<PAGE>
COLONIAL
CALIFORNIA TAX-EXEMPT FUND
SEMIANUUAL REPORT
JULY 31, 1996
NOT FDIC- MAY LOSE VALUE
INSURED NO BANK GUARANTEE
<PAGE>
COLONIAL CALIFORNIA TAX-EXEMPT FUND HIGHLIGHTS
FEBRUARY 1, 1996 - JULY 31, 1996
INVESTMENT OBJECTIVE: Colonial California Tax-Exempt Fund seeks as high a level
of after-tax total return, as is consistent with prudent risk, by pursuing
current income exempt from federal and California state personal income tax. The
Fund also provides opportunities for long-term appreciation from a portfolio
primarily invested in investment grade municipal bonds.
THE FUND IS DESIGNED TO OFFER:
- High monthly double-tax-free income
- Long-term appreciation
- Emphasis on quality
PORTFOLIO MANAGER COMMENTARY: "Many favorable developments in the California
economy have resulted in a positive long-term outlook for the State's municipal
bond market. A combination of increased demand and continued low supply of bonds
suggest a favorable environment for California municipal bonds."- William Loring
COLONIAL CALIFORNIA TAX-EXEMPT FUND PERFORMANCE
<TABLE>
<CAPTION>
CLASS A CLASS B
Inception dates 6/16/86 8/4/92
- -------------------------------------------------------------------------------------
<S> <C> <C>
Distributions declared per share* $0.193 $0.166
- -------------------------------------------------------------------------------------
SEC yields on 7/31/96** 4.72% 4.19%
Taxable-equivalent SEC yields*** 8.78% 7.79%
- -------------------------------------------------------------------------------------
Total returns, assuming reinvestment
of all distributions and no sales charge
or contingent deferred sales charge (CDSC)
6-months (0.72)% (1.09)%
- -------------------------------------------------------------------------------------
Net asset value per share at 7/31/96 $ 7.29 $ 7.29
</TABLE>
*A portion of the Fund's income may be subject to the alternative minimum tax.
**The 30-day SEC yields on July 31, 1996 reflect the portfolio's earning power,
net of expenses, expressed as an annualized percentage of the maximum offering
price per share at the end of the period.
***Taxable-equivalent SEC yields are based on the maximum effective 46.2%
federal and California income tax rates.
<TABLE>
<CAPTION>
QUALITY BREAKDOWN TOP FIVE SECTORS
(as of 7/31/96) (as of 7/31/96)
<S> <C>
AAA .......................... 54.5% Water & Sewer .............. 17.3%
AA ........................... 10.0% Refunded ................... 11.8%
A ............................ 14.7% Tax Allocation ............. 11.8%
BBB .......................... 11.6% General Obligations ........ 10.2%
Non-rated .................... 7.4% Public Improvement ......... 9.0%
Cash & Equivalents ........... 1.8%
</TABLE>
Sector classifications are based upon Colonial's defined criteria as used in the
investment process. Because the Fund is actively managed, quality and sector
weightings will change.
2
<PAGE>
PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
[PHOTO]
I am pleased to present your Fund's semiannual report for the period ended July
31, 1996. Your receipt of this report provides us with the opportunity to
reflect on the investment environment of the past six months.
In the bond market, significantly stronger than expected economic indicators
early in the period stirred inflation fears and propelled long-term interest
rates upward. The Federal Reserve Board lowered short-term interest rates in
January, but failed to continue the easing trend that the market anticipated. As
a result, long-term interest rates rose during the period, eliminating almost
half of the ground gained during 1995's bond market rally. Bond market
volatility continues, based upon receipt of conflicting economic reports and
changing expectations of Federal Reserve Board activity.
While market conditions put pressure on municipal bond prices as well, there was
some good news for the tax-exempt sector. Some of the significant reasons that
municipal bonds outperformed Treasury bonds were technical, such as low supply
and strong retail market support. Others were fundamental, such as the easing of
fears generated by tax-reform proposals, particularly those promoting a flat
tax.
In the stock market, generally favorable conditions prevailed throughout most of
the period, with both large company and small company stocks posting strong
performance until July, when a price correction took place. As a result of that
correction, stock indices generally posted negative total returns for July.
Our expectations for the remainder of 1996 include a moderating economy. We do
believe that the economy will continue to grow, although at a slower pace than
was indicated earlier this year. The lack of any appreciable wage and price
pressure should put the bond market's fears of inflation to rest. Therefore, we
are optimistic that market psychology will shift and volatility will decline by
year-end.
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
September 11, 1996
3
<PAGE>
PORTFOLIO MANAGER REPORT
WILLIAM LORING is portfolio manager of the Colonial California Tax-Exempt Fund
and is vice president of Colonial Management Associates, Inc.
Q: WHAT WAS YOUR INVESTMENT STRATEGY DURING THE PAST SIX MONTHS?
A: The Fund continued to pursue the defensive strategy implemented near the end
of 1995 which was to protect the net asset value and lower the overall risk of
the portfolio. The Fund benefited from this strategy, as reports of stronger
than expected economic conditions caused interest rates to increase close to 100
basis points between February 1 and July 31. We continued to shorten the Fund's
duration, intending to further insulate the Fund from losses associated with
rising interest rates. Duration measures a fund's sensitivity to interest rates;
the shorter the duration, the smaller the losses when interest rates rise.
Q: HOW DID THE FUND'S SIX MONTH PERFORMANCE COMPARE TO THE LEHMAN BROTHERS
MUNICIPAL BOND INDEX?
A: The Fund modestly underperformed the Lehman Brothers
Municipal Bond Index, a broad-based, unmanaged index that measures the
performance of the municipal bond market. The total return for the Fund's Class
A shares, based on net asset value, was down 0.72%, while the return on the
Lehman Brothers Municipal Bond Index was down 0.30%. We attribute this
underperformance to the Fund's narrower range of investments; the Fund invests
only in California bonds while the Index is invested in bonds of many states,
some of which may have outperformed California investments.
Q: WHAT FACTORS CONTRIBUTED TO PERFORMANCE DURING THIS PERIOD?
