<PAGE> 1
[Picture of Domed Building]
COLONIAL TAX-EXEMPT INSURED FUND ANNUAL REPORT
November 30, 1998
Not FDIC Insured
May Lose Value
No Bank Guarantee
<PAGE> 2
COLONIAL TAX-EXEMPT INSURED FUND HIGHLIGHTS
DECEMBER 1, 1997 - NOVEMBER 30, 1998
INVESTMENT OBJECTIVE: Colonial Tax-Exempt Insured Fund seeks as high a level of
after-tax total return as is consistent with prudent risk, by pursuing current
income exempt from federal income tax and opportunities for long-term
appreciation from a portfolio primarily invested in insured municipal bonds.
PORTFOLIO MANAGER COMMENTARY: "Interest rate volatility, low nominal rates, and
a near-record level of supply created challenging conditions for investors in
tax-exempt bonds. Despite these hurdles, the Fund was well-positioned to take
advantage of declining interest rates and was able to generate attractive
performance relative to its Lipper competitive peer group."(1)
-- Gary Swayze
Colonial Tax-Exempt Insured Fund Performance
<TABLE>
<CAPTION>
Class A Class B Class C
<S> <C> <C> <C>
Inception date 11/20/85 5/5/92 8/1/97
- --------------------------------------------------------------------------------------
12-month distributions declared per share(2) $0.452 $0.386 $0.413
- --------------------------------------------------------------------------------------
SEC yields on 11/30/98 (3) 3.32% 2.73% 3.02%
- --------------------------------------------------------------------------------------
Taxable-equivalent SEC yields (4) 5.50% 4.52% 5.00%
- --------------------------------------------------------------------------------------
12-month total returns, assuming 7.29% 6.47% 6.80%(5)
reinvestment of all distributions and no
sales charge or contingent deferred
sales charge (CDSC)
- --------------------------------------------------------------------------------------
Net asset value per share on 11/30/98 $8.62 $8.62 $8.62
</TABLE>
Maturity Breakdown(6) (as of 11/30/98)
- ---------------------------------------
1 - 3 years....................... 6.3%
3 - 5 years....................... 2.5%
5 - 7 years........................1.3%
7 - 10 years...................... 4.8%
10 - 15 years.................... 25.6%
15 - 20 years.................... 31.7%
20 - 25 years.................... 18.8%
25+ years......................... 6.8%
Cash equivalents.................. 2.2%
(1) See page 5 for complete Lipper rankings.
(2) A portion of the Fund's income may be subject to the alternative
minimum tax.
(3) The 30-day SEC yields on 11/30/98 reflect the portfolio's earning
power, net of expenses and expressed as an annualized percentage of the
public offering price 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 2.68%.
(4) Taxable-equivalent SEC yields are based on the maximum federal income
tax rate of 39.6%. The Fund may at times purchase tax-exempt securities
at a discount. Some or all of this discount may be included in the
Fund's ordinary income, and is taxable when distributed.
(5) Performance results reflect any voluntary waiver of Fund expenses by
the Distributor. Absent this waiver, performance results would have
been lower.
(6) Maturity breakdown is calculated as a percentage of total investments,
including short-term obligations. Maturity breakdown is based on each
security's effective maturity, which reflects pre-refundings, mandatory
puts and other conditions that affect a bond's maturity. Because the
Fund is actively managed, there can be no guarantee the Fund will
continue to maintain these maturity breakdowns in the future.
2
<PAGE> 3
PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
[PICTURE OF STEPHEN E. GIBSON]
I am pleased to present the annual report for Colonial Tax-Exempt Insured Fund
for the 12-month period ended November 30, 1998.
Conditions for fixed-income investments varied considerably during the period.
While the environment for bonds was positive overall, a variety of domestic and
international factors created a volatile climate for bond fund investors. In the
U.S., the periodic fears of inflation that existed early in the period all but
vanished during the second half, as an increasing number of signs pointed toward
a gradually slowing U.S. economy. This environment set the stage for a series of
interest rate cuts by the Federal Reserve Board in the fall of 1998, helping
bond values end the period on a positive note.
Flight to quality was a theme that repeated itself at various times during the
period. Abroad, the economic and financial turmoil that began in Asia in the
fall of 1997 gradually spread to other less-developed markets. As a result,
investors worldwide were drawn to the relative safety and stability of U.S.
Treasury bonds. While returns on higher-quality fixed-income investments,
including municipals, were positive, investor demand for quality and stability
made U.S. Treasury bonds the biggest winners.
The disciplined bond fund management style for which Colonial is known served
investors well, enabling the Fund's Class A shares to outperform the majority of
its peers over the past 12 months.(1) For quality-conscious investors seeking
competitive levels of tax-free income and the potential for long-term price
appreciation, Colonial Tax-Exempt Insured Fund remains a viable investment
option for their investment portfolios.
The following report will provide you with more specific information on your
Fund's performance and the market in which the Fund invests. Thank you for
choosing Colonial Tax-Exempt Insured Fund and for giving us the opportunity to
serve your investment needs.
Respectfully,
/s/ Stephen E. Gibson
- ----------------------
Stephen E. Gibson
President
January 13, 1999
(1) Please see page 5 for complete Lipper rankings.
Because market and economic conditions change frequently, there can be
no assurance that the trends discussed above or on the following pages
will continue.
3
<PAGE> 4
PORTFOLIO MANAGEMENT REPORT
GARY SWAYZE is portfolio manager of Colonial Tax-Exempt Insured Fund and is vice
president of Colonial Management Associates, Inc.
TAX-EXEMPT MARKET GENERATED GAINS DESPITE CHALLENGING CONDITIONS
The market value of municipal bonds appreciated approximately 3% during the past
12 months, according to the Bond Buyer 40 Index, a widely used measure of
tax-exempt market performance. This gain was generated under challenging
investment conditions. Interest rates were volatile during the period as
investors remained preoccupied with events that had the potential to affect the
U.S. economy's growth rate and, therefore, the direction of interest rates.
During the first half of the period, these events included economic weakness in
Southeast Asia that investors thought would have a negative impact on the level
of U.S. business activity. When a slowdown failed to materialize and the U.S.
economy continued to generate stable economic growth, investors feared that the
Federal Reserve Board might raise interest rates, and bond prices declined. In
the tax-exempt market, the environment was further complicated by a near-record
level of new-issue supply, as issuers rushed to take advantage of lower interest
rates to refinance existing debt as well as to finance new projects. At times,
the market found it difficult to absorb this supply, and tax-exempt prices
suffered.
During the second half of the period, a financial and political crisis
emerged in Russia that increased market volatility in the U.S. and abroad.
