<PAGE>
[Graphic Omitted]
- -----------------------------------------------------
COLONIAL HIGH YIELD MUNICIPAL FUND ANNUAL REPORT
- -----------------------------------------------------
November 30, 1998
<PAGE>
--------------------------
Not FDIC May Lose Value
Insured No Bank Guarantee
---------------------------
<PAGE>
COLONIAL HIGH YIELD MUNICIPAL FUND HIGHLIGHTS
DECEMBER 1, 1997 - NOVEMBER 30, 1998
INVESTMENT OBJECTIVE: Colonial High Yield Municipal Fund seeks a high level of
after-tax total return by pursuing current income exempt from ordinary federal
income tax and opportunities for long-term appreciation from a portfolio
primarily invested in medium- to lower-grade municipal bonds.
PORTFOLIO MANAGER COMMENTARY: "Significant interest rate volatility throughout
the 12-month period created a challenging environment for bond market investors.
Nevertheless, the Fund turned in above-average total returns.(1) This
performance resulted from our positioning the portfolio to benefit from falling
interest rates and the exceptional efforts of our research analysts."
- Maureen Newman
COLONIAL HIGH YIELD MUNICIPAL FUND PERFORMANCE
CLASS A CLASS B CLASS C
- -----------------------------------------------------------------------------
Inception dates 9/1/94 6/8/92 8/1/97
12-month distributions declared per share(2) $0.581 $0.500 $0.516
- -----------------------------------------------------------------------------
SEC yields on 11/30/98(3) 4.36% 3.82% 3.97%
Taxable-equivalent SEC yields(4) 7.22% 6.32% 6.57%
12-month total returns, assuming reinvestment 8.11% 7.29% 7.45%(5)
of all distributions and no sales charge or
contingent deferred sales charge (CDSC)
Net asset value per share on 11/30/98 $10.58 $10.58 $10.58
QUALITY BREAKDOWN (AS OF 11/30/98)
- -------------------------------------------------------------------------------
AAA ......................... 9.3% BB .......................... 3.1%
AA .......................... 3.5% B ........................... 1.5%
A ........................... 11.1% Non-rated ................... 44.0%
BBB ......................... 27.4% Cash equivalents ............ 0.1%
Quality 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 weightings
in the future.
(1) Please see page five 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 November 30, 1998 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 3.81%.
(4) Taxable-equivalent SEC yields are based on the maximum federal income tax
rate of 39.6%. The Fund may at times purchase tax-exempt securities at a
discount, and some or all of this discount may be included in the Fund's
ordinary income and will be taxable when distributed.
(5) Performance results reflect any voluntary waivers or reimbursement of Fund
expenses by the Distributor. Absent these waivers or reimbursement
arrangements, performance results would have been lower.
<PAGE>
PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
[Photo of Stephen E. Gibson]
I am pleased to present the annual report for Colonial High Yield Municipal 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 generally positive, a variety of domestic
and international factors created a volatile climate for fixed-income investors.
In the U.S., periodic fears of inflation that had 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 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 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, helping the Fund outperform the majority of its peers over the
past 12 months.1 For investors seeking competitive levels of tax-free income and
the potential for long-term price appreciation, Colonial High Yield Municipal
Fund remains a viable 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 High Yield Municipal 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 five for complete Lipper rankings.
Because market and economic conditions change, there can be no assurance
that the trends discussed above or on the following pages will continue.
<PAGE>
PORTFOLIO MANAGEMENT REPORT
MAUREEN NEWMAN is portfolio manager of Colonial High Yield Municipal Fund and is
vice president of Colonial Management Associates, Inc. The following is a
discussion of the Fund's performance for the 12-month period ended November 30,
1998.
INTERNATIONAL EVENTS IMPACTED U.S. BOND PRICES
The period began on a positive note, with the U.S. economy strong and no clear
signs of inflation. Throughout the year, however, a series of international
crises were manifested domestically, affecting both stock and bond prices.
Instability in Asia, along with political, economic and financial turmoil in
Russia and Latin America, contributed to an increase in the U.S. trade deficit
and continued concerns about corporate profitability. This fall, the Federal
Reserve Board lowered short-term interest rates three times in an effort to
renew investor confidence. Domestic consumption and employment remained strong.
Sentiment about how these events might impact the U.S. economy in the long run
shifted throughout the period, taking fixed-income investors on a roller coaster
ride through much of the year. The yield on the 30-year Treasury bond ranged
from 6.1% early in the period to 4.7% in October before settling at around 5% on
November 30, 1998.
In an environment that, overall, was favorable for most bonds, returns on U.S.
Treasury bonds overshadowed those of municipal and corporate bonds, particularly
during the last six months of the period. Economic weakness and volatile
financial markets abroad periodically produced significant demand for U.S.
Treasury bonds, as investors sought refuge in higher-quality U.S. dollar-based
investments.
Colonial High Yield Municipal Fund performed well during the period. The Fund
generated a total return of 8.11% for Class A shares, based on net asset value,
significantly outperforming the average return of funds in the Lipper High Yield
Municipal Debt category, which was 6.59%. The Fund's performance placed it in
the top quintile of its Lipper peer group during the 12-month period, ranking it
third out of 52 funds.(1)
FUND POSITIONED TO BENEFIT FROM DECLINING INTEREST RATES
During the year, we kept the portfolio's duration relatively long and shifted
assets into noncyclical sectors, which helped the Fund's performance. Duration
management is designed to control the degree to which a fund's share price will
fluctuate in response to a change in interest rates. In a period of falling
rates and rising bond prices, bonds with longer durations can provide greater
price appreciation potential. As an increasing number of signs pointed towards a
slowing economy, we believed that interest rates would decline. By maintaining a
duration that was slightly longer than that of the competition, the Fund's share
price appreciated more, relative to its peer group, when interest rates fell.
Our strategic shift from cyclical to noncyclical sectors was based on the belief
that economic weakness could start to creep into the market. Cyclical sectors
tend to perform better in a growing economy, while noncyclical sectors tend to
be less dependent on economic conditions. Most noticeably, we moved out of
industrial revenue bonds in the steel, airline and chemical industries. We
shifted these assets into less cyclical sectors such as education, including
colleges, universities and secondary schools, and the senior housing sector,
including nursing homes and assisted living centers. This strategy paid off, as
many of the bonds we sold underperformed the market, while the bonds we owned in
the portfolio either kept pace or outperformed the municipal market.
