<PAGE>
[PHOTO]
COLONIAL TAX-EXEMPT INSURED FUND ANNUAL REPORT
November 30, 1997
-------------------------------
Not FDIC | May Lose Value
Insured | No Bank Guarantee
-------------------------------
<PAGE>
================================================================================
COLONIAL TAX-EXEMPT INSURED FUND HIGHLIGHTS
DECEMBER 1, 1996 - NOVEMBER 30, 1997
INVESTMENT OBJECTIVE: Colonial Tax-Exempt Insured Fund seeks as high a level of
after-tax total return, as is consistent with prudent risk, by pursuing current
income exempt from federal income tax and opportunities for long-term
appreciation from a portfolio primarily invested in insured municipal bonds.
PORTFOLIO MANAGER COMMENTARY: "The investment environment for interest
rate-sensitive investments, including municipal bonds, improved during the
second half of the period. The Fund was well positioned to take advantage of
this shift and the portfolio delivered above average after-tax total returns for
the fiscal year." -- GARY SWAYZE
COLONIAL TAX-EXEMPT INSURED FUND PERFORMANCE
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C(1)
Inception dates 11/20/85 5/5/92 8/1/97
<S> <C> <C> <C>
Twelve-month distributions declared per share(2) $0.394 $0.332 $0.117
SEC yields on 11/30/97(3) 3.79% 3.22% 3.53%
Taxable-equivalent SEC yields(4) 6.27% 5.33% 5.84%
Twelve-month total returns, assuming 6.63% 5.83% 0.68%
reinvestment of all distributions and no
sales charge or contingent deferred
sales charge (CDSC)
Net asset value per share on 11/30/97 $ 8.47 $ 8.47 $ 8.47
</TABLE>
(1) Class C share total returns are cumulative since inception on August 1,
1997.
(2) A portion of the Fund's income may be subject to the alternative minimum
tax.
(3) The 30-day SEC yields on November 30, 1997 reflect the portfolio's earning
power, net of expenses, expressed as an annualized percentage of the public
offering price per share at the end of the period.
(4) 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.
MATURITY BREAKDOWN as of 11/30/97 (Based on effective maturity)
1 - 3 years................ 3.1% 15 - 20 years.............. 28.7%
3 - 5 years................ 6.3% 20 - 25 years.............. 25.4%
5 - 7 years................ 1.3% 25+ years.................. 8.7%
7 - 10 years............... 1.5% Cash and Equivalents....... 1.1%
10 - 15 years.............. 23.9%
Maturity breakdown is calculated as a percentage of unaudited total investments,
including short-term obligations. Maturity breakdown is based on each security's
effective maturity, which reflects pre-refundings, mandatory puts and other
conditions that affect a bond's maturity. Because the Fund is actively managed,
there can be no guarantee the Fund will continue to maintain these maturity
weightings in the future.
================================================================================
2
<PAGE>
================================================================================
PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
I am pleased to present the annual report for Colonial Tax-Exempt Insured Fund.
This report reflects on the investment environment for the 12 months ended
November 30, 1997.
[PHOTO]
The economy grew at a healthy pace during the past year. The strength of the
economy during the first quarter of 1997 led the Federal Reserve Board to raise
short-term interest rates in March for the first time in two years. This action
was a response to growing concern about future wage and price inflation. As
interest rates rose, bond prices declined. However, by mid-April, economic
growth appeared to slow while inflation remained under control. During the
second half of the period, interest rates declined and bond prices rose. At this
point, evidence suggests that moderate economic growth will continue in 1998 and
that inflation will remain subdued despite low levels of unemployment.
Investments in municipal bonds outperformed most alternative fixed-income
investments, including Treasury bonds, during the first half of the period.
However, during the second half, a seasonal surge in municipal supply combined
with increased refundings caused the tax-exempt market to fall behind. This
offered attractive relative yields and positioned the market for relative
positive performance in the months ahead as the supply is absorbed.
During the year, the yield spreads between high and low quality municipal bonds
decreased. Investors did not receive much benefit for taking on additional risk
associated with lower quality bonds as spreads narrowed. As interest rates
declined during the last months of the period, investors increasingly "reached"
for yield, despite a decrease in yields. This resulted in rising prices for
lower quality municipal bonds relative to insured bonds, as investors downplayed
the value of higher quality issues in this strong economy.
The long-term benefits of investing in any municipal bond fund include tax-free
income and the opportunity to diversify your fixed-income portfolio. Colonial
Tax-Exempt Insured Fund continues to offer you competitive tax-free income and
potential for long-term total return.
Respectfully,
/s/ Harold W. Cogger
Harold W. Cogger
President
January 9, 1998
Because market conditions change frequently, there can be no assurance that the
trends described here will continue.
================================================================================
3
<PAGE>
PORTFOLIO MANAGEMENT REPORT
GARY SWAYZE is portfolio manager of Colonial Tax-Exempt Insured Fund and is vice
president of Colonial Management Associates, Inc. Mr. Swayze assumed management
of the Fund in October, 1997.
FUND WAS WELL POSITIONED TO BENEFIT FROM IMPROVING INVESTMENT ENVIRONMENT
During the first half of the period, interest rates were rising in response to
unanticipated strength in the auto, housing and manufacturing sectors. However,
by mid-April we saw signs of improving conditions for bond prices - economic
growth was slowing and inflation continued to be low. In addition, Congress
agreed to a balanced budget plan that further calmed fixed-income markets.
Because many signs suggested that the rising interest rate environment was
behind us, we shifted the Fund's focus to investments that we expected would
outperform during periods of declining interest rates.
For example, we increased our holdings of non-callable bonds. Callable bonds are
likely to be redeemed when interest rates decline because issuers want to reduce
their borrowing costs. Non-callable bonds are attractive in a falling interest
rate environment because their issuers cannot "call", or redeem, the bonds
before they mature. As a result of their longer lifespans, non-callable bonds
are more sensitive to changes in interest rates and experience greater price
increases when interest rates decline.
