<PAGE> 1
[Picture of Domed Building]
COLONIAL INTERMEDIATE TAX-EXEMPT FUND
ANNUAL REPORT
November 30, 1998
Not FDIC May Lose Value
Insured No Bank Guarantee
<PAGE> 2
COLONIAL INTERMEDIATE TAX-EXEMPT FUND
DECEMBER 1, 1997 - NOVEMBER 30, 1998
PORTFOLIO MANAGER COMMENTARY: "During the past 12 months, interest rate
volatility, low nominal rates and a near-record level of supply created
challenging conditions for investors in tax-exempt bonds. Despite these
obstacles, the Fund was well-structured to take advantage of declining interest
rates and was able to generate results that placed the Fund's Class A shares in
the top 20% of its Lipper competitive peer group."(1)
--William Loring
COLONIAL INTERMEDIATE TAX-EXEMPT FUND PERFORMANCE
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
Inception date 2/1/93 2/1/93 8/1/97
12-month distributions declared per share(2) $0.386 $0.333 $0.370
SEC yields on 11/30/98(3) 3.43% 2.89% 3.34%
Taxable-equivalent SEC yields(4) 5.68% 4.78% 5.53%
12-month total returns, assuming 6.88% 6.17% 6.66%
reinvestment of all distributions and
no sales charge or contingent
deferred sales charge (CDSC)(5)
Net asset value per share on 11/30/98 $ 8.13 $ 8.13 $ 8.13
</TABLE>
QUALITY BREAKDOWN(6) (as of 11/30/98) MATURITY BREAKDOWN(6) (as of 11/30/98)
AAA ......................... 53.2% 0-3 years ................... 3.5%
AA .......................... 19.0% 3-5 years ................... 12.4%
A ........................... 9.2% 5-7 years ................... 23.3%
BBB ......................... 15.0% 7-10 years .................. 26.8%
BB .......................... 0.4% 10-15 years ................. 28.1%
Non-rated ................... 2.4% 15-20 years ................. 5.1%
Cash equivalents ............ 0.8% Cash equivalents ........... 0.8%
(1) Please see page 3 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 Advisor or Distributor had
not waived or borne certain fund expenses, SEC yields would have been 2.95%
for Class A shares, 2.39% for Class B shares and 2.39% for Class C shares.
(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 waivers or reimbursements of
expenses by the Advisor or Distributor. Absent these waivers or
reimbursement arrangements, performance results would have been lower.
(6) Quality and maturity breakdowns are 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
maintain these quality and maturity breakdowns in the future.
2
<PAGE> 3
PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
[PHOTOGRAPH OF STEPHEN E. GIBSON]
I am pleased to present the annual report for Colonial Intermediate Tax-Exempt
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 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 investors seeking competitive levels
of tax-free income and the potential for long-term price appreciation, Colonial
Intermediate Tax-Exempt 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 Intermediate Tax-Exempt 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) Source: Lipper, Inc. Lipper rankings are based on the Lipper Intermediate
Municipal Debt Funds universe. The Fund (Class A shares) ranked in the
first quartile for 1 year (rated 27 out of 149 funds) and in the first
quartile for 5 years (rated 17 out of 78 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. 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
WILLIAM LORING is portfolio manager of Colonial Intermediate Tax-Exempt 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 reviewed events that had the potential to affect the U.S. economy's
growth rate. 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 and 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 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.
MUNICIPAL MARKET GAINS DICTATED BY STRUCTURAL CHARACTERISTICS
During the past 12 months, municipal bond market gains were largely determined
by structural characteristics. In other words, rather than bonds of specific
issuers or industry sectors performing well, gains were governed by certain
types of bonds, such as non-callable bonds and bonds with longer durations.
Bonds with those characteristics have a greater-than-average sensitivity to
changes in interest rates and, therefore, tend to generate price gains when
interest rates are declining, as they were during much of the period.
Non-callable bond prices are more sensitive to changes in interest rates because
they cannot be redeemed by their issuers and refinanced at lower interest rates,
resulting in a longer life span. Longer-duration bonds are more sensitive to
interest rate movements because a bond's duration increases as the factors that
contribute to duration combine to produce a longer time to the bond's
retirement. However, since the Fund's investments have intermediate maturities,
they are generally less sensitive to changes in interest rates than investments
with longer maturities. Supporting a relatively long duration means that the
Fund is constantly fighting an effect known as "rolling down the yield curve,"
which occurs as a fund's maturity shortens naturally due to the passage of time.
As the time to maturity becomes shorter, the potential price changes in response
to interest rate movements
4
<PAGE> 5
becomes smaller. During periods of falling rates, it is particularly important
to manage this shortening effect. We try to reverse it by constantly increasing
the portfolio's investments in bonds with longer maturities. This management
technique helped maintain the Fund's relatively higher sensitivity to interest
rates during the Fund's fiscal year.