Investors sought relatively stable investments, such as U.S. Treasury
securities. This flight to quality and some slowing of the U.S. economy
increased demand for U.S. Treasurys, helping to push yields down to their lowest
level in 30 years. As a result, Treasurys outperformed all other sectors of the
fixed-income market, including municipal bonds. However, because the credit
quality of tax-exempt bonds is second only to U.S. government securities, their
prices benefited from this trend.
FUND'S OUTPERFORMANCE REFLECTS INVESTMENT STRATEGY
For the 12-month period ended November 30, 1998, the Fund generated a
total return of 7.29% for Class A shares, based on net asset value. This
compares favorably with the performance of the Fund's Lipper competitive peer
group, which averaged 6.87% for the same period.(1)
We attribute this outperformance to the Fund's investment strategy. Based on our
expectation for low inflation and modest economic growth, we structured the
portfolio with a larger-than-average proportion of bonds that tend to perform
well during periods of declining interest rates. These included bonds with good
call protection. In addition, the Fund had a longer-than-average maturity
structure. Longer-maturity bonds are generally more sensitive to changes in
interest rates than shorter-maturity bonds, and experience attractive price
increases when interest rates decline.
4
<PAGE> 5
MAJOR BOND INSURERS MAY RAISE THEIR UNDERWRITING STANDARDS
During the period, $500 million in tax-exempt bonds issued by the Allegheny
Health Education and Research Foundation (AHERF) for a teaching hospital system
in greater Philadelphia were affected by a bankruptcy filing. A sizable portion
of these bonds were insured by MBIA, a leading bond insurer. Although the Fund
did not own any AHERF bonds, the default affected the entire tax-exempt market
and may affect the tax-exempt insured market. Historically tight quality spreads
(the extra payment required by investors to own bonds they believe carry higher
risk) widened in response to this default, as the market began to look more
carefully at the projects or facilities coming to market. In other words,
investors required higher coupons to own bonds with lower credit ratings,
highlighting the relative safety of insured municipal bonds. We expect that this
default may cause the major bond insurers to review and possibly adjust their
underwriting standards and become more selective in the issuers they insure.
Moving in that direction should have a positive impact on the underlying credit
quality of insured tax-exempt bonds.
Just as the AHERF default may cause the major, AAA-rated bond insurers to pull
back from insuring certain issues, it may also create an opportunity for new
insurers to enter the market. One potential beneficiary is American Capital
Access (ACA), an A-rated bond insurer that currently insures lower-quality
issuers that typically would not qualify for AAA-rated insurance support, such
as small, profitable community hospitals.
OUTLOOK FOR A POSITIVE ECONOMIC AND MARKET ENVIRONMENT
We have a positive market outlook and do not anticipate changing our long-term
investment strategy. However, while we believe that interest rates may still
fall further, we appreciate how many of our economic expectations have already
been met -- economic growth continues to be under control, inflation remains in
check, and the Federal Reserve Board has lowered interest rates three times. We
will continue to monitor the economy and the market carefully in the months
ahead. If we think that there is a decisive shift in the environment and that
interest rates may begin to rise, we will adjust our strategy in response. In
the meantime, we believe that the Fund is well positioned to take advantage of
current market conditions.
(1) Source: Lipper, Inc. Lipper rankings are based on the Lipper Insured
Municipal Debt Funds universe. The Fund (Class A shares) ranked in the
second quartile for 1 year (rated 14 out of 48 funds), in the second
quartile for 5 years (rated 15 out of 30 funds), and in the third
quartile for 10 years (rated 10 out of 17 funds). Rankings do not
include any sales charges. Performance for different share classes will
vary with fees associated with each class. Past performance cannot
predict future results.
5
<PAGE> 6
Colonial Tax-Exempt Insured Fund's Investment Performance vs.
the Lehman Brothers Municipal Bond Index
Change in Value of $10,000 from 11/30/88 - 11/30/98
based on NAV and POP for Class A shares
[GRAPHIC OF LINE CHART]
<TABLE>
<CAPTION>
LABEL A B C
----- ----- -----
LABEL NAV POP
----- ----- -----
<S> <C> <C> <C>
1 10000 10000 10000
2 10225 9739 10193
3 10606 10102 10627
4 10755 10244 10811
5 11007 10484 11101
6 11105 10577 11239
7 11263 10728 11404
8 11333 10794 11505
9 11739 11181 11956
10 12023 11452 12275
11 12328 11743 12554
12 12559 11963 12861
13 12873 12262 13183
14 13200 12573 13501
15 13401 12765 13787
16 13839 13182 14297
17 14012 13347 14505
18 14827 14122 15359
19 14856 14150 15436
20 15395 14663 16042
21 15414 14681 16113
22 15426 14694 16210
23 15017 14304 15817
24 15240 14516 16064
25 14394 13711 15266
26 15653 14909 16515
27 16238 15466 17258
28 16249 15477 17488
29 17063 16253 18151
30 17127 16313 18339
31 16717 15923 18047
32 17019 16210 18405
33 17827 16980 19218
34 17810 16964 19349
35 17962 17109 19541
36 18525 17645 20106
37 19009 18106 20596
38 19507 18580 21118
39 19708 18772 21375
40 19911 18965 21845
41 20394 19425 22194
</TABLE>
Growth of a $10,000 Investment Made on 11/30/88
As of 11/30/98
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Class A Class B Class C
NAV POP NAV w/CDSC NAV w/CDSC
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$20,394 $19,425 $19,422 $19,422 $20,270 $20,270
</TABLE>
Average Annual Total Returns
As of 11/30/98
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Class A Class B Class C
Inception 11/20/85 5/5/92 8/1/97
NAV POP NAV w/CDSC NAV w/CDSC
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 year 7.29% 2.19% 6.47% 1.47% 6.80% 5.80%
- --------------------------------------------------------------------------------
5 years 5.76 4.74 4.97 4.64 5.63 5.63
- --------------------------------------------------------------------------------
10 years 7.39 6.87 6.86 6.86 7.32 7.32
- --------------------------------------------------------------------------------
</TABLE>
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. 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%. The CDSC
returns reflect the maximum 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 and 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 B and Class C share (newer class shares) performance information includes
returns of the Fund's Class A shares (the oldest existing fund class) for
periods prior to the inception of the newer class shares. These Class A share
returns are not restated to reflect any expense differential (e.g., Rule 12b-1
fees) between Class A shares and the newer class shares. Had the expense
differential been reflected, the returns for periods prior to the inception of
the newer class shares would have been lower.
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 in an index.
