<PAGE>
- --------------------------------------------------------------------------------
--------
Colonial
--------
-------------------------
High Yield Municipal Fund
-------------------------
[Photo]
-------------
Annual Report
-------------
-----------------
November 30, 1996
-----------------
---------------------------------
NOT FDIC- MAY LOSE VALUE
INSURED NO BANK GUARANTEE
---------------------------------
- --------------------------------------------------------------------------------
<PAGE>
COLONIAL HIGH YIELD MUNICIPAL FUND HIGHLIGHTS
DECEMBER 1, 1995 - NOVEMBER 30, 1996
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
- Expert credit analysis
- Experienced professional management
PORTFOLIO MANAGER COMMENTARY: "We continue to focus on industrial revenue bonds
and to broadly diversify the Fund across sectors. We believe the supply of high
yield bonds will diminish over the near term and we will be working harder to
identify unconventional total return opportunities, such as bond issuers that
are candidates for credit rating upgrades or acquisition."
-- BONNY BOATMAN AND PETER ANDERSEN
<TABLE>
COLONIAL HIGH YIELD MUNICIPAL FUND PERFORMANCE
<CAPTION>
CLASS A CLASS B
<S> <C> <C>
Inception dates 9/1/94 6/8/92
- --------------------------------------------------------------------------------
Distributions declared per share* $0.643 $0.567
- --------------------------------------------------------------------------------
SEC yields on 11/30/96** 5.57% 5.09%
- --------------------------------------------------------------------------------
Taxable-equivalent SEC yields*** 9.22% 8.43%
- --------------------------------------------------------------------------------
12-month total returns, assuming reinvestment 5.86% 5.07%
of all distributions and no sales charge or
contingent deferred sales charge (CDSC)
- --------------------------------------------------------------------------------
Net asset value per share on 11/30/96 $10.16 $10.16
- --------------------------------------------------------------------------------
<FN>
*A portion of the Fund's income may be subject to the alternative minimum tax.
** The 30-day SEC yields on November 30, 1996, reflect 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 yields are based on the maximum federal income tax
rate of 39.6%.
The Fund may at times purchase tax-exempt securities at a discount, and some or
all of this discount may be included in the Fund's ordinary income which will be
taxable when distributed.
<CAPTION>
QUALITY BREAKDOWN (as of 11/30/96)
<S> <C>
AAA ................................................................ 6.1%
AA ................................................................. 5.0%
A .................................................................. 13.8%
BBB ................................................................ 29.0%
BB ................................................................. 1.6%
B .................................................................. 0.3%
Non-rated .......................................................... 43.1%
Cash and equivalents ............................................... 1.1%
Quality weightings are calculated as a percentage of total net assets. Because
the Fund is actively managed, there can be no guarantee the Fund will continue
to maintain quality weightings in the future.
</TABLE>
2
<PAGE>
PRESIDENT'S MESSAGE
To Fund Shareholders
[PHOTO]
I am pleased to present your Fund's annual report for the fiscal year ended
November 30, 1996. This report reflects on the investment environment of the
past 12 months and on the performance of your Fund.
While the Federal Reserve Board lowered short-term interest rates early in the
period, stronger than expected economic reports in February 1996 brought the
Fed's easing trend to a halt. As a result, long-term interest rates were rising
during most of the period, having a negative effect on fixed income investments.
However, with recent statistics suggesting an easing pace of economic activity
and a continued benign inflation outlook, we are hopeful that bond market
volatility will be somewhat reduced in the months ahead.
There was some good news for the tax-exempt sector. Low supply and strong retail
market support, enabled municipal bonds to outperform Treasury bonds for much of
the year. The post-election conditions should promote a period of stability for
the tax-exempt market as the flat tax initiative is now a receding memory.
In the domestic stock market, generally favorable conditions prevailed until
July, when a price-based correction took place. Since then, the market has
rebounded nicely with the Dow Jones Industrial Average setting several new
records. Internationally, the Tiger countries of the Pacific Rim continue to
offer a good combination of growth and value. In the European markets,
short-term interest rates continue to be much lower than long-term rates. We
expect these conditions to prevail until we see an increase in economic
activity.
Our economic expectations include growth continuing at a slower, but more
sustainable rate, and our outlook for 1997 is relatively bright.
The following report will provide you with specific information on your
Fund's performance as well as an in-depth discussion with your portfolio
manager. As always, we thank you for the opportunity to help you meet your
investment goals through the Colonial family of funds.
Respectfully,
/s/ Harold W. Cogger
Harold W. Cogger
President
January 10, 1997
Because market conditions change frequently, there can be no assurance that the
trends described here will continue, come to pass or affect Fund performance.
3
<PAGE>
PORTFOLIO MANAGEMENT REPORT
BONNY BOATMAN AND PETER ANDERSEN are portfolio co-managers of Colonial High
Yield Municipal Fund. Ms. Boatman is senior vice president of Colonial
Management Associates, Inc. and Director of the Municipal Bond Department.
Mr. Andersen is vice president of Colonial Management Associates, Inc.
Q. HAS THERE BEEN ANY CHANGE TO YOUR INVESTMENT STRATEGY DURING THE PAST 12
MONTHS?
A. Over the past twelve months, we maintained a long-range outlook. Our strategy
continued to focus on industrial revenue bonds backed by publicly held companies
and on broad diversification across many sectors of the economy. For example,
during the period we added positions in FMC Corp., B.F. Goodrich, Texas
Instruments, Quaker Oats, Lockheed Martin and Alcoa Corp. based on our belief
that these companies would benefit from either economic or specific market
sector conditions. These holdings provided strong total return contributions to
the Fund's performance.
Q. WHAT OTHER FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE DURING THE PERIOD?
A. Despite the fact that long-term interest rates, as tracked by the yield on
the 30-year Treasury bond, were only somewhat higher at the end of the period
than at the beginning, there was significant market volatility during the year.
The Fund had approximately 43% of its assets invested in non-rated bonds. These
bonds performed very well in this environment; they have a lower sensitivity to
changes in interest rates as a result of their high coupons and credit intensive
nature. The Fund's performance this year was driven by high levels of current
income, in contrast to last year's performance that was driven by capital
appreciation.
Our investment in two paper recycling projects partially offset the positive
performance of our positions in industrial revenue and non-rated bonds. These
two paper recycling projects declined in value as pulp prices fell to all-time
lows. The Fund's exposure to these two projects has been significantly reduced
and we are hopeful that our remaining holdings may benefit as market conditions
improve.
Q. HOW DID THE FUND'S 12-MONTH PERFORMANCE COMPARE TO THE LEHMAN BROTHERS
MUNICIPAL BOND INDEX?
A. The Fund underperformed the Lehman Brothers Municipal Bond Index, a
broad-based, unmanaged index that tracks the performance of the municipal bond
market. The total return for Class A Shares, based on net asset value, was 5.86%
while the return on the Index was 5.89%. The Fund under-performed the Index as a
result of its holdings in high coupon, non-rated bonds that are not represented
by the Index.
