<PAGE>
COLONIAL
HIGH YIELD MUNICIPAL FUND
[GRAPHIC]
ANNUAL REPORT
NOVEMBER 30, 1995
<PAGE>
- --------------------------------------------------------------------------------
COLONIAL HIGH YIELD MUNICIPAL FUND HIGHLIGHTS
DECEMBER 1, 1994-NOVEMBER 30, 1995
INVESTMENT OBJECTIVE: Colonial High Yield Municipal Fund seeks a high level of
after-tax total return by pursuing current income exempt from ordinary federal
income tax and opportunities for long-term appreciation from a portfolio
primarily invested in medium- to lower-grade municipal bonds.
THE FUND IS DESIGNED TO OFFER:
- Potential for high tax-free income
- Experienced professional management
- Expert credit analysis
PORTFOLIO MANAGER COMMENTARY: "Despite recent developments that may have a
negative impact on the municipal bond market, including discussions about tax
reform, we remain confident about the long-term prospects for this market. The
municipal bond market should continue to be a source of attractive returns for
investors."
<TABLE>
COLONIAL HIGH YIELD MUNICIPAL FUND PERFORMANCE
<CAPTION>
CLASS A CLASS B
<S> <C> <C>
Inception date 9/1/94 6/8/92
Distributions declared per share* $0.668 $0.595
SEC yield on 11/30/95** 4.95% 4.45%
Taxable-equivalent SEC yield*** 8.20% 7.37%
12-month total return, assuming reinvest-
ment of all distributions and no sales charge
or contingent deferred sales charge (CDSC) 17.28% 16.42%
Net asset value per share at 11/30/95 $10.23 $10.23
<FN>
* 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%
</TABLE>
<TABLE>
QUALITY BREAKDOWN
(as of 11/30/95)
...............................................................................
<S> <C> <C> <C>
AAA.................................6.1% BB.........................2.1%
AA..................................3.4% B..........................0.3%
A...................................7.8% Non-rated.................49.0%
BBB................................28.6% Cash and equivalents.......2.7%
</TABLE>
Because the Fund is actively managed, quality weightings will change.
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
[Picture of John A. McNeice, Jr.] In general, conditions in the municipal bond
market were favorable during the 12 months ended November 30, 1995. In fact,
shareholders who stayed the course through a difficult 1994 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,
although this problem did not have a significant impact on bond prices. 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.
Of course, 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 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
BONNY BOATMAN is a Senior Vice President of Colonial Management Associates,
Inc., and Portfolio Manager of Colonial High Yield Municipal Fund. Bonny also
directs Colonial's Tax-Exempt Bond Group. PETER ANDERSEN is an Assistant Vice
President of Colonial Management Associates, Inc. and co-manages the Fund.
WHAT WAS YOUR INVESTMENT STRATEGY DURING THE PERIOD? "We took advantage of the
declining interest rate environment by upgrading the credit quality of the
portfolio. As interest rates moved lower, the difference in yields available
from higher and lower quality bonds narrowed, allowing us to improve quality
without sacrificing income or returns."
HOW DID THE FUND PERFORM RELATIVE TO THE LEHMAN BROTHERS MUNICIPAL BOND INDEX?
"The total return for the Fund's Class A shares was 17.28%, based on net asset
value. The Fund underperformed the Lehman Brothers Municipal Bond Index, a broad
based, unmanaged Index that tracks the performance of the municipal bond market.
The Index posted a return of 18.90%.
"The Fund and the Index benefited from declining interest rates during the
period. The Fund slightly underperformed the Index because of the difference in
credit quality between the two. The Fund's average credit rating is lower than
that of the Index, reflecting the Fund's focus on non-rated bonds. Although
these non-rated bonds may support the Fund's total return when interest rates
are increasing, they tend to receive less of a benefit from declining interest
rates than higher quality rated bonds. We reduced our exposure to non-rated
bonds during the fiscal year."
WHAT FACTORS INFLUENCED THE FUND'S PERFORMANCE DURING THE PERIOD? "The biggest
impact came from the downward move in interest rates. From the beginning to the
end of the period, long-term interest rates, as represented by the 30-year
Treasury bond, declined from 8.01% to 6.14%. Another factor was the favorable
supply/demand dynamic within the municipal bond market. The supply of municipal
bonds has been declining for several years, and this trend is expected to
continue. From January through November 1995, approximately $136 billion in new
bonds were issued, a decline of 11.8% from calendar 1994. At the same time,
demand remained strong, despite ongoing tax reform discussions in Washington.
The combination of declining supply and continued interest in municipal bonds
has enhanced the value of these securities.
"Although we avoid large positions in individual issues, there were some
investments that especially contributed to performance. Among the Fund's
non-rated holdings, T.L. Systems, a manufacturer of medical instruments and
measuring devices, produced a total return of 34%, when that company was
acquired by Bosch Company. Rated investments included bonds issued by the San
Joaquin Hills Transportation Corridor Agency, which
4
<PAGE>
realized a price gain after the successful resolution of questions raised about
the project's environmental impact."
