<PAGE>
[COLONIAL FUNDS LOGO]
================================================================================
COLONIAL
TAX-EXEMPT INSURED FUND
================================================================================
ANNUAL REPORT
NOVEMBER 30, 1995
<PAGE>
COLONIAL TAX-EXEMPT INSURED FUND HIGHLIGHTS
DECEMBER 1, 1994 - NOVEMBER 30, 1995
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.
THE FUND IS DESIGNED TO OFFER:
+ High monthly tax-free income
+ Long-term appreciation
+ Diversification
+ Insured "AAA" quality holdings
PORTFOLIO MANAGER COMMENTARY: "As interest rates declined over the last 12
months, the narrowing `yield spread' between higher and lower quality bonds gave
investors incentive to upgrade their investments by purchasing insured bonds
similar to those held in your Fund's portfolio."
COLONIAL TAX-EXEMPT INSURED FUND PERFORMANCE
<TABLE>
<CAPTION>
CLASS A CLASS B
<S> <C> <C>
Inception date 11/20/85 5/5/92
Distributions declared per share* $0.423 $0.364
SEC yield on 11/30/95** 4.28% 3.74%
Taxable-equivalent SEC yield*** 7.09% 6.19%
12-month total returns, assuming reinvest-
ment of all distributions and no sales charge
or contingent deferred sales charge (CDSC) 18.55% 17.68%
Net asset value per share at 11/30/95 $ 8.38 $ 8.38
</TABLE>
*A portion of the Fund's income may be subject to the alternative minimum tax.
**The 30-day SEC yield on November 30, 1995 reflects the portfolio's earning
power, net of expenses, expressed as an annualized percentage of the maximum
offering price per share at the end of the period.
***Taxable-equivalent SEC yield is based on the maximum federal income tax rate
of 39.6%.
MATURITY BREAKDOWN
(as of 11/30/95)
<TABLE>
<S> <C>
1 - 3 years............................................. 1.9%
3 - 5 years............................................. 3.1%
5 - 7 years............................................. 4.9%
7 - 10 years............................................ 1.0%
10 - 15 years........................................... 8.3%
15 - 20 years........................................... 27.5%
20 - 25 years........................................... 25.3%
25+ years............................................... 25.4%
Cash and equivalents.................................... 2.6%
</TABLE>
Because the Fund is actively managed, maturity weightings will change.
2
<PAGE>
PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
[PHOTO OF JOHN A. McNEICE, JR. IN UPPER LEFT-HAND CORNER]
Conditions in the municipal bond market were quite favorable during the 12
months ended November 30, 1995. Those investors who stayed the course through
1994's difficult environment were amply rewarded.
The impasse between President Clinton and the Congress over the federal
government's debt ceiling produced some volatility in the fixed-income markets.
The tax-exempt market has been focusing on this issue as well. However, tax
reform, including the flat tax proposal, may have much larger implications for
this market.
While these political issues have commanded our attention, it must be pointed
out that, over the past 12 months, the positive impact of declining interest
rates overcame almost all of the market's other concerns. This favorable trend
reflects what we believe to be the Federal Reserve Board's success at slowing
the economy and keeping inflation under control. The federal government's stated
resolve to balance the budget added further downward momentum to interest rates.
With this update, I encourage you to read the following report on your Fund,
including an interview with the Fund's Portfolio Manager. We appreciate the
opportunity to help you meet your investment goals.
Respectfully,
/s/ JOHN A. McNEICE, JR.
- ------------------------
John A. McNeice, Jr.
President
January 12, 1996
3
<PAGE>
PORTFOLIO MANAGEMENT REPORT
William Loring is a Vice President of Colonial Management Associates, Inc., and
Portfolio Manager of Colonial Tax-Exempt Insured Fund and four other Colonial
tax-exempt funds.
What was your investment strategy during the period? "In conformance with the
Fund's objective, we maintained our emphasis on insured municipal bonds -- bonds
rated AAA by the major bond rating agencies, the highest quality rating
available. We extended the Fund's duration from the beginning to the end of the
fiscal year, a move that helped the Fund participate in a bond market rally
during the period. Duration measures a portfolio's sensitivity to interest rate
changes. The higher the duration, the greater the gains when interest rates move
lower."
Did your strategy have a positive or negative impact on performance? "Our
strategy had a positive impact on performance -- the Fund's total return for
Class A shares was 18.55%, based on net asset value. With this strong return,
the Fund only modestly underperformed the Lehman Brothers Municipal Bond Index,
a broad based, unmanaged Index that tracks the performance of the municipal bond
market. The return for the Index was 18.90%. Even with the Fund's higher average
quality rating, its performance compares well against the Index because we
extended duration to allow better participation in the rally."
What influenced the Fund's performance during the period? "Congress' focus on
tax reform put some negative pressure on municipal bond prices. However, the
event that exerted the most influence on the performance of municipal bonds was
the downward movement in interest rates. From the beginning to the end of the
period, long-term interest rates declined by 1.87 percentage points, from 8.01%
to 6.14%.
The Fund was well positioned for the overall trend toward declining interest
rates that prevailed during the fiscal year. As rates declined, the `yield gap'
- -- the difference between yields available from higher quality and lower quality
bonds -- narrowed. This created an opportunity to purchase higher quality bonds,
like those in your Fund's portfolio, at appealing prices."
What is your outlook for the tax-exempt bond market? "We believe that if
economic growth remains moderate and inflation stays under control, interest
rates may continue to decline in the months ahead. Tax reform will remain a
source of concern. However, barring a radical change in the tax code, municipal
bonds should continue to provide investors with attractive yields and total
returns."