A: The reversal in the direction of interest rates was clearly the biggest
factor, and that had a negative effect on fixed income investments. However, the
Fund's relatively neutral-to-short duration insulated the portfolio from some of
the losses experienced by funds with longer durations. A tight supply of
California bonds made it difficult to target specific sectors for investment,
but we continued to avoid new investments in the highly competitive California
healthcare market, as well as investments in unseasoned land development issues.
Q: HOW IS THE STATE'S ECONOMY FARING?
A: The State of California is doing exceptionally well, as illustrated by
Standard & Poor's recent upgrade of the State's general obligation bonds to A+.
Economic improvement is being experienced in all parts of the State,
particularly in heavily developed areas. Employment levels, tax revenue
collections and housing prices have all been strengthening and we are confident
that California's economic recovery will continue. We have been increasing the
Fund's holdings of the State's general obligation bonds for some time and we
recently began purchasing selected bonds backed indirectly by the State.
4
<PAGE>
Q: WHAT IS YOUR OUTLOOK FOR THE TAX-EXEMPT BOND MARKET?
A: A number of recent economic indicators indicate stronger economic growth than
previously expected. Despite these growth indicators, we have not seen any
appreciable wage and price pressure, which should calm the market's fears of
inflation. We do expect continued volatility and fluctuating interest rates
through the end of the year, and are continuing to position the Fund
defensively.
COLONIAL CALIFORNIA TAX-EXEMPT FUND'S INVESTMENT PERFORMANCE
Change in Value of $10,000 from 7/86 to 7/96
Based on Net Asset Value (NAV) and Maximum Offering Price (MOP)
for Class A Shares
<TABLE>
<CAPTION>
NAV MOP LEHMAN
------ ------ --------
<S> <C> <C> <C>
Jul 31, 86 10000 9525 10000
Aug 31, 86 10505 10006 10448
Sep 30, 86 10528 10028 10474
Dec 31, 86 10902 10384 10836
Mar 31, 87 11190 10659 11099
Jun 30, 87 10482 9984 10797
Sep 30, 87 9940 9468 10529
Dec 31, 87 10428 9932 10999
Mar 31, 88 10890 10372 11378
Jun 30, 88 11106 10579 11598
Sep 30, 88 11409 10867 11896
Dec 31, 88 11676 11122 12117
Mar 31, 89 11828 11267 12198
Jun 30, 89 12348 11761 12920
Sep 30, 89 12382 11794 12928
Dec 31, 89 12742 12137 13424
Mar 31, 90 12823 12214 13484
Jun 30, 90 13053 12433 13800
Sep 30, 90 13078 12457 13807
Dec 31, 90 13504 12863 14403
Mar 31, 91 13774 13120 14728
Jun 30, 91 14089 13420 15043
Sep 30, 91 14572 13879 15628
Dec 31, 91 15018 14304 16152
Mar 31, 92 15086 14369 16200
Jun 30, 92 15604 14863 16814
Sep 30, 92 15915 15159 17261
Dec 31, 92 16191 15422 17575
Mar 31, 93 16735 15940 18228
Jun 30, 93 17170 16354 18825
Sep 30, 93 17671 16832 19461
Dec 31, 93 17898 17048 19734
Mar 31, 94 16843 16043 18651
Jun 30, 94 16898 16095 18856
Sep 30, 94 17001 16194 18986
Dec 31, 94 16593 15804 18714
Mar 31, 95 17944 17091 20037
Jun 30, 95 18140 17278 20520
Sep 30, 95 18594 17711 21109
Dec 31, 95 19831 18889 21981
Mar 31, 96 19392 18471 21716
Jun 30, 96 19568 18638 21882
Jul 31, 96 19771 18832 22080
</TABLE>
A $10,000 investment in Class B shares made on 8/92 (inception) at NAV would
have been valued at $11,999 on 7/31/96. The same investment after deducting the
applicable contingent deferred sales charge (CDSC) would have grown to $11,704
on 7/31/96.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
As of June 30, 1996 (most recent quarter end)
- --------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES
Inception 6/16/86 Inception 8/4/92
NAV MOP NAV w/CDSC
- --------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
1 YEAR 7.87% 2.74% 7.07% 2.07%
- --------------------------------------------------------------------------------
5 YEARS 6.79% 5.76% -- --
- --------------------------------------------------------------------------------
10 YEARS 6.88% 6.36% -- --
- --------------------------------------------------------------------------------
SINCE INCEPTION 6.87% 6.35% 4.51% 3.84%
- --------------------------------------------------------------------------------
</TABLE>
The Lehman Brothers Municipal Bond Index is a broad-based, unmanaged index that
tracks the performance of the municipal bond market. The performance of the
Index does not reflect fees or expenses associated with an actual investment.
Past performance cannot predict future results. Return and value of an
investment will vary, resulting in a gain or loss on sale. All results shown
assume reinvestment of distributions. NAV return does not include sales charges
or CDSC. MOP return includes the maximum sales charge of 4.75%. The CDSC return
reflects the maximum charge of 5% for one year and 3% since inception.
Performance for different share classes will vary based on differences in sales
charges and fees associated with each class.