WHAT IS YOUR OUTLOOK FOR THE TAX-EXEMPT BOND MARKET? "Tax reform will remain a
source of concern. However, barring a radical change in the tax code, the
combination of low supply and strong demand should produce attractive returns
over the long term."
COLONIAL HIGH YIELD MUNICIPAL FUND INVESTMENT PERFORMANCE
Change in Value of $10,000 from 6/92 - 11/95
Based on Net Asset Value and CDSC for Class B Shares
[CHART]
<TABLE>
<CAPTION>
A B C D
- - - -
Label Label CHYMF w/cdsc nav lehman
- ----- ----- ----- ------ --- -------
<S> <C> <C> <C> <C> <C>
1 6/92 6/92 10000 10000 10000
2 10251 10251 10300
3 10194 10194 10199
4 10227 10227 10265
5 10180 10180 10165
6 10264 10264 10347
7 10369 10369 10452
8 10433 10433 10573
9 10653 10653 10956
10 10625 10625 10840
11 10711 10711 10950
12 10745 10745 11011
13 10874 10874 11195
14 10909 10909 11209
15 11103 11103 11443
16 11202 11202 11573
17 11238 11238 11595
18 11187 11187 11493
19 11261 11261 11735
20 11369 11369 11869
21 11227 11227 11562
22 10851 10851 11091
23 10827 10827 11185
24 10902 10902 11283
25 10922 10922 11214
26 11077 11077 11419
27 11097 11097 11459
28 11016 11016 11291
29 10890 10890 11090
30 10727 10727 10889
31 10877 10877 11129
32 11131 11131 11447
33 11399 11399 11780
34 11527 11527 11915
35 11538 11538 11930
36 11844 11844 12310
37 11808 11808 12203
38 11878 11878 12319
39 11985 11985 12476
40 12104 12104 12554
41 12271 12271 12736
42 11/95 12189 12489 12948
</TABLE>
A $10,000 investment in Class A shares made on 9/1/94 at net asset value (NAV)
would have been valued at $11,728 on 11/30/95. The same investment based on
maximum offering price (MOP) would have grown to $11,171 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 9/1/94 6/8/92
NAV MOP NAV w/CDSC
- --------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
1 year 16.89% 11.34% 16.04% 11.04%
- --------------------------------------------------------------------------------
Since inception 10.94% 6.97% 7.08% 6.37%
- --------------------------------------------------------------------------------
</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 contingent deferred sales charge (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 - 95.5% PAR VALUE
- ---------------------------------------------------------------------------------------
<S> <C> <C>
AGRICULTURE, FORESTRY & FISHING - 1.3%
AGRICULTURE - CROPS
LA Port New Orleans Industrial Development,
Continental Grain Co., Series 1993,
7.500% 07/01/13 $ 2,000 $ 2,070
-----------
- ---------------------------------------------------------------------------------------
CERTIFICATES OF PARTICIPATION - 0.4%
MA Health and Educational Facilities,
Independent Living Bonds, Series 1993-A,
8.100% 07/01/18 600 609
-----------
- ---------------------------------------------------------------------------------------
CONSTRUCTION - 1.4%
BUILDING CONSTRUCTION
IN Hammond Sewer & Solid Waste Disposal,
American Maize Products Co., Series A,
8.000% 12/01/24 2,000 2,230
-----------
- ---------------------------------------------------------------------------------------
FINANCE, INSURANCE & REAL ESTATE - 0.5%
REAL ESTATE
MD Baltimore, Economic Development,
Park Charles Project, Series 1986,
8.000% 01/01/10 700 752
-----------
- ---------------------------------------------------------------------------------------
GENERAL OBLIGATION - 1.7%
AZ Apache County School District
Number 010, Round Valley
Project of 1987, Series 1990-C,
9.875% 07/01/05 500 559
CA State of California,
5.750% 03/01/19 2,000 2,007
-----------
2,566
-----------
- ---------------------------------------------------------------------------------------
HEALTH - 18.9%
HOSPITALS - 9.3%
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% 01/01/22 610 702
FL Tarpon Springs Health Facilities
Authority, Tarpon Springs Hospital
Foundation, Series 1988,
8.750% 05/01/12 1,000 1,069
</TABLE>
6
<PAGE>
<TABLE>
Investment Portfolio/November 30, 1995
- ---------------------------------------------------------------------------------------
<S> <C> <C>
GA Clayton Hospital Authority,
The Woodlands Foundation, Inc.,
Series 1991-A,
9.750% 05/01/21 (a) $ 1,500 $ 1,275
ID State Health Facilities Authority,
IHC Hospitals, Inc.,
8.190% 02/15/21 1,000 1,152
IL Health Facilities Authority,
Edgewater Medical Center, Series A,
9.250% 07/01/24 2,000 2,110
MI State Hospital Finance Authority:
Detroit Osteopathic Hospital C,
Series 1987-A,
7.500% 11/01/10 500 511
Saratoga Community Hospital,
Series 1992,
8.750% 06/01/10 295 318
MO Hannibal Industrial Development,
Medical Systems of Northeast Missouri,
Series 1992,
9.500% 03/01/22 1,000 1,169
NC Lincoln County Hospital Project,
9.000% 05/01/07 350 439
NJ State Health Care Facilities Financing