Because bond structure played such a large role in the market's movement during
the period, it was difficult to add value through specific credit- or
sector-driven investments. However, even though market conditions did not always
support our efforts to find relative value outside of bond type, we continued to
carefully evaluate a number of industry sectors. For example, we avoided
investments in housing bonds because falling interest rates increase the risk of
mortgage-holders prepaying their loans. When that happens, bonds are often
called early, reducing their life span and causing them to underperform the
broader market. We also avoided cyclical issuers, such as steel and paper that
have been negatively impacted by decreased demand overseas, particularly by
countries in Southeast Asia and Latin America.
FUND'S OUTPERFORMANCE REFLECTS INVESTMENT STRATEGY
For the 12-month period, the Fund generated a total return of 6.88% 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 6.30% 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, such as bonds with good call
protection. In addition, we consistently maintained a longer-than-average
duration in the portfolio. As rates fell, the portfolio's structure enabled the
Fund to generate attractive price gains.
OUTLOOK FOR A POSITIVE ECONOMIC AND MARKET ENVIRONMENT
We have a positive economic outlook and we do not anticipate changing our
long-term investment strategy. We expect global economic conditions will
continue to have a dampening effect on the U.S. economy and the level of
inflation -- conditions that are positive for bond prices. While we believe that
interest rates may still fall further, we will continue to monitor the economy
and the market carefully in the months ahead. We will adjust our strategy if we
begin to see signs of significant inflation, accelerating economic growth or
rising interest rates. In the meantime, we believe that the Fund is
well-positioned to take advantage of current market conditions.
5
<PAGE> 6
COLONIAL INTERMEDIATE TAX-EXEMPT FUND'S INVESTMENT PERFORMANCE
VS. THE LEHMAN BROTHERS MUNICIPAL BOND INDEX
Change in Value of $10,000 from 2/1/93 - 11/30/98
Based on NAV and POP for Class A shares
[GRAPHIC OF LINE CHART]
<TABLE>
<CAPTION>
LABEL A B C
----- ----- -----
<S> <C> <C> <C>
LABEL 10000 10000 10000
1 10308 9973 10362
2 10214 9882 10252
3 10320 9985 10355
4 10373 10036 10414
5 10535 10193 10588
6 10575 10232 10601
7 10765 10415 10822
8 10860 10507 10946
9 10888 10534 10967
10 10818 10466 10870
11 11011 10654 11099
12 11137 10775 11226
13 10886 10533 10935
14 10522 10180 10490
15 10635 10289 10579
16 10705 10357 10671
17 10719 10371 10605
18 10836 10484 10800
19 10882 10528 10837
20 10799 10448 10678
21 10658 10312 10489
22 10487 10146 10299
23 10650 10304 10526
24 10815 10463 10826
25 11039 10681 11141
26 11162 10799 11269
27 11166 10803 11283
28 11437 11066 11643
29 11367 10997 11541
30 11521 11147 11650
31 11674 11295 11798
32 11752 11370 11873
33 11890 11504 12045
34 12013 11623 12245
35 12075 11683 12363
36 12184 11788 12456
37 12138 11744 12372
38 12030 11639 12214
39 12015 11625 12179
40 12000 11610 12175
41 12094 11701 12307
42 12205 11808 12419
43 12222 11825 12416
44 12335 11934 12590
45 12432 12028 12732
46 12642 12231 12965
47 12597 12188 12910
48 12616 12206 12935
49 12732 12319 13053
50 12589 12180 12879
51 12641 12230 12987
52 12791 12375 13183
53 12925 12505 13323
54 13258 12827 13692
55 13145 12717 13564
56 13297 12865 13725
57 13350 12916 13813
58 13437 13000 13894
59 13609 13167 14097
60 13714 13268 14242
61 13735 13288 14247
62 13721 13275 14259
63 13639 13195 14195
64 13865 13415 14420
65 13903 13452 14477
66 13855 13405 14513
67 13997 13542 14737
68 14241 13779 14921
69 14364 13897 14920
70 14361 13895 14973
</TABLE>
GROWTH OF A $10,000 INVESTMENT MADE ON 2/1/93
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>
$14,361 $13,895 $13,828 $13,828 $13,913 $13,913
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
As of 11/30/98
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
INCEPTION 2/1/93 2/1/93 8/1/97
NAV POP NAV w/CDSC NAV w/CDSC
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 year 6.88% 3.40% 6.17% 2.17% 6.66% 5.66%
5 years 5.83 5.13 5.14 5.14 5.27 5.27
Life 6.40 5.80 5.71 5.71 5.83 5.83
</TABLE>
Past performance cannot predict future results. Return 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 3.25%. The CDSC
returns reflect the maximum charge of 4% for one year 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 C share performance information includes returns of the Fund's Class B
shares (the oldest existing fund class with a similar cost structure) for
periods prior to its inception date. These Class B share returns are not
restated to reflect any expense differential (e.g., Rule 12b-1 fees) between
Class B and C 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, do not incur fees or expenses and it is not
possible to invest in an index.
