<PAGE>
[GRAPHIC OMITTED]
COLONIAL HIGH YIELD MUNICIPAL FUND ANNUAL REPORT
November 30, 1997
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NOT FDIC- | MAY LOSE VALUE
INSURED | NO BANK GUARANTEE
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<PAGE>
COLONIAL HIGH YIELD MUNICIPAL FUND HIGHLIGHTS
DECEMBER 1, 1996 - NOVEMBER 30, 1997
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: "During the period, heightened investor demand for
high yield municipals resulted in higher bond prices and created a challenging
investment environment. However, rather than `reach' for yield and increase the
portfolio's risk, we chose instead to increase the Fund's overall credit
quality."
-- Bonny Boatman
COLONIAL HIGH YIELD MUNICIPAL FUND PERFORMANCE
CLASS A CLASS B CLASS C
Inception dates 9/1/94 6/8/92 8/1/97
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12-month distributions declared per share(1) $0.600 $0.524 $0.174
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SEC yields on 11/30/97(2) 4.80% 4.28% 4.40%
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Taxable-equivalent SEC yields(3) 7.95% 7.09% 7.28%
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12-month total returns, assuming reinvestment 7.95% 7.15% 1.90%(4)
of all distributions and no sales charge or
contingent deferred sales charge (CDSC)
- --------------------------------------------------------------------------------
Net asset value per share on 11/30/97 $10.34 $10.34 $10.34
(1) A portion of the Fund's income may be subject to the alternative minimum
tax.
(2) 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.
(3) Taxable-equivalent SEC yields are based on the maximum federal income tax
rate of 39.6%.
(4) Class C share returns are cumulative since inception on August 1, 1997. 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.
QUALITY BREAKDOWN (as of 11/30/97)
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AAA .......................... 8.6% BB ........................... 3.8%
AA ........................... 4.2% B ............................ 0.7%
A ............................ 11.0% Non-rated .................... 40.5%
BBB .......................... 30.4% Cash and equivalents ......... 0.8%
Quality weightings are 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 quality weightings in the future.
<PAGE>
PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
[Photo of Harold W. Cogger]
I am pleased to present the annual report for Colonial High Yield Municipal
Fund. This report reflects on the investment environment for the 12 months ended
November 30, 1997.
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 moderate 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
surge offered higher relative yields and positioned the municipal market for
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. This means that investors were not rewarded for taking on additional
risk associated with lower quality bonds, particularly in the non-rated sector.
As interest rates declined during the last months of the period, investors
increasingly "reached" for yield, despite an increase in supply. This resulted
in further price increases for lower quality municipal bonds. While these
conditions made identifying attractive new investments more difficult, the
Fund's lower quality holdings benefited from this trend.
For more information about your Fund, please turn to the Portfolio Manager's
Report on the following pages. We thank you for giving us the opportunity to
help meet your financial goals, and we hope to continue serving you in the years
to come.
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.
<PAGE>
PORTFOLIO MANAGEMENT REPORT
BONNY BOATMAN is portfolio manager of Colonial High Yield Municipal Fund. Ms.
Boatman is senior vice president of Colonial Management Associates, Inc. and
director of the Muncipal Bond Department.
STRONG ECONOMY AND FALLING INTEREST RATES INCREASE INVESTOR DEMAND FOR HIGH
YIELD MUNICIPAL BONDS
During the first half of the period, interest rates were rising in response to
unanticipated economic strength. However, by mid-April economic growth was
slowing and inflation continued to be insignificant. Many signs suggested that
the rising interest rate environment was behind us.
As interest rates and bond yields began to fall, investors began "reaching" for
yield causing high yield bond prices to rise. As a result, credit quality
spreads became very narrow. In other words, the interest rate premium for
investing in lower-rated, less financially secure bonds declined. This created a
challenging situation for us. We did not believe that these higher prices and
lower yields provided adequate risk-adjusted compensation and we did not
participate in many transactions. On the other hand, we used this situation as
an opportunity to sell some of the portfolio's less attractive bonds at
compelling prices.
NARROW CREDIT SPREADS EMPHASIZE NEED FOR SELECTIVITY
Declining risk-adjusted compensation in the high yield market has led us to be
increasingly selective. We are seeing a smaller variety of issues and those that
we do see tend to be very large and, in our opinion, very risky. For example,
one of the largest issuing sectors in the market is electric co-generation.
Co-generation facilities are typically independent entities that are
contractually aligned to an electric power distributor and are obligated to
produce a specified amount of electricity. Until recently, many of these
transactions had been driven by utility regulation rather than by an
economically sound supply and demand relationship. However, we are starting to
see transactions that are economically sound and whose success is not determined
by contractual agreements paying above-market rates. We will continue to closely
monitor this sector for attractive opportunities.
MARKET DYNAMICS RESULT IN STRATEGIC REALIGNMENT
In the past, we have spoken about our emphasis on Industrial Revenue Bonds
(IRBs) issued by well-known corporations. Our focus on this sector was driven by
our belief that the strong economy and household name quality of these issuers
would cause these bonds to appreciate more quickly than many traditional,
municipally-issued bonds. While we did experience this effect, we now believe
most of those gains have been captured. We are now looking for bonds that are
structured to provide the Fund with better yield, maturity and interest rate
sensitivity characteristics. We believe that this approach will allow us to
identify bonds that should be more responsive to specific market conditions.