Authority, Raritan Bay Medical Center,
7.250% 07/01/27 2,000 2,012
PA Cambria County Hospital Authority,
Conemaugh Valley Memorial Hospital,
Series 1988-A,
8.875% 07/01/18 165 181
TN Chattanooga Health Education
and Housing Facilities Board,
North Park Hospital Project, Series 1993,
8.500% 02/01/23 1,000 1,036
VA Dickenson County Industrial
Development, Volunteer Healthcare
Systems Inc., Series 1988-A,
10.750% 06/01/18(a) 500 110
VT State Educational & Health Buildings
Financing Agency, Springfield Hospital,
Series A,
7.750% 01/01/13 835 870
WA State Health Care Facility,
Grays Harbor Community
Hospital, Series 1993:
7.200% 07/01/03 210 226
8.025% 07/01/20 960 1,043
-----------
14,514
-----------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/November 30, 1995
- ---------------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- ---------------------------------------------------------------------------------------
<S> <C> <C>
HEALTH - CONT.
HUMAN SERVICES PROVIDERS - 1.2%
IL Champaign First Mortgage,
Hoosier Care, Inc., Series 1989-A,
9.750% 08/01/19 $ 495 $ 532
IN Wabash First Mortgage, Hoosier
Care, Inc., Series 1989-A,
9.750% 08/01/19 495 531
TN Shelby County, Health, Education,
& Housing Facilities Board, Open Arms
Development Center:
Series 1992-A,
9.750% 08/01/19 335 392
Series 1992-C,
9.750% 08/01/19 330 386
-----------
1,841
-----------
NURSING HOMES - 8.4%
AZ Tucson Industrial Development
Authority, Villa Maria Care Center,
10.125% 11/01/21 350 328
CO State Health Facilities Authority,
Denver,
10.500% 05/01/19 (a) 450 310
DE State Economic Development Authority,
Churchman Village Project, Series A,
10.000% 03/01/21 750 882
DE Sussex County Healthcare Facility,
Delaware Health Corp., Series 1994-A,
7.600% 01/01/24 1,000 977
FL Broward County, Beverly Enterprises,
9.800% 11/01/10 615 689
FL Flagler County Industrial
Redevelopment Authority,
South Florida Properties, Series 1988,
10.500% 12/01/18 925 931
FL Gadsden County Industrial Development,
Florida Housing Properties, Inc.,
Series 1988-A,
10.450% 10/01/18 340 353
FL Palm Beach County,
Hillcrest Manor Project,
10.250% 12/01/16 675 707
IA State Healthcare Facility Finance
Authority, Mercy Health Initiatives,
9.950% 07/01/19 500 510
KS Halstead Industrial Health Care
Project,
10.250% 08/01/13 335 234
</TABLE>
8
<PAGE>
<TABLE>
Investment Portfolio/November 30, 1995
- ---------------------------------------------------------------------------------------
<S> <C> <C>
MA State Industrial Finance Agency:
GF/Massachusetts Inc., Series 1994,
8.300% 07/01/23 $ 1,000 $ 986
Mary Ann Morse Nursing Home,
Series 1991-I,
10.000% 01/01/21 500 637
MI Cheboygan County Economic
Development Corp.,
Metro Health Foundation Project,
10.000% 11/01/22 (a) 600 420
MO Grove Industrial Development Authority,
First Mortgage Health Care Facility,
Heritage Manor GR, Series 1988,
10.250% 11/01/13 440 396
NJ Economic Development Authority,
Geriatric and Medical Service, Inc.,
Series A,
10.500% 05/01/04 115 125
OH Lucas County, Villa North
Nursing Home, Series 1988-B,
10.500% 06/01/18 300 294
PA Chartiers Valley Industrial
and Commercial Authority,
Beverly Enterprises, Series 1985,
10.000% 06/01/07 1,790 1,953
PA Chester County Industrial Development,
Pennsylvania Nursing Home, Inc., Series 1989,
10.125% 05/01/19 450 468
PA Delaware County Authority,
Main Line and Haverford Nursing,
Series 1992,
9.000% 08/01/22 50 54
PA Lackawanna County Industrial Authority,
Green Ridge Nursing Center, Inc.,
10.500% 12/01/10 200 213
PA Luzerne County Industrial Development
Authority, Millville Nursing Center,
10.500% 12/01/12 235 223
PA Montgomery County Higher Education
& Health Authority, AHF/Roslyn-
Hatboro, Inc. Project,
9.000% 11/15/22 300 312
PA Philadelphia Authority for Industrial
Development, First Mortgage, RHA/PA
Nursing Home, Series 1988,
10.250% 11/01/18 740 769
VA Beach Development Authority,
Beverly Enterprises, Series 1985,
10.000% 04/01/10 240 270
-----------
13,041
-----------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/November 30, 1995
- ---------------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- ---------------------------------------------------------------------------------------
<S> <C> <C>
HOUSING - 18.5%
ASSISTED LIVING/SENIOR - 3.5%
CT State Authority, First
Mortgage Gross Health Care,
Church-Avery Project, Series 1990,
9.000% 04/01/20 $ 500 $ 540
IL State Development Finance Authority,
Care Institute, Inc.,
8.250% 06/01/25 2,000 2,060
MN Roseville, Care Institute, Inc.,
Series 1993,
7.750% 11/01/23 1,270 1,181
PA Montgomery County Industrial
Development Authority, Assisted
Living Facility, Series 1993-A,
8.250% 05/01/23 620 627
TX Bell County Health Facilities
Development Corp., Care Institutions, Inc.