4
<PAGE>
Colonial Tax-Exempt Insured Fund Investment Performance
Change in Value of $10,000 from 11/85 - 11/95 Based
on Net Asset Value and Maximum Offering Price for Class A Shares
<TABLE>
<CAPTION>
MOP NAV Lehman
- --------------------------------------------------------------------------------
<S> <C> <C>
9525 10000 10000
9761 10247 10088
10870 11412 11110
10700 11233 11041
11139 11694 11635
11534 12110 12037
11799 12388 12328
11157 11713 11993
10767 11304 11695
11270 11832 12217
11653 12234 12638
11872 12464 12882
12208 12816 13213
12515 13140 13457
12627 13257 13547
13252 13913 14349
13247 13907 14358
13664 14345 14909
13714 14398 14975
14001 14700 15325
13977 14674 15334
14533 15258 15996
14846 15586 16358
15164 15920 16706
15666 16447 17356
16235 17044 17939
16234 17044 17993
16793 17630 18675
17168 18025 19171
17445 18315 19520
18104 19007 20244
18617 19546 20907
19174 20131 21613
19356 20321 21916
18281 19192 20713
18436 19356 20943
18499 19422 21086
18167 19073 20783
19482 20453 22253
19691 20673 22790
20169 21175 23445
21039 22088 24180
</TABLE>
A $10,000 investment in Class B shares made on 5/5/92 at net asset value (NAV)
would have been valued at $12,534 on 11/30/95. The same investment based on CDSC
would have grown to $12,234 on 11/30/95.
Average Annual Total Returns as of December 31, 1995 (most recent quarter end)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES
INCEPTION 11/20/85 5/5/92
NAV MOP NAV w/CDSC
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 year 17.38% 11.81% 16.52% 11.52%
- --------------------------------------------------------------------------------
5 years 7.97% 6.92% -- --
- --------------------------------------------------------------------------------
10 years 8.13% 7.60% -- --
- --------------------------------------------------------------------------------
Since inception 8.30% 7.78% 6.74% 6.04%
- --------------------------------------------------------------------------------
</TABLE>
The Lehman Brothers Municipal Bond Index is a broad-based, unmanaged index that
tracks the performance of the municipal bond market. The performance of the
Index does not reflect fees or expenses associated with an actual investment.
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. NAV return does not include sales charges
or CDSC. MOP return includes the maximum sales charge of 4.75%. The CDSC return
reflects the maximum charge of 5.00% for one year and 3.00% since inception.
Performance for different share classes will vary based on differences in sales
charges and fees associated with each class.
5
<PAGE>
INVESTMENT PORTFOLIO/NOVEMBER 30, 1995
(in thousands)
<TABLE>
<CAPTION>
MUNICIPAL BONDS - 97.9% CURRENCY PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
EDUCATION - 8.9%
AL State Higher Education Loan Corp.,
Series 1994-C,
5.850% 09/01/04 (a) $ $ 1,000 $ 1,049
IL Chicago Board of Education,
General Obligation Lease Certificates,
Series 1992-A,
6.250% 01/01/15 $ 6,000 6,533
IL State University,
Auxiliary Facilities System Series 1993,
5.750% 04/01/14 $ 1,350 1,358
MA Health and Education Facilities:
Harvard University,
6.250% 04/01/20 $ 6,760 7,605
Northeastern University:
Series 1988-B,
7.600% 10/01/10 $ 1,000 1,104
Series E,
6.550% 10/01/22 $ 1,500 1,626
NH Higher Education and Health Facilities,
University Systems of New Hampshire,
Series 1992,
6.250% 07/01/20 $ 2,000 2,093
NY State Dormitory Authority,
Series 1993-A,
6.000% 07/01/20 $ 3,000 3,232
PA State Higher Education Facilities
Authority, Temple University, Series 1,
6.500% 04/01/21 $ 250 264
UT State Municipal Finance Co-Operative
Local Government, Pooled Capital
Improvement,
6.800% 05/01/12 $ 1,000 1,092
-------
25,956
-------
- --------------------------------------------------------------------------------
GENERAL OBLIGATION - 10.3%
AZ Maricopa County School District,
Number 8 Osborn,
7.500% 07/01/08 (a) $ 1,235 1,519
AZ Mohave County Unified High School
District, Series B,
8.500% 07/01/06 (a) $ 250 327
DC District of Columbia,
Series 1993-B1,
5.500% 06/01/09 $ 1,000 1,006
</TABLE>
6
<PAGE>
Investment Portfolio/November 30, 1995
<TABLE>
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
GA Columbia County School District,
Series A,
6.750% 04/01/08 (a) $ 1,695 $ 1,973
IL Chicago Series A-2,
6.250% 01/01/14 (b) $ 4,000 4,260
IL Chicago Board of Education,
Lease Certificates, Series 1992-A,
6.000% 01/01/20 $ 2,000 2,107
IL Decatur,
6.900% 10/01/14 $ 250 268
IL State Dedicated Tax,
Civic Center, Series A,
7.000% 12/15/13 $ 200 216
IN Whitko Middle School,
Corporation First Mortgage, Series 1991,
6.750% 07/15/12 $ 1,000 1,081
LA State, Series 1991,
(c) 09/01/16 $ 2,000 607
MD Baltimore:
7.000% 10/15/08 $ 300 358
7.000% 10/15/09 (d) $ 1,055 1,258
MI Big Rapids Public School District,
5.625% 05/01/25 $ 2,725 2,725
MI Brighton Area School District,
Series II,
(c) 05/01/17 $ 10,340 3,115
MI Mona Shores School District,
5.500% 05/01/14 $ 2,000 2,010
NV Las Vegas-Clark
County Library District,
7.500% 02/01/02 (d) $ 1,000 1,147
PA Philadelphia School District, Series B,
5.500% 09/01/25 $ 5,000 4,925
WA Bellevue Convention Center Authority,
(c) 02/01/24 $ 5,000 1,000
-------
29,902
-------
- --------------------------------------------------------------------------------
HEALTH - 11.4%
HOSPITALS - 10.6%
AZ Scottsdale Industrial Development
Authority, Scottsdale Memorial Hospital,
Series 1987-A,
8.500% 09/01/17 $ 500 544
FL Dunedin Hospital, Mease Health Care,
6.750% 11/15/11 $ 100 114
IL Health Facilities Authority:
Methodist Health Services Corp.:
Series 1985-G,
8.000% 08/01/15 $ 965 1,069
</TABLE>
7
<PAGE>
Investment Portfolio/November 30, 1995
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. CURRENCY PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
HEALTH - CONT.
