<PAGE>
[graphic omitted]
- ---------------------------------------------------
COLONIAL HIGH YIELD MUNCIPAL FUND SEMIANNUAL REPORT
- ---------------------------------------------------
MAY 31, 1999
-----------------------------
Not FDIC May Lose Value
Insured No bank Guarantee
-----------------------------
<PAGE>
- --------------------------------------------------------------------------------
COLONIAL HIGH YIELD MUNICIPAL FUND
- --------------------------------------------------------------------------------
[Photo of Stephen E. Gibson]
PRESIDENT'S MESSAGE
Dear Shareholder:
During the six months ended May 31, 1999, the bond market experienced
considerable volatility. In early December 1998, continued fears of a global
recession resulted in a flight to quality that benefited bond performance.
Treasury securities, considered the safest bond investments, performed well
during the last half of 1998, but municipal bonds also posted solid returns. By
the end of May 1999, several events reversed this trend. Global economies
stabilized, and strong U.S. economic growth renewed investors' inflation fears.
Bond prices declined, driving interest rates up across the board. Municipal
bonds were not hit as hard as Treasurys as prices fell.
This difficult environment was reflected in the Fund's performance. While past
performance cannot predict future trends, it is important to keep a long-term
perspective and remember that the Fund has provided above-average returns for
the one- and three-year periods ended May 31, 1999.(1)
The following report will provide you with more specific information about your
Fund's performance and the strategies employed during the period. As always, we
thank you for choosing Colonial High Yield Municipal Fund and for giving us the
opportunity to serve your investment needs.
Respectfully,
/s/ Stephen E. Gibson
Stephen E. Gibson
President
July 13, 1999
TABLE OF CONTENTS
1 HIGHLIGHTS
2 PORTFOLIO MANAGER'S REPORT
4 PERFORMANCE
5 PORTFOLIO OF INVESTMENTS
13 FINANCIAL STATEMENTS
15 NOTES TO FINANCIAL STATEMENTS
17 FINANCIAL HIGHLIGHTS
(1) Source: Lipper, Inc. Lipper rankings are based on the Lipper High Yield
Municipal Debt Funds category. The Fund (Class A shares at net asset value)
ranked in the fourth quartile for six months (48th out of 55 funds); in the
second quartile for one year (22nd out of 53 funds); and in the second quartile
for three years (17th out of 36 funds). The Fund's Class B shares ranked in the
third quartile for five years (16th out of 27 funds). Rankings do not include
any sales charges. Performance for different share classes will vary with fees
associated with each class. Past performance cannot guarantee future results.
Because market and economic conditions change, there can be no assurance that
the trends described above or on the following pages will continue.
<PAGE>
- --------------------------------------------------------------------------------
HIGHLIGHTS
- --------------------------------------------------------------------------------
o Bond market conditions were challenging.
Long-term interest rates rose almost a full percentage point between
December and May in response to renewed concerns about the economy's
strength and fears of potentially higher inflation. As yields rose,
bond prices fell.
0 Municipal bonds outperformed Treasurys as interest rates rose.
Within the tax-exempt market sector, bond prices moved in tandem with
the Treasury market during the past six months. While tax-exempt bonds
gained less ground than Treasurys early in the period when interest
rates were falling, municipal bonds outperformed the Treasury sector
later in the period, losing less of their principal value as interest
rates rose.
o Impact of Federal Reserve actions felt toward the end of the period.
In May, Federal Reserve Board policy makers prepared investors for a
rate increase later this year by switching from a neutral stance to one
biased towards raising rates in the future. Bond prices fell in
response and remained weak throughout the period. As the chart below
indicates, this had a negative impact on municipal bond performance.
LEHMAN BROTHERS MUNICIPAL BOND INDEX
$10,000 Hypothetical Investment 11/30/98 - 5/31/99
Lehman
Brothers
Municipal
Bond Index
-------------------------
11/30/98 10,000
12/31/98 10,025
1/31/99 10,144
2/28/99 10,100
3/31/99 10,114
4/30/99 10,139
5/31/99 10,081
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 and do not incur fees or expenses. It is not
possible to invest directly in an index.
Six-month cumulative total returns for the period ended 5/31/99(1)
POP or
NAV w/CDSC
------- ------
Class A 0.28% -4.48%
- ----------------------------------------------------
Class B -0.09% -4.98%
- ----------------------------------------------------
Class C(2) -0.02% -0.99%
- ----------------------------------------------------
DISTRIBUTIONS DECLARED
PER SHARE FOR THE PERIOD ENDED 5/31/99(3)
Class A $0.280
- ----------------------------------------------------
Class B $0.241
- ----------------------------------------------------
Class C $0.249
- ----------------------------------------------------
SEC YIELDS AS OF 5/31/99(4)
Class A 4.47%
- ----------------------------------------------------
Class B 3.93%
- ----------------------------------------------------
Class C 4.08%
- ----------------------------------------------------
(1) Net asset value (NAV) returns do not include sales charges or contingent
deferred sales charges (CDSC). Public offering price (POP) returns include
the maximum sales charge of 4.75% for Class A shares. The CDSC returns
reflect the maximum applicable charges for six months of 5% for Class B
shares and 1% for Class C shares.
(2) Performance results reflect any voluntary waivers or reimbursement of Fund
expenses by the Advisor or its affiliates. Absent these waivers or
reimbursement arrangements, performance results would have been lower.
(3) A portion of the Fund's income may be subject to the alternative minimum
tax. The Fund may at times purchase tax-exempt securities at a discount.
Some or all of this discount may be included in the Fund's ordinary income,
and is taxable when distributed.
(4) The 30-day SEC yields on May 31, 1999 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. If the Distributor had
not waived certain Fund expenses, the SEC yield for Class C shares would
have been 3.92%.
<PAGE>
SEMIANNUAL REPORT: COLONIAL HIGH YIELD MUNICIPAL FUND
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER'S REPORT
- --------------------------------------------------------------------------------
STRATEGY ADJUSTED TO REFLECT CHANGES IN MARKET CONDITIONS
We made several shifts in the Fund's investment strategy during the past six
months. First, we reduced the portfolio's interest rate sensitivity in response
to numerous reports detailing the economy's strength. Since these reports raised
concerns about inflation and potentially higher interest rates -- both negative
conditions for fixed income investments -- we structured the Fund to be
relatively less sensitive to interest rate changes. Second, we took advantage of
the widening of credit spreads, or the difference in yield between higher- and
lower-quality securities. We selectively invested in fundamentally sound,
higher-yielding bonds that provided the Fund with attractive current income and
the potential for price appreciation.
HOUSING SECTOR BONDS PERFORMED WELL IN A CHALLENGING MARKET
The portfolio's multi-family housing bonds outperformed many market sectors when
interest rates began to rise. Housing issues typically perform better in weak
market environments because real estate owners are less likely to refinance and
prepay their mortgages, which can reduce the Fund's income stream. The Fund's
housing issues also benefited from a strong real estate market nationwide.
Healthy demand and high occupancy levels supported higher rents and increased
cash flows for project owners. As a result, a number of the portfolio's holdings
in the housing sector outperformed the general market.
INVESTMENT ACTIVITY FOCUSED ON INCREASING THE FUND'S DIVERSIFICATION
In addition to taking advantage of attractively priced, lower-rated bonds for
yield and total return potential, we focused on increasing the portfolio's
diversification and spreading the credit risk over a larger number and wider
variety of bonds. We purchased issues that we believed represented well-managed
businesses with strong cash flows, good service territories and adequate
financial safeguards. For example, we increased our holdings in health care
issues -- such as small rural hospitals, lifecare and assisted living facilities
- -- that have profitably managed their costs, enjoyed good demographics, and
offered services that have experienced increasing demand. In addition, many of
these bonds have provided above-average income and may have rating upgrade
potential.
