COLONIAL
NORTH CAROLINA
TAX-EXEMPT FUND
[PHOTO OF GOLF COURSE]
SEMIANNUAL REPORT
JULY 31, 1997
--------------------------------------
NOT FDIC- MAY LOSE VALUE
INSURED NO BANK GUARANTEE
--------------------------------------
<PAGE>
COLONIAL NORTH CAROLINA TAX-EXEMPT FUND HIGHLIGHTS
FEBRUARY 1, 1997 - JULY 31, 1997
Investment Objective: Colonial North Carolina 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 North Carolina state personal income tax
and opportunities for long-term appreciation from a portfolio primarily invested
in investment grade municipal bonds.
The Fund is Designed to Offer:
(check mark) High monthly double tax-free income
(check mark) Long-term appreciation
(check mark) Emphasis on quality
Portfolio Manager Commentary: "As the investment environment for bonds improved
over the period, the Fund's strategic shift towards more interest rate sensitive
bonds yielded positive results. Combined with North Carolina's strong,
well-managed economy and the portfolio's continued emphasis on high quality
revenue bonds, the Fund is positioned to enjoy good performance in the
months ahead." - Peter Andersen
Colonial North Carolina Tax-Exempt Fund Performance
Class A Class B
Inception date 9/1/93 9/1/93
- --------------------------------------------------------------------------------
Distributions declared per share(1) $0.186 $0.159
- --------------------------------------------------------------------------------
SEC yields on 7/31/97(2) 4.62% 4.09%
- --------------------------------------------------------------------------------
Taxable-equivalent SEC yields(3) 8.29% 7.34%
- --------------------------------------------------------------------------------
Six-month total returns, assuming reinvestment 5.80% 5.41%
of all distributions and no sales charge or
contingent deferred sales charge (CDSC)
- --------------------------------------------------------------------------------
Net asset value per share on 7/31/97 $7.34 $7.34
(1)A portion of the Fund's income may be subject to the alternative minimum tax.
(2)The 30-day SEC yields on July 31, 1997, 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. If the Advisor had not
waived or borne certain Fund expenses, SEC yields would have been 3.98% for
Class A shares and 3.43% for Class B shares.
(3)Taxable-equivalent SEC yields are based on the maximum effective 44.3%
federal and North Carolina income tax rates.
The Fund may at times purchase tax-exempt securities at a discount, and some or
all of this discount may be included in the Fund's ordinary income which will be
taxable when distributed.
Quality Breakdown
(as of 7/31/97)
AAA . . . . . . . . . . . . . . . . . . . . . . . . 44.3%
AA . . . . . . . . . . . . . . . . . . . . . . . . . 26.2%
A . . . . . . . . . . . . . . . . . . . . . . . . . 27.4%
Non-rated . . . . . . . . . . . . . . . . . . . . . 1.8%
Cash & Equivalents . . . . . . . . . . . . . . . . . 0.3%
Top Five Sectors
(as of 7/31/97)
Local Appropriated . . . . . . . . . . . . . . . . . 18.7%
Refunded . . . . . . . . . . . . . . . . . . . . . . 17.3%
General Obligations . . . . . . . . . . . . . . . . 16.5%
Housing . . . . . . . . . . . . . . . . . . . . . . 13.0%
Hospitals . . . . . . . . . . . . . . . . . . . . . 11.5%
Because the Fund is actively managed, quality and sector weightings will
change. Quality breakdown and sector classifications are based on total net
assets.
2
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PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
[photo of Harold W. Cogger]
I am pleased to present the semiannual report for Colonial North Carolina
Tax-Exempt Fund. This report reflects on the investment environment for the six
months ended July 31, 1997.
The national economy continued to grow during the past six months. A firm job
market buoyed consumer confidence, resulting in strong retail, auto and housing
sales during the first quarter of 1997. The Federal Reserve Board raised
short-term interest rates in March for the first time in two years in response
to growing concern about future wage and price inflation. As interest rates
rose, bond prices declined.
Bond prices recovered during the second half of the period as consumer spending
declined, dampening investors' fears of potential inflation. At the same time,
industrial production, corporate capital spending and consumer income levels
continued to expand while inflation remained very low. This indicates that while
economic growth has slowed down, the economy is still on track to post gains for
1997 and carry the current economic expansion into its eighth year.
