<PAGE>
[Graphic Omitted]
COLONIAL
GOVERNMENT
MONEY
MARKET FUND
SEMIANNUAL REPORT
FEBRUARY 28, 1997
NOT FDIC- MAY LOSE VALUE
INSURED NO BANK GUARANTEE
<PAGE>
COLONIAL GOVERNMENT MONEY MARKET FUND
HIGHLIGHTS
SEPTEMBER 1, 1996 - FEBRUARY 28, 1997
INVESTMENT OBJECTIVE: Colonial Government Money Market Fund seeks current
income, consistent with capital preservation and liquidity, by investing
exclusively in short-term U.S. government securities.
THE FUND IS DESIGNED TO OFFER:
|X| Steady monthly income
|X| Stable net asset value
|X| A high quality portfolio
PORTFOLIO MANAGER COMMENTARY: "The potential for the Federal Reserve Board to
raise short-term interest rates early in 1997 played a key role in our strategy.
As expectations for Fed intervention heightened near the end of the period, we
shortened the portfolio's average days to maturity to capture any increase in
short-term rates. Going forward, we will look to lengthen maturity when we
believe our expectations for interest rate rises have been factored into
short-term bond prices." -- Steve Harasimowicz
COLONIAL GOVERNMENT MONEY MARKET FUND PERFORMANCE
CLASS A CLASS B CLASS D
Inception dates 1/30/81 6/8/92 7/1/94
- --------------------------------------------------------------------------------
Distributions declared per share $0.023 $0.018 $0.018
- --------------------------------------------------------------------------------
Seven-day yields on 2/28/97 4.67% 3.48% 3.51%
- --------------------------------------------------------------------------------
30-day yields on 2/28/97 4.70% 3.53% 3.57%
A PORTFOLIO OF HIGH QUALITY MONEY MARKET SECURITIES
- --------------------------------------------------------------------------------
As of 2/28/97
Your Fund's portfolio holdings represented a selection of short-term,
fixed-income U.S. government and agency securities. These holdings include notes
issued by the Federal National Mortgage Association (FNMA), Federal Home Loan
Mortgage Corporation (FHLMC) and Federal Farm Credit Bank (FFCB).
REPURCHASE AGREEMENTS 35.52%
FHLMC 31.57%
FNMA 26.87%
FFCB 6.04%
Portfolio holdings calculated as a percent of total investments.
An investment in the Fund is neither insured nor guaranteed by the U.S.
government. There can be no assurance that the Fund will maintain a stable net
asset value of $1.00 per share.
<PAGE>
PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
[Photo of Harold W. Cogger]
I am pleased to present your Fund's semiannual report for the period ended
February 28, 1997. This report provides information on the investment
environment of the past six months and on the performance of your Fund.
Long-term interest rates moved up and down in a well-defined range during the
period. Signs that economic growth was easing during the third quarter of 1996
led to a bond market rally and declining interest rates. However, interest rates
climbed once again December through February in response to accelerating
economic activity. Examples include a surge in construction and a sharp
improvement in retail sales. Despite continued low levels of inflation, the
Federal Reserve Board characterized factors holding down prices as "temporary"
and made clear its willingness to strike against inflation in the future. True
to its word, the Federal Reserve Board did raise rates in March.
Tax-exempt bonds outperformed Treasurys during most of the period,
as a result of low supply and narrowing yield spreads. Fundamentals remain
positive and state credit quality has generally improved, reflecting in part
increased tax revenue collections generated by a stronger economy, among other
factors.
Prior to recent declines in the domestic stock market, a focus on large
capitalization stocks carried market indexes to record highs in February.
European markets continued to experience declining interest rates and inflation
levels, conditions that may prevail until economic activity in these nations
increases.
Our economic expectations for 1997 are relatively bright and include growth
slowing to a more sustainable rate as the year progresses. However, we expect
real rates, interest rates adjusted for inflation, to remain relatively high
until questions regarding both the Federal Reserve's monetary policy and Federal
budget negotiations are resolved.