6
<PAGE> 7
INVESTMENT PORTFOLIO
NOVEMBER 30, 1998 (IN THOUSANDS)
<TABLE>
<CAPTION>
MUNICIPAL BONDS - 97.6% PAR VALUE
<S> <C> <C>
EDUCATION - 5.2%
Education - 3.5%
IN Purdue University,
Series 1998-P,
5.250% 07/1/12 (a) $ 1,000 $ 1,067
MA Health and Educational Facilities Authority:
Harvard University, Series N,
6.250% 04/1/20 3,000 3,572
Northeastern University, Series E,
6.550% 10/1/22 1,500 1,660
UT State Municipal Finance Co-operative
Local Government, Pooled Capital
Improvement,
6.800% 05/1/12 1,000 1,115
-----
7,414
-----
Student Loan - 1.7%
AL State Higher Education Loan Corp.,
Series 1994-C,
5.850% 09/1/04 1,000 1,070
NM State Educational Assistance
Foundation, Series A,
6.700% 04/1/02 200 214
PA State Higher Education Assistance
Student Loan IFRN (variable rate),
Series 1990-B,
11.143% 03/1/20 2,000 2,230
-----
3,514
-----
HEALTHCARE - 8.2%
Hospital
IL Health Facilities Authority:
Methodist Health Services Corp.:
Series 1985-G,
8.000% 08/1/15 925 960
Series 1992-B, IFRN (variable rate),
9.872% 05/1/21 500 589
Rockford Memorial Hospital, Series B,
6.750% 08/15/18 50 55
MA Health and Educational Facilities Authority:
McLean Hospital, Series C,
6.625% 07/1/15 500 550
</TABLE>
7
<PAGE> 8
Investment Portfolio/November 30, 1998
<TABLE>
<CAPTION>
MUNICIPAL BONDS - CONT. PAR VALUE
<S> <C> <C>
HEALTHCARE - CONT.
Hospital - Cont.
New England Deaconess Hospital,
Series D,
6.875% 04/01/22 $ 2,500 $ 2,787
Valley Regional Health System,
Series C,
7.000% 07/01/08 1,585 1,896
MS State Hospital Equipment and
Facilities Authority,
Rush Medical Foundation Project,
6.700% 01/01/18 250 273
OK State Industrial Authority,
Baptist Medical Center,
Series C,
7.000% 08/15/04 1,500 1,716
TN Knox City Health Education and
Housing Facilities,
5.250% 01/01/15 5,000 5,261
WA Health Care Multicare Health,
5.000% 08/15/22 1,000 977
WI State Health & Educational
Facilities Authority:
Bellin Memorial Hospital,
6.625% 02/15/08 1,000 1,168
Waukesha Memorial Hospital,
7.250% 08/15/19 60 64
Milwaukee Regional Medical Center,
Series 1990,
7.500% 08/01/11 1,000 1,067
------
17,363
------
HOUSING - 4.5%
Multi-Family - 2.3%
IL Onterie Center Housing Finance Corp.,
Onterie Center Project,
Series 1992-A,
7.050% 07/01/27 2,000 2,145
MA State Housing Finance Agency,
Series A,
6.400% 01/01/09 1,910 2,064
MD Howard County Medical Mortgage
Heartlands Elderly Apartments,
Series 1985,
8.875% 12/01/10 490 528
------
4,737
------
</TABLE>
8
<PAGE> 9
<TABLE>
<CAPTION>
Investment Portfolio/November 30, 1998
<S> <C> <C>
Single-Family - 2.2%
AK State Housing Finance Corp.,
Series 1990-A2,
7.000% 12/01/11 $ 45 $ 48
FL Brevard County Housing Finance Authority,
Series C,
7.000% 09/01/23 40 42
MA State Housing Finance Agency,
Series 21,
7.125% 06/01/25 1,310 1,407
MS Housing Finance Corporation Single
Family Mortgage,
8.250% 10/15/18 1,990 2,073
WV State Housing Development Fund,
Series C,
5.800% 05/01/17 1,000 1,059
------
4,629
------
OTHER - 7.9%
Pool/Bond Bank - 0.7%
MI Municipal Bond Authority, Local
Government Loan Program,
Series 1991-C,
(b) 06/15/15 3,380 1,515
------
Refunded/Escrowed (c) - 7.2%
FL Dunedin, Mease Health Care Center,
Series 1991,
6.750% 11/15/11 100 111
FL Hollywood Water & Sewer Revenue,
6.750% 10/01/11 50 55
IL Chicago, Central Public Library Project,
Series 1988-C,
6.850% 01/01/17 1,000 1,117
IL Decatur,
6.900% 10/01/14 250 272
IN Whitko Middle School Building
Corporation First Mortgage, Series 1991,
6.750% 07/15/12 1,000 1,086
MA State Port Authority,
Series 1990-A,
7.500% 07/01/20 235 254
</TABLE>
9
<PAGE> 10
<TABLE>
<CAPTION>
Investment Portfolio/November 30, 1998
MUNICIPAL BONDS - CONT. PAR VALUE
OTHER - CONT.
<S> <C> <C>
Refunded/Escrowed - Cont.
NV Reno Hospital, St. Mary's Regional
Medical Center, Series 1991-A,
6.700% 07/01/21 $ 1,000 $ 1,093
NY New York City Municipal Finance
Authority Water and Sewer Systems,
Series 1991-C,
7.000% 06/15/16 1,500 1,643
OK State Industrial Authority,
Baptist Medical Center,
Series A,
7.000% 08/15/14 150 162
OR Portland International Airport,
7.100% 07/01/21 950 1,175
PA Pottstown Borough Authority Sewer,
Guaranteed Sewer Revenue, Series 1991,
(b) 11/01/16 1,000 413
SC Charleston County Certificate
of Participation, Series 1991,
7.100% 06/01/11 2,000 2,202
SC Piedmont Municipal Power Agency,
Series 1991-A,
6.125% 01/01/07 75 85
TN Chattanooga-Hamilton County,
Series 1991-B, IFRN (variable rate),
10.622% 05/25/21 1,000 1,175
TX Colorado River Municipal Water
District, Water Transmission Facilities,
Series 1991-A,
6.625% 01/01/21 250 265
TX Harris County Health Facilities
Development Corp.,
Texas Children's Hospital, Series A,
7.000% 10/01/19 50 53
WA Clark County Public Utilities
District Number 001 Electric System,
6.500% 01/01/11 200 215
WA State Housing Finance Commission,
Franciscan Eldercare Corp.,
Series 1991:
6.875% 01/01/21 910 986
6.875% 01/01/21 1,340 1,452
</TABLE>
10
<PAGE> 11
<TABLE>
<CAPTION>
Investment Portfolio/November 30, 1998
<S> <C> <C>
WA State Public Power Supply System,
Nuclear Project No. 2,
Series A,
6.500% 07/01/05 $ 200 $ 217
WI State Health & Educational
Facilities Authority,
Waukesha Memorial Hospital,
7.250% 08/15/19 940 1,016
WV School Building Authority, Capital
Import Revenue Bonds, Series 1990-B,
6.750% 07/01/17 75 80
-------
15,127
-------
OTHER REVENUE - 0.7%
Recreation
CA Fairs Financing Authority,
Series 1991,
6.500% 07/01/11 1,300 1,411
-------
RESOURCE RECOVERY - 0.8%
Resource Recovery
SC Charleston County Solid Waste User Fee,
6.500% 01/01/09 1,405 1,597
-------
TAX-BACKED - 33.3%
Local Appropriated - 4.5%
IL Chicago Board of Education,
Series 1992-A,
6.250% 01/01/15 (d) 6,000 6,997
OH Butler County Transportation Improvement
District, Series A,
6.000% 04/01/12 2,250 2,547
-------
9,544
-------
Local General Obligations - 14.2%
AZ Maricopa County School District,
Number 8 Osborn,
7.500% 07/01/08 1,235 1,547
AZ Mohave County Unified High School
District, Series B,
8.500% 07/01/06 250 321
AZ Tucson,
Series 1994-G,
7.625% 07/01/14 3,140 4,157
</TABLE>
11
<PAGE> 12
<TABLE>
<CAPTION>
Investment Portfolio/November 30, 1998
MUNICIPAL BONDS - CONT. PAR VALUE
TAX-BACKED - CONT.