5
<PAGE>
INVESTMENT PORTFOLIO
JULY 31, 1996 (UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
MUNICIPAL BONDS - 97.0% PAR VALUE
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EDUCATION - 6.2%
EDUCATION - 2.7%
Antioch Unified School District,
School Sites Acquisition, Series 1991-A:
(a) 07/01/11 $3,690 $ 1,324
(a) 07/01/16 3,565 878
Fresno Unified School District,
Phase VI, Series 1991-A,
7.200% 05/01/11 1,000 1,063
Grossmont Unified High School District,
1991 Capital Projects,
(a) 11/15/06 4,500 2,599
San Mateo County Board of Education,
Series 1991,
7.100% 05/01/21 750 780
Victor Elementary School District,
Series 1996,
6.450% 05/01/18 3,345 3,633
----------
10,277
----------
SCHOOL DISTRICT GENERAL OBLIGATIONS - 3.5%
Alum Rock Unified Elementary School
District,
(a) 09/01/15 1,825 500
Benicia Unified School District,
Series 1994 C,
6.450% 06/01/19 3,870 4,102
Central Unified School District,
(a) 03/01/18 (b) 20,065 5,643
Manhattan Beach Unified School
District, Series 1996-A,
(a) 09/01/07 1,970 1,079
Rocklin Unified School District, Series 1991- C,
(a) 07/01/20 6,920 1,678
----------
13,002
----------
------------------------------------------------------------------------------------------------------------------
HEALTHCARE - 2.0%
HOSPITAL
Duarte, City of Hope National Medical Center,
Series 1993,
6.000% 04/01/08 500 491
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/July 31, 1996
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
San Bernadino County, Sisters of Charity,
Series 1991-A,
7.000% 07/01/21 $ 500 $ 558
State Health Facilities Financing Authority:
Catholic Healthcare West, Series 1994 A,
4.750% 07/01/19 2,000 1,702
Kaiser Permanente, Series 1993 C,
5.600% 05/01/33 5,000 4,593
----------
7,344
----------
------------------------------------------------------------------------------------------------------------------
HOUSING - 3.4%
MULTI-FAMILY - 0.1%
Santa Rosa, Chanate Lodge Projects,
Series 1992,
6.625% 12/01/02 335 335
----------
SINGLE-FAMILY - 3.3%
Delta County Home Mortgage Finance
Authority, Series 1992-A,
6.750% 12/01/25 3,000 3,034
PR Puerto Rico Housing Finance Corp.,
Series B,
7.650% 10/15/22 595 625
Southern California Home Financing Authority:
Series A,
7.625% 10/01/22 1,315 1,354
Series 1990 A,
7.625% 10/01/23 545 570
State Housing Finance Agency:
Series B,
8.600% 08/01/19 2,540 2,654
Series 1991-C,
7.450% 08/01/11 205 216
Series 1990-D,
7.750% 08/01/10 965 1,023
State Rural Home Mortgage Finance
Authority, Series 1995-B,
7.750% 09/01/27 2,485 2,819
Stockton, Mortgage-Backed Security
Program, Series 1990-A,
7.400% 08/01/05 40 42
----------
12,337
----------
------------------------------------------------------------------------------------------------------------------
PUBLIC FACILITIES IMPROVEMENT - 8.9%
Alameda County, Capital Projects,
Series 1989,
(a) 06/15/14 2,185 740
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/July 31, 1996
------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PUBLIC FACILITIES IMPROVEMENT - CONT.
Beverly Hills Public Financing Authority,
Series 1993-A,
5.650% 06/01/15 (b) $5,000 $ 4,819
Long Beach, Fleet Services Project,
Series 1992-A,
6.600% 05/01/14 2,000 2,043
Los Angeles County Public Works
Financing Authority,
5.000% 03/01/17 5,000 4,369
Los Angeles County, Series 1991, RIB,
(variable rate),
9.177% 05/01/15 1,000 1,000
Modesto, Community Center Project,
Series 1993-A,
5.000% 11/01/23 2,235 1,992
Pasadena Civic Improvement Corp.,
Series 1996,
5.250% 02/01/16 3,020 2,839
PR Commonwealth of Puerto Rico
Public Buildings Authority, Series 1993-M,
stepped coupon, (5.700% 07/01/98)
3.750% 07/01/16 (c) 2,250 2,000
Rancho Mirage Joint Powers
Financing Authority, Series 1991-A,
7.500% 04/01/17 455 480
Riverside Public Financing
Authority, Series 1991-A,
8.000% 02/01/18 410 421
Special Districts Finance Authority,
Certificates of Participation, Series 1988-A,
8.400% 07/01/05 1,670 1,790
State Public Works Board:
Secretary of State & State Archives,
J. Paul Getty Trust Center,
5.000% 10/01/23 (b) 10,560 9,265
Series 1992-A,
6.500% 12/01/08 1,000 1,103
Watsonville Mammoth Lakes, Series-B,
7.875% 06/01/11 500 539
----------
33,400
----------
- ---------------------------------------------------------------------------------------------------------------------
PUBLIC INFRASTRUCTURE - 3.6%
Bishop, Escalon & Lemoore Cities, Series 1991-A,
7.700% 05/01/11 700 739
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/July 31, 1996
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Compton, Civic Center Project,
Series 1989-B,
7.500% 08/01/15 $1,000 $ 1,045
Oakland, Series 1988-A,
7.600% 08/01/21 1,995 2,147
State Public Capital Improvements
Financing Authority:
Series 1988-A,
8.500% 03/01/18 3,500 3,675
Series 1988-B,
8.100% 03/01/18 (b) 4,725 5,020
Virgin Islands Public Financing,
Series 1992-A,
7.250% 10/01/18 1,000 1,056
----------
13,682
----------
------------------------------------------------------------------------------------------------------------------
REFUNDED/ESCROW/SPECIAL OBLIGATION (d) - 11.6%
Alum Rock Unified Elementary School
District, Series 1991:
(a) 09/01/11 1,925 717
(a) 09/01/12 1,565 538
(a) 09/01/14 1,000 295
Central School District,
San Bernardino County, Series A,
7.050% 05/01/16 750 822
Commerce Joint Powers Financing
Authority, Multiple Project Loans,
Series A,
8.000% 03/01/21 30 35
Desert Hospital, Series 1990,
8.100% 07/01/20 1,750 2,002
Empire Union School District,
Mello-Roos Financing, Series 1990-A,
7.400% 10/01/15 1,000 1,129
Fontana Public Financing Authority,
North Fontana Redevelopment, Series 1991-A,
7.750% 12/01/20 785 912
Glendora Public Financing Authority,
Series B,
7.625% 09/01/10 850 946
La Quinta Redevelopment Agency,
Series 1990,
8.400% 09/01/12 1,000 1,159
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/July 31,
------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REFUNDED/ESCROW/SPECIAL OBLIGATION (d) - CONT.