4
<PAGE>
Q. WHAT IS YOUR OUTLOOK FOR THE TAX-EXEMPT BOND MARKET?
A. We believe that strong levels of consumer activity may result in the Federal
Reserve Board tightening interest rates further down the line in 1997. However,
with the election year behind us and a balance of Democrats and Republicans in
Congress we believe that political conditions will promote stability in the
municipal bond market. Accordingly, we will continue to pursue value for
shareholders by investing in industrial revenue bonds, diversifying into many
economic sectors and maintaining our non-rated holdings at their current level.
<TABLE>
COLONIAL HIGH YIELD MUNICIPAL FUND INVESTMENT PERFORMANCE
Change in Value of $10,000 from 6/30/92 - 11/30/96
Based on NAV and CDSC for Class B Shares
<CAPTION>
[Line Graph]
DATE NAV MOP Lehman Muncipal Bond IX Trust
---- --- --- -----------------------------
<S> <C> <C> <C>
Jun 30, 92 .................. $10000 $10000 $10000
Jul 31, 92 .................. 10251.34 10251.34 10300
Aug 31, 92 .................. 10194.34 10194.34 10200
Sep 30, 92 .................. 10227.46 10227.46 10266
Oct 31, 92 .................. 10179.73 10179.73 10165
Nov 30, 92 .................. 10263.83 10263.83 10347
Dec 31, 92 .................. 10368.82 10368.82 10453
Jan 31, 93 .................. 10433.26 10433.26 10575
Feb 28, 93 .................. 10652.63 10652.63 10957
Mar 31, 93 .................. 10624.52 10624.52 10841
Apr 30, 93 .................. 10710.79 10710.79 10950
May 31, 93 .................. 10745.30 10745.30 11012
Jun 30, 93 .................. 10874.46 10874.46 11196
Jul 31, 93 .................. 10909.07 10909.07 11211
Aug 31, 93 .................. 11102.97 11102.97 11444
Sep 30, 93 .................. 11202.26 11202.3 11575
Oct 31, 93 .................. 11237.94 11237.94 11597
Nov 30, 93 .................. 11186.70 11186.70 11494
Dec 31, 93 .................. 11261.29 11261.29 11737
Jan 31, 94 .................. 11369.42 11369.42 11871
Feb 28, 94 .................. 11226.66 11226.66 11564
Mar 31, 94 .................. 10850.82 10850.82 11093
Apr 30, 94 .................. 10826.84 10826.84 11187
May 31, 94 .................. 10901.7 10901.7 11284
Jun 30, 94 .................. 10921.84 10921.84 11215
Jul 31, 94 .................. 11076.86 11076.86 11420
Aug 31, 94 .................. 11097.48 11097.48 11460
Sep 30, 94 .................. 11016.23 11016.23 11292
Oct 31, 94 .................. 10890.06 10890.06 11091
Nov 30, 94 .................. 10727.45 10727.45 10891
Dec 31, 94 .................. 10877.21 10877.21 11130
Jan 31, 95 .................. 11131.03 11131 11449
Feb 28, 95 .................. 11398.50 11398.50 11782
Mar 31, 95 .................. 11526.62 11526.62 11917
Apr 30, 95 .................. 11538 11538 11931
May 31, 95 .................. 11844.03 11844 12312
Jun 30, 95 .................. 11807.70 11807.70 12204
Jul 31, 95 .................. 11878.35 11878.35 12320
Aug 31, 95 .................. 11984.63 11984.63 12476
Sep 30, 95 .................. 12103.58 12103.6 12555
Oct 31, 95 .................. 12271.41 12271.41 12737
Nov 30, 95 .................. 12488.43 12488.43 12949
Dec 31, 95 .................. 12621.42 12621.42 13073
Jan 31, 96 .................. 12668.84 12668.84 13172
Feb 29, 96 .................. 12619.03 12619.03 13083
Mar 31, 96 .................. 12466.91 12466.91 12916
Apr 30, 96 .................. 12463.33 12463.33 12879
May 31, 96 .................. 12459.81 12459.81 12874
Jun 30, 96 .................. 12581.87 12581.87 13015
Jul 31, 96 .................. 12640.34 12640.34 13132
Aug 31, 96 .................. 12674.32 12674.32 13129
Sep 30, 96 .................. 12809.88 12809.88 13313
Oct 31, 96 .................. 12946.38 12946.38 13463
Nov 30, 96 .................. 13122.12 12922.12 13710
<FN>
A $10,000 investment in Class A shares made on September 1, 1994 at net asset
value (NAV) would have been valued at $12,024 on November 30, 1996. The same
investment based on maximum offering price (MOP) would have grown to $11,453 on
November 30, 1996.
The Lehman Brothers Municipal Bond Index is a broad-based, unmanaged index that
tracks the performance of the municipal bond market. Unlike mutual funds,
indexes are not investments, do not incur fees or expenses and it is not
possible to invest in an index.
AVERAGE ANNUAL TOTAL RETURNS
As of December 31, 1996 (Most Recent Quarter End)
<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 4.51% (0.45)% 3.73% (1.17)%
- --------------------------------------------------------------------------------
Since Inception 8.13% 5.90% 6.34% 5.98%
- --------------------------------------------------------------------------------
Return and value of an investment will vary, resulting in a gain or loss on
sale. All results shown assume reinvestment of distributions. NAV returns do not
include sales charges or CDSC. MOP returns include the maximum sales charge of
4.75%. The CDSC returns reflect the maximum charge of 5% for one year and 2%
since inception. Past performance cannot predict future results.
