<PAGE> 1
QUALITY GOVERNMENT BONDS
CAN ADD DIVERSIFICATION TO
YOUR PORTFOLIO.
COLONIAL GOVERNMENT FUNDS Semiannual Report
FEBRUARY 29, 2000
- COLONIAL SHORT DURATION U.S. GOVERNMENT FUND
- COLONIAL INTERMEDIATE U.S. GOVERNMENT FUND
- COLONIAL FEDERAL SECURITIES FUND
<PAGE> 2
Table of Contents
<TABLE>
<CAPTION>
<S> <C>
1 PRESIDENT'S MESSAGE
2 PORTFOLIO MANAGERS'
REPORT
3 HIGHLIGHTS
5 PERFORMANCE
INFORMATION
10 INVESTMENT PORTFOLIO
15 FINANCIAL
STATEMENTS
18 NOTES TO FINANCIAL
STATEMENTS
22 FINANCIAL
HIGHLIGHTS
</TABLE>
Important Notes:
Past performance cannot predict future investment results. Returns and value of
an investment will vary, resulting in a gain or loss on sales.
All results shown assume reinvestment of distributions. The "without sales
charge" returns do not include sales charges or contingent deferred sales
charges (CDSC). The "with sales charge" returns include the maximum sales charge
of 3.25% for Colonial Short Duration U.S. Government Fund and 4.75% for Colonial
Intermediate U.S. Government Fund and Colonial Federal Securities Fund, and the
maximum applicable contingent deferred sales charge of 4% for six months and 1
year on Class B shares and 1% for six months and 1 year for Class C shares for
Colonial Short Duration U.S. Government Fund; 5% for six months and 1 year and
2% for 5 years on Class B shares and 1% for six months and 1 year on Class C
shares for Colonial Intermediate U.S. Government Fund and Colonial Federal
Securities Fund.
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 class. Because the Funds are actively managed,
there can be no guarantee the Funds will continue to maintain the portfolio
structure and average life shown in the future.
Because market conditions change frequently, there can be no assurance that the
trends described in this report will continue or come to pass.
Not FDIC May Lose Value
Insured No Bank Guarantee
<PAGE> 3
PRESIDENT'S MESSAGE
COLONIAL GOVERNMENT FUNDS
Dear Shareholder:
During the six months that ended February 29, 2000, bond prices slumped under
the pressures of rising interest rates and worries about continued economic
growth and the potential rise in inflation. In an attempt to ward off
inflationary pressures stemming from the unexpectedly strong U.S. economy and
rebounding foreign economies, the Federal Reserve Board (Fed) raised interest
rates in November and February. However, these rate hikes did little to calm
investors' inflationary fears. A lower rate of bond issuance due to a federal
budget surplus supported bond prices. While the supply of mortgage securities
dwindled, causing these securities to become more sensitive to rising rates.
The Funds' managers actively managed each portfolio in response to the
challenging bond market environment during the period. Although the Funds'
performance reflected these difficult conditions, it is important to remember to
maintain a long-term perspective when making investment decisions. For the six
months ended February 29, 2000, Class A shares of each Fund generated the
following returns without a sales charge:
Colonial Short Duration U.S. Government Fund: 2.18%
Colonial Intermediate U.S. Government Fund: 1.01%
Colonial Federal Securities Fund: 0.67%
On the pages that follow, the Funds' managers will provide you with more
specific information about the Funds' performance and the strategies employed
during the period. As always, we thank you for choosing one of Colonial's
Government Funds and for giving us the opportunity to serve your investment
needs.
Respectfully,
/S/ Stephen E. Gibson
---------------------
Stephen E. Gibson
President
April 12, 2000
1
<PAGE> 4
PORTFOLIO MANAGERS' REPORT
WHAT IS DURATION?
Duration measures a bond mutual fund's price sensitivity to interest rate
movements. It is a mathematical calculation that assesses such factors as the
maturities of the bonds in a fund's portfolio, coupon rates and how often they
are paid, and market interest rates. In government bond funds, interest rate
risk is the primary consideration. Therefore, the specific benefits and risks of
these funds vary by their duration.
For example, if interest rates rise 1%, a fund with a 5-year duration is likely
to lose 5% of its value. If interest rates decline 1%, the value of the same
fund may increase 5%. The longer the fund's duration, the more sensitive its
price is to interest rates.
ACTIVE MANAGEMENT OF DURATION
To combat some of the effects of rising interest rates, we actively managed the
duration of the portfolios. Duration measures a portfolio's price sensitivity to
interest rate movements. Generally speaking, the longer a portfolio's duration,
the more its share price will fall (rise) as interest rates rise (fall).
In a rising interest rate environment, mortgage prepayment activity slows and
the duration of mortgage securities lengthens. Like most bonds, as duration
lengthens, the bonds' sensitivity to changing interest rates increases.
Rather than selling the portfolios' mortgage holdings as interest rates fell, we
sold some Treasury securities to offset the lengthening of the portfolio. This
strategy allowed us to maintain our exposure to the mortgage sector, which we
felt offered compelling value and attractive long-term performance potential.
OUTLOOK CALLS FOR LESS VOLATILE ENVIRONMENT
We expect market conditions to moderate over the next six months or so. The
Federal Reserve Board appears to be taking a gradual approach to keeping
potential inflation in check. Given that, we expect further interest rate
increases over the near term. But current consensus calls for some slowing of
global economic growth in the second half of 2000. Even though higher oil prices
may cause a slight uptick in the inflation rate, we don't expect it will rise
dramatically. We believe productivity gains generated by New Economy technology,
Internet and telecommunications companies should offset higher energy prices.
With that outlook in mind, we believe that bonds will perform well over the
longer term.
/S/ Leslie W. Finnemore /S/ Michael R. Bissonnette /S/ Ann T. Peterson
LESLIE W. FINNEMORE and MICHAEL R. BISSONNETTE are senior vice presidents of
Colonial Management Associates (CMA). MS. FINNEMORE is co-portfolio manager of
Colonial Federal Securities Fund, Colonial Intermediate U.S. Government Fund and
Colonial Short Duration U.S. Government Fund. MR. BISSONNETTE is co-portfolio
manager of Colonial Federal Securities Fund. ANN T. PETERSON is vice president
of CMA and co-portfolio manager of Colonial Intermediate U.S. Government Fund
and Colonial Short Duration U.S. Government Fund.
Government investing offers attractive income and total return opportunities,
but also involves certain risks. The value of an investment in the Funds will
fluctuate with changes in interest rates.
2
<PAGE> 5
HIGHLIGHTS
- INTEREST RATES MOVED STEADILY HIGHER.
Short-term interest rates rose more than 0.8% to 6.5% between the beginning
and end of the period. Despite generally rising interest rates, long-term
Treasurys got a boost from the government's plan to buy back outstanding
long-term debt and curtail future issuance. Lower expected supply, along with
increased demand for these bonds, tempered their increase in yield.
- THE FED ACTED TO STEM POTENTIAL INFLATION.
The Federal Reserve Board took a gradual, not aggressive, approach to raising
interest rates to keep inflation in check. Persistent economic strength in
both the U.S. and abroad prompted two quarter percent interest rate hikes,
one in November and one in February.
- MORTGAGES TRAILED TREASURYS.
Although no bonds escaped the effects of rising interest rates, Treasury
bonds outperformed mortgage-backed securities during the period. As the
durations of mortgage securities lengthened in response to rising rates, they
underperformed.
Mortgage vs. Treasury Bond Performance
8/31/99 - 2/29/00
[LINE GRAPH OMITTED]
<TABLE>
<CAPTION>
Lehman Brothers MBS Index Salomon 10-Year Treasury Index
<S> <C> <C>
"8/99" 0 0
"9/99" 0.74 1.62
"10/99" 0.1 0.58
"11/99" -0.71 0.06
"12/99" -1.49 -0.25
"1/00" 1.36 -0.87
"2/00" 3.04 2.3
</TABLE>
Performance of the 10-year Treasury bond is illustrated by the Salomon 10-Year
Treasury Bond Index, a broad-based, unmanaged index that tracks the performance
of the 10-year on-the-run Treasury market. Performance of mortgage bonds is
illustrated by the Lehman Brothers MBS (Mortgage-Backed Security) Index, a
broad-based, unmanaged index that tracks the performance of mortgage-backed
securities. Unlike mutual funds, indexes are not investments and do not incur
fees, risks or expenses. It is not possible to invest directly in an index.
3
<PAGE> 6
SEMIANNUAL REPORT: COLONIAL SHORT DURATION U.S. GOVERNMENT FUND
COLONIAL SHORT DURATION U.S. GOVERNMENT FUND
DURATION
<TABLE>
<S> <C>
2/29/00 1.78 years
8/31/99 2.45 years
</TABLE>
NET ASSET VALUE PER SHARE
ON 2/29/00
<TABLE>
<S> <C>
Class A $9.65
Class B $9.65
Class C $9.65
</TABLE>
DISTRIBUTIONS DECLARED PER
SHARE FROM 9/1/99 TO 2/29/00
<TABLE>
<S> <C>
Class A $0.280
Class B $0.249
Class C $0.270
</TABLE>
30-DAY SEC YIELDS ON 2/29/00
<TABLE>
<S> <C>
Class A 5.56%
Class B 5.08%
Class C 5.34%
</TABLE>
The 30-day SEC yields reflect the portfolio's earning power, net of expenses,
expressed as an annualized percentage of the public offering price at the end of
the period. If the Advisor or its affiliates had not waived certain Fund
expenses, the SEC yield would have been 4.99% for Class A shares, 4.49% for
Class B shares and 4.75% for Class C shares.
INVESTING PRIMARILY IN U.S. GOVERNMENT SECURITIES, THE FUND IS MANAGED FOR LOW
PRICE VOLATILITY. IT IS THE MOST CONSERVATIVE OF COLONIAL'S THREE GOVERNMENT
FUNDS, DESIGNED FOR INVESTORS WITH A SHORT INVESTMENT HORIZON AND/OR LOW RISK
TOLERANCE.
The proportion of assets invested in mortgage-backed securities remained
relatively constant at between 60% to 67% of investments throughout the past six
months, with most of the remaining investments in Treasurys and agency notes.(1)
In response to the dramatic rise in interest rates during the period, the
duration of our mortgage holdings lengthened. To offset this lengthening effect,
we sold some holdings of mortgage-backed securities, which would have been most
susceptible to rising rates. We also increased our cash position. These actions
shortened the duration of the portfolio during the period and helped performance
in a difficult bond environment. We believe that our active duration management
and asset mix should benefit the Fund over the longer term.
(1)Calculated as a percentage of senior securities.
4
<PAGE> 7
PERFORMANCE INFORMATION
AVERAGE ANNUAL TOTAL RETURNS AS OF 2/29/00
<TABLE>
<CAPTION>
SHARE CLASS A B C
INCEPTION 10/1/92 2/1/93 1/4/95
Without With Without With Without With
Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge
<S> <C> <C> <C> <C> <C> <C>
6 months
(cumulative) 2.18% (1.14)% 1.85% (2.12)% 2.08% 1.09%
1 year 2.74 (0.60) 2.07 (1.83) 2.53 1.56
5 years 5.50 4.81 4.82 4.82 5.29 5.29
Life 4.74 4.28 4.10 4.10 4.60 4.60
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/99
<TABLE>
<CAPTION>
SHARE CLASS A B C
Without With Without With Without With
Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge
<S> <C> <C> <C> <C> <C> <C>
6 months
(cumulative) 1.51% (1.79)% 1.20% (2.76)% 1.42% 0.43%
1 year 1.80 (1.51) 1.14 (2.73) 1.60 0.63
5 years 5.88 5.18 5.20 5.20 5.67 5.67
Life 4.77 4.29 4.12 4.12 4.62 4.62
</TABLE>
Past performance cannot predict future investment results.