The following report provides you with specific information on your Fund's
performance and insights from your portfolio manager. As always, we thank you
for the opportunity to help you meet your investment goals through the Colonial
family of funds.
Respectfully,
/s/ Harold W. Cogger
Harold W. Cogger
President
April 10, 1997
Because market conditions change frequently, there can be no assurance that the
trends described in this report will continue, come to pass or affect Fund
performance.
<PAGE>
INVESTMENT PORTFOLIO
FEBRUARY 28, 1997 (UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
SHORT-TERM OBLIGATIONS - 114.4%
- ---------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES - 73.8%
- ---------------------------------------------------------------------------------------------------------------
ANNUALIZED
YIELD AT TIME
MATURITY OF PURCHASE PAR VALUE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Federal Farm Credit Bank:
04/03/97 5.240% $ 5,000 $ 4,976
04/08/97 5.220% 2,760 2,745
04/24/97 5.240% 5,000 4,961
-----------
12,682
-----------
Federal Home Loan Mortgage Corp:
03/07/97 5.210% 8,000 7,993
03/17/97 5.220% 8,259 8,240
03/21/97 5.240% 5,000 4,985
04/04/97 5.240% 5,000 4,975
04/23/97 5.220% 7,181 7,126
05/06/97 5.180% 5,000 4,953
05/06/97 5.240% 8,733 8,652
05/08/97 5.165% 7,539 7,465
05/09/97 5.160% 7,050 6,980
05/19/97 5.180% 5,000 4,943
-----------
66,312
-----------
Federal National Mortgage Association:
03/03/97 5.230% 5,000 4,999
03/10/97 5.500% 10,250 10,236
03/12/97 5.230% 5,000 4,992
03/21/97 5.250% 5,000 4,985
03/31/97 5.230% 10,000 9,959
04/03/97 5.320% 5,000 4,976
04/07/97 5.230% 5,000 4,973
04/09/97 5.230% 6,405 6,369
05/02/97 5.240% 5,000 4,956
-----------
56,445
-----------
TOTAL U.S. GOVERNMENT AGENCIES (cost of $135,439) 135,439
-----------
</TABLE>
<PAGE>
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REPURCHASE AGREEMENTS - 40.6%
- --------------------------------------------------------------------------------
Repurchase agreement with Bankers Trust
Securities Corp., dated 2/28/97, due 03/03/97
at 5.350%, collateralized by U.S. Treasury notes
with various maturities to 2019, market value
$38,121 (repurchase proceeds $37,330) $ 37,313 $ 37,313
Repurchase agreement with Bank of America,
dated 2/28/97, due 3/03/97 at 5.360%, collateralized
by U.S. Treasury bonds maturing in 1998,
market value $38,086 (repurchase proceeds
$37,331) 37,314 37,314
---------
TOTAL REPURCHASE AGREEMENTS (cost of $74,627) 74,627
---------
TOTAL SHORT-TERM OBLIGATIONS
(cost of $210,066) (a) 210,066
---------
OTHER ASSETS & LIABILITIES, NET - (14.4)% (26,447)
- --------------------------------------------------------------------------------
NET ASSETS - 100% $ 183,619
=========
NOTE TO INVESTMENT PORTFOLIO:
- --------------------------------------------------------------------------------
(a) Cost for federal income tax purposes is the same.
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
FEBRUARY 28, 1997 (UNAUDITED)
(in thousands except for per share amounts)
ASSETS
Investments at amortized cost $ 210,066
Receivable for:
Fund shares sold $ 4,102
Interest 11
Other 37 4,150
---------- ----------
Total Assets 214,216
LIABILITIES
Payable for:
Investments purchased 23,567
Fund shares repurchased 6,470
Distributions 557
Accrued Deferred Trustees fees 3
----------
Total Liabilities 30,597
----------
NET ASSETS $ 183,619
==========
Net asset value:
Class A ($124,605/124,558) $1.00
==========
Class D ($56,700/56,706) $1.00 (a)
==========
Class B ($2,314/2,314) $1.00 (a)
==========
Maximum offering price per share - Class D
($1.00/0.9900) $1.01
==========
COMPOSITION OF NET ASSETS
Capital paid in $ 183,579
Undistributed net investment income 41
Accumulated net realized loss (1)
----------
$ 183,619
==========
(a) Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
See notes to financial statements.