DETAILED CREDIT RESEARCH WAS A BIG CONTRIBUTOR TO PERFORMANCE
While buying the right bonds can boost a fund's performance, avoiding pitfalls
in the municipal market is an equally important contributor toward positive
performance. Our research analysts did an excellent job identifying hidden risks
and opportunities during the period.
A good example of our research team's diligent work is a bond issued for an
assisted living facility in California managed by Eskaton Corporation. Eskaton
is a premier provider of senior assisted-living and nursing home facilities
operating in northern California. Bearing the reputable Eskaton name, this
non-rated issue (0.65% of total net assets) has strong capital, strong demand
and a competitive coupon rate, making it a good example of the kind of new
construction project we seek to participate in.
FUNDAMENTALS REMAIN REASONABLY FAVORABLE FOR THE TAX-EXEMPT MARKET
Our economic outlook for the bond market remains positive. In addition to recent
layoffs at major multinational companies, commodity prices remain low. Both of
these factors should help contain inflation in the coming year.
As cyclical industries tend to underperform during periods of slower economic
growth, we will likely maintain our current weighting in non-cyclicals after
aggressively moving into those sectors during the past 12 months. As attractive
opportunities appear, we may gradually move back into select cyclicals in the
future, focusing our efforts on the higher-quality issues.
(1) Source: Lipper, Inc. Lipper rankings are based on the Lipper High Yield
Municipal Debt category. The Fund's Class A share ranking is in the first
quartile for the one-year period (ranked 3rd out of 52 funds) and in the
second quartile for the three-year period (ranked 12th out of 38 funds).
Although Lipper did not calculate a five-year ranking for class A shares,
the Fund's Class B share ranking is in the third quartile for the five-year
period (ranked 14th out of 26 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.
COLONIAL HIGH YIELD MUNICIPAL FUND INVESTMENT PERFORMANCE
VS. THE LEHMAN BROTHERS MUNICIPAL BOND INDEX
Change in Value of $10,000 from 6/30/92 - 11/30/98
Based on NAV and POP for Class A Shares
NAV POP LEHMAN
- ------------------------------------------------
06/92 10,000 10,000 10,000
10,251 9,764 10,300
10,194 9,710 10,200
10,227 9,742 10,266
10,180 9,696 10,165
10,264 9,776 10,347
10,369 9,876 10,453
10,433 9,938 10,575
10,653 10,147 10,957
10,625 10,120 10,841
10,711 10,202 10,950
10,745 10,235 11,012
10,874 10,358 11,196
10,909 10,391 11,211
11,103 10,576 11,444
11,202 10,670 11,575
11,238 10,704 11,597
11,187 10,655 11,494
11,261 10,726 11,737
11,369 10,829 11,871
11,227 10,693 11,564
10,851 10,335 11,093
10,827 10,313 11,187
10,902 10,384 11,284
10,922 10,403 11,215
11,077 10,551 11,420
11,097 10,570 11,460
11,023 10,500 11,292
10,904 10,386 11,091
10,748 10,238 10,891
10,905 10,387 11,130
11,166 10,636 11,449
11,441 10,898 11,782
11,577 11,027 11,917
11,596 11,045 11,931
11,910 11,345 12,312
11,881 11,317 12,204
11,960 11,392 12,320
12,074 11,501 12,476
12,202 11,622 12,555
12,378 11,790 12,737
12,605 12,006 12,949
12,747 12,141 13,073
12,803 12,195 13,172
12,761 12,154 13,083
12,615 12,016 12,916
12,619 12,020 12,879
12,624 12,024 12,874
12,755 12,149 13,015
12,822 12,213 13,132
12,865 12,254 13,129
13,010 12,392 13,313
13,157 12,532 13,463
13,344 12,711 13,710
13,322 12,689 13,652
13,352 12,718 13,678
13,486 12,845 13,804
13,379 12,743 13,619
13,459 12,820 13,734
13,621 12,974 13,940
13,782 13,127 14,089
14,109 13,438 14,479
14,040 13,373 14,343
14,203 13,529 14,513
14,312 13,632 14,607
14,405 13,721 14,693
14,652 13,956 14,907
14,859 14,153 15,061
14,870 14,164 15,065
14,880 14,174 15,079
14,834 14,130 15,011
15,044 14,330 15,248
15,155 14,435 15,308
15,165 14,444 15,347
15,290 14,564 15,584
15,489 14,753 15,778
15,543 14,804 15,778
11/98 15,574 14,834 15,833
VALUE OF A $10,000 INVESTMENT MADE ON 6/30/92
As of 11/30/98
---------------------------------------------------------------------------
CLASS A CLASS B CLASS C
NAV POP NAV W/CDSC NAV W/CDSC
- ----------------------------------------------------------------------------
$15,574 $14,834 $15,085 $15,085 $15,116 $15,116
AVERAGE ANNUAL TOTAL RETURNS
As of 11/30/98
- ----------------------------------------------------------------------------
CLASS A CLASS B CLASS C
INCEPTION 11/21/78 5/5/92 8/1/97
NAV POP NAV W/CDSC NAV W/CDSC
- ----------------------------------------------------------------------------
1 YEAR 8.11% 2.98% 7.29% 2.29% 7.45% 6.45%
- ----------------------------------------------------------------------------
5 YEARS 6.84 5.81 6.16 5.84 6.21 6.21
- ----------------------------------------------------------------------------
LIFE 7.26 6.46 6.73 6.73 6.76 6.76
- ----------------------------------------------------------------------------
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 charges of 4.75%. The
CDSC returns reflect the maximum charges of 5% for one year, 2% for five years,
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.
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.