FUND GENERATED ABOVE AVERAGE ANNUAL TOTAL RETURN
The Fund's 12-month total return of 6.63% for Class A shares, based on net asset
value, outperformed the Fund's Lipper competitive peer group average of 6.03%
for the same period. Our above average performance was due primarily to a larger
than average concentration in bonds that have a relatively high sensitivity to
interest rates. These bonds experienced larger price gains as interest rates
declined during the second half of the period.
NEW FUND MANAGER ANTICIPATES FEW CHANGES IN APPROACH
The Fund has been actively managed in keeping with the investment environment,
emphasizing longer maturity bonds when interest rates are falling and shorter
maturity bonds when interest rates are rising. We do not anticipate making any
substantive changes in investment style or philosophy.
Going forward, we expect the current investment environment to continue, with
moderate economic growth and controlled inflation. We believe municipal market
dynamics are positive as we look for a period of potentially strong performance
relative to Treasuries early in 1998. The supply of tax-exempt bonds typically
declines early in the year. On the demand side, municipal holders tend to
receive most interest payments at the beginning and in the middle of the year
stimulating reinvestment demand during these periods. Municipal bonds currently
represent excellent value when
================================================================================
4
<PAGE>
================================================================================
compared to other fixed-income investments, including Treasury bonds. We believe
that tax-exempt bonds will continue to offer compelling after-tax total returns.
COLONIAL TAX-EXEMPT INSURED FUND INVESTMENT PERFORMANCE VS.
THE LEHMAN BROTHERS MUNICIPAL BOND INDEX
Change in Value of $10,000 from 11/30/87 - 11/30/97
Based on NAV and POP for Class A Shares
[GRAPH]
<TABLE>
<CAPTION>
NAV POP Lehman
-------- -------- ------
<S> <C> <C> <C>
11/30/87 10000 9525 10000
10551.27 10050.08 10618
10449.98 9953.606 10543
10703.58 10195.16 10777
11004.43 10481.72 11063
11251.66 10717.21 11277
11671.27 11116.89 11757
11834.75 11272.6 11960
12112.49 11537.14 12282
12219.99 11639.54 12434
12394.82 11806.07 12617
12470.91 11878.54 12728
12918.07 12304.46 13227
13230.9 12602.43 13580
13566.78 12922.36 13888
13820.72 13164.24 14229
14165.98 13493.1 14584
14526.34 13836.34 14936
14747.46 14046.95 15252
15229.54 14506.13 15817
15419.73 14687.3 16047
16315.84 15540.84 16992
16347.87 15571.34 17077
16941.02 16136.32 17747
16961.69 16156.01 17826
16975.88 16169.53 17933
16525.53 15740.57 17499
16771.07 15974.45 17772
15840.24 15087.83 16889
17224.73 16406.56 18271
17868.57 17019.81 19093
17881.38 17032.01 19348
18777.24 17885.32 20081
18846.96 17951.73 20289
18396.65 17522.81 19966
18728.13 17838.55 20361
19617.91 18686.06 21261
19598.87 18667.92 21407
19765.81 18826.94 21619
20386.01 19417.67 22243
11/30/97 20917.95 19924.35 22786
</TABLE>
A $10,000 investment in Class B shares made on May 5, 1992 (inception), at net
asset value (NAV), would have been valued at $13,755 on November 30, 1997. The
same investment after deducting the applicable contingent deferred sales charge
(CDSC) would have grown to $13,655 on November 30, 1997. A $10,000 investment in
Class C shares made on August 1, 1997 (inception), at NAV, would have grown to
$10,068 on November 30, 1997. The same investment after deducting the applicable
CDSC would have been valued at $9,969.
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 11/30/97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C SHARES(1)
INCEPTION 11/20/85 5/5/92 8/1/97
NAV POP NAV W/CDSC NAV W/CDSC
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 YEAR 6.63% 1.56% 5.83% 0.83% -- --
- --------------------------------------------------------------------------------
5 YEARS 6.29 5.26 5.50 5.18 -- --
- --------------------------------------------------------------------------------
10 YEARS 7.66 7.14 -- -- -- --
- --------------------------------------------------------------------------------
SINCE INCEPTION 7.78 7.34 5.88 5.74 0.68% (0.31)%
- --------------------------------------------------------------------------------
</TABLE>
(1) Class C share total returns are cumulative since inception on August 1,
1997.
Returns 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. Public offering price (POP) returns include the
maximum sales charge of 4.75%. The CDSC returns reflect the maximum charges of
5% for one year, 2% for five years and 1% since inception for Class B shares,
and 1% since inception for Class C shares. Past performance cannot predict
future results.