6
<PAGE> 7
INVESTMENT PORTFOLIO
NOVEMBER 30, 1998 (IN THOUSANDS)
<TABLE>
<CAPTION>
MUNICIPAL BONDS - 98.2% PAR VALUE
-----------------------------------------------------------------------------
<S> <C> <C>
EDUCATION - 5.6%
EDUCATION - 2.3%
IL Latin School Chicago,
5.200% 08/01/11 $ 250 $ 253
NY State Lawrence University,
4.150% 07/01/08 200 199
VT State Educational & Health Buildings
Finance Agency,
Norwich University, Series 1998,
5.750% 07/01/13 100 105
-----
557
-----
STUDENT LOAN - 3.3%
NM State Educational Assistance
Foundation,
Series 1-A,
6.200% 12/01/01 400 423
SC State Education Assistance Authority
Student Loan Revenue Bonds, Series 1991,
6.200% 09/01/99 50 51
TX Brazos Higher Educational
Facilities Authority,
Series 1992-A,
6.600% 03/01/00 325 335
-----
809
-----
- --------------------------------------------------------------------------------
HEALTHCARE - 5.7%
HOSPITAL - 4.9%
AL East Health Care Authority,
Health Care Facilities and Tax Anticipation,
Series 1993,
5.625% 09/01/04 50 54
MI Dickinson County,
Memorial Hospital System,
7.625% 11/01/05 250 283
MN Minneapolis Children's Hospital,
4.500% 08/15/04 250 256
NY State Dormitory Authority,
St. Clare's Hospital,
Series 1998-B,
4.900% 02/15/09 250 254
OH Green Springs,
St. Francis Health Care Center,
Series 1994-A,
7.000% 05/15/04 100 107
</TABLE>
7
<PAGE> 8
Investment Portfolio/November 30, 1998
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
MUNICIPAL BONDS - CONT. PAR VALUE
-----------------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE - CONT.
HOSPITAL - CONT.
PA Philadelphia Hospitals and Higher
Educational Facilities, Temple
University Hospital, Series 1993,
5.750% 11/15/99 $ 100 $ 102
TX Health Facilities Development
Corp. Hospital, All Saints Episcopal
Hospitals, Series 1993-A,
5.800% 08/15/04 80 87
TX Tarrant County Health Facilities
Development Corp. Hospital, Fort
Worth Osteopathic Hospital, Series 1993,
5.800% 05/15/04 50 54
------
1,197
------
NURSING HOME - 0.8%
KY Jefferson County Health Facilities,
Beverly Enterprises, Inc., Series 1985-B,
9.750% 08/01/07 85 90
MA State Industrial Finance Agency,
Belmont Home Care Project,
Series A,
7.970% 01/01/99 100 100
------
190
------
- --------------------------------------------------------------------------------
HOUSING - 5.8%
MULTI-FAMILY - 1.2%
MA State Housing Finance Agency,
Series 1992-C,
6.350% 05/15/03 (a) 200 215
NJ State Housing and Mortgage Finance
Agency,
6.500% 05/01/03 85 91
------
306
------
SINGLE-FAMILY - 4.6%
MD Montgomery County Housing Commission,
Series A,
5.750% 07/01/13 250 267
NE State Investment Authority,
Series C,
5.650% 09/01/07 495 527
</TABLE>
8
<PAGE> 9
Investment Portfolio/November 30, 1998
-----------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
RI Housing and Mortgage Finance
Corporation, Homeownership
Opportunity, Series 6-B:
6.500% 04/01/03 $ 100 $ 106
6.500% 10/01/03 200 212
-------
1,112
-------
- --------------------------------------------------------------------------------
OTHER - 10.8%
POOL/BOND BANK - 1.1%
MI State Municipal Bond Authority,
Clean Water Revolving Fund,
Series 1998,
5.250% 10/01/12 250 264
-------
REFUNDED/ESCROWED - 9.7%(b)
CA Sacramento Cogeneration Authority,
Procter & Gamble Project,
6.500% 07/01/14 500 583
IL State Health Facilities Authority,
Edgewater Medical Center,
Series A,
9.250% 07/01/24 95 121
OH Cuyahoga County,
Meridia Health System,
6.300% 08/15/06 890 1,025
OH Olmstead Falls Local School District,
6.850% 12/15/11 550 645
-------
2,374
-------
- --------------------------------------------------------------------------------
OTHER REVENUE - 1.6%
INDUSTRIAL - 0.4%
SC State Economic Development
Authority,
Caterpillar, Inc., Series 1998,
5.050% 06/01/08 100 100
-------
RECREATION - 0.4%
NY Hamilton Industrial Development Agency,
Adirondack Historical Association,
4.700% 11/01/08 100 101
-------
RETAIL - 0.8%
IA State Finance Authority,
Mason City Shopping Center,
8.500% 12/01/04 50 52
OH Lake County,
North Madison Properties,
Series 1993,
8.069% 09/01/01 55 59
</TABLE>
9
<PAGE> 10
Investment Portfolio/November 30, 1998
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
-----------------------------------------------------------------------------
<S> <C> <C>
OTHER REVENUE - CONT.