<PAGE>
INVESTMENT PORTFOLIO
NOVEMBER 30, 1998 (IN THOUSANDS)
MUNICIPAL BONDS - 98.6% PAR VALUE
- ------------------------------------------------------------------------------
EDUCATION - 3.4%
EDUCATION - 2.5%
CA Statewide Communities Development Authority,
Crossroads School for Arts & Sciences,
Series 1998,
6.000% 08/01/2028 (a) $ 1,200 $ 1,215
IL State Development Finance Authority,
Latin School of Chicago,
Series 1998:
5.600% 08/01/2018 250 254
5.650% 08/01/2028 500 507
MA State Industrial Finance Agency,
St. John's High School,
Series 1998,
5.350% 06/01/2028 400 399
ME South Berwick,
Berwick Academy,
Series 1998,
5.550% 08/01/2023 750 751
MI Southfield Economic Development Corp.,
Lawrence University,
Series 1998-A,
5.400% 02/01/2018 1,000 1,003
NM Santa Fe,
College of Santa Fe,
Series 1998-A,
5.500% 10/01/2028 250 252
VT State Educational & Health Buildings
Finance Agency, Norwich University,
Series 1998,
5.750% 07/01/2013 600 628
----------
5,009
----------
STUDENT LOAN - 0.9%
OH Cincinnati Student Loan Funding Corp.,
Series-B,
6.750% 01/01/2007 1,685 1,730
----------
- ------------------------------------------------------------------------------
HEALTHCARE - 21.2%
HEALTH SERVICES - 0.2%
IL State Health Facilities Authority,
Midwest Physician Group, Ltd.,
Series 1998,
5.500% 11/15/2019 325 319
----------
HOSPITALS - 9.0%
AL Alabama Special Care Facilities Authority,
Montgomery Healthcare, Series 1989,
11.000% 10/01/2019 295 299
CO State Health Care Facilities Authority,
National Jewish Medical & Research Center,
Series 1998,
5.375% 01/01/2023 830 827
GA Baldwin County Hospital Authority,
Oconee Regional Medical Center,
Series 1998,
5.450% 12/01/2016 1,000 1,018
GA Clayton Hospital Authority,
The Woodlands Foundation, Inc.,
Series 1991-A,
9.750% 05/01/2021 (b) 1,500 975
GA Forsyth County Hospital Authority,
Georgia Baptist Heathcare System,
Series 1998,
6.000% 10/01/2008 1,000 996
IL Health Facilities Authority,
Thorek Hospital & Medical Center,
5.375% 08/15/2028 500 497
LA State Public Facilities Authority,
Pendleton Memorial Methodist Hospital,
Series 1998,
5.250% 06/01/2017 1,000 975
MI Flint Hospital Building Authority,
Hurley Medical Center,
Series 1998-A,
5.375% 07/01/2020 625 621
MN Washington County Housing &
Redevelopment Authority, Healtheast, Inc.,
Series 1998,
5.250% 11/15/2012 1,250 1,229
MO State Housing Development Commission,
Freeman Health Systems,
Series 1998,
5.250% 02/15/2018 750 740
MS State Business Finance Corp.,
Medical Foundation, Inc.,
Series 1998,
5.625% 07/01/2023 1,150 1,156
NH State Higher Educational & Health Facilities
Authority, Littleton Hospital Association,
5.900% 05/01/2028 675 670
OH Belmont County,
East Ohio Regional Hospital,
Series 1998,
5.700% 01/01/2013 1,500 1,481
OH Marion County,
Community Hospital,
Series 1996,
6.375% 05/15/2011 1,000 1,098
OH Sandusky County Memorial Hospital,
Series 1998,
5.150% 01/01/2010 250 254
PA Allegheny County Hospital Development,
Ohio Valley General Hospital,
Series 1998-A,
5.450% 01/01/2028 1,550 1,549
PA Pottsville Hospital Authority,
Pottsville Hospital & Warne Clinic,
Series 1998,
5.625% 07/01/2024 1,000 1,005
TX Lufkin Health Facilities Development Corp.,
Memorial Health Systems of East Texas,
Series 1998,
5.700% 02/15/2028 750 760
VT State Educational & Health Building Authority,
Springfield Hospital, Series-A,
7.750% 01/01/2013 605 682
VT State Educational & Health Buildings
Finance Agency,
Brattleboro Memorial Hospital,
5.375% 03/01/2028 1,000 985
----------
17,817
----------
INTERMEDIATE CARE FACILITIES - 1.9%
IL Champaign,
Hoosier Care, Inc.,
Series 1989-A,
9.750% 08/01/2019 475 497
IN Wabash First Mortgage, Hoosier
Care, Inc., Series 1989-A,
9.750% 08/01/2019 475 498
MA State Health & Educational Facilities Authority,
Corp. for Independent Living,
8.100% 07/01/2018 595 666
PA State Economic Development Financing Authority,
Northwestern Human Services, Inc.,
Series 1998-A,
5.250% 06/01/2014 2,150 2,105
----------
3,766
----------
LIFECARE - 3.7%
CO State Health Care Facilities Authority,
National Benevolent Association:
Series 1998-A,
5.250% 01/01/2027 400 394
Series 1998-B,
5.250% 02/01/2028 750 733
KY State Economic Development Finance Authority,
Christian Church Homes of Kentucky, Inc.,
Series 1998,
5.500% 11/15/2030 800 801
MI State Strategic Fund, Holland Home,
Series 1998,
5.750% 11/15/2028 400 391
MN Columbia Heights, Crest View Corp.,
Series 1998,
6.000% 03/01/2033 740 741
NH State Higher Educational & Health
Facilities Authority, Rivermead
at Peterborough, Series 1998,
5.625% 07/01/2018 500 493
PA Philadelphia Authority for Industrial Development
Baptist Home of Philadelphia, Series 1998-A:
5.500% 11/15/2018 530 522
5.600% 11/15/2028 860 835
TN Metropolitan Government, Nashville &
Davidson County, Blakefield at Green Hills,
Series 1998,
5.650% 07/01/2024 575 564
TX Abilene Health Facilities Development Corp.,
Sears Methodist Retirement Obligation Group,
Series 1998-A,
5.900% 11/15/2025 1,000 988