================================================================================
5
<PAGE>
INVESTMENT PORTFOLIO
NOVEMBER 30, 1997 (IN THOUSANDS)
<TABLE>
<CAPTION>
MUNICIPAL BONDS - 97.6% PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EDUCATION - 15.7%
EDUCATION - 3.7%
MA Health and Educational Facilities:
Harvard University, Series N,
6.250% 04/01/20 $4,760 $ 5,504
Northeastern University, Series E,
6.550% 10/01/22 1,500 1,639
UT State Municipal Finance Co-Operative
Local Government, Pooled Capital
Improvement,
6.800% 05/01/12 1,000 1,101
--------
8,244
--------
LOCAL GENERAL OBLIGATIONS - 10.4%
AZ Maricopa County School District,
Number 8 Osborn,
7.500% 07/01/08 1,235 1,531
AZ Mohave County Unified High School
District, Series B,
8.500% 07/01/06 250 321
AZ Tucson, Series 1994-G,
7.625% 07/01/14 3,140 4,066
CO El Paso County School District No. 11,
Series 1996,
7.100% 12/01/18 3,220 4,021
CO Highlands Ranch Metropolitan
District No. 2, Series 1996,
6.500% 06/15/12 1,000 1,164
GA Columbia County School District,
Series A,
6.750% 04/01/08 1,695 1,981
IL Chicago, Series 1995 A-2,
6.250% 01/01/14 4,000 4,465
MD Baltimore:
7.000% 10/15/08 300 361
7.000% 10/15/09 1,055 1,274
NV Clark County:
Las Vegas Library District,
7.500% 02/01/02 1,000 1,119
Series A,
7.500% 06/01/07 350 427
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/November 30, 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OH Greater Cleveland Regional
Transportation Authority,
Series 1996,
5.600% 12/01/11 $2,000 $ 2,092
--------
22,822
--------
STUDENT LOAN - 1.6%
AL State Higher Education Loan Corp.,
Series 1994-C,
5.850% 09/01/04 1,000 1,059
NM State Educational Assistance
Foundation, Series A,
6.700% 04/01/02 200 211
PA State Higher Education Assistance
Student Loan RIB (variable rate),
Series 1990-B,
10.739% 03/01/20 2,000 2,237
--------
3,507
--------
- --------------------------------------------------------------------------------
HEALTHCARE - 8.9%
HOSPITALS - 8.3%
IL Health Facilities Authority:
Methodist Health Services Corp.:
Series 1985-G,
8.000% 08/01/15 940 1,001
Series 1992-B, RIB (variable rate),
9.740% 05/01/21 500 592
Rockford Memorial Hospital, Series B,
6.750% 08/15/18 50 54
MA Health and Educational Facilities Authority:
New England Deaconess Hospital,
Series D,
6.875% 04/01/22 2,500 2,759
McLean Hospital, Series C,
6.625% 07/01/15 500 547
Valley Regional Health System,
Series C,
7.000% 07/01/08 1,585 1,880
MS State Hospital Equipment and
Facilities Authority,
Rush Medical Foundation Project,
6.700% 01/01/18 250 272
NC Charlotte-Mecklenburg Hospital
Authority,
5.125% 01/15/22 1,000 970
NV Reno Hospital, St. Mary's Regional
Medical Center, Series 1991-A,
6.700% 07/01/21 1,000 1,078
</TABLE>
7
<PAGE>
<TABLE>
Investment Portfolio/November 30, 1997
<CAPTION>
- --------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HEALTHCARE - CONT.
HOSPITALS - CONT.
OK State Industrial Authority,
Baptist Medical Center,
Series C,
7.000% 08/15/04 $1,500 $ 1,716
TN Knox City Health Education and
Housing Facilities,
5.250% 01/01/15 5,000 5,081
WI State Health & Educational
Facilities Authority:
Bellin Memorial Hospital,
6.625% 02/(a)08 1,000 1,147
Waukesha Memorial Hospital,
7.250% 08/15/19 60 65
WI Milwaukee Regional Medical Center,
Series 1990,
7.500% 08/(a)11 1,000 1,087
--------
18,249
--------
NURSING HOMES - 0.6%
WA State Housing Finance Commission,
Franciscan Elder Care Corp.,
Series 1991,
6.875% 01/01/21 1,340 1,442
--------
- --------------------------------------------------------------------------------
HOUSING - 4.6%
MULTI-FAMILY - 2.2%
IL Onterie Center Housing Finance Corp.,
Onterie Center Project,
Series 1992-A,
7.050% 07/01/27 2,000 2,142
MA State Housing Finance Agency,
Series A,
6.400% 01/01/09 2,000 2,155
MD Howard County Medical Mortgage
Heartlands Elderly Apartments,
Series 1985,
8.875% 12/01/10 490 529
--------
4,826
--------
SINGLE-FAMILY - 2.4%
AK State Housing Finance Corp.,
Series 1990-A2,
7.000% 12/01/11 145 156
FL Brevard County Housing Finance Authority,
Series C,
7.000% 09/01/23 40 42
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/November 30, 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MA State Housing Finance Agency,
Series 21,
7.125% 06/01/25 $1,310 $ 1,412
MS Housing Finance Corporation Single
Family Mortgage,
8.250% 10/15/18 2,445 2,558
WV State Housing Development Fund,
Series C,
5.800% 05/(a)(b) 1,000 1,064
--------
5,232
--------
- --------------------------------------------------------------------------------
OTHER - 13.9%
LOCAL APPROPRIATED - 4.2%
CA Santa Clara County Financing Authority,
Series A,
5.000% 11/15/17 2,500 2,425
IL Chicago Board of Education,
Series 1992-A,
6.250% 01/01/15 6,000 6,742
--------
9,167
--------
POOL/BOND BANK - 0.6%
MI Municipal Bond Authority, Local
Government Loan Program,
Series 1991-C,
(c) 06/15/15 3,380 1,331
--------
REFUNDED/ESCROWED (d) - 9.1%
CA Alameda County, Series 1985-1,
7.250% 12/01/08 1,300 1,436
CA East Bay Municipal Utilities District,
Series 1990,
7.500% 06/01/18 2,500 2,744
CA Los Angeles County Transport Commission
Sales Tax, Metropolitan Train,
Series 1991-A,
6.750% 07/01/18 1,000 1,102
FL Dunedin, Mease Health Care Center,
Series 1991,
6.750% 11/15/11 100 111
FL Hollywood Water & Sewer Revenue,
6.750% 10/01/11 50 55
IL Chicago, Central Public Library Project,
Series 1988-C,
6.850% 01/01/17 1,000 1,115
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/November 30, 1997
- --------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OTHER - CONT.
refunded/escrowed - cont.