Class B and C share (newer class shares) performance information includes
returns of the Fund's Class A shares (the oldest existing Fund class) for
periods prior to the inception of the newer class shares. These Class A share
returns are not restated to reflect any expense differential (e.g., Rule 12b-1
fees) between Class A shares and the newer class shares. Had the expense
differential been reflected, the returns for the periods prior to the inception
of Class B and Class C shares would have been lower.
AVERAGE LIFE BREAKDOWN
AS OF 2/29/00
<TABLE>
<S> <C>
0-2 years 36.51%
2-4 years 34.13%
4-6 years 14.76%
6-7 years 14.60%
</TABLE>
Average life is the expected maturity of a bond and is calculated as a
percentage of senior securities.
SECTOR BREAKDOWNS
2/29/00 VS. 8/31/99
[BAR CHART OMITTED PLOT POINTS]
<TABLE>
<CAPTION>
2/29/00 8/31/99
<S> <C> <C>
Fixed Rate
Mortgage Securities 61.2% 69.2%
Floating Rate Notes 19.3% 16.9%
Treasury Securities 10.5% 7.0%
Adjustable Rate
Mortgage Securities 9.0% 6.9%
</TABLE>
Sector breakdowns are calculated as a percentage of total investments. Because
the Fund is actively managed, there can be no guarantee that the Fund will
continue to maintain this breakdown in the future.
5
<PAGE> 8
SEMIANNUAL REPORT: COLONIAL INTERMEDIATE U.S. GOVERNMENT FUND
COLONIAL INTERMEDIATE U.S. GOVERNMENT FUND
Duration
2/29/00 4.02 years
8/31/99 5.40 years
NET ASSET VALUE PER SHARE
ON 2/29/00
<TABLE>
<S> <C>
Class A $6.19
Class B $6.19
Class C $6.19
Class Z $6.19
</TABLE>
DISTRIBUTIONS DECLARED PER SHARE FROM 9/1/99 TO 2/29/00
<TABLE>
<S> <C>
Class A $0.194
Class B $0.170
Class C $0.175
Class Z $0.201
</TABLE>
30-day SEC yields on 2/29/00
<TABLE>
<S> <C>
Class A 5.63%
Class B 5.15%
Class C 5.30%
Class Z 6.17%
</TABLE>
The 30-day SEC yields reflect the portfolio's earning power, net of expenses,
expressed as an annualized percentage of the public offering price at the end of
the period. If the Advisor or its affiliates had not waived certain Fund
expenses, the SEC yield would have been 5.15% for Class C shares.
THE FUND MAINTAINS A CONSERVATIVE PORTFOLIO INVESTED PRIMARILY IN U.S.
GOVERNMENT SECURITIES, WITH A RISK PROFILE SIMILAR TO A FIVE-YEAR TREASURY. THE
FUND IS MANAGED TO MAINTAIN AN AVERAGE DURATION OF BETWEEN 2.2 AND 5.5 YEARS.
Over the past six months, the bulk of the portfolio -- about 65% of investments
-- remained in mortgage-backed securities.(1) This sector tends to perform well
in a stable interest rate environment.
Our exposure to mortgage-backed securities held back the Fund's six-month
performance because interest rates rose much higher and much faster than we and
most other market watchers had anticipated. In response, the rate of mortgage
prepayment activity slowed and mortgages' interest rate sensitivity -- as
measured by duration -- was heightened. To offset some of the natural
lengthening of our mortgage holdings and the rise in interest rates, we lowered
the overall duration of the portfolio during the period. We expect more
favorable conditions for mortgage-backed securities ahead and believe we are
well positioned to take advantage of these conditions.
(1) Calculated as a percentage of senior securities.
6
<PAGE> 9
PERFORMANCE INFORMATION
AVERAGE ANNUAL TOTAL RETURNS AS OF 2/29/00
<TABLE>
<CAPTION>
SHARE CLASS A B C Z
Inception 10/13/87 6/8/92 8/1/97 1/29/99
-----------------------------------------------------------------------------------------
Without With Without With Without With Without
Sales Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge Charge
<S> <C> <C> <C> <C> <C> <C> <C>
6 months
(cumulative) 1.01% (3.78)% 0.64% (4.26)% 0.71% (0.27)% 1.14%
1 year (0.28) (5.01) (1.03) (5.72) (0.88) (1.81) (0.03)
5 years 5.61 4.58 4.82 4.49 5.28 5.28 5.66
10 years 6.06 5.55 5.45 5.45 5.90 5.90 6.09
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/99
<TABLE>
<CAPTION>
SHARE CLASS A B C Z
------------------------------------------------------------------------------------------
Without With Without With Without With Without
Sales Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge Charge
<S> <C> <C> <C> <C> <C> <C> <C>
6 months
(cumulative) 0.20% (4.56)% (0.16)% (5.03)% (0.09)% (1.06)% 0.31%
1 year (2.15) (6.80) (2.89) (7.50) (2.74) (3.66) (1.94)
5 years 6.26 5.23 5.47 5.15 5.95 5.95 6.31
10 years 6.05 5.54 5.46 5.46 5.90 5.90 6.08
</TABLE>
Past performance cannot predict future investment results.
Class B, C and Z share (newer class shares) performance information includes
returns of the Fund's Class A shares (the oldest existing Fund class) for
periods prior to its inception date. These Class A share returns are not
restated to reflect any expense differential (e.g., Rule 12b-1 fees) between
Class A shares and the newer class shares. Had the expense differential been
reflected, the returns for the periods prior to the inception of Class B and
Class C shares would have been lower.
AVERAGE LIFE BREAKDOWN
AS OF 2/29/00
<TABLE>
<S> <C>
0-2 years 0.52%
2-4 years 24.20%
4-6 years 11.88%
6-8 years 24.15%
8-10 years 22.29%
10-15 years 11.75%
20+ years 5.21%
</TABLE>
Average life is the expected maturity of a bond and is calculated as a
percentage of senior securities.
SECTOR BREAKDOWNS
2/29/00 VS. 8/31/99
<TABLE>
<CAPTION>
2/29/00 8/31/99
<S> <C> <C>
FHMAs 34.9% 27.8%
GNMAs 26.9% 28.7%
Treasury Securities 33.6% 29.1%
FHLMCs 2.4% 2.3%
Small Business Administration 2.2% 2.1%
</TABLE>
Sector breakdowns are calculated as a percentage of total investments. Because
the Fund is actively managed, there can be no guarantee that the Fund will
continue to maintain this breakdown in the future.
7
<PAGE> 10
SEMIANNUAL REPORT: COLONIAL FEDERAL SECURITIES FUND
COLONIAL FEDERAL SECURITIES FUND
Duration
2/29/00 5.47 years
8/31/99 7.32 years
Net asset value per share
on 2/29/00
<TABLE>
<S> <C>
Class A $9.86
Class B $9.86
Class C $9.86
Class Z $9.86
</TABLE>
Distributions declared per share from 9/1/99 to 2/29/00
<TABLE>
<S> <C>
Class A $0.357
Class B $0.320
Class C $0.337
Class Z $0.370
</TABLE>
30-day SEC yields on 2/29/00
<TABLE>
<S> <C>
Class A 6.65%
Class B 6.21%
Class C 6.37%
Class Z 7.25%
</TABLE>
The 30-day SEC yields reflect the portfolio's earning power, net of expenses,
expressed as an annualized percentage of the public offering price at the end of
the period. If the Advisor or its affiliates had not waived certain Fund
expenses, the SEC yield would have been 6.21% for Class C shares.
THE FUND INVESTS PRIMARILY IN U.S. GOVERNMENT SECURITIES AND IS DESIGNED FOR
INVESTORS WHO ARE WILLING TO ACCEPT THE RISKS ASSOCIATED WITH LONGER-TERM
SECURITIES. THE FUND OFFERS THE HIGHEST RETURN POTENTIAL OF COLONIAL'S THREE
GOVERNMENT FUNDS.
Throughout the period our asset allocation was tilted in favor of
mortgage-backed securities, comprising about 55% of investments.1 That
positioning was based on our view that interest rates would move slightly
higher, which typically benefits mortgage-backed securities. Homeowners are less
likely to prepay their mortgages when rates are on the rise, giving bondholders
protection from being forced to reinvest prepayment proceeds when yields are
lower.
In response to the dramatic rise in interest rates during the period, the
duration of our mortgage holdings lengthened. To offset this lengthening effect,
we sold some mortgage-backed securities, which would have been most susceptible
to rising rates. Toward the end of the period, we found some attractive
opportunities among asset-backed securities, which offered yields well in excess
of comparable Treasury securities. Looking forward, we expect more favorable
conditions for mortgage-backed securities and believe the portfolio is well
positioned to take advantage of these conditions.
(1) Calculated as a percentage of senior securities.
8
<PAGE> 11
PERFORMANCE INFORMATION
AVERAGE ANNUAL TOTAL RETURNS AS OF 2/29/00
<TABLE>
<CAPTION>
SHARE CLASS A B C Z
Inception 3/30/84 6/8/92 8/1/97 1/11/99
-------------------------------------------------------------------------------------------
Without With Without With Without With Without
Sales Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge Charge
<S> <C> <C> <C> <C> <C> <C> <C>
6 months
(cumulative) 0.67% (4.11)% 0.30% (4.56)% 0.37% (0.60)% 0.79%
1 year (1.93) (6.58) (2.66) (7.24) (2.52) (3.43) (1.68)
5 years 5.93 4.90 5.13 4.82 5.59 5.59 5.99
10 years 7.09 6.57 6.47 6.47 6.93 6.93 7.12
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/99
<TABLE>
<CAPTION>
SHARE CLASS A B C Z
------------------------------------------------------------------------------------------
Without With Without With Without With Without
Sales Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge Charge
<S> <C> <C> <C> <C> <C> <C> <C>
6 months
(cumulative) (0.89)% (5.60)% (1.25)% (6.04)% (1.17)% (2.13)% (0.78)%
1 year (4.29) (8.83) (5.01) (9.49) (4.86) (5.76) (4.05)
5 years 6.90 5.86 6.10 5.78 6.58 6.58 6.95
10 years 6.79 6.27 6.19 6.19 6.64 6.64 6.82
</TABLE>
Past performance cannot predict future investment results.
Class B, C and Z share (newer class shares) performance information includes
returns of the Fund's Class A shares (the oldest existing Fund class) for
periods prior to its inception date. These Class A share returns are not
restated to reflect any expense differential (e.g., Rule 12b-1 fees) between
Class A shares and the newer class shares. Had the expense differential been
reflected, the returns for the periods prior to the inception of Class B and
Class C shares would have been lower.
AVERAGE LIFE BREAKDOWN
AS OF 2/29/00
<TABLE>
<S> <C>
0-2 years 0.86%
2-4 years 12.52%
4-6 years 15.40%
6-8 years 2.13%
8-10 years 29.56%
10-15 years 31.59%
15-20 years 5.05%
20+ years 2.89%
</TABLE>
Average life is the expected maturity of a bond and is calculated as a
percentage of senior securities.