MODEST TOTAL RETURN OFFSET BY STRONG INCOME
A 12-month total return of 7.95% for Class A shares, based on net asset value,
slightly underperformed the Lipper High Yield Municipal Debt Average. This
performance was due primarily to a smaller than average concentration in bond
types, such as non-callable bonds, that have a relatively high sensitivity to
interest rates. Such bonds experience larger price gains as interest rates
decline, as they did during the second half of the period. In addition, prices
of several non-rated issues in the de-inked paper market experienced problems.
As paper prices in general fell precipitously, these producers of de-inked paper
experienced fiscal distress and many of these projects were restructured. We
have sold these bonds from the portfolio.
The Fund generated attractive levels of tax-exempt income, paying dividends
totalling $0.60 per Class A share for the year. In addition, the Fund's 30-day
yield was 4.80% for Class A shares at November 30, 1997. For shareholders in the
maximum 39.6% effective federal income tax bracket, that is equivalent to a
taxable yield of 7.95%.
POSITIVE OUTLOOK FOR HIGH YIELD MUNICIPAL BONDS
Going forward, we expect the current investment environment to continue, with
moderate economic growth and controlled inflation. While we do not see an end to
tight credit quality spreads in our market, which makes identifying credit value
very difficult, we are confident that we will continue to find bonds that are
responsive to changing market conditions. We believe that municipal bonds
currently represent excellent value when compared to other fixed income
investments, including Treasury bonds. In the near-term we anticipate that high
yield tax-exempt bonds will continue to offer compelling after-tax total
returns.
COLONIAL HIGH YIELD MUNICIPAL FUND INVESTMENT PERFORMANCE
Change in Value of $10,000 from 6/30/92 - 11/30/97
Based on NAV and CDSC for Class B Shares
Date Lehman Brothers Net Asset Value W/CDSC
---- --------------- --------------- ------
6/30/92 10,000 10,000 10,000
7/31/92 10,300 10,251 10,251
8/31/92 10,200 10,194 10,194
9/30/92 10,266 10,227 10,227
10/31/92 10,165 10,180 10,180
11/30/92 10,347 10,264 10,264
12/31/92 10,453 10,369 10,369
1/31/93 10,575 10,433 10,433
2/28/93 10,957 10,653 10,653
3/31/93 10,841 10,625 10,625
4/30/93 10,950 10,711 10,711
5/31/93 11,012 10,745 10,745
6/30/93 11,196 10,874 10,874
7/31/93 11,211 10,909 10,909
8/31/93 11,444 11,103 11,103
9/30/93 11,575 11,202 11,202
10/31/93 11,597 11,238 11,238
11/30/93 11,494 11,187 11,187
12/31/93 11,737 11,261 11,261
1/31/94 11,871 11,369 11,369
2/28/94 11,564 11,227 11,227
3/31/94 11,093 10,851 10,851
4/30/94 11,187 10,827 10,827
5/31/94 11,284 10,902 10,902
6/30/94 11,215 10,922 10,922
7/31/94 11,420 11,077 11,077
8/31/94 11,460 11,097 11,097
9/30/94 11,292 11,016 11,016
10/31/94 11,091 10,890 10,890
11/30/94 10,891 10,727 10,727
12/31/94 11,130 10,877 10,877
1/31/95 11,449 11,131 11,131
2/28/95 11,782 11,399 11,399
3/31/95 11,917 11,527 11,527
4/30/95 11,931 11,538 11,538
5/31/95 12,312 11,844 11,844
6/30/95 12,204 11,808 11,808
7/31/95 12,320 11,878 11,878
8/31/95 12,476 11,985 11,985
9/30/95 12,555 12,104 12,104
10/31/95 12,737 12,271 12,271
11/30/95 12,949 12,488 12,488
12/31/95 13,073 12,621 12,621
1/31/96 13,172 12,669 12,669
2/29/96 13,083 12,619 12,619
3/31/96 12,916 12,467 12,467
4/30/96 12,879 12,463 12,463
5/31/96 12,874 12,460 12,460
6/30/96 13,015 12,582 12,582
7/31/96 13,132 12,640 12,640
8/31/96 13,129 12,674 12,674
9/30/96 13,313 12,810 12,810
10/31/96 13,463 12,946 12,946
11/30/96 13,710 13,123 13,123
12/31/96 13,652 13,092 13,092
1/31/97 13,678 13,114 13,114
2/28/97 13,804 13,237 13,237
3/31/97 13,619 13,124 13,124
4/30/97 13,734 13,194 13,194
5/31/97 13,940 13,344 13,344
6/30/97 14,089 13,494 13,494
7/31/97 14,479 13,805 13,805
8/31/97 14,343 13,729 13,729
9/30/97 14,513 13,880 13,880
10/31/97 14,607 13,978 13,978
11/30/97 14,693 14,061 14,061
$14,693 $14,061 $13,961
A $10,000 investment in Class A shares made on 9/1/94 (inception) at net asset
value (NAV) would have grown to $12,981 on 11/30/97. The same investment based
on public offering price (POP) would have been valued at $12,364 on 11/30/97. A
$10,000 investment in Class C shares made on 8/1/97 (inception) at NAV would
have grown to $10,190 on 11/30/97. The same investment after deducting the
applicable CDSC would be valued at $10,090. 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 November 30, 1997
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CLASS A SHARES CLASS B SHARES CLASS C SHARES(1)
INCEPTION 9/1/94 6/8/92 8/1/97
NAV POP NAV w/CDSC NAV w/CDSC
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1 year 7.95% 2.82% 7.15% 2.15% -- --
- --------------------------------------------------------------------------------
5 years -- -- 6.50 6.18 -- --
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Since inception 8.35 6.74 6.63 6.49 1.90% 0.90%
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(1) Class C share performance shown is cumulative since inception on 8/1/97.