IL Decatur,
6.900% 10/01/14 $ 250 $ 272
IN Whitko Middle School Building
Corporation First Mortgage, Series 1991,
6.750% 07/15/12 1,000 1,091
NY New York City Municipal Finance
Authority Water and Sewer Systems,
Series 1991-C,
7.000% 06/15/16 1,500 1,658
NY State Dormitory Authority,
City University System, Series 1990-F,
7.500% 07/01/20 2,000 2,200
NY State Medical Care Facilities
Finance Agency, St. Luke's-Roosevelt
Hospital Center, Series 1989-B,
7.450% 02/15/29 500 544
OK State Industrial Authority,
Baptist Medical Center,
Series A,
7.000% 08/15/14 150 164
OR Portland International Airport,
7.100% 07/01/21 950 1,142
PA Pottstown Borough Authority Sewer,
Guaranteed Sewer Revenue, Series 1991,
(c) 11/01/16 1,000 375
SC Charleston County Certificate
of Participation, Series 1991,
7.100% 06/01/11 2,000 2,223
SC Piedmont Municipal Power Agency,
Series 1991-A,
6.125% 01/01/07 75 84
TN Chattanooga-Hamilton County,
Series 1991-B, RIB (variable rate),
9.824% 05/25/21 1,000 1,205
TX Colorado River Municipal Water
District, Water Transmission Facilities,
Series 1991-A,
6.625% 01/01/21 250 267
TX Harris County Health Facilities
Development Corp.,
Texas Children's Hospital, Series A,
7.000% 10/01/19 50 54
WA State Health & Educational Facilities
Authority, Franciscan Eldercare 91,
6.875% 01/01/21 910 994
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/November 30, 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
WI State Health & Educational
Facilities Authority,
Waukesha Memorial Hospital,
7.250% 08/15/19 $ 940 $ 1,029
WV School Building Authority, Capital
Import Revenue Bonds, Series 1990-B,
6.750% 07/01/17 75 81
--------
19,946
--------
- --------------------------------------------------------------------------------
OTHER REVENUE - 5.8%
STATE APPROPRIATED
CA Fairs Financing Authority,
Series 1991,
6.500% 07/01/11 1,300 1,406
IN State Office Building Commission,
Women's Prison, Series B,
6.250% 07/01/16 8,000 9,000
OH Butler County Transportation Improvement
District, Series A,
6.000% 04/01/12 2,250 2,427
--------
12,833
--------
- --------------------------------------------------------------------------------
RESOURCE RECOVERY - 0.7%
RESOURCE RECOVERY
SC Charleston County Solid Waste User Fee,
6.500% 01/01/09 1,405 1,574
--------
- --------------------------------------------------------------------------------
TAX-BACKED - 11.6%
SPECIAL NON-PROPERTY TAX - 7.5%
FL Hillsborough County,
County Center Project, Series B,
5.125% 07/01/22 3,500 3,465
IL Metropolitan Pier & Exposition
Authority, McCormick Place Expansion
Project,
Series A:
(c) 06/15/16 3,750 1,392
(c) 06/15/17 3,800 1,339
IL State Dedicated Tax,
Civic Center, Series A,
7.000% 12/15/13 200 218
NY New York City Transitional Finance
Authority, Series A,
5.125% 08/15/21 1,000 978
NY State Local Government Assistance Corp.,
Series 1993-E,
5.000% 04/01/21 3,175 3,020
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/November 30, 1997
- --------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TAX-BACKED - CONT.
SPECIAL NON-PROPERTY TAX - CONT.
NY Triborough Bridge & Tunnel Authority,
Series A,
6.625% 01/01/17 $ 250 $ 269
PR Commonwealth of Puerto Rico Highway
& Transportation Authority,
Series 1996-Y,
6.250% 07/01/12 3,000 3,458
PR Commonwealth of Puerto Rico,
Infrastructure Finance Authority, Series A,
5.000% 07/(e)28 2,500 2,413
--------
16,552
--------
STATE GENERAL OBLIGATIONS - 4.1%
CA State,
Series 1995,
10.000% 10/01/06 1,000 1,395
DC District of Columbia
General Obligation, Series 1993-B1,
5.500% 06/01/09 1,000 1,044
MA Massachusetts Bay Transportation
Authority, Series C,
5.000% 03/01/24 1,500 1,433
MA State,
Series B,
5.500% 06/01/11 5,000 5,206
--------
9,078
--------
- --------------------------------------------------------------------------------
TRANSPORTATION - 8.4%
AIR TRANSPORTATION - 0.5%
NY Port Authority of New York & New Jersey,
JFK International Air Terminal, Series 6,
6.250% 12/01/08 1,000 1,123
--------
AIRPORT - 1.1%
HI State Airport System Revenue,
Series 2,
6.750% 07/01/21 250 270
IL Chicago O'Hare International Airport
Special Facility, International Terminal,
6.750% 01/01/12 300 325
OR Portland International Airport,
7.100% 07/01/21 50 55
TX Dallas-Fort Worth Regional Airport,
Series A,
7.375% 11/01/11 1,380 1,604
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/November 30, 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TX Houston Airport System Revenue,
Series A,
6.750% 07/01/21 $ 200 $ 216
--------
2,470
--------
TOLL FACILITIES - 0.1%
TX Harris County,
Toll Road Revenue,
6.500% 08/15/11 120 131
--------
TRANSPORTATION - 6.7%
DC Metropolitan Area Transit Authority,
6.000% 07/01/10 1,000 1,105
IL Regional Transportation Authority,
Series C,
7.750% 06/01/20 5,000 6,638
MA State Port Authority,
Series A,
7.500% 07/01/20 1,000 1,086
NY Metropolitan Transportation Authority,
Commuter Facilities, Series 1997 B-1,
5.000% 07/01/18 2,500 2,422
SC State Ports Authority,
Series 1991:
6.500% 07/01/06 250 269
6.750% 07/01/21 3,000 3,236
--------
14,756
--------
- --------------------------------------------------------------------------------
UTILITY - 28.0%
INVESTOR OWNED - 5.7%
DE State Economic Development Authority,
New Castle County Gas System,
Series 1991-C,
7.150% 07/01/21 1,000 1,101
HI State Department of Budget & Finance,
Hawaiian Electric Co.,
Series A,
6.600% 01/01/25 4,000 4,395
MI St. Clair County Economic
Development Corp.,
Detroit Edison Co., Series 1993-AA,
6.400% 08/01/24 1,000 1,104
NV Clark County Pollution Control
Nevada Power Company, Series 1992-B,
6.600% 06/01/19 3,500 3,811
</TABLE>
13
<PAGE>
Investment Portfolio/November 30, 1997
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
MUNICIPAL BONDS - CONT. PAR VALUE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UTILITY - CONT.