TOTAL RETURN NEGATIVELY IMPACTED BY TWO POOR-PERFORMING BONDS
During the six-month period, the Fund's Class A shares generated a total return
of 0.28%, based on net asset value. In addition to a difficult fixed-income
investment environment, two of the Fund's holdings experienced significant price
declines. Woodlands (0.22% of total net assets), a health facility in Georgia,
and Indiantown Cogeneration, an independent power producer in Florida, had legal
and contractual problems that negatively impacted their valuations. We sold the
Indiantown position late in the period and are seeking buyers for the Woodlands
holdings.
FAVORABLE LONG-TERM MARKET OUTLOOK ANTICIPATED
Our long-term market outlook is favorable. We believe that economic growth
should begin to slow and that interest rates may be modestly lower by the end of
1999 -- both positive conditions for fixed-income investments. Looking ahead, we
expect to actively manage the portfolio's interest rate sensitivity in order to
take advantage of potentially lower rates. We also plan to maintain our emphasis
on diversifying the Fund by making opportunistic purchases in bonds whose prices
may not reflect their underlying strength.
/s/ Maureen S. Newman
MAUREEN NEWMAN is portfolio manager of Colonial High Yield Municipal Fund and is
a senior vice president of Colonial Management Associates, Inc. (CMA).
<PAGE>
PORTFOLIO QUALITY BREAKDOWN
AS OF 5/31/99(1), (2)
AAA 8.7%
AA 3.2%
A 8.8%
BBB 27.0%
BB 3.4%
B 1.4%
Non-rated 44.5%
Cash equivalents 3.0%
TOP 5 ECONOMIC SECTORS
AS OF 5/31/99(1)
HOSPITALS 10.1%
REFUNDED/ESCROWED 8.4%
MULTI-FAMILY HOUSING 7.3%
NURSING HOMES 6.6%
ASSISTED LIVING/SENIOR 5.8%
(1) Quality and economic sector weightings are calculated as a percentage of
total investments, including short-term obligations. Because the Fund is
actively managed, there can be no guarantee the Fund will continue to
maintain these quality and sector weightings in the future.
(2) Ratings shown in the quality breakdown represent the highest rating assigned
to a particular bond by one of the following respected rating agencies:
Standard & Poor's, Moody's or Fitch.
BOUGHT
- --------------------------------------------------------------------------------
HOSPITALS
We added positions in Baylor/Richardson Hospital (TX), Touro Infirmary (LA), and
Shellpointe Village (FL) (0.28%, 0.24% and 0.12% of net assets, respectively)
which represent a cross-section of large and small acute care hospitals and
senior living/care facilities.
PORTFOLIO MATURITY BREAKDOWN AS OF 5/31/99(1)
0-1 years 0.0%
1-3 years 1.3%
3-5 years 2.5%
5-7 years 2.1%
7-10 years 4.5%
10-15 years 7.3%
15-20 years 22.2%
20-25 years 21.1%
25 years + 36.0%
Cash equivalents 3.0%
(1) 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.
The Fund's Trustees recently approved a change in investment policy. The Fund
will no longer invest primarily in lower-rated debt securities. The Advisor will
invest primarily in tax-exempt bonds that are consistent with the Fund's goal of
a high level of after-tax total return by pursuing current income exempt from
ordinary federal income tax and opportunities for long-term appreciation.
<PAGE>
Semiannual Report: Colonial High Yield Municipal Fund
Performance Information
Average Annual Total Returns as of 5/31/99
Share Class A B C
Inception 9/1/94 6/8/92 8/1/97
- -------------------------------------------------------------------------------
NAV POP NAV w/CDSC NAV w/CDSC
- -------------------------------------------------------------------------------
1 year 3.81% (1.12)% 3.01% (1.90)% 3.17% 2.19
- -------------------------------------------------------------------------------
5 years 7.45 6.41 6.69 6.38 6.75 6.75
- -------------------------------------------------------------------------------
Life of Fund 6.76 6.02 6.22 6.22 6.26 6.26
- -------------------------------------------------------------------------------
Past performance cannot predict future results. 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 initial sales
charges or contingent deferred sales charges (CDSC). Public offering price (POP)
returns include the maximum sales charge of 4.75% for Class A shares. CDSC
returns reflect the maximum applicable charges of 5% for one year and 2% for
five years for Class B shares; and 1% for one year for Class C shares.
Performance results reflect any voluntary waivers or reimbursement of Fund
expenses by the Advisor or its affiliates. Absent these waivers or reimbursement
arrangements, performance results would have been lower. Performance for
different share classes will vary based on differences in sales charges and fees
associated with each class.
Class A and Class C shares (newer class shares) performance information includes
returns of the Fund's Class B shares (the oldest existing fund class) for
periods prior to the inception dates of the newer class shares. These Class B
share returns are not restated to reflect any expense differential (e.g., Rule
12b-1 fees) between Class B and the newer class shares.
<PAGE>
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INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------
May 31, 1999 (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
MUNICIPAL BONDS - 95.8% PAR VALUE
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
EDUCATION - 3.6%
EDUCATION - 2.9%
CA Statewide Communities Development Authority, Crossroads School for
Arts & Sciences,
Series 1998,
6.000% 8/1/28 (a) $1,200 $ 1,205
IL State Development Finance Authority, Latin School of Chicago,
Series 1998:
5.600% 8/1/18 250 245
5.650% 8/1/28 500 487
MA State Industrial Finance Agency, St. John's High School,
Series 1998,
5.350% 6/1/28 400 380
ME South Berwick, Berwick Academy,
Series 1998,
5.550% 8/1/23 750 719