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. POP returns include the maximum sales charge of
4.75%. The CDSC returns reflect the maximum charge 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.
<PAGE>
INVESTMENT PORTFOLIO
NOVEMBER 30, 1997 (IN THOUSANDS)
MUNICIPAL BONDS - 97.5% PAR VALUE
- ----------------------------------------------------------------------------
EDUCATION - 1.3%
STUDENT LOANS
OH Cincinnati Student Loan Funding Corp.,
Series B,
6.750% 01/01/07 $ 2,450 $ 2,606
---------
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HEALTHCARE - 14.9%
HOSPITALS - 7.7%
AL Alabama Special Care Facilities Authority,
Montgomery Healthcare,
Series 1989,
11.000% 10/01/19 295 301
GA Clayton Hospital Authority,
The Woodlands Foundation, Inc.,
Series 1991-A,
9.750% 05/01/21(a) 1,500 975
IL State Health Facilities Authority,
Edgewater Medical Center,
Series A,
9.250% 07/01/24 2,000 2,440
MS State Hospital Equipment & Facilities
Authority, Rush Medical Foundation Project,
6.000% 01/01/22 500 507
NJ Health Care Facilities Financing
Authority, Raritan Bay Medical Center,
7.250% 07/01/27 2,000 2,152
OH Marion County,
Community Hospital,
Series 1996,
6.375% 05/15/11 1,000 1,084
PA Cambria County Hospital Authority,
Conemaugh Valley Memorial Hospital,
Series 1988-A,
8.875% 07/01/18 165 172
PA Delaware County Authority,
Southeastern Pennsylvania Obligated Group,
Series 1996,
6.000% 12/15/26 2,500 2,581
PA Scranton-Lackawanna Health & Welfare
Authority, Moses Taylor Hospital Project,
6.200% 07/01/17 1,855 1,950
TN Chattanooga Health Education
and Housing Facilities Board,
North Park Hospital Project, Series 1993,
8.500% 02/01/23 980 1,049
TX Denison Hospital Authority,
Texama Medical Center Project,
6.125% 08/15/17 1,000 1,046
VT State Educational & Health
Buildings Authority,
Springfield Hospital, Series A,
7.750% 01/01/13 775 867
---------
15,124
---------
INTERMEDIATE CARE FACILITIES - 1.3%
IL Champaign, Hoosier Care, Inc.,
Series 1989-A,
9.750% 08/01/19 485 518
IN Wabash First Mortgage, Hoosier
Care, Inc., Series 1989-A,
9.750% 08/01/19 485 519
MA State Health & Educational
Facilities Authority,
Corporation for Independent Living,
8.100% 07/01/18 600 652
TN Shelby County, Health, Education,
& Housing Facilities Board, Open Arms
Development Center:
Series 1992-A,
9.750% 08/01/19 335 395
Series 1992-C,
9.750% 08/01/19 330 388
---------
2,472
---------
NURSING HOMES - 5.9%
DE State Economic Development Authority,
Churchman Village Project,
Series A,
10.000% 03/01/21 745 898
DE Sussex County, Healthcare Facility,
Delaware Health Corporation,
Series 1994-A,
7.600% 01/01/24 1,000 1,030
FL Broward County,
Beverly Enterprises, Inc.,
9.800% 11/01/10 615 680
FL Flagler County Industrial
Development Authority,
South Florida Properties, Series 1988,
10.500% 12/01/18(a) 915 732
FL Gadsden County Industrial
Development Authority,
Florida Properties, Inc., Series 1988-A,
10.450% 10/01/18 340 350
IA State Finance Authority,
Care Initiatives Project,
Series 1996,
9.250% 07/01/25 500 666
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% 07/01/23 980 1,011
MI Cheboygan County Economic
Development Corp.,
Metro Health Foundation Project, Series 1993,
10.000% 11/01/(b) 600 600
NJ Economic Development Authority
Geriatric and Medical Service, Inc.,
Series A,
10.500% 05/01/04 95 101
OH Lucas County, Gericare, Inc.,
Series 1988-B,
10.500% 06/01/18 300 307
PA Chartiers Valley
Industrial and Commercial Authority,
Beverly Enterprises, Inc., Series 1985,
10.000% 06/01/07 1,650 1,725
PA Chester County Industrial Development,
Pennsylvania Nursing Home, Inc.,
Series 1989,
10.125% 05/01/19 440 427
PA Delaware County Authority,
Main Line and Haverford Nursing,
Series 1992,
9.000% 08/01/22 50 56
PA Lackawanna County Industrial Authority,
Greenridge Nursing Center, Series 1990,
10.500% 12/01/10 190 208
PA Luzerne County Industrial
Development Authority,
Millville Nursing Center, Series 1990,
10.500% 12/01/12 225 214
PA Montgomery County Higher Education
& Health Authority,
Roslyn-Hatboro, Inc. Project,
9.000% 11/15/22 300 240
PA Philadelphia Authority for Industrial
Development, RHA/Philadelphia Project,
10.250% 11/01/18 735 734
VA Virginia Beach Development Authority,
Beverly Enterprises, Series 1985,
10.000% 04/01/10 230 252
WA Kitsap County Housing Authority,
Martha & Mary Nursing Home,