9.000% 11/01/24 1,000 1,071
-----------
5,479
-----------
MULTI-FAMILY - 11.1%
AK State Housing Finance Corp.,
Series 1992-A2,
6.750% 12/01/24 1,735 1,804
FL Clearwater,
Hampton Apartments,
8.250% 05/01/24 2,000 2,125
FL Hialeah Housing Authority,
Series 1991,
9.500% 11/01/21 2,000 2,100
FL State Housing Finance Agency,
Windsong Apartments, Series 1993-C,
9.250% 01/01/19 750 762
MN Lakeville, Southfork
Apartment Project, Series 1989-A,
9.875% 02/01/20 700 714
MN White Bear Lake,
Birch Lake Townhomes Project,
Series 1988-A,
9.750% 07/15/19 750 759
NC Eastern Carolina Regional Housing
Authority, Jacksonville New River
Apartments,
8.250% 09/01/14 1,500 1,528
Resolution Trust Corp.,
Pass Through Certificates,
Series 1993-A,
8.500% 12/01/16 (b) 4,248 4,391
</TABLE>
10
<PAGE>
<TABLE>
Investment Portfolio/November 30, 1995
- ---------------------------------------------------------------------------------------
<S> <C> <C>
SC State Housing Finance and Development,
Multi-family Housing Finance Revenue,
Westbridge Apartments, Series A,
9.500% 09/01/20 $ 650 $ 666
TN Memphis Center City Finance Corp.,
Multi-family Housing Board, Riverset
Apartments-Phase II Project, Series 1989-A,
9.500% 10/01/19 500 454
TX Galveston Pass Through Certificates,
Health Facilities Center,
8.000% 08/01/23 1,000 1,043
VA Alexandria Redevelopment
& Housing Authority, Courthouse
Commons Apartments, Series 1990-A,
10.000% 01/01/21 500 508
VA Roanoke Redevelopment & Housing
Authority, First Mortgage, Mountain Ridge,
9.250% 11/01/22 500 515
-----------
17,369
-----------
SINGLE-FAMILY - 3.9%
CA Orange County, Series 1983, Issue 1,
9.250% 09/01/16 55 52
CO State Housing Finance Authority,
Series D-1,
7.375% 06/01/26 2,000 2,213
MN Washington County Housing &
Redevelopment Authority, Cottages of
Aspen Project,
9.250% 06/01/22 495 509
MO State Housing Development Commission,
Series C,
7.250% 09/01/26 3,000 3,304
-----------
6,078
-----------
- ---------------------------------------------------------------------------------------
MANUFACTURING - 9.1%
FURNITURE & FIXTURES - 0.3%
TN McKenzie Industrial Development Board,
American Lantern Co.,
10.500% 05/01/16 473 509
-----------
MEASURING & ANALYZING INSTRUMENTS - 0.4%
MN Brooklyn Park, TL Systems Corp.,
Series 1991,
10.000% 09/01/16 535 637
-----------
PAPER PRODUCTS - 6.6%
GA Rockdale County Development
Authority, Solid Waste Disposal, Visy
Paper, Inc., Series 1993,
7.500% 01/01/26 2,500 2,563
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/November 30, 1995
- ---------------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- ---------------------------------------------------------------------------------------
<S> <C> <C>
MANUFACTURING - CONT.
PAPER PRODUCTS - CONT.