MI Southfield Economic Development Corp., Lawrence University,
Series 1998-A,
5.400% 2/1/18 1,000 977
MN Victoria, Holy Family Catholic High School,
Series 1999-A,
5.875% 9/1/29 (b) 1,000 1,000
NM Santa Fe, College of Santa Fe,
Series 1998-A,
5.500% 10/1/28 250 243
VT State Educational & Health Buildings Finance Agency, Norwich
University,
Series 1998,
5.750% 7/1/13 600 614
--------
5,870
--------
STUDENT LOAN - 0.7%
OH Cincinnati Student Loan Funding Corp.,
Series B,
6.750% 1/1/07 1,500 1,520
--------
- ------------------------------------------------------------------------------------------------
HEALTHCARE - 22.0%
CONGREGATE CARE RETIREMENT - 3.7%
FL Lee County Industrial Development Authority, Shell Point Village
Project,
Series 1999-A,
5.500% 11/1/29 250 244
KY State Economic Development Finance Authority, Christian Church
Homes of Kentucky, Inc.,
Series 1998,
5.500% 11/15/30 800 766
MA Boston Industrial Development Financing Authority, Springhouse,
Inc.,
Series 1998,
5.875% 7/1/20 500 490
MA State Development Finance Agency, Loomis Community Project,
Series 1999-A,
5.625% 7/1/15 250 245
MI State Strategic Fund, Holland Home,
Series 1998,
5.750% 11/15/28 400 390
MN Columbia Heights, Crest View Corp.,
Series 1998,
6.000% 3/1/33 740 730
NH State Higher Educational & Health Facilities Authority, Rivermead
at Peterborough,
Series 1998,
5.625% 7/1/18 500 486
PA Philadelphia Authority for Industrial Development, Baptist Home of
Philadelphia,
Series 1998-A:
5.500% 11/15/18 530 515
5.600% 11/15/28 860 823
TN Metropolitan Government, Nashville and Davidson County, Blakeford
at Green Hills,
Series 1998,
5.650% 7/1/24 575 555
TX Abilene Health Facilities Development Corp., Sears Methodist
Retirement Obligated Group:
Series 1998-A,
5.875% 11/15/18 500 490
Series 1999,
5.900% 11/15/25 1,000 974
WI State Health & Educational Facilities Authority, Attic Angel
Obligated Group,
5.750% 11/15/27 875 841
--------
7,549
--------
HEALTH SERVICES - 0.1%
IL State Health Facilities Authority, Midwest Physician Group, Ltd.,
Series 1998,
5.500% 11/15/19 90 85
MA State Development Finance Agency, Boston Biomedical Research,
Series 1999,
5.650% 2/1/19 120 118
--------
203
--------
HOSPITALS - 10.1%
AL Alabama Special Care Facilities Authority, Montgomery Healthcare,
Series 1989,
11.000% 10/1/19 295 298
CO State Health Care Facilities Authority, National Jewish Medical &
Research Center,
Series 1998,
5.375% 1/1/23 830 794
GA Baldwin County Hospital Authority, Oconee Regional Medical Center,
Series 1998,
5.450% 12/1/16 1,000 998
GA Clayton Hospital Authority, The Woodlands Foundation, Inc.,
Series 1991-A,
9.750% 5/1/21 (c) 1,500 450
GA Forsyth County Hospital Authority, Georgia Baptist Heathcare
System,
Series 1998,
6.000% 10/1/08 1,000 990
IL Health Facilities Authority, Thorek Hospital & Medical Center,
5.375% 8/15/28 500 468
IL Southwestern Development Authority, Anderson Hospital,
Series 1999:
5.375% 8/15/15 500 489
5.500% 8/15/20 550 535
IN State Health Facilities Financing Authority, Riverview Hospital
Project,
Series 1999,
5.500% 8/1/24 275 266
LA State Public Facilities Authority, Touro Infirmary,
Series 1999-A,
5.500% 8/15/19 500 489
MI Dickinson County Healthcare System,
Series 1999, 5.800% 11/1/24 (b) 800 785
MI Flint Hospital Building Authority, Hurley Medical Center,
Series 1998-A,
5.375% 7/1/20 625 584
MI State Hospital Finance Authority, Detroit Medical Center,
Series 1998-A,
5.250% 8/15/28 600 526
MN Washington County Housing & Redevelopment Authority, Healtheast,
Inc.,
Series 1998,
5.250% 11/15/12 1,250 1,148
MS State Business Finance Corp., Medical Foundation, Inc.,
Series 1998,
5.625% 7/1/23 1,150 1,115
NH State Higher Educational & Health Facilities Authority, Littleton
Hospital Association, Inc.,
Series 1998-A:
5.900% 5/1/18 500 499
5.900% 5/1/28 675 661
NM State Hospital Equipment Loan Council, Memorial Medical Center,
Inc. Project,
Series 1998,
5.500% 6/1/28 1,000 966
OH Belmont County, East Ohio Regional Hospital,
Series 1998,
5.700% 1/1/13 1,500 1,466
OH Franklin County, Doctors OhioHealth Corp.,
Series 1998-A,
5.600% 12/1/28 1,600 1,551
OH Sandusky County, Memorial Hospital,
Series 1998,
5.150% 1/1/10 250 253
PA Allegheny County Hospital Development, Ohio Valley General
Hospital,
Series 1998-A,
5.450% 1/1/28 1,550 1,496
PA Pottsville Hospital Authority, Pottsville Hospital & Warner Clinic,
Series 1998,
5.625% 7/1/24 1,000 949
TX Lufkin Health Facilities Development Corp., Memorial Health Systems
of East Texas,
Series 1998,
5.700% 2/15/28 750 736
TX Richardson Hospital Authority, Baylor Richardson Medical Center,
Series 1998,
5.625% 12/1/28 600 573
VT State Educational & Health Buildings Financing Agency:
Brattleboro Memorial Hospital,
5.375% 3/1/28 1,000 950
Springfield Hospital,
Series A,
7.750% 1/1/13 425 478
--------
20,513
--------
INTERMEDIATE CARE FACILITIES - 1.5%
IL Champaign, Hoosier Care, Inc.,
Series 1989-A,
9.750% 8/1/19 475 491
IN Wabash First Mortgage, Hoosier Care, Inc.,
Series 1989-A,
9.750% 8/1/19 475 491
PA State Economic Development Financing Authority, Northwestern Human
Services, Inc.,
Series 1998-A,
5.250% 6/1/14 2,150 2,093
--------
3,075
--------
NURSING HOMES - 6.6%
CO State Health Facilities Authority, Volunteers of America Care
Facilities, Inc.:
Series 1998-A:
5.450% 7/1/08 250 248
5.750% 7/1/20 700 677
Series 1999-A,
6.000% 7/1/29 520 503
DE State Economic Development Authority, Churchman Village Project,
Series A,
10.000% 3/1/21 730 904
DE Sussex County, Healthcare Facility, Delaware Health Corp.,
Series 1994-A,
7.600% 1/1/24 1,000 1,048
FL Gadsden County Industrial Development Authority, Florida
Properties, Inc.,
Series 1988-A,
10.450% 10/1/18 335 338
IA State Finance Authority, Care Initiatives Project:
Series 1996,
9.250% 7/1/25 500 664
Series 1998-B:
5.750% 7/1/18 600 590