</TABLE>
5
<PAGE>
<TABLE>
CHYMF
<CAPTI0N>
CHYMF.XLS NAV M0P
<S> <C> <C>
6/30/92 00: 10000 10000
7/31/92 00: 10251.34 10251.34
8/31/92 00: 10194.34 10194.34
9/30/92 00: 10227.46 10227.46
10/31/92 00 10179.73 10179.73
11/30/92 00 10263.83 10263.83
12/31/92 00 10368.82 10368.82
1/31/93 00: 10433.26 10433.26
2/28/93 00: 10652.63 10652.63
3/31/93 00: 10624.52 10624.52
4/30/93 00: 10710.79 10710.79
5/31/93 00: 10745.3 10745.3
6/30/93 00: 10874.46 10874.46
7/31/93 00: 10909.07 10909.07
8/31/93 00: 11102.97 11102.97
9/30/93 00: 11202.26 11202.26
10/31/93 00 11237.94 11237.94
11/30/93 00 11186.7 11186.7
12/31/93 00 11261.29 11261.29
1/31/94 00: 11369.42 11369.42
2/28/94 00: 11226.66 11226.66
3/31/94 00: 10850.82 10850.82
4/30/94 00: 10826.84 10826.84
5/31/94 00: 10901.7 10901.7
6/30/94 00: 10921.84 10921.84
7/31/94 00: 11076.86 11076.86
8/31/94 00: 11097.48 11097.48
9/30/94 00: 11016.23 11016.23
10/31/94 00 10890.06 10890.06
11/30/94 00 10727.45 10727.45
12/31/94 00 10877.21 10877.21
1/31/95 00: 11131.03 11131.03
2/28/95 00: 11398.5 11398.5
3/31/95 00: 11526.62 11526.62
4/30/95 00: 11538 11538
5/31/95 00: 11844.03 11844.03
6/30/95 00: 11807.7 11807.7
7/31/95 00: 11878.35 11878.35
8/31/95 00: 11984.63 11984.63
9/30/95 00: 12103.58 12103.58
10/31/95 00 12271.41 12271.41
11/30/95 00 12488.43 12488.43
12/31/95 00 12621.42 12621.42
1/31/96 00: 12668.84 12668.84
2/29/96 00: 12619.03 12619.03
3/31/96 00: 12466.91 12466.91
4/30/96 00: 12463.33 12463.33
5/31/96 00: 12459.81 12459.81
</TABLE>
Page 1
<PAGE>
<TABLE>
CHYMF
<S> <C> <C>
6/30/96 00: 12581.87 12581.87
7/31/96 00: 12640.34 12640.34
8/31/96 00: 12674.32 12674.32
9/30/96 00: 12809.88 12809.88
10/31/96 00 12946.38 12946.38
11/30/96 00 13122.12 12922.12
</TABLE>
Page 2
<PAGE>
<TABLE>
Sheet 1
Lehman Muni Bond IX Tr
<S> <C>
6/30/92 $10,000
7/31/92 10,300
8/31/92 10,200
9/30/92 10,266
10/31/92 10,165
11/30/92 1O,347
12/31/92 10,453
1/31/93 10,575
2/28/93 10,957
3/31/93 10,841
4/30/93 10,950
5/31/93 11,012
6/30/93 11,196
7/31/93 11,211
8/31/93 11,444
9/30/93 11,575
10/31/93 11,597
11/30/93 11,494
12/31/93 11,737
1/31/94 11,871
2/28/94 11,564
3/31/94 11,093
4/30/94 11,187
5/31/94 11,284
6/30/94 11,215
7/31/94 11,420
8/31/94 11,460
9/30/94 11,292
10/31/94 11,091
11/30/94 10,891
12/31/94 11,130
1/31/95 11,449
2/28/95 11,782
3/31/95 11,917
4/30/95 11,931
5/31/95 12,312
6/30/95 12,204
7/31/95 12,320
8/31/95 12,476
9/30/95 12,555
10/31/95 12,737
11/30/95 12,949
12/31/95 13,073
1/31/96 13,172
2/29/96 13,083
3/31/96 12,916
4/30/96 12,879
</TABLE>
Page 1
<PAGE>
<TABLE>
Sheet 1
<S> <C>
5/31/96 12,874
6/30/96 13,015
7/31/96 13,132
8/31/96 13,129
9/30/96 13,313
10/31/96 13,463
11/30/96 $13,710
</TABLE>
Page 2
<PAGE>
Lable A B C
--------------------------------------------------------
Label nav mop
---------------------------------------------------------
1 Jun 30, 92 $10000 $10000 $10000
2 Jul 31, 92 10251.34 10251.34 10300
3 Aug 31, 92 10194.34 10194.34 10200
4 Sep 30, 92 10227.46 10227.46 10266
5 Oct 31, 92 10179.73 10179.73 10165
6 Nov 30, 92 10263.83 10263.83 10347
7 Dec 31, 92 10368.82 10368.82 10453
8 Jan 31, 93 10433.26 10433.26 10575
9 Feb 28, 93 10652.63 10652.63 10957
10 Mar 31, 93 10624.52 10624.52 10841
11 Apr 30, 93 10710.79 10710.79 10950
12 May 31, 93 10745.3 10745.3 11012
13 Jun 30, 93 10874.46 10874.46 11196
14 Jul 31, 93 10909.07 10909.07 11211
15 Aug 31, 93 11102.97 11102.97 11444
16 Sep 30, 93 11202.26 11202.26 11575
17 Oct 31, 93 11237.94 11237.94 11597
18 Nov 30, 93 11186.70 11186.7 11494
19 Dec 31, 93 11261.29 11261.29 11737
20 Jan 31, 94 11369.42 11369.42 11871
21 Feb 28, 94 11226.66 11226.66 11564
22 Mar 31, 94 10850.82 10850.82 11093
23 Apr 30, 94 10826.84 10826.84 11187
24 May 31, 94 10901.7 10901.7 11284
25 Jun 30, 94 10921.84 10921.84 11215
26 Jul 31, 94 11076.86 11076.86 11420
27 Aug 31, 94 11097.48 11097.48 11460
28 Sep 30, 94 11016.23 11016.23 11292
29 Oct 31, 94 10890.06 10890.06 11091
30 Nov 30, 94 10727.45 10727.45 10891
31 Dec 31, 94 10877.21 10877.21 11130
32 Jan 31, 95 11131.03 11131.03 11449
33 Feb 28, 95 11398.5 11398.50 11782
34 Mar 31, 95 11526.62 11526.62 11917
35 Apr 30, 95 11538 11538 11931
36 May 31, 95 11844.03 11844.03 12312
37 Jun 30, 95 11807.7 11807.7 12204
38 Jul 31, 95 11878.35 11878.35 12320
39 Aug 31, 95 11984.63 11984.63 12476
40 Sep 30, 95 12103.58 12103.58 12555
41 Oct 31, 95 12271.41 12271.41 12737
42 Nov 30, 95 12488.43 12488.43 12949
43 Dec 31, 95 12621.42 12621.42 13073
44 Jan 31, 96 12668.84 12668.84 13172
45 Feb 29, 96 12619.03 12619.03 13083
46 Mar 31, 96 12466.91 12466.91 12916
<PAGE>
Label A B C
- -----------------------------------------------------------------
47 Apr 30, 96 12463.33 12463.33 12879
48 May 31, 96 12459.81 12459.81 12874
49 Jun 30, 96 12581.87 12581.87 13015
50 Jul 31, 96 12640.34 12640.34 13132
51 Aug 31, 96 12674.32 12674.32 13129
52 Sep 30, 96 12809.88 12809.88 13313
53 Oct 31, 96 12946.38 12946.38 13463
54 Nov 30, 96 13122.12 12922.12 13710
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
NOVEMBER 30, 1996 (IN THOUSANDS)
<CAPTION>
MUNICIPAL BONDS - 95.9% PAR VALUE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EDUCATION - 0.3%
SCHOOL DISTRICT GENERAL OBLIGATION
AZ Apache County School District
Number 010, Round Valley
Project of 1987, Series 1990-C,
9.875% 07/01/05 $ 500 $ 555
------
- ------------------------------------------------------------------------------
HEALTH - 15.8%
HOSPITALS - 8.1%
AL Alabama Special Care Facilities Authority,
Montgomery Healthcare,
Series 1989,
11.000% 10/01/19 295 301
DE State Economic Development Authority,
Riverside Hospital,
Series 1992-A,
9.500% 01/01/22 605 799
FL Tarpon Springs Health Facilities
Authority Hospital, Tarpon Springs
Hospital Foundation, Series 1988,
8.750% 05/01/12 1,000 1,058
GA Clayton Hospital Authority,
The Woodlands Foundation, Inc.,
Series 1991-A,
9.750% 05/01/21 1,500 1,275
ID State Health Facilities Authority,
IHC Hospitals, Inc.,
8.420% 02/15/21 1,000 1,121
IL Health Facilities Authority,
Edgewater Medical Center,
Series A,