7.100% 02/20/36 1,000 1,130
---------
11,495
---------
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HOUSING - 17.8%
ASSISTED LIVING/SENIOR - 5.2%
CT State Authority,
First Mortgage Gross Health Care
Church-Avery Project Series 1990,
9.000% 04/01/20 500 566
FL Clearwater Housing Authority,
Hampton Apartments, Series 1994,
8.250% 05/01/24 2,000 2,127
IL State Development Finance Authority,
Care Institute, Inc.,
8.250% 06/01/25 2,000 2,195
MN Roseville,
Care Institute, Inc., Series 1993,
7.750% 11/01/23 1,270 1,270
NY Glen Cove Housing Authority,
8.250% 10/01/26 2,000 2,195
PA Montgomery County Industrial
Development Authority, Assisted
Living Facility, Series 1993-A,
8.250% 05/01/23 615 653
TX Bell County Health Facilities
Development Corp., Care Institutions, Inc.,
9.000% 11/01/24 1,000 1,111
---------
10,117
---------
MULTI-FAMILY - 7.5%
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% 01/01/19 750 770
MN Lakeville,
Southfork Apartment Project,
Series 1989-A,
9.875% 02/01/20 700 708
MN Washington County Housing &
Redevelopment Authority,
Cottages of Aspen, Series 1992,
9.250% 06/01/22 495 548
MN White Bear Lake,
Birch Lake Townhomes Project,
Series 1989-A,
9.750% 07/15/19 750 758
NC Eastern Carolina Regional Housing
Authority, New River Apartments -
Jacksonville, Series 1994,
8.250% 09/01/14 1,420 1,477
Resolution Trust Corp., Pass Through Certificates,
Series 1993-A,
8.500% 12/01/16(b) 4,248 4,423
SC State Housing Finance and Development
Multi-Family Housing Finance Revenue,
Westbridge Apartments, Series A,
9.500% 09/01/20 615 630
TN Franklin Industrial Board,
Landings Apartment Project, Series 1996-B,
8.750% 04/01/27 1,800 1,824
TX Galveston Pass Through Certificates,
Health Facilities Center,
8.000% 08/01/23 1,000 1,055
VA Alexandria Redevelopment
& Housing Authority, Courthouse
Commons Apartments, Series 1990-A,
10.000% 01/01/21 500 509
---------
14,602
---------
SINGLE-FAMILY - 5.1%
CO Housing Finance Authority,
Series D-1,
7.375% 06/01/26 2,000 2,242
CO State Housing Finance Authority,
Series 1997 A-2,
7.250% 05/01/27 800 906
MO State Housing Development Commission,
Series C,
7.250% 09/01/26 2,755 3,117
NJ State Housing & Mortgage Finance Agency,
Series 1989-D,
7.700% 10/01/29(c) 945 989
PA State Housing Finance Agency,
Series 1994-42,
6.850% 04/01/25(c) 2,435 2,642
---------
9,896
---------
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OTHER - 5.0%
REFUNDED/ESCROWED (D)
AZ Apache County School District
Number 010 Round Valley
Project of 1987, Series 1990-C,
9.875% 07/01/05 500 550
CA Colton Public Financing Authority,
Series 1995,
7.500% 10/01/20 1,000 1,165
CO Denver City and County Airport:
Series A,
8.500% 11/15/23 25 28
Series C,
6.750% 11/15/22 265 295
Series D,
7.750% 11/15/21 415 471
DE State Economic Development Authority,
Riverside Hospital,
Series 1992-A,
9.500% 01/01/22 600 777
ID State Health Facilities Authority,
IHC Hospitals, Inc.,
8.260% 02/15/21(c) 1,000 1,140
MA State Industrial Finance Agency,
Mary Ann Morse Nursing Home, Inc.,
Series 1991-I,
10.000% 01/01/21 500 594
MA State Industrial Finance Agency,
Series 1990,
9.000% 10/01/20 920 1,050
MN Mille Lacs Capital Improvement Authority,
Mille Lacs Bond of Chippewa,
Series 1992-A,
9.250% 11/01/12 625 771
MO Hannibal Industrial Development Authority,
Regional Healthcare Systems,
Series 1992,
9.500% 03/01/22 1,000 1,223
NC Lincoln County,
Lincoln County Hospital, Series 1991,
9.000% 05/01/07 315 380
WA State Health Care Facilities Authority,
Grays Harbor Community Hospital,
Series 1993:
7.200% 07/01/03 170 186
8.025% 07/01/20 960 1,075
---------
9,705
---------
- ----------------------------------------------------------------------------
OTHER REVENUE - 27.2%
CHEMICALS - 5.6%
SC York County,
Hoechst Celanese Corp., Series 1994,
5.700% 01/01/24 4,535 4,615
WA Spokane County Industrial Development Corp.,
Kaiser Aluminum & Chemical Corp. Project,
7.600% 03/01/27 2,500 2,775
WY Sweetwater County,
FMC Corp. Project, Series 1994-A,
7.000% 06/01/24 3,325 3,653
---------
11,043
---------
HOTELS - 1.5%
MN Burnsville Commercial Development,
Holiday Inn Project, Series 1989,
10.600% 06/01/06 500 505
MN Minneapolis,
Holiday Inn Metrodome Project,
6.000% 12/01/01 400 402
PA Philadelphia Authority for Industrial
Development, Doubletree Project,
6.500% 10/01/27 2,000 2,077
---------
2,984