5.750% 7/1/28 1,475 1,436
IN State Health Facilities Financing Authority, Metro Health Indiana,
Inc. Project,
Series 1998,
6.400% 12/1/33 1,000 976
KS Halstead Industrial Health Care Project,
10.250% 8/1/13 (c) 335 79
MA State Industrial Finance Agency,
GF/Massachusetts, Inc.,
Series 1994,
8.300% 7/1/23 970 1,074
MI Cheboygan County Economic Development Corp., Metro Health
Foundation Project,
Series 1993,
10.000% 11/1/22 (c) 600 600
MN Minneapolis, Walker Methodist Senior Services Group,
Series 1998-A,
6.000% 11/15/28 1,000 1,004
MN New Hope Housing and Health, Masonic Home North Ridge,
Series 1999,
5.875% 3/1/29 500 486
NJ Economic Development Authority, Geriatric and Medical Service,
Inc.,
Series A,
10.500% 5/1/04 70 72
PA Chester County Industrial Development, Pennsylvania Nursing Home,
Inc.,
Series 1989,
10.125% 5/1/19 (c) 434 373
PA Delaware County Authority, Main Line and Haverford Nursing,
Series 1992,
9.000% 8/1/22 50 57
PA Lackawanna County Industrial Authority, Greenridge Nursing Center,
10.500% 12/1/10 180 196
PA Luzerne County Industrial Development Authority, Millville Nursing
Center,
10.500% 12/1/12 220 236
TX Kirbyville Health Facilities Development Corp., Heartway III
Project:
Series 1997-A,
10.000% 3/20/18 586 582
Series 1997-B,
(d) 3/20/04 100 56
WA Kitsap County Housing Authority, Martha & Mary Nursing Home,
7.100% 2/20/36 (e) 1,000 1,160
--------
13,359
--------
- ------------------------------------------------------------------------------------------------
HOUSING - 17.3%
ASSISTED LIVING/SENIOR - 5.8%
CA Abag Finance Authority for Nonprofit Corps., Eskaton Gold River Lodge,
Series 1998:
6.375% 11/15/15 (f) 750 746
6.375% 11/15/28 (g) 550 543
IL Clarendon Hills Residential Facilities, Churchill Estate,
Series 1998-A:
6.750% 3/1/24 1,050 1,058
6.750% 3/1/31 1,365 1,375
IL State Development Finance Authority, Care Institute, Inc.,
8.250% 6/1/25 2,000 2,245
MN Roseville, Care Institute, Inc.,
Series 1993,
7.750% 11/1/23 1,270 1,268
NY Glen Cove Housing Authority, Mayfair Senior Living,
8.250% 10/1/26 2,000 2,250
TX Bell County Health Facilities Development Corp., Care Institute,
Inc.,
9.000% 11/1/24 1,000 1,133
WI State Health & Educational Facilities Authority:
Clement Manor,
Series 1998,
5.750% 8/15/24 450 429
United Lutheran Program for Aging, Inc.,
5.700% 3/1/28 750 728
--------
11,775
--------
MULTI-FAMILY - 7.3%
DE Wilmington, Electra Arms Senior Association Project,
6.250% 6/1/28 1,000 964
MN Lakeville, Southfork Apartment Project,
Series 1989-A,
9.875% 2/1/20 700 700
MN Washington County Housing & Redevelopment Authority, Cottages of
Aspen,
Series 1992,
9.250% 6/1/22 495 540
MN White Bear Lake, Birch Lake Townhomes Project,
Series 1989-A,
9.750% 7/15/19 750 756
NC Eastern Carolina Regional Housing Authority, New River Apartments
Jacksonville,
Series 1994,
8.250% 9/1/14 1,360 1,457
Resolution Trust Corp., Pass Through Certificates,
Series 1993-A,
9.250% 12/1/16 (h) 4,248 4,344
SC State Housing Finance and Development Multi-Family Housing Finance
Revenue, Westbridge Apartments,
Series A,
9.500% 9/1/20 607 620
TN Franklin Industrial Development Board, Landings Apartment Project,
Series 1996-B,
8.750% 4/1/27 1,775 1,912
TX Galveston Health Facilities Center, Driftwood Apartments,
8.000% 8/1/23 1,000 1,060
VA Alexandria Redevelopment & Housing Authority, Courthouse Commons
Apartments,
Series 1990-A,
10.000% 1/1/21 500 515
WA Vancouver Housing Authority,
Series I,
5.500% 3/1/28 2,000 2,007
--------
14,875
--------
SINGLE FAMILY - 4.2%
CO Housing Finance Authority:
Series 1997 A-2,
7.250% 5/1/27 (e) 800 889
Series D-1,
7.375% 6/1/26 1,575 1,717
MO State Housing Development Commission,
Series C,
7.250% 9/1/26 (e) 2,380 2,664
NJ State Housing & Mortgage Finance Agency,
Series 1989-D,
7.700% 10/1/29 (e) 640 655
PA State Housing Finance Agency,
Series 1994-42,
6.850% 4/1/25 (e) 2,435 2,621
--------
8,546
--------
- ------------------------------------------------------------------------------------------------
INDUSTRIAL - 14.9%
CHEMICALS - 1.8%
WY Sweetwater County, FMC Corp. Project,
Series 1994-A,
7.000% 6/1/24 3,325 3,643
--------
FOOD PRODUCTS - 2.6%
IN Hammond, American Maize Products Co.,
Series 1994,
8.000% 12/1/24 2,000 2,293
LA Port New Orleans Industrial Development, Continental Grain Co.,
Series 1993,
7.500% 7/1/13 2,000 2,075
MI State Strategic Fund, Michigan Sugar Co., Sebewaing Project,
Series 1998-A,
6.250% 11/1/15 1,000 1,009
--------
5,377
--------
FOREST PRODUCTS - 3.0%
GA Rockdale County Development Authority, Solid Waste Disposal, Visy
Paper, Inc.,
Series 1993,
7.500% 1/1/26 1,800 1,901
GA Wayne County Development Authority, Solid Waste Disposal, ITT
Rayonier, Inc.,
Series 1990,
8.000% 7/1/15 500 525
SC Darlington County, Industrial Development Authority:
Sonoco Products Co.,
Series 1996,
6.000% 4/1/26 1,500 1,567
Sonoco Products Co. Project,
6.125% 6/1/25 2,000 2,103
--------
6,096
--------
MANUFACTURING - 4.8%
IL State Development Finance Authority, Armstrong World Industries,
Inc. Project,
5.950% 12/1/24 2,000 2,151
IL Will-Kankakee Regional Development Authority, Flanders Corp./
Precisionaire Project,
Series 1997,
6.500% 12/15/17 970 1,014
MN Brooklyn Park, TL Systems Corp.,
Series 1991,
10.000% 9/1/16 510 609
MN Buffalo, Von Ruden Manufacturing, Inc.,
Series 1989,
10.500% 9/1/14 740 770
NV Henderson Public Improvement Trust, Dongsung America Co., Inc.,
Series 1998,
7.000% 11/1/10 500 496
TN McKenzie Industrial Development Board, American Lantern Co.,
10.500% 5/1/16 (c) 454 249
TX Trinity River Authority, Texas Instruments Project,
Series 1996,
6.200% 3/1/20 2,000 2,138
VA State Small Business Financing Authority, Dongsung America,
Series 1998-A,
7.250% 11/1/15 250 247
WA Pilchuck Public Development Corp., Goodrich (B.F.) Co. Tramco, Inc.