Local Government Power Authority,
Anaheim Redevelopment Agency,
Series 1986 A,
8.200% 09/01/15 $4,500 $ 4,949
Los Angeles Convention & Exhibit,
Center, Series 1985,
9.000% 12/01/20 500 648
Los Angeles County Transportation,
Metro Train, Series 1991-A,
6.900% 07/01/21 1,000 1,116
Los Angeles Department of Water &
Power, Series 1988,
7.900% 05/01/28 2,340 2,535
Los Angeles Waste Water System,
Series 1991-A,
7.100% 02/01/21 400 435
Monterey Redevelopment Agency,
Series A:
9.250% 11/01/10 500 548
9.250% 11/01/11 250 274
9.250% 11/01/12 750 825
Moreno Valley Unified School District,
7.400% 09/01/16 20 23
Northern California Power Agency,
Hydroelectric Project No. 1,
Series 1986 B-2,
8.000% 07/01/24 1,750 1,877
Orange County Community Facility:
District Number 87-3 Mello-Roos,
7.800% 08/15/15 2,000 2,272
District 87-4, Series 1990-A
8.000% 08/15/15 1,000 1,141
Pomona, Series 1990-B,
7.500% 08/01/23 1,000 1,229
PR Commonwealth of Puerto Rico,
Electric Power Authority:
Series 1989-N,
7.000% 07/01/07 635 692
Series 1991,
7.300% 07/01/20 1,200 1,343
Rancho Mirage Joint Powers
Financing Authority, Series 1991-A,
7.500% 04/01/17 1,545 1,753
Riverside County, Series 1989-A,
7.800% 05/01/21 2,500 3,090
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/July 31, 1996
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Riverside Public Financing Authority,
Series A,
8.000% 02/01/18 $ 590 $ 578
Rocklin, Stanford Ranch Community
Facilities District, Series 1990,
8.100% 11/01/15 1,000 1,149
Sacramento City Financing Authority,
Series 1991,
6.800% 11/01/20 2,500 2,893
State Educational Facilities Authority,
Westmont College, Series 1985-A,
9.200% 12/01/00 40 44
State Health Facilities Finance Authority,
Children's Hospital of Los Angeles,
Series 1991-A,
7.125% 06/01/21 2,000 2,250
State Public Works,
University of California, Series 1990-A,
7.000% 09/01/15 1,625 1,804
Turlock Irrigation District,
1991 Improvement Project, Series 1991,
7.300% 01/01/11 1,500 1,598
----------
43,621
----------
------------------------------------------------------------------------------------------------------------------
JUSTICE & PUBLIC ORDER - 3.3%
Santa Anna Financing Authority,
Police Holding Facility, Series 1994-A,
6.250% 07/01/18 6,035 6,488
State Public Works Board:
Department of Corrections Corcoran II Project,
Series 1996-A,
5.250% 01/01/21 4,000 3,715
State Prisons, Series 1993-A,
5.250% 12/01/13 2,500 2,375
----------
12,578
----------
------------------------------------------------------------------------------------------------------------------
RESOURCE RECOVERY - 2.3%
CO-GENERATION - 1.7%
Sacramento Cogeneration Authority,
Procter & Gamble Project, Series 1995,
6.500% 07/01/21 6,500 6,581
----------
LANDFILL - 0.3%
Nevada County
Western Nevada County Solid Waste
Management System, Series 1991,
7.500% 06/01/21 1,000 1,009
----------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/July 31, 1996
------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
RESOURCE RECOVERY - CONT.
RECYCLING - 0.3%
Pollution Control Financing Authority, North
California Recycling Center, Series 1991-A,
6.750% 07/01/17 $1,000 $ 1,000
----------
------------------------------------------------------------------------------------------------------------------
TAX-BACKED - 28.7%
GENERAL OBLIGATIONS - 10.0%
Moulton Niguel, Series 1993,
5.250% 09/01/13 (b) 11,000 10,409
PR Commonwealth of Puerto Rico:
Series 1995,
5.650% 07/01/15 1,000 1,011
Series 1996,
6.500% 07/01/14 2,000 2,180
State of California:
5.125% 10/01/17 (b) 7,710 7,084
5.500% 04/01/12 2,770 2,725
5.750% 03/01/19 10,000 9,850
10.000% 02/01/10 2,000 2,833
Series 1995,
10.000% 10/01/06 1,185 1,623
----------
37,715
----------
MELLO - ROOS/1915 ACT - 5.3%
Alameda County, Marina Village
Assessment District, Series 1989-1,
7.650% 09/02/10 1,000 1,030
Carlsbad Unified School District, Community
Facility District No. 5, Series 1990,
7.650% 09/01/14 1,000 1,031
Carson, Series 1992,
7.375% 09/02/22 980 1,012
Corona Community Facility District,
Foothill Ranch, Series 1990 A-1,
8.350% 09/01/20 1,000 1,020
Costa Mesa Public Financing,
Series 1991-A,
7.100% 08/01/21 890 889
Elk Grove Unified School District:
Community Facilities, Series 1995,
6.500% 12/01/08 1,000 1,108
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/July 31, 1996
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Community Facilities District No. 1,
Series 1995:
(a) 12/01/18 $2,720 $ 734
6.500% 12/01/24 4,055 4,481
Fairfield Improvement Bond,
Series 1990,
8.000% 09/02/11 240 247
Folsom Willow Creek,
8.250% 12/01/06 400 418
Los Angeles County, Harbor Boulevard,
8.375% 09/02/18 1,000 1,030
Murrieta County Water District,
Series 1991,
8.300% 10/01/21 1,000 1,054
Placentia, Community Facilities District,
7.900% 09/01/15 1,000 1,030
Riverside Unified School District,
Community Facilities District No. 2,
Series 1993-A,
7.250% 09/01/18 1,000 1,005
Sacramento Unified School,
Community Facilities District No. 1,
Series B,
7.300% 09/01/13 1,760 1,883
Stockton Community Facilities District,
Series 2,
7.750% 08/01/15 1,000 1,028
West Covina Redevelopment Agency,
Community Facilities District No. 1,
Series 1989,
7.800% 09/01/22 1,000 1,023
----------
20,023
----------
SALES & EXCISE TAX - 1.8%
Los Angeles County Metropolitan
Transportation Authority, Series 1995-A
5.000% 07/01/25 5,000 4,413
Riverside County Transportation
Commission, Series 1996-A,
6.000% 06/01/09 2,000 2,110
----------
6,523
----------
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/July 31, 1996
------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TAX-BACKED - CONT.