WI State Health & Educational Facilities Authority,
Attic Angel Obligated Group,
5.750% 11/15/2027 875 853
----------
7,315
----------
NURSING HOMES - 6.4%
CO State Health Facilities Authority,
Volunteers of America Care Facilities, Inc.,
Series 1998-A:
5.450% 07/01/2008 250 250
5.750% 07/01/2020 700 688
DE State Economic Development Authority,
Churchman Village Project,
Series-A,
10.000% 03/01/2021 740 931
DE Sussex County, Healthcare Facility,
Delaware Health Corporation, Series
1994-A,
7.600% 01/01/2024 1,000 1,059
FL Gadsden County Industrial
Development Authority,
Florida Properties, Inc., Series 1988-A,
10.450% 10/01/2018 335 341
IA State Finance Authority,
Care Initiatives Project,
Series 1996,
9.250% 07/01/2025 500 668
IA State Finance, Care Initiatives Authority,
Series 1998-B:
5.750% 07/01/2018 600 599
5.750% 07/01/2028 1,475 1,462
KS Halstead Industrial Health Care
Project,
10.250% 08/01/2013 (b) 335 114
MA State Industrial Finance Agency,
GF/Massachusetts, Inc.,
Series 1994,
8.300% 07/01/2023 970 1,089
MI Cheboygan County Economic
Development Corp.,
Metro Health Foundation Project, Series 1993,
10.000% 11/01/2022 600 600
MN Minneapolis,
Walker Methodist Senior Services Group,
Series 1998-A,
6.000% 11/15/2028 (c) 1,000 998
NJ Economic Development Authority
Geriatric and Medical Service,
Incorporated, Series-A,
10.500% 05/01/2004 85 90
NM State Hospital Equipment Loan Council,
Memorial Medical Center,
Series 1998,
5.500% 06/01/2028 1,000 979
PA Chester County Industrial Development,
Pennsylvania Nursing Home, Inc.,
Series 1989,
10.125% 05/01/2019 (b) 434 399
PA Delaware County Authority,
Main Line and Haverford Nursing,
Series 1992,
9.000% 08/01/2022 50 58
PA Lackawanna County Industrial Authority,
Greenridge Nursing Center,
10.500% 12/01/2010 180 200
PA Luzerna County Industrial Development Authority
Millville Nursing Center,
10.500% 12/01/2012 220 240
PA Montgomery County Higher Education
& Health Authority,
Roslyn-Hatboro, Inc. Project,
9.000% 11/15/2022 295 236
TX Kirbyville Health Facilities Development Corp.,
Heartway III Project:
Series 1997-A,
10.000% 03/20/2018 591 593
Series 1997-B,
(d) 03/20/2004 100 54
WA Kitsap County Housing Authority,
Martha & Mary Nursing Home,
7.100% 02/20/2036 (e) 1,000 1,188
----------
12,836
----------
- ------------------------------------------------------------------------------
HOUSING - 19.1%
ASSISTED LIVING/SENIOR - 6.6%
CA Abag Finance Authority for Nonprofit Corps.,
Eskaton Gold River Lodge,
Series 1998:
6.375% 11/15/2015 750 743
6.375% 11/15/2028 550 538
IL Clarendon Hills Residential Facilities,
Churchill Estate,
Series 1998-A:
6.750% 03/01/2031 1,365 1,387
6.750% 03/01/2024 1,050 1,067
IL State Development Finance Authority,
Care Institute, Inc.,
8.250% 06/01/2025 2,000 2,250
MA Boston Industrial Development
Finance Authority, Springhouse, Inc.,
Series 1988,
5.875% 07/01/2020 500 497
MN Roseville,
Care Institute, Inc.,
Series 1993,
7.750% 11/01/2023 1,250 1,262
NY Glen Cove Housing Authority,
Mayfair Senior Living,
8.250% 10/01/2026 2,000 2,274
PA Montgomery County Industrial
Development Authority, Assisted
Living Facility, Series 1993-A,
8.250% 05/01/2023 605 671
TX Bell County Health Facilities
Development Corp., Care Institute, Inc.,
9.000% 11/01/2024 1,000 1,146
WI State Health & Educational
Facilities Authority, United Lutheran
Program for Aging, Inc.,
5.700% 03/01/2028 750 740
WI State Health & Educational
Facilities Authority, Clement Manor,
Series 1998,
5.750% 08/15/2024 450 435
----------
13,010
----------
MULTI-FAMILY - 7.8%
DE Wilmington,
Electra Arms Senior Association Project,
6.250% 06/01/2028 1,000 978
FL State Housing Finance Agency,
Windsong Apartments, Series 1993-C,
9.250% 01/01/2019 750 675
MN Lakeville,
Southfork Apartment Project,
Series 1989-A,
9.875% 02/01/2020 700 704
MN Washington County Housing &
Redevelopment Authority,
Cottages of Aspen, Series 1992,
9.250% 06/01/2022 495 546
MN White Bear Lake,
Birch Lake Townhomes Project,
Series 1989-A,
9.750% 07/15/2019 750 761
NC Eastern Carolina Regional Housing
Authority, New River Apartments
Jacksonville, Series 1994,
8.250% 09/01/2014 1,380 1,492
Resolution Trust Corp.,
Pass Through Certificates, 1993-A,
8.500% 12/01/2016 (f) 4,248 4,380
SC State Housing Finance and Development
Multi-Family Housing Finance Revenue,
Westbridge Apartments, Series-A,
9.500% 09/01/2020 607 623
TN Franklin Industrial Development Board,
Landings Apartment Project,
Series 1996-B,
8.750% 04/01/2027 1,775 1,815
TX Galveston Health Facilities Center,
Driftwood Apartments,
8.000% 08/01/2023 1,000 1,074
VA Alexandria Redevelopment
& Housing Authority, Courthouse
Commons Apartments, Series 1990-A,
10.000% 01/01/2021 500 510
WA Vancouver Housing Authority,
Series I,
5.500% 03/01/2028 2,000 2,035
----------
15,593
----------
SINGLE FAMILY - 4.7%
CO Housing Finance Authority, Series D-1,
7.375% 06/01/2026 1,820 2,008
CO State Housing Finance Authority,
Series 1997 A-2,
7.250% 05/01/2027 800 912