RETAIL - CONT.
VA Virginia Beach Development Authority,
SC Diamond Associates, Inc.,
8.000% 12/01/10 $ 75 $ 84
-----
195
-----
- --------------------------------------------------------------------------------
RESOURCE RECOVERY - 3.5%
DISPOSAL - 0.4%
MA State Industrial Finance Agency,
Peabody Monofill Associates, Inc.,
Series 1995,
9.000% 09/01/05 85 94
-----
RESOURCE RECOVERY - 3.1%
FL Lake County Resources Industrial
Development, NRG / Recovery Group,
Series 1993-A,
5.400% 10/01/03 500 508
MA State Industrial Finance Agency,
Ogden Hill Project,
Series 1998 A,
5.450% 12/01/12 250 253
-----
761
-----
- --------------------------------------------------------------------------------
TAX-BACKED - 44.4%
LOCAL APPROPRIATED - 2.4%
AZ Phoenix Civic Improvement Corporation,
Waste Water Lease, Series 1993,
5.750% 07/01/04 50 55
NC Greenville,
Series 1998,
5.000% 06/01/06 500 527
-----
582
-----
LOCAL GENERAL OBLIGATIONS - 23.0%
AZ Maricopa County Unified School
District No. 69, Paradise Valley,
Series 1995,
6.350% 07/01/10 500 590
AZ Phoenix General Obligation,
6.125% 07/01/03 250 274
HI Honolulu City & County,
Series 1995,
6.000% 11/01/10 500 570
ID Kootenai County School District No. 271,
6.000% 07/30/09 250 286
</TABLE>
10
<PAGE> 11
Investment Portfolio/November 30, 1998
-----------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
IL Chicago, General Obligation,
6.300% 01/01/05 $ 250 $ 279
MI Berkley,
City School District,
7.000% 01/01/09 500 608
MN West St. Paul,
Independent School District No. 197,
(c) 02/01/04 500 407
NY Franklin County,
Series 1998,
4.100% 11/01/04 250 253
NY New York City,
Series 1997 A,
7.000% 08/01/06 850 992
OH Cleveland,
Series 1998,
4.750% 10/01/03 (d) 500 519
OH Oak Hills Local School District,
5.650% 12/01/07 250 278
OH Strongsville, Public Improvement,
6.000% 12/01/06 500 565
------
5,621
------
SPECIAL NON-PROPERTY TAX - 0.9%
LA Sulphur Public Import Sales and Use
Tax, Series 1993-ST,
5.650% 04/01/04 50 54
NY State Local Government Assistance Corp.,
Series C,
6.000% 04/01/12 150 172
------
226
------
SPECIAL PROPERTY TAX - 1.3%
MI Downtown Development Tax,
5.250% 07/01/12 300 314
------
STATE APPROPRIATED - 9.6%
KS State Development Authority,
Lease Juvenile Detention Facility
Project, Series 1992-H,
5.750% 06/01/02 60 64
NY New York Dormitory Authority:
New York City University, Series A,
5.625% 07/01/16 (d) 500 550
State University of New York,
Series 1989 B,
7.100% 05/15/01 100 107
</TABLE>
11
<PAGE> 12
Investment Portfolio/November 30, 1998
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
-----------------------------------------------------------------------------
<S> <C> <C>
TAX-BACKED - CONT.
STATE APPROPRIATED - CONT.