<S> <C> <C>
Local General Obligations - Cont.
CO El Paso County School District No. 11,
Series 1996,
7.100% 12/01/18 $ 4,420 $ 5,711
CO Highlands Ranch Metropolitan
District No. 2,
Series 1996,
6.500% 06/15/12 1,000 1,198
GA Columbia County School District,
Series A,
6.750% 04/01/08 1,695 2,020
IL Chicago,
Series 1995 A-2,
6.250% 01/01/14 4,000 4,660
LA New Orleans,
Series 1998,
5.500% 12/01/15 (a) 1,060 1,151
MD Baltimore:
7.000% 10/15/08 300 366
7.000% 10/15/09 1,055 1,303
NV Clark County,
Series A,
7.500% 06/01/07 350 431
NV Las Vegas-Clark County Library District,
7.500% 02/01/02 1,000 1,108
OH Greater Cleveland Regional
Transportation Authority:
Series 1996,
5.600% 12/01/11 2,000 2,177
Series 1998,
5.375% 12/01/14 1,040 1,100
PA Allegheny County Institution District,
Series 18,
(b) 04/01/10 2,000 1,198
TX Deer Park Independent School District,
Series 1998,
4.250% 02/15/18 1,500 1,367
-------
29,815
-------
Special Non-Property Tax - 5.9%
IL Metropolitan Pier & Exposition
Authority, McCormick Place Expansion
Project, Series A:
(b) 06/15/01 3,750 1,556
(b) 06/15/17 3,800 1,488
</TABLE>
12
<PAGE> 13
<TABLE>
<CAPTION>
Investment Portfolio/November 30, 1998
<S> <C> <C>
IL State Dedicated Tax,
Civic Center, Series A,
7.000% 12/15/13 $ 200 $ 217
NV Clark County,
Series 1998,
5.250% 11/01/13 2,000 2,098
NY State Local Government Assistance Corp.,
Series 1993-E,
5.000% 04/01/21 3,175 3,200
NY Triborough Bridge & Tunnel Authority,
Series A,
6.625% 01/01/17 250 268
PR Commonwealth of Puerto Rico Highway
& Transportation Authority,
Series 1996-Y,
6.250% 07/01/12 3,000 3,546
-------
12,373
-------
State Appropriated - 5.0%
IN State Office Building Commission,
Women's Prison, Series B,
6.250% 07/01/16 8,000 9,356
WV State Building Commission,
Series 1998-A,
5.375% 07/01/18 1,000 1,065
-------
10,421
-------
State General Obligations - 3.7%
CA State,
Series 1995,
10.000% 10/01/06 1,000 1,389
DC District Columbia,
General Obligation, Series 1993-B1,
5.500% 06/01/09 1,000 1,081
MA State,
Series B,
5.500% 06/01/11 (d) 5,000 5,381
-------
7,851
-------
TRANSPORTATION - 9.0%
Air Transportation - 0.5%
NY Port Authority of New York & New Jersey,
JFK International Air Terminal, Series 6,
6.250% 12/01/08 1,000 1,152
-------
</TABLE>
13
<PAGE> 14
<TABLE>
<CAPTION>
Investment Portfolio/November 30, 1998
MUNICIPAL BONDS - CONT. PAR VALUE
TRANSPORTATION - CONT.
<S> <C> <C>
Airport - 2.2%
CA San Francisco City & County Airport Commission,
Series 1998,
4.500% 05/01/26 $ 1,500 $ 1,406
HI State, Airport System Revenue,
Series 2,
6.750% 07/01/21 250 270
IL Chicago O'Hare International Airport
Special Facility, International Terminal,
6.750% 01/01/12 300 326
MA State Port Authority,
Series 1990 A,
7.500% 07/01/20 765 821
OR Portland International Airport,
7.100% 07/01/21 50 54
TX Dallas-Fort Worth Regional Airport,
Series A,
7.375% 11/01/11 1,380 1,616
TX Houston Airport System Revenue,
Series A,
6.750% 07/01/21 200 216
-------
4,709
-------
Toll Facilities - 0.8%
NY State Thruway Authority,
Series 1997-D,
5.375% 01/01/27 1,395 1,445
TX Harris County,
Toll Road Revenue,
6.500% 08/15/11 120 132
-------
1,577
-------
Transportation - 5.5%
DC Metropolitan Area Transit Authority,
6.000% 07/01/10 1,000 1,143
IL Regional Transportation Authority,
Series C,
7.750% 06/01/20 5,000 6,898
SC State Ports Authority,
Series 1991:
6.500% 07/01/06 250 269
6.750% 07/01/21 3,000 3,241
-------
11,551
-------
</TABLE>
14
<PAGE> 15
<TABLE>
<CAPTION>
Investment Portfolio/November 30, 1998
<S> <C> <C>
UTILITY - 28.0%
Investor Owned - 6.1%
DE State Economic Development Authority,
New Castle County Gas System,
Series 1991-C,
7.150% 07/01/21 $ 1,000 $ 1,091
HI State Department of Budget & Finance,
Hawaiian Electric Co.,
Series A,
6.600% 01/01/25 4,000 4,464
MI St. Clair County Economic
Development Corp.,
Detroit Edison Co., Series 1993-AA,
6.400% 08/01/24 1,000 1,139
NV Clark County Pollution Control
Nevada Power Company, Series 1992-B,
6.600% 06/01/19 3,500 3,850
NY New York Energy Research & Development
Adjusted Gas Facilities,
Brooklyn Union Gas Company Series 1989-B,
6.750% 02/01/24 2,000 2,194
------
12,738
======
Joint Power Authority - 11.3%
CA Southern California Power Authority,
Palo Vero Project,
Series 1989-A,
5.000% 07/01/15 5,250 5,258
GA Municipal Electric Authority Power,
Series 1997-Y,
6.400% 01/01/13 1,000 1,175
SC Piedmont Municipal Power Agency,
Series 1991-A,
6.125% 01/01/07 425 478
SC State Public Service Authority,
Series A,
6.250% 01/01/22 3,500 3,942
TX State Municipal Power Agency:
(b) 09/01/10 5,000 2,947
(b) 09/01/11 7,900 4,396
(b) 09/01/12 3,000 1,573
(b) 09/01/15 8,975 3,956
------
23,725
------
</TABLE>
15
<PAGE> 16
<TABLE>
<CAPTION>
Investment Portfolio/November 30, 1998
MUNICIPAL BONDS - CONT. PAR VALUE
UTILITY - CONT.
