accrued.
(d) Zero coupon bond.
(e) This security is being used to collateralize the delayed delivery purchase
indicated in note (g).
(f) This is a restricted security which was acquired at a cost of $4,026. This
security represents 3.1% of the Fund's net assets at May 31, 1995.
(g) This security has been purchased on a delayed delivery basis for settlement
at a future date beyond the customary settlement time.
(h) Cost for federal income tax purposes is the same.
(i) 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, 1995.
</TABLE>
See notes to financial statements.
7
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
<CAPTION>
STATEMENT OF ASSETS & LIABILITIES (UNAUDITED)
May 31, 1995
(in thousands except for per share amounts and footnote)
===============================================================================
<S> <C> <C>
ASSETS
Investments at value (cost $129,293)............ $ 131,817
Short-term obligations.......................... 6,000
----------
137,817
Receivable for:
Interest....................... $ 2,986
Investments sold............... 539
Fund shares sold............... 747
Deferred organization expenses.. 38
Other........................... 154 4,464
---------- ----------
Total assets............................... 142,281
LIABILITIES
Payable for:
Investments bought............. 1,454
Distributions.................. 699
Fund shares repurchased........ 89
Accrued:
Deferred Trustees fees......... 9
Other.......................... 20
----------
Total liabilities.......................... 2,271
----------
NET ASSETS...................................... $ 140,010
----------
Net asset value & redemption price per
share - Class A ($10,976/1,099)................ $ 9.99
----------
Maximum offering price per share - Class A
($9.99/0.9525)................................. $ 10.49*
----------
Net asset value & offering price per share -
Class B ($129,034/12,916)...................... $ 9.99
----------
COMPOSITION OF NET ASSETS
Capital paid in................................ $ 141,366
Undistributed net investment income............ 408
Accumulated net realized loss.................. (4,288)
Net unrealized appreciation.................... 2,524
----------
$ 140,010
----------
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS (UNAUDITED)
Six months ended May 31, 1995
(in thousands)
===============================================================================
<S> <C> <C>
INVESTMENT INCOME
Interest........................................ $ 5,205
EXPENSES
Management fee.................. $ 358
Service fee..................... 163
Distribution fee - Class B...... 455
Transfer agent.................. 111
Bookkeeping fee................. 27
Trustees fees................... 8
Custodian fee................... 5
Audit fee....................... 16
Legal fee....................... 11
Registration fees............... 17
Reports to shareholders......... 3
Amortization of deferred
organization expenses.......... 9
Other........................... 9 1,192
------- ----------
Net investment income....................... 4,013
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON PORTFOLIO POSITIONS
Net realized loss............... (2,246)
Net unrealized appreciation
during the period.............. 11,118
-------
Net gain.................................... 8,872
----------
Net increase in net assets from
operations..................................... $ 12,885
---------
<FN>
* On sales of $50,000 or more the offering price is reduced.
</TABLE>
See notes to financial statements.
8
<PAGE>
FINANCIAL STATEMENTS - CONTINUED
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(in thousands)
<CAPTION>
(unaudited)
Six months
ended Year ended
May 31 November 30
---------- -----------
1995 1994(a)
---------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income......................................... $ 4,013 $ 7,305
Net realized loss............................................. (2,246) (1,389)
Net unrealized appreciation (depreciation).................... 11,118 (11,175)
-------- --------
Net increase (decrease) from operations................... 12,885 (5,259)
-------- --------
Distributions
From net investment income - Class A.......................... (294) (79)
From net investment income - Class B.......................... (3,753) (6,882)
-------- --------
8,838 (12,220)
-------- --------
Fund share transactions
Receipts for shares sold - Class A............................ 5,130 7,128
Value of distributions reinvested - Class A................... 78 11
Cost of shares repurchased - Class A.......................... (831) (862)
-------- --------
4,377 6,277
-------- --------
Receipts for shares sold - Class B............................ 15,370 17,113
Value of distributions reinvested - Class B................... 1,786 3,138
Cost of shares repurchased - Class B.......................... (9,937) (15,255)
-------- --------
7,219 4,996
-------- --------
Net increase from Fund share transactions................. 11,596 11,273
-------- --------
Total increase (decrease)......................... 20,434 (947)
NET ASSETS
Beginning of period........................................... 119,576 120,523
-------- --------
End of period (including undistributed net investment
income of $408 and $432, respectively)...................... $140,010 $119,576
-------- --------
NUMBER OF FUND SHARES
Sold - Class A................................................ 531 735
Issued for distributions reinvested - Class A................. 8 1
Repurchased - Class A........................................ (86) (90)
-------- --------
453 646
-------- --------
Sold - Class B................................................ 1,582 1,738
Issued for distributions reinvested - Class B................ 187 317
Repurchased - Class B........................................ (1,027) (1,558)
-------- --------
742 497
-------- --------
Net increase in shares outstanding........................ 1,195 1,143
Outstanding at
Beginning of period.......................................... 12,820 11,677
-------- --------
End of period................................................ 14,015 12,820
-------- --------
<FN>
(a) Class A shares were initially offered on September 1, 1994.