<PAGE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 28, 1997
(UNAUDITED)
(in thousands)
INVESTMENT INCOME
Interest $ 4,880
EXPENSES
Management fee $ 274
Service fee - Class B 86
Service fee - Class D 6
Distribution fee - Class B 257
Distribution fee - Class D 17
Transfer agent 232
Bookkeeping fee 37
Trustee fee 9
Custodian fee 2
Audit fee 11
Legal fee 3
Registration fee 38
Reports to shareholders 3
Other 11 986
-------- ---------
Net Investment Income $ 3,894
=========
See notes to financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(Unaudited)
Six months
ended Year ended
(in thousands) February 28 August 31
----------- ------------
INCREASE (DECREASE) IN NET ASSETS 1997 1996
Operations:
Net investment income $ 3,894 $ 6,673
--------- ----------
Distributions:
From net investment income - Class A (2,544) (4,162)
From net investment income - Class B (1,256) (2,436)
From net investment income - Class D (82) (82)
--------- ----------
12 (7)
--------- ----------
Fund Share Transactions:
Receipts for shares sold - Class A 707,319 892,066
Value of distributions reinvested - Class A 2,076 3,327
Cost of shares repurchased - Class A (699,868) (863,413)
--------- ----------
9,527 31,980
--------- ----------
Receipts for shares sold - Class B 174,059 264,792
Value of distributions reinvested - Class B 1,038 1,845
Cost of shares repurchased - Class B (194,934) (245,533)
--------- ----------
(19,837) 21,104
--------- ----------
Receipts for shares sold - Class D 11,299 9,081
Value of distributions reinvested - Class D 83 61
Cost of shares repurchased - Class D (13,502) (5,334)
--------- ----------
(2,120) 3,808
--------- ----------
Net Increase (Decrease) from Fund Share
Transactions (12,430) 56,892
--------- ----------
Total Increase (Decrease) (12,418) 56,885
NET ASSETS
Beginning of period 196,037 139,152
--------- ----------
End of period (including undistributed
net investment income of $41 and $29,
respectively) $ 183,619 $ 196,037
========= ==========
NUMBER OF FUND SHARES
Sold - Class A 707,319 892,065
Issued for distributions reinvested - Class A 2,076 3,327
Repurchased - Class A (699,868) (863,413)
--------- ----------
9,527 31,979
--------- ----------
Sold - Class B 174,059 264,792
Issued for distributions reinvested - Class B 1,038 1,845
Repurchased - Class B (194,934) (245,533)
--------- ----------
(19,837) 21,104
--------- ----------
Sold - Class D 11,299 9,081
Issued for distributions reinvested - Class D 83 61
Repurchased - Class D (13,501) (5,334)
--------- ----------
(2,119) 3,808
--------- ----------
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1997 (UNAUDITED)
NOTE 1. INTERIM FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
In the opinion of management of Colonial Government Money Market Fund (the
Fund), a series of Colonial Trust II, the accompanying financial statements
contain all normal and recurring adjustments necessary for the fair presentation
of the financial position of the Fund at February 28, 1997, and the results of
its operations, the changes in its net assets and the financial highlights for
the six months then ended.