Project,
Series 1993,
6.000% 8/1/23 2,000 2,055
--------
9,729
--------
METALS & MINING - 1.7%
MD Baltimore County, Bethlehem Steel Corp. Project,
Series B,
7.500% 6/1/15 2,000 2,155
OH Cuyahoga County, Joy Technologies, Inc.,
Series 1992,
8.750% 9/15/07 360 383
VA Greensville County Industrial Development Authority, Wheeling Steel
Project,
Series 1999-A:
6.375% 4/1/04 75 75
6.900% 5/2/22 500 504
VA Peninsula Ports Authority, Zeigler Coal,
Series 1997,
7.000% 4/1/14 375 371
--------
3,488
--------
Oil & Gas - 1.0%
WA Pierce County Economic Development Corp., Occidental Petroleum Co.,
5.800% 9/1/29 2,000 2,009
--------
- ------------------------------------------------------------------------------------------------
OTHER - 8.7%
OTHER - 0.3%
MD Baltimore, Park Charles Project,
Series 1986,
8.000% 1/1/10 565 602
--------
REFUNDED/ESCROWED (I) - 8.4%
CA Colton Public Financing Authority,
Series 1995,
7.500% 10/1/20 1,000 1,148
CA San Joaquin Hills Transportation Corridor Agency,
Series 1993,
(d) 1/1/23 (e) 5,250 1,544
FL Clearwater Housing Authority, Hampton Apartments,
Series 1994,
8.250% 5/1/24 2,000 2,405
ID State Health Facilities Authority, IHC Hospitals, Inc.,
6.650% 2/15/21 1,000 1,196
IL State Health Facilities Authority, Edgewater Medical Center,
Series A,
9.250% 7/1/24 (e) 1,990 2,490
MA State Health & Educational Facilities Authority, Corp. for
Independent Living,
8.100% 7/1/18 595 695
MA State Industrial Finance Agency,
Tunnel Revenue Bonds,
Series 1990,
9.000% 10/1/20 910 990
MN Mille Lacs Capital Improvement Authority, Mille Lacs Band of Chippewa,
Series 1992-A,
9.250% 11/1/12 605 721
NC Lincoln County, Lincoln County Hospital,
9.000% 5/1/07 275 323
PA Delaware County Authority, Southeastern Pennsylvania Obligated Group,
Series 1996,
6.000% 12/15/26 (e) 2,500 2,760
PA Montgomery County Industrial Development Authority, Assisted Living
Facility,
Series 1993-A,
8.250% 5/1/23 600 689
TN Shelby County, Health, Education, & Housing Facilities Board, Open
Arms Development Center:
Series 1992-A,
9.750% 8/1/19 330 452
Series 1992-C,
9.750% 8/1/19 325 445
WA State Health Care Facilities Authority, Grays Harbor Community
Hospital,
Series 1993:
7.200% 7/1/03 170 179
8.025% 7/1/20 960 1,039
--------
17,076
--------
- ------------------------------------------------------------------------------------------------
OTHER REVENUE - 3.2%
HOTELS - 1.2%
MN Minneapolis, Holiday Inn Metrodome Project,
6.000% 12/1/01 400 403
PA Philadelphia Authority for Industrial Development, Starwood,
6.500% 10/1/27 2,000 2,100
--------
2,503
--------
RECREATION - 0.5%
NM Red River Sports Facility, Red River Ski Area Project,
Series 1998,
6.450% 6/1/07 1,000 998
--------
RETAIL - 1.5%
NJ State Economic Development Authority, Glimcher Properties L.P.
Project,
6.000% 11/1/28 1,000 986
OH Lake County, North Madison Properties,
Series 1993,
8.819% 9/1/11 545 618
VA Virginia Beach Development Authority, SC Diamond Associates, Inc.,
8.000% 12/1/10 1,280 1,411
--------
3,015
--------
- ------------------------------------------------------------------------------------------------
RESOURCE RECOVERY - 4.1%
DISPOSAL - 2.7%
CT State:
Development Authority, Sewer Sludge Disposal Facilities, NETCO New
Haven,
Series 1996,
8.250% 12/1/06 925 1,061
Disposal Facility, NETCO Waterbury Ltd.,
Series 1995,
9.375% 6/1/16 1,400 1,624
MA State Industrial Finance Agency:
Massachusetts Environmental Services,
Series 1994-A,
8.750% 11/1/21 980 784
Peabody Monofill Associates, Inc.,
Series 1995,
9.000% 9/1/05 850 930
UT Carbon County, Laidlaw Environmental,
Series A,
7.450% 7/1/17 1,000 1,094
--------
5,493
--------
RESOURCE RECOVERY - 1.4%
MA State Industrial Finance Agency, Ogden Haverhill Project,
Series 1998-A,
5.500% 12/1/13 500 502
PA Delaware County Industrial Development Authority, BFI Project,
Series A,
6.200% 7/1/19 2,225 2,293
--------
2,795
--------
- ------------------------------------------------------------------------------------------------
TAX-BACKED - 5.4%
LOCAL GENERAL OBLIGATIONS - 0.2%
CA Roseville Unified High School District,
Series B,
(d) 6/1/20 (e) 1,000 333
--------
SPECIAL NON-PROPERTY TAX - 1.9%
IL Metropolitan Pier & Exposition Authority, McCormick Place Expansion,
(d) 6/15/17 (e) 6,750 2,599
IL State Development Finance Authority, City of Marion Project,
Series 1991,
9.625% 9/15/21 1,160 870
LA Jefferson Parish School Board,
Series 1998,
(d) 3/1/10 (e) 500 296
--------
3,765
--------
SPECIAL PROPERTY TAX - 3.3%
CA Carson,
Series 1992,
7.375% 9/2/22 940 1,001
CA Pleasanton Joint Powers Financing Reassessment Subordinated
Revenue,
Series 1993-B,
6.750% 9/2/17 1,745 1,852
CA Poway Community Facilities District,
No. 88-1 Parkway Business Center,
Series 1998,
6.750% 8/15/15 575 620
CA Riverside County Public Financing Authority, Redevelopment
Projects,
Series A,
5.500% 10/1/22 700 694
FL Lexington Oaks Community Development District:
Series 1998-A,
6.125% 5/1/19 300 300
Series 1998-B,
5.500% 5/1/05 720 713
FL Orlando, Conroy Road Interchange Project,
Series 1998-A:
5.500% 5/1/10 125 123
5.800% 5/1/26 500 491
FL Stoneybrook Community Development District,
Series 1998-B,
5.700% 5/1/08 1,000 995
--------
6,789
--------
- ------------------------------------------------------------------------------------------------
TRANSPORTATION - 7.1%
Air Transportation - 3.4%
CO Denver City & County Airport, United Airlines, Inc.,
Series 1992-A,
6.875% 10/1/32 3,000 3,195
IN Indianapolis Airport Authority, Federal Express Corp.,
Series 1994,
7.100% 1/15/17 3,000 3,331
PA Philadelphia Authority for Industrial Development, Aero
Philadelphia LLC,
Series 1999,
5.250% 1/1/09 500 485
--------
7,011
--------
Airports - 1.8%
CO Denver City and County Airport,
Series C:
6.750% 11/15/22 985 1,056
7.750% 11/15/21 1,585 1,723
8.500% 11/15/23 225 242
OH Toledo-Lucas County Port Authority,
Series 1998,
5.500% 5/15/20 590 571
--------
3,592
--------
Toll Facilities - 1.9%
CA Foothill Eastern Transportation Corridor Agency,
Series 1995-A,
(d) 1/1/15 8,800 3,881
--------
- ------------------------------------------------------------------------------------------------
UTILITY - 9.5%
INDEPENDENT POWER PRODUCER - 4.8%
NY Port Authority of New York & New Jersey, KIAC Partners,
Series 1996-IV,
6.750% 10/1/11 2,000 2,193
OH State Water Development Authority, Bay Shore Power Project,
Series 1998-A,
5.875% 9/1/20 2,500 2,506
PA State Economic Development Financing Authority:
Colver Project,
Series D,
7.150% 12/1/18 3,650 4,065
Northampton Generating,
Series A,
6.500% 1/1/13 1,000 1,053
--------
9,817
--------
INVESTOR OWNED - 2.8%
AZ Pima County Industrial Development Authority, Tucson Electric Power Co.,