9.250% 07/01/24 2,000 2,205
MO Hannibal Industrial Development,
Medical Systems of Northeast Missouri,
Series 1992,
9.500% 03/01/22 1,000 1,259
NJ Health Care Facilities Financing
Authority, Raritan Bay Medical Center,
7.250% 07/01/27 2,000 2,105
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/November 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OH Marion County,
Community Hospital,
Series 1996,
6.375% 05/15/11 $1,000 $ 1,016
PA Cambria County Hospital Authority,
Conemaugh Valley Memorial Hospital,
Series 1988-A,
8.875% 07/01/18 165 176
TN Chattanooga Health Education
and Housing Facilities Board,
North Park Hospital Project, Series 1993,
8.500% 02/01/23 990 1,036
VA Dickenson County Industrial Development
Authority, Volunteer Healthcare Systems, Inc.,
Series 1988-A,
10.750% 06/(a)18 500 150
VT Educational & Health Buildings
Financing Agency,
Springfield Hospital, Series A,
7.750% 01/01/13 810 886
WA Washington State Health Care
Facility, Grays Harbor Community
Hospital, Series 1993:
7.200% 07/01/03 195 217
8.025% 07/01/20 960 1,098
-------
14,702
-------
INTERMEDIATE CARE FACILITIES - 1.3%
IL Champaign,
Hoosier Care, Inc.,
Series 1989-A,
9.750% 08/01/19 490 522
IN Wabash First Mortgage, Hoosier
Care, Inc., Series 1989-A,
9.750% 08/01/19 490 522
MA State Health & Educational
Facilities Authority,
Corporation for Independent Living,
8.100% 07/01/18 600 606
TN Shelby County, Health, Education,
& Housing Facilities Board, Open Arms
Development Center, Series 1992-A,
9.750% 08/01/19 335 387
</TABLE>
7
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO/NOVEMBER 30, 1996
<CAPTION>
- -------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HEALTH - CONT.
Intermediate Care Facilities - Cont.
TN Shelby County, Health, Education,
& Housing Facilities Board, Open Arms
Development Center, Series 1992-C,
9.750% 08/01/19 $ 330 $ 382
-------
2,419
-------
NURSING HOMES - 6.4%
DE State Economic Development Authority,
Churchman Village Project,
Series A,
10.000% 03/01/21 750 884
DE Sussex County, Healthcare Facility,
Delaware Health Corp., Series 1994-A,
7.600% 01/01/24 1,000 996
FL Broward County,
Beverly Enterprises, Inc.,
9.800% 11/01/10 615 683
FL Flagler County Industrial
Development Authority,
South Florida Properties, Series 1988,
10.500% 12/01/18 925 935
FL Gadsden County Industrial
Development Authority,
Florida Properties, Inc., Series 1988-A,
10.450% 10/01/18 340 350
FL Palm Beach County,
Hillcrest Manor Project,
10.250% 12/01/16 665 694
IA State Finance Authority,
Care Initiatives Project,
Series 1996,
9.250% 07/01/25 500 610
KS Halstead Industrial Health Care
Project,
10.250% 08/01/13 (a) 335 134
MA State Industrial Finance Agency,
GF/Massachusetts, Inc.,
Series 1994,
8.300% 07/01/23 990 990
MI Cheboygan County Economic
Development Corp.,
Metro Health Foundation Project, Series 1993,
10.000% 11/01/22 (b) 600 540
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT PORTFOLIO/NOVEMBER 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MO Grove Industrial Development Authority,
First Mortgage Health Care Facility,
Heritage Mannor GR, Series 1988,
10.250% 11/01/13 $ 425 $ 382
NJ Economic Development Authority,
Geriatric and Medical Service, Inc.,
Series A,
10.500% 05/01/04 105 112
OH Lucas County,
Gericare, Inc.,
Series 1988-B,
10.500% 06/01/18 300 302
PA Chartiers Valley
Industrial and Commercial Authority,
Beverly Enterprises, Inc., Series 1985,
10.000% 06/01/07 1,720 1,836
PA Chester County Industrial Development,
Pennsylvania Nursing Home, Inc.,
Series 1989,
10.125% 05/01/19 445 463
PA Delaware County Authority,
Main Line and Haverford Nursing,
Series 1992,
9.000% 08/01/22 50 55
PA Lackawanna County Industrial Authority,
Greenridge Nursing Center,
10.500% 12/01/10 195 214
PA Luzerne County Industrial
Development Authority,
Millville Nursing Center,
10.500% 12/01/12 230 219
PA Montgomery County Higher Education
& Health Authority,
Roslyn-Hatboro, Inc. Project,
9.000% 11/15/22 300 301
PA Philadelphia Authority for Industrial
Development,
RHA/Philadelphia Project,
10.250% 11/01/18 735 760
VA Beach Development Authority,
Beverly Enterprises, Series 1985,
10.000% 04/01/10 235 261
-------
11,721
-------
- -------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO/NOVEMBER 30, 1996
<CAPTION>
- -------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HOUSING - 18.2%
ASSISTED LIVING/SENIOR - 4.1%
CT State Authority,
First Mortgage Gross Health Care,
Church-Avery Project, Series 1990,
9.000% 04/01/20 $ 500 $ 537
IL State Development Finance Authority,
Care Institute, Inc.,
8.250% 06/01/25 2,000 2,083
MN Roseville,
Care Institute, Inc.,
Series 1993,
7.750% 11/01/23 1,270 1,197
NY Glen Cove Housing Authority,
8.250% 10/01/26 2,000 2,003
PA Montgomery County Industrial
Development Authority, Assisted
Living Facility, Series 1993-A,
8.250% 05/01/23 620 640
TX Bell County Health Facilities
Development Corp., Care Institutions, Inc.,
9.000% 11/01/24 1,000 1,086
------
7,546
------
MULTI-FAMILY - 9.1% AK State Housing Finance Corp.,
Series 1992-A2,
6.750% 12/01/24 1,735 1,802
FL Clearwater Housing Authority,
Hampton Apartments,
Series 1994,
8.250% 05/01/24 2,000 2,112
FL Hialeah Housing Authority,
Series 1991,
9.500% 11/01/21 2,000 1,900
FL State Housing Finance Agency,
Windsong Apartments,
Series 1993-C,
9.250% 01/01/19 750 757
MN Lakeville,
Southfork Apartment Project,
Series 1989-A,
9.875% 02/01/20 700 709
</TABLE>
10
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO/NOVEMBER 30, 1996
<CAPTION>
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MN Washington County Housing &
Redevelopment Authority,
Cottages of Aspen, Series 1992,
9.250% 06/01/22 $ 495 $ 536
MN White Bear Lake,
Birch Lake Townhomes Project,
Series 1989-A,
9.750% 07/15/19 750 755
NC Eastern Carolina Regional Housing
Authority, New River Apartments,
Jacksonville, Series 1994,
8.250% 09/01/14 1,460 1,478
Resolution Trust Corp.,
Pass Through Certificates,
Series 1993-A,
8.500% 12/(b)16 4,248 4,360
SC State Housing Finance and Development