</TABLE>
See notes to financial statements.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 1. INTERIM FINANCIAL STATEMENTS
In the opinion of management of Colonial High Yield Municipal 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, 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 Massachusetts business trust, registered under the Investment
Company Act of 1940, as amended, as a diversified, 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
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.
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 taxexempt 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.
- --------------------------------------------------------------------------------
DEFERRED ORGANIZATION EXPENSES
The Fund incurred $95,525 of expenses, in connection with its organization,
initial
10
<PAGE>
registration with the Securities and Exchange Commission and with various
states, and the initial public offering of its shares. These expenses were
deferred and are being amortized on a straight-line basis over five years.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
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
Tax-Exempt Insured Fund as follows:
<TABLE>
<CAPTION>
Average Net Assets Annual Fee Rate
------------------ ---------------
<S> <C>
First $1 billion...................... 0.60%
Next $2 billion...................... 0.55%
Next $1 billion...................... 0.50%
Over $4 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
The Adviser, through Colonial Investment Services, Inc., (the Distributor),
is the Fund's principal underwriter. During the six months ended May 31, 1995,
the Distributor retained net underwriting discounts of $11,763 on sales of the
Fund's Class A shares and received contingent deferred sales charges (CDSC) of
$125,953 on Class B share redemptions.
The Fund has adopted a 12b-1 plan which requires it to pay the Distributor
a service fee equal to 0.25% annually of the Fund's net assets as of the 20th of
each month. The plan also requires the payment of a distribution fee to the
Distributor equal to 0.75% of the average net assets attributable to Class B
shares only.
The CDSC and the fees received from the 12b-1 plan are used principally as
repayment to the Distributor for amounts paid by the Distributor to dealers who
sold such shares.
- --------------------------------------------------------------------------------
OTHER
The Fund pays no compensation to its officers, all of whom are employees of
the Adviser.
The Fund's Trustees may participate in a deferred compensation plan which
may be terminated at any time. Obligations of the plan will be paid solely out
of the Fund's assets.
- --------------------------------------------------------------------------------
NOTE 4. PORTFOLIO INFORMATION
During the six months ended May 31, 1995, purchases and sales of
investments, other than short-term obligations, were $22,602,325 and
$16,480,999, respectively.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------
Unrealized appreciation (depreciation) at May 31, 1995, based on cost of
investments for both financial statement and federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation............... $ 5,437,197
Gross unrealized depreciation............... (2,913,076)
--------------
Net unrealized appreciation.............. $ 2,524,121
--------------
</TABLE>
- --------------------------------------------------------------------------------
CAPITAL LOSS CARRYFORWARDS
At November 30, 1994, capital loss carryforwards available (to the extent
provided in regulations) to offset future realized gains were approximately as
follows:
<TABLE>
<CAPTION>
YEAR OF CAPITAL LOSS
EXPIRATION CARRYFORWARD
---------- ------------
<S> <C>
1996................ $ 57,000
1997................ 186,000
1998................ 590,000
1999................ 364,000
2000................ 302,000
2002................ 1,731,000
----------
$3,230,000
==========
</TABLE>
The loss carryfowards expiring in 1996, 1997, 1998, and 1999, respectively,
were acquired in the merger with Colonial VIP High Yield Municipal Bond Fund.
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.
- --------------------------------------------------------------------------------
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. Out of the shares of beneficial
interest outstanding on December 9, 1994, 8,994,284 voted for the new Management
Agreement 61,773 voted against and 464,519 abstained. Of the shares of
beneficial interest outstanding that abstained, 74,014 represent broker
non-votes.