Series A,
6.100% 9/1/25 760 758
CT State Development Authority, Connecticut Light & Power Co.,
Series 1993-B,
5.950% 9/1/28 300 299
LA Calcasieu Parish Industrial Development Board, Entergy Gulf States,
Inc.,
Series 1999,
5.450% 7/1/10 500 493
MS State Business Finance Corp., Systems Energy Resources Project,
Series 1998,
5.875% 4/1/22 1,500 1,493
NM Farmington, San Juan Public Service Co. Project,
Series D,
6.375% 4/1/22 2,000 2,105
OH State Water Development Authority, Pennsylvania Power Co.,
8.100% 1/15/20 500 519
--------
5,667
--------
Joint Power Authority - 0.4%
MN Southern Minnesota Municipal Power Agency,
Series 1994-A,
(d) 1/1/25 (e) 2,660 692
--------
MUNICIPAL ELECTRIC - 1.1%
WA Chelan County Public Utilities District No. 1, Columbia River Rock
Hydroelectric,
(d) 6/1/14 (e) 5,000 2,294
--------
WATER & SEWER - 0.4%
LA Public Facility Belmont Water Authority,
9.000% 3/15/24 (c)(j) 585 497
MS Five Lakes Utility District,
8.250% 7/15/24 400 320
--------
817
--------
TOTAL MUNICIPAL BONDS (cost of $187,418)(k) 194,767
--------
SHORT-TERM OBLIGATIONS - 3.0%
- ------------------------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (l)
CA Irvine Improvement Bond Act of 1915,
Series 1998,
3.250% 9/2/23 900 900
CA Irvine Ranch Water District,
3.250% 1/1/21 100 100
FL Pinellas County Health Facilities Authority,
Series 1985,
3.400% 12/1/15 300 300
IA State Finance Authority, Burlington Medical Center,
Series 1997,
3.300% 6/1/27 1,400 1,400
ID State Health Facilities Authority,
St. Lukes Regional Medical Facility,
Series 1995,
3.350% 5/1/22 1,100 1,100
IL State Development Finance Authority,
Council for Jewish Elderly,
Series 1995,
3.250% 3/1/15 1,400 1,400
MS Perry County, Leaf River Forest Project,
3.300% 3/1/02 100 100
NM Farmington, Arizona Public Service Co., Four Corners Project,
Series 1994-B,
3.300% 9/1/24 200 200
NY New York City,
Series 1992-B,
3.300% 10/1/20 500 500
WA State Health Care Facilities Authority,
Fred Hutchinson Cancer Research Center,
Series 1996,
3.500% 1/1/23 100 100
--------
TOTAL SHORT-TERM OBLIGATIONS 6,100
--------
OTHER ASSETS & LIABILITIES, NET - 1.2% 2,394
- ------------------------------------------------------------------------------------------------
NET ASSETS - 100.0% $203,261
========
</TABLE>
NOTES TO INVESTMENT PORTFOLIO
- -------------------------------------------------------------------------------
(a) This is a restricted security which was acquired on August 21, 1998 and
August 31, 1998 at an aggregate cost of $1,200. This security represents
0.6% of the Fund's net assets as of May 31, 1999.
(b) These securities have been purchased on a delayed delivery basis for
settlement at a future date beyond the customary settlement date.
(c) This issuer is in default of certain debt covenants. Income is not being
accrued.
(d) Zero coupon bond.
(e) These securities, or a portion thereof, with a total market value of
$20,528, are being used to collateralize the delayed delivery purchases
indicated in note (b) above and open futures contracts.
(f) This is a restricted security which was acquired on July 30, 1998 at a cost
of $746. This security represents 0.4% of the Fund's net assets as of May
31, 1999.
(g) This is a restricted security which was acquired on July 30, 1998 at a cost
of $541. This security represents 0.3% of the Fund's net assets as of May
31, 1999.
(h) This security is exempt from registration under Rule 144A of the Securities
Act of 1933. This security may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At May 31, 1999,
the value of this security amounted to $4,344 or 2.1% of net assets.
(i) The Fund has been informed that each issuer has placed direct obligations of
the U.S. Government in an irrevocable trust, solely for the payment of the
principal and interest.
(j) This is a restricted security which was acquired on March 22, 1994 at a cost
of $585. This security represents 0.3% of the Fund's net assets as of May
31, 1999.
(k) Cost for federal income tax purposes is $187,439.
(l) 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 May 31, 1999.
FUTURES CONTRACTS OPEN AT MAY 31, 1999:
Par value Unrealized
covered by Expiration depreciation
Type contracts month at 5/31/99
- ------------------------------------------------------------------------------
Treasury Bond $13,900 September $(75)
See accompanying notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
May 31, 1999 (Unaudited)
(in thousands except for per share amounts and footnotes)
ASSETS
Investments at value (cost $187,418) $194,767
Short-term obligations 6,100
--------
200,867
Receivable for:
Interest 3,744
Investments sold 1,226
Fund shares sold 409
Variation margin on futures 3
Other 93
--------
5,475
--------
Total assets 206,342
LIABILITIES
Payable for:
Investments 1,792
Distributions 753
Fund shares repurchased 531
Accrued:
Deferred Trustees fees 5
--------
Total liabilities 3,081
--------
Net assets $203,261
========
Class A
Net asset value & redemption price per share ($68,858/6,664) $ 10.33(a)
--------
Maximum offering price per share ($10.33/0.9525) $ 10.85(b)
--------
Class B
Net asset value & offering price per share
($130,433/12,622) $ 10.33(a)
--------
Class C
Net asset value & offering price per share
($3,970/384) $ 10.33(a)
--------
Composition of Net Assets
Capital paid in $199,566
Overdistributed net investment income (619)
Accumulated net realized loss (2,960)
Net unrealized appreciation (depreciation) on:
Investments 7,349
Open futures contracts (75)
--------
$203,261
========
(a) Redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
(b) On sales of $50,000 or more the offering price is reduced.
See accompanying notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Six Months Ended May 31, 1999 (Unaudited)
(in thousands)
INVESTMENT INCOME
Interest $ 6,316
EXPENSES
Management fee 565
Service fee 251
Distribution fee - Class B 490
Distribution fee - Class C 13
Transfer agent 160
Bookkeeping fee 40
Trustees fee 11
Custodian fee 1
Audit fee 15
Legal fee 10
Registration fee 31
Reports to shareholders 7
Other 25
-------
1,619
Fees waived by the Distributor - Class C (3)
-------
Total expenses 1,616
-------
Net investment income 4,700
-------
REALIZED AND UNREALIZED GAIN (LOSS) ON
PORTFOLIO POSITIONS
Net realized gain (loss) on:
Investments 373
Closed futures contracts (909)
-------
Net realized loss (536)
Net change in unrealized depreciation during the period on:
Investments (3,806)
Open futures contracts (284)
-------
Net change in unrealized depreciation (4,090)
-------
Net loss (4,626)
-------
INCREASE IN NET ASSETS FROM OPERATIONS $ 74
-------
See accompanying notes to financial statements.