TAX ALLOCATION - 11.6%
Brea Redevelopment Agency, Project AB,
Series 1993,
6.125% 08/01/13 $2,920 $ 2,993
Cerritos Public Financing Authority,
Los Coyotes Redevelopment Project,
Series 1993-A,
6.500% 11/01/23 2,000 2,205
Commerce Joint Powers Financing
Authority, Series 1991-A
8.000% 03/01/21 970 1,015
Concord Redevelopment Agency,
Central Concord Project,
Series 1988-3,
8.000% 07/01/18 25 27
Contra Costa County Public Financing
Authority, Series 1992-A,
7.100% 08/01/22 1,000 1,039
Emeryville Public Finance Authority,
Emeryville Redevelopment, Series 1993-A,
6.500% 05/01/21 2,000 2,030
Folsom Redevelopment Agency, Central
Folsom Project Area, Series 1987-A,
8.600% 02/01/13 400 417
Glendora Public Financing Authority,
Series B,
7.625% 09/01/10 150 153
Oakland Redevelopment Agency,
Central District Project, Series 1992,
5.500% 02/01/14 7,400 7,234
Pomona Public Financing Authority,
Southwest Pomona Redevelopment Project,
Series 1994-L,
5.750% 02/01/20 3,800 3,525
Richmond Joint Powers Financing
Authority, Series 1990-A,
7.700% 10/01/10 925 984
San Jose Redevelopment Agency,
Series 1993,
5.000% 08/01/21 10,000 8,888
Santa Fe Springs Redevelopment Agency,
Consolidated Project, Series 1992-A,
6.400% 09/01/22 7,275 7,592
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/July 31, 1996
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Santa Margarita, Series 1994-B,
7.250% 08/01/13 (b) $2,000 $ 2,347
Seaside Redevelopment Agency,
Gateway Project, Series 1986,
8.500% 08/01/06 105 107
Soledad Redevelopment Agency, Series 1992,
7.400% 11/01/12 970 1,025
Torrance, Downtown Redevelopment
Project, Series 1992,
7.125% 09/01/21 1,000 1,032
Westminster Redevelopment Agency,
Project No. 1, Series 1993,
6.200% 08/01/23 1,000 959
----------
43,572
----------
------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 4.8%
AIRPORT - 0.8%
Los Angeles International Airport,
Series 1995-D,
5.500% 05/15/15 3,025 2,889
----------
TURNPIKE/TOLLROAD/BRIDGE - 4.0%
Foothill Eastern Transportation Corridor
Agency, Series 1995-A,
5.000% 01/01/35 10,000 8,063
PR Commonwealth of Puerto Rico
Highway & Transportation Authority:
Series-W,
5.500% 07/01/09 580 586
Series 1996-Y,
6.250% 07/01/12 3,000 3,251
San Joaquin Hills Transportation
Corridor Agency, Series 1993,
(a) 01/01/20 15,400 3,215
----------
15,115
----------
UTILITY - 22.2%
INVESTOR OWNED - 1.3%
State Pollution Control Finance Authority,
San Diego Gas & Electric Co., Series 1996 A,
5.900% 06/01/14 4,650 4,714
----------
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/July 31, 1996
------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UTILITY - CONT.
JOINT POWER AUTHORITY - 0.4%
Northern California Power Agency,
Hydroelectric Project No.1
Series 1991-E,
7.150% 07/01/24 $1,460 $ 1,517
----------
MUNICIPAL ELECTRIC - 3.4%
Colton Public Financing Authority,
Electric System Imports, Series 1995,
7.500% 10/01/20 3,000 3,086
Commonwealth of Puerto Rico Electric
Power Authority:
Series 1989-O,
(a) 07/01/17 2,490 713
Series 1989-N,
7.000% 07/01/07 365 390
Reading Electric System,
RIB (variable rate), Series 1992-A,
8.800% 07/01/22 750 842
Sacramento Municipal Utilities District:
Series 1993-D,
5.250% 11/15/20 5,000 4,580
Series 1993 G,
6.500% 09/01/13 1,500 1,646
Turlock Irrigation District,
Series 1996-A:
6.000% 01/01/11 (b) 1,000 1,044
6.000% 01/01/12 500 521
----------
12,822
----------
WATER & SEWER - 17.1%
Anderson,
7.900% 12/01/11 610 649
Contra Costa Water District, Series 1994-G,
5.000% 10/01/24 7,500 6,675
Covina Water System Improvement Project,
Series 1991,
7.300% 04/01/16 1,000 1,044
East Bay Municipal Utilities District,
Wastewater Treatment Project,
Sub-Series 1996:
5.000% 06/01/15 (b) 7,500 6,853
5.000% 06/01/16 1,000 906
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/July 31, 1996
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fresno Sewer Revenue:
Series 1993-A,
5.250% 09/01/19 $4,000 $ 3,745
Series 1995-A:
6.000% 09/01/09 1,525 1,601
6.000% 09/01/10 1,420 1,489
Hemet Public Financing Authority,
Series 1992-A,
6.500% 02/01/12 1,500 1,509
Irvine Ranch Water District, Joint
Powers Agency, Series 1988-II,
8.250% 08/15/23 5,500 5,871
Metropolitan Water District,
RIB (variable rate),
8.077% 08/05/22 2,000 1,990
Mojave Water Agency,
Morongo Basin Pipeline:
Series 1991,
6.950% 09/01/21 1,000 1,125
Series 1992,
6.600% 09/01/13 800 892
PR Puerto Rico Aqueduct & Sewer Authority,
Series 1995:
6.000% 07/01/09 1,250 1,303
6.250% 07/01/13 2,750 2,888
Sacramento County Sanitation District
Financing Authority, Series 1993,
4.750% 12/01/23 12,000 9,974
San Diego Sewer Redevelopment, Series 1993,
5.000% 05/15/23 5,000 4,313
State Department Water Resources,
Central Valley Project, Series 1996-P,
5.250% 12/01/24 10,000 9,188
Tehachapi Water & Sewer District,
8.200% 11/01/20 2,000 2,183
----------
64,198
----------
TOTAL MUNICIPAL BONDS (cost of $353,080) (e) 364,254
----------
SHORT-TERM OBLIGATIONS - 1.7%
------------------------------------------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (f)
Newport Beach Hoag Hospital,
3.500% 10/01/22 800 800
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/July 31, 1996
------------------------------------------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS - CONT. PAR VALUE
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
VARIABLE RATE DEMAND NOTES (f) - CONT.