NOTE 2. ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
ORGANIZATION: The Fund is a diversified portfolio of a Massachusetts business
trust, registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company. The Fund's investment objective is to
seek current income, consistent with capital preservation and liquidity, by
investing exclusively in short-term U.S. government securities. The Fund may
issue an unlimited number of shares. The Fund offers three classes of shares:
Class A, Class B and Class D. Class B shares, which are identical to Class A
shares except for an annual service and distribution fee and a contingent
deferred sales charge, will convert to Class A shares when they have been
outstanding approximately eight years. Class D shares are subject to a reduced
front-end sales charge, a contingent deferred sales charge on redemptions made
within one year after purchase and a continuing service and distribution fee.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies that are consistently followed by the Fund in
the preparation of its financial statements.
SECURITY VALUATION AND TRANSACTIONS: The Fund values its portfolio securities
utilizing the amortized cost valuation method.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains and losses are based upon the specific
identification method for both financial statement and federal income tax
purposes.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS: All income,
expenses (other than the Class B and Class D service and distribution fees),
realized and unrealized gains (losses) are allocated to each class
proportionately on a daily basis for purposes of determining the net asset value
of each class.
Class B and Class D per share data and ratios are calculated by adjusting the
expense and net investment income per share data and ratios for the Fund for the
entire period by the service and distribution fees applicable to Class B and
Class D shares only.
FEDERAL INCOME TAXES: Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
DISTRIBUTIONS TO SHAREHOLDERS: The Fund declares and records distributions daily
and pays monthly.
OTHER: Interest income, including discount accretion and premium amortization,
is recorded daily on the accrual basis.
The Fund's 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 Adviser)
is the investment Adviser of the Fund and furnishes accounting
and other services and office facilities for a monthly fee equal to 0.30%
annually of the Fund's average net assets.
BOOKKEEPING FEE: The Adviser provides bookkeeping and pricing services for
$27,000 per year plus 0.035% of the Fund's average net assets over $50 million.
TRANSFER AGENT: Colonial Investors Service Center, Inc. (the Transfer
Agent), an affiliate of the Adviser, provides shareholder services for a
monthly fee equal to 0.20% annually of the Fund's average net assets and
receives reimbursement for certain out of pocket expenses.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES: Colonial Investment
Services, Inc. (the Distributor), an affiliate of the Adviser, is the Fund's
principal underwriter. During the six months ended February 28, 1997, the Fund
has been advised that the Distributor received contingent deferred sales charges
(CDSC) of $156,576 and $2,903 on Class B and Class D share redemptions,
respectively.
The Fund has adopted a 12b-1 plan which requires it to pay the Distributor a
service fee equal to 0.25% annually of Class B and Class D net assets as of the
20th of each month. The plan also requires the payment of a distribution fee to
the Distributor equal to 0.75% annually of the average net assets attributable
to Class B shares and Class D shares.
The CDSC and the fees received from the 12b-1 plan are used principally as
repayment to the Distributor for amounts paid by the Distributor to dealers who
sold such shares.
EXPENSE LIMITS: The Adviser 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 1.00% annually of the Fund's average net
assets.
For the six months ended February 28, 1997, the Fund's operating expenses did
not exceed the 1.00% expense limit.
OTHER: The Fund pays no compensation to its officers, all of whom are
employees of the Adviser.
The Fund's Trustees may participate in a deferred compensation plan which may be
terminated at any time. Obligations of the plan will be paid solely out of the
Fund's assets.
NOTE 4. PORTFOLIO INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT ACTIVITY: During the six months ended February 28, 1997, purchases
and sales (including maturities) of short-term obligations (excluding repurchase
agreements) were $240,513,989 and $219,830,000, respectively, all of which were
U.S. government securities.
NOTE 5. OTHER RELATED PARTY TRANSACTIONS
- --------------------------------------------------------------------------------
At February 28, 1997, Liberty Financial Companies, Inc. and Colonial
Investment Services, Inc. each owned greater than 5% of the Fund's shares
outstanding.