MO State Housing Development Commission,
Series-C,
7.250% 09/01/2026 2,690 3,043
NJ State Housing & Mortgage Finance Agency,
Series 1989-D,
7.700% 10/01/2029 680 705
PA State Housing Finance Agency,
Series 1994 42,
6.850% 04/01/2025 2,435 2,653
----------
9,321
----------
- ------------------------------------------------------------------------------
OTHER- 10.7%
OTHER - 2.6%
IN Hammond,
American Maize Products Co.,
Series 1994,
8.000% 12/01/2024 2,000 2,338
LA Port New Orleans Industrial Development,
Continental Grain Company, Series 1993,
7.500% 07/01/2013 2,000 2,123
MD Baltimore,
Park Charles Project, Series 1986,
8.000% 01/01/2010 595 640
----------
5,101
----------
REFUNDED/ESCROWED (g) - 8.1%
CA Colton Public Financing Authority,
Series 1995,
7.500% 10/01/2020 1,000 1,173
CA San Joaquin Hills Transportation
Corridor Agency,
Series 1993,
(d) 01/01/2023 (e) 5,250 1,573
CO Denver City and County Airport,
Series-A,
8.500% 11/15/2023 25 28
FL Clearwater Housing Authority,
Hampton Apartments, Series 1994,
8.250% 05/01/2024 2,000 2,465
ID State Health Facilities Authority,
IHC Hospitals, Inc.,
8.700% 02/15/2021 1,000 1,231
IL State Health Facilities Authority,
Edgewater Medical Center,
Series-A,
9.250% 07/01/2024 1,990 2,528
MA State Industrial Finance Agency,
Series 1990,
9.000% 10/01/2020 910 1,015
MN Mille Lacs Capital Improvement Authority,
Mille Lacs Band of Chippewa,
Series 1992-A,
9.250% 11/01/2012 605 740
NC Lincoln County, Lincoln County Hospital,
9.000% 05/01/2007 295 357
PA Delaware County Authority,
Southeastern Pennsylvania Obligated Group,
Series 1996,
6.000% 12/15/2026 2,500 2,808
TN Shelby County, Health, Education,
& Housing Facilities Board, Open Arms
Development Center:
Series 1992-A,
9.750% 08/01/2019 330 468
Series 1992-C,
9.750% 08/01/2019 325 461
WA State Health Care Facilities Authority,
Grays Harbor Community Hospital,
Series 1993:
7.200% 07/01/2003 170 182
8.025% 07/01/2020 960 1,061
----------
16,090
----------
- ------------------------------------------------------------------------------
OTHER REVENUE - 16.8%
CHEMICALS - 1.8%
WY Sweetwater County,
FMC Corp. Project,
Series 1994-A,
7.000% 06/01/2024 3,325 3,648
----------
HOTELS - 1.3%
MN Minneapolis, Metrodome Project,
6.000% 12/01/2001 400 405
PA Philadelphia Authority for Industrial
Development, Starwood,
6.500% 10/01/2027 2,000 2,120
----------
2,525
----------
INDUSTRIAL - 7.8%
GA Wayne County Development Authority,
Solid Waste Disposal, ITT Rayonier, Inc.,
Series 1990,
8.000% 07/01/2015 500 533
IL State Development Finance Authority,
Armstrong World Industries, Inc. Project,
5.950% 12/01/2024 2,000 2,237
IL Will-Kankakee Regional Development Authority,
Flanders Corp./Precisionaire Project, Series 1997,
6.500% 12/15/2017 970 1,026
MD Baltimore County,
Bethlehem Steel Corp. Project, Series-B,
7.500% 06/01/2015 2,000 2,180
MI State Strategic Fund,
Michigan Sugar Co.,
Sebewaing Project, Series 1998-A,
6.250% 11/01/2015 1,000 996
MN Brooklyn Park,
TL Systems Corp.,
Series 1991,
10.000% 09/01/2016 510 622
MN Buffalo,
Von Ruden Manufacturing, Inc.,
Series 1989,
10.500% 09/01/2014 740 786
NV Henderson Public Improvement Trust,
Dongsung America Co., Inc.,
Series 1998,
7.000% 11/01/2010 500 501
OH Cuyahoga County, Joy Technologies, Inc.,
Series 1992,
8.750% 09/15/2007 360 404
TN McKenzie Industrial Development Board,
American Lantern Co.,
10.500% 05/01/2016 (b) 454 272
TX Trinity River Authority,
Texas Instruments Project,
Series 1996,
6.200% 03/01/2020 2,000 2,183
WA Pilchuck Public Development Corp.,
Goodrich (B.F.) Co. Tarmac Project,
Series 1993,
6.000% 08/01/2023 3,500 3,611
----------
15,351
----------
OIL AND GAS - 1.0%
WA Pierce County Economic
Development Corp.,
Occidental Petroleum Co.,
5.800% 09/01/2029 2,000 2,022
----------
PAPER PRODUCTS - 2.9%
GA Rockville County Development
Authority, Solid Waste Disposal, Visy
Paper, Inc., Series 1993,
7.500% 01/01/2026 1,800 1,917
SC Darlington County:
Industrial Development Authority,
Sonoco Products Co. Project,
6.125% 06/01/2025 2,000 2,139
Sonoco Products Co.,
Series 1996,
6.000% 04/01/2026 1,500 1,610
----------
5,666
----------
RECREATION - 0.5%
NM Red River Sports Facility,
Red River Ski Area Project,
Series 1998,
6.450% 06/01/2007 1,000 1,005
----------
RETAIL - 1.5%
NJ State Economic Development Authority,
Glimcher Properties LP Project,
6.000% 11/01/2028 1,000 1,001
OH Lake County,
North Madison Properties,
Series 1993,
8.819% 09/01/2011 545 625
VA Virginia Beach Development Authority,
SC Diamond Associates, Inc.,
8.000% 12/01/2010 1,280 1,427
----------
3,053
----------
- ------------------------------------------------------------------------------
RESOURCE RECOVERY - 4.4%
DISPOSAL - 2.9%
CT State Development Authority,
Sewer Sludge Disposal Facilities,
NETCO New Haven,
Series 1996,
8.250% 12/01/2006 1,000 1,134
CT State Disposal Facility,
NETCO Waterbury Ltd.,
Series 1995,
9.375% 06/01/2016 1,450 1,707
GA Fulton County Development Authority,