INVESTOR OWNED - CONT.
NY New York Energy Research & Development
Adjusted Gas Facilities,
Brooklyn Union Gas Company, Series 1989-B,
6.750% 02/01/24 $2,000 $ 2,187
--------
12,598
--------
JOINT POWER AUTHORITY - 10.5%
CA Southern California Power Authority,
Palo Vero Project,
Series 1989-A,
5.000% 07/01/15 5,500 5,349
GA Municipal Electrical Authority
Special Obligation, Project One,
Fifth Cross,
6.400% 01/01/13 1,000 1,146
MN Southern Minnesota Municipal Power
Agency,
Series A,
5.000% 01/01/16 750 728
SC Piedmont Municipal Power Agency,
Series 1991-A,
6.125% 01/01/07 425 471
SC State Public Service Authority,
Series A,
6.250% 01/01/22 3,500 3,824
TX State Municipal Power Agency:
(c) 09/01/10 5,000 2,625
(c) 09/01/11 7,900 3,911
(c) 09/01/12 3,000 1,395
(c) 09/01/15 8,975 3,511
WA State Public Power Supply System,
Nuclear Project No. 2,
Series A,
6.500% 07/01/05 200 215
--------
23,175
--------
MUNICIPAL ELECTRIC - 5.5% AK ANCHORAGE:
Series 1993,
8.000% 12/01/09 1,000 1,288
Series 1996,
6.500% 12/01/10 3,075 3,536
OH Cleveland,
Series 1996-1,
5.000% 11/15/24 4,000 3,835
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/November 30, 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PR Puerto Rico Electric Power Authority,
Series 1989-O,
5.000% 07/01/12 $2,900 $ 2,842
SD Heartland Consumers Power District,
6.000% 01/01/09 300 332
WA Clark County Public Utilities
District, Number 001 Electric System,
6.500% 01/01/11 200 216
--------
12,049
--------
WATER & SEWER - 6.3%
CA Central Coast Water Authority,
State Water Project Regional Facilities,
Series 1996-A,
5.000% 10/01/22 2,000 1,927
FL Saint John's County Water and Sewer
Saint Augustine Shores System,
Series 1991-A:
(c) 06/01/13 2,600 1,176
(c) 06/01/14 1,500 639
GA Fulton County Water and Sewer,
6.375% 01/01/14 6,000 6,908
IL Kankakee Sewer,
Series 1991,
7.000% 05/01/16 1,000 1,124
SC Spartanburg,
5.000% 06/01/17 1,000 983
VA Loudoun County Sanitation Authority,
Series 1992,
6.250% 01/01/16 1,000 1,076
--------
13,833
--------
TOTAL MUNICIPAL BONDS (cost of $195,803) 214,938
--------
<CAPTION>
OPTIONS - 0.0% CONTRACTS
- --------------------------------------------------------------------------------
<S> <C> <C>
March 1998 Treasury Bond Calls:
Strike price 118, expiration 2/21/98
(cost of $75) 34 89
--------
TOTAL INVESTMENTS - 97.6% (cost of $195,878)(f) 215,027
--------
<CAPTION>
SHORT-TERM OBLIGATIONS - 1.1% PAR
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
VARIABLE RATE DEMAND NOTES (g)
CA Newport Beach Hoag Hospital,
3.800% 10/01/22 $ 800 800
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/November 30, 1997
- --------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS - CONT. PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LA East Baton Rouge Paris,
Rhone-Poulenc Project,
3.850% 06/01/98 $ 600 $ 600
MS Perry County,
Leaf River Forest Project,
3.900% 03/01/02 600 600
NY New York City Municipal Water
Finance Authority,
Series 1995-A,
4.000% 06/15/25 300 300
--------
TOTAL SHORT-TERM OBLIGATIONS 2,300
--------
OTHER ASSETS & LIABILITIES, NET - 1.3% $ 2,896
- --------------------------------------------------------------------------------
NET ASSETS - 100.0% $220,223
--------
</TABLE>
NOTES TO INVESTMENT PORTFOLIO:
- --------------------------------------------------------------------------------
(a) These securities, or a portion thereof, with a total market value of $2,882
are being used to collateralize the delayed delivery purchase indicated in
note (e) below.
(b) This security, or a portion thereof, with a total market value of $98, is
being used to collateralize open calls on futures.
(c) Zero coupon bond.
(d) The Fund has been informed that the issuer has placed direct obligations of
the U.S. Government in an irrevocable trust, solely for the payment of the
interest and principal.
(e) This security has been purchased on a delayed delivery basis for settlement
at a future date beyond the customary settlement time.
(f) Cost for federal income tax purposes is the same.
(g) Variable rate demand notes are considered short-term obligations. Interest
rates change periodically on specified dates. These securities are payable
on demand and are secured by either letters of credit or other credit
support agreements from banks. The rates listed are as of November 30,
1997.
Acronym Name
------- ----
RIB Residual Interest Bond
16
<PAGE>
Investment Portfolio/November 30, 1997
- --------------------------------------------------------------------------------
SUMMARY OF SECURITIES BY INSURER
<TABLE>
<CAPTION>
% of
Insurer Net Assets
------- ----------
<S> <C>
Municipal Bond Insurance Agency 30.1
AMBAC Indemnity Corporation 27.0
Financial Guarantee Insurance Company 23.5
Uninsured Securities 13.2
Financial Security Assurance 2.9
Capital Guarantee Insurance Company 1.2
Bond Investment Guarantee Insurance 1.1
Connie Lee Insurance Company 1.0
-----
100.0
=====
</TABLE>
See notes to financial statements.