LA DeSoto Parish, International Paper,
6.550% 04/01/19 $ 1,000 $ 1,044
MI State Strategic Fund,
Blue Water Fiber Project, Series 1994,
8.000% 01/01/12 2,000 1,927
MI State Strategic Fund Limited,
Great Lakes Pulp & Fibre Project,
10.250% 12/01/16 2,500 2,634
SC Darlington County,
Industrial Development Authority,
Sonoco Products Co. Project,
6.125% 06/01/25 2,000 2,070
-----------
10,238
-----------
PRIMARY METAL - 1.3%
LA Vidalia, Alcoa Co. of
America Project,
5.875% 09/01/13 2,000 2,048
-----------
TRANSPORTATION EQUIPMENT - 0.5%
MN Buffalo, Von Ruden Manufacturing Inc.,
10.500% 09/01/14 790 851
-----------
- ---------------------------------------------------------------------------------------
MINING - 1.5%
CRUDE PETROLEUM & NATURAL GAS - 1.2%
WA Pierce County, Economic
Development Corp.,
Occidental Petroleum Co.,
5.800% 09/01/29 2,000 1,888
-----------
METAL MINING - 0.3%
OH Cuyahoga County,
Joy Technologies, Inc.,
8.750% 09/15/07 360 391
-----------
- ---------------------------------------------------------------------------------------
POLLUTION CONTROL REVENUE - 5.6%
GA Wayne County Development Authority,
Solid Waste Disposal, ITT Royonier,
Inc., Series 1990,
8.000% 07/01/15 500 561
IL Bryant Pollution Control Revenue,
Central Illinois Light Co. Project,
5.900% 08/01/23 1,750 1,792
OH State Water Development, Pollution
Control, Pennsylvania Power Co.,
8.100% 01/15/20 500 546
SC York County Industrial Revenue,
Hoechst Celanese Corp.,
5.700% 01/01/24 4,535 4,512
</TABLE>
12
<PAGE>
<TABLE>
Investment Portfolio/November 30, 1995
- ---------------------------------------------------------------------------------------
<S> <C> <C>
TX Matagorda County, Collateralized
Pollution Control, Houston Lighting
and Power Co., Series 1986-A,
7.875% 11/01/16 $ 800 $ 836
WV Weirton Pollution Control, Weirton
Steel Corp., Series 1989,
8.625% 11/01/14 500 532
-----------
8,779
-----------
- ---------------------------------------------------------------------------------------
PUBLIC FACILITIES IMPROVEMENT - 5.1%
CO Denver City and County
Special Facilities Airport,
United Air Lines, Series 1992-A,
6.875% 10/01/32 5,000 5,125
MN Mille Lacs Capital Improvement
Infrastructure, Band of Chippewa,
Series 1992-A,
9.250% 11/01/12 655 744
TX Dallas-Fort Worth International Airport,
American Airlines, Inc., Series 1990,
7.500% 11/01/25 2,000 2,140
-----------
8,009
-----------
- ---------------------------------------------------------------------------------------
PUBLIC INFRASTRUCTURE - 12.2%
AIRPORTS - 8.0%
CO Denver City & County Airport:
Airport System, Series 1992-C,
6.750% 11/15/22 1,250 1,300
Denver International Airport, Series 1991-D,
7.750% 11/15/21 2,000 2,233
Stapleton International Airport, Series 1990-A,
8.500% 11/15/23 250 285
IL Chicago O'Hare International Airport
Special Facility, United Airlines, Inc.,
Series 1988-A,
8.400% 05/01/18 965 1,055
IN State Airport Authority,
7.100% 01/15/17 4,000 4,350
TX Alliance Airport Authority,
American Airlines Project,
7.500% 12/01/29 3,000 3,217
-----------
12,440
-----------
TURNPIKES/TOLL ROADS/BRIDGES - 4.2%
CA Foothill Eastern Transportation
Corridor Agency, State Toll Road,
Senior Lien, Series A:
(c) 01/01/29 12,000 1,410
6.000% 01/01/34 1,500 1,466
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/November 30, 1995
- ---------------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- ---------------------------------------------------------------------------------------
<S> <C> <C>
PUBLIC INFRASTRUCTURE - CONT.
TURNPIKES/TOLL ROADS/BRIDGES - CONT.