Very, Inc.,
10.500% 12/01/2007 110 116
MA State Industrial Finance Agency:
Massachusetts Environmental Services,
Series 1994-A,
8.750% 11/01/2021 (b) 980 784
Peabody Monofill Associates,
Series 1995,
9.000% 09/01/2005 850 940
UT Carbon County,
Laidlaw Environmental, Series A,
7.450% 07/01/2017 1,000 1,108
----------
5,789
----------
RESOURCE RECOVERY - 1.5%
MA State Industrial Finance Agency,
Ogden Haverhill Project,
Series 1998-A,
5.500% 12/01/2013 500 507
PA Delaware County Industrial
Development Authority, Series-A,
6.200% 07/01/2019 2,225 2,382
----------
2,889
----------
- ------------------------------------------------------------------------------
TAX-BACKED - 5.1%
LOCAL GENERAL OBLIGATIONS - 0.2%
CA Roseville Unified High School District,
Series-B,
(d) 06/01/2020 1,000 335
----------
SPECIAL NON-PROPERTY TAX - 1.9%
IL Metropolitan Pier & Exposition Authority,
McCormick Place Expansion,
(d) 06/15/2017 6,750 2,644
IL State Development Finance Authority,
City of Marion Project,
Series 1991,
9.625% 09/15/2021 1,160 870
LA Jefferson Parish School Board,
Series 1998,
(d) 03/01/2010 500 301
----------
3,815
----------
SPECIAL PROPERTY TAX - 3.0%
CA Carson,
Series 1992,
7.375% 09/02/2022 940 1,011
CA Pleasanton Joint Powers Financing
Reassessment Subordinated Revenue,
Series 1993-B,
6.750% 09/02/2017 1,755 1,897
CA Poway Community Facilities District,
No. 88-1 Parkway Business Center,
Series 1998,
6.750% 08/15/2015 575 629
CA Riverside County Public Financing Authority,
Redevelopment Projects, Series A,
5.500% 10/01/2022 700 714
FL Lexington Oaks Community Development District:
Series 1998-A,
6.125% 05/01/2019 300 302
Series 1998-B,
5.500% 05/01/2005 750 746
FL Orlando,
Conroy Road Interchange Project,
Series 1998-A:
5.500% 05/01/2010 (c) 125 124
5.800% 05/01/2026 (c) 500 493
----------
5,916
----------
- ------------------------------------------------------------------------------
TRANSPORTATION - 7.5%
AIR TRANSPORTATION - 3.9%
CO Denver City & County Airport,
United Airlines, Inc.,
Series 1992-A,
6.875% 10/01/2032 3,000 3,229
IN Indianapolis Airport Authority,
Federal Express Corp.,
Series 1994,
7.100% 01/15/2017 4,000 4,452
----------
7,681
----------
AIRPORTS - 1.8%
CO Denver City and County Airport,
Series-C:
6.750% 11/15/2022 985 1,074
7.750% 11/15/2021 1,585 1,748
8.500% 11/15/2023 225 246
OH Toledo-Lucas County Port Authority,
Series 1998,
5.500% 05/15/2020 590 578
----------
3,646
----------
TOLL FACILITIES - 1.8%
CA Foothill Eastern Transportation
Corridor Agency,
Series 1995-A,
(d) 01/01/2015 8,000 3,470
----------
- ------------------------------------------------------------------------------
UTILITY - 10.4%
INDIVIDUAL POWER PRODUCER - 5.6%
FL Martin County Industrial
Development Authority,
Indiantown Cogeneration Project, Series 1994 A,
7.875% 12/15/2025 1,000 1,153
NY Port Authority of New York & New Jersey,
KIAC Partners, Series 1996 IV,
6.750% 10/01/2011 2,000 2,243
OH State Water Development Authority,
Bay Shore Power Project,
Series 1998-A,
5.875% 09/01/2020 2,500 2,516
PA State Economic Development Financing Authority:
Colver Project, Series D,
7.150% 12/01/2018 3,650 4,062
Northampton Generating, Series-A,
6.500% 01/01/2013 1,000 1,063
----------
11,037
----------
INVESTOR OWNED - 2.6%
AZ Pima County Industrial Development Authority,
Tucson Electric Power Co., Series-A,
6.100% 09/01/2025 760 767
CT State Development Authority,
Connecticut Light & Power Co.,
Series 1993-B,
5.950% 09/01/2028 300 301
MS State Business Finance Corp.,
Systems Energy Resources Project,
Series 1998,
5.875% 04/01/2022 1,500 1,494
NM Farmington,
San Juan Public Service Co. Project, Series-D,
6.375% 04/01/2022 2,000 2,147
OH State Water Development Authority,
Pennsylvania Power Co.,
8.100% 01/15/2020 500 526
----------
5,235
----------
JOINT POWER AUTHORITY - 0.4%
MN Southern Minnesota Municipal
Power Agency, Series 1994-A,
(d) 01/01/2025 2,660 716
----------
MUNICIPAL ELECTRIC - 1.2%
WA Chelan County Public Utilities District No. 1,
Columbia River Rock Hydroelectric,
(d) 06/01/2014 5,000 2,343
----------
WATER & SEWER - 0.6%
LA Public Facility Belmont Water
Authority,
9.000% 03/15/2024 (h) 585 527
MS Five Lakes Utility District,
8.250% 07/15/2024 400 320
NJ State Economic Development Authority,
Hills Development Co.,
10.500% 09/01/2008 400 411
----------
1,258
----------
TOTAL MUNICIPAL BONDS (cost of $184,152)(i) 195,307
----------
SHORT-TERM OBLIGATIONS - 0.1%
- ------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (j)
ID State Health Facilities Authority,
St. Lukes Regional Medical Facility,
Series 1995,
3.300% 05/01/2022 100 100
IL State Educational Facilities Authority,
3.150% 12/01/2025 100 100
----------
TOTAL SHORT-TERM OBLIGATIONS 200
----------
OTHER ASSETS & LIABILITIES, NET - 1.3% 2,562
- ------------------------------------------------------------------------------
NET ASSETS - 100% $ 198,069
----------
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 November 30, 1998.