HOSPITALS - CONT.
Series 1992-B, RIB (variable rate),
9.467% 05/01/21 $ $ 500 $ 578
Rockford Memorial Hospital, Series B,
6.750% 08/15/18 $ 50 54
MA Health and Education Facilities:
McLean Hospital, Series C,
6.625% 07/01/15 $ 500 543
New England Deaconess Hospital,
Series D,
6.875% 04/01/22 $ 2,500 2,741
North Shore Medical Center, Series A,
5.625% 07/01/14 $ 10,000 10,175
Valley Regional Health System,
Series C,
7.000% 07/01/08 (d) $ 1,585 1,837
MS State Hospital Equipment and
Facilities Authority,
Rush Medical Foundation Project,
6.700% 01/01/18 $ 250 266
NV Reno Hospital, St. Mary's Regional
Medical Center, Series 1991-A,
6.700% 07/01/21 $ 1,000 1,082
OK State Industrial Authority:
Baptist Medical Center:
Series A,
7.000% 08/15/14 $ 150 161
Series C,
7.000% 08/15/04 (a) $ 1,500 1,723
TN Knox City Health, Education and
Housing Facilities,
5.250% 01/01/15 $ 5,000 4,881
TX Harris County Health Facilities
Development Corp.,
Texas Children's Hospital, Series A,
7.000% 10/01/19 $ 50 56
WI State Health & Education
Facilities Authority:
Bellin Memorial Hospital,
6.625% 02/15/08 (a) $ 1,000 1,147
Milwaukee Regional Medical Center:
Series 1990,
7.500% 08/01/11 $ 1,000 1,101
Series 1992,
6.500% 08/01/13 $ 1,500 1,584
</TABLE>
8
<PAGE>
Investment Portfolio/November 30, 1995
<TABLE>
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Waukesha Memorial Hospital, Series 1990-B,
7.250% 08/15/19 $ 1,000 $ 1,101
-------
$ 30,757
-------
NURSING HOME - 0.8%
WA State Housing Finance Commission,
Franciscan Elder Care, Series 1991,
6.875% 01/01/21 $ 2,250 2,416
-------
- --------------------------------------------------------------------------------
HOUSING - 3.8%
MULTI - FAMILY - 1.0%
KY Housing Corp.,
Multi-Family Mortgage, Series 1985-A,
8.875% 07/01/19 235 240
MA State Housing Finance Agency,
Series A,
6.400% 01/01/09 2,000 2,115
MD Howard County Medical Mortgage
Heartlands Elderly Apartments,
Series 1985,
8.875% 12/01/10 495 527
-------
2,882
-------
SINGLE - FAMILY - 2.8%
AK State Housing Finance Corp.,
Series 1990-A2,
7.000% 12/01/11 235 251
FL Brevard County Housing Finance Authority,
Series C,
7.000% 09/01/23 40 42
FL Duval County Housing Finance Authority
Single Family Mortgage Series 1991,
7.350% 07/01/24 860 916
IL Onterie Center Housing Finance
Mortgage Revenue Bonds, Onterie Center,
Series 1992-A,
7.050% 07/01/27 2,000 2,123
MA State Housing Finance Agency,
Series 21,
7.125% 06/01/25 1,310 1,387
MS Housing Finance Corp.,
8.250% 10/15/18 3,170 3,356
NM Mortgage Finance Authority,
Series 1985-A,
9.250% 07/01/12 5 5
-------
8,080
-------
</TABLE>
9
<PAGE>
Investment Portfolio/November 30, 1995
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
POLLUTION CONTROL REVENUE - 2.4%
FL Hollywood Water & Sewer Revenue,
6.750% 10/01/11 $ 50 $ 57
FL State Municipal Power Agency,
Series 1993,
5.100% 10/01/25 $ 5,000 4,713
NY New York Energy Research & Development
Adjusted Gas Facilities,
Brooklyn Union Gas Company, Series 1989-B,
6.750% 02/01/24 $ 2,000 2,145
-------
6,915
-------
- --------------------------------------------------------------------------------
PUBLIC FACILITIES IMPROVEMENT - 3.4%
AL Birmingham Jefferson Civil Center
Authority Special Tax, Series 1992,
5.500% 09/01/14 2,500 2,503
CA Fairs Financing Authority,
Series 1991,
6.500% 07/01/11 1,300 1,388
FL Gulf Breeze,
Local Government Loan Program,
Series 1985-B,
8.000% 12/01/15 1,000 1,122
MI Municipal Bond Authority, Local
Government Loan Program:
Series 1991-C,
(c) 06/15/15 3,380 1,141
Series G,
(c) 05/01/18 2,000 565
SC State Port Authority,
Series 1991,
6.750% 07/01/21 3,000 3,221
WV School Building Authority, Capital
Import Revenue Bonds, Series 1990-B,
6.750% 07/01/17 75 80
-------
10,020
-------
- --------------------------------------------------------------------------------
PUBLIC INFRASTRUCTURE - 7.2%
Airports - 6.9%
GA Atlanta Airport Facilities Revenue,
Series A,
6.500% 01/01/07 (d) 1,000 1,134
HI State Airport System Revenue,
Series 2,
6.750% 07/01/21 250 268
</TABLE>
10
<PAGE>
Investment Portfolio/November 30, 1995
<TABLE>
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
IL Chicago O'Hare International Airport
Special Facility, International Terminal,
6.750% 01/01/12 (a) $ 300 $ 323
IL Regional Transportation Authority,
Series C,
7.750% 06/01/20 5,000 6,500
NV Clark County Airport Improvements,
McCarren International Airport Las Vegas:
Series A,
7.500% 06/01/07 (d) 350 428
Series 1988,
8.250% 07/01/15 3,500 3,867
OR Portland International Airport,
Series Seven-B,
7.100% 07/01/21 1,000 1,108
PA Allegheny County Airport,
Greater Pittsburgh International:
Series 1988-C,
8.250% 01/01/16 3,250 3,530
Series 1992-B,
6.625% 01/01/22 1,000 1,059
TX Dallas-Fort Worth Regional Airport,
Series A,
7.375% 11/01/11 1,380 1,599
TX Houston Airport System Revenue,
Series A,
6.750% 07/01/21 200 214
-------
20,030
-------
TURNPIKES/TOLL ROADS/BRIDGES - 0.3%
KY State Turnpike Authority, Economic
Development Road Revitalization Projects,
Series 1993,
5.500% 07/01/09 500 515
NY Triborough Bridge & Tunnel
Authority, Series A,
6.625% 01/01/17 250 268
TX Harris County,
Toll Road Revenue,
6.500% 08/15/11 120 130
-------
913
-------
- --------------------------------------------------------------------------------
REFUNDED/ESCROW/SPECIAL OBLIGATIONS (e) - 10.4%
CA Alameda County, Certificates of Participation,
Series 1985-1,
7.250% 12/01/08 (a) 1,300 1,498
CA East Bay Municipal Utilities District,
Water System Subordinated,
Series 1990,
7.500% 06/01/18 2,500 2,875
</TABLE>
11
<PAGE>
Investment Portfolio/November 30, 1995
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
REFUNDED/ESCROW/SPECIAL OBLIGATIONS - CONT.
CA Los Angeles County Transport Commission
Sales Tax, Metropolitan Train,
Series 1991-A,
6.750% 07/01/18 $ 1,000 $ 1,136
CA University Revenues, 1989 Multiple
Purpose Projects, Series 1991-B,
6.750% 09/01/23 1,000 1,107
IL Chicago, General Obligation,
Central Public Library Project,
Series 1988-C,
6.850% 01/01/17 1,000 1,144
IN Marion County Convention
and Recreational Facilities Authority,
Excise Taxes Lease Rental Series 1991-B,
7.000% 06/01/21 1,000 1,141
LA New Orleans International Airport
General Purpose, Series 1987-A,
8.875% 08/01/17 5,000 5,469
MA Bay Transportation Authority:
Certificates of Participation,
Series 1990-A,
7.650% 08/01/15 1,000 1,161
General Transportation System,
Series 1990-A,
7.625% 03/01/15 2,000 2,292
NY New York City Municipal Finance
Authority Water and Sewer Systems,
Series 1991-C,
7.000% 06/15/16 1,500 1,716
NY State Dormitory Authority,
City University System, Series
1990-F,
7.500% 07/01/20 2,000 2,305
NY State Medical Care Facilities
Finance Agency, St. Luke's-Roosevelt
Hospital Center, Series 1989-B,
7.450% 02/15/29 500 570
PA Pittsburgh Water & Sewer Authority,
Series A,
6.500% 09/01/14 270 303
SC Charleston County, Certificate
of Participation, Series 1991,
7.100% 06/01/11 2,000 2,298
TN Chattanooga-Hamilton County
Series 1991-B, RIB (variable rate),
10.923% 05/25/21 1,000 1,264
</TABLE>
12
<PAGE>
Investment Portfolio/November 30, 1995
<TABLE>
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
TX Coastal Water Authority,
Water Conveyance System, Series 1991,
6.250% 12/15/17 $ 1,750 $ 1,818
TX Colorado River Municipal Water
District, Water Transmission Facilities,
Series 1991-A,
6.625% 01/01/21 250 275
UT State Municipal Cooperative Local
Government, Series 1991,
7.000% 06/01/16 1,750 1,984
-------
30,356
-------
- --------------------------------------------------------------------------------
SOLID WASTE - 1.0%
RESOURCE RECOVERY
FL Palm Beach County Solid Waste Authority,
Series 1984,
8.375% 07/01/10 1,000 1,092
NJ Bergen County Utilities Authority,
Series A,
6.250% 06/15/07 (d) 230 253
SC Charleston County Solid Waste User Fee,
6.500% 01/01/09 (a) 1,405 1,546
-------
2,891
-------
- --------------------------------------------------------------------------------
STATE & COMMUNITY LEASE - 3.0%
IN State Office Building Commission,
Women's Prison, Series B,
6.250% 07/01/16 8,000 8,710
-------
- --------------------------------------------------------------------------------
STUDENT LOAN - 1.2%
MA Education Loan Authority,
Issue D, Series 1991-A,
7.250% 01/01/09 845 896
NM State Education Assistance
Foundation, Series A,
6.700% 04/01/02 (d) 235 248
PA State Higher Education Assistance
Student Loan RIB (variable rate), Series 1990-B,
10.515% 03/01/20 2,000 2,250
-------
3,394
-------
- --------------------------------------------------------------------------------
TAX ALLOCATION - 1.6%
CA Los Angeles Community Redevelopment
Agency, Bunker Hill Project,
6.500% 12/01/14 1,500 1,614
13
<PAGE>
Investment Portfolio/November 30, 1995
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
TAX ALLOCATION - CONT.