Municipal bonds prices continued to outperform Treasury prices. A low supply of
new municipal issues combined with strong demand helped support these tax-exempt
bond prices. Municipal bond prices also received a boost as the final balanced
budget agreement emerged from Congress. However, the investment environment for
municipal bonds was not without challenge. The yield advantage for investing in
lower quality municipal bonds continued to be historically low. This, combined
with tight supply, created higher prices and lower yields for many new
investments.
The long-term benefits of investing in any municipal bond fund include tax-free
income and the opportunity to diversify your fixed-income portfolio. Colonial
North Carolina Tax-Exempt Fund continues to offer you competitive tax-free
income and long-term total return as well as an opportunity to participate in
North Carolina's economic expansion.
As always, we thank you for the opportunity to help meet your investment goals.
Respectfully,
/s/ Harold W. Cogger
Harold W. Cogger
President
September 11, 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.
3
<PAGE>
PORTFOLIO MANAGEMENT REPORT
As of August 27, 1997, Peter Andersen resigned from Colonial Management
Associates, Inc. Brian Hartford, vice president of the Advisor, now manages the
Fund. Mr. Hartford has managed various other municipal bond funds for Colonial
since 1993 and is the Quantitative Risk Manager for Colonial's tax-exempt
investments.
Investment environment reflects changing economic conditions
A series of economic reports near the beginning of the period suggested a
stronger pace of economic growth than had been expected. The economy's healthy
rate of growth during the first quarter of 1997 sparked fears of potential
inflation, a negative for bonds. As a result, bond prices declined. The Federal
Reserve Board raised short-term interest rates in March and bond prices declined
further. By April, bond prices began to recover as decreased consumer spending
on autos, homes and retail goods restrained the pace of economic growth.
Bond prices increased at the end of July as the final budget accord emerged.
This agreement by Congress to balance the budget indicates that the nation's
budget deficit should decline and the Government would need to borrow less
money. This should have a positive impact on long-term interest rates and,
therefore, on bond prices.
Fund increases its sensitivity to interest rates
The Fund's investment strategy reflected the changes in the economic
environment. The portfolio was structured defensively at the beginning of the
period with a relatively low sensitivity to changes in interest rates.
Significant holdings of bonds with shorter maturities and bonds with higher
coupons helped to reduce price declines when interest rates rose during the
first half of the period, helping to stabilize the Fund's asset value.
During April and May, economic reports suggested a slow down in economic growth
with continued low inflation, creating a positive environment for fixed-income
investments. We increased the Fund's average maturity by selling shorter
maturity and higher coupon bonds and purchasing noncallable and longer maturity
bonds. These bonds are more sensitive to interest rate changes and generated
larger price gains during the last three months of the period.
These strategies had a positive impact on performance. The Fund's Class A shares
posted a total return of 5.80% for the period based on the net asset value.
Positive expectations for North Carolina's economy continued
The State's economy continued to expand rapidly. Employment growth exceeded the
national average while unemployment continued well below the national average.
North Carolina's relatively low cost of doing business and a high quality of
life has attracted many service industries, as well as
4
<PAGE>
research and development firms. For example, Charlotte has become a major
banking center and the Research Triangle has benefited from numerous high tech
business relocation. The Research Triangle Park (the "Park") is a nationally
recognized center for research and light manufacturing located adjacent to the
city. Rapid population growth has been fueled by both economic growth and the
State's attractiveness as a retirement destination. Increased infrastructure
needs generated by this growth may increase North Carolina's debt level as State
and local governments borrow to finance municipal projects. However, we
anticipate that improved demographics and continued population growth will be
adequate to support additional borrowing.
Increasing your total return
With the strong economy producing the lowest inflation and unemployment in a
generation, interest rates have been going down over the last few months. If
this trend continues, its effect will be reflected in smaller dividend checks.
With inflation under control, current dividends continue to outpace the
inflation rate, and remain a reliable source of tax-exempt income. The goal of
the Fund is to increase shareholders' total return, so while interest rates have
gone down, and dividends are likely to follow, the net asset value per share of
the Fund has been increasing. We will continue to invest primarily in investment
grade municipal bonds that provide the most potential for long-term
appreciation.