(b) This issuer is in default of certain debt covenants. Income is not being
accrued.
(c) This security has been purchased on a delayed delivery basis for settlement
at a future date beyond the customary settlement date.
(d) Zero coupon bond.
(e) These securities, or a portion thereof, with a total market value of
$13,964, are being used to collateralize the delayed delivery purchases
indicated in note (c) above and open futures contracts.
(f) 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 November 30,
1998, the value of this security amounted to $4,380 or 2.2% of net assets.
(g) 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.
(h) 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
November 30, 1998.
(i) Cost for federal income tax purposes is $184,173.
(j) 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.
Short futures contracts open at November 30, 1998:
Unrealized
Par value appreciation/
covered by Expiration depreciation
Type contracts month at 11/30/98
- ------------------------------------------------------------------------------
Municipal Bond $ 3,500 December $ (7)
Treasury Bond 7,000 March 216
----------
$ 209
----------
See notes to financial statements.
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
NOVEMBER 30, 1998
(in thousands except for per share amounts and footnotes)
ASSETS
Investments at value (cost $184,152) $ 195,307
Short-term obligations 200
---------
195,507
Receivable for:
Interest $ 3,795
Investments sold 1,297
Fund shares sold 365
Variation margin on futures 104
Other 108 5,669
------- ---------
Total Assets 201,176
LIABILITIES
Payable for:
Investments 1,615
Fund shares repurchased 761
Distributions 711
Accrued:
Deferred Trustees fees 5
Other 15
-------
Total Liabilities 3,107
---------
NET ASSETS $ 198,069
---------
Net asset value & redemption price per share -
Class A ($64,749/6,119) $ 10.58(a)
---------
Maximum offering price per share - Class A
($10.58/0.9525) $ 11.11(b)
---------
Net asset value & offering price per share -
Class B ($130,691/12,350) $ 10.58(a)
---------
Net asset value & offering price per share -
Class C ($2,629/248) $ 10.58(a)
---------
COMPOSITION OF NET ASSETS
Capital paid in $ 189,590
Overdistributed net investment income (461)
Accumulated net realized loss (2,424)
Net unrealized appreciation on:
Investments 11,155
Open futures contracts 209
---------
$ 198,069
---------
(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.
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 1998
(in thousands)
INVESTMENT INCOME
Interest $ 12,646
EXPENSES
Management fee $ 1,102
Service fee 493
Distribution fee - Class B 1,021
Distribution fee - Class C 10
Transfer agent 292
Bookkeeping fee 78
Trustees fee 11
Custodian fee 4
Audit fee 29
Legal fee 32
Registration fee 31
Reports to shareholders 10
Other 13
-------
3,126
Fees waived by the Distributor - Class C (2) 3,124
------- ---------
Net Investment Income 9,522
---------
NET REALIZED & UNREALIZED GAIN ON PORTFOLIO POSITIONS
Net realized gain on:
Investments 3,365
Closed futures contracts 1,067
-------
Net Realized Gain 4,432
Net change in unrealized appreciation
during the period on:
Investments 230
Open futures contracts 145
-------
Net Change in Unrealized Appreciation 375
---------
Net Gain 4,807
---------
Increase in Net Assets from Operations $ 14,329
---------
See notes to financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(in thousands) Year ended November 30
------------------------
INCREASE (DECREASE) IN NET ASSETS 1998 1997 (a)
Operations:
Net investment income $ 9,522 $ 9,982
Net realized gain (loss) 4,432 (1,550)
Net unrealized appreciation 375 5,265
-------- ---------
Net Increase from Operations 14,329 13,697
Distributions:
From net investment income - Class A (3,168) (2,677)
In excess of net investment income - Class A (87) (29)
From net investment income - Class B (6,290) (7,352)
In excess of net investment income - Class B (172) (80)
From net investment income - Class C (64) (4)
In excess of net investment income - Class C (2) --
-------- ---------
4,546 3,555
-------- ---------
Fund Share Transactions:
Receipts for shares sold - Class A 22,822 21,128
Value of distributions reinvested - Class A 1,460 1,026
Cost of shares repurchased - Class A (13,666) (7,723)
-------- ---------
10,616 14,431
-------- ---------
Receipts for shares sold - Class B 18,931 27,096
Value of distributions reinvested - Class B 2,939 3,211
Cost of shares repurchased - Class B (36,706) (35,777)
-------- ---------
(14,836) (5,470)
-------- ---------
Receipts for shares sold - Class C 2,628 354
Value of distributions reinvested - Class C 46 2
Cost of shares repurchased - Class C (406) (17)
-------- ---------
2,268 339
-------- ---------
Net Increase (Decrease) from Fund Share
Transactions (1,952) 9,300
-------- ---------
Total Increase 2,594 12,855
NET ASSETS
Beginning of period 195,475 182,620
-------- ---------
End of period (net of overdistributed
net investment income of $461 and $93,
respectively) $198,069 $ 195,475
-------- ---------
(a) Class C shares were initially offered on August 1, 1997.
See notes to financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS - CONT.
(in thousands) Year ended November 30
------------------------
NUMBER OF FUND SHARES 1998 1997 (a)
Sold - Class A 2,165 2,087
Issued for distributions reinvested - Class A 139 101
Repurchased - Class A (1,297) (761)
-------- ---------
1,007 1,427
-------- ---------
Sold - Class B 1,798 2,678
Issued for distributions reinvested - Class B 280 316
Repurchased - Class B (3,489) (3,529)
-------- ---------
(1,411) (535)
-------- ---------
Sold - Class C 250 35
Issued for distributions reinvested - Class C 4 (b)
Repurchased - Class C (39) (2)
-------- ---------
215 33
-------- ---------
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1998
NOTE 1. ACCOUNTING POLICIES
- -------------------------------------------------------------------------------
ORGANIZATION: Colonial High Yield Municipal Fund (the Fund), a series of
Colonial Trust IV, is a diversified portfolio of a Massachusetts business trust,
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company. The Fund's investment objective is to seek a high
level of after-tax total return by pursuing current income exempt from ordinary
federal income tax and opportunities for long-term appreciation from a portfolio
primarily invested in medium-to-lower-grade municipal bonds. The Fund may issue
an unlimited number of shares. The Fund offers 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 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
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., formerly Colonial Investors
Service Center, Inc. (the Transfer Agent), an affiliate of 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 by 0.01% in cumulative monthly increments,
resulting in a decrease in the fee from 0.14% to 0.13% annually.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES: Liberty 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 $26,118 on sales of the
Fund's Class A shares and received contingent deferred sales charges (CDSC) of
none, $393,882, and $1,080 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 3. PORTFOLIO INFORMATION
- -------------------------------------------------------------------------------
INVESTMENT ACTIVITY: For the year ended November 30, 1998, purchases and sales
of investments, other than short-term obligations were $69,942,253 and
$69,302,980, respectively.