SECTOR BREAKDOWNS
2/29/00 VS. 8/31/99
<TABLE>
<CAPTION>
2/29/00 8/31/99
<S> <C> <C>
Treasury Securities 38.1% 33.8%
FNMAs 25.3% 19.0%
FHLMCs 14.5% 10.5%
Non-Agency MBS 13.9% 11.3%
GNMAs 8.2% 25.4%
</TABLE>
Sector breakdowns are calculated as a percentage of total investments. Because
the Fund is actively managed, there can be no guarantee that the Fund will
continue to maintain this breakdown in the future.
9
<PAGE> 12
INVESTMENT PORTFOLIO
February 29, 2000 (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
COLONIAL SHORT DURATION U.S. GOVERNMENT FUND
U.S. GOVERNMENT &
AGENCY OBLIGATIONS - 97.6% PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C> <C>
GOVERNMENT AGENCIES - 87.3%
MATURITIES
COUPON FROM/TO
---------------------------------------------------------
FEDERAL FARM CREDIT BANK:
FIXED RATE NOTE,
6.400% 2002 $ 250 $ 248
---------
FEDERAL HOME LOAN BANK:
FIXED RATE NOTE:
5.720% 2003 500 479
6.150% 2000(a) 500 499
7.590% 2005 50 51
---------
1,029
---------
FLOATING RATE NOTE,
5.556% 2000(a) 3,000 3,000
---------
FEDERAL HOME LOAN MORTGAGE CORP.:
FIXED RATE NOTE:
8.000% 2017(a) 906 904
9.250% 2009 96 99
9.750% 2009 166 173
---------
1,176
---------
ADJUSTABLE RATE MORTGAGE: (b)
6.096% 2018 94 91
6.577% 2018 123 119
6.811% 2018 401 408
7.391% 2019 195 194
---------
812
---------
FEDERAL NATIONAL MORTGAGE ASSOCIATION:
FIXED RATE NOTE:
5.310% 2001 500 492
6.080% 2000(a) 120 120
6.240% 2000(a) 400 399
7.000% 2009-2050(c) 2,276 2,237
7.500% 2006-2012(a)(c) 3,939 3,953
9.500% 2006 41 43
10.000% 2006(a) 348 368
---------
7,612
---------
ADJUSTABLE RATE MORTGAGE: (b)
6.391% 2027 108 105
7.296% 2019 139 140
7.435% 2019 92 94
7.583% 2023(a) 110 112
7.614% 2020 76 77
7.995% 2022 86 87
8.105% 2017 60 62
8.366% 2019 88 90
---------
767
---------
</TABLE>
<TABLE>
<CAPTION>
PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C> <C>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION:
FIXED RATE MORTGAGE:
9.000% 2008-2009(a) $ 707 $ 739
9.500% 2009(a) 3,035 3,223
10.500% 2012(a) 267 292
---------
4,254
---------
ADJUSTABLE RATE MORTGAGE: (b)
6.875% 2022 27 27
7.000% 2022 269 271
7.375% 2023 212 214
---------
512
---------
STUDENT LOAN MARKETING ASSOCIATION:
FLOATING RATE NOTE, (b)
5.384% 2000(a) 1,500 1,500
---------
TOTAL GOVERNMENT AGENCIES:
(cost of $21,033) 20,910
---------
GOVERNMENT OBLIGATIONS - 10.3%
U.S. TREASURY BOND,
5.625% 02/28/01(a) 1,200 1,192
---------
U.S. TREASURY NOTE,
6.500% 05/31/01(a) 475 475
---------
U.S. TREASURY NOTE/BOND,
4.500% 09/30/00(a) 200 198
6.000% 08/15/04(a) 610 596
---------
794
---------
TOTAL GOVERNMENT OBLIGATIONS
(cost of $2,508) 2,461
---------
TOTAL INVESTMENTS
(cost of $23,541) (d) 23,371
---------
SHORT-TERM OBLIGATIONS - 22.1%
--------------------------------------------------------------------------------
Repurchase agreement with
SBC Warburg Ltd., dated
02/29/00, due 03/01/00 at 5.77%,
collateralized by U.S. Treasury notes
and/or bonds with various maturities
to 2021, market value $5,401
(repurchase proceeds $5,284) 5,283 5,283
---------
OTHER ASSETS & LIABILITIES, - NET (19.7%) (4,725)
--------------------------------------------------------------------------------
Net Assets - 100.0% $23,929
=======
</TABLE>
10
<PAGE> 13
INVESTMENT PORTFOLIO (CONTINUED)
COLONIAL SHORT DURATION U.S. GOVERNMENT FUND
(CONTINUED)
--------------------------------------------------------------------------------
NOTES TO INVESTMENT PORTFOLIO:
(a) These securities, or a portion thereof, with a total market value of
$14,918, are being used to collateralize the delayed delivery purchases
indicated in note (c) below.
(b) Interest rates on variable rate securities change periodically. The rates
listed are as of February 29, 2000.
(c) These securities, or a portion thereof, have been purchased on a delayed
delivery basis whereby the terms that are fixed are the purchase price,
interest rate and the settlement date. The exact quantity purchased may be
slightly more or less than the amount shown.
(d) Cost for federal income tax purposes is the same.
February 29, 2000 (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
COLONIAL INTERMEDIATE U.S. GOVERNMENT FUND
U.S. GOVERNMENT &
AGENCY OBLIGATIONS - 107.9% PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C> <C>
GOVERNMENT AGENCIES - 71.7%
MATURITIES
COUPON FROM/TO
-----------------------------------
FEDERAL HOME LOAN MORTGAGE CORP.:
7.500% 2007-2016 $ 676 $ 669
8.000% 2003-2016 6,618 6,624
8.500% 2007-2017 1,628 1,658
8.750% 2005-2013 718 736
9.000% 2001-2018 1,272 1,309
9.250% 2008-2019 2,629 2,711
9.500% 2005-2016 924 961
9.750% 2016 42 44
10.000% 2019 285 301
10.250% 2009-2016 761 805
10.500% 2009-2021 1,239 1,341
11.250% 2005-2015 1,308 1,416
-----------
18,575
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION:
6.000% 2008-2026(a) 114,549 108,095
6.500% 2007-2029 57,096 53,337
7.000% 2007-2027(a) 2,496 2,411
7.500% 2006-2027(a) 92,072 90,310
8.000% 2008-2009 1,260 1,272
8.250% 2008 622 630
8.500% 2003-2021 3,075 3,161
9.000% 2002-2022 9,233 9,522
10.000% 2001-2006 3,109 3,286
10.500% 2010-2016 1,926 2,088
11.000% 2015 502 549
-----------
274,661
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION:
6.500% 2023-2029 8,185 7,680
7.000% 2022-2028(a) 90,764 87,112
7.500% 2007 139 140
8.000% 2004-2023 1,413 1,415
8.500% 2017-2022 811 828
8.750% 2021-2022 898 939
8.850% 2018-2020 1,886 1,928
9.000% 2008-2025 7,585 7,869
9.250% 2016-2022 3,780 3,960
9.500% 2004-2025 54,332 57,677
10.000% 2000-2018 1,554 1,627
10.250% 2018 189 204
10.500% 2000-2020 4,282 4,669
10.625% 2010 21 23
11.000% 2009-2021 5,250 5,785
11.250% 2015 72 78
11.500% 2010-2021 8,291 9,215
</TABLE>
See notes to financial statements.
11
<PAGE> 14
INVESTMENT PORTFOLIO (CONTINUED)
February 29, 2000
(In thousands)
<TABLE>
<CAPTION>
COLONIAL INTERMEDIATE U.S. GOVERNMENT FUND
(CONTINUED) PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C> <C>
MATURITIES
COUPON FROM/TO
------------------------------------
11.750% 2013-2015 $ 148 $ 166
12.000% 2011-2016 8,270 9,274
12.250% 2013-2014 374 420
12.500% 2010-2015 5,477 6,235
12.750% 2014 44 49
13.000% 2011-2016 2,121 2,437
13.500% 2010-2015 1,398 1,618
14.000% 2011-2012 86 100
14.500% 2012 17 20
15.000% 2011-2012 85 100
--------
211,568
--------
U.S. SMALL BUSINESS ADMINISTRATION:
7.600% 01/01/12 2,624 2,623
8.200% 10/01/11 2,328 2,367
8.250% 11/01/11 5,338 5,423
8.650% 11/01/14 3,758 3,824
8.850% 08/01/11 711 731
9.150% 07/01/11 2,121 2,199
--------
17,167
--------
TOTAL GOVERNMENT AGENCIES
(cost of $560,967) 521,971
--------
GOVERNMENT OBLIGATIONS - 36.2%
U.S. TREASURY BONDS:
5.250% 02/15/29 10,020 8,658
7.875% 02/15/21(b) 25,241 29,382
12.000% 08/15/13(b) 13,843 18,396
--------
56,436
--------
U.S. TREASURY NOTES:
5.750% 08/15/03(b) 19,169 18,663
5.875% 11/15/05(b) 18,210 17,524
6.500% 11/15/26(b) 4,294 4,394
6.875% 05/15/06(b) 85,383 86,157
7.875% 11/15/04(b) 19,518 20,460
10.375% 11/15/12(b) 49,603 60,035
--------
207,233
--------
TOTAL GOVERNMENT OBLIGATIONS
(cost of $246,589) 263,669
--------
TOTAL INVESTMENTS (cost of $807,556) (c) 785,640
--------
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM OBLIGATIONS - 16.0% PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
Repurchase agreement with SBC
Warburg Ltd., dated 2/29/00, due
3/01/00 at 5.77%, collateralized by
U.S. Treasury notes and/or bonds with various
maturities to 2021, market value $118,720
(repurchase proceeds $116,150) (b) $116,131 $ 116,131
---------
OTHER ASSETS & LIABILITIES, NET - (23.9)% (173,743)
--------------------------------------------------------------------------------
Net Assets - 100% $ 728,028
=========
</TABLE>
NOTES TO INVESTMENT PORTFOLIO:
(a) These securities, or a portion thereof, have been purchased on a delayed
delivery basis whereby the terms that are fixed are the purchase price,
interest rate and the settlement date. The exact quantity purchased may be
slightly more or less than the amount shown.
(b) These securities, or a portion thereof, with a total market value of
$337,089, are being used to collateralize the delayed delivery purchases
indicated in note (a) above, open futures contracts and written call
options.
(c) Cost for federal income tax purposes is the same.
Short future contracts open at February 29, 2000:
<TABLE>
<CAPTION>
PAR VALUE UNREALIZED
COVERED BY EXPIRATION APPRECIATION
TYPE CONTRACTS MONTH AT 2/29/00
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Treasury Bond $268 June $197
Treasury Note $661 March 106
----
$303
====
</TABLE>
See notes to financial statements.