Pinellas County Health Facilities
Authority, Series 1985,
3.750% 12/01/15 $5,200 $ 5,200
State Pollution Control Financing Authority:
Ultrapower Rocklin Series-A,
3.700% 06/01/17 300 300
Western Power Group Unit II,
3.650% 09/01/18 200 200
----------
TOTAL SHORT-TERM OBLIGATIONS 6,500
----------
OTHER ASSETS & LIABILITIES, NET - 1.3% 4,801
------------------------------------------------------------------------------------------------------------------
NET ASSETS - 100.0% $ 375,555
----------
NOTES TO INVESTMENT PORTFOLIO:
------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Zero coupon bond.
(b) These securities, or a portion thereof, with a total market value of
$52,484 are being used to collateralize open futures contracts.
(c) Shown parenthetically is the interest rate to be paid and the date the
Fund will begin accruing this rate.
(d) The Fund has been informed that each issuer has placed direct
obligations of the U.S. Government in an irrevocable trust, solely for
the payment of the interest and principal.
(e) Cost for federal income tax purposes is the same.
(f) Variable rate demand notes are considered short-term obligations.
Interest rates change periodically on specified dates. These securities
are payable on demand and are secured by either letters of credit or
other credit support agreements from banks. The rates listed are as of
July 31, 1996.
Short futures contracts open at July 31, 1996:
<TABLE>
<CAPTION>
Par value Unrealized
covered by Expiration depreciation
Type contracts month at 7/31/96
----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Treasury bonds $365 September $ 809
Acronym Name
------- -----------------------
RIB Residual Interest Bonds
</TABLE>
See notes to financial statements.
18
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
JULY 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
(in thousands except for per share amounts and footnotes)
<S> <C> <C>
ASSETS
Investments at value (cost $353,080) $ 364,254
Short-term obligations 6,500
----------
370,754
Receivable for:
Interest $ 6,521
Fund shares sold 412
Investments sold 50
Other 68 7,051
---------- ----------
Total Assets 377,805
LIABILITIES
Payable for:
Distributions 1,755
Variation margin on futures 251
Fund shares repurchased 221
Accrued:
Deferred Trustees fees 4
Other 19
----------
Total Liabilities 2,250
----------
NET ASSETS $ 375,555
----------
Net asset value & redemption price per share -
Class A ($273,554/37,522) $ 7.29
----------
Maximum offering price per share - Class A
($7.29/0.9525) $ 7.65 (a)
----------
Net asset value & offering price per share -
Class B ($102,001/13,991) $ 7.29 (b)
----------
COMPOSITION OF NET ASSETS
Capital paid in $ 367,161
Overdistributed net investment income (70)
Accumulated net realized loss (1,901)
Net unrealized appreciation (depreciation) on:
Investments 11,174
Open futures contracts (809)
----------
$ 375,555
----------
</TABLE>
(a) On sales of $50,000 or more the offering price is reduced.
(b) Redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
See notes to financial statements.
19
<PAGE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JULY 31, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
(in thousands)
INVESTMENT INCOME
Interest $ 11,801
EXPENSES
Management fee $ 1,038
Service fee 257
Distribution fee - Class B 385
Transfer agent 302
Bookkeeping fee 72
Trustees fee 14
Custodian fee 26
Audit fee 17
Legal fee 6
Registration fee 7
Reports to shareholders 4
Other 15 2,143
---------- ----------
Net Investment Income 9,658
----------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain on:
Investments 2,464
Closed futures contracts 4,081
----------
Net Realized Gain 6,545
Net unrealized depreciation during the period on:
Investments (19,257)
Open futures contracts (700)
----------
Net Unrealized Depreciation (19,957)
----------
Net Loss (13,412)
----------
Net Decrease in Net Assets from Operations $ (3,754)
----------
</TABLE>
See notes to financial statements.
20
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
(Unaudited)
Six months
ended Year ended
(in thousands) July 31 January 31
------------------ --------------------
INCREASE (DECREASE) IN NET ASSETS 1996 1996
<S> <C> <C>
Operations:
Net investment income $ 9,658 $ 21,032
Net realized gain (loss) 6,545 (741)
Net unrealized appreciation (depreciation) (19,957) 38,695
----------------- --------------------
Net Increase (Decrease) from Operations (3,754) 58,986
Distributions:
From net investment income - Class A (7,458) (16,481)
From net investment income - Class B (2,339) (4,822)
----------------- --------------------
(13,551) 37,683
----------------- --------------------
Fund Share Transactions:
Receipts for shares sold - Class A 5,834 15,423
Value of distributions reinvested - Class A 3,205 7,161
Cost of shares repurchased - Class A (30,062) (48,031)
----------------- --------------------
(21,023) (25,447)
----------------- --------------------
Receipts for shares sold - Class B 5,854 11,772
Value of distributions reinvested - Class B 1,174 2,530
Cost of shares repurchased - Class B (8,405) (15,919)
----------------- --------------------
(1,377) (1,617)
----------------- --------------------
Net Decrease from Fund Share Transactions (22,400) (27,064)
----------------- --------------------
Total Increase (Decrease) (35,951) 10,619
NET ASSETS
Beginning of period 411,506 400,887
----------------- --------------------
End of period (net of overdistributed and
including undistributed net investment
income of $70 and $28, respectively) $ 375,555 $ 411,506
----------------- --------------------
NUMBER OF FUND SHARES
Sold - Class A 802 2,147
Issued for distributions reinvested - Class A 439 995
Repurchased - Class A (4,110) (6,670)
----------------- --------------------
(2,869) (3,528)
----------------- --------------------
Sold - Class B 803 1,634
Issued for distributions reinvested - Class B 161 351
Repurchased - Class B (1,153) (2,203)
----------------- --------------------
(189) (218)
----------------- --------------------
</TABLE>
See notes to financial statements.