17
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
NOVEMBER 30, 1997
(in thousands except for per share amounts and footnotes)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value (cost $195,878) $215,027
Short-term obligations 2,300
--------
217,327
Receivable for:
Interest $4,133
Investments sold 2,381
Fund shares sold 105
Other 54 6,673
------ --------
Total Assets 224,000
LIABILITIES
Payable for:
Investments purchased 2,395
Distributions 824
Fund shares repurchased 534
Accrued:
Deferred Trustees fees 4
Other 20
------
Total Liabilities 3,777
--------
NET ASSETS $220,223
========
Net asset value & redemption price per share -
Class A ($181,543/21,440) $ 8.47
========
Maximum offering price per share - Class A
($8.47/0.9525) $ 8.89(a)
========
Net asset value & offering price per share -
Class B ($38,580/4,556) $ 8.47(b)
========
Net asset value & offering price per share -
Class C ($100/12) $ 8.47(b)
========
COMPOSITION OF NET ASSETS
Capital paid in 201,888
Undistributed net investment income 168
Accumulated net realized loss (982)
Net unrealized appreciation 19,149
--------
$220,223
========
</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, 1997
(in thousands)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest $13,518
EXPENSES
Management fee $ 1,294
Service fee 579
Distribution fee - Class B 309
Distribution fee - Class C (a)
Transfer agent fee 368
Bookkeeping fee 91
Trustees fee 21
Audit fee 28
Legal fee 5
Custodian fee 7
Registration fee 46
Reports to shareholders 10
Other 24 2,782
------- -------
Net Investment Income 10,736
-------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain on:
Investments 4,572
Closed futures contracts 5
-------
Net Realized Gain 4,577
-------
Change in net unrealized appreciation
(depreciation) during the period on:
Investments (1,189)
Open futures contracts 45
-------
Net Change in Unrealized Depreciation (1,144)
-------
Net Gain 3,433
-------
Increase in Net Assets from Operations $14,169
=======
</TABLE>
(a) Rounds to less than one.
See notes to financial statements.
19
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
(in thousands) Year ended November 30
------------------------
1997(a) 1996
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 10,736 $ 12,766
Net realized gain 4,577 1,722
Net unrealized depreciation (1,144) (4,024)
-------- --------
Net Increase from Operations 14,169 10,464
Distributions:
From net investment income - Class A (9,102) (10,994)
From net investment income - Class B (1,656) (1,979)
From net investment income - Class C (1) -
-------- --------
3,410 (2,509)
-------- --------
Fund Share Transactions
Receipts for shares sold - Class A 8,069 12,464
Value of distributions reinvested - Class A 5,450 6,488
Cost of shares repurchased - Class A (41,496) (51,021)
-------- --------
(27,977) (32,069)
-------- --------
Receipts for shares sold - Class B 1,089 3,033
Value of distributions reinvested - Class B 962 1,129
Cost of shares repurchased - Class B (8,696) (9,160)
-------- --------
(6,645) (4,998)
-------- --------
Receipts for shares sold - Class C 100 -
Value of distributions reinvested - Class C 1 -
-------- --------
101 -
-------- --------
Net Decrease from Fund Share Transactions (34,521) (37,067)
-------- --------
Total Decrease (31,111) (39,576)
NET ASSETS
Beginning of period 251,334 290,910
-------- --------
End of period (including undistributed net
investment income of $168 and $63, respectively) $220,223 $251,334
======== ========
NUMBER OF FUND SHARES
Sold - Class A 974 1,521
Issued for distributions reinvested - Class A 659 791
Repurchased - Class A (5,014) (6,241)
-------- --------
(3,381) (3,929)
-------- --------
Sold - Class B 132 370
Issued for distributions reinvested - Class B 116 138
Repurchased - Class B (1,050) (1,119)
-------- --------
(802) (611)
-------- --------
Sold - Class C 12 -
Issued for distributions reinvested - Class C (b) -
-------- --------
12 -
-------- --------
</TABLE>
(a) Class C shares were initially offered on August 1, 1997.
(b) Rounds to less than one.
See notes to financial statements.
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1997
NOTE 1. ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
ORGANIZATION: Colonial Tax-Exempt Insured Fund (the Fund), a series of Colonial
Trust IV, is a diversified portfolio of a Massachusetts business trust,
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company. The Fund's investment objective is to seek as
high a level of after-tax total return, as is consistent with prudent risk, by
pursuing current income exempt from federal income tax and opportunities for
long-term appreciation from a portfolio primarily invested in insured municipal
bonds. The Fund may issue an unlimited number of shares. The Fund offers three
classes of shares: Class A, Class B and Class C. Class A shares are sold with a
front-end sales charge and Class B shares 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. Effective
August 1, 1997, the Fund began offering Class C shares which are subject to a
contingent deferred sales charge on redemptions made within one year after
purchase and an annual distribution fee.
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 revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies that are 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.
Options are valued at the last reported sale price, or in the absence of a sale,
the mean between the last quoted bid and asking price.
Futures contracts are valued based on the difference between the last sale price
and the opening price of the contract.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
Portfolio positions for which market quotations are not readily available 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.
21
<PAGE>
Notes to Financial Statements/November 30, 1997
- --------------------------------------------------------------------------------
NOTE 1. ACCOUNTING POLICIES - CONT.
- --------------------------------------------------------------------------------
Cost is determined and gains and losses are based upon the specific
identification method for both financial statement and federal income tax
purposes.