12
<PAGE> 15
INVESTMENT PORTFOLIO (CONTINUED)
February 29, 2000 (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
COLONIAL FEDERAL SECURITIES FUND
U.S. GOVERNMENT &
AGENCY OBLIGATIONS - 112.2% PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C> <C>
GOVERNMENT AGENCIES - 62.5%
MATURITIES
COUPON FROM/TO
-------------------------------
FEDERAL HOME LOAN MORTGAGE CORP.:
6.500% 2024(a) $ 65,000 $ 62,400
6.500% 2029 56,228 52,573
7.500% 2016 384 376
8.000% 2003-2016 1,818 1,816
8.500% 2007-2010 1,286 1,310
8.750% 2004-2010 467 478
9.000% 2001-2022 2,879 2,967
9.250% 2008-2010 2,451 2,528
9.500% 2004-2016 1,113 1,158
9.750% 2008-2016 405 423
10.000% 2019 285 301
10.250% 2009-2013 682 721
10.500% 2017-2020 998 1,082
11.250% 2003-2015 767 828
11.500% 2015 90 98
12.000% 2013 31 34
---------
129,093
---------
FEDERAL NATIONAL MORTGAGE ASSOCIATION:
6.000% 2008-2024(a) 46,006 43,523
6.500% 2003-2029 5,228 4,899
7.000% 2010-2027(a) 27,770 26,567
7.500% 2002-2027(a) 138,207 135,548
8.000% 2008-2019 1,451 1,465
8.250% 2008-2011 715 716
8.500% 2008-2017 2,369 2,436
9.000% 2002-2021 8,282 8,565
9.500% 2008-2018 864 908
---------
224,627
---------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION:
6.500% 2023-2029 9,782 9,116
7.000% 2022-2028(a) 37,765 35,879
7.500% 2006-2007 543 539
8.000% 2005-2008 38 39
9.000% 2008-2017 4,112 4,290
9.500% 2009-2019 11,172 11,857
10.000% 2000-2003 44 46
10.500% 2013-2021 5,833 6,362
11.000% 2010 1 2
11.500% 2013-2013 22 24
11.750% 2013-2015 99 110
12.000% 2012-2015 280 314
</TABLE>
<TABLE>
<CAPTION>
PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C> <C>
12.500% 2010-2014 $ 2,675 $ 3,049
13.000% 2011-2015 1,103 1,268
---------
72,895
---------
TOTAL GOVERNMENT AGENCIES
(cost of $412,699) 426,615
---------
GOVERNMENT OBLIGATIONS - 49.7%
U.S. TREASURY BONDS:
5.250% 02/15/29 8,980 7,759
8.750% 08/15/20 14,333 18,042
12.000% 08/15/13 91,051 120,999
12.750% 11/15/10(b) 46,873 59,704
---------
206,504
---------
U.S. TREASURY NOTES:
7.875% 11/15/04(b) 2,052 2,151
8.875% 02/15/19 35,758 45,049
10.375% 11/15/12(b) 53,118 64,289
---------
111,489
---------
U.S. TREASURY STRIP:
0.000% 08/15/12 47,184 21,075
---------
TOTAL GOVERNMENT OBLIGATIONS
(cost of $330,194) 339,068
---------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(cost of $742,893) 765,683
---------
NON-AGENCY MORTGAGE-BACKED SECURITIES &
ASSET-BACKED SECURITIES - 18.1%
--------------------------------------------------------------------------------
NON-AGENCY MORTGAGE-BACKED SECURITIES - 7.1%
MATURITIES
COUPON FROM/TO
-------------------------------
Countrywide Mortgage Trust:
7.600% 04/25/23 893 893
7.990% 03/31/31 20,520 20,538
8.600% 03/31/31 3,840 3,722
CS First Boston Mortgage Securities Corp.,
7.500% 06/01/20(b) 6,962 6,790
First Boston Mortgage Securities Corp.,
6.150% 09/28/13 942 935
Headlands Mortgage Securities, Inc.:
6.500% 11/25/28 494 406
7.750% 03/25/27 5,255 5,165
Norwest Asset Securities Corp.:
6.750% 05/25/28 1,690 1,518
7.000% 04/25/12 2,299 2,154
PNC Mortgage Securities Corp.,
7.000% 05/25/27 2,299 2,200
</TABLE>
13
<PAGE> 16
INVESTMENT PORTFOLIO (CONTINUED)
February 29, 2000
(In thousands)
<TABLE>
<CAPTION>
COLONIAL FEDERAL SECURITIES FUND
(CONTINUED) PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C> <C>
NON-AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
MATURITIES
COUPON FROM/TO
--------------------------------
Residential Asset Securitization Trust:
7.500% 11/25/11 $ 1,034 $ 1,002
7.500% 12/25/29 1,698 1,628
Structured Mortgage Asset Residential Trust,
8.375% 06/25/08 1,438 1,460
---------
48,411
---------
ASSET-BACK SECURITIES - 11.0%
Contimortgage Home Equity Loan Trust,
7.340% 04/15/28 4,000 3,843
Conseco Finance,
8.380% 02/15/31 1,300 1,300
Contimortgage Home Equity Loan Trust,
7.310% 08/15/28 7,150 7,066
Delta Funding Home Equity Loan Trust,
7.330% 10/25/28 7,300 6,752
Empire Funding Home Loan Owner Trust,
7.510% 03/25/23 4,000 3,864
Green Tree Financial Corp.:
7.200% 01/15/28 10,000 9,907
7.320% 07/15/28 4,500 4,380
7.850% 08/15/25 8,600 7,575
Indymac Manufactured Housing Contract,
6.970% 02/25/28 4,610 4,472
The Money Store Home Equity Trust:
7.910% 05/15/24 9,306 9,357
8.525% 06/15/25 2,800 2,846
Option One Mortgage Loan Trust,
8.438% 04/25/30 300 300
Preferred Mortgage Asset Trust,
7.900% 05/25/12 1,766 1,743
Prudential Home Mortgaged Securities,
6.454% 12/28/08 1,263 1,195
Residential Accredited Loans, Inc.,
6.500% 05/25/29 3,900 3,265
Salomon Brothers Mortgage Securities,
7.000% 02/25/30 3,750 3,313
Tryon Mortgage Funding, Inc.,
7.500% 02/20/27 1,214 1,168
UCFC Home Equity Loan Trust,
8.550% 01/10/20 2,650 2,684
---------
75,030
=========
</TABLE>
<TABLE>
<CAPTION>
VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
NON-AGENCY MORTGAGE-BACKED &
ASSET-BACKED SECURITIES
(cost $185,443) $ 123,441
---------
TOTAL INVESTMENTS
(cost of $928,336) (c) 889,124
---------
SHORT-TERM OBLIGATIONS - 5.3% PAR
--------------------------------------------------------------------------------
Repurchase agreement with
SBC Warburg Ltd., dated 02/29/00,
due 03/01/00 at 5.77%,
collateralized by U.S. Treasury notes
and/or bonds with various maturities
to 2021, market value $37,033 (repurchase
proceeds $36,231) $36,225 36,225
---------
OTHER ASSETS & LIABILITIES, NET - (35.6)% (242,909)
--------------------------------------------------------------------------------
Net Assets - 100.0% $ 682,440
=========
</TABLE>
--------------------------------------------------------------------------------
NOTES TO INVESTMENT PORTFOLIO:
(a) These securities have been purchased on a delayed delivery basis whereby the
terms that are fixed are the purchase price, interest rate and the
settlement date. The exact quantity purchased may be slightly more or less
than the amount shown.
(b) These securities, or a portion thereof, with a total market value of
$132,934 are being used to collateralize the delayed delivery purchases
indicated in note (a) above.
(c) Cost for federal income tax purposes is the same.
Futures contracts open on February 29, 2000:
<TABLE>
<CAPTION>
PAR VALUE UNREALIZED
COVERED BY EXPIRATION DEPRECIATION
TYPE CONTRACTS MONTH AT 2/29/00
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Treasury Note $105 March $(914)
</TABLE>
ACRONYM NAME
--------------------------------------------------------------------------------
STRIP Separately Traded Receipt
of Interest and Principal
See notes to financial statements.
14
<PAGE> 17
STATEMENT OF ASSETS AND LIABILITIES
February 29, 2000 (Unaudited)
(In thousands except for per share amounts and footnotes)
<TABLE>
<CAPTION>
CSDUSGF CIUSGF
--------------------------------------------------------- ----------------------- ----------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments at cost $ 23,541 $ 807,556
Depreciation (170) (21,916)
------------- ---------------
Investments at value 23,371 785,640
Short-term obligations 5,283 116,131
------------- ---------------
28,654 901,771
Receivable for:
Investments sold $3,476 $ 38,688
Interest 233 7,029
Fund shares sold 29 33
Variation margin on futures -- 264
Expense reimbursement due from Advisor 28 --
Other 2 3,768 117 46,131
------ ------------- -------- ---------------
Total Assets 32,422 947,902
LIABILITIES
Payable for:
Investments purchased 8,250 215,909
Fund shares repurchased 128 2,096
Distributions 35 1,048
Accrued:
Management fee 11 369
Service fee 2 --
Transfer Agent fee 10 166
Bookkeeping fee 2 22
Deferred Trustees fees 3 24
Other 52 240
------ --------
Total Liabilities 8,493 219,874
------------- ---------------
NET ASSETS $ 23,929 $ 728,028
------------- ---------------
Net asset value & redemption price per share -- $9.65(a) $6.18(a)
------------- ---------------
Class A ($12,300/1,275) ($481,123/77,769)
Maximum offering price per share -- $9.97(b) $6.49(b)
Class A ($9.65/0.9675) ($6.18/0.9525)
------------- ---------------
Net asset value & offering price per share -- $9.65(a) $6.18(a)
Class B ($7,460/773) ($237,450/38,358)
------------- ---------------
Net asset value & offering price per share -- $9.65(a) $6.18(a)
Class C ($4,169/433) ($2,475/401)
------------- ---------------
Net asset value, offering & redemption price per share -- N/A $6.18
Class Z N/A ($6,980/1,129)
COMPOSITION OF NET ASSETS
Capital paid in $ 24,662 $ 895,278
Undistributed (Overdistributed) net investment income (42) 379
Accumulated net realized loss (521) (146,016)
Net unrealized appreciation (depreciation) on:
Investments (170) (21,916)
Open futures contracts -- 303
------------- ---------------
$ 23,929 $ 728,028
============= ===============
</TABLE>
<TABLE>
<CAPTION>
CFSF
--------------------------------------------------------- ---------------------------
<S> <C> <C>
ASSETS
Investments at cost $ 928,336
Depreciation (39,212)
---------------
Investments at value 889,124
Short-term obligations 36,225
---------------
925,349
Receivable for:
Investments sold $104,537
Interest 6,383
Fund shares sold 247
Variation margin on futures 459
Expense reimbursement due from Advisor --
Other 645 112,271
-------- ---------------
Total Assets 1,037,620
LIABILITIES
Payable for:
Investments purchased 349,020
Fund shares repurchased 1,915
Distributions 3,370
Accrued:
Management fee 338
Service fee --
Transfer Agent fee 213
Bookkeeping fee 23
Deferred Trustees fees 20
Other 281
--------
Total Liabilities 355,180
---------------
NET ASSETS $ 682,440
---------------
Net asset value & redemption price per share -- $9.85(a)
---------------
Class A ($616,750/62,633)
Maximum offering price per share -- $10.34(b)
Class A ($9.86/0.9525)
---------------
Net asset value & offering price per share -- $9.85(a)
Class B ($61,098/6,205)
---------------
Net asset value & offering price per share -- $9.85(a)
Class C ($4,591/466)
---------------
Net asset value, offering & redemption price per share -- $9.85
Class Z ($1/(c))
COMPOSITION OF NET ASSETS
Capital paid in $ 866,244
Undistributed (Overdistributed) net investment income 792
Accumulated net realized loss (144,470)
Net unrealized appreciation (depreciation) on:
Investments (39,212)
Open futures contracts (914)
---------------
$ 682,440
===============
</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 of CSDUSGF, $50,000 or more of CIUSGF, $50,000
or more of CFSF the offering price is reduced.
(c) Rounds to less than one.
See notes to financial statements.