Unrealized appreciation (depreciation) at November 30, 1998, based on cost of
investments for federal income tax purposes was:
Gross unrealized appreciation $ 12,932,998
Gross unrealized depreciation (1,799,094)
-------------
Net unrealized appreciation $ 11,133,904
-------------
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 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.
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 18,553,184 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 10,652,443 375,716
Tom Bleasdale 10,652,816 375,343
John Carberry 10,650,997 377,162
Lora S. Collins 10,651,946 376,213
James E. Grinnell 10,653,082 375,077
Richard W. Lowry 10,653,082 375,077
Salvatore Macera 10,650,624 377,535
William E. Mayer 10,653,082 375,077
James L. Moody, Jr. 10,652,709 375,450
John J. Neuhauser 10,653,082 375,077
Thomas E. Stitzel 10,652,133 376,026
Robert L. Sullivan 10,652,709 375,450
Anne-Lee Verville 10,650,997 377,162
To amend fundamental investment policies regarding borrowing and lending:
FOR AGAINST ABSTAIN
--- ------- -------
8,176,385 232,600 632,545
To approve policies for a master fund/feeder fund structure:
FOR AGAINST ABSTAIN
--- ------- -------
8,019,349 321,200 700,982
To reclassify the fundamental investment policy regarding the purchase of
illiquid securities:
FOR AGAINST ABSTAIN
--- ------- -------
7,986,238 361,745 693,544
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are
as follows:
Year ended November 30
------------------------------------------
1998
Class A Class B Class 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.
- -------------------------------------------------------------------------------
Federal Income Tax Information (unaudited)
All of the income distributions will be treated as exempt income for
federal income tax purposes.
- -------------------------------------------------------------------------------
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Selected data for a share of each class outstanding throughout each
period are as follows:
Year ended November 30
-------------------------------------------
1997
Class A Class B Class C (a)
----------- ----------- -----------
Net asset value -
Beginning of period $ 10.160 $ 10.160 $ 10.320
-------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.592 0.516 0.176
Net realized and
unrealized gain (loss) 0.188 0.188 0.018 (b)
-------- -------- --------
Total from Investment
Operations 0.780 0.704 0.194
-------- -------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment
income (0.594) (0.518) (0.174)
In excess of net
investment income (0.006) (0.006) -
-------- -------- --------
Total Distributions Declared
to Shareholders (0.600) (0.524) (0.174)
-------- -------- --------
Net asset value -
End of period $ 10.340 $ 10.340 $ 10.340
-------- -------- --------
Total return (c) 7.95% 7.15% 1.90% (d)
-------- -------- --------
RATIOS TO AVERAGE NET ASSETS
Expenses (e) 1.11% 1.86% 1.72% (f)
Net investment income (e) 5.83% 5.08% 5.14% (f)
Portfolio turnover 23% 23% 23%
Net assets at end
of period (000) $ 52,847 $ 142,287 $ 341
(a) Class C shares were initially offered on August 1, 1997. Per share amounts
reflect activity from that date.
(b) The amount shown for a share outstanding does not correspond with the
aggregate net gain on investments for the period due to the timing of
sales and repurchases of Fund shares in relation to fluctuationg market
values of the investments of the Fund.
(c) Total return at net asset value assuming all distributions reinvested
and no initial sales charge or contingent deferred sales charge.
(d) Not annualized.
(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(f) Annualized.
<PAGE>
Year ended November 30
------------------------------------------------------------------------
1996 1995
Class A Class B Class A Class B
------------- --------------- -------------- ------------------
$ 10.230 $ 10.230 $ 9.330 $ 9.330
-------- -------- ------- -------
0.624 0.548 0.656 0.583
(0.051) (0.051) 0.912 0.912
-------- -------- ------- -------
0.573 0.497 1.568 1.495
-------- -------- ------- -------
(0.643) (0.567) (0.668) (0.595)
- - - -
-------- -------- ------- -------
(0.643) (0.567) (0.668) (0.595)
-------- -------- ------- -------
$ 10.160 $ 10.160 $ 10.230 $ 10.230
-------- -------- ------- -------
5.86% 5.07% 17.28% 16.42%
-------- -------- ------- -------
1.10% 1.85% 1.17% 1.92%
6.19% 5.44% 6.67% 5.92%
8% 8% 26% 26%
$ 37,420 $ 145,200 $ 17,997 $ 137,893
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Selected data for a share of each class outstanding throughout each
period are as follows:
Year 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.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
T0 THE TRUSTEES OF COLONIAL TRUST IV AND THE SHAREHOLDERS OF COLONIAL HIGH YIELD
MUNICIPAL FUND
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Colonial High Yield Municipal Fund
(a series of Colonial Trust IV) at November 30, 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
<PAGE>
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.
LIBERTY 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
<PAGE>
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
Colonial High Yield Municipal 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 Performance Update.
*Effective October 1, 1998, Colonial Investors Service Center, Inc. - the
Transfer Agent for Colonial, Crabbe Huson, Newport and Stein Roe Advisor Funds
- changed its name to Liberty Funds Services, Inc.
<PAGE>
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, Inc.)
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 & 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, Chief Executive Officer and Director,
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)
[logo] L I B E R T Y
COLONIAL o CRABBE HUSON o NEWPORT o 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
HM-02/335G-1298 (1/99) 98/1430