The Fund may trade securities on other than normal settlement terms. This may
increase the risk if the other party to the transaction fails to deliver and
causes the Fund to subsequently invest at less advantageous prices.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS: All income,
expenses (other than the Class B and Class C distribution fee), and 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 and Class C 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 and Class C 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.
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
- --------------------------------------------------------------------------------
MANAGEMENT FEE: Colonial Management Associates, Inc. (the Adviser) is the
investment Adviser of the Fund and furnishes accounting and other services and
office facilities for a monthly fee based on each fund's pro rata portion of the
combined average net assets of the Fund, Colonial Tax-Exempt Fund, and Colonial
High Yield Municipal Fund as follows:
22
<PAGE>
Notes to Financial Statements/November 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE NET ASSETS ANNUAL FEE RATE
------------------ ---------------
<S> <C>
First $1 billion 0.60%
Next $2 billion 0.55%
Next $1 billion 0.50%
Over $4 billion 0.45%
</TABLE>
BOOKKEEPING FEE: The Adviser provides bookkeeping and pricing services for
$27,000 per year plus 0.035% of the Fund's average net assets over $50 million.
TRANSFER AGENT FEE: Colonial Investors Service Center, Inc., (the Transfer
Agent), an affiliate of the Adviser, provides shareholder services 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.
Effective January 1, 1997, and continuing through calendar year 1997, the
Transfer Agent fee will be reduced 0.01% in cumulative monthly increments,
resulting in a decrease in the fee from 0.14% to 0.13% annually.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES: Liberty Financial
Investments, Inc., formerly Colonial Investment Services, Inc. (the
Distributor), an affiliate of the Adviser, is the Fund's principal underwriter.
For the year ended November 30, 1997, the Fund has been advised that the
Distributor retained net underwriting discounts of $11,208 on sales of the
Fund's Class A shares and received contingent deferred sales charges (CDSC) of
$125,849 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 and
Class C shares. The Distributor has voluntarily agreed to waive a portion of the
Class C share distribution fee so that it will not exceed 0.45% annually.
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.
23
<PAGE>
Notes to Financial Statements/November 30, 1997
- --------------------------------------------------------------------------------
NOTE 3. PORTFOLIO INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT ACTIVITY: For the year ended November 30, 1997, purchases and sales
of investments, other than short-term obligations were $60,052,691 and
$94,896,695, respectively.
Unrealized appreciation (depreciation) at November 30, 1997, based on cost of
investments for both financial statement and federal income tax purposes was
approximately:
Gross unrealized appreciation $19,149,000
Gross unrealized depreciation -
-----------
Net unrealized appreciation $19,149,000
===========
OTHER: The Fund has greater than 10% of its net assets at November 30, 1997
invested in both Illinois and Massachusetts.
There are certain risks arising from geographic concentration in any state.
Certain revenue or tax related events in a state may impair the ability of
certain issuers of municipal securities to pay principal and interest on their
obligations.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
The Fund may purchase or sell municipal and Treasury bond futures contracts and
purchase and write options on futures. The Fund will invest in these instruments
to hedge against the effects of changes in the value of portfolio securities due
to anticipated changes in interest rates and/or market conditions, for duration
management, or when the transactions are economically appropriate to the
reduction of risk inherent in the management of the Fund and not for trading
purposes. The use of futures contracts and options involves certain risks which
include (1) imperfect correlation between the price movement of the instruments
and the underlying securities, (2) inability to close out a position due to
different trading hours, or the temporary absence of a liquid market for either
the instrument or the underlying securities or (3) an inaccurate prediction by
the Adviser of the future direction of interest rates. Any of these risks may
involve amounts exceeding the variation margin recorded in the Fund's Statement
of Assets and Liabilities at any given time.
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 offshore loan
rate plus 1/2 of 1%. There were no borrowings under the line of credit during
the year ended November 30, 1997.
24
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
Year ended November 30
------------------------------------
1997
Class A Class B Class C (a)
------- ------- -----------
<S> <C> <C> <C>
Net asset value -
Beginning of period $ 8.330 $ 8.330 $8.530
-------- ------- ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.398 0.336 0.118
Net realized and
unrealized gain (loss) 0.136 0.136 (0.061) (b)
-------- ------- ------
Total from Investment
Operations 0.534 0.472 0.057
-------- ------- ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment
income (0.394) (0.332) (0.117)
-------- ------- ------
Net asset value -
End of period $ 8.470 $ 8.470 $8.470
======== ======= ======
Total return (c) 6.63% 5.83% 0.68% (d)
======== ======= ======
RATIOS TO AVERAGE NET ASSETS
Expenses (e) 1.07% 1.82% 1.51 (f)
Net investment income(e) 4.76% 4.01% 4.22% (f)
Portfolio turnover 26% 26% 26%
Net assets at end
of period (000) $181,543 $38,580 $ 100
</TABLE>
(a) Class C shares were initially offered on August 1, 1997. Per share amounts
reflect activity from that date.
(b) The amount shown for a share outstanding does not correspond with the
aggregate net gain on investments for the period due to the timing of sales
and repurchases of Fund shares in relation to fluctuating market values of
the investments of the Fund.
(c) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(d) Not annualized.
(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(f) Annualized.
- --------------------------------------------------------------------------------
Federal Income Tax Information (unaudited)
99.72% of the income distributions will be treated as exempt income for federal
income tax purposes.