15
<PAGE> 18
STATEMENT OF OPERATIONS
For the Six Months Ended February 29, 2000 (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
CSDUSGF CIUSGF CFSF
------------------------------------------------- --------------- ------------------ ---------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Interest $ 776 $ 28,543 $ 27,991
Dollar roll fee income 33 1,477 2,236
----- -------- ---------
809 30,020 30,227
EXPENSES
Management fee $ 67 $ 2,387 $ 2,182
Service fee -- Class A, Class B, Class C 26 976 903
Distribution fee -- Class B 26 1,013 255
Distribution fee -- Class C 4 11 19
Transfer agent fee 21 882 620
Bookkeeping fee 14 144 135
Trustees fee 4 22 21
Custodian fee 1 17 14
Audit fee 9 21 22
Legal fee 6 5 2
Registration fee 17 21 33
Reports to shareholders 1 21 19
Other 6 79 230
------- ------- ---------
202 5,599 4,455
Fees and expenses waived or borne
by the Advisor (73) -- --
Fees waived by the Distributor -- Class C -- 129 (2) 5,597 (4) 4,451
------- ----- ------- -------- --------- ---------
Net Investment Income 680 24,423 25,776
----- -------- ---------
NET REALIZED & UNREALIZED GAIN (LOSS)
ON PORTFOLIO POSITIONS
Net realized gain (loss) on:
Investments and purchased options (226) (7,523) (11,063)
Written options -- 289 281
Closed futures contracts -- (1,750) (1,522)
Net Realized Loss -- (226) (8,984) (12,304)
------- ----- ------- -------- --------- ---------
Net change in unrealized appreciation
(depreciation)
during the period on:
Investments 46 (7,858) (7,388)
Open futures contracts -- (25) (1,126)
Open written options -- (147) (147)
Net Change in Unrealized
Appreciation/Depreciation -- 46 (8,030) (8,661)
------- ----- ------- -------- --------- ---------
Net Loss (180) (17,014) (20,965)
----- -------- ---------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ 500 $ 7,409 $ 4,811
===== ======== =========
</TABLE>
See notes to financial statements.
16
<PAGE> 19
STATEMENT OF CHANGES IN NET ASSETS
(In thousands)
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Six Months Six Months
Ended Year Ended Ended Year Ended
February 29 August 31 February 29 August 31
---------------------------------------------------------------------------------------------------------------------------------
CSDUSGF CIUSGF
---------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS 2000 1999 2000 1999(a)
<S> <C> <C> <C> <C>
Operations:
Net investment income $ 680 $ 1,101 $ 24,423 $ 55,956
Net realized loss (226) (235) (8,984) (11,415)
Net unrealized appreciation (depreciation) 46 (203) (8,030) (52,631)
----------- ----------- ----------- -----------
Net Increase (Decrease) from Operations 500 663 7,409 (8,090)
Distributions:
From net investment income -- Class A (330) (567) (15,750) (33,518)
In excess of net investment income -- Class A -- (11) -- --
In excess of gains -- Class A -- (7) -- --
From net investment income -- Class B (205) (325) (7,264) (16,988)
In excess of net investment income -- Class B -- (6) -- --
In excess of gains -- Class B -- (4) -- --
From net investment income -- Class C (149) (169) (84) (116)
In excess of net investment income -- Class C -- (3) -- --
In excess of gains -- Class C -- (3) -- --
From net investment income -- Class Z -- -- (230) (138)
In excess of net investment income -- Class Z -- -- -- --
----------- ----------- ----------- -----------
(184) (432) (15,919) (58,850)
----------- ----------- ----------- -----------
Fund Share Transactions:
Receipts for shares sold -- Class A 4,735 16,989 26,085 132,798
Receipts for shares issued in the acquisition of Crabbe Huson
U.S. Government Income Fund -- 4,254 -- --
Value of distributions reinvested -- Class A 274 467 9,846 20,730
Cost of shares repurchased -- Class A (4,379) (17,154) (81,682) (229,910)
----------- ----------- ----------- -----------
630 4,556 (45,751) (76,382)
----------- ----------- ----------- -----------
Receipts for shares sold -- Class B 2,104 9,622 8,585 35,046
Value of distributions reinvested -- Class B 143 219 4,073 9,834
Cost of shares repurchased -- Class B (2,927) (8,969) (65,826) (122,781)
----------- ----------- ----------- -----------
(680) 872 (53,168) (77,901)
----------- ----------- ----------- -----------
Receipts for shares sold -- Class C 765 4,319 366 3,162
Value of distributions reinvested -- Class C 105 138 62 97
Cost of shares repurchased -- Class C (1,858) (1,066) (994) (969)
----------- ----------- ----------- -----------
(988) 3,391 (566) 2,290
----------- ----------- ----------- -----------
Receipts for shares sold -- Class Z -- -- 699 7,432
Value of distributions reinvested -- Class Z -- -- 233 125
Cost of shares repurchased -- Class Z -- -- (1,111) (13)
----------- ----------- ----------- -----------
-- -- (179) 7,544
----------- ----------- ----------- -----------
Net Increase (Decrease) from Fund Share Transactions (1,038) 8,819 (99,664) (144,449)
----------- ----------- ----------- -----------
Total Increase (Decrease) (1,222) 8,387 (115,583) (203,299)
----------- ----------- ----------- -----------
NET ASSETS
Beginning of period 25,151 16,764 843,611 1,046,910
----------- ----------- ----------- -----------
End of period $ 23,929 $ 25,151 $ 728,028 $ 843,611
----------- ----------- ----------- -----------
Net of undistributed (overdistributed) net investment income $ (42) $ (49) $ 379 $ 3,548
----------- ----------- ----------- -----------
NUMBER OF FUND SHARES
Sold -- Class A 489 1,732 4,158 19,974
Issued in acquisition of Crabbe Huson U.S. Government Income Fund -- 421 -- --
Issued for distributions reinvested -- Class A 28 47 1,571 3,136
Repurchased -- Class A (451) (1,719) (13,039) (34,684)
----------- ----------- ----------- -----------
66 481 (7,310) (11,574)
----------- ----------- ----------- -----------
Sold -- Class B 217 965 1,363 5,259
Issued for distributions reinvested -- Class B 15 22 650 1,487
Repurchased -- Class B (302) (898) (10,497) (18,569)
----------- ----------- ----------- -----------
(70) 89 (8,484) (11,823)
----------- ----------- ----------- -----------
Sold -- Class C 79 435 58 476
Issued for distributions reinvested -- Class C 11 14 10 15
Repurchased -- Class C (192) (108) (159) (148)
----------- ----------- ----------- -----------
(102) 341 (91) 343
----------- ----------- ----------- -----------
Sold -- Class Z -- -- 110 1,141
Issued for distributions reinvested -- Class Z -- -- 37 19
Repurchased -- Class Z -- -- (176) (2)
----------- ----------- ----------- -----------
-- -- (29) 1,158
----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
(Unaudited)
Six Months
Ended Year Ended
February 29 August 31
--------------------------------------------------------------------------------------------------
CFSF
--------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS 2000 1999(b)
<S> <C> <C>
Operations:
Net investment income $ 25,776 $ 55,075
Net realized loss (12,304) (16,079)
Net unrealized appreciation (depreciation) (8,661) (60,077)
----------- -----------
Net Increase (Decrease) from Operations 4,811 (21,081)
Distributions:
From net investment income -- Class A (23,306) (47,748)
In excess of net investment income -- Class A -- --
In excess of gains -- Class A -- --
From net investment income -- Class B (2,157) (4,106)
In excess of net investment income -- Class B -- --
In excess of gains -- Class B -- --
From net investment income -- Class C (162) (207)
In excess of net investment income -- Class C -- --
In excess of gains -- Class C -- --
From net investment income -- Class Z (c) (c)
In excess of net investment income -- Class Z -- --
----------- -----------
(20,814) (73,142)
----------- -----------
Fund Share Transactions:
Receipts for shares sold -- Class A 11,542 45,956
Receipts for shares issued in the acquisition of Crabbe Huson
U.S. Government Income Fund -- --
Value of distributions reinvested -- Class A 12,274 24,813
Cost of shares repurchased -- Class A (69,859) (144,033)
----------- -----------
(46,043) (73,264)
----------- -----------
Receipts for shares sold -- Class B 5,968 36,968
Value of distributions reinvested -- Class B 1,319 2,386
Cost of shares repurchased -- Class B (16,576) (32,284)
----------- -----------
(9,289) 7,070
----------- -----------
Receipts for shares sold -- Class C 846 4,548
Value of distributions reinvested -- Class C 137 171
Cost of shares repurchased -- Class C (1,232) (725)
----------- -----------
(249) 3,994
----------- -----------
Receipts for shares sold -- Class Z (c) 1
Value of distributions reinvested -- Class Z (c) (c)
Cost of shares repurchased -- Class Z (c) (c)
----------- -----------
-- 1
----------- -----------
Net Increase (Decrease) from Fund Share Transactions (55,581) (62,199)
----------- -----------
Total Increase (Decrease) (76,395) (135,341)
----------- -----------
NET ASSETS
Beginning of period 758,835 894,176
----------- -----------
End of period $ 682,440 $ 758,835
----------- -----------
Net of undistributed (overdistributed) net investment income $ 792 $ 641
----------- -----------
NUMBER OF FUND SHARES
Sold -- Class A 1,171 4,205
Issued in acquisition of Crabbe Huson U.S. Government Income Fund -- --
Issued for distributions reinvested -- Class A 1,196 2,305
Repurchased -- Class A (6,975) (13,322)
----------- -----------
(4,608) (6,812)
----------- -----------
Sold -- Class B 604 3,383
Issued for distributions reinvested -- Class B 121 222
Repurchased -- Class B (1,653) (2,972)
----------- -----------
(928) 633
----------- -----------
Sold -- Class C 85 416
Issued for distributions reinvested -- Class C 13 16
Repurchased -- Class C (124) (67)
----------- -----------
(26) 365
----------- -----------
Sold -- Class Z (c) (c)
Issued for distributions reinvested -- Class Z (c) (c)
Repurchased -- Class Z (c) --
----------- -----------
-- --
----------- -----------
</TABLE>
(a) Class Z shares were initially offered on January 29, 1999
(b) Class Z shares were initially offered on January 11, 1999.
(c) Rounds to less than one.
See notes to financial statements.
17
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
February 29, 2000 (Unaudited)
NOTE 1. INTERIM FINANCIAL STATEMENTS
In the opinion of management of Colonial Short Duration U.S. Government Fund
(CSDUSGF) and Colonial Intermediate U.S. Government Fund (CIUSGF), both a series
of Colonial Trust II, and Colonial Federal Securities Fund (CFSF), a series of
Colonial Trust III (the series are collectively referred to as the Funds and are
diversified portfolios), the accompanying financial statements contain all
normal and recurring adjustments necessary for the fair presentation of the
financial position of the Funds at February 29, 2000, and the results of their
operations, the changes in their net assets and the financial highlights for the
six months ended.
NOTE 2: ACCOUNTING POLICIES
ORGANIZATION:
The Funds are Massachusetts business trusts registered under the Investment
Company Act of 1940, as amended, as open end management investment companies.