5
<PAGE>
Colonial North Carolina Tax-Exempt Fund Investment Performance
Change in Value of $10,000 from 9/1/93 -- 7/31/97
Based on NAV and MOP for Class A Shares
and NAV and applicable CDSC for Class B Shares
[mountain chart]
Class A Shares
(arrow) LEHMAN
$12,652
(arrow) NAV
$12,121
(arrow) MOP
$11,545
1/97 A Shares NAV MOP LEHMAN
- ----------------------------- -------- -------- -----
Sep 1, 93 10000 9525 10000
Sep 30, 93 10070.34 9592.001 10114
Oct 31, 93 10061.42 9583.499 10133
Nov 30, 93 9957.159 9484.194 10044
Dec 31, 93 10163.66 9680.884 10256
Jan 31, 94 10221.97 9736.43 10373
Feb 28, 94 9899.763 9429.524 10105
Mar 31, 94 9314.748 8872.298 9693
Apr 30, 94 9415.313 8968.086 9775
May 31, 94 9528.947 9076.322 9860
Jun 30, 94 9477.207 9027.04 9800
Jul 31, 94 9620.893 9163.9 9979
Aug 31, 94 9666.96 9207.779 10014
Sep 30, 94 9502.362 9051 9867
Oct 31, 94 9253.125 8813.602 9692
Nov 30, 94 9028.829 8599.96 9516
Dec 31, 94 9304.988 8863.001 9726
Jan 31, 95 9653.627 9195.08 10004
Feb 28, 95 9990.697 9516.139 10295
Mar 31, 95 10110.88 9630.614 10413
Apr 30, 95 10129.85 9648.68 10426
May 31, 95 10396.79 9902.94 10758
Jun 30, 95 10208.34 9723.447 10664
Jul 31, 95 10286.51 9797.897 10765
Aug 31, 95 10377.28 9884.359 10902
Sep 30, 95 10468.39 9971.146 10971
Oct 31, 95 10665.03 10158.44 11130
Nov 30, 95 10892.34 10374.96 11315
Dec 31, 95 11030.38 10506.43 11424
Jan 31, 96 11092.84 10565.93 11510
Feb 29, 96 10972.54 10451.35 11432
Mar 31, 96 10822.17 10308.12 11286
Apr 30, 96 10793.79 10281.08 11254
May 31, 96 10827.06 10312.78 11250
Jun 30, 96 10924.09 10405.2 11372
Jul 31, 96 11019.29 10495.88 11475
Aug 31, 96 11037.16 10512.9 11473
Sep 30, 96 11196.54 10664.7 11633
Oct 31, 96 11309.24 10772.05 11765
Nov 30, 96 11518.03 10970.93 11980
Dec 31, 96 11439.73 10896.34 11929
Jan 31, 97 11457.07 10912.86 11952
Feb 28, 97 11571.46 11021.82 12062
Mar 31, 97 11427.77 10884.95 11901
Apr 30, 97 11510.48 10963.74 12001
May 31, 97 11674.87 11120.31 12181
Jun 30, 97 11790.64 11230.58 12311
Jul 31, 97 12121.17 11545.41 12652
Class B Shares
[mountain chart]
(arrow) LEHMAN
$12,652
(arrow) NAV
$11,772
(arrow) MOP
$11,478
1/97 A Shares NAV MOP LEHMAN
- ----------------------------- -------- -------- ------
Sep 1, 93 10000 10000 10000
Sep 30, 93 10064.08 10064.08 10114
Oct 31, 93 10048.77 10048.77 10133
Nov 30, 93 9938.39 9938.39 10044
Dec 31, 93 10138.29 10138.29 10256
Jan 31, 94 10190.2 10190.2 10373
Feb 28, 94 9862.589 9862.589 10105
Mar 31, 94 9273.505 9273.505 9693
Apr 30, 94 9367.683 9367.683 9775
May 31, 94 9474.937 9474.937 9860
Jun 30, 94 9417.56 9417.56 9800
Jul 31, 94 9554.351 9554.351 9979
Aug 31, 94 9594.102 9594.102 10014
Sep 30, 94 9424.658 9424.658 9867
Oct 31, 94 9171.343 9171.343 9692
Nov 30, 94 8943.309 8943.309 9516
Dec 31, 94 9211.324 9211.324 9726
Jan 31, 95 9550.859 9550.859 10004
Feb 28, 95 9878.436 9878.436 10295
Mar 31, 95 9991.14 9991.14 10413
Apr 30, 95 10003.68 10003.68 10426
May 31, 95 10261.15 10261.15 10758
Jun 30, 95 10068.86 10068.86 10664
Jul 31, 95 10139.62 10139.62 10765
Aug 31, 95 10222.82 10222.82 10902
Sep 30, 95 10306.29 10306.29 10971
Oct 31, 95 10493.55 10493.55 11130
Nov 30, 95 10710.75 10710.75 11315
Dec 31, 95 10839.78 10839.78 11424
Jan 31, 96 10894.47 10894.47 11510
Feb 29, 96 10769.58 10769.58 11432
Mar 31, 96 10615.08 10615.08 11286