---------
INDUSTRIAL - 10.7%
AZ Greenlee County Industrial
Development Authority,
Phelps Dodge Corp.,
5.450% 06/01/09 3,000 3,098
AZ Tucson Airport Authority,
Lockheed Aeromod Center, Inc.,
Series 1990,
8.700% 09/01/19 2,500 2,812
GA Wayne County Development Authority,
Solid Waste Disposal, ITT Rayonier
Inc., Series 1990,
8.000% 07/01/15 500 546
IL State Development Finance Authority,
Armstrong World Industries, Inc. Project,
5.950% 12/01/24 2,000 2,105
IN State Development Finance Authority,
Inland Steel, Series A,
5.750% 10/01/11 500 507
MD Baltimore County,
Bethlehem Steel Corp. Project, Series B,
7.500% 06/01/15 2,000 2,200
MN Brooklyn Park,
TL Systems Corp., Series 1991,
10.000% 09/01/16 520 642
MN Buffalo,
Von Ruden Manufacturing, Inc.,
Series 1989,
10.500% 09/01/14 760 830
OH Cuyahoga County,
Joy Technologies, Inc., Series 1992,
8.750% 09/15/07 360 412
TN McKenzie Individual Development Board,
American Lantern Co., Series 1989,
10.500% 05/01/16 458 458
TX Trinity River Authority,
Texas Instruments Project, Series 1996,
6.200% 03/01/20 2,000 2,100
WA Pilchuck Public Development Corp.,
Goodrich (B.F.) Co. Tramco Project,
Series 1993,
6.000% 08/01/23 4,500 4,607
WV Weirton Pollution Control, Weirton
Steel Corp., Series 1989,
8.625% 11/01/14 500 530
---------
20,847
---------
OIL & GAS - 1.0%
WA Pierce County Economic
Development Corp.,
Occidental Petroleum Co.,
5.800% 09/01/29 2,000 2,015
---------
OTHER - 4.4%
DC District of Columbia,
Carnegie Endowment, Series 1996,
5.750% 11/15/10 1,155 1,216
IL Bi-State Development Agency,
American Commerical Lines, Inc.,
7.750% 06/01/10 2,000 2,180
IN Hammond,
American Maize Products Co.,
Series 1994,
8.000% 12/01/24 2,000 2,333
LA Port New Orleans Industrial Development,
Continental Grain Company, Series 1993,
7.500% 07/01/13 2,000 2,192
MD Baltimore,
Park Charles Project, Series 1986,
8.000% 01/01/10 640 693
---------
8,614
---------
PAPER PRODUCTS - 2.9%
GA Rockdale County Development
Authority, Solid Waste Disposal, Visy
Paper, Inc., Series 1993,
7.500% 01/01/26 1,800 1,953
SC Darlington County,
Industrial Development Authority:
Sonoco Products Co.
Series 1996,
6.000% 04/01/26 1,500 1,553
Sonoco Products Co. Project,
6.125% 06/01/25 2,000 2,092
---------
5,598
---------
RETAIL - 1.1%
OH Lake County,
North Madison Properties,
Series 1993,
8.819% 09/01/11 545 587
VA Virginia Beach Development Authority,
SC Diamond Associates, Inc.,
8.000% 12/01/10 1,365 1,493
---------
2,080
---------
- ----------------------------------------------------------------------------
RESOURCE RECOVERY - 4.6%
DISPOSAL - 2.9%
CT State Development Authority,
NETCO - New Haven,
Series 1996,
8.250% 12/01/06 1,000 1,043
CT State Disposal Facility,
NETCO Waterbury Ltd., Series 1995,
9.375% 06/01/16 1,500 1,721
GA Fulton County Development
Authority, Very, Inc.,
10.500% 12/01/07 110 115
MA State Industrial Finance Agency:
Massachusetts Environmental Services,
Series 1994-A,
8.750% 11/01/21(a) 980 735
Peabody Monofill Associates, Inc.,
Series 1995,
9.000% 09/01/05 915 1,012
UT Carbon County,
Laidlaw Environmental, Series A,
7.450% 07/01/17 1,000 1,064
---------
5,690
---------
RESOURCE RECOVERY - 1.7%
PA Delaware County Industrial
Development Authority, Series A,
6.200% 07/01/19 2,225 2,361
PA State Economic Development Financing
Authority, Northampton Generating,
Series A,
6.500% 01/01/13 1,000 1,044
---------
3,405
---------
- ----------------------------------------------------------------------------
TAX-BACKED - 4.3%
LOCAL GENERAL OBLIGATIONS - 0.5%
CA Roseville Unified High School District,
Series B,
(e) 06/01/20(c) 3,000 889
NY New York City, Series C,
5.375% 11/15/17 180 177
---------
1,066
---------
SPECIAL NON-PROPERTY TAX - 1.7%
IL Metropolitan Pier & Exposition
Authority, McCormick Place Expansion,
(e) 06/15/17(c) 6,750 2,380
IL State Development Finance Authority,
City of Marion Project, Series 1991,
9.625% 09/15/21 1,175 881
---------
3,261
---------
SPECIAL PROPERTY TAX - 1.9%
CA Carson, Improvement Assessment District,
Series 1992,
7.375% 09/02/22 955 1,027
CA Pleasanton Joint Powers Financing
Reassessment Subordinated Revenue,
Series 1993-B,
6.750% 09/02/17 1,850 1,961
CA Riverside County Public Financing Authority,
Redevelopment Projects, Series A,
5.500% 10/01/22 700 689
---------
3,677
---------
STATE APPROPRIATED - 0.2%