CSDUSGF's investment objective is to seek as high a level of current income, as
is consistent with very low volatility, by investing primarily in U.S.
government securities and maintaining a weighted average portfolio duration of
three years or less. CIUSGF's investment objective is to seek as high a level of
current income and total return, as is consistent with prudent risk, by
investing primarily in U.S. government securities. CFSF's investment objective
is to seek as high a level of current income and total return, as is consistent
with prudent longer-term investing, by investing primarily in U.S. government
securities. The Funds may issue an unlimited number of shares. CSDUSGF offers
three classes of shares: Class A, Class B, and Class C. CIUSGF and CFSF offer
four classes of shares: Class A, Class B, Class C, and Class Z. Class A shares
are sold with a front-end sales charge. A 1.00% contingent deferred sales charge
is assessed 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. Effective February 1,
2000, Class B shares will convert to Class A shares as follows:
<TABLE>
<CAPTION>
ORIGINAL PURCHASE CONVERTS TO CLASS A SHARES
-------------------------------------------------------------
<S> <C>
Less than $250,000 8 years
$250,000 to less than $500,000 4 years
$500,000 to less than $1,000,000 3 years
</TABLE>
Class C shares are subject to a contingent deferred sales charge on redemptions
made within one year after purchase and an annual distribution fee. Class Z
shares are offered continuously at net asset value. There are certain
restrictions on purchasing Class Z shares, please refer to a prospectus.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount 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 in the preparation of the Funds' financial statements.
SECURITY VALUATION AND TRANSACTIONS:
The Funds portfolio positions 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.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
Portfolio positions for which market quotations are not readily available are
valued at fair value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains (losses) are based upon the specific identification
method for both financial statement and federal income tax purposes.
The Funds may enter into mortgage dollar roll transactions. A mortgage dollar
roll transaction involves a sale by the Fund of securities that it holds with an
agreement by the Fund to repurchase substantially similar securities at an
agreed upon price and date. During the period between the sale and repurchase,
the Fund will not be entitled to accrue interest and receive principal payments
on the securities sold. Mortgage dollar roll transactions involve the risk that
the market value of the securities sold by the Fund may decline below the
repurchase price of those securities. In the event the buyer of the securities
under a mortgage dollar roll transaction files for bankruptcy or becomes
insolvent, the Fund's use of proceeds of the transaction may be restricted
pending a determination by or with respect to the other party.
The Funds 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 invest at less advantageous prices.
The Funds maintain U.S. government securities or other liquid high grade debt
obligations as collateral with respect to mortgage dollar roll transactions and
securities traded on other than normal settlement terms.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS:
All income, expenses (other than the Class A, Class B, and Class C service fees
and 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 A, Class B, and Class C per share data and ratios are calculated by
adjusting the expense and net investment income ratios for each Fund for the
entire period by the service fees for Class A, Class B, and Class C shares and
the distribution fees for Class B and Class C shares only.
FEDERAL INCOME TAXES:
Consistent with each 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, FEE INCOME, DEBT DISCOUNT AND PREMIUM:
Interest income is recorded on the accrual basis. Fee income attributable to
mortgage dollar roll transactions is recorded on the accrual basis over the term
of the transaction. Original issue discount is accreted to interest income over
the life of a security with a corresponding increase in the cost basis. For
18
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
February 29, 2000 (Unaudited)
CSDUSGF market discount is not accreted and premium is amortized against
interest income with a corresponding decrease in the cost basis. For CIUSGF and
CFSF premium and market discount are not amortized or accreted.
DISTRIBUTIONS TO SHAREHOLDERS:
Each 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. These differences are primarily due to differing
treatments for mortgage backed securities for book and tax purposes and expired
capital loss carryforwards. Permanent book and tax basis differences will result
in reclassifications to capital accounts.
OTHER:
The Funds' custodian takes possession through the federal book entry system of
securities collateralizing repurchase agreements. Collateral is marked-to-market
daily to ensure that the market value of the underlying assets remains
sufficient to protect the Fund. The Fund may experience costs and delays in
liquidating the collateral if the issuer defaults or enters bankruptcy.
NOTE 3: FEES AND COMPENSATION PAID TO AFFILIATES
MANAGEMENT FEE:
Colonial Management Associates, Inc. (the Advisor) is the investment Advisor of
each Fund and furnishes accounting and other services and office facilities for
a monthly fee based on each Fund's average net assets as follows:
CSDUSGF
Flat fee rate of 0.55%
CIUSGF
<TABLE>
<CAPTION>
AVERAGE NET ASSETS ANNUAL FEE RATE
-------------------------------------------------------------
<S> <C>
First $1 billion 0.60%
Next $500 million 0.55%
Over $1.5 billion 0.50%
</TABLE>
CFSF
<TABLE>
<CAPTION>
AVERAGE NET ASSETS ANNUAL FEE RATE
------------------------------------------------------------
<S> <C>
First $1 billion 0.60%
Next $1 billion 0.55%
Next $1 billion 0.50%
Over $3 billion 0.40%
</TABLE>
BOOKKEEPING FEE:
For each Fund the Advisor provides bookkeeping and pricing services for a
monthly fee equal to $27,000 annually plus a percentage of the Fund's average
net assets as follows:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS ANNUAL FEE RATE
------------------------------------------------------------
<S> <C>
First $50 million No charge
Next $950 million 0.035%
Next $1 billion 0.025%
Next $1 billion 0.015%
</TABLE>
TRANSFER AGENT FEE:
Liberty Funds Services, Inc. (the Transfer Agent), an affiliate of the Advisor,
provides shareholder services for a monthly fee equal to 0.17% annually of each
Fund's average net assets and receives reimbursement for certain out-of-pocket
expenses.
Effective January 1, 2000, the Transfer Agent fee was changed to a fee comprised
of 0.07% annually of average net assets plus charges based on the number of
shareholder accounts and transactions.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES:
Liberty Funds Distributor, Inc. (the Distributor), a subsidiary of the Advisor,
is each Fund's principal underwriter. During the six months ended February 29,
2000, each Fund has been advised that the Distributor retained net underwriting
discounts on CSDUSGF, CIUSGF and CFSF of $857, $35,703, and $8,357,
respectively, on sales of the Funds' Class A shares and received contingent
deferred sales charges (CDSC) of $1,555, $4,835, and $20 on Class A share
redemptions, $26,797, $441,463, and $114,727 on Class B share redemptions, and
$1,834, $4,915, and $695, on Class C share redemptions, respectively.
Each Fund has adopted a 12b-1 plan which requires the payment of a service fee
to the Distributor. CIUSGF and CFSF pay a service fee equal to 0.25% annually of
their net assets as of the 20th of each month. CSDUSGF pays a service fee equal
to 0.20% annually of Class A and Class B net assets and 0.25% annually of Class
C net assets as of the 20th of each month. The plan also requires the payment of
a distribution fee to the Distributor. CSDUSGF pays a distribution fee equal to
0.65% annually of the average net assets of Class B shares and 0.15% annually of
the average net assets of Class C shares. CIUSGF and CFSF each pay a
distribution fee 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.
EXPENSE LIMITS:
For CSDUSGF, 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.
OTHER:
The Funds pay no compensation to their officers, all of whom are employees of
the Advisor.
The Funds' 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
Funds' assets.
NOTE 4: PORTFOLIO INFORMATION
INVESTMENT ACTIVITY:
For the six months ended February 29, 2000, purchases and sales of investments,
other than short-term obligations and mortgage dollar roll transactions, were as
follows:
<TABLE>
<CAPTION>
PURCHASES SALES
-------------------------------------------------------------
<S> <C> <C>
CSDUSGF $ 31,708,436 $ 36,053,349
CIUSGF $1,112,205,200 $1,230,453,124
CFSF $1,794,270,923 $1,875,028,083
</TABLE>
19
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
February 29, 2000 (Unaudited)
Transactions in written call options were as follows:
<TABLE>
<CAPTION>
CIUSGF
-------------------------------------------------------------
PAR VALUE
COVERED BY PREMIUMS
WRITTEN OPTIONS RECEIVED
-------------------------------------------------------------
<S> <C> <C>
Outstanding at
Beginning of period $30,000,000 $147,656
Written 37,000,000 141,641
Closed -- --
Expirations 67,000,000 289,297
Exercises -- --
Outstanding at
End of period -- --
</TABLE>
<TABLE>
<CAPTION>
CFSF
-------------------------------------------------------------
PAR VALUE
COVERED BY PREMIUMS
WRITTEN OPTIONS RECEIVED
-------------------------------------------------------------
<S> <C> <C>
Outstanding at
Beginning of period $30,000,000 $147,656
Written 35,000,000 133,984
Closed -- --
Expirations 65,000,000 281,640
Exercises -- --
Outstanding at
End of period -- --
</TABLE>
Unrealized appreciation (depreciation) at February 29, 2000, for both financial
statement and federal income tax purposes was:
<TABLE>
<CAPTION>
CSDUSGF CIUSGF CFSF
------------------------------------------------------------
<S> <C> <C> <C>
Gross unrealized
appreciation $ 56,019 $ 3,657 $ 3,010
Gross unrealized
depreciation (225,765) (25,573) (42,222)
--------- -------- --------
Net unrealized
depreciation $(169,746) $(21,916) $(39,212)
--------- -------- --------
</TABLE>
CAPITAL LOSS CARRYFORWARDS:
At August 31, 1999, 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> <C>
CIUSGF 2001 $ 4,910,000
2002 7,249,000
2003 67,291,000
2004 32,580,000
2005 18,973,000
------------
$131,003,000
============
</TABLE>
Of the CIUSGF loss carryforwards expiring in 2001 and 2002, $4,910,000 and
$4,423,000, respectively, were acquired in the merger with Liberty Financial
U.S. Government Securities Fund. Their availability for use in offsetting any
future realized gains may be limited in a given year.
<TABLE>
<CAPTION>
YEAR OF CAPITAL LOSS
EXPIRATION CARRYFORWARD
-------------------------------------------------------------
<S> <C> <C>
CFSF 2000 $ 595,000
2002 84,302,000
2004 21,929,000
------------
$106,826,000
============
</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:
CIUSGF and CFSF may purchase or sell futures contracts and purchase and write
options on futures and securities. The Funds will use these instruments to hedge
against the effects of changes in the value of the portfolio securities due to
anticipated changes in interest rates and/or market conditions and not for
trading purposes. The Funds may also invest in these instruments for duration
management. The use of futures contracts and options involves certain risks
which include (1) the 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 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, or option premium recorded in
the Funds' Statement of Assets and Liabilities at any given time.
NOTE 5: LINE OF CREDIT
CSDUSGF may borrow up to 331/3% of its net assets under a line of credit for
temporary or emergency purposes. Any borrowings bear interest at one of the
following options determined at the inception of the loan: (1) federal funds
rate plus 1/2 of 1%, (2) the lending bank's base rate or (3) IBOR offshore loan
rate plus 1/2 of 1%. There were no borrowings under the line of credit during
the six months ended February 29, 2000.
NOTE 6: MERGER INFORMATION
On October 16, 1998, Crabbe Huson U.S. Government Income Fund (CHUSGIF) was
merged into CSDUSGF by a non-taxable exchange of 421,220 Class A shares of the
Fund (valued at $4,254,320) for the 382,027 of CHUSGIF shares then outstanding.
The assets of CHUSGIF acquired included unrealized appreciation of $105,545. The
aggregate net assets of the Fund and CHUSGIF immediately after the merger were
$23,875,969.