Apr 30, 96 10580.52 10580.52 11254
May 31, 96 10606.4 10606.4 11250
Jun 30, 96 10694.66 10694.66 11372
Jul 31, 96 10781.37 10781.37 11475
Aug 31, 96 10792.11 10792.11 11473
Sep 30, 96 10941.21 10941.21 11633
Oct 31, 96 11044.57 11044.57 11765
Nov 30, 96 11241.57 11241.57 11980
Dec 31, 96 11158.16 11158.16 11929
Jan 31, 97 11168.08 11168.08 11952
Feb 28, 97 11272.67 11272.67 12062
Mar 31, 97 11125.58 11125.58 11901
Apr 30, 97 11199.16 11199.16 12001
May 31, 97 11352.16 11352.16 12181
Jun 30, 97 11457.79 11457.79 12311
Jul 31, 97 11771.8 11478.2 12652
The Lehman Brothers Municipal Bond Index is a broad-based, unmanaged index that
tracks the performance of the municipal bond market. Unlike mutual funds,
indexes are not investments, do not incur fees or expenses, and it is not
possible to invest in an index.
Average Annual Total Returns
As of June 30, 1997 (most recent quarter end)
\-------------------------------------------------------------------------------
Class A Shares Class B Shares
Inception 9/1/93 9/1/93
NAV MOP NAV w/CDSC
- --------------------------------------------------------------------------------
1 year 7.94% 2.81% 7.14% 2.14%
- --------------------------------------------------------------------------------
Since inception 4.39 3.08 3.62 2.93
- --------------------------------------------------------------------------------
Past performance cannot predict future results. Returns and value of an
investment will vary, resulting in a gain or loss on sale. All results shown
assume reinvestment of distributions. Net asset value (NAV) returns do not
include sales charges or CDSC (contingent deferred sales charge). Maximum
offering price (MOP) returns include the maximum sales charge of 4.75%. The CDSC
returns reflect the maximum charge of 5% for one year and 3% since inception. If
the Advisor had not waived or borne certain Fund expenses, total returns would
have been lower.
Performance for different share classes will vary based on differences in sales
charges and fees associated with each class.
As of August 1, 1997, the Fund began offering Class C shares.
6
<PAGE>
INVESTMENT PORTFOLIO
JULY 31, 1997 (UNAUDITED, IN THOUSANDS)
MUNICIPAL BONDS - 98.4% PAR VALUE
- --------------------------------------------------------------------------------
EDUCATION - 10.1%
Education - 7.0%
East Carolina University,
Series 1994,
6.200% 11/01/15 $ 475 $ 518
State Educational Facilities Finance
Agency, Duke University, Series C,
6.750% 10/01/21 1,235 1,362
State University,
Raleigh Centennial Campus,
5.125% 12/15/16 500 499
----------
2,379
----------
Student Loans - 3.1%
State Education Assistance Authority,
Series 1996-C,
6.350% 07/01/16 1,000 1,048
---------
................................................................................
HEALTH - 11.5%
Hospitals
Charlotte-Mecklenburg Hospital
Authority, Series 1992,
6.250% 01/01/20 1,500 1,588
New Hanover County,
New Hanover Regional Medical Center,
Series 1993,
4.750% 10/01/13 500 483
State Medical Care Commission,
St. Joseph's Hospital Project,
Series 1994,
5.100% 10/01/14 555 555
University of North Carolina at
Chapel Hill, University Hospital,
Series 1996:
5.250% 02/15/19 750 752
5.250% 02/15/26 500 499
-----------
3,877
-----------
................................................................................