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------------------------------
(in thousands)
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
MAY 31, NOVEMBER 30,
INCREASE (DECREASE) IN NET ASSETS 1999 1998
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment income $ 4,700 $ 9,522
Net realized gain (loss) (536) 4,432
Net unrealized appreciation (depreciation) (4,090) 375
------------ ------------
Net increase from operations 74 14,329
DISTRIBUTIONS
From net investment income -- Class A (1,777) (3,168)
In excess of net investment income -- Class A -- (87)
From net investment income -- Class B (3,000) (6,290)
In excess of net investment income -- Class B -- (172)
From net investment income -- Class C (81) (64)
In excess of net investment income -- Class C -- (2)
------------ ------------
(4,784) 4,546
------------ ------------
FUND SHARE TRANSACTIONS
Receipts for shares sold -- Class A 12,325 22,822
Value of distributions reinvested -- Class A 833 1,460
Cost of shares repurchased -- Class A (7,460) (13,666)
------------ ------------
5,698 10,616
------------ ------------
Receipt for shares sold -- Class B 14,773 18,931
Value of distributions reinvested -- Class B 1,404 2,939
Cost of shares repurchased -- Class B (13,325) (36,706)
------------ ------------
2,852 (14,836)
------------ ------------
Receipt for shares sold -- Class C 1,743 2,628
Value of distributions reinvested -- Class C 61 46
Cost of shares repurchased -- Class C (378) (406)
------------ ------------
1,426 2,268
------------ ------------
Net increase (decrease) from fund share transactions 9,976 (1,952)
------------ ------------
Total increase 5,192 2,594
NET ASSETS
Beginning of period 198,069 195,475
------------ ------------
End of period (net of overdistributed net investment income of
$619 and $461, respectively) $ $203,261 $ 198,069
============ ============
NUMBER OF FUND SHARES
Sold -- Class A 1,177 2,165
Issued for distributions reinvested -- Class A 80 139
Repurchased -- Class A (712) (1,297)
------------ ------------
545 1,007
------------ ------------
Sold -- Class B 1,411 1,798
Issued for distributions reinvested -- Class B 134 280
Repurchased -- Class B (1,273) (3,489)
------------ ------------
272 (1,411)
------------ ------------
Sold -- Class C 166 250
Issued for distributions reinvested -- Class C 6 4
Repurchased -- Class C (36) (39)
------------ ------------
136 215
------------ ------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
May 31, 1999 (Unaudited)
NOTE 1. INTERIM FINANCIAL STATEMENTS
In the opinion of management of Colonial High Yield Municipal Fund (the Fund),
a series of Liberty Funds Trust IV, formerly Colonial Trust IV, the
accompanying financial statements contain all normal and recurring adjustments
necessary for the fair presentation of the financial position of the Fund at
May 31, 1999, and the results of its operations, the changes in its net assets
and the financial highlights for the six months then ended.
NOTE 2. ACCOUNTING POLICIES
ORGANIZATION
The Fund is a diversified portfolio of a Massachusetts business trust,
registered under the Investment Company Act of 1940, as amended, as an open-
end management investment company. The Fund's investment objective is to seek
a high level of after-tax total return by pursuing current income exempt from
ordinary federal income tax and opportunities for long-term appreciation. The
portfolio primarily invests in tax-exempt bonds that are consistent with the
Fund's objective. 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 a 1.00% contingent deferred sales
charge on redemptions made within eighteen months on an original purchase of
$1 million to $5 million. 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.
Class C shares 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 (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.
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 3. FEES AND COMPENSATION PAID TO AFFILIATES
MANAGEMENT FEE
Colonial Management Associates, Inc. (the Advisor) is the investment Advisor
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 Advisor 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
Liberty Funds Services, Inc. (the Transfer Agent), an affiliate of the
Advisor, provides shareholder services for a monthly fee equal to 0.13%
annually of the Fund's average net assets and receives reimbursement for
certain out-of-pocket expenses.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES
Liberty Funds Distributor, Inc. (the Distributor), a subsidiary of the
Advisor, is the Fund's principal underwriter. For the six months ended May 31,
1999, the Fund has been advised that the Distributor retained net underwriting
discounts of $24,457 on sales of the Fund's Class A shares and received
contingent deferred sales charges (CDSC) of $3,025, $151,345 and $2,639 on
Class A, 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 the
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, until further notice, 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 Advisor.
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 4. PORTFOLIIO INFORMATION
INVESTMENT ACTIVITY
During the six months ended May 31, 1999, purchases and sales of investments,
other than short-term obligations were $15,466,703 and $12,811,927,
respectively.
Unrealized appreciation (depreciation) at May 31, 1999, based on cost of
investments for federal income tax purposes was:
Gross unrealized appreciation $10,318,034
Gross unrealized depreciation (2,990,256)
-----------
Net unrealized appreciation $ 7,327,778
===========
CAPITAL LOSS CARRYFORWARDS
At November 30, 1998, 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
---------- ------------
2003 $ 684,000
2005 1,526,000
----------
$2,210,000
==========
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 Advisor 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 5. LINE OF CREDIT
The Fund may borrow up to 33 1/3% 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 six months ended May 31, 1999.
<PAGE>
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- ----------------------------------------------------------------------------------------------------------------------------
Selected data for a share of each class outstanding throughout each period are
as follows:
<CAPTION>
(Unaudited)
Six Months Ended May 31, 1999
------------------------------------------------------------------------
Class A Class B Class C
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.580 $ 10.580 $ 10.580
---------- ----------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.274 0.235 0.243(a)
Net realized and unrealized loss (0.244) (0.244) (0.244)
---------- ----------- ----------
Total from Investment Operations 0.030 (0.009) (0.001)
---------- ----------- ----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income (0.280) (0.241) (0.249)
---------- ----------- ----------
NET ASSET VALUE, END OF PERIOD $ 10.330 $ 10.330 $ 10.330
---------- ----------- ----------
Total return (b)(c) 0.28% (0.09)% (0.02)%(d)
---------- ----------- ----------
RATIOS TO AVERAGE NET ASSETS
Expenses (e)(f) 1.11% 1.86% 1.71%(a)
Net investment income (e)(f) 5.19% 4.44% 4.59%(a)
Portfolio turnover (c) 7% 7% 7%
Net assets at end of period (000) $ 68,858 $ 130,433 $ 3,970
(a) Net of fees waived by the Distributor which amounted to $0.008 per share and 0.15% annualized.
(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) Had the Distributor not waived a portion of expenses, total return would have been reduced.
(e) The benefits derived from custody credits and directed brokerage arrangements had no impact.
(f) Annualized.
</TABLE>
<TABLE>
<CAPTION>
Year Ended November 30, 1998
----------------------------------------------------------------
Class A Class B Class C
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.340 $ 10.340 $ 10.340
----------- ----------- ----------
Income From Investment Operations
Net investment income 0.561 0.480 0.496(a)
Net realized and unrealized gain 0.260 0.260 0.260
----------- ----------- ----------
Total from Investment Operations 0.821 0.740 0.756
----------- ----------- ----------
Less Distributions Declared to Shareholders
From net investment income (0.565) (0.487) (0.502)
In excess of net investment income (0.016) (0.013) (0.014)
----------- ----------- ----------
Total Distributions Declared to Shareholders (0.581) (0.500) (0.516)
----------- ----------- ----------
Net Asset Value, End of Period $ 10.580 $ 10.580 $ 10.580
----------- ----------- ----------
Total return (b) 8.11% 7.29% 7.45%(c)
----------- ----------- ----------
Ratios to Average Net Assets
Expenses (d) 1.07% 1.82% 1.67%(a)
Net investment income (d) 5.37% 4.62% 4.77%(a)
Portfolio turnover 36% 36% 36%
Net assets at end of period (000) $ 64,749 $ 130,691 $ 2,629
(a) Net of fees waived by the Distributor which amounted to $0.016 per share and 0.15%.
(b) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent
deferred sales charge.
(c) Had the Distributor not waived a portion of expenses, total return would have been reduced.
(d) The benefits derived from custody credits and directed brokerage arrangements had no impact.