CA San Joaquin Hills Transportation Corridor
Agency, Senior Lien Toll Road,
Series 1993, Current Interest Bond Series:
(c) 01/01/23 $ 5,250 $ 932
5.000% 01/01/33 2,000 1,685
MA State Industrial Finance Agency,
Series 1990,
9.000% 10/01/20 940 1,081
-----------
6,574
-----------
- ---------------------------------------------------------------------------------------
RETAIL TRADE - 1.4%
MISCELLANEOUS RETAIL
OH Lake County Economic Development,
North Madison Properties, Series 1993,
8.819% 09/01/11 545 579
VA Virginia Beach Development Authority,
SC Diamond Associates, Inc.,
8.000% 12/01/10 1,500 1,547
-----------
2,126
-----------
- ---------------------------------------------------------------------------------------
SERVICES - 0.3%
HOTELS, CAMPS & LODGING
MN Burnsville Commercial Development,
Holiday Inn Project,
10.600% 06/01/06 500 514
-----------
- ---------------------------------------------------------------------------------------
SOLID WASTE - 5.3%
LAND FILL - 2.0%
MA State Industrial Finance Agency,
Peabody Monofill Associates, Inc. Project,
9.000% 09/01/05 950 1,018
WA Walla Walla Public Corp.,
Ponderosa Fibres Project,
9.125% 01/01/26 2,000 2,087
-----------
3,105
-----------
MISCELLANEOUS DISPOSAL - 1.0%
CT State Disposal Facility,
Waterbury Project, Series 1995,
9.375% 06/01/16 1,500 1,519
-----------
RECYCLING - 0.1%
GA Fulton County Industrial Development
Authority, Waste Recycling, Inc.,
10.500% 12/01/07 120 127
-----------
</TABLE>
14
<PAGE>
<TABLE>
Investment Portfolio/November 30, 1995
- ---------------------------------------------------------------------------------------
<S> <C> <C>
RESOURCE RECOVERY - 2.2%
WY Sweetwater County,
FMC Corp. Project, Series A,
7.000% 06/01/24 $ 3,325 $ 3,491
-----------
- ---------------------------------------------------------------------------------------
TAX ALLOCATION - 2.7%
CA Carson Improvement, Series 1992,
7.375% 09/02/22 975 1,030
CA Pleasanton Joint Powers Financing
Reassesment Subordinated Revenue,
Series 1993-B,
6.750% 09/02/17 1,950 1,960
IL State Development Finance Authority,
City of Marion Project, Series 1991,
9.625% 09/15/21 1,195 1,241
-----------
4,231
-----------
- ---------------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 1.4%
AIR TRANSPORTATION
NY New York City Industrial Development
Agency, American Airlines,
6.900% 08/01/24 2,000 2,128
-----------
- ---------------------------------------------------------------------------------------
UTILITY - 5.1%
CO-GENERATION - 1.6%
FL Martin County Industrial
Development Authority, Indiantown
Co-Generation Project,
7.875% 12/15/25 1,000 1,142
MD State Energy Financing Administration,
Co-Generation Warrior Run Project,
7.400% 09/01/19 1,250 1,308
-----------
2,450
-----------
INDIVIDUAL POWER PRODUCER - 2.0%
PA State Economic Development Finance
Authority, Colver Project, Series D,
7.150% 12/01/18 2,900 3,063
-----------
MUNICIPAL ELECTRIC - 1.5%
CA Colton Public Finance Authority,
7.500% 10/01/20 1,000 1,013
MN Southern Minnesota Municipal
Power Agency, Series 1994-A,
(c) 01/01/25 6,660 1,340
-----------
2,353
-----------
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/November 30, 1995
- ---------------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- ---------------------------------------------------------------------------------------
<S> <C> <C>
WATER & SEWER - 3.1%
LA Public Facility Belmont Water
Authority,
9.000% 03/15/24 $ 630 $ 664
MA State Industrial Finance Agency,
Environmental Service Project,
Series 1994-A,
8.750% 11/01/21 1,000 1,036
MS Five Lakes Utility District,
8.250% 07/15/24 400 415
NJ Economic Development Authority,
Hills Development Co., Series 1988,
10.500% 09/01/08 400 418
NY New York City Municipal Water
Finance Authority, Series B,
5.500% 06/15/19 2 ,000 1,995
OH State Water Development Pollution
Collateralized Control, The Cleveland
Electric Illumination, Series 1987 A-2,
9.750% 11/01/22 250 266
-----------
4,794
-----------
TOTAL MUNICIPAL BONDS (cost of $142,456) (d) 148,814
-----------
SHORT-TERM OBLIGATIONS - 2.6%
- ---------------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (e)
IL State Development Finance Authority,
Ulhich Children's Home Project,
3.900% 04/01/07 1,500 1,500
IL State Health Facilities Authority,
Franciscan Sisters Health Center,
4.100% 01/01/18 700 700
MA State Health and Educational Facilities,
Capital Assets,
3.800% 01/01/35 1,000 1,000
MI Farmington, Botsford Hospital,
3.900% 02/15/16 300 300
SC State Jobs Economic Development
Authority,
4.100% 12/01/12 600 600
-----------
TOTAL SHORT-TERM OBLIGATIONS 4,100
-----------
OTHER ASSETS & LIABILITIES, NET - 1.9% 2,976
- ---------------------------------------------------------------------------------------
NET ASSETS - 100% $ 155,890
-----------
</TABLE>
16
<PAGE>
Investment Portfolio/November 30, 1995
- --------------------------------------------------------------------------------
NOTES TO INVESTMENT PORTFOLIO:
- --------------------------------------------------------------------------------
(a) This issuer is in default of certain debt covenants. Income is not being
accrued.