HOUSING - 13.0%
Multi-Family - 10.5%
Eastern Carolina Regional Housing
Authority, Jacksonville New River
Apartments, Series 1994,
8.250% 09/01/14 250 259
7
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Investment Portfolio/July 31, 1997
- --------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- --------------------------------------------------------------------------------
HOUSING - CONT.
Multi-Family - cont.
State Housing Finance Agency,
Multi-Family Revenue,
6.600% 07/01/17 $ 1,340 $1,452
North Wilkesboro Housing
Development Corp.,
Series 1995-A,
6.350% 10/01/22 1,745 1,846
---------
3,557
---------
Single Family - 2.5%
State Housing Finance Agency:
Series KK,
5.500% 03/01/09 305 320
Series W,
6.450% 09/01/14 485 517
--------
837
--------
...............................................................................
OTHER - 36.0%
Local Appropriated - 18.7%
Chapel Hill, Parking Facilities,
Series 1994,
6.450% 12/01/23 500 539
Charlotte, Cityfair Parking Facility,
Series 1994-A,
6.125% 06/01/10 430 463
Charlotte-Mecklenberg Law Project,
Series 1993-B,
5.375% 06/01/13 700 711
Cumberland County,
Civic Center Project,
Series 1995-A,
6.400% 12/(a)24 2,000 2,197
Durham County,
Hospital & Office Facilities,
Series 1994,
6.000% 05/01/14 1,000 1,063
Harnett County,
Harnett County Projects,
Series 1994,
6.400% 12/01/14 250 275
Randolph County,
Randolph County Project,
Series 1995,
5.300% 06/01/15 500 504
8
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Investment Portfolio/July 31, 1997
- -------------------------------------------------------------------------------
Rowan County,
Justice Center Project,
Series 1992,
6.250% 12/01/07 $ 500 $ 556
----------
6,308
----------
Refunded/Escrow/Special Obligations (b) - 17.3%
Eastern Municipal Power Agency,
Series 1991-A,
6.500% 01/01/18 1,500 1,770
Lincoln County,
Lincoln County Hospital,
9.000% 05/01/07 270 326
State Medical Care Commission,
Mercy Hospital,
Series 1992,
6.500% 08/01/15 2,000 2,195
State Municipal Power Agency,
Catawba No. 1, Series 1990,
5.500% 01/01/13 1,000 1,065
Wake County,
Series 1993,
5.125% 10/01/13 500 504
--------
5,860
--------
...............................................................................
OTHER REVENUE - 0.6%
State Appropriated
PR Commonwealth of Puerto Rico
Public Buildings Authority, Series 1993-M,
stepped coupon, (5.700% 07/01/98)
3.750% 07/(c)16 200 201
--------
...............................................................................
TAX-BACKED - 13.8%
Sales & Excise Tax - 0.8%
PR Commonwealth of Puerto Rico
Highway & Transportation Authority,
Series W,
5.500% 07/01/09 240 257
--------
State General Obligations - 13.0%
PR Commonwealth of Puerto Rico
Aqueduct & Sewer Authority,
Series 1995,
6.250% 07/01/12 1,000 1,131
9
<PAGE>
Investment Portfolio/July 31, 1997
-------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
-------------------------------------------------------------------------------
TAX-BACKED - CONT.
State General Obligations - cont.
PR Commonwealth of Puerto Rico:
Series 1994:
6.400% 07/01/11 $ 500 $ 544
6.500% 07/01/23 500 547
Series 1996,
6.500% 07/01/14 1,000 1,159
State,
Series 1994-A,
4.750% 02/01/13 1,000 995
--------
4,376
--------
...............................................................................
UTILITY - 13.4%
Investor Owned - 3.2%
Wake County Industrial Facilities &
Pollution Control Financing Authority,
Carolina Power & Light Co., Series 1983,
6.900% 04/01/09 1,010 1,089
--------
Joint Power Authority - 0.9%
Eastern Municipal Power Agency,
Series 1996-A,
5.700% 01/01/16 300 312
--------
Local General Obligations - 3.5%
Charlotte,
Series 1994,
5.800% 02/01/15 1,000 1,061
Mount Holly,
Series 1993,
4.900% 03/01/12 120 120
--------
1,181
--------
Water & Sewer - 5.8%
Asheville,
Series 1996,
5.625% 08/01/16 500 517
Fayetteville Public Works Commission,
Series 1993,
4.750% 03/(a)14 1,500 1,432
--------
1,949
--------
TOTAL INVESTMENTS - (cost of $31,485) (d) 33,231
--------
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Investment Portfolio/July 31, 1997
-------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 0.3%
-------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (e)
Craven County Industrial Facilities &
Pollution Control Financing Authority,
John Hancock Resource Recovery, Inc., Series C,
3.800% 05/01/11 $ 100 $100
--------
OTHER ASSETS & LIABILITIES, NET - 1.3% 437
-------------------------------------------------------------------------------
NET ASSETS - 100.0% $33,768
--------
NOTES TO INVESTMENT PORTFOLIO:
-------------------------------------------------------------------------------
(a) These securities, or a portion thereof, with a total market value
of $2,114 are being used to collateralize open futures contracts.