<S> <C> <C>
Municipal Electric - 4.5%
AK Anchorage: Series 1993,
8.000% 12/01/09 $ 1,000 $ 1,316
Series 1996,
6.500% 12/01/10 3,075 3,669
PR Puerto Rico Electric Power Authority,
Series 1989-O,
5.000% 07/01/12 1,900 1,903
SD Heartland Consumers Power District,
6.000% 01/01/09 300 337
TX San Antonio,
Series 1998-A,
4.500% 02/01/21 (a) 1,000 933
WA State Public Power Supply System,
Nuclear Project No. 2,
Series 1992-A,
(b) 07/01/11 2,315 1,284
-----
9,442
-----
Water & Sewer - 6.1%
FL Saint John's County Water and Sewer,
Saint Augustine Shores System,
Series 1991-A:
(b) 06/01/13 2,600 1,312
(b) 06/01/14 1,500 717
GA Fulton County Water and Sewer,
6.375% 01/01/14 6,000 7,034
IL Kankakee Sewer,
Series 1991,
7.000% 05/01/14 1,000 1,129
MD Baltimore,
Wastewater Project,
Series 1998-B,
5.375% 07/01/15 1,540 1,628
VA Loudoun County Sanitation Authority,
Series 1992,
6.250% 01/01/16 1,000 1,097
-------
12,917
-------
TOTAL INVESTMENTS - 97.6% (cost of $182,530)(e) 205,122
-------
</TABLE>
16
<PAGE> 17
<TABLE>
<CAPTION>
Investment Portfolio/November 30, 1998
SHORT-TERM OBLIGATIONS - 2.2%
VARIABLE RATE DEMAND NOTES (f)
<S> <C> <C>
IL Health Facilities Authority,
Central Dupage Hospital,
3.300% 11/01/20 $ 1,300 $ 1,300
IN State Health Facilities Financing Authority,
Series 1990,
3.200% 12/01/10 100 100
MS Perry County,
Leaf River Forest Project,
3.250% 03/01/02 800 800
NM Farmington,
Arizona Public Service Co.,
Four Corners Project, Series 1994-B,
3.250% 09/01/24 1,700 1,700
NY New York City Municipal Water
Finance Authority,
Series 1995-A,
3.750% 06/15/25 700 700
---------
TOTAL SHORT-TERM OBLIGATIONS 4,600
---------
OTHER ASSETS & LIABILITIES, NET - 0.2% 511
---------
NET ASSETS - 100.0% $ 210,233
=========
</TABLE>
NOTES TO INVESTMENT PORTFOLIO:
(a) These securities have been purchased on a delayed delivery basis for
settlement at a future date beyond the customary settlement time.
(b) Zero coupon bond.
(c) 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.
(d) These securities, or a portion thereof, with a total market value of
$11,444 are being used to collateralize the delayed delivery purchase
indicated in note (a) above.
(e) Cost for federal income tax purposes is the same.
(f) Variable rate demand notes are considered short-term obligations.
Interest rates change periodically on specified dates. These securities
are payable on demand and are secured by either letters of credit or
other credit support agreements from banks. The rates listed are as of
November 30, 1998.
Acronym Name
------- --------------------------
IFRN Inverse Floating Rate Note
Notes to Investment Portfolio continued on following page.
17
<PAGE> 18
Investment Portfolio/November 30, 1998
NOTES TO INVESTMENT PORTFOLIO - CONT.
SUMMARY OF SECURITIES BY INSURER
% of
Insurer Net Assets
------- ----------
Municipal Bond Insurance Agency 30.6
Financial Guarantee Insurance Company 29.4
AMBAC Indemnity Corporation 27.5
Uninsured Securities 8.7
Financial Security Assurance 2.4
Connie Lee Insurance Company 0.7
Bond Investment Guarantee Insurance 0.6
Capital Guarantee Insurance Company 0.1
----------
100.0
==========
Short futures contract open on November 30, 1998,
<TABLE>
<CAPTION>
Par Value Unrealized
covered by Expiration appreciation
Type contracts month at 11/30/98
<S> <C> <C> <C>
Treasury Bond 5,500 March $ 124
</TABLE>
See notes to financial statements.
18
<PAGE> 19
STATEMENT OF ASSETS & LIABILITIES
NOVEMBER 30, 1998
(in thousands except for per share amounts and footnotes)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value (cost $182,530) $205,122
Short-term obligations 4,600
--------
209,722
Receivable for:
Interest $3,852
Fund shares sold 122
Variation margin on futures 67
Investments sold 65
Other 65 4,171
------ --------
Total Assets 213,893
LIABILITIES
Payable for:
Investments purchased 3,128
Fund shares repurchased 268
Distributions 246
Accrued:
Deferred Trustees fees 5
Other 13
------
Total Liabilities 3,660
--------
NET ASSETS $210,233
========
Net asset value & redemption price per share -
Class A ($171,812/19,926) $8.62(a)
=====
Maximum offering price per share - Class A
($8.62/0.9525) $9.05(b)
=====
Net asset value & offering price per share -
Class B ($37,716/4,374) $8.62(a)
=====
Net asset value & offering price per share -
Class C ($705/82) $8.62(a)
=====
COMPOSITION OF NET ASSETS
Capital paid in $187,979
Overdistributed net investment income (260)
Accumulated net realized loss (202)
Net unrealized appreciation on:
Investments 22,592
Open futures contracts 124
--------
$210,233
========
</TABLE>
(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 notes to financial statements.