Multi-family Housing Finance Revenue,
Westbridge Apartments, Series A,
9.500% 09/01/20 620 632
TX Galveston Pass Through Certificates,
Health Facilities Center,
8.000% 08/01/23 1,000 1,037
VA Alexandria Redevelopment
& Housing Authority, Courthouse
Commons Apartments, Series 1990-A,
10.000% 01/01/21 500 505
-------
16,583
-------
SINGLE-FAMILY - 5.0%
CA Orange County,
Series 1983, Issue 1,
9.250% 09/01/16 10 10
CO Housing Finance Authority, Series D-1,
7.375% 06/01/26 2,000 2,230
MO State Housing Development Commission,
Series C,
7.250% 09/01/26 2,755 3,069
NJ State Housing & Mortgage Finance Agency,
Series 1989-D,
7.700% 10/01/29 1,250 1,309
PA State Housing Finance Agency,
Series 1994-42,
6.850% 04/01/25 2,435 2,581
-------
9,199
-------
</TABLE>
11
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO/NOVEMBER 30, 1996
<CAPTION>
- -------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OTHER - 1.4%
REFUNDED/ESCROW/SPECIAL OBLIGATIONS
MA State Industrial Finance Agency,
Mary Ann Morse Nursing Home, Inc.:
Series 1990,
9.000% 10/01/20 $ 930 $1,096
Series 1991-I,
10.000% 01/01/21 500 615
MI State Hospital Finance Authority,
Detroit Osteopathic Hospital,
Series 1987-A,
7.500% 11/01/10 500 528
NC Lincoln County,
Lincoln County Hospital,
9.000% 05/01/07 335 402
------
2,641
------
- -------------------------------------------------------------------------------
OTHER REVENUE - 28.5%
Amusements & Recreation - 0.4%
MN Mille Lacs Capital Improvement
Infrastructure, Band of Chippewa,
Series 1992-A,
9.250% 11/01/12 640 717
------
CHEMICALS - 4.4%
SC York County Industrial Revenue,
Hoechst Celanese Corp.,
5.700% 01/01/24 4,535 4,512
WY Sweetwater County,
FMC Corp. Project,
Series 1994-A,
7.000% 06/01/24 3,325 3,566
------
8,078
------
HOTELS/CAMPS/LODGING - 0.3%
MN Burnsville Commercial Development,
Holiday Inn Project,
10.600% 06/01/06 500 509
------
JUSTICE & PUBLIC ORDER - 1.0%
TN Franklin Industrial Board,
Landings Apartment Project,
Series 1996-B,
8.750% 04/01/27 1,800 1,804
------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT PORTFOLIO/NOVEMBER 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MANUFACTURING - 7.3%
AZ Tucson Airport Authority,
Lockheed Aeromod Center, Inc.,
Series 1990,
8.700% 09/01/19 $2,500 $2,853
LA Vidalia,
Alcoa Co. of America Project,
5.875% 09/01/13 2,000 2,057
MN Brooklyn Park,
TL Systems Corp.,
Series 1991,
10.000% 09/01/16 530 658
MN Buffalo,
Von Ruden Manufacturing, Inc.,
Series 1989,
10.500% 09/01/14 775 865
OH Cuyahoga County,
Joy Technologies, Inc.,
Series 1992
8.750% 09/15/07 360 397
TN McKenzie Individual Development Board,
American Lantern Co.,
10.500% 05/01/16 466 497
TX Trinity River Authority,
Texas Instruments Project,
Series 1996,
6.200% 03/01/20 2,000 2,063
WA Pilchuck Public Development Corp.,
Goodrich (B.F.) Co. Tramco Project,
Series 1993,
6.000% 08/01/23 3,500 3,461
WV Weirton Pollution Control, Weirton
Steel Corporation, Series 1989
8.625% 11/01/14 500 521
-------
13,372
-------
MISCELLANEOUS RETAIL - 1.2%
OH Lake County,
North Madison Properties,
Series 1993,
8.819% 09/01/11 545 575
VA Virginia Beach Development Authority,
SC Diamond Associates, Inc.,
8.000% 12/01/10 1,465 1,575
------
2,150
------
</TABLE>
13
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO/NOVEMBER 30, 1996
<CAPTION>
- -------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- -------------------------------------------------------------------------------
.<S> <C> <C> <C> <C>
OTHER REVENUE - CONT.
OTHER REVENUE - 6.0%
AZ Greenlee County Industrial
Development Authority,
Phelps Dodge Corp.,
5.450% 06/01/09 $2,000 $ 2,022
DC District of Columbia,
Carnegie Endowment,
Series 1996,
5.750% 11/15/10 1,155 1,184
IN Hammond,
American Maize Products Co.,
Series 1994,
8.000% 12/01/24 2,000 2,255
LA Port New Orleans Industrial Development,
Continental Grain Co., Series 1993,
7.500% 07/01/13 2,000 2,150
MD Baltimore,
Park Charles Project,
Series 1986,
8.000% 01/01/10 670 708
TX Gulf Coast Waste Disposal Authority,
Quaker Oats Co.,
Series 1994,
5.700% 05/01/06 2,500 2,616
-------
10,935
-------
PAPER PRODUCTS - 6.9%
GA Rockdale County Development
Authority, Solid Waste Disposal, Visy
Paper, Inc., Series 1993,
7.500% 01/01/26 1,800 1,867
GA Wayne County Development Authority,
Solid Waste Disposal, ITT Royonier,
Inc., Series 1990,
8.000% 07/01/15 500 551
LA DeSoto Parish,
International Paper,
6.550% 04/01/19 1,000 1,049
MI State Strategic Fund:
Blue Water Fiber Project,
Series 1994,
8.000% 01/01/12 2,000 1,497
Great Lakes Pulp & Fibre Project,
Series 1994,
10.250% 12/01/16(c) 2,500 1,275
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT PORTFOLIO/NOVEMBER 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NY New York City Industrial
Development Agency,
Visy Paper, Inc., Series 1995,
7.950% 01/01/28 $1,500 $ 1,611
SC Darlington County:
Sonoco Products Co.,
Series 1996,
6.000% 04/01/26 1,500 1,549
Sonoco Products Co. Project,
6.125% 06/01/25 2,000 2,080
WA Walla Walla Public Corp.,
Ponderosa Fibres Project,
9.125% 01/01/26 1,230 1,147
-------
12,626
-------
PETROLEUM REFINING - 1.0%
WA Pierce County Economic
Development Corp.,
Occidental Petroleum Co.,
5.800% 09/01/29 2,000 1,915
-------
- -------------------------------------------------------------------------------
RESOURCE RECOVERY - 4.0%
CO-GENERATION - 2.5%
FL Martin County Industrial
Development Authority,
Indiantown Co-Generation Project, Series 1994-A,
7.875% 12/15/25 1,000 1,147
MD State Energy Financing Administration,
AES Warrior Co-Generation Project,
7.400% 09/01/19 1,250 1,325
NY Port Authority of New York & New Jersey,
KIAC Partners,
Series 1996-IV,
6.750% 10/01/11 2,000 2,083
-------
4,555
-------
LAND FILL - 0.5%
MA State Industrial Finance Agency,
Peabody Monofill Associates, Inc.,
Series 1995,
9.000% 09/01/05 915 973
-------
</TABLE>
15
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO/NOVEMBER 30, 1996
<CAPTION>
- -------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
RESOURCE RECOVERY - CONT.