(b) The Fund has been informed that each issuer has placed direct
obligations of the U.S. Government in an irrevocable trust,
solely for the payment of the interest and principal.
(c) Shown parenthetically is the interest rate to be paid and the
date the Fund will begin accruing this rate.
(d) Cost for federal income tax purposes is the same.
(e) 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, 1997.
Short futures contracts open at July 31, 1997:
Par value Unrealized
covered by Expiration depreciation
Type contracts month at 07/31/97
-----------------------------------------------------------------------------
Municipal Bond $ 1,400 December $ 6
See notes to financial statements.
11
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
JULY 31, 1997 (UNAUDITED)
(in thousands except for per share amounts and footnotes)
ASSETS
Investments at value (cost $31,485) $33,231
Short-term obligations 100
-------
33,331
Receivable for:
Interest $471
Fund shares sold 50
Deferred organization expenses 6
Other 69 596
----- ------
Total Assets 33,927
LIABILITIES
Payable for:
Distributions 132
Fund shares repurchased 20
Variation margin on futures 2
Accrued :
Deferred Trustees fees 2
Other 3
----
Total Liabilities 159
-------
NET ASSETS $33,768
=======
Net asset value & redemption price per share -
Class A ($16,562/2,256) $ 7.34
======== ===== =======
Maximum offering price per share - Class A
($7.34/0.9525) $ 7.71(a)
====== ====== =======
Net asset value & offering price per share -
Class B ($17,206/2,344) $ 7.34(b)
======== ===== ========
COMPOSITION OF NET ASSETS
Capital paid in $33,535
Undistributed net investment income 30
Accumulated net realized loss (1,537)
Net unrealized appreciation (depreciation) on:
Investments 1,746
Open futures contracts (6)
-------
$33,768
=======
(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.
12
<PAGE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JULY 31, 1997
(UNAUDITED)
(in thousands)
INVESTMENT INCOME
Interest $ 950
EXPENSES
Management fee $ 84
Service fee 26
Distribution fee - Class B 63
Transfer agent 26
Bookkeeping fee 14
Trustees fee 6
Custodian fee 1
Audit fee 11
Legal fee 3
Registration fee 6
Reports to shareholders 5
Amortization of deferred
organization expenses 4
Other 1
-----
250
Fees and expenses waived or borne
by the Adviser (110) 140
----- -----
Net Investment Income 810
-----
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain (loss) on:
Investments 28
Closed futures contracts (134)
-----
Net Realized Loss (106)
Net unrealized appreciation (depreciation)
during the period on:
Investments 1,118
Open futures contracts (14)
-----
Net Unrealized Appreciation 1,104
------
Net Gain 998
------
Net Increase in Net Assets from Operations $1,808
======
See notes to financial statements.
13
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(Unaudited)
Six months Year ended
(in thousands) ended July 31 January 31
---------------------------
INCREASE (DECREASE) IN NET ASSETS 1997 1997
Operations:
Net investment income $ 810 $ 1,627
Net realized gain (loss) (106) 173
Net unrealized appreciation (depreciation) 1,104 (883)
------- -------
Net Increase from Operations 1,808 917
Distributions:
From net investment income - Class A (429) (822)
From net investment income - Class B (378) (812)
------- -------
1,001 (717)
------- -------
Fund Share Transactions:
Receipts for shares sold - Class A 703 2,864
Value of distributions reinvested - Class A 253 481
Cost of shares repurchased - Class A (1,415) (2,302)
------- -------
(459) 1,043
------- -------
Receipts for shares sold - Class B 796 2,087
Value of distributions reinvested - Class B 189 421
Cost of shares repurchased - Class B (1,708) (3,291)
------- -------
(723) (783)
------- -------
Net Increase (Decrease) from Fund
Share Transactions (1,182) 260
------- -------
Total Decrease (181) (457)
NET ASSETS
Beginning of period 33,949 34,406
------- -------
End of period (including undistributed
net investment income of $30 and $24,
respectively) $33,768 $33,949
======= =======
NUMBER OF FUND SHARES
Sold - Class A 99 405
Issued for distributions reinvested - Class A 35 68
Repurchased - Class A (197) (328)
------- -------
(63) 145
------- -------
Sold - Class B 111 297
Issued for distributions reinvested - Class B 26 60
Repurchased - Class B (240) (467)
------- -------
(103) (110)
------- -------
See notes to financial statements.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1997 (UNAUDITED)
NOTE 1. INTERIM FINANCIAL STATEMENTS
...............................................................................