NY Metropolitan Transportation Authority,
Commuter Facilities, Series 1997-8,
5.250% 07/01/17 315 306
---------
- ----------------------------------------------------------------------------
TRANSPORTATION - 13.9% AIR TRANSPORTATION - 7.3%
CO Denver City &
County Airport,
United Airlines, Inc.,
Series 1992-A,
6.875% 10/01/32 3,000 3,278
IN Indianapolis Airport Authority,
Federal Express Corp.,
Series 1994,
7.100% 01/15/17 4,000 4,470
TX Alliance Airport Authority,
American Airlines Project,
7.500% 12/01/29 2,000 2,188
TX Dallas-Fort Worth International Airport,
American Airlines, Inc., Series 1990,
7.500% 11/01/25 2,000 2,177
TX Houston Airport System,
Continental Airline Terminal, Series B,
6.125% 07/15/17 2,000 2,077
---------
14,190
---------
AIRPORTS - 1.6%
CO Denver City and County Airport:
Series A,
8.500% 11/15/23 225 253
Series C,
6.750% 11/15/22 985 1,065
Series D,
7.750% 11/15/21 1,585 1,777
---------
3,095
---------
TOLL FACILITIES - 5.0%
CA Foothill Eastern Transportation
Corridor Agency, Series 1995-A,
(e) 01/01/15 8,000 3,060
CA San Joaquin Hills Transportation
Corridor Agency, Series 1993,
(e) 01/01/23 5,250 1,372
5.000% 01/01/33 2,000 1,855
CO State Public Highway Authority,
E-470, Series B, Arapahoe Co.,
(e) 09/01/12 5,500 2,578
NY State Thruway Authority,
5.000% 04/01/17 1,000 948
---------
9,813
---------
- ----------------------------------------------------------------------------
UTILITY - 8.5%
INDEPENDENT POWER PRODUCER - 3.8%
FL Martin County Industrial
Development Authority,
Indiantown Co-Generation Project,
Series 1994-A,
7.875% 12/15/25 1,000 1,160
NY Port Authority of New York & New Jersey,
KIAC Partners, Series 1996-IV,
6.750% 10/01/11 2,000 2,175
PA Economic Development Finance
Authority, Colver Project, Series D,
7.150% 12/01/18 3,650 4,024
---------
7,359
---------
INVESTOR OWNED - 1.7%
AZ Pima County Industrial Development
Authority, Tucson Electric Power Co., Series 1994,
6.100% 09/01/25 760 769
NM Farmington,
San Juan Public Service Co. Project,
Series D,
6.375% 04/01/22 2,000 2,120
OH State Water Development Pollution
Control Facilities, Pennsylvania Power Co.,
8.100% 01/15/20 500 535
---------
3,424
---------
JOINT POWER AUTHORITY - 0.3%
MN Southern Minnesota Municipal
Power Agency, Series 1994-A,
(e) 01/01/25(c) 2,660 622
---------
MUNICIPAL ELECTRIC - 1.1%
WA Chelan County Public Utilities, District No. 1,
Columbia River Rock Hydroelectric,
(e) 06/01/14(c) 5,000 2,162
---------
WATER & SEWER - 1.6%
LA Public Facility Belmont Water Authority,
9.000% 03/15/24(b) 585 527
MS Five Lakes Utility District,
8.250% 07/15/24 400 320
NJ State Economic Development
Authority, Hills Development Co.,
10.500% 09/01/08 400 406
NY New York City Municipal Water
Finance Authority, Series B,
5.250% 06/15/29 2,000 1,937
---------
3,190
---------
TOTAL INVESTMENTS (cost of $179,533)(f) 190,458
---------
SHORT-TERM OBLIGATIONS - 0.8%
- ----------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (g)
IL State Educational Facilities Authority,
3.900% 12/01/25 100 100
IN Portage Economic Development Revision,
Pedcor Investments, Series A,
4.050% 08/01/30 900 900
IN State Health Facilities
Financing Authority, Series 1992,
3.900% 12/01/02 100 100
LA State Offshore Terminal Authority, Loop, Inc.,
3.900% 09/01/06 400 400
NY Niagara Mohawk, Series 1985-A,
4.000% 07/01/15 100 100
---------
TOTAL SHORT -TERM OBLIGATIONS 1,600
---------
OTHER ASSETS & LIABILITIES, NET - 1.7 % 3,417
- ----------------------------------------------------------------------------
NET ASSETS - 100.0% $ 195,475
=========
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, 1997, the value of these securities amounted to $5,550 or 2.8%
of net assets.
(c) These securities, or a portion thereof, with a total market value of
$10,824, are being used to collateralize open futures contracts.
(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) Zero coupon bond.
(f) Cost for federal income tax purposes is $179,550. (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.
SHORT FUTURES CONTRACTS OPEN AT NOVEMBER 30, 1997:
Par value Unrealized
covered by Expiration appreciation
Type contracts month at 11/30/97
---------------------------------------------------------------------------
Municipal Bond $ 3,500 December $ 49
Treasury Bond 3,500 March 15
---------
$ 64
=========
See notes to financial statements.