MISCELLANEOUS DISPOSAL - 0.9%
CT State Disposal Facility,
Netco Waterbury Ltd.,
Series 1995,
9.375% 06/01/16 $1,500 $ 1,564
-------
RECYCLING - 0.1%
GA Fulton County Development
Authority,
Very, Inc.,
10.500% 12/01/07 115 121
-------
- -------------------------------------------------------------------------------
TAX-BACKED - 4.1%
GENERAL OBLIGATIONS - 1.7%
CA State,
5.750% 03/01/19 2,000 2,038
NY New York City,
Series 1997-A,
7.000% 08/01/07 1,000 1,106
-------
3,144
-------
MELLO-ROOS/1915 ACT - 0.6%
CA Carson,
Series 1992,
7.375% 09/02/22 965 1,013
-------
SALES & EXCISE TAX - 0.7%
IL Development Finance Authority,
City of Marion Project,
Series 1991,
9.625% 09/15/21 1,185 1,225
-------
SPECIAL ASSESSMENT - 1.1%
CA Pleasanton Joint Powers Financing
Reassurement Subordinated Revenue,
Series 1993-B,
6.750% 09/02/17 1,890 1,951
-------
- -------------------------------------------------------------------------------
TRANSPORTATION - 15.0%
AIR TRANSPORTATION - 9.9%
CO Denver City and County,
Special Facilities Airport,
United Airlines Series, 1992-A,
6.875% 10/01/32 5,000 5,212
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT PORTFOLIO/NOVEMBER 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
IL Chicago O'Hare International Airport,
Special Facility,
United Airlines, Inc., Series 1988-A,
8.400% 05/01/18 $ 950 $ 1,037
IN Indianapolis Airport Authority,
Federal Express Project,
7.100% 01/15/17 4,000 4,340
TX Alliance Airport Authority,
American Airlines Project,
7.500% 12/01/29 5,000 5,375
TX Dallas-Fort Worth International Airport,
American Airlines, Inc., Series 1990,
7.500% 11/01/25 2,000 2,148
-------
18,112
-------
AIRPORTS - 2.1%
CO Denver City & County Airport:
Airport System, Series 1992-C,
6.750% 11/15/22 1,250 1,317
Denver International Airport,
Series 1991-D,
7.750% 11/15/21 2,000 2,225
Stapleton International Airport,
Series 1990-A,
8.500% 11/15/23 250 289
-------
3,831
-------
TURNPIKES/TOLLROADS/BRIDGES - 3.0%
CA Foothill Eastern Transportation
Corridor Agency,
Series 1995-A,
(d) 01/01/15 8,000 2,670
CA San Joaquin Hills Transcorridor
Agency Senior Lien Toll Road,
Series 1993, Current Interest Bond Series:
(d) 01/01/23 5,250 1,076
5.000% 01/01/33 2,000 1,760
-------
5,506
-------
</TABLE>
17
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO/NOVEMBER 30, 1996
<CAPTION>
- -------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UTILITY - 8.6%
INDIVIDUAL POWER PRODUCER - 2.1%
PA Economic Development Finance
Authority, Colver Project, Series D,
7.150% 12/01/18 $3,650 $ 3,828
-------
INVESTOR OWNED - 2.6%
IL Bryant Pollution Control Revenue,
Central Illinois Light Co. Project,
5.900% 08/01/23 1,750 1,772
NY State Energy Research & Development
Authority,
Consolidated Edison Co., Series 1991-A,
7.500% 01/01/26 1,250 1,350
OH State Water Development Pollution
Collateralized Control:
Pennsylvania Power Company,
8.100% 01/15/20 500 539
The Cleveland Electric Illumination,
Series 1987-A-2,
9.750% 11/01/22 250 259
TX Matagorda County,
Collateralized Pollution Control, Houston
Lighting and Power Co., Series 1986-A,
7.875% 11/01/16 800 825
-------
4,745
-------
JOINT POWER AUTHORITY - 0.3%
MN Southern Minnesota Municipal
Power Agency, Series 1994-A,
(d) 01/01/25 2,660 548
-------
MUNICIPAL ELECTRIC - 0.6%
CA Colton Public Financing Authority,
Series 1995,
7.500% 10/01/20 1,000 1,053
-------
WATER & SEWER - 3.0%
CT State Development Authority,
Sewer Sludge Disposal Facilities,
Series 1996,
8.250% 12/01/06 1,000 1,021
LA Public Facility, Belmont Water
Authority,
9.000% 03/(b)24 630 659
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT PORTFOLIO/NOVEMBER 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MA State Industrial Finance Agency,
Massachusetts Environmental Services,
Series 1994-A,
8.750% 11/01/21 $ 990 $ 970
MS Five Lakes Utility District,
8.250% 07/15/24 400 413
NJ State Economic Development
Authority,
Hills Development Co.,
10.500% 09/01/08 400 402
NY New York City Municipal Water
Finance Authority,
Series B,
5.500% 06/15/19 2,000 1,988
---------
5,453
---------
TOTAL INVESTMENTS (cost of $169,370) (e) 175,094
---------
SHORT-TERM OBLIGATIONS - 1.1%
- -------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (f)
AZ Pinal County Industrial Development
Authority,
Magma Copper Co.,
4.000% 12/01/09 500 500
MI Farmington Hills Hospital
Finance Authority,
Botsford General Hospital, Series 1991-B,
4.100% 02/15/16 100 100
MS Perry County,
Leaf River Forest Project,
4.000% 03/01/02 200 200
NC Craven County Industrial Facilities &
Pollution Control Financing Authority,
John Hancock Resource Recovery, Inc.,
4.200% 05/01/11 300 300
NY New York City,
Series 1994-B4,
4.250% 08/15/21 900 900
---------
TOTAL SHORT-TERM OBLIGATIONS 2,000
---------
OTHER ASSETS & LIABILITIES, NET - 3.0% 5,526
- -------------------------------------------------------------------------------
NET ASSETS - 100% $182,620
========
</TABLE>
19
<PAGE>
Investment Portfolio/November 30, 1996
- -------------------------------------------------------------------------------
NOTES TO INVESTMENT PORTFOLIO:
- -------------------------------------------------------------------------------
(a) This issuer is in default of certain debt covenants. Income is not being
accrued.