NY State Urban Development Corp.:
5.750% 04/01/11 $ 500 $ 548
6.250% 04/01/02 500 534
OH State Higher Education Commission,
Series II-B,
5.750% 11/01/04 500 547
------
2,350
------
STATE GENERAL OBLIGATIONS - 7.2%
CT State,
Series 1997-A,
5.125% 03/01/10 250 266
MA State,
Series 1998-C,
5.250% 08/01/12 500 529
MN State,
5.600% 10/01/04 100 109
NJ State, General Obligation,
Series D,
(c) 02/15/04 90 73
TX State,
Series A,
5.800% 10/01/04 500 549
WA State,
Series B,
6.000% 06/01/05 200 222
------
1,748
------
- --------------------------------------------------------------------------------
TRANSPORTATION - 10.1%
AIRPORT - 0.2%
CO Denver City & County
Airport System, Series 1992-C,
6.250% 11/15/00 50 52
------
TOLL FACILITIES - 7.6%
CA Foothill Eastern Transportation
Corridor Agency, State Toll Road,
Senior Lien, Series A,
(c) 01/01/04 500 398
IN State Transportation Finance Authority,
Series 1993-A,
5.250% 06/01/09 (d) 600 643
KY State Turnpike Authority, Economic
Development Revitalization Projects,
Series 1992,
5.500% 01/01/01 50 52
</TABLE>
12
<PAGE> 13
Investment Portfolio/November 30, 1998
-----------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
OH State Turnpike Commission:
Series 1996-A,
6.000% 02/15/06 $ 500 $ 558
Series 1998-B,
5.000% 02/15/06 200 211
------
1,862
------
TRANSPORTATION - 2.3%
DC Metropolitan Area Transit Authority,
6.000% 07/01/07 250 283
WA Port of Seattle,
Series A,
6.000% 10/01/08 250 284
------
567
------
- --------------------------------------------------------------------------------
UTILITY - 10.7%
INVESTOR OWNED - 0.5%
MN Anoka County,
Northern States Power Co.,
Series 1998,
4.600% 12/01/08 (e) 125 124
------
JOINT POWER AUTHORITY - 5.2%
AZ Salt River Project, Agricultural
Improvement & Power District, Series A:
5.750% 01/01/07 250 279
6.000% 01/01/05 500 554
NC State Municipal Power Agency,
Catawba Electric No. 1,
Series 1998-A,
5.000% 01/01/08 305 321
TX State Municipal Power Agency,
(c) 09/01/15 250 110
------
1,264
------
MUNICIPAL ELECTRIC - 0.2%
WA Grant County Public Utilities,
District Number 002,
Electric System, Series 1993-E,
5.300% 01/01/03 50 53
------
WATER & SEWER - 4.8%
AZ State Central Water Conservation District,
Central Arizona Project, Series A,
5.500% 11/01/08 250 276
</TABLE>
13
<PAGE> 14
Investment Portfolio/November 30, 1998
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
-----------------------------------------------------------------------------
<S> <C> <C>
UTILITY - CONT.
WATER & SEWER - CONT.
TX Houston Water & Sewer System,
Series C,
5.900% 12/01/05 $ 800 $ 889
-------
1,165
-------
TOTAL INVESTMENTS (cost of $22,530)(f) 23,988
-------
SHORT-TERM OBLIGATIONS - 0.8%
-----------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (g)
CA Irvine Improvement Bond Act of 1915,
Series 1998,
3.250% 09/02/23 100 100
NY State Energy Research & Development
Authority, Niagara Mohawk Power Corp.,
Series B,
3.800% 07/01/27 100 100
-------
TOTAL SHORT-TERM OBLIGATIONS 200
-------
OTHER ASSETS & LIABILITIES, NET - 1.0% 234
-----------------------------------------------------------------------------
NET ASSETS - 100.0% $24,422
=======
</TABLE>
NOTES TO INVESTMENT PORTFOLIO:
-----------------------------------------------------------------------------
(a) This security, or a portion thereof, with a total market value of $215 is
being used to collateralize the delayed delivery purchase indicated in note
(e) below.
(b) 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 interest and principal.
(c) Zero coupon bond.
(d) These securities, or a portion thereof, with a total market value of $1,297
are being used to collateralize open futures contracts.
(e) This security has been purchased on a delayed delivery basis for settlement
at a future date beyond the customary settlement time.
(f) Cost for federal income tax purposes is the same.
(g) Variable rate demand notes are considered short-term obligations. Interest
rates change periodically on specified dates. These securities are payable
on demand and are secured by either letters of credit or other credit
support agreements from banks. The rates listed are as of November 30,
1998.
Short futures contracts open on November 30, 1998,
<TABLE>
<CAPTION>
Par Value Unrealized
covered by Expiration depreciation
Type contracts month at 11/30/98
-----------------------------------------------------------------------------
<S> <C> <C> <C>
Treasury Bond 700 March $ 15
</TABLE>
See notes to financial statements
14
<PAGE> 15
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 $22,530) $ 23,988
Short-term obligations 200
--------
24,188
Receivable for:
Interest $ 381
Fund shares sold 37
Investments sold 5
Expense reimbursement due from Advisor 1
Other 18 442
-------- --------
Total Assets 24,630
LIABILITIES
Payable for:
Investments purchased 125
Distributions 70
Variation margin on futures 8
Accrued:
Deferred Trustees fees 2
Other 3
--------
Total Liabilities 208
--------
NET ASSETS $ 24,422
========
Net asset value & redemption price per share -
Class A ($14,051/1,728) $ 8.13(a)
========
Maximum offering price per share - Class A
($8.13/0.9675) $ 8.40(b)
========
Net asset value & offering price per share -
Class B ($9,504/1,168) $ 8.13(a)
========
Net asset value & offering price per share -
Class C ($867/107) $ 8.13(a)
========
COMPOSITION OF NET ASSETS
Capital paid in $ 23,325
Overdistributed net investment income (20)
Accumulated net realized loss (326)
Net unrealized appreciation (depreciation) on:
Investments 1,458
Open futures contracts (15)
--------
$ 24,422
========
</TABLE>
(a) Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
(b) On sales of $100,000 or more the offering price is reduced.