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------------------------------------------------
Selected data for a share of each class outstanding throughout each period
are as follows:
<CAPTION>
Year Ended November 30
-------------------------------------------------------------------------------------------------
1997 1996 1995
----------------------------------------- -------------------------- --------------------------
Class A Class B Class C(a) Class A Class B Class A Class B
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.160 $ 10.160 $ 10.320 $ 10.230 $ 10.230 $ 9.330 $ 9.330
--------- --------- --------- --------- --------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.592 0.516 0.176 0.624 0.548 0.656 0.583
Net realized and
unrealized gain (loss) 0.188 0.188 0.018(b) (0.051) (0.051) 0.912 0.912
--------- --------- --------- --------- --------- -------- --------
Total from
Investment
Operations 0.780 0.704 0.194 0.573 0.497 1.568 1.495
--------- --------- --------- --------- --------- -------- --------
LESS DISTRIBUTIONS
DECLARED TO
SHAREHOLDERS
From net investment
income (0.594) (0.518) (0.174) (0.643) (0.567) (0.668) (0.595)
In excess of net -- --
investment income (0.006) (0.006) -- -- --
--------- --------- --------- --------- --------- -------- --------
Total Distributions
Declared to
Shareholders (0.600) (0.524) (0.174) (0.643) (0.567) (0.668) (0.595)
--------- --------- --------- --------- --------- -------- --------
NET ASSET VALUE, END OF
PERIOD $ 10.340 $ 10.340 $ 10.340 $ 10.160 $ 10.160 $ 10.230 $ 10.230
--------- --------- --------- --------- --------- -------- --------
Total return (c) 7.95% 7.15% 1.90%(d) 5.86% 5.07% 17.28% 16.42%
--------- --------- --------- --------- --------- -------- --------
RATIOS TO AVERAGE
NET ASSETS
Expenses (e) 1.11% 1.86% 1.72%(f) 1.10% 1.85% 1.17% 1.92%
Net investment income
(e) 5.83% 5.08% 5.14%(f) 6.19% 5.44% 6.67% 5.92%
Portfolio turnover 23% 23% 23% 8% 8% 26% 26%
Net assets at end of
period (000) $ 52,847 $ 142,287 $ 341 $ 37,420 $ 145,200 $ 17,997 $ 137,893
(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.
</TABLE>
Ended November 30
-----------------------
1994
------------------------
Class A(a) Class B
- --------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.800 $ 10.320
-------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.188 0.605
Net realized and unrealized loss (0.496) (1.016)
-------- --------
Total from Investment Operations (0.308) (0.411)
-------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income (0.162) (0.579)
-------- --------
NET ASSET VALUE, END OF PERIOD $ 9.330 $ 9.330
-------- --------
Total return (b) (3.15)%(c) (4.10)%
-------- --------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.15%(d) 1.90%
Net investment income 7.19%(d) 6.44%
Portfolio turnover 25% 25%
Net assets at end of period (000) $ 6,027 $113,549
(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) Annualized.
See accompanying notes to financial statements.
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE>
- --------------------------------------------------------------------------------
TRUSTEES & TRANSFER AGENT
- --------------------------------------------------------------------------------
SEMIANNUAL REPORT: COLONIAL HIGH YIELD MUNICIPAL FUND
- --------------------------------------------------------------------------------
ROBERT J. BIRNBAUM WILLIAM E. MAYER
Consultant (formerly Special Partner, Development Capital, LLC
Counsel, Dechert, Price & Rhoads; (formerly Dean, College of Business
President and Chief Operating and Management, University of
Officer, New York Stock Exchange, Maryland; Dean, Simon Graduate
Inc.; President, American Stock School of Business, University of
Exchange Inc.) Rochester; Chairman and Chief
Executive Officer, CS First Boston
TOM BLEASDALE Merchant Bank; and President and
Retired (formerly Chairman of the Chief Executive Officer, The First
Board and Chief Executive Officer, Boston Corporation)
Shore Bank & Trust Company)
JAMES L. MOODY, JR.
JOHN V. CARBERRY Retired (formerly Chairman of the
Senior Vice President of Liberty Board, Chief Executive Officer and
Financial Companies, Inc. (formerly Director Hannaford Bros. Co.)
Managing Director, Salomon
Brothers) JOHN J. NEUHAUSER
Dean, Boston College School of
LORA S. COLLINS Management
Attorney (formerly Attorney,
Kramer, Levin, Naftalis & Frankel) THOMAS E. STITZEL
Professor of Finance, College of
JAMES E. GRINNELL Business, Boise State University;
Private Investor (formerly Senior Business Consultant and Author
Vice President-Operations, The
Rockport Company) ROBERT L. SULLIVAN
Retired Partner, KPMG LLP (formerly
RICHARD W. LOWRY Management Consultant, Saatchi and
Private Investor (formerly Chairman Saatchi Consulting Ltd. and
and Chief Executive Officer, U.S. Principal and International
Plywood Corporation) Practice Director, Management
Consulting, Peat Marwick Main &
SALVATORE MACERA Co.)
Private Investor (formerly
Executive Vice President of Itek ANNE-LEE VERVILLE
Corp. and President of Itek Optical Consultant (formerly General
& Electronic Industries, Inc.) Manager, Global Education Industry,
and President, Applications
Solutions Division, IBM
Corporation)
- --------------------------------------------------------------------------------
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial High Yield Municipal Fund is:
Liberty Funds Services, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
The 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 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, and with the most recent copy of
the Liberty Funds Distributor, Inc. Performance Update.
<PAGE>
- --------------------------------------------------------------------------------
CHOOSE LIBERTY
- --------------------------------------------------------------------------------
BECAUSE NO SINGLE INVESTMENT MANAGER CAN BE ALL THINGS TO ALL INVESTORS.(SM)
At Liberty Funds Distributor, Inc. (Liberty), we believe that -- try as they
may -- no single investment manager can do all things well. That's why we make
available the individual talents of investment managers that have excelled in a
particular investment discipline. These managers not only specialize in a
distinct investment style, they hold a passion for the style along with a
demonstrated track record.
- --------------------------------------------------------------------------------
L I B E R T Y
- --------------------------------------------------------------------------------
[Graphic Omitted] Colonial has long been a recognized leader in fixed-income
investing. In addition, Colonial has distinguished itself
with both a traditional value and a more contemporary
approach to equity investing.
- --------------------------------------------------------------------------------
[Graphic Omitted] Crabbe Huson's contrarian investment style seeks long-term
performance by investing in stocks from high-quality,
out-of-favor companies. This risk-averse strategy
capitalizes on the potential of these companies to regain
market popularity.
- --------------------------------------------------------------------------------
[Graphic Omitted] LAMCO brings institutional money management to individual
investors through a disciplined multi-manager investment
process that seeks to deliver consistent long-term returns.
- --------------------------------------------------------------------------------
[Graphic Omitted] A leader in Asian investing(TM), Newport has an unparalleled
knowledge of Asian economies, business and culture.
- --------------------------------------------------------------------------------
[Graphic Omitted] Stein Roe's growth management style emphasizes companies
with the ability to create, maintain and grow earnings in
different market environments.
- --------------------------------------------------------------------------------
BOSTON o CHICAGO o NEW YORK o PORTLAND o SAN FRANCISCO
- --------------------------------------------------------------------------------
Each of these managers is a member of the Liberty Financial Companies (NYSE: L),
a diversified asset accumulation and management organization with approximately
$61 billion in assets under management for more than 1.7 million investors.
- --------------------------------------------------------------------------------
COLONIAL HIGH YIELD MUNICIPAL FUND
- --------------------------------------------------------------------------------
-------------
BULK RATE
U.S. POSTAGE
[logo] L I B E R T Y PAID
ALL-STAR o COLONIAL o CRABBE HUSON o NEWPORT Holliston, MA
o STEIN ROE ADVISOR PERMIT NO. 20
Liberty Funds Distributor, Inc. (C)1999 -------------
One Financial Center, Boston, MA 02111-2621, 1-800-426-3750
Visit us at www.libertyfunds.com
HM-03/287H-0599 (7/99) 99/812