NY State Local Government Assistance
Corp., Series 1993-E,
5.000% 04/01/21 $ 3,175 $ 2,969
-------
4,583
-------
- --------------------------------------------------------------------------------
TRANSPORTATION - 2.5%
DC Metropolitan Area Transit Authority,
6.000% 07/01/10 1,000 1,076
MA Massachusetts Bay Transportation
Authority, Series B,
5.375% 03/01/25 5,000 4,850
MA State Port Authority,
7.500% 07/01/20 1,000 1,120
SC State Port Authority, Series 1991,
6.500% 07/01/06 (a) 250 271
-------
7,317
-------
- --------------------------------------------------------------------------------
UTILITY - 20.0%
INVESTOR OWNED - 0.8%
DE State Economic Development Authority,
New Castle County Gas System,
Series 1991-C,
7.150% 07/01/21 1,000 1,111
MI St. Clair County Economic
Development Corp., Detroit Edison Co.,
Series 1993-AA,
6.400% 08/01/24 1,000 1,089
-------
2,200
-------
JOINT POWER AUTHORITY - 5.2%
MN Southern Minnesota Municipal
Power Agency, Series A,
(c) 01/01/24 21,000 4,462
TX State Municipal Power Agency:
(c) 09/01/10 5,000 2,256
(c) 09/01/12 3,000 1,193
(c) 09/01/15 8,975 2,962
UT State Municipal Power Agency
Electric Systems, Series 1993-A,
5.250% 07/01/18 3,000 2,880
WA Snohomish County Public Utilities, 1993,
5.500% 01/01/20 1,500 1,476
-------
15,229
-------
MUNICIPAL ELECTRIC - 14.0%
AK Anchorage Electric Utilities Revenue,
8.000% 12/01/09 1,000 1,262
14
<PAGE>
Investment Portfolio/November 30, 1995
</TABLE>
<TABLE>
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
CA Northern California Power Agency,
Hydroelectric Project No. 1,
Series 1992-A,
5.500% 07/01/23 $ 3,000 $ 2,962
GA Municipal Electrical Authority,
Special Obligation, Project One,
Fifth Cross,
6.400% 01/01/13 1,000 1,115
IN State Development Finance Authority,
PSI-Energy Inc., Series B,
5.750% 02/15/28 5,000 5,063
NC Municipal Power Agency Number 1
Catawba Electric Revenue Bonds,
Series 1992,
5.750% 01/01/15 3,000 3,030
NV Clark County Pollution Control
Nevada Power Company, Series 1992-B,
6.600% 06/01/19 3,500 3,749
NY New York State Power Authority
General Purpose Bonds, Series V,
7.875% 01/01/13 3,950 4,330
SC Piedmont Municipal Power Agency,
Series A,
6.125% 01/01/07 (a) 500 552
SC State Public Service Authority:
Series A,
6.250% 01/01/22 3,500 3,675
Series C,
5.125% 01/01/32 5,000 4,650
SD Heartland Consumers Power District,
6.000% 01/01/09 300 317
TX Austin Utilities System:
Series A:
5.750% 11/15/14 5,000 5,075
7.000% 05/15/16 1,200 1,323
TX State Municipal Power Agency,
(c) 09/01/11 7,900 3,348
WA Clark County Public Utilities
District Number 001 Electric System,
6.500% 01/01/11 200 212
WA State Public Power Supply System,
Nuclear Project No. 2, Series A,
6.500% 07/01/05 (a) 200 219
-------
40,882
-------
- --------------------------------------------------------------------------------
WATER & SEWER - 10.8%
FL Reedy Creek Improvement District,
Series 1,
5.000% 10/01/19 5,000 4,719
</TABLE>
15
<PAGE>
Investment Portfolio/November 30, 1995
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
WATER & SEWER - CONT.