20
<PAGE> 23
Financial Highlights CSDUSGF
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED FEBRUARY 29, 2000
------------------------------------------
CLASS A CLASS B CLASS C
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.720 $ 9.720 $ 9.720
----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.282 0.251 0.272
Net realized and unrealized loss (0.072) (0.072) (0.072)
----------- ----------- -----------
Total from Investment Operations 0.210 0.179 0.200
----------- ----------- -----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.280) (0.249) (0.270)
----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 9.650 $ 9.650 $ 9.650
----------- ----------- -----------
Total return (b)(c)(d) 2.18% 1.85% 2.08%
----------- ----------- -----------
RATIOS TO AVERAGE NET ASSETS:
Expenses (e)(f) 0.80% 1.45% 1.00%
Net investment income (e)(f) 5.84% 5.19% 5.64%
Fees and expenses waived or borne by the Advisor (e)(f) 0.60% 0.60% 0.60%
Portfolio turnover (d) 157% 157% 157%
Net assets at end of period (000) $ 12,300 $ 7,460 $ 4,169
(a) Net of fees and expenses waived or
borne by the Advisor which amounted
to: $ 0.060 $ 0.060 $ 0.060
</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 or its affiliates not waived or reimbursed a portion of
expenses, total return would have been reduced.
(d) Not annualized.
(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(f) Annualized.
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31, 1999
------------------------------------------
CLASS A CLASS B CLASS C
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.000 $ 10.000 $ 10.000
----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.482 0.417 0.462
Net realized and unrealized loss (0.278) (0.278) (0.278)
----------- ----------- -----------
Total from Investment Operations 0.204 0.139 0.184
----------- ----------- -----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.470) (0.406) (0.451)
In excess of net investment income (0.009) (0.008) (0.008)
In excess of net realized gains (0.005) (0.005) (0.005)
----------- ----------- -----------
Total Distributions Declared to Shareholders (0.484) (0.419) (0.464)
----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 9.720 $ 9.720 $ 9.720
----------- ----------- -----------
Total return (b)(c) 2.05% 1.39% 1.85%
----------- ----------- -----------
RATIOS TO AVERAGE NET ASSETS:
Expenses (d) 0.80% 1.45% 1.00%
Net investment income (d) 4.87% 4.22% 4.67%
Fees and expenses waived or borne by the Advisor (d) 0.69% 0.69% 0.69%
Portfolio turnover 112% 112% 112%
Net assets at end of period (000) $ 11,750 $ 8,198 $ 5,203
(a) Net of fees and expenses waived or borne
by the Advisor which amounted
to: $ 0.069 $ 0.069 $ 0.069
</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 or its affiliates not waived or reimbursed a portion of
expenses, total return would have been reduced.
(d) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
21
<PAGE> 24
Financial Highlights CSDUSGF (Continued)
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31, 1998
-----------------------------------------
CLASS A CLASS B CLASS C
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.920 $ 9.920 $ 9.920
---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.529 0.462 0.508
Net realized and unrealized gain 0.113 0.113 0.113
---------- ---------- ----------
Total from Investment Operations 0.642 0.575 0.621
---------- ---------- ----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.541) (0.476) (0.521)
In excess of net investment income (0.021) (0.019) (0.020)
---------- ---------- ----------
Total Distributions Declared to Shareholders (0.562) (0.495) (0.541)
---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 10.000 $ 10.000 $ 10.000
---------- ---------- ----------
Total return (b)(c) 6.64% 5.93% 6.41%
---------- ---------- ----------
RATIOS TO AVERAGE NET ASSETS:
Expenses (d) 0.70% 1.35% 0.90%
Net investment income (d) 5.37% 4.72% 5.17%
Fees and expenses waived or borne by the Advisor (d) 1.10% 1.10% 1.10%
Portfolio turnover 183% 183% 183%
Net assets at end of period (000) $ 7,284 $ 7,543 $ 1,937
(a) Net of fees and expenses waived or borne by the Advisor which amounted to: $ 0.110 $ 0.110 $ 0.110
</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 or its affiliates not waived or reimbursed a portion of
expenses, total return would have been reduced.
(d) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31, 1997
-----------------------------------------
CLASS A CLASS B CLASS C
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.820 $ 9.820 $ 9.820
---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.561 0.497 0.542
Net realized and unrealized gain 0.090 0.090 0.090
---------- ---------- ----------
Total from Investment Operations 0.651 0.587 0.632
---------- ---------- ----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.551) (0.487) (0.532)
---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 9.920 $ 9.920 $ 9.920
---------- ---------- ----------
Total return (b)(c) 6.79% 6.11% 6.59%
---------- ---------- ----------
RATIOS TO AVERAGE NET ASSETS:
Expenses (d) 0.50% 1.15% 0.70%
Net investment income (d) 5.64% 4.99% 5.44%
Fees and expenses waived or borne by the Advisor (d) 1.76% 1.76% 1.76%
Portfolio turnover 73% 73% 73%
Net assets at end of period (000) $ 6,858 $ 4,233 $ 575
(a) Net of fees and expenses waived or borne by the Advisor which amounted to: $ 0.169 $ 0.169 $ 0.169
</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 or its affiliates not waived or reimbursed a portion of
expenses, total return would have been reduced.
(d) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
See notes to financial statements.
22
<PAGE> 25
Financial Highlights CSDUSGF (Continued)
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
Year ended August 31
--------------------------------------------------
1996
--------------------------------------------------
Class A Class B Class C
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $ 9.850 $ 9.850 $ 9.850
---------- ---------- ----------
Income From Investment Operations:
Net investment income (a) 0.568 0.504 0.549
Net realized and unrealized gain (loss) (0.032) (0.032) (0.032)
---------- ---------- ----------
Total from Investment Operations 0.536 0.472 0.517
---------- ---------- ----------
Less Distributions Declared to Shareholders:
From net investment income (0.566) (0.502) (0.547)
---------- ---------- ----------
Net Asset Value, End of Period $ 9.820 $ 9.820 $ 9.820
---------- ---------- ----------
Total return (c)(d) 5.57% 4.89% 5.36%
---------- ---------- ----------
Ratios to Average Net Assets:
Expenses 0.50%(f) 1.15%(f) 0.70%(f)
Net investment income 5.99%(f) 5.34%(f) 5.79%(f)
Fees and expenses waived or borne by the Advisor 1.48%(f) 1.48%(f) 1.48%(f)
Portfolio turnover 51% 51% 51%
Net assets at end of period (000) $ 6,136 $ 4,004 $ 461
(a) Net of fees and expenses waived or borne by the
Advisor which amounted to: $ 0.136 $ 0.136 $ 0.136
</TABLE>
<TABLE>
<CAPTION>
Year ended August 31
-----------------------------------------
1995
----------------------------------------
Class A Class B Class C(b)
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $ 9.670 $ 9.670 $ 9.550
---------- ---------- ----------
Income From Investment Operations:
Net investment income (a) 0.514 0.451 0.334
Net realized and unrealized gain (loss) 0.152 0.152 0.280
---------- ---------- ----------
Total from Investment Operations 0.666 0.603 0.614
---------- ---------- ----------
Less Distributions Declared to Shareholders:
From net investment income (0.486) (0.423) (0.314)
---------- ---------- ----------
Net Asset Value, End of Period $ 9.850 $ 9.850 $ 9.850
---------- ---------- ----------
Total return (c)(d) 7.08% 6.39% 6.50%(e)
---------- ---------- ----------
Ratios to Average Net Assets:
Expenses 0.50% 1.15% 0.70%(g)
Net investment income 5.50% 4.85% 5.30%(g)
Fees and expenses waived or borne by the Advisor 1.14% 1.14% 1.14%(g)
Portfolio turnover 36% 36% 36%
Net assets at end of period (000) $ 9,934 $ 3,968 $ 385
(a) Net of fees and expenses waived or borne by the
Advisor which amounted to: $ 0.107 $ 0.107 $ 0.107
</TABLE>
(a) Net of fees and expenses waived or borne by the Advisor which amounted
to:
(b) Class C shares were initially offered on January 4, 1995. Per share
data reflects activity from that date
(c) Total return at net asset value assuming all distributions reinvested
and no initial sales charge or contingent deferred sales charge.
(d) Had the Advisor or its affiliates not waived or reimbursed a portion of
expenses, total return would have been reduced.
(e) Not annualized.
(f) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
(g) Annualized.
23
<PAGE> 26
Financial Highlights CIUSGF
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
(Unaudited)
Six Months Ended February 29, 2000
--------------------------------------------------
Class A Class B Class C Class Z
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 6.320 $ 6.320 $ 6.320 $ 6.320
-------- -------- -------- --------
Income From Investment Operations:
Net investment income 0.194 0.170 0.175(a) 0.201
Net realized and unrealized loss (0.130) (0.130) (0.130) (0.130)
-------- -------- -------- --------
Total from Investment Operations 0.064 0.040 0.045 0.071
-------- -------- -------- --------
Less Distributions Declared to Shareholders:
From net investment income (0.194) (0.170) (0.175) (0.201)
-------- -------- -------- --------
Net Asset Value, End of Period $ 6.190 $ 6.190 $ 6.190 $ 6.190
-------- -------- -------- --------
Total return (b)(c) 1.01% (0.64)% (0.71)%(f) 1.14%
-------- -------- -------- --------
Ratios to Average Net Assets
Expenses (d)(e) 1.16% 1.91% 1.76%(a) 0.91%
Net investment income (d)(e) 6.41% 5.66% 5.81%(a) 6.66%
Portfolio turnover 128% 128% 128% 128%
Net assets at end of period (in millions) $ 481 $ 237 $ 2 $ 7
</TABLE>
(a) Net of fees waived by the Distributor which amounted to $0.007 per
share and 0.15% (annualized).
(b) Total return at net asset value assuming all distributions reinvested
and no initial sales charge or contingent deferred sales charge.
(c) Not annualized.
(d) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(e) Annualized.
(f) Had the Distributor not waived a portion of the expenses, total return
would have been reduced.
<TABLE>
<CAPTION>
Year Ended August 31
---------------------------------------------------
1999
---------------------------------------------------
Class A Class B Class C Class Z(a)
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value,Beginning of Period $ 6.730 $ 6.730 $ 6.730 $ 6.760
-------- -------- -------- --------
Income From Investment Operations:
Net investment income 0.375 0.325 0.335(b) 0.224
Net realized and unrealized gain (loss) (0.416) (0.416) (0.416) (0.435)
-------- -------- -------- --------
Total from Investment Operations (0.041) (0.091) (0.081) (0.211)
-------- -------- -------- --------
Less Distributions Declared to Shareholders:
From net investment income (0.369) (0.319) (0.329) (0.229)
In excess of net investment income -- -- -- --
-------- -------- -------- --------
Total Distributions Declared to Shareholders (0.369) (0.319) (0.329) (0.229)
-------- -------- -------- --------
Net Asset Value, End of Period $ 6.320 $ 6.320 $ 6.320 $ 6.320
-------- -------- -------- --------
Total return (c) (0.70)% (1.44)% (1.29)%(d) (3.31)%(e)
-------- -------- -------- --------
Ratios to Average Net Assets
Expenses (f) 1.15% 1.90% 1.75%(b) 0.92%(g)
Net investment income (f) 6.10% 5.35% 5.50%(b) 6.35%(g)
Portfolio turnover 62% 62% 62% 62%
Net assets at end of period (in millions) $ 537 $ 296 $ 3 $ 7
</TABLE>
<TABLE>
<CAPTION>
Year Ended August 31
----------------------------------------
1998
----------------------------------------
Class A Class B Class C
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value,Beginning of Period $ 6.510 $ 6.510 $ 6.510
-------- -------- --------
Income From Investment Operations:
Net investment income 0.420 0.370 0.380(b)
Net realized and unrealized gain (loss) 0.204 0.204 0.204
-------- -------- --------
Total from Investment Operations 0.624 0.574 0.584
-------- -------- --------
Less Distributions Declared to Shareholders:
From net investment income (0.376) (0.329) (0.339)
In excess of net investment income (0.028) (0.025) (0.025)
-------- -------- --------
Total Distributions Declared to Shareholders (0.404) (0.354) (0.364)
-------- -------- --------
Net Asset Value, End of Period $ 6.730 $ 6.730 $ 6.730
-------- -------- --------
Total return (c) 9.87% 9.03% 9.20%(d)
-------- -------- --------
Ratios to Average Net Assets
Expenses (f) 1.12% 1.87% 1.72%(b)
Net investment income (f) 6.02% 5.27% 5.42%(b)
Portfolio turnover 214% 214% 214%
Net assets at end of period (in millions) $ 651 $ 395 $ 1
</TABLE>
(a) Class Z shares were initially offered on January 29, 1999. Per share
data reflects activity from that date.