19
<PAGE> 20
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 1998
<TABLE>
(in thousands)
INVESTMENT INCOME
<S> <C> <C>
Interest $ 11,918
EXPENSES
Management fee $1,204
Service fee 537
Distribution fee - Class B 284
Distribution fee - Class C 2
Transfer agent fee 325
Bookkeeping fee 85
Trustees fee 17
Audit fee 31
Legal fee 5
Custodian fee 2
Registration fee 27
Reports to shareholders 8
Other 25
------
Total expenses 2,552
Fees waived by
the Distributor - Class C (1) 2,551
------ --------
Net Investment Income 9,367
--------
NET REALIZED & UNREALIZED GAIN ON PORTFOLIO POSITIONS
Net realized gain on:
Investments 2,068
Closed futures contracts 22
------
Net Realized Gain 2,090
Change in net unrealized appreciation
during the period on:
Investments 3,443
Open futures contracts 124
------
Net Change in Unrealized Appreciation 3,567
--------
Net Gain 5,657
--------
Increase in Net Assets from Operations $ 15,024
========
</TABLE>
See notes to financial statements.
20
<PAGE> 21
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended
(in thousands) November 30
----------------------------
INCREASE (DECREASE) IN NET ASSETS 1998 1997(a)
<S> <C> <C>
Operations:
Net investment income $ 9,367 $ 10,736
Net realized gain 2,090 4,577
Net unrealized appreciation (depreciation) 3,567 (1,144)
--------- ---------
Net Increase from Operations 15,024 14,169
Distributions:
From net investment income - Class A (8,073) (9,102)
In excess of net investment income - Class A (220) --
From net realized gains - Class A (1,079) --
From net investment income - Class B (1,451) (1,656)
In excess of net investment income - Class B (39) --
From net realized gains - Class B (230) --
From net investment income - Class C (12) (1)
In excess of net investment income - Class C (b) --
From net realized gains - Class C (1) --
--------- ---------
3,919 3,410
--------- ---------
Fund Share Transactions
Receipts for shares sold - Class A 5,722 8,069
Value of distributions reinvested - Class A 5,974 5,450
Cost of shares repurchased - Class A (24,642) (41,496)
--------- ---------
(12,946) (27,977)
--------- ---------
Receipts for shares sold - Class B 4,704 1,089
Value of distributions reinvested - Class B 1,102 962
Cost of shares repurchased - Class B (7,365) (8,696)
--------- ---------
(1,559) (6,645)
--------- ---------
Receipts for shares sold - Class C 680 100
Value of distributions reinvested - Class C 9 1
Cost of shares repurchased - Class C (93) --
--------- ---------
596 101
--------- ---------
Net Decrease from Fund Share Transactions (13,909) (34,521)
--------- ---------
Total Decrease (9,990) (31,111)
NET ASSETS
Beginning of period 220,223 251,334
--------- ---------
End of period (net of overdistributed and
including undistributed net investment
income of $260 and $168, respectively) $ 210,233 $ 220,223
========= =========
</TABLE>
(a) Class C shares were initially offered on August 1, 1997.
(b) Rounds to less than one.
See notes to financial statements.
21
<PAGE> 22
STATEMENT OF CHANGES IN NET ASSETS - CONT.
<TABLE>
<CAPTION>
Year ended
November 30
-----------------------
1998 1997(a)
<S> <C> <C>
NUMBER OF FUND SHARES
Sold - Class A 672 974
Issued for distributions reinvested - Class A 700 659
Repurchased - Class A (2,886) (5,014)
------ ------
(1,514) (3,381)
------ ------
Sold - Class B 551 132
Issued for distributions reinvested - Class B 129 116
Repurchased - Class B (862) (1,050)
------ ------
(182) (802)
------ ------
Sold - Class C 80 12
Issued for distributions reinvested - Class C 1 (b)
Repurchased - Class C (11) --
------ ------
70 12
------ ------
</TABLE>
(a) Class C shares were initially offered on August 1, 1997.
(b) Rounds to less than one.
See notes to financial statements.
22
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1998
NOTE 1. ACCOUNTING POLICIES
ORGANIZATION: Colonial Tax-Exempt Insured Fund (the Fund), a series of
Colonial Trust IV, is a diversified portfolio of a Massachusetts
business trust, registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company. The Fund's
investment objective is to seek as high a level of after-tax total
return, as is consistent with prudent risk, by pursuing current income
exempt from federal income tax and opportunities for long-term
appreciation from a portfolio primarily invested in insured municipal
bonds. The Fund may issue an unlimited number of shares. The Fund
offers three classes of shares: Class A, Class B and Class C. Class A
shares are sold with a front-end sales charge and 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.
Options are valued at the last reported sale price, or in the absence
of a sale, the mean between the last quoted bid and asking price.
Futures contracts are valued based on the difference between the last
sale price and the opening price of the contract.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
Portfolio positions for which market quotations are not readily
available are valued at fair value under procedures approved by the
Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
23
<PAGE> 24
Notes to Financial Statements/November 30, 1998
NOTE 1. ACCOUNTING POLICIES - CONT.
Cost is determined and gains and losses are based upon the specific
identification method for both financial statement and federal income
tax purposes.
The Fund may trade securities on other than normal settlement terms.
This may increase the risk if the other party to the transaction fails
to deliver and causes the Fund to subsequently invest at less
advantageous prices.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS: All
income, expenses (other than the Class B and Class C distribution
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 2. 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 High Yield Municipal Fund as
follows:
24
<PAGE> 25
Notes to Financial Statements/November 30, 1998
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Average Net Assets Annual Fee Rate
------------------ ---------------
<S> <C>
First $1 billion 0.60%
Next $2 billion 0.55%
Next $1 billion 0.50%
Over $4 billion 0.45%
</TABLE>
BOOKKEEPING FEE: The 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., formerly Colonial Investors
Service Center, 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.
Effective January 1, 1997, and continuing through calendar year 1997, the
Transfer Agent fee was reduced 0.01% in cumulative monthly increments, resulting
in a decrease in the fee from 0.14% to 0.13% annually.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES: Liberty Funds
Distributor, Inc., formerly Liberty Financial Investments, Inc. (the
Distributor), a subsidiary of the Advisor, is the Fund's principal underwriter.
For the year ended November 30, 1998, the Fund has been advised that the
Distributor retained net underwriting discounts of $16,095 on sales of the
Fund's Class A shares and received contingent deferred sales charges (CDSC) of
none, $69,989 and $931 on Class A, Class B and Class C shares, respectively.