See notes to financial statements.
15
<PAGE> 16
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 1998
(in thousands)
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C> <C>
Interest $ 1,139
EXPENSES
Management fee $ 121
Service fee 44
Distribution fee - Class B 64
Distribution fee - Class C 3
Transfer agent 34
Bookkeeping fee 27
Trustees fee 9
Custodian fee 3
Audit fee 14
Legal fee 4
Registration fee 26
Reports to shareholders 6
Amortization of deferred
organization expenses 3
Other 2
-------
Total expenses 360
Fees and expenses waived or borne by
the Advisor (125)
Fees waived by
the Distributor - Class C (2)
Custodian Credits Earned (2) 231
------- ----------
Net Investment Income 908
----------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain on:
Investments 52
Closed futures contracts 39
-------
Net realized gain 91
Change in net unrealized appreciation (depreciation)
during the period on:
Investments 429
Open futures contracts (5)
-------
Net Change in Unrealized Appreciation 424
----------
Net Gain 515
----------
Increase in Net Assets from Operations $ 1,423
==========
</TABLE>
See notes to financial statements.
16
<PAGE> 17
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 $ 908 $ 1,003
Net realized gain 91 228
Net unrealized appreciation (depreciation) 424 (24)
-------- --------
Net Increase from Operations 1,423 1,207
Distributions:
From net investment income - Class A (547) (522)
In excess of net investment income - Class A (12) --
From net investment income - Class B (400) (486)
In excess of net investment income - Class B (9) --
From net investment income - Class C (18) (2)
In excess of net investment income - Class C (1) --
-------- --------
436 197
-------- --------
Fund Share Transactions:
Receipts for shares sold - Class A 5,396 1,767
Value of distributions reinvested - Class A 340 273
Cost of shares repurchased - Class A (2,258) (4,276)
-------- --------
3,478 (2,236)
-------- --------
Receipts for shares sold - Class B 790 379
Value of distributions reinvested - Class B 269 345
Cost of shares repurchased - Class B (2,012) (3,645)
-------- --------
(953) (2,921)
-------- --------
Receipts for shares sold - Class C 864 100
Value of distributions reinvested - Class C 9 1
Cost of shares repurchased - Class C (112) --
-------- --------
761 101
-------- --------
Net Increase (Decrease) from
Fund Share Transactions 3,286 (5,056)
-------- --------
Total Increase (Decrease) 3,722 (4,859)
NET ASSETS
Beginning of period 20,700 25,559
-------- --------
End of period (net of overdistributed and
including undistributed net investment income
of $20 and $57, respectively) $ 24,422 $ 20,700
======== ========
</TABLE>
(a) Class C shares were initially offered on August 1, 1997.
See notes to financial statements.
17
<PAGE> 18
STATEMENT OF CHANGES IN NET ASSETS - CONT.
<TABLE>
<CAPTION>
Year ended
(in thousands) November 30
------------------
NUMBER OF FUND SHARES 1998 1997(a)
<S> <C> <C>
Sold - Class A 670 221
Issued for distributions reinvested - Class A 42 38
Repurchased - Class A (279) (548)
---- ----
433 (289)
---- ----
Sold - Class B 98 48
Issued for distributions reinvested - Class B 33 44
Repurchased - Class B (250) (465)
---- ----
(119) (373)
---- ----
Sold - Class C 107 13
Issued for distributions reinvested - Class C 1 (b)
Repurchased - Class C (14) --
---- ----
94 13
---- ----
</TABLE>
(a) Class C shares were initially offered on August 1, 1997.
(b) Rounds to less than one.
See notes to financial statements.
18
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1998
NOTE 1. ACCOUNTING POLICIES
ORGANIZATION: Colonial Intermediate Tax-Exempt 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 moderate
volatility, by pursuing current income exempt from federal income tax and
opportunities for appreciation from a portfolio primarily invested in
investment-grade, intermediate-term 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.
19
<PAGE> 20
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.
DEFERRED ORGANIZATION EXPENSES: The Fund incurred expenses of $75,021 in
connection with its organization, initial registration with the Securities and
Exchange Commission and with various states, and the initial public offering of
its shares. These expenses were deferred and were amortized on a straight-line
basis over five years.
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.
20
<PAGE> 21
Notes to Financial Statements/November 30, 1998
- -------------------------------------------------------------------------------
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 equal to 0.55% annually of the Fund's
average net assets.