FL Saint John's County Water and Sewer,
Saint Augustine Shores System,
Series 1991-A:
(c) 06/01/13 $ 2,600 $ 994
(c) 06/01/14 1,500 540
GA Fulton County Water and Sewer,
6.375% 01/01/14 6,000 6,765
IL Kankakee Sewer, Series 1991,
7.000% 05/01/16 1,000 1,104
MA Boston Water & Sewer Commission,
Series A,
5.250% 11/01/19 3,465 3,378
PA Philadelphia Water and Waste Water,
Series 1993,
5.250% 06/15/23 1,150 1,098
PA Pottstown Borough Authority Sewer,
Guaranteed Sewer Revenue, Series 1991,
(c) 11/01/16 1,000 311
VA Prince William County Services
Authority,
5.000% 07/01/21 4,900 4,520
VA Roanoke County Water System,
5.000% 07/01/21 3,500 3,277
VA Virginia Beach Water and Sewer,
5.125% 02/01/19 4,880 4,648
--------
31,354
--------
TOTAL MUNICIPAL BONDS (cost of $260,124) 284,787
--------
<CAPTION>
OPTIONS - 0.0% CONTRACTS
- --------------------------------------------------------------------------------
<S> <C> <C>
December 1995 Municipal Bond Puts:
Strike price 113, expiration 12-19-95 3,300 1
Strike price 115, expiration 12-19-95 6,000 3
--------
TOTAL OPTIONS (cost of $64) 4
--------
TOTAL INVESTMENTS - 97.9% (cost of $260,188)(f) 284,791
--------
<CAPTION>
SHORT-TERM OBLIGATIONS - 2.4% PAR
- --------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (g)
- --------------------------------------------------------------------------------
<S> <C> <C>
CA State Health Facilities Financing Authority,
St. Francis Memorial Hospital, Series B,
3.500% 11/01/19 3,300 3,300
MS Jackson County,
Chevron USA, Inc. Project,
3.650% 06/01/23 2,800 2,800
NY Triborough Bridge & Tunnel Authority,
4.050% 01/01/24 1,000 1,000
--------
TOTAL SHORT-TERM OBLIGATIONS 7,100
--------
</TABLE>
<PAGE>
INVESTMENT PORTFOLIO/NOVEMBER 30, 1995
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
OTHER ASSETS & LIABILITIES, NET - (0.3)% $ (981)
- --------------------------------------------------------------------------------
NET ASSETS - 100.0% $290,910
--------
</TABLE>
NOTES TO INVESTMENT PORTFOLIO:
- --------------------------------------------------------------------------------
(a) These securities, or a portion thereof, with a total market value of
$10,884, are being used to collateralize open futures contracts.
(b) This security has been purchased on a delayed delivery basis for settlement
at a future date beyond the customary settlement time.
(c) Zero coupon bond.
(d) These securities, or a portion thereof, with a total market value of
$4,727, are being used to collateralize the delayed delivery purchase
indicated in note (b) above.
(e) 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.
(f) Cost for federal income tax purposes is $260,242.
(g) Variable rate demand notes are considered short-term obligations. Interest
rates change periodically on specified dates. These securities are payable
on demand and are secured by either letters of credit or other credit
support agreements from banks. The rates listed are as of November 30,
1995.
Short futures contracts open at November 30, 1995:
<TABLE>
<CAPTION>
Par value Unrealized
covered Expiration depreciation
Type by contracts month at 11/30/95
- --------------------------------------------------------------
<S> <C> <C> <C>
Municipal bond $7,500 December $286
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ACRONYM NAME
- ------- ----------------------
<S> <C>
RIB Residual Interest Bond
</TABLE>
SUMMARY OF SECURITIES BY INSURER
<TABLE>
<CAPTION>
% of
Insurer Net Assets
------- ----------
<S> <C>
Municipal Bond Insurance Agency 38.1
AMBAC Indemnity Corporation 27.3
Financial Guarantee Insurance Company 21.7
Uninsured Securities 5.8
Financial Security Assurance 3.4
Capital Guarantee Insurance Company 1.6
Bond Investment Guarantee Insurance 1.4
Connie Lee Insurance Company 0.7
-----
100.0
-----
</TABLE>
See notes to financial statements.
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
NOVEMBER 30, 1995
(in thousands except for per share amounts and footnotes)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value (cost $260,188) $ 284,791
Short-term obligations 7,100
---------
291,891
Receivable for:
Interest $5,154
Fund shares sold 134
Investments sold 31
Other 62 5,381
------ ---------
Total Assets 297,272
LIABILITIES
Payable for:
Investments purchased 4,246
Distributions 1,167
Fund shares repurchased 842
Variation margin on futures 56
Accrued:
Deferred Trustees fees 2
Other 49
------
Total Liabilities 6,362
---------
NET ASSETS $ 290,910
---------
Net asset value & redemption price per share -
Class A ($240,894/28,750) $ 8.38
---------
Maximum offering price per share - Class A
($8.38/0.9525) $ 8.80 (a)
---------
Net asset value & offering price per share -
Class B ($50,016/5,969) $ 8.38 (b)
---------
COMPOSITION OF NET ASSETS
Capital paid in $ 271,956
Undistributed net investment income 230
Accumulated net realized loss (5,593)
Net unrealized appreciation (depreciation) on:
Investments 24,603
Open futures contracts (286)
---------
$ 290,910
---------
</TABLE>
(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 YEAR ENDED NOVEMBER 30, 1995
(in thousands)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest $17,529
EXPENSES
Management fee $ 1,544
Service fee 699
Distribution fee - Class B 364
Transfer agent 452
Bookkeeping fee 108
Trustees fee 16
Custodian fee 22
Audit fee 38
Legal fee 8
Registration fee 36
Reports to shareholders 6
Other 18 3,311
------- -------
Net Investment Income 14,218
-------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain (loss) on:
Investments 5,745
Closed futures contracts (4,926)
-------
Net Realized Gain 819
Net unrealized appreciation (depreciation)
during the period on:
Investments 30,813
Open futures contracts (165)
-------
Net Unrealized Gain 30,648
-------
Net Gain 31,467
-------
Net Increase in Net Assets from Operations $45,685
-------
</TABLE>
See notes to financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended
(in thousands) November 30
----------------------
INCREASE (DECREASE) IN NET ASSETS 1995 1994
-------- --------
<S> <C> <C>
Operations:
Net investment income $ 14,218 $ 14,576
Net realized gain (loss) 819 (2,726)
Net unrealized appreciation (depreciation) 30,648 (30,613)
-------- --------
Net Increase (Decrease) from Operations 45,685 (18,763)
Distributions:
From net investment income - Class A (12,225) (12,079)
From net investment income - Class B (2,207) (2,287)
-------- --------
31,253 (33,129)
-------- --------
Fund Share Transactions:
Receipts for shares sold - Class A 20,382 23,583
Receipts for shares issued in the acquisition
of Liberty Financial Insured Municipal Fund 42,751 --
Value of distributions reinvested - Class A 6,971 6,917
Cost of shares repurchased - Class A (53,716) (46,210)
-------- --------
16,388 (15,710)
-------- --------
Receipts for shares sold - Class B 5,062 12,774
Value of distributions reinvested - Class B 1,259 1,291
Cost of shares repurchased - Class B (7,762) (8,161)
-------- --------
(1,441) 5,904
-------- --------
Net Increase (Decrease) from
Fund Share Transactions 14,947 (9,806)
-------- --------
Total Increase (Decrease) 46,200 (42,935)
NET ASSETS
Beginning of period 244,710 287,645
-------- --------
End of period (including undistributed net
investment income of $185 and $397,
respectively) $290,910 $244,710
-------- --------
NUMBER OF FUND SHARES
Sold - Class A 2,596 2,945
Issued in the acquisition of Liberty
Financial Insured Municipal Fund 5,319 --
Issued for distributions reinvested - Class A 873 858
Repurchased - Class A (6,739) (5,793)
-------- --------
2,049 (1,990)
-------- --------
Sold - Class B 639 1,552
Issued for distributions reinvested - Class B 158 161
Repurchased - Class B (977) (1,031)
-------- --------
(180) 682
-------- --------
</TABLE>
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1995
NOTE 1. ACCOUNTING POLICIES
ORGANIZATION: Colonial Tax-Exempt Insured Fund (the Fund), a series of Colonial
Trust IV is a diversified portfolio of a Massachusetts business trust,
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company. The Fund 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.
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 which cannot be valued as set forth above are valued at fair
value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains and losses are based upon the specific
identification method for both financial statement and federal income tax
purposes.
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 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
<PAGE>
NOTES TO FINANCIAL STATEMENTS/NOVEMBER 30, 1995
- --------------------------------------------------------------------------------
NOTE 1. ACCOUNTING POLICIES - CONT.
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 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
carryovers) under income tax regulations.
NOTE 2. FEES AND COMPENSATION PAID TO AFFILIATES
MANAGEMENT FEE: Colonial Management Associates, Inc. (the Adviser) is the
investment Adviser of the Fund and furnishes accounting and other services and
office facilities for a monthly fee based on each fund's pro rata portion of the
combined average net assets of the Fund, Colonial Tax-Exempt Fund, and Colonial
High Yield Municipal 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 FEE: Colonial Investors Service Center, Inc., (the Transfer
Agent), an affiliate of the Adviser, provides shareholder services and receives
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 year ended November 30, 1995, the Fund has
been advised that the Distributor retained net underwriting discounts of $26,560
on sales of the Fund's Class A shares and received contingent deferred sales
charges (CDSC) of $161,047 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.
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
the Fund's assets.
<PAGE>
NOTES TO FINANCIAL STATEMENTS/NOVEMBER 30, 1995
- --------------------------------------------------------------------------------
NOTE 3. PORTFOLIO INFORMATION
INVESTMENT ACTIVITY: During the year ended November 30, 1995, purchases and
sales of investments, other than short-term obligations were $86,678,150 and
$122,752,195, respectively.
Unrealized appreciation (depreciation) at November 30, 1995, based on cost of
investments for federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation $24,610,192
Gross unrealized depreciation (61,145)
-----------
Net unrealized appreciation $24,549,047
-----------
</TABLE>
CAPITAL LOSS CARRYFORWARDS: At November 30, 1995, 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 $ 414,000
1998 180,000
2000 171,000
2001 982,000
2002 3,313,000
----------
$5,060,000
----------
</TABLE>
Of the loss carryforwards expiring in 2001 and 2002, $982,000 and $620,000,
respectively, were acquired in the merger with Liberty Financial Insured
Municipal Fund. Their availability may be limited in a given year.
Expired capital loss carryforwards, if any, are recorded as a reduction of
capital paid in.
To the extent loss carryforwards are used to offset any future realized gains,
it is unlikely that such gains would be distributed since they may be taxable to
shareholders as ordinary income.
OTHER: The Fund has greater than 10% of its net assets at November 30, 1995
invested in 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 invest in municipal and Treasury bond futures contracts and
purchase and write options on futures. The Fund will invest in these instruments
to hedge against the effects of changes in value of portfolio securities due to
anticipated changes in interest rates and/or market conditions, for duration
management, or when the transactions are economically appropriate to the
reduction of risk inherent in the management of the Fund and not for trading
purposes. The use of futures contracts and options involves certain risks, which
include (1) imperfect correlation between the price movement of the instruments
and the underlying securities, (2) inability to close out positions due to
different trading hours or the temporary absence of a liquid market for either
the
<PAGE>
Notes to Financial Statements/November 30, 1995
- --------------------------------------------------------------------------------
NOTE 3. PORTFOLIO INFORMATION - CONT.
instruments or the underlying securities or (3) an innaccurate prediction by the
Adviser of the future direction of interest rates. Any of these risks may
involve amounts exceeding the amount recognized in the Fund's Statement of
Assets and Liabilities at any given time.
NOTE 4. MERGER INFORMATION
On March 24, 1995, Liberty Financial Insured Municipal Fund (LFIMF) was merged
into the Fund by a non-taxable exchange of 5,318,858 Class A shares of the Fund
(valued at $42,750,988) for the 4,080,498 of LFIMF shares then outstanding. The
assets of LFIMF acquired included unrealized appreciation of $282,748. The
aggregate net assets of the Fund and LFIMF immediately after the merger were
$300,749,659.