The Fund has adopted a 12b-1 plan which requires it to pay the Distributor a
service fee equal to 0.25% annually of the Fund's net assets as of the 20th of
each month. The plan also requires the payment of a distribution fee to the
Distributor equal to 0.75% of the average net assets attributable to Class B and
Class C shares. The Distributor has voluntarily agreed to waive a portion of the
Class C share distribution fee so that it will not exceed 0.45% annually.
The CDSC and the fees received from the 12b-1 plan are used principally as
repayment to the Distributor for amounts paid by the Distributor to dealers who
sold such shares.
OTHER: The Fund pays no compensation to its officers, all of whom are employees
of the 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.
25
<PAGE> 26
Notes to Financial Statements/November 30, 1998
NOTE 3. PORTFOLIO INFORMATION
INVESTMENT ACTIVITY: During the year ended November 30, 1998, purchases and
sales of investments, other than short-term obligations were $25,109,443 and
$41,358,708, respectively.
Unrealized appreciation at November 30, 1998, based on cost of investments for
both financial statement and federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation $22,591,894
Gross unrealized depreciation -
-----------
Net unrealized appreciation $22,591,894
===========
</TABLE>
OTHER: The Fund has greater than 10% of its net assets at November 30, 1998
invested in Illinois.
There are certain risks arising from geographic concentration in any
state. Certain revenue or tax related events in a state may impair the
ability of certain issuers of municipal securities to pay principal and
interest on their obligations.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
The Fund may purchase or sell municipal and Treasury bond futures contracts and
purchase and write options on futures. The Fund will invest in these instruments
to hedge against the effects of changes in the value of portfolio securities due
to anticipated changes in interest rates and/or market conditions, for duration
management, or when the transactions are economically appropriate to the
reduction of risk inherent in the management of the Fund and not for trading
purposes. The use of futures contracts and options involves certain risks which
include (1) imperfect correlation between the price movement of the instruments
and the underlying securities, (2) inability to close out a position due to
different trading hours, or the temporary absence of a liquid market for either
the instrument or the underlying securities or (3) an inaccurate prediction by
the Advisor of the future direction of interest rates. Any of these risks may
involve amounts exceeding the variation margin recorded in the Fund's Statement
of Assets and Liabilities at any given time.
NOTE 4. LINE OF CREDIT
The Fund may borrow up to 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 year ended November 30, 1998.
26
<PAGE> 27
Notes to Financial Statements/November 30, 1998
NOTE 5. RESULTS OF SPECIAL MEETING OF SHAREHOLDERS (UNAUDITED)
On October 30, 1998, a Special Meeting of Shareholders of the Fund was
held to approve the following items, all as described in the Proxy
Statement for the Meeting. On August 21, 1998, the record date for the
Meeting, the Fund had outstanding 24,630,502 shares of beneficial
interest. The votes cast at the Meeting were as follows:
AUTHORITY
FOR WITHHELD
To Elect a Board of Trustees.
Robert J. Birnbaum 14,646,956 656,728
Tom Bleasedale 14,650,977 652,707
John Carberry 14,648,602 655,082
Lora S. Collins 14,650,977 652,707
James E. Grinnell 14,646,956 656,728
Richard W. Lowry 14,650,977 652,707
Salvatore Macera 14,646,956 656,728
William E. Mayer 14,638,728 664,956
James L. Moody, Jr. 14,650,977 652,707
John J. Neuhauser 14,650,977 652,707
Thomas E. Stitzel 14,648,533 655,151
Robert L. Sullivan 14,650,977 652,707
Anne-Lee Verville 14,650,977 652,707
To amend fundamental investment policies regarding borrowing and
lending.
FOR AGAINST ABSTAIN
11,289,536 560,166 866,806
To reclassify the fundamental investment policy regarding the purchase
of illiquid securities.
FOR AGAINST ABSTAIN
11,083,873 716,598 916,036
To approve policies for a master fund/feeder structure.
FOR AGAINST ABSTAIN
11,178,137 517,688 1,020,684
27
<PAGE> 28
\ FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
Year ended November 30
1998
Class A Class B Class C
------------ ------------- -------------
<S> <C> <C> <C>
Net asset value -
Beginning of period $ 8.470 $ 8.470 $ 8.470
------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.384 0.318 0.345 (b)
Net realized and
unrealized gain (loss) 0.218 0.218 0.218
------------ ------------ ------------
Total from Investment
Operations 0.602 0.536 0.563
------------ ------------ ------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.390) (0.326) (0.352)
In excess of net investment income (0.011) (0.009) (0.010)
From net realized gains (0.051) (0.051) (0.051)
------------ ------------ ------------
Total Distributions
Declared to Shareholders (0.452) (0.386) (0.413)
------------ ------------ ------------
Net asset value -
End of period $ 8.620 $ 8.620 $ 8.620
============ ============ ============
Total return (d) 7.29% 6.47% 6.80% (e)
============ ============ ============
RATIOS TO AVERAGE NET ASSETS
Expenses (g) 1.06% 1.81% 1.51% (b)
Net investment income(g) 4.49% 3.74% 4.04% (b)
Portfolio turnover 12% 12% 12%
Net assets at end
of period (000) $ 171,812 $ 37,716 $ 705
</TABLE>
(a) Class C shares were initially offered on August 1, 1997. Per share
amounts reflect activity from that date.
(b) Net of fees waived by the Distributor which amounted to $0.026 per
share and 0.30%.
(c) 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.
(d) Total return at net asset value assuming all distributions reinvested
and no initial sales charge or contingent deferred sales charge.
(e) Had the Distributor not waived a portion of expenses, total return
would have been reduced.
(f) Not annualized.
28
<PAGE> 29
FINANCIAL HIGHLIGHTS - CONT.
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
Year ended November 30
--------------------------------------------------------------------
1997 1996
Class A Class B Class C(a) Class A Class B
------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
$ 8.330 $ 8.330 $ 8.530 $ 8.380 $ 8.380
------------ ----------- ----------- ----------- -----------
0.398 0.336 0.118 0.403 0.342
0.136 0.136 (0.061)(c) (0.045) (0.045)
------------ ----------- ----------- ----------- -----------
0.534 0.472 0.057 0.358 0.297
------------ ----------- ----------- ----------- -----------
(0.394) (0.332) (0.117) (0.408) (0.347)
- - - - -
- - - - -
------------ ----------- ----------- ----------- -----------
- - - - -
------------ ----------- ----------- ----------- -----------
$ 8.470 $ 8.470 $ 8.470 $ 8.330 $ 8.330
------------ ----------- ----------- ----------- -----------
6.63% 5.83% 0.68% (f) 4.48% 3.70%
------------ ----------- ----------- ----------- -----------
1.07% 1.82% 1.51% (h) 1.05% 1.80%
4.76% 4.01% 4.22% (h) 4.92% 4.17%
26% 26% 26% 25% 25%
$ 181,543 $ 38,580 $ 100 $ 206,713 $ 44,621
</TABLE>
(g) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
(h) Annualized.