12
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are
as follows:
- --------------------------------------------------------------------------------
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED PERIOD ENDED
MAY 31 YEAR ENDED NOVEMBER 30 NOVEMBER 30
----------------------------------------------------------------------------------------
1995 1994 1993 1992(a)
----------------------------------------------------------------------------------------
CLASS A CLASS B CLASS A(b) CLASS B CLASS B CLASS B
--------- --------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value -
Beginning of period ............. $ 9.330 $ 9.330 $ 9.800 $ 10.320 $ 10.070 $ 10.000
--------- --------- --------- --------- --------- ---------
Income (loss) from investment
operations:
Net investment income ........ 0.330 0.294 0.188 0.605 0.609 0.338(c)
Net realized and unrealized
gain (loss) on investments.. 0.666 0.666 (0.496) (1.016) 0.277 0.041
--------- --------- --------- --------- --------- ---------
Total from investment
operations ............ 0.996 0.960 (0.308) (0.411) 0.886 0.379
--------- --------- --------- --------- --------- ---------
Less distributions declared to
shareholders:
From net investment income... (0.336) (0.300) (0.162) (0.579) (0.636) (0.309)
--------- --------- --------- --------- --------- ---------
Net asset value - End of period... $ 9.990 $ 9.990 $ 9.330 $ 9.330 $ 10.320 $ 10.070
========= ========= ========= ========= ========= =========
Total return(d) .................. 10.82%(e) 10.41%(e) (3.15)%(e) (4.10)% 9.00% 3.80%(e)(f)
========= ========= ========= ========= ========= =========
Ratios to average net assets:
Expenses ....................... 1.13%(g) 1.88%(g) 1.15%(g) 1.90% 1.94% 2.00%(g)
Fees waived by the adviser ..... -- -- -- -- -- 0.01%(g)
Net investment income .......... 6.88%(g) 6.13%(g) 7.19%(g) 6.44% 5.95% 6.83%(g)
Portfolio turnover ............... 26%(g) 26%(g) 25% 25% 31% 13%(g)
Net assets at end of period
(000) .......................... $ 10,976 $129,034 $ 6,027 $113,549 $120,523 $ 63,390
<FN>
(a) The Fund commenced investment operations on June 8, 1992.
(b) Class A shares were initially offered on September 1, 1994. Per share
amounts reflect activity from that date.
(c) Net of fees and expenses waived or borne by the adviser which amounted to
$0.000.
(d) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or CDSC.
(e) Not annualized.
(f) Had the adviser not waived or reimbursed a portion of expenses total
return would have been reduced.
(g) Annualized.
</TABLE>
13
<PAGE>
TRUSTEES
ROBERT J. BIRNBAUM
Trustee (formerly Special Counsel, Dechert, Price & Rhoads; President and Chief
Operating Officer, New York Stock Exchange, Inc.)
TOM BLEASDALE
Trustee (formerly Chairman of the Board and Chief Executive Officer, Shore Bank
& Trust Company)
LORA S. COLLINS
Attorney, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
JAMES E. GRINNELL
Private Investor (formerly Senior Vice President-Operations, The Rockport
Company)
WILLIAM D. IRELAND, JR.
Trustee (formerly Chairman of the Board, Bank of New England-Worcester)
RICHARD W. LOWRY
Private Investor (formerly Chairman and Chief Executive Officer, U.S. Plywood
Corporation)
WILLIAM E. MAYER
Dean, College of Business and Management, University of Maryland (formerly Dean,
Simon Graduate School of Business, University of Rochester; Chairman and Chief
Executive Officer, C.S. First Boston Merchant Bank; and President and Chief
Executive Officer, The First Boston Corporation)
JOHN A. MCNEICE, JR.
Chairman of the Board and Director, The Colonial Group, Inc. and Colonial
Management Associates, Inc. (formerly Chief Executive Officer, The Colonial
Group, Inc. and Colonial Management Associates, Inc.)
JAMES L. MOODY, JR.
Chairman of the Board, Hannaford Bros. Co. (formerly Chief Executive Officer,
Hannaford Bros. Co.)
JOHN J. NEUHAUSER
Dean, Boston College School of Management
GEORGE L. SHINN
Financial Consultant (formerly Chairman, Chief Executive Officer and Consultant,
The First Boston Corporation)
ROBERT L. SULLIVAN
Management Consultant (formerly Management Consultant, Saatchi and Saatchi
Consulting Ltd. and Principal and International Practice Director, Management
Consulting, Peat Marwick Main & Co.)
SINCLAIR WEEKS, JR.
Chairman of the Board, Reed & Barton Corporation
14
<PAGE>
[PICTURE OF CAPITAL]
ABOUT OUR COVER...
The symbol on the cover of this Report represents the Fund's primary investment
focus on municipal bonds.
Colonial High Yield Municipal 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 may be used with potential investors if it is preceded or
accompanied by a current Fund prospectus containing more complete information
including fees, risks, and expenses.
15
<PAGE>
[COLONIAL MUTUAL FUNDS LOGO]
Printed on recycled paper.
IS-03/-058B-0595
Colonial Investment Services, Inc. (C)1995
[COLONIAL MUTUAL FUNDS LOGO]
[PICTURE OF CAPITOL]
COLONIAL
HIGH YIELD
MUNICIPAL FUND
================================================================================
Semiannual Report
MAY 31, 1995