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are
as follows:
(Unaudited)
Six months ended February 28
-----------------------------------------------
1997
Class A Class B Class D
--------- -------- --------
Net asset value -
Beginning of period $ 1.000 $ 1.000 $ 1.000
--------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income (a) 0.023 0.018 0.018
--------- -------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment
income (0.023) (0.018) (0.018)
--------- -------- --------
Net asset value -
End of period $ 1.000 $ 1.000 $ 1.000
--------- -------- --------
Total return (b) 2.37%(c) 1.84%(c) 1.86%(c)
========= ======== ========
RATIOS TO AVERAGE NET ASSETS
Expenses 0.68%(e)(f) 1.68%(e)(f) 1.68%(e)(f)
Fees and expenses waived
or borne by the Adviser -- -- --
Net investment
income 4.65%(e)(f) 3.65%(e)(f) 3.65%(e)(f)
Net assets at end
of period (000) $ 124,605 $ 56,700 $ 2,314
(a) Net of fees and expenses waived or borne by the Adviser which amounted to:
$ -- $ -- $ --
(b) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(c) Not annualized.
(d) Had the Adviser not waived or reimbursed a portion of expenses, total return
would have been reduced.
(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
(f) Annualized.
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Year ended August 31
- --------------------------------------------------------------------------------
1996 1995
Class A Class B Class D Class A Class B Class D
------- ------- ------- ------- ------- -------
$ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- -------- -------- -------- -------- -------- --------
0.048 0.038 0.038 0.050 0.040 0.040
- -------- -------- -------- -------- -------- --------
(0.048) (0.038) (0.038) (0.050) (0.040) (0.040)
- -------- -------- -------- -------- -------- --------
$ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- -------- -------- -------- -------- -------- --------
4.93% 3.86% 3.85% 5.14%(d) 4.08%(d) 4.07%(d)
======== ======== ======== ======== ======== ========
0.70%(e) 1.70%(e) 1.70%(e) 0.69% 1.69% 1.69%
--- --- --- 0.04% 0.04% 0.04%
4.76%(e) 3.76%(e) 3.76%(e) 4.96% 3.96% 3.96%
$115,063 $ 76,539 $ 4,435 $ 83,086 $ 55,441 $ 625
$ -- $ -- $ -- $0.000 $0.000 $0.000
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Year ended August 31
-----------------------------------------------
1994
Class A Class B Class D (b)
--------- -------- ------------
Net asset value -
Beginning of period $ 1.000 $ 1.000 $ 1.000
-------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income (a) 0.028 0.018 0.005
-------- -------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment
income (0.028) (0.018) (0.005)
-------- -------- --------
Net asset value -
End of period $ 1.000 $ 1.000 $ 1.000
-------- -------- --------
Total return (e)(f) 2.85% 1.82% 0.45%(g)
======== ======== ========
RATIOS TO AVERAGE NET ASSETS
Expenses 0.73% 1.73% 1.73%(h)
Fees and expenses waived
or borne by the Adviser 0.20% 0.20% 0.20%(h)
Net investment
income 3.01% 2.01% 2.01%(h)
Net assets at end
of period (000) $ 97,115 $ 54,535 $ 518
(a) Net of fees and expenses waived or borne by the Adviser which amounted to:
$0.002 $0.002 $0.002
(b) Class D shares were initially offered on July 1, 1994. Per share amounts
reflect activity from that date.
(c) The Fund changed its fiscal year end from December 31 to August 31 in 1992.
(d) Class B shares were initially offered on June 8, 1992. Per share amounts
reflect activity from that date.
(e) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(f) Had the Adviser not waived or reimbursed a portion of expenses, total return
would have been reduced.
(g) Not annualized.
(h) Annualized.