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
NOVEMBER 30, 1997
(in thousands except for per share amounts and footnotes)
ASSETS
Investments at value (cost $179,533) $ 190,458
Short-term obligations 1,600
---------
192,058
Receivable for:
Interest $ 4,077
Fund shares sold 155
Investments sold 120
Variation margin on futures 5
Other 52 4,409
------- ---------
Total Assets 196,467
LIABILITIES
Payable for:
Distributions 809
Fund shares repurchased 158
Accrued:
Deferred Trustees fees 3
Other 22
-------
Total Liabilities 992
---------
NET ASSETS $ 195,475
=========
Net asset value & redemption price per share -
Class A ($52,847/5,112) $ 10.34
=========
Maximum offering price per share - Class A
($10.34/0.9525) $ 10.86(a)
=========
Net asset value & offering price per share -
Class B ($142,287/13,761) $ 10.34(b)
=========
Net asset value & offering price per share -
Class C ($341/33) $ 10.34(b)
=========
COMPOSITION OF NET ASSETS
Capital paid in $ 190,453
Overdistributed net investment income (93)
Accumulated net realized loss (5,874)
Net unrealized appreciation on:
Investments 10,925
Open futures contracts 64
---------
$ 195,475
=========
(a) On sales of $50,000 or more the offering price is reduced.
(b) Redemption price per share is equal to net asset value less
any applicable contingent deferred sales charge.
See notes to financial statements.
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 1997
(in thousands)
INVESTMENT INCOME
Interest $ 13,177
EXPENSES
Management fee $ 1,059
Service fee 476
Distribution fee - Class B 1,079
Distribution fee - Class C (a)
Transfer agent 297
Bookkeeping fee 76
Trustees fee 20
Custodian fee 8
Audit fee 31
Legal fee 59
Registration fee 56
Reports to shareholders 9
Amortization of deferred
organization expenses 9
Other 16 3,195
------- ---------
Net Investment Income 9,982
---------
NET REALIZED & UNREALIZED GAIN (LOSS)
ON PORTFOLIO POSITIONS
Net Realized Gain (Loss) on:
Investments (1,603)
Closed futures contracts 53
-------
Net Realized Loss (1,550)
Net Change in Unrealized Appreciation
during the period on:
Investments 5,201
Open futures contracts 64
-------
Net Change in Unrealized Appreciation 5,265
---------
Net Gain 3,715
---------
Net Increase in Net Assets from Operations $ 13,697
=========
(a) Rounds to less than one.
See notes to financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(in thousands) Year ended November 30
-----------------------------
INCREASE (DECREASE) IN NET ASSETS 1997 (a) 1996
Operations:
Net investment income $ 9,982 $ 9,306
Net realized gain (loss) (1,550) 73
Net unrealized appreciation (depreciation) 5,265 (634)
--------- ---------
Net Increase from Operations 13,697 8,745
Distributions:
From net investment income - Class A (2,677) (1,682)
In excess of net investment income - Class A (29) ----
From net investment income - Class B (7,352) (7,931)
In excess of net investment income - Class B (80) ----
From net investment income - Class C (4) ----
In excess of net investment income - Class C ---- ----
--------- ---------
3,555 (868)
--------- ---------
Fund Share Transactions:
Receipts for shares sold - Class A 21,128 22,506
Value of distributions reinvested - Class A 1,026 467
Cost of shares repurchased - Class A (7,723) (3,674)
--------- ---------
14,431 19,299
--------- ---------
Receipts for shares sold - Class B 27,096 31,304
Value of distributions reinvested - Class B 3,211 3,532
Cost of shares repurchased - Class B (35,777) (26,537)
--------- ---------
(5,470) 8,299
--------- ---------
Receipts for shares sold - Class C 354 ----
Value of distributions reinvested - Class C 2 ----
Cost of shares repurchased - Class C (17) ----
--------- ---------
339 ----
--------- ---------
Net Increase from Fund Share
Transactions 9,300 27,598
--------- ---------
Total Increase 12,855 26,730
NET ASSETS
Beginning of period 182,620 155,890
--------- ---------
End of period (net of overdistributed and
including undistributed net investment
income of $93 and $51, respectively) $ 195,475 $ 182,620
========= =========
(a) Class C shares were initially offered on August 1, 1997.
See notes to financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(continued)
Year ended November 30
-----------------------------
NUMBER OF FUND SHARES 1997 (a) 1996
Sold - Class A 2,087 2,243
Issued for distributions reinvested - Class A 101 47
Repurchased - Class A (761) (364)
--------- ---------
1,427 1,926
--------- ---------
Sold - Class B 2,678 3,109
Issued for distributions reinvested - Class B 316 351
Repurchased - Class B (3,529) (2,643)
--------- ---------
(535) 817
--------- ---------
Sold - Class C 35 ----
Issued for distributions reinvested - Class C (b) ----
Repurchased - Class C (2) ----
--------- ---------
33 ----
--------- ---------
(a) Class C shares were initially offered on August 1, 1997.
(b) Rounds to less than one.
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1997
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 as
high a 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 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.
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.
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 fees), 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.
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 were 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
- --------------------------------------------------------------------------------
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:
Average Net Assets Annual Fee Rate
------------------ ---------------
First $1 billion 0.60%
Next $2 billion 0.55%
Next $1 billion 0.50%
Over $4 billion 0.45%
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 by 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.
During the year ended November 30, 1997, the Fund has been advised that the
Distributor retained net underwriting discounts of $26,197 on sales of the
Fund's Class A shares and received contingent deferred sales charges (CDSC) of
$348,081 and none on Class B and Class C share redemptions, respectively.