(b) These securities are exempt from registration under Rule 144-A of the
Securities Act of 1933. These securities may be resold in transactions
exempt from registration, normally to qualified institutional buyers. At
November 30, 1996, the value of these securities amounted to $5,559 or
3.0% of net assets.
(c) Subsequent to November 30, 1996, this issuer is in default of certain debt
covenants. Income is not being accrued.
(d) Zero coupon bond.
(e) Cost for federal income tax purposes is $169,385.
(f) Variable rate demand notes are considered short-term obligations.
Interest rates change periodically on specified dates. These securities
are payable on demand and are secured by either letters of credit or other
credit support agreements from banks. The rates listed are as of November
30, 1996.
See notes to financial statements.
20
<PAGE>
<TABLE>
STATEMENT OF ASSETS & LIABILITIES
NOVEMBER 30, 1996
<CAPTION>
(in thousands except for per share amounts and footnotes)
<S> <C> <C>
ASSETS
Investments at value (cost $169,370) $175,094
Short-term obligations 2,000
--------
177,094
Receivable for:
Interest $4,092
Investments sold 2,582
Fund shares sold 332
Deferred organization expenses 9
Other 101 7,116
------ --------
Total Assets 184,210
LIABILITIES
Payable for:
Distributions 857
Investments purchased 503
Fund shares repurchased 201
Accrued:
Deferred Trustees fees 2
Other 27
------
Total Liabilities 1,590
--------
NET ASSETS $182,620
========
Net asset value & redemption price per share -
Class A ($37,420/3,685) $ 10.16
========
Maximum offering price per share - Class A
($10.16/0.9525) $ 10.67(a)
========
Net asset value & offering price per share -
Class B ($145,200/14,296) $ 10.16(b)
========
COMPOSITION OF NET ASSETS
Capital paid in $181,295
Undistributed net investment income 51
Accumulated net realized loss (4,450)
Net unrealized appreciation 5,724
--------
$182,620
========
<FN>
(a) On sales of $50,000 or more the offering price is reduced.
(b) Redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
</TABLE>
See notes to financial statements.
21
<PAGE>
<TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 1996
<CAPTION>
(in thousands)
<S> <C> <C>
INVESTMENT INCOME
Interest $ 12,203
--------
EXPENSES
Management fee $ 925
Service fee 418
Distribution fee - Class B 1,057
Transfer agent 271
Bookkeeping fee 68
Trustees fee 17
Custodian fee 4
Audit fee 33
Legal fee 23
Registration fee 32
Reports to shareholders 15
Amortization of deferred
organization expenses 21
Other 13 2,897
------ --------
Net Investment Income 9,306
--------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain 73
Net realized gain depreciation during
the period (634)
------
Net Loss (561)
--------
Net Increase in Net Assets from Operations $ 8,745
========
</TABLE>
See notes to financial statements.
22
<PAGE>
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
(in thousands) Year ended November 30
----------------------
INCREASE (DECREASE) IN NET ASSETS 1996 1995
<S> <C> <C>
Operations:
Net investment income $ 9,306 $ 8,258
Net realized gain (loss) 73 (2,355)
Net unrealized appreciation (depreciation) (634) 14,952
-------- --------
Net Increase from Operations 8,745 20,855
Distributions:
From net investment income - Class A (1,682) (771)
From net investment income - Class B (7,931) (7,619)
-------- --------
(868) 12,465
-------- --------
Fund Share Transactions:
Receipts for shares sold - Class A 22,506 12,349
Value of distributions reinvested - Class A 467 218
Cost of shares repurchased - Class A (3,674) (1,592)
-------- --------
19,299 10,975
-------- --------
Receipts for shares sold - Class B 31,304 30,411
Value of distributions reinvested - Class B 3,532 3,686
Cost of shares repurchased - Class B (26,537) (21,223)
-------- --------
8,299 12,874
-------- --------
Net Increase from Fund Share
Transactions 27,598 23,849
-------- --------
Total Increase 26,730 36,314
NET ASSETS
Beginning of period 155,890 119,576
-------- --------
End of period (including undistributed
net investment income of $51 and $337,
respectively) $182,620 $155,890
======== ========
NUMBER OF FUND SHARES
Sold - Class A 2,243 1,253
Issued for distributions reinvested - Class A 47 22
Repurchased - Class A (364) (162)
-------- --------
1,926 1,113
-------- --------
Sold - Class B 3,109 3,085
Issued for distributions reinvested - Class B 351 377
Repurchased - Class B (2,643) (2,157)
-------- --------
817 1,305
-------- --------
</TABLE>
See notes to financial statements.
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996
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's
investment objective is to seek 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 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 preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those
estimates. The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements.
SECURITY VALUATION AND TRANSACTIONS: Debt securities generally are
valued by a pricing service based upon market transactions for normal,
institutional-size trading units of similar securities. When management
deems it appropriate, an over-the-counter or exchange bid quotation is
used.
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.
24
<PAGE>
Notes to Financial Statements/November 30, 1996
-----------------------------------------------------------------------
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.
DEFERRED ORGANIZATION EXPENSES: The Fund incurred expenses of $95,525 in
connection 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 carryforwards)
under income tax regulations.
NOTE 2. FEES AND COMPENSATION PAID TO AFFILIATES
-----------------------------------------------------------------------
<TABLE>
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:
<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>
25
<PAGE>
Notes to Financial Statements/November 30, 1996
-----------------------------------------------------------------------
NOTE 2. FEES AND COMPENSATION PAID TO AFFILIATES - CONT.
-----------------------------------------------------------------------
BOOKKEEPING FEE: The Adviser provides bookkeeping and pricing services
for $27,000 per year plus 0.035% of the Fund's average net assets over
$50 million.
TRANSFER AGENT: Colonial Investors Service Center, Inc., (the Transfer
Agent), an affiliate of the Adviser, provides shareholder services for a
monthly fee equal to 0.14% annually of the Fund's average net assets and
receives 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, 1996, the Fund has been advised that the Distributor
retained net underwriting discounts of $48,709 on sales of the Fund's
Class A shares and received contingent deferred sales charges (CDSC) of
$280,681 on Class B share redemptions.
The Fund has adopted a 12b-1 plan which requires it to pay the
Distributor a service fee equal to 0.25% annually of the Fund's net
assets as of the 20th of each month. The plan also requires the payment
of a distribution fee to the Distributor equal to 0.75% of the average
net assets attributable to Class B shares only.