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1996 (UNAUDITED)
NOTE 1. INTERIM FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
In the opinion of management of Colonial California Tax-Exempt Fund (the Fund),
a series of Colonial Trust V, the accompanying financial statements contain all
normal and recurring adjustments necessary for the fair presentation of the
financial position of the Fund at July 31, 1996, 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 objective is to seek as high
a level of after-tax total return, as is consistent with prudent risk. The Fund
may issue an unlimited number of shares. The Fund offers Class A shares sold
with a front-end sales charge and Class B shares which are subject to an annual
distribution fee and a contingent deferred sales charge. Class B shares will
convert to Class A shares when they have been outstanding approximately eight
years.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies that are consistently followed by the Fund in
the preparation of its financial statements.
SECURITY VALUATION AND TRANSACTIONS: Debt securities generally are valued by a
pricing service based upon market transactions for normal, institutional-size
trading units of similar securities. When management deems it appropriate, an
over-the-counter or exchange bid quotation is used.
Futures contracts are valued based on the difference between the last sale price
and the opening price of the contract.
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 which cannot be valued as set forth above 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.
22
<PAGE>
Notes to Financial Statements/July 31, 1996
- --------------------------------------------------------------------------------
Cost is determined and gains (losses) are based upon the specific identification
method for both financial statement and federal income tax purposes.
The Fund may trade securities on other than normal settlement terms. This may
increase the risk if the other party to the transaction fails to deliver and
causes the Fund to subsequently invest at less advantageous prices.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS: All income,
expenses (other than the Class B distribution fee), 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 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 annualized distribution fee applicable to Class B 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 and tax-exempt
income, no federal income tax has been accrued.
INTEREST INCOME, DEBT DISCOUNT AND PREMIUM: Interest income is recorded on the
accrual basis. Original issue discount is accreted to interest income over the
life of a security with a corresponding increase in the cost basis; market
discount is not accreted. Premium is amortized against interest income with a
corresponding decrease in the cost basis.
DISTRIBUTIONS TO SHAREHOLDERS: The Fund declares and records distributions daily
and pays monthly.
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforwards) under income tax regulations.
NOTE 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 based on each Fund's pro rata portion of the
combined average net assets of Trust V as follows:
Average Net Assets Annual Fee Rate
------------------ ---------------
First $1 billion 0.55%
Next $1 billion 0.50%
Over $2 billion 0.45%
23
<PAGE>
Notes to Financial Statements/July 31, 1996
- --------------------------------------------------------------------------------
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES - CONT.
- --------------------------------------------------------------------------------
Effective January 1, 1996, the management fee applicable to the Trust is being
reduced based on the following schedule for the first $1 billion in combined
average net assets:
Cumulative Annualized
Effective Date Reduction
--------------- ---------------------
January 1, 1996 0.0125%
April 1, 1996 0.0250%
July 1, 1996 0.0375%
October 1, 1996 0.0500%
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 FEE: Colonial Investors Service Center, Inc., (the Transfer
Agent), an affiliate of the Adviser, provides shareholder services for a monthly
fee equal to 0.14% annually of the Fund's average net assets and receives a
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 July 31, 1996, the Fund has
been advised that the Distributor retained net underwriting discounts of $14,644
on sales of the Fund's Class A shares and received contingent deferred sales
charges (CDSC) of $166,142 on Class B shares redemptions.
The Fund has adopted a 12b-1 plan which requires the payment of a distribution
fee to the Distributor equal to 0.75% annually of the Fund's average net assets
attributable to Class B shares. The plan also requires the payment of a service
fee to the Distributor as follows:
Valuation of shares Annual
outstanding on the 20th of Fee
each month which were issued Rate
---------------------------- ----
Prior to November 30, 1994 0.10%
On or after December 1, 1994 0.25%
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.
24
<PAGE>
Notes to Financial Statements/July 31, 1996
- --------------------------------------------------------------------------------
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 0.80% annually of the Fund's average net
assets.
For the six months ended July 31,1996, the Fund's operating expenses did not
exceed the 0.80% 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 July 31, 1996, purchases and
sales of investments, other than short-term obligations were $50,038,286 and
$73,483,051, respectively.
Unrealized appreciation (depreciation) at July 31, 1996, based on cost of
investments for both financial statement and federal income tax purposes was:
Gross unrealized appreciation $ 15,404,431
Gross unrealized depreciation ( 4,230,034)
----------------
Net unrealized appreciation $ 11,174,397
----------------
CAPITAL LOSS CARRYFORWARDS: At January 31, 1996, capital loss carryforwards,
available (to the extent provided in regulations) to offset future realized
gains were approximately as follows:
Year of Capital loss
expiration carryforward
---------- ------------
1998 $ 421,000
1999 409,000
2003 4,419,000
----------
$5,249,000
==========
Expired capital loss carryforwards, if any, are recorded as a reduction of
capital paid in.
To the extent loss carryforwards are used to offset any future realized gains,
it is unlikely that such gains would be distributed since they may be taxable to
shareholders as ordinary income.
25
<PAGE>
Notes to Financial Statements/July 31, 1996
- --------------------------------------------------------------------------------
OTHER: There are certain risks arising from geographic concentration in any
state. Certain revenue or tax related events in a state may impair the ability
of certain issuers of municipal securities to pay principal and interest on
their obligations.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
The Fund may purchase or sell municipal and Treasury bond futures contracts and
purchase and write options on futures. The Fund will invest in these instruments
to hedge against the effects of changes in the value of portfolio securities due
to anticipated changes in interest rates and/or market conditions, for duration
management, or when the transactions are economically appropriate to the
reduction of risk inherent in the management of the Fund and not for trading
purposes. The use of futures contracts and options involves certain risks which
include (1) imperfect correlation between the price movement of the instruments
and the underlying securities, (2) inability to close out a position due to
different trading hours, or the temporary absence of a liquid market for either
the instrument or the underlying securities or (3) an inaccurate prediction by
the Adviser of the future direction of interest rates. Any of these risks may
involve amounts exceeding the variation margin recognized in the Fund's
Statement of Assets and Liabilities at any given time.
NOTE 5. LINE OF CREDIT
- --------------------------------------------------------------------------------
The Fund may borrow up to 10% 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 July 31, 1996.