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 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 $1,982 on sales of the Fund's
Class A shares and received contingent deferred sales charges (CDSC) of none,
$4,727 and $500 on Class A, Class B and Class C share redemptions, respectively.
The Fund has adopted a 12b-1 plan which requires it to pay the Distributor a
service fee equal to 0.20% annually of the Fund's net assets as of 20th of each
month. The plan also requires the payment of a distribution fee to the
Distributor equal to 0.65% annually of the average net assets attributable to
Class B and Class C shares. The Distributor has voluntarily agreed to waive a
portion of the Class C share distribution fee so that it does not exceed 0.20%
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.
EXPENSE LIMITS: The Advisor has agreed, until further notice, to waive fees and
bear certain Fund expenses to the extent that total expenses (exclusive of
service and distribution fees, brokerage commissions, interest, taxes, and
extraordinary expenses, if any) exceed 0.60% annually of the Fund's average net
assets. Through December 31, 1997, the expense limit was 0.40% of the Fund's
average net assets.
OTHER: The Fund pays no compensation to its officers, all of whom are
21
<PAGE> 22
Notes to Financial Statements/November 30, 1998
- -------------------------------------------------------------------------------
NOTE 2. FEES AND COMPENSATION PAID TO AFFILIATES - CONT.
- -------------------------------------------------------------------------------
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.
The Fund had an agreement with its custodian bank under which $3,101 of
custodian fees were reduced by balance credits applied during the year ended
November 30, 1998. The Fund could have invested a portion of the assets utilized
in connection with the expense offset arrangements in an income producing asset
if it had not entered into such agreements.
NOTE 3. PORTFOLIO INFORMATION
- -------------------------------------------------------------------------------
INVESTMENT ACTIVITY: During the year ended November 30, 1998, purchases and
sales of investments, other than short-term obligations, were $5,237,090 and
$2,250,073, respectively.
Unrealized appreciation (depreciation) 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 $ 1,460,254
Gross unrealized depreciation (2,015)
-----------
Net unrealized appreciation $ 1,458,239
===========
</TABLE>
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:
<TABLE>
<CAPTION>
Year of Capital loss
expiration carryforward
---------- ------------
<S> <C>
2003 $91,000
</TABLE>
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: 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
22
<PAGE> 23
Notes to Financial Statements/November 30, 1998
- -------------------------------------------------------------------------------
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.
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 2,729,497 shares of beneficial interest. The votes cast at the
Meeting were as follows:
<TABLE>
<CAPTION>
AUTHORITY
FOR WITHHELD
--- --------
<S> <C> <C>
To Elect a Board of Trustees.
Robert J. Birnbaum 1,675,411 26,632
Tom Bleasdale 1,675,543 26,500
John Carberry 1,675,632 26,411
Lora S. Collins 1,675,965 26,078
James E. Grinnell 1,674,669 27,374
Richard W. Lowry 1,674,743 27,300
Salvatore Macera 1,675,640 26,403
William E. Mayer 1,675,755 26,288
James L. Moody, Jr. 1,675,611 26,432
John J. Neuhauser 1,676,044 25,999
Thomas E. Stitzel 1,675,632 26,411
Robert L. Sullivan 1,675,632 26,411
Anne-Lee Verville 1,675,490 26,553
</TABLE>
To amend fundamental investment policies regarding borrowing and lending.
FOR AGAINST ABSTAIN
--- ------- -------
1,246,147 5,667 50,268
To approve policies for a master fund/feeder fund structure.
FOR AGAINST ABSTAIN
--- ------- -------
1,237,784 12,083 52,215
23
<PAGE> 24
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 $ 7.980 $ 7.980 $ 7.980
----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.357 0.304 0.341(c)
Net realized and
unrealized gain (loss) 0.179 0.179 0.179
----------- ----------- -----------
Total from Investment
Operations 0.536 0.483 0.520
----------- ----------- -----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment
income (0.378) (0.326) (0.362)
In excess of net investment
income (0.008) (0.007) (0.008)
----------- ----------- -----------
Total Distributions
Declared to Shareholders (0.386) (0.333) (0.370)
----------- ----------- -----------
Net asset value -
End of period $ 8.130 $ 8.130 $ 8.130
=========== =========== ===========
Total return (e)(f) 6.88% 6.17% 6.66%(g)
=========== =========== ===========
RATIOS TO AVERAGE NET ASSETS
Expenses (i) 0.74% 1.39% 0.94%(c)
Net investment income (i) 4.44% 3.79% 4.24%(c)
Fees and expenses waived
or borne by the Advisor (i) 0.58% 0.58% 0.58%
Portfolio turnover 10% 10% 10%
Net assets at end
of period (000) $ 14,051 $ 9,504 $ 867
(a) Net of fees and expenses waived or borne by the Advisor which amounted to:
$ 0.047 $ 0.047 $ 0.047
</TABLE>
(b) Class C shares were initially offered on August 1, 1997. Per share amounts
reflect activity from that date.