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Year ended Period ended Year ended
August 31 August 31 December 31
- --------------------- --------------------- -----------
1993 1992 (c) 1991
Class A Class B Class A Class B (d) Class A
- -------- -------- -------- ----------- --------
$ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- -------- -------- -------- -------- --------
0.023 0.013 0.022 0.004 0.053
- -------- -------- -------- -------- --------
(0.023) (0.013) (0.022) (0.004) (0.053)
- -------- -------- -------- -------- --------
$ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- -------- -------- -------- -------- --------
2.28% 1.27% 2.18%(g) 0.43%(g) 5.38%
======== ======== ======== ======== ========
0.88% 1.88% 1.00%(h) 2.00%(h) 0.85%
0.20% 0.20% 0.38%(h) 0.38%(h) 0.20%
2.26% 1.26% 3.23%(h) 2.23%(h) 5.32%
$ 44,693 $ 10,890 $ 47,885 $ 14,096 $ 56,198
$0.002 $0.002 $0.003 $0.001 $0.002
<PAGE>
SHAREHOLDER COMMUNICATIONS
TO KEEP YOU INFORMED
To make recordkeeping easy and keep you up-to-date on the performance of your
investments, you can expect to receive the following information about your
Colonial account:
TRANSACTION CONFIRMATIONS: Each time you make a purchase, sale, or exchange, you
receive a confirmation statement within just a few days.
QUARTERLY STATEMENTS: Every three months, if any transactions are made that
affect your share balance, this statement reports on your account activity
during the quarter (including any reinvestment of dividends). This statement
also provides year-to-date information.
COLONIAL SHAREHOLDER NEWS: Mailed with your quarterly account statements, this
newsletter highlights timely investment strategies, portfolio manager
commentary, and shareholder service updates.
TAX FORMS AND YEAR-END TAX GUIDE: Easy-to-use forms and timely information are
designed to make tax reporting simpler. (Usually mailed in January.)
AVERAGE COST BASIS STATEMENTS: If you sold or exchanged shares during the year,
this statement may help you calculate your gain/loss for tax purposes. (Usually
mailed in February.)
<PAGE>
HOW TO REACH COLONIAL
BY PHONE OR BY MAIL
BY TELEPHONE
COLONIAL CUSTOMER CONNECTION - 1-800-345-6611
For 24-hour account information, call from your touch-tone phone. (Rotary
callers will be automatically connected to a representative during business
hours.) A recorded message will guide you through the menu:
For fund prices, dividends, and capital gains information ........... press 1
For account information ............................................. press 2
To speak to a Colonial representative ............................... press 3
For yield and total return information .............................. press 4
For duplicate statements or new supply of checks .................... press 5
To order duplicate tax forms and year-end statements ................ press 6
(February through May)
To review your options at any time during your call ................. press *
To speak with a shareholder services representative about your account, call
Monday to Friday, 8:00 am to 8:00 pm ET, and Saturdays from February through
mid-April, 10:00 am to 2:00 pm ET.
COLONIAL TELEPHONE TRANSACTION DEPARTMENT - 1-800-422-3737
To purchase, exchange, or sell shares by telephone, call Monday to Friday,
9:00 am to 8:00 pm ET. Transactions received after the close of the New York
Stock Exchange will receive the next business day's closing price.
COLONIAL LITERATURE - 1-800-426-3750
To request literature on any Colonial fund, call Monday to Friday, 8:30 am to
6:30 pm ET.
BY MAIL
COLONIAL INVESTORS SERVICE CENTER, INC.
P.O. BOX 1722
BOSTON, MA 02105-1722
<PAGE>
SHAREHOLDER SERVICES
TO MAKE INVESTING EASIER
Colonial has one of the most extensive selections of shareholder services
available. Your financial adviser can help you arrange for any of these
services, or you can call Colonial directly at 1-800-345-6611.
AFFORDABLE ADDITIONAL INVESTMENTS: Add to your account with as little as $50;
$25 for an IRA account.
FREE EXCHANGES*: Exchange all or part of your account into the same share class
of another Colonial fund, by phone or mail, as your needs change over time.
EASY ACCESS TO YOUR MONEY*: Make withdrawals from your account by phone, by mail
or, for certain funds, by check.