(b) Net of fees waived by the Distributor which amounted to $0.007 and
$0.010 per share and 0.15% and 0.15%, respectfully.
(c) Total return at net asset value assuming all distributions reinvested
and no initial sales charge or contingent deferred sales charge.
(d) Had the Distributor not waived a portion of the expenses, total return
would have been reduced.
(e) Not annualized.
(f) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(g) Annualized.
24
<PAGE> 27
FINANCIAL HIGHLIGHTS CIUSGF (CONTINUED)
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31
-------------------------------------------
1997
-------------------------------------------
CLASS A CLASS B CLASS C(a)
------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 6.370 $ 6.370 $ 6.590
---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.393 0.344 0.032
Net realized and unrealized gain (loss) 0.145 0.145 (0.082)
---------- ---------- ----------
Total from Investment Operations 0.538 0.489 (0.050)
---------- ---------- ----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.398) (0.349) (0.030)
In excess of net investment income -- -- --
---------- ---------- ----------
Total Distributions Declared to Shareholders (0.398) (0.349) (0.030)
---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 6.510 $ 6.510 $ 6.510
---------- ---------- ----------
Total return (b) 8.64% 7.83% (0.77)%(c)
---------- ---------- ----------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.13%(d) 1.88%(d) 1.78%(d)(e)
Net investment income 6.43%(d) 5.68%(d) 5.85%(d)(e)
Portfolio turnover 61% 61% 61%
Net assets at end of period (in millions) $ 731 $ 461 $ (f)
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31
------------------------------------------------------
1996 1995
------------------------- -----------------------
CLASS A CLASS B CLASS A CLASS B
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 6.550 $ 6.550 $ 6.420 $ 6.420
---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
NET investment income 0.390 0.341 0.447 0.399
Net realized and unrealized gain (loss) (0.161) (0.161) 0.100 0.100
---------- ---------- ---------- ----------
Total from Investment Operations 0.229 0.180 0.547 0.499
---------- ---------- ---------- ----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.391) (0.344) (0.417) (0.369)
In excess of net investment income (0.018) (0.016) -- --
---------- ---------- ---------- ----------
Total Distributions Declared to Shareholders (0.409) (0.360) (0.417) (0.369)
---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 6.370 $ 6.370 $ 6.550 $ 6.550
---------- ---------- ---------- ----------
Total return (b) 3.51% 2.74% 8.88% 8.07%
---------- ---------- ---------- ----------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.11%(d) 1.86%(d) 1.11% 1.86%
Net investment income 6.45%(d) 5.70%(d) 7.51% 6.76%
Portfolio turnover 123% 123% 140% 140%
Net assets at end of period (in millions) $ 921 $ 572 $ 1,164 $ 701
</TABLE>
(a) Class C shares were initially offered on August 1, 1997. Per share data
reflects activity from that date.
(b) Total return at net asset value assuming all distributions reinvested
and no initial sales charge or contingent deferred sales charge.
(c) Not annualized.
(d) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(e) Annualized.
(f) Rounds to less than one million.
25
<PAGE> 28
FINANCIAL HIGHLIGHTS CFSF
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED FEBRUARY 29, 2000
---------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS Z
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.140 $ 10.140 $ 10.140 $ 10.140
------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.358 0.321 0.328(a) 0.371
Net realized and unrealized loss (0.291) (0.291) (0.291) (0.291)
------------ ------------ ------------ ------------
Total from Investment Operations 0.067 0.030 0.037 0.080
------------ ------------ ------------ ------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.357) (0.320) (0.327) (0.370)
------------ ------------ ------------ ------------
NET ASSET VALUE, END OF PERIOD $ 9.850 $ 9.850 $ 9.850 $ 9.850
------------ ------------ ------------ ------------
Total return (b)(c) 0.67% 0.30% 0.37% 0.79%
------------ ------------ ------------ ------------
RATIOS TO AVERAGE NET ASSETS
Expenses (d)(e) 1.15% 1.90% 1.75%(a) 0.90%
Net investment income (d)(e) 7.18% 6.43% 6.58%(a) 7.43%
Portfolio turnover (c) 184% 184% 184% 184%
Net assets at end of period (in millions) $ 616,750 $ 61,098 $ 4,591 $ 1
</TABLE>
(a) Net of fees waived by the Distributor which amounted to $0.008 per
share and 0.15% annualized.
(b) Total return at net asset value assuming all distributions reinvested
and no initial sales charge or contingent deferred sales charge.
(c) Not annualized.
(d) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(e) Annualized.
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31, 1999
---------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS Z(a)
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.080 $ 11.080 $ 11.080 $ 11.010
------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.703 0.621 0.637(b) 0.479
Net realized and unrealized loss (0.969) (0.969) (0.969) (0.885)
------------ ------------ ------------ ------------
Total from Investment Operations (0.266) (0.348) (0.332) (0.406)
------------ ------------ ------------ ------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.674) (0.592) (0.608) (0.464)
------------ ------------ ------------ ------------
NET ASSET VALUE, END OF PERIOD $ 10.140 $ 10.140 $ 10.140 $ 10.140
------------ ------------ ------------ ------------
Total return (c) (2.56)% (3.30)% (3.15)%(d) (3.77)%(e)
------------ ------------ ------------ ------------
RATIOS TO AVERAGE NET ASSETS
Expenses (f) 1.15% 1.90% 1.79%(b) 0.91%(g)
Net investment income (f) 6.58% 5.83% 5.98%(b) 7.19%(g)
Portfolio turnover 42% 42% 42% 42%
Net assets at end of period (in millions) $ 681,542 $ 72,306 $ 4,986 $ 1
</TABLE>
(a) Class Z shares were initially offered on January 11, 1999. Per share
data reflects activity from that date.
(b) Net of fees waived by the Distributor which amounted to $0.013 per
share and 0.15%.
(c) Total return at net asset value assuming all distributions reinvested
and no initial sales charge or contingent deferred sales charge.
(d) Had the Distributor not waived a portion of expenses, total return
would have been reduced.
(e) Not annualized.
(f) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(g) Annualized.
26
<PAGE> 29
FINANCIAL HIGHLIGHTS CFSF (CONTINUED)
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31, 1998
------------------------------------
CLASS A CLASS B CLASS C
--------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.520 $10.520 $10.520
-------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.708 0.625 0.642(a)
Net realized and unrealized gain 0.530 0.530 0.530
-------- ------- -------
Total from Investment Operations 1.238 1.155 1.172
-------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.678) (0.595) (0.612)
-------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 11.080 $11.080 $11.080
======== ======= =======
Total return (b) 12.11% 11.26% 11.43%
======== ======= =======
RATIOS TO AVERAGE NET ASSETS
Expenses (c) 1.14% 1.89% 1.74%(a)
Net investment income (c) 6.49% 5.74% 5.89%(a)
Portfolio turnover 356% 356% 356%
Net assets at end of period (in millions) $ 821 $ 72 $ 1
</TABLE>
(a) Net of fees waived by the Distributor which amounted to $0.017 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) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
<TABLE>
<CAPTION>
PERIOD ENDED AUGUST 31, 1997(a)
---------------------------------------
CLASS A CLASS B CLASS C(b)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.530 $10.530 $ 10.710
------- ------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.580 0.515 0.058
Net realized and unrealized loss (0.038) (0.038) (0.198)
------- ------- --------
Total from Investment Operations 0.542 0.477 0.140
------- ------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.552) (0.487) (0.050)
------- ------- --------
NET ASSET VALUE, END OF PERIOD $10.520 $10.520 $ 10.520
======= ======= ========
Total return (c) 5.31%(d) 4.66%(d) (1.31)%(d)
======= ======= ========
RATIOS TO AVERAGE NET ASSETS
Expenses (e) 1.19%(f) 1.94%(f) 1.82%(f)
Net investment income (e) 6.71%(f) 5.96%(f) 6.55%(f)
Portfolio turnover 79%(d) 79%(d) 79%(d)
Net assets at end of period (in millions) $ 888 $ 64 $ (g)
</TABLE>
(a) The Fund changed its fiscal year end from October 31 to August 31.
Information presented is for the period November 1, 1996 through August 31,
1997.
(b) Class C shares were initially offered on August 1, 1997. Per share data
reflects activity from that date.
(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.
(g) Rounds to less than one million.
27
<PAGE> 30
FINANCIAL HIGHLIGHTS CFSF (CONTINUED)
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
----------------------------------------------------------------------
1996 1995
------------------------------- ----------------------------
CLASS A CLASS B CLASS A CLASS B
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.830 $ 10.830 $ 9.950 $ 9.950
---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.696 0.617 0.710 0.633
Net realized and unrealized gain (loss) (0.300) (0.300) 0.907 0.907
---------- ---------- ---------- ----------
Total from Investment Operations 0.396 0.317 1.617 1.540
---------- ---------- ---------- ----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.684) (0.606) (0.709) (0.632)
From net realized gains -- -- (0.028) (0.028)
From capital paid in (0.012) (0.011) -- --
---------- ---------- ---------- ----------
Total Distributions Declared to Shareholders (0.696) (0.617) (0.737) (0.660)
---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 10.530 $ 10.530 $ 10.830 $ 10.830
========== ========== ========== ==========
Total return (a) 3.88% 3.11% 16.82% 15.96%
========== ========== ========== ==========
RATIOS TO AVERAGE NET ASSETS
Expenses 1.18%(b) 1.93%(b) 1.17% 1.92%
Net investment income 6.62%(b) 5.87%(b) 7.04% 6.29%
Portfolio turnover 125% 125% 171% 171%
Net assets at end of period (in millions) $ 1,026 $ 73 $ 1,201 $ 79
</TABLE>
(a) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(b) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
28
<PAGE> 31
TRUSTEES & TRANSFER AGENT
-------------------------------------------------------------------------------
TOM BLEASDALE
Retired (formerly Chairman of the Board and Chief Executive Officer, Shore Bank
& Trust Company)
JOHN V. 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
Academic Vice President and Dean of Faculties, Boston College (formerly 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 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)
-------------------------------------------------------------------------------
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial Government Funds is:
Liberty Funds Services, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
The Funds mail 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 Government Funds.
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 Funds and with the most recent copy of
the Liberty Funds Distributor, Inc. Performance Update.
SEMIANNUAL REPORT:
COLONIAL GOVERNMENT FUNDS
<PAGE> 32
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Your financial advisor can help you develop a long-term plan for reaching your
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COLONIAL GOVERNMENT FUNDS SEMIANNUAL REPORT
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GOV-03/754A-0300 (4/00) 00/547