26
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
(Unaudited)
Six months
ended July 31 Year ended January 31
---------------------------- -----------------------------
1996 1996
Class A Class B Class A Class B
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 7.540 $ 7.540 $ 6.870 $ 6.870
-------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income (a) 0.188 0.160 0.388 0.334
Net realized and
unrealized gain (loss) (0.244) (0.244) 0.671 0.671
-------- -------- -------- --------
Total from Investment
Operations (0.056) (0.084) 1.059 1.005
-------- -------- -------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment
income (0.190) (0.162) (0.389) (0.335)
From net realized
gains (0.004) (0.004) -- --
-------- -------- -------- --------
Total Distributions Declared
to Shareholders (0.194) (0.166) -- --
-------- -------- -------- --------
Net asset value
End of period $ 7.290 $ 7.290 $ 7.540 $ 7.540
-------- -------- -------- --------
Total return (b)(c) (0.72)%(d) (1.09)%(d) 15.78 % 14.94 %
======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS
Expenses 0.91 %(e)(f) 1.66 %(e)(f) 0.89 %(e) 1.64 %(e)
Net investment income 5.23 %(e)(f) 4.48 %(e)(f) 5.33 %(e) 4.58 %(e)
Fees and expenses
waived or borne
by the Adviser -- -- 0.01 % 0.01 %
Portfolio turnover 13 %(d) 13 %(d) 47 % 47 %
Net assets at end
of period (000) $273,554 $102,001 $304,581 $106,925
(a) Net of fees and expenses waived or borne by the Adviser which amounted to:
$ -- $ -- $ 0.001 $ 0.001
</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 Adviser 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. Prior years' ratios are net of benefits
received, if any.
(f) Annualized
27
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
Year ended January 31
---------------------------------------------------------------------
1995 1994
Class A Class B Class A Class B
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 7.660 $ 7.660 $ 7.350 $ 7.350
------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a) 0.413 0.360 0.434 0.378
Net realized and
unrealized gain (loss) (0.791) (0.791) 0.315 0.315
------------ ------------ ------------ ------------
Total from Investment
Operations (0.378) (0.431) 0.749 0.693
------------ ------------ ------------ ------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net
investment income (0.412) (0.359) (0.439) (0.383)
------------ ------------ ------------ ------------
Net asset value -
End of period $ 6.870 $ 6.870 $ 7.660 $ 7.660
------------ ------------ ------------ ------------
Total return(d)(e) (4.83)% (5.55)% 10.44% 9.63%
------------ ------------ ------------ ------------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.77% 1.52% 0.75% 1.50%
Net investment income 5.91% 5.16% 5.73% 4.98%
Fees and expenses waived
or borne by the Adviser 0.06% 0.06% 0.08% 0.08%
Portfolio turnover 47% 47% 17% 17%
Net assets at end
of period (000) $ 301,912 $ 98,975 $ 379,987 $ 104,578
(a) Net of fees and expenses waived or borne by the Adviser which amounted
to:
$ 0.004 $ 0.004 $ 0.006 $ 0.006
</TABLE>
(b) The Fund changed its fiscal year end from November 30 to January 31 in
1992.
(c) Class B shares were initially offered on August 4, 1992. Per share
amounts reflect activity from that date.
(d) Total return at net asset value assuming all distributions reinvested
and no initial sales charge or contingent deferred sales charge.
(e) Had the Adviser not waived or reimbursed a portion of expenses, total
return would have been reduced.
(f) Not annualized.
(g) Annualized
28
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
<TABLE>
<CAPTION>
Two months
ended Year ended
January 31 (b) November 30
- ---------------------------------- ----------------------------------------------------
1993 1992 1991
Class A Class B Class A Class B(c) Class A
- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
$ 7.270 $ 7.270 $ 7.150 $ 7.410 $ 6.940
- ------------ ------------ ------------ ------------ ------------
0.076 0.067 0.467 0.143 0.473
0.081 0.081 0.109 (0.151) 0.211
- ------------ ------------ ------------ ------------ ------------
0.157 0.148 0.576 (0.008) 0.684
- ------------ ------------ ------------ ------------ ------------
(0.077) (0.068) (0.456) (0.132) (0.474)
- ------------ ------------ ------------ ------------ ------------
$ 7.350 $ 7.350 $ 7.270 $ 7.270 $ 7.150
- ------------ ------------ ------------ ------------ ------------
8.70%(f) 1.01%(f) 8.27% 1.94%(f) 10.18%
- ------------ ------------ ------------ ------------ ------------
0.65%(g) 1.40%(g) 0.71% 1.46%(g) 0.80%
6.29%(g) 5.54%(g) 6.44% 5.69%(g) 6.69%
0.21%(g) 0.21%(g) 0.13% 0.13%(g) 0.05%
19%(g) 19%(g) 12% 12% 11%
$ 337,409 $ 33,819 $ 324,012 $ 22,797 $ 295,459
$ 0.002 $ 0.002 $ 0.010 $ 0.010 $ 0.003
</TABLE>
29
<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 DEPARTMENT - 1-800-248-2828
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
30
<PAGE>
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial California Tax-Exempt Fund is:
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Colonial California Tax-Exempt Fund mails one shareholder report to each
shareholder address. If you would like more than one report, please call our
Literature Department at 1-800-248-2828 and additional reports will be sent to
you.
This report has been prepared for shareholders of Colonial California Tax-Exempt
Fund. This report may also be used as sales literature when preceded or
accompanied by the current prospectus which provides details of sales charges,
investment objectives, and operating policies of the Fund.
31
<PAGE>
[COLONIAL MUTUAL FUNDS LOGO]
Mutual Funds for
Planned Portfolios
TRUSTEES
ROBERT J. BIRNBAUM
Trustee (formerly Special Counsel, Dechert, Price & Rhoads; President and Chief
Operating Officer, New York Stock Exchange, Inc.)
TOM BLEASDALE
Trustee (formerly Chairman of the Board and Chief Executive Officer, Shore Bank
& Trust Company)
LORA S. COLLINS
Attorney, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
JAMES E. GRINNELL
Private Investor (formerly Senior Vice President-Operations, The Rockport
Company)
WILLIAM D. IRELAND, JR.
Trustee (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
Dean, College of Business and Management, University of Maryland (formerly 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.
Chairman of the Board, 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
Management Consultant (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) 1996
One Financial Center, Boston, Massachusetts 02111-2621, 617-426-3750
CA-03/506C-0796 M (9/96)