The CDSC and the fees received from the 12b-1 plan are used principally
as repayment to the Distributor for amounts paid by the Distributor to
dealers who sold such shares.
OTHER: The Fund pays no compensation to its officers, all of whom are
employees of the Adviser.
The Fund's Trustees may participate in a deferred compensation plan
which may be terminated at any time. Obligations of the plan will be
paid solely out of the Fund's assets.
NOTE 3. PORTFOLIO INFORMATION
-----------------------------------------------------------------------
INVESTMENT ACTIVITY: During the year ended November 30, 1996, purchases
and sales of investments, other than short-term obligations, were
$40,176,901 and $13,510,045, respectively.
<TABLE>
Unrealized appreciation (depreciation) at November 30, 1996, based on
cost of investments for federal income tax purposes was approximately:
<S> <C>
Gross unrealized appreciation $ 8,722,000
Gross unrealized depreciation (3,013,000)
-----------
Net unrealized appreciation $ 5,709,000
===========
</TABLE>
26
<PAGE>
Notes to Financial Statements/November 30, 1996
-----------------------------------------------------------------------
<TABLE>
CAPITAL LOSS CARRYFORWARDS: At November 30, 1996, capital loss
carryforwards available (to the extent provided in regulations) to
offset future realized gains were approximately as follows:
<CAPTION>
Year of Capital loss
expiration carryforward
---------- ------------
<S> <C>
1997 $ 133,000
1998 590,000
1999 364,000
2000 302,000
2002 1,731,000
2003 2,383,000
----------
$5,503,000
----------
</TABLE>
The loss carryforwards expiring in 1997, 1998, and 1999, respectively,
were acquired in the merger with Colonial VIP High Yield Municipal Bond
Fund.
Expired capital loss carryforwards, if any, are recorded as a reduction
of capital paid in.
To the extent loss carryforwards are used to offset any future realized
gains, it is unlikely that such gains would be distributed since they
may be taxable to shareholders as ordinary income.
OTHER: There are certain risks arising from geographic concentration in
any state. Certain revenue or tax related events in a state may impair
the ability of certain issuers of municipal securities to pay principal
and interest on their obligations.
The Fund may focus its investments in certain industries, subjecting it
to greater risk than a fund that is more diversified.
NOTE 4. LINE OF CREDIT
-----------------------------------------------------------------------
The Fund may borrow up to 10% of its net assets under a line of credit
for temporary or emergency purposes. Any borrowings bear interest at one
of the following options determined at the inception of the loan: (1)
federal funds rate plus 1/2 of 1%, (2) the lending bank's base rate or
(3) IBOR off-shore loan rate plus 1/2 of 1%. There were no borrowings
under the line of credit during the year ended November 30, 1996.
27
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
Selected data for a share of each class outstanding throughout each period
are as follows:
<CAPTION>
Year ended November 30
=============================================================
1996 1995
Class A Class B Class A Class B
------- -------- ------- --------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $10.230 $ 10.230 $ 9.330 $ 9.330
------- -------- ------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.624 0.548 0.656 0.583
Net realized and
unrealized gain (loss) (0.051) (0.051) 0.912 0.912
------- -------- ------- --------
Total from Investment
Operations 0.573 0.497 1.568 1.495
------- -------- ------- --------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS:
From net investment
income (0.643) (0.567) (0.668) (0.595)
------- -------- ------- --------
Net asset value -
End of period $10.160 $ 10.160 $10.230 $ 10.230
======= ======== ======= ========
Total return (d) 5.86% 5.07% 17.28% 16.42%
======= ======== ======= ========
RATIOS TO AVERAGE NET ASSETS
Expenses 1.10%(g) 1.85%(g) 1.17%(g) 1.92%(g)
Fees waived by
the Adviser -- -- -- --
Net investment income 6.19%(g) 5.44%(g) 6.67%(g) 5.92%(g)
Portfolio turnover 8% 8% 26% 26%
Net assets at end
of period (000) $37,420 $145,200 $17,997 $137,893
- ----------
<FN>
(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 $0.000.
(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 years' ratios are net of benefits
received, if any.
(h) Annualized.
</TABLE>
28
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS - CONT.
<CAPTION>
Period ended
Year ended November 30 November 30
========================================== ===========
1994 1993 1992
Class A(a) Class B Class B Class B(b)
------- -------- ------- --------
<S> <C> <C> <C>
$ 9.800 $ 10.320 $ 10.070 $10.000
------- -------- -------- -------
0.188 0.605 0.609 0.338(c)
(0.496) (1.016) 0.277 0.041
------- -------- -------- -------
(0.308) (0.411) 0.886 0.379
------- -------- -------- -------
(0.162) (0.579) (0.636) (0.309)
------- -------- -------- -------
$ 9.330 $ 9.330 $ 10.320 $10.070
======= ======== ======== =======
(3.15)%(e) (4.10)% 9.00% 3.80%(e)(f)
======= ======== ======== =======
1.15%(h) 1.90% 1.94% 2.00%(h)
-- -- -- 0.01%(h)
7.19%(h) 6.44% 5.95% 6.83%(h)
25% 25% 31% 13%(h)
$ 6,027 $113,549 $120,523 $63,390
</TABLE>
- ------------------------------------------------------------------------------
Federal Income Tax Information (unaudited)
All of the distribution will be treated as exempt income for federal income tax
purposes.
- ------------------------------------------------------------------------------
29
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO 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, 1996, 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, 1996 by correspondence with the custodian and brokers, and the
application of alternative auditing procedures where confirmations from brokers
were not received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
January 10, 1997
30
<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
Colonial at 1-800-426-3750 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.
31
<PAGE>
[Colonial Logo]COLONIAL
MUTUAL FUNDS
Mutual Funds for
Planned Portfolios
- --------------------------------------------------------------------------------
TRUSTEES
ROBERT J. BIRNBAUM
Retired (formerly Special Counsel, Dechert, Price & Rhoads; President and Chief
Operating Officer, New York Stock Exchange, Inc.)
TOM BLEASDALE
Retired (formerly Chairman of the Board and Chief Executive Officer, Shore Bank
& Trust Company)
LORA S. COLLINS
Attorney (formerly Attorney, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel)
JAMES E. GRINNELL
Private Investor (formerly Senior Vice President-Operations, The Rockport
Company)
WILLIAM D. IRELAND, JR.
Retired (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
Partner, Development Capital, L.L.C. (formerly Dean, College of Business and
Management, University of Maryland; Dean, Simon Graduate School of Business,
University of Rochester; Chairman and Chief Executive Officer, 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., Distributor [Copyright] 1997
One of the Liberty Financial Companies (NYSE: L)
One Financial Center, Boston, Massachusetts 02111-2621, 617-426-3750
HM-02/104D-1196 M (1/97)
- --------------------------------------------------------------------------------