The Fund has adopted a 12b-1 plan which requires the payment of a service fee to
the Distributor equal to 0.25% annually of the Fund's net assets as of 20th of
each month. The plan also requires the payment of a distribution fee to the
Distributor equal to 0.75%, annually, 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 does not exceed 0.60%
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.
NOTE 3. PORTFOLIO INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT ACTIVITY: During the year ended November 30, 1997, purchases and
sales of investments, other than short-term obligations were $53,456,754 and
$41,984,006, respectively.
Unrealized appreciation (depreciation) at November 30, 1997, based on cost of
investments for federal income tax purposes was approximately:
Gross unrealized appreciation $12,783,000
Gross unrealized depreciation (1,875,000)
-----------
Net unrealized appreciation $10,908,000
===========
CAPITAL LOSS CARRYFORWARDS: At November 30, 1997, capital loss carryforwards,
available (to the extent provided in regulations) to offset future realized
gains were approximately as follows:
Year of Capital loss
expiration carryforward
---------- ------------
1998 590,000
1999 364,000
2000 302,000
2002 1,731,000
2003 2,383,000
2005 1,526,000
-----------
$ 6,896,000
===========
The loss carryforwards expiring in 1998 and 1999 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.
The Fund may invest in municipal and Treasury bond futures contracts and
purchase and write options on futures. The Fund will invest in these instruments
to hedge against the effects of changes in 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 recognized 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.
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are
as follows:
Year ended November 30
--------------------------------------
1997
Class A Class B Class C (a)
-------- -------- ----------
Net asset value - Beginning of
period $ 10.160 $ 10.160 $ 10.320
-------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.592 0.516 0.176
Net realized and unrealized gain 0.188 0.188 0.018(b)
-------- -------- --------
Total from Investment Operations 0.780 0.704 0.194
-------- -------- --------
LESS DISTRIBUTIONS DECLARED TO
SHAREHOLDERS:
From net investment income (0.594) (0.518) (0.174)
In excess of net investment income (0.006) (0.006) -
-------- -------- --------
Total Distributions Declared
to Shareholders (0.600) (0.524) (0.174)
-------- -------- --------
Net asset value - End of period $ 10.340 $ 10.340 $ 10.340
======== ======== ========
Total return (c) 7.95% 7.15% 1.90(d)
======== ======== ========
RATIOS TO AVERAGE NET ASSETS
Expenses (e) 1.11% 1.86% 1.72%(f)
Net investment income (e) 5.83% 5.08% 5.14%(f)
Portfolio turnover 23% 23% 23%
Net assets at end of period (000) $ 52,847 $142,287 $ 341
(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.
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Selected data for a share of each class outstanding throughout each period are
as follows:
Year ended November 30
------------------------------------------------
1996 1995
Class A Class B Class A Class B
------- ------- ------- -------
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 (b) 5.86% 5.07% 17.28% 16.42%
======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS
Expenses 1.10% (d) 1.85%(d) 1.17%(d) 1.92%(d)
Net investment income 6.19%(d) 5.44%(d) 6.67%(d) 5.92%(d)
Portfolio turnover 8% 8% 26% 26%
Net assets at end of
period (000) $37,420 $145,200 $17,997 $137,893
(a) Class A shares were initially offered on September 1, 1994. Per share
amounts reflect activity from that date.
(b) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(c) Not annualized.
(d) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
(e) Annualized.
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Year ended November 30
----------------------------------------
1994 1993
Class A(a) Class B Class B
---------- ------- -------
$ 9.800 $ 10.320 $ 10.070
------- -------- --------
0.188 0.605 0.609
(0.496) (1.016) 0.277
------- -------- --------
(0.308) (0.411) 0.886
------- -------- --------
(0.162) (0.579) (0.636)
------- -------- --------
$ 9.330 $ 9.330 $ 10.320
======= ======== ========
(3.15)(c) (4.10%) 9.00%
======= ======== ========
1.15(e) 1.90% 1.94%
7.19(e) 6.44% 5.95%
25% 25% 31%
$ 6,027 $113,549 $120,523
- --------------------------------------------------------------------------------
Federal Income Tax Information (unaudited)
All of the income distributions will be treated as exempt income for federal
income tax purposes.
- --------------------------------------------------------------------------------
<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, 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
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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.
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SHAREHOLDER COMMUNICATIONS
TO KEEP YOU INFORMED
To make recordkeeping easy and keep you up-to-date on the performance of your
investments, you can expect to receive the following information about your
account:
TRANSACTION CONFIRMATIONS: Each time you make a purchase, sale or exchange, you
receive a confirmation statement within just a few days.
QUARTERLY STATEMENTS: Every three months, if any transactions are made that
affect your share balance, this statement reports on your account activity
during the quarter (including any reinvestment of dividends). This statement
also provides year-to-date information.
LIBERTY FINANCIAL INVESTMENTS INVESTOR OPPORTUNITIES: Mailed with your
quarterly account statements, this newsletter highlights timely investment
strategies, portfolio manager commentary and shareholder service updates.
TAX FORMS AND YEAR-END TAX GUIDE: Easy-to-use forms and timely information are
designed to make tax reporting simpler. (Usually mailed in January.)
AVERAGE COST BASIS STATEMENTS: If you sold or exchanged shares during the year,
this statement may help you calculate your gain/loss for tax purposes. (Usually
mailed in February.)
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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.
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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, Massachusetts 02111-2621
HM-02/344E-1097 M (1/98)