(b) This security is exempt from registration under rule 144A of the Securities
Act of 1933. This security may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At year end, the
value of this security amounted to $4,391 or 2.8% of net assets.
(c) Zero coupon bond.
(d) Cost for federal income tax purposes is the same.
(e) 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.
See notes to financial statements.
17
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
NOVEMBER 30, 1995
<TABLE>
(In thousands except for per share amounts and footnotes)
<S> <C> <C>
ASSETS
Investments at value (cost $142,456) ............................... $ 148,814
Short-term obligations ............................................. 4,100
---------
152,914
Receivable for:
Interest ...................................... $ 3,504
Fund shares sold .............................. 678
Investments sold .............................. 211
Deferred organization expenses ................ 30
Other ......................................... 15 4,438
--------- ---------
Total Assets .................................................... 157,352
LIABILITIES
Payable for:
Distributions ................................. 751
Fund shares repurchased ....................... 386
Accrued:
Deferred Trustees fees ........................ 3
Other ........................................... 322
---------
Total Liabilities .............................................. 1,462
---------
NET ASSETS ......................................................... $ 155,890
---------
Net asset value & redemption price per share -
Class A ($17,997/1,759) ............................................ $ 10.23
---------
Maximum offering price per share - Class A
($10.23/0.9525) .................................................... $ 10.74(a)
---------
Net asset value & offering price per share -
Class B ($137,893/13,479) .......................................... $ 10.23(b)
---------
COMPOSITION OF NET ASSETS
Capital paid in ................................................... $ 153,609
Undistributed net investment income ................................ 337
Accumulated net realized loss ...................................... (4,414)
Net unrealized appreciation during the period ...................... 6,358
---------
$ 155,890
---------
</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.
18
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 1995
<TABLE>
<S> <C> <C>
(in thousands)
INVESTMENT INCOME
Interest................................................................. $ 10,820
EXPENSES
Management fee............................................. $ 759
Service fee................................................ 345
Distribution fee - Class B................................. 948
Transfer agent............................................. 227
Bookkeeping fee............................................ 58
Trustees fee............................................... 15
Custodian fee.............................................. 7
Audit fee.................................................. 32
Legal fee.................................................. 96
Registration fee........................................... 32
Reports to shareholders.................................... 6
Amortization of deferred...................................
organization expenses.................................... 18
Other...................................................... 19 2,562
-------- --------
Net Investment Income............................................. 8,258
--------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized loss.......................................... (2,355)
Net unrealized appreciation during
the period............................................... 14,952
--------
Net Gain.......................................................... 12,597
--------
Net Increase in Net Assets From Operations............................... $ 20,855
--------
</TABLE>
See notes to financial statements.
19
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended
(in thousands) November 30
------------------------
INCREASE (DECREASE) IN NET ASSETS 1995 1994(a)
---- -------
<S> <C> <C>
Operations:
Net investment income ............................. $ 8,258 $ 7,305
Net realized loss ................................. (2,355) (1,389)
Net unrealized appreciation (depreciation) ........ 14,952 (11,175)
--------- ---------
Net Increase from Operations .................. 20,855 (5,259)
Distributions:
From net investment income - Class A .............. (771) (79)
From net investment income - Class B .............. (7,619) (6,882)
--------- ---------
12,465 (12,220)
--------- ---------
Fund Share Transactions:
Receipts for shares sold - Class A ................ 12,349 7,128
Value of distributions reinvested - Class A ....... 218 11
Cost of shares repurchased - Class A .............. (1,592) (862)
--------- ---------
10,975 6,277
--------- ---------
Receipts for shares sold - Class B ................ 30,411 17,113
Value of distributions reinvested - Class B ....... 3,686 3,138
Cost of shares repurchased - Class B .............. (21,223) (15,255)
--------- ---------
12,874 4,996
--------- ---------
Net Increase from Fund Share Transactions ..... 23,849 11,273
--------- ---------
Total Increase (Decrease) ................. 36,314 (947)
NET ASSETS
Beginning of period ............................... 119,576 120,523
--------- ---------
End of period (including undistributed net
investment income of $337 and $432,
respectively) .................................. $ 155,890 $ 119,576
--------- ---------
NUMBER OF FUND SHARES
Sold - Class A .................................... 1,253 735
Issued for distributions reinvested - Class A ..... 22 1
Repurchased - Class A ............................. (162) (90)
--------- ---------
1,113 646
--------- ---------
Sold - Class B .................................... 3,085 1,738
Issued for distributions reinvested - Class B ..... 377 317
Repurchased - Class B ............................. (2,157) (1,558)
--------- ---------
1,305 497
--------- ---------
</TABLE>
(a) Class A shares were initially offered on September 1, 1994.
See notes to financial statements.
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30,1995
NOTE 1. ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
ORGANIZATION: Colonial High Yield Municipal 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.