In the opinion of management of Colonial North Carolina 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, 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 non-diversified portfolio of a Massachusetts
business trust, registered under the Investment Company Act of 1940, as amended,
as an open-end management investment company. The Fund's investment objective is
to seek as high a level of after-tax total return, as is consistent with prudent
risk, by pursuing current income exempt from federal and North Carolina state
personal income tax and opportunities for long-term appreciation from a
portfolio primarily invested in investment grade municipal bonds. 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 revenue and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies 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.
15
<PAGE>
Notes to Financial Statements/July 31, 1997
-------------------------------------------------------------------------------
NOTE 2. ACCOUNTING POLICIES - CONT.
...............................................................................
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 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) and realized and unrealized
gains (losses) are allocated to each class proportionately on a daily basis for
purposes of determining the net asset value of each class.
Class B per share data and ratios are calculated by adjusting the expense and
net investment income per share data and ratios for the Fund for the entire
period by the distribution fee applicable to Class B 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.
Deferred organization expenses: The Fund incurred $31,806 of expenses in
connection with its organization, initial registration with the Securities and
Exchange Commission and various states, and the initial public offering of its
shares. These expenses were deferred and are being amortized on a straight-line
basis over five years.
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.
16
<PAGE>
Notes to Financial Statements/July 31, 1997
- -------------------------------------------------------------------------------
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 $2 billion 0.50%
Over $2 billion 0.45%
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
reimbursement for certain out-of-pocket expenses.
Effective January 1, 1997 and continuing through calendar year 1997, the
Transfer Agent fee will be reduced by 0.01% in cumulative monthly increments,
resulting in a decrease in the fee from 0.14% to 0.13% annually.
Underwriting discounts, service and distribution fees: Colonial Investment
Services, Inc. (the Distributor), an affiliate of the Adviser, is the Fund's
principal underwriter. During the six months ended July 31, 1997, the Fund has
been advised that the Distributor retained net underwriting discounts of $13,348
on sales of the Fund's Class A shares and received contingent deferred sales
charges (CDSC) of $32,548 on Class B share 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.
17
<PAGE>
Notes to Financial Statements/July 31, 1997
- -------------------------------------------------------------------------------
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES - CONT.
...............................................................................
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 0.30% annually of the Fund's average net
assets.
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, 1997, purchases and
sales of investments, other than short-term obligations, were $1,903,402 and
$2,835,407 respectively.
Unrealized appreciation (depreciation) at July 31, 1997, based on cost of
investments for both financial statement and federal income tax purposes was:
Gross unrealized appreciation $1,746,077
Gross unrealized depreciation 0
----------
Net unrealized appreciation $1,746,077
==========
Capital loss carryforwards: At January 31, 1997, capital loss carryforwards,
available (to the extent provided in regulations) to offset future realized
gains were approximately as follows:
Year of Capital loss
expiration carryforward
------------ -------------
2003 $ 230,000
2004 735,000
2005 124,000
--------
$1,089,000
==========
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.
18
<PAGE>
Notes to Financial Statements/July 31, 1997
-------------------------------------------------------------------------------
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 positions 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 amount 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, 1997.