- --------------------------------------------------------------------------------
25
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
<TABLE>
<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 $ 8.380 $ 8.380 $ 7.450 $ 7.450
-------- ------- -------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.403 0.342 0.418 0.359
Net realized and
unrealized gain (loss) (0.045) (0.045) 0.935 0.935
-------- ------- -------- -------
Total from Investment
Operations 0.358 0.297 1.353 1.294
-------- ------- -------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment
income (0.408) (0.347) (0.423) (0.364)
-------- ------- -------- -------
Net asset value -
End of period $ 8.330 $ 8.330 $ 8.380 $ 8.380
======== ======= ======== =======
Total return (a) 4.48% 3.70% 18.55% 17.68%
======== ======= ======== =======
RATIOS TO AVERAGE NET ASSETS
Expenses 1.05%(b) 1.80%(b) 1.05%(b) 1.80%(b)
Net investment income 4.92%(b) 4.17%(b) 5.20%(b) 4.45%(b)
Portfolio turnover 25% 25% 31% 31%
Net assets at end
of period (000) $206,713 $44,621 $240,894 $50,016
</TABLE>
(a) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(b) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
26
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
Year ended November 30
-----------------------------------------------------
1994 1993
Class A Class B Class A Class B
------- ------- ------- -------
<S> <C> <C> <C>
$ 8.420 $ 8.420 $ 8.080 $ 8.080
-------- ------- -------- -------
0.439 0.378 0.456 0.395
(0.977) (0.977) 0.338 0.338
-------- ------- -------- -------
(0.538) (0.599) 0.794 0.733
-------- ------- -------- -------
(0.432) (0.371) (0.454) (0.393)
-------- ------- -------- -------
$ 7.450 $ 7.450 $ 8.420 $ 8.420
======== ======= ======== =======
(6.61)% (7.31)% 10.00% 9.20%
======== ======= ======== =======
1.05% 1.80% 1.07% 1.82%
5.44% 4.69% 5.44% 4.69%
36% 36% 12% 12%
$198,909 $45,801 $241,610 $46,035
</TABLE>
27
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE TRUSTEES OF COLONIAL TRUST IV AND THE SHAREHOLDERS
OF COLONIAL TAX-EXEMPT INSURED FUND
In our opinion, the accompanying statement of assets and liabilities,
including the investment portfolio, and the related statements of operations and
of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Colonial Tax-Exempt Insured Fund (a
series of Colonial Trust IV) at November 30, 1997, 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, 1997 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 9, 1998
28
<PAGE>
SHAREHOLDER SERVICES
TO MAKE INVESTING EASIER
Your Fund has one of the most extensive selections of shareholder services
available. Your financial advisor can help you arrange for any of these
services, or you can call Colonial Investors Service Center directly at
1-800-345-6611.
AFFORDABLE ADDITIONAL INVESTMENTS: Add to your account with as little as $50 on
most funds; $25 for an IRA account.
FREE EXCHANGES(1): Exchange all or part of your account into the same share
class of another fund distributed by Liberty Financial Investments, Inc. by
phone or mail.
EASY ACCESS TO YOUR MONEY(1): 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 within one year, you can reinvest in any fund distributed by
Liberty Financial Investments 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 Fund 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 calendar day of each month unless the 10th falls on a
non-business day or the first business day of the week. If this occurs, the
processing date will be the previous business day. Dividends and capital gains
must be reinvested.
AUTOMATED DOLLAR COST AVERAGING: Transfer money on a monthly basis from any fund
with a balance of $5,000 into the same share class of up to four other funds
distributed by Liberty Financial Investments. Minimum for each transfer is $100.
RETIREMENT PLANS: Choose from a broad range of retirement plans, including IRAs.
(1) Redemptions and exchanges are made at the next determined net asset value
after the request is received by the Transfer Agent. Proceeds may be more
or less than your original cost. The exchange privilege may be terminated
at any time. Exchanges are not available on all funds. Investors who
purchase Class B or C shares, or $1 million or more of Class A shares, may
be subject to a contingent deferred sales charge.
29
<PAGE>
HOW TO REACH COLONIAL
BY PHONE OR BY MAIL
BY TELEPHONE
CUSTOMER CONNECTION - 1-800-345-6611
For 24-hour account information, call from your touch-tone phone. (Rotary
callers will be automatically connected to a representative during business
hours.) A recorded message will guide you through the menu:
For fund prices, dividends and capital gains information . . . . . press 1
For account information . . . . . . . . . . . . . . . . . . . . . .press 2
To speak to a service representative . . . . . . . . . . . . . . . press 3
For yield and total return information . . . . . . . . . . . . . . press 4
For duplicate statements or new supply of checks . . . . . . . . . press 5
To order duplicate tax forms and year-end statements . . . . . . . press 6
(February through May)
To review your options at any time during your call . . . . . . . press *
To speak with a shareholder services representative about your account, call
Monday to Friday, 8:00 a.m. to 8:00 p.m. ET, and Saturdays from February through
mid-April, 10:00 a.m. to 2:00 p.m. ET.
COLONIAL TELEPHONE TRANSACTION DEPARTMENT - 1-800-422-3737
To purchase, exchange or sell shares by telephone, call Monday to Friday, 9:00
a.m. to 7:00 p.m. ET. Transactions received after the close of the New York
Stock Exchange will receive the next business day's closing price.
LITERATURE - 1-800-426-3750
To request literature on any fund distributed by Liberty Financial Investments,
call Monday to Friday, 8:30 a.m. to 6:30 p.m. ET.
BY MAIL
COLONIAL INVESTORS SERVICE CENTER, INC.
P.O. BOX 1722
BOSTON, MA 02105-1722
30
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IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial Tax-Exempt Insured Fund is:
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Colonial Tax-Exempt Insured Fund mails one shareholder report to each
shareholder address. If you would like more than one report, please call
1-800-426-3750 and additional reports will be sent to you.
This report has been prepared for shareholders of Colonial Tax-Exempt Insured
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
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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, CS First
Boston Merchant Bank; and President and Chief Executive Officer, The First
Boston Corporation)
JAMES L. MOODY, JR.
Retired (formerly Chairman of the Board and 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
Retired Partner, Peat Marwick Main & Co. (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
[LOGO] LIBERTY FINANCIAL INVESTMENTS, INC. (C)1998
Distributor for Colonial Funds, Stein Roe Advisor Funds and Newport Funds
One Financial Center, Boston, MA 02111-2621
TI-02/514E-1197 (1/98)
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