(c) Net of fees waived by the Distributor which amounted to $0.036 per share
and 0.45%.
(d) 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.
(e) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(f) Had the Advisor not waived or reimbursed a portion of expenses, total
return would have been reduced.
24
<PAGE> 25
FINANCIAL HIGHLIGHTS - CONT.
<TABLE>
<CAPTION>
Year ended November 30
-----------------------------------------------------------------------------
1997 1996
Class A Class B Class C (b) Class A Class B
----------- ----------- ------------- ------------ -----------
<S> <C> <C> <C> <C>
$ 7.880 $ 7.880 $ 8.000 $ 7.850 $ 7.850
----------- ----------- ----------- ----------- -----------
0.388 0.337 0.121 0.375 0.324
0.093 0.093 (0.019)(d) 0.022 0.022
----------- ----------- ----------- ----------- -----------
0.481 0.430 0.102 0.397 0.346
----------- ----------- ----------- ----------- -----------
(0.381) (0.330) (0.122) (0.367) (0.316)
-- -- -- -- --
----------- ----------- ----------- ----------- -----------
(0.381) (0.330) (0.122) (0.367) (0.316)
----------- ----------- ----------- ----------- -----------
$ 7.980 $ 7.980 $ 7.980 $ 7.880 $ 7.880
=========== =========== =========== =========== ===========
6.29% 5.60% 1.29% (h) 5.23% 4.55%
=========== =========== =========== =========== ===========
0.60% 1.25% 0.80% (j) 0.60% 1.25%
4.84% 4.19% 4.55% (j) 4.75% 4.10%
0.85% 0.85% 0.97% (j) 0.72% 0.72%
31% 31% 31% 20% 20%
$ 10,330 $ 10,269 $ 101 $ 12,479 $ 13,080
$ 0.073 $ 0.073 $ 0.073 $ 0.057 $ 0.057
</TABLE>
(g) Had the Distributor not waived a portion of expenses, total return would
have been reduced.
(h) Not annualized.
(i) The benefits derived from custody credits and directed brokerage
arrangements had an impact of 0.01% and $0.001 per share in 1998 and 1997
only. Prior year ratios are net of benefits received, if any.
(j) Annualized.
---------------------------------------------------------------------------
1998 Federal Tax information (unaudited)
99.69% of the income distributions will be treated as exempt income for
federal income tax purposes.
---------------------------------------------------------------------------
25
<PAGE> 26
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 $ 7.210 $ 7.210 $ 7.810 $ 7.810
----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.387 0.338 0.366 0.317
Net realized and
unrealized gain (loss) 0.641 0.641 (0.596) (0.596)
----------- ----------- ----------- -----------
Total from Investment
Operations 1.028 0.979 (0.230) (0.279)
----------- ----------- ----------- -----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment
income (0.388) (0.339) (0.370) (0.321)
----------- ----------- ----------- -----------
Net asset value -
End of period $ 7.850 $ 7.850 $ 7.210 $ 7.210
=========== =========== =========== ===========
Total return (b)(c) 14.56% 13.82% (3.05)% (3.68)%
=========== =========== =========== ===========
RATIOS TO AVERAGE NET ASSETS
Expenses 0.36% 1.01% 0.20% 0.85%
Fees and expenses waived
or borne by the Advisor 0.96% 0.96% 1.07% 1.07%
Net investment income 5.03% 4.38% 4.85% 4.20%
Portfolio turnover 69% 69% 26% 26%
Net assets at end
of period (000) $ 13,317 $ 14,820 $ 16,791 $ 14,138
(a) Net of fees and expenses waived or borne by the Advisor which amounted to:
$ 0.074 $ 0.074 $ 0.080 $ 0.080
</TABLE>
(b) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(c) Had the Advisor not waived or reimbursed a portion of expenses, total
return would have been reduced.
26
<PAGE> 27
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE TRUSTEES OF COLONIAL TRUST IV AND THE SHAREHOLDERS OF
COLONIAL INTERMEDIATE TAX-EXEMPT 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 Intermediate Tax-Exempt
Fund (the 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
27
<PAGE> 28
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.
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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
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<PAGE> 30
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.)
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IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial Intermediate Tax-Exempt Fund is:
Liberty Funds Services, Inc.*
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Colonial Intermediate Tax-Exempt 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 Intermediate
Tax-Exempt 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 objective and operating policies of the Fund and with 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.
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TRUSTEES
ROBERT J. BIRNBAUM
Consultant (formerly Special Counsel, Dechert, Price & Rhoads; President and
Chief Operating Officer, New York Stock Exchange, Inc.)
TOM BLEASDALE
Retired (formerly Chairman of the Board and Chief Executive Officer, Shore Bank
& Trust Company)
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)
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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