19
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period
are as folllows:
<TABLE>
<CAPTION>
(Unaudited)
Six months ended
July 31 Year ended January 31,
----------------------- -----------------------
1997 1997
Class A Class B Class A Class B
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value-
Beginning of period $ 7.120 $ 7.120 $ 7.270 $ 7.270
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income (a) 0.188 0.161 0.376 0.322
Net realized and
unrealized gain (loss) 0.218 0.218 (0.150) (0.150)
------- ------- ------- -------
Total from Investment
Operations 0.406 0.379 0.226 0.172
------- ------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net
investment income (0.186) (0.159) (0.376) (0.322)
------- ------- ------- -------
Net asset value-
End of period $ 7.340 $ 7.340 $ 7.120 $ 7.120
======= ======= ======= =======
Total return(b)(c) 5.80%(d) 5.41%(d) 3.29% 2.51%
======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS
Expenses 0.46%(e)(f) 1.21%(e)(f) 0.45%(e) 1.20%(e)
Net investment income 5.23%(e)(f) 4.48%(e)(f) 5.29%(e) 4.54%(e)
Fees and expenses waived
or borne by the Adviser 0.66%(e)(f) 0.66%(e)(f) 0.66%(e) 0.66%(e)
Portfolio turnover 6%(d) 6%(d) 38% 38%
Net assets at end
of period (000) $16,562 $17,206 $16,522 $17,427
</TABLE>
(a) Net of fees and expenses waived or borne by the Adviser which amounted to:
$ 0.025 $ 0.025 $ 0.047 $ 0.047
(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.
20
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Year ended January 31,
----------------------------------------------------
1996 1995
Class A Class B Class A Class B
------- ------- ------- -------
$ 6.680 $ 6.680 $ 7.500 $ 7.500
-------- ------- ------- -------
0.386 0.334 0.396 0.345
0.588 0.588 (0.822) (0.822)
-------- ------- ------- -------
0.974 0.922 (0.426) (0.477)
-------- ------- ------- -------
(0.384) (0.332) (0.394) (0.343)
-------- ------- ------- -------
$ 7.270 $ 7.270 $ 6.680 $ 6.680
======== ======= ======= =======
14.91% 14.07% (5.55)% (6.27)%
======== ======= ======= =======
0.33%(e) 1.08%(e) 0.12% 0.87%
5.47%(e) 4.72%(e) 5.83% 5.08%
0.76%(e) 0.76%(e) 0.93% 0.93%
34% 34% 37% 37%
$ 15,813 $18,593 $14,189 $17,169
$ 0.053 $ 0.053 $ 0.063 $ 0.063
21
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Selected data for a share of each class outstanding throughout each period are
as follows:
Period ended
January 31
----------------------
1994(b)
Class A Class B
------- -------
Net asset value-
Beginning of period $ 7.500 $ 7.500
-------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income (a) 0.164 0.141
Net realized and
unrealized gain (loss) - -
-------- -------
Total from Investment
Operations 0.164 0.141
-------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net
investment income (0.164) (0.141)
-------- -------
Net asset value-
End of period $ 7.500 $ 7.500
======== =======
Total return(c)(d) 2.22%(e) 1.90%(e)
======== =======
RATIOS TO AVERAGE NET ASSETS
Expenses 0.10%(f) 0.85%(f)
Net investment income 4.91%(f) 4.16%(f)
Fees and expenses waived
or borne by the Adviser 1.20%(f) 1.20%(f)
Portfolio turnover 1%(f) 1%(f)
Net assets at end
of period (000) $ 13,710 $ 9,934
(a) Net of fees and expenses waived or borne by the Adviser which amounted to:
$ 0.040 $ 0.040
(b) The Fund commenced investment operations on September 1, 1993.
(c) Total return at net asset value assuming all distributions reinvested
and no initial sales charge or contingent deferred sales charge.
(d) Had the Adviser not waived or reimbursed a portion of expenses,
total return would have been reduced.
(e) Not annualized.
(f) Annualized.
22
<PAGE>
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial North Carolina Tax-Exempt Fund is:
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Colonial North Carolina Tax-Exempt 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 North Carolina
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.
23
<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, CS First
Boston Merchant Bank; and President and Chief Executive Officer, The First
Boston Corporation)
James L. Moody, Jr.
Retired (formerly Chairman of the Board and Chief Executive Officer,
Hannaford Bros. Co.)
John J. Neuhauser
Dean, Boston College School of Management
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 [copyright] 1997
A Liberty Financial Company (NYSE: L)
One Financial Center, Boston, Massachusetts 02111-2621, 617-426-3750
NC-03/987D-0797 M (9/97)