ONE-YEAR REINSTATEMENT PRIVILEGE: If you need access to your money, but then
choose to return it to Colonial within one year, you can reinvest in any
Colonial fund of the same share class without any penalty or sales charge.
FUNDAMATIC: Make periodic investments as low as $50 from your checking account
to your Colonial account.
SYSTEMATIC WITHDRAWAL PLAN (SWP): Receive monthly, quarterly, or semiannual
payments via check or bank transmission. There is a $5,000 account value
required, but no minimum for the payment amount. The maximum annual withdrawal
is 12% of account balance at time SWP is established. SWPs by check are
processed on the 10th of each month. Dividends and capital gains must be
reinvested.
AUTOMATED DOLLAR COST AVERAGING: Transfer money on a monthly basis from any
Colonial fund with a balance of $5,000 into the same share class of up to four
other Colonial funds. Minimum for each transfer is $100.
LOW COST IRAS: Choose from a broad range of retirement plans, including IRAs.
* Redemptions and exchanges are made at the next determined net asset value
after the request is received by Colonial in good order. Proceeds may be more or
less than your original cost. The exchange privilege may be terminated at any
time. Investors who purchase Class B or Class D shares (for applicable funds),
or $1 million or more of Class A shares, may be subject to a contingent deferred
sales charge.
<PAGE>
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial Government Money Market Fund is:
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Colonial Government Money Market Fund mails one shareholder report to each
shareholder address. If you would like more than one report, please call
Colonial at 1-800-426-3750 and additional reports will be sent to you.
This report has been prepared for shareholders of Colonial Government Money
Market Fund. This report may also be used as sales literature when preceded or
accompanied by the current prospectus which provides details of sales charges,
investment objective and operating policies of the Fund.
<PAGE>
[logo] COLONIAL
MUTUAL FUNDS
Mutual Funds for
Planned Portfolios
TRUSTEES
ROBERT J. BIRNBAUM
Retired (formerly Special Counsel, Dechert, Price & Rhoads; President and Chief
Operating Officer, New York Stock Exchange, Inc.)
TOM BLEASDALE
Retired (formerly Chairman of the Board and Chief Executive Officer, Shore Bank
& Trust Company)
LORA S. COLLINS
Attorney (formerly Attorney, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel)
JAMES E. GRINNELL
Private Investor (formerly Senior Vice President-Operations, The Rockport
Company)
WILLIAM D. IRELAND, JR.
Retired (formerly Chairman of the Board, Bank of New England-Worcester)
RICHARD W. LOWRY
Private Investor (formerly Chairman and Chief Executive Officer, U.S. Plywood
Corporation)
WILLIAM E. MAYER
Partner, Development Capital, L.L.C. (formerly Dean, College of Business and
Management, University of Maryland; Dean, Simon Graduate School of Business,
University of Rochester; Chairman and Chief Executive Officer, C. S. First
Boston Merchant Bank; and President and Chief Executive Officer, The First
Boston Corporation)
JAMES L. MOODY, JR.
Chairman of the Board and Director, Hannaford Bros. Co. (formerly Chief
Executive Officer, Hannaford Bros. Co.)
JOHN J. NEUHAUSER
Dean, Boston College School of Management
GEORGE L. SHINN
Financial Consultant (formerly Chairman, Chief Executive Officer and Consultant,
The First Boston Corporation)
ROBERT L. SULLIVAN
Retired Partner, Peat Marwick Main & Co. (formerly Management Consultant,
Saatchi and Saatchi Consulting Ltd. and Principal and International Practice
Director, Management Consulting, Peat Marwick Main & Co.)
SINCLAIR WEEKS, JR.
Chairman of the Board, Reed & Barton Corporation
COLONIAL INVESTMENT SERVICES, INC., Distributor (C) 1997
A Liberty Financial Company (NYSE: L)
One Financial Center, Boston, Massachusetts 02111-2621, 617-426-3750
MM-03/453D-0297 M (4/97)