1998 Federal Income Tax Information (unaudited) 99.12% of the
income distributions will be treated as exempt income for federal
income tax purposes.
For the fiscal year ended November 30, 1998 the Fund earned
$855,839 of long term capital gains of which none and $855,839 are
28% and 20% rate gains, respectively.
29
<PAGE> 30
FINANCIAL HIGHLIGHTS - CONT.
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
Year ended November 30
--------------------------------------------------------------------
1995 1994
Class A Class B Class A Class B
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 7.450 $ 7.450 $ 8.420 $ 8.420
------------ ------------ ------------ ------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.418 0.359 0.439 0.378
Net realized and
unrealized gain (loss) 0.935 0.935 (0.977) (0.977)
------------ ------------ ------------ ------------
Total from Investment
Operations 1.353 1.294 (0.538) (0.599)
------------ ------------ ------------ ------------
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net investment
income (0.423) (0.364) (0.432) (0.371)
------------ ------------ ------------ ------------
Net asset value -
End of period $ 8.380 $ 8.380 $ 7.450 $ 7.450
------------ ------------ ------------ ------------
Total return (a) 18.55% 17.68% (6.61)% (7.31)%
------------ ------------ ------------ ------------
RATIOS TO AVERAGE NET
ASSETS
Expenses 1.05% (b) 1.80% (b) 1.05% 1.80%
Net investment income 5.20% (b) 4.45% (b) 5.44% 4.69%
Portfolio turnover 31% 31% 36% 36%
Net assets at end
of period (000) $ 240,894 $ 50,016 $ 198,909 $ 45,801
</TABLE>
(a) Total return at net asset value assuming all distributions reinvested
and no initial sales charge or contingent deferred sales charge.
(b) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
30
<PAGE> 31
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE TRUSTEES OF COLONIAL TRUST IV AND THE SHAREHOLDERS OF
COLONIAL TAX-EXEMPT INSURED FUND
In our opinion, the accompanying statement of assets and liabilities,
including the investment portfolio, and the related statements of operations and
of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Colonial Tax-Exempt Insured Fund (a
series of Colonial Trust IV) at November 30, 1998, 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, 1998 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
January 13, 1999
31
<PAGE> 32
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 Liberty Funds Services 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 Funds Distributor, 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 Funds Distributor 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 Funds Distributor. 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.
32
<PAGE> 33
HOW TO REACH US
BY PHONE OR BY MAIL
BY TELEPHONE
Customer Connection - 1-800-345-6611
For 24-hour account information, call from your touch-tone phone. (Rotary
callers will be automatically connected to a representative during business
hours.) A recorded message will guide you through the menu:
For fund prices, dividends and capital gains information............ press 1
For account information............................................. press 2
To speak to a service representative................................ press 3
For yield and total return information.............................. press 4
For duplicate statements or new supply of checks.................... press 5
To order duplicate tax forms and year-end statements................ press 6
(February through May)
To review your options at any time during your call................. press *
To speak with a shareholder services representative about your account, call
Monday to Friday, 8:00 a.m. to 8:00 p.m. ET, and Saturdays from February through
mid-April, 10:00 a.m. to 2:00 p.m. ET.
TELEPHONE TRANSACTION DEPARTMENT - 1-800-422-3737
To purchase, exchange or sell shares by telephone, call Monday to Friday, 9:00
a.m. to 7:00 p.m. ET. Transactions received after the close of the New York
Stock Exchange will receive the next business day's closing price.
LITERATURE - 1-800-426-3750
To request literature on any fund distributed by Liberty Funds Distributor,
Inc., call Monday to Friday, 8:30 a.m. to 6:30 p.m. ET.
BY MAIL
LIBERTY FUNDS SERVICES, INC.
P.O. BOX 1722
BOSTON, MA 02105-1722
33
<PAGE> 34
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 FUNDS DISTRIBUTOR 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.)
34
<PAGE> 35
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial Tax-Exempt Insured Fund is:
Liberty Funds Services, Inc.*
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Colonial Tax-Exempt Insured Fund mails one shareholder report to each
shareholder address. If you would like more than one report, please call
1-800-426-3750 and additional reports will be sent to you.
This report has been prepared for shareholders of Colonial Tax-Exempt Insured
Fund. This report may also be used as sales literature when preceded or
accompanied by the current prospectus which provides details of sales charges,
investment objectives and operating policies of the Fund and the most recent
copy of the Liberty Funds Distributor, Inc. Performance Update.
* Effective October 1, 1998, Colonial Investor Service Center, Inc. -- the
Transfer Agent for Colonial, Crabbe Huson, Newport and Stein Roe Advisor funds
- -- changed its name to Liberty Funds Services, Inc.
35
<PAGE> 36
TRUSTEES
ROBERT J. BIRNBAUM
Consultant (formerly Special Counsel, Dechert, Price & Rhoads; President and
Chief Operating Officer, New York Stock Exchange, Inc.; President, American
Stock Exchange)
TOM BLEASDALE
Retired (formerly Chairman of the Board and Chief Executive Officer, Shore Bank
& Trust Company)
JOHN CARBERRY
Senior Vice President of Liberty Financial Companies, Inc. (formerly Managing
Director, Salomon Brothers)
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)
RICHARD W. LOWRY
Private Investor (formerly Chairman and Chief Executive Officer, U.S. Plywood
Corporation)
SALVATORE MACERA
Private Investor (formerly Executive Vice President of Itek Corp. and President
of Itek Optical & Electronic Industries, Inc.)
WILLIAM E. MAYER
Partner, Development Capital, LLC (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
THOMAS E. STITZEL
Professor of Finance, College of Business, Boise State University; Business
Consultant and Author
ROBERT L. SULLIVAN
Retired Partner, KPMG Peat Marwick LLP (formerly Management Consultant, Saatchi
and Saatchi Consulting Ltd. and Principal and International Practice Director,
Management Consulting, Peat Marwick Main & Co.)
ANNE-LEE VERVILLE
Consultant (formerly General Manager, Global Education Industry, and President,
Applications Solutions Division, IBM Corporation)
[LIBERTY LOGO]
LIBERTY
COLONIAL - CRABBE HUSON - NEWPORT - STEIN ROE ADVISOR
LIBERTY FUNDS DISTRIBUTOR, INC. (C) 1999
ONE FINANCIAL CENTER, BOSTON, MA 02111-2621, 1-800-426-3750
VISIT US AT www.libertyfunds.com