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 (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 is not accreted. Premium is amortized against interest income with a
corresponding decrease in the cost basis.
21
<PAGE>
Notes to Financial Statements/November 30, 1995
- ---------------------------------------------------------------------------
NOTE 1. ACCOUNTING POLICIES - CONT.
DEFERRED ORGANIZATION EXPENSES: The Fund incurred expenses of $95,525 in con-
nection with its organization, initial registration with the Securities and
Exchange Commission and 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. 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
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 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. For the year ended November 30, 1995, the Fund has been
advised that the Distributor retained net underwriting discounts of $27,077 on
sales of the Fund's Class A shares and received contingent deferred sales
charges (CDSC) of $264,994 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.
22
<PAGE>
Notes to Financial Statements/November 30, 1995
- --------------------------------------------------------------------------------
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.
NOTE 3. PORTFOLIO INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT ACTIVITY: During the year ended November 30, 1995, purchases and
sales of investments, other than short-term obligations, were $54,203,267 and
$34,991,513, respectively.
Unrealized appreciation (depreciation) at November 30, 1995, based on cost of
investments for both financial statement and federal income tax purposes was
approximately:
<TABLE>
<S> <C>
Gross unrealized appreciation ......... $ 7,794,000
Gross unrealized depreciation ......... (1,436,000)
-------------
Net unrealized appreciation ....... $ 6,358,000
-------------
</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................................. $ 57,000
1997................................. 186,000
1998................................. 590,000
1999................................. 364,000
2000................................. 302,000
2002................................. 1,731,000
2003................................. 2,398,000
---------------
$ 5,628,000
---------------
</TABLE>
The loss carryforwards 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
share- holders 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.
23
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each
period are as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
YEAR ENDED NOVEMBER 30 NOVEMBER 30
------------------------------------------------------------------------------
1995 1994 1993 1992
CLASS A CLASS B CLASS A(a) CLASS B CLASS B CLASS B(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 FROM INVESTMENT OPERATIONS:
Net investment income ............. 0.656 0.583 0.188 0.605 0.609 0.338(c)
Net realized and
unrealized gain (loss) ............ 0.912 0.912 (0.496) (1.016) 0.277 0.041
------- -------- ------- -------- -------- -------
Total from Investment
Operations .................. 1.568 1.495 (0.308) (0.411) 0.886 0.379
------- -------- ------- -------- -------- -------
LESS DISTRIBUTIONS DECLARED TO
SHAREHOLDERS:
From net
investment income ................. (0.668) (0.595) (0.162) (0.579) (0.636) (0.309)
------- -------- ------- -------- -------- -------
Net asset value -
End of period .................. $10.230 $ 10.230 $ 9.330 $ 9.330 $ 10.320 $10.070
------- -------- ------- -------- -------- -------
Total return (d) .................. 17.28% 16.42% (3.15%)(e) (4.10%) 9.00% 3.80%(e)(f)
------- -------- ------- -------- -------- -------
RATIOS TO AVERAGE NET ASSETS
Expenses ......................... 1.17%(g) 1.92%(g) 1.15%(h) 1.90% 1.94% 2.00%(h)
Fees waived by
the Adviser ................... -- -- -- -- -- 0.01%(h)
Net investment income ............ 6.67%(g) 5.92%(g) 7.19%(h) 6.44% 5.95% 6.83%(h)
Portfolio turnover ............... 26% 26% 25% 25% 31% 13%(h)
Net assets at end
of period (000) ............... $17,997 $137,893 $ 6,027 $113,549 $120,523 $63,390
</TABLE>
(a) Class A shares were initially offered on September 1, 1994. Per share
amounts reflect activity from that date.
(b) The Fund commenced investment operations on June 8, 1992.
(c) Net of fees and expenses waived or borne by the Adviser which amounted to
$0.00.
(d) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(e) Not annualized.
(f) Had the Adviser not waived or reimbursed a portion of expenses total return
would have been reduced.
(g) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior year ratios are net of benefits received,
if any.
(h) Annualized.
- --------------------------------------------------------------------------------
Federal Income Tax Information (unaudited)
All of the distributions will be treated as exempt income for federal income
tax purposes.
- --------------------------------------------------------------------------------
24
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
T0 THE TRUSTEES OF COLONIAL TRUST IV AND THE SHAREHOLDERS OF
COLONIAL HIGH YIELD MUNICIPAL 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 High Yield Municipal 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, provide a reasonable
basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
January 12, 1996
25
<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.
26
<PAGE>
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial High Yield Municipal Fund is:
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
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.
This report has been prepared for shareholders of Colonial High Yield Municipal
Fund. This report may also be used as sales literature when preceded or
accompanied by the current prospectus which provides details of sales charges,
investment objectives and operating policies of the Fund.
27
<PAGE>
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
HM-02/485B-1195 (1/96)
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