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
Year ended November 30
---------------------------------------------------
1995 1994
Class A Class B Class A Class B
-------- ------- -------- -------
<S> <C> <C> <C> <C>
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
</TABLE>
(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 year ratios are net of benefits received,
if any.
- --------------------------------------------------------------------------------
Federal income tax information (unaudited)
All of the distributions will be treated as exempt income for federal income tax
purposes.
<PAGE>
FINANCIAL HIGHLIGHTS - continued
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
Year ended November 30
------------------------------------------------------------------
1993 1992 1991
Class A Class B Class A Class B(a) Class A
-------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 8.080 $ 8.080 $ 7.880 $ 7.910 $ 7.660
-------- ------- -------- ------- --------
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income 0.456 0.395 0.480 0.240 0.496
Net realized and
unrealized gain 0.338 0.338 0.200 0.170 0.222
-------- ------- -------- ------- --------
Total from Investment
Operations 0.794 0.733 0.680 0.410 0.718
-------- ------- -------- ------- --------
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net
investment income (0.454) (0.393) (0.480) (0.240) (0.498)
-------- ------- -------- ------- --------
Net asset value -
End of period $ 8.420 $ 8.420 $ 8.080 $ 8.080 $ 7.880
-------- ------- -------- ------- --------
Total return (b) 10.00% 9.20% 8.85% 5.23% (c) 9.66%
-------- ------- -------- ------- --------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.07% 1.82% 1.10% 1.85% (d) 1.08%
Net investment income 5.44% 4.69% 5.97% 5.22% (d) 6.35%
Portfolio turnover 12% 12% 7% 7% 8%
Net assets at end
of period (000) $241,610 $46,035 $217,782 $16,519 $189,483
</TABLE>
(a) Class B shares were initially offered on May 5, 1992. Per share amounts
reflect activity from that date.
(b) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(c) Not annualized.
(d) Annualized.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE TRUSTEES OF COLONIAL TRUST IV AND THE SHAREHOLDERS OF
COLONIAL TAX-EXEMPT INSURED FUND
In our opinion, the accompanying statement of assets and liabilities,
including the investment portfolio, and the related statements of operations and
of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Colonial Tax-Exempt Insured Fund (a
series of Colonial Trust IV) at November 30, 1995, the results of its
operations, the changes in its net assets and the financial highlights for the
periods indicated, in conformity with generally accepted accounting principles.
These financial statements and the financial highlights (hereafter referred to
as "financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of portfolio positions
at November 30, 1995 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
January 12, 1996
<PAGE>
SHAREHOLDER SERVICES
TO MAKE INVESTING EASIER
Colonial has one of the most extensive selections of shareholder services
available. Your financial adviser can help you activate any of these services,
or call Colonial directly at 1-800-345-6611.
AFFORDABLE ADDITIONAL INVESTMENTS: Add to your account with as little as $50;
$25 for an IRA account.
FREE EXCHANGES(*): Exchange all or part of your account into the same share
class of another Colonial fund, by phone or mail, as your needs change over
time.
EASY ACCESS TO YOUR MONEY(*): 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 to Colonial within one year, you can reinvest in any
Colonial fund 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 Colonial 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 of each month.
AUTOMATED DOLLAR COST AVERAGING: Transfer money on a monthly basis from any
Colonial fund with a balance of $5,000 into the same share class of up to four
other Colonial funds. Minimum for each transfer is $100.
LOW COST IRAS: Choose from a broad range of retirement plans, including IRAs.
(*) Redemptions and exchanges are made at the next determined net asset value
after the request is received by Colonial. Proceeds may be more or less than
your original cost. The exchange privilege may be terminated at any time.
Investors who purchase Class B or Class D shares (for applicable funds), or $1
million or more of Class A shares, may be subject to a contingent deferred sales
charge.
<PAGE>
HOW TO REACH COLONIAL
BY PHONE OR BY MAIL
BY TELEPHONE
Colonial Customer Connection - 1-800-345-6611
For 24-hour account information, call from your touch-tone phone. (Rotary
callers will be automatically connected to a representative during business
hours.) A recorded message will guide you through the menu:
For fund prices, dividends, and capital gains information ........ press 1
For account information .......................................... press 2
To speak to a Colonial representative ............................ press 3
For yield and total return information ........................... press 4
For duplicate statements or new supply of checks ................. press 5
To order duplicate tax forms and year-end statements ............. press 6
(February through May)
To review your options at any time during your call .............. press 7
To speak with a shareholder services representative about your account, call
Monday to Friday, 8:00 am to 8:00 pm ET, and Saturdays from February through
mid-April, 10:00 am to 2:00 pm ET.
COLONIAL TELEPHONE TRANSACTION DEPARTMENT - 1-800-422-3737
To purchase, exchange, or sell shares by telephone, call Monday to Friday, 9:00
am to 8:00 pm ET. Transactions received after the close of the New York Stock
Exchange will receive the next business day's closing price.
COLONIAL LITERATURE DEPARTMENT - 1-800-248-2828
To request literature on any Colonial fund, call Monday to Friday, 8:30 am to
6:30 pm ET.
BY MAIL
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
<PAGE>
[COLONIAL MUTUAL FUNDS LOGO]
Mutual Funds for
Planned Portfolios
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)
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
COLONIAL INVESTMENT SERVICES, INC. (C)1996
One Financial Center, Boston, Massachusetts 02111-2621, 617-426-3750
TI-02/487B-1195 (1/96)
