<PAGE>
[graphic omitted]
COLONIAL
MASSACHUSETTS TAX-EXEMPT FUND
SEMIANNUAL REPORT
JULY 31, 1997
[Graphic Omitted]
- -----------------------------------
NOT FDIC- MAY LOSE VALUE
INSURED NO BANK GUARANTEE
- -----------------------------------
<PAGE>
COLONIAL MASSACHUSETTS TAX-EXEMPT FUND HIGHLIGHTS
FEBRUARY 1, 1997 - JULY 31, 1997
INVESTMENT OBJECTIVE: Colonial Massachusetts 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 Massachusetts 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:
|X| High monthly double tax-free income
|X| Long-term appreciation
|X| Emphasis on quality
PORTFOLIO MANAGER COMMENTARY: "Massachusetts' growing economy, and the Fund's
focus on non-callable, shorter-maturity bonds contributed to good performance
during a volatile period in the bond market. As we foresee no major changes in
the state's economy or our strategy, we believe this level of performance should
continue into early 1998." - Maureen Newman
Colonial Massachusetts Tax-Exempt Fund Performance
- --------------------------------------------------------------------------------
Class A Class B
Inception dates 4/10/87 6/8/92
- --------------------------------------------------------------------------------
Distributions declared per share (1) $0.207 $0.178
- --------------------------------------------------------------------------------
SEC yields on 7/31/97 (2) 4.30% 3.76%
- --------------------------------------------------------------------------------
Taxable-equivalent SEC yields (3) 8.09% 7.07%
- --------------------------------------------------------------------------------
Six-month total returns, assuming 6.08% 5.69%
reinvestment of all distributions
and no sales charge or contingent
deferred sales charge (CDSC)
- --------------------------------------------------------------------------------
Net asset value per share on 7/31/97 $8.07 $8.07
(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.
(3) Taxable-equivalent SEC yields are based on the maximum effective 46.8%
federal and Massachusetts 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 .................42.4%
AA ...................8.1%
A ...................32.3%
BBB ..................4.8%
Non-rated ............9.5%
Cash & Equivalents ...2.9%
TOP FIVE SECTORS (as of 7/31/97)
- ---------------------------------
General Obligations .23.2%
Water & Sewer .......12.8%
Education ............9.9%
Hospital .............8.8%
Housing ..............8.1%
Because the Fund is actively managed, quality and sector weightings will change.
Quality breakdown and sector allocations are based on total net assets.
<PAGE>
PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
[Photo of Harold W. Cogger]
I am pleased to present the semiannual report for Colonial Massachusetts
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 bond 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 condition,
in combination 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
Massachusetts Tax-Exempt Fund continues to offer you competitive tax-free income
and long-term total return potential as well as an opportunity to participate in
Massachusetts' 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 15, 1997
Because market conditions change frequently, there can be no assurance that the
trends described in this report will continue, come to pass or affect Fund
performance.
<PAGE>
PORTFOLIO MANAGEMENT REPORT
MAUREEN NEWMAN is portfolio manager of Colonial Massachusetts Tax-Exempt Fund.
Ms. Newman is Vice President of Colonial Management Associates, Inc. and is the
Manager of Tax-Exempt Credit Research.
SOLID RETURNS IN A VOLATILE MARKET
For the six months ended July 31, 1997, the total return for Class A shares,
based on net asset value, was 6.08%. In comparison, the average Massachusetts
municipal bond fund as measured by Lipper Analytical Services, Inc. was 5.57%.
In addition, the Fund outperformed its benchmark, the Lehman Brothers Municipal
Bond Index, with a total return of 6.08% versus Lehman's 5.86% total return.
Bonds were negatively affected early in the period by the Federal Reserve
Board's decision to raise short term interest rates, but the bond market rallied
in July as economic reports continued to show no signs of increased inflation.
The Fund's strong performance was achieved by careful sector selection and
taking advantage of market momentum.
AIMING FOR STRONG PERFORMANCE IN ALL MARKETS
During the period, we continued to pursue our strategy of increasing the
percentage of non-callable bonds in the Fund. These bonds, which cannot be
redeemed by the issuer until the maturity date, generally perform well in both
up and down markets. We also focused on purchasing bonds with shorter
maturities, which are earning yields close to those offered by bonds with longer
maturities, but are less sensitive to interest rates. The yield advantage
between high and low quality bonds is relatively narrow, so the Fund maintained
its focus on holding higher quality bonds.
MASSACHUSETTS REMAINS ECONOMICALLY STRONG
With low unemployment and continued growth in the mutual fund, high tech and
construction sectors, the Massachusetts economy continues to perform well. Areas
of concern include recent downsizing in health care, and the amount of debt
carried by state government, including its pension liability. However, the state
government is benefiting from increased tax revenues. In addition, the recent
transition of power from former Governor William Weld to Acting Governor Paul
Cellucci should not result in any deterioration in the state's fiscal situation.
A FAVORABLE INVESTMENT ENVIRONMENT AHEAD
We expect few major changes in either the bond market or the Massachusetts
economy over the next six months. Inflation appears to be under control, and
that should mean no sharp rise in interest rates. The strong economy has
provided state government with surplus revenues that have been used to improve
the State's fiscal condition. The substantial amount of debt that will be issued
to finance the "Big Dig" construction project in Boston may provide an
opportunity to add attractive securities to the Fund. We will keep pursuing our
strategy of purchasing shorter-maturity, high quality bonds designed to increase
total return.
<PAGE>
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 and the
value of bonds has been increasing. Some of you may have noticed the effect of
this reflected recently in slightly 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 and dividends have
declined, 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 tax-free income and long-term appreciation.
COLONIAL MASSACHUSETTS TAX-EXEMPT FUND INVESTMENT PERFORMANCE
Change in Value of $10,000 from 7/31/87 to 7/31/97
NAV and MOP for Class A Shares
CMATEF NAV MOP Lehman
- ------ --------- -------- ------
7/31/87 10000 9525 10000
10/31/87 9504.574 9053.107 9687
1/31/88 10310.45 9820.704 10444
4/30/88 10397.33 9903.462 10510
7/31/88 10650.73 10144.82 10703
10/31/88 11030.84 10506.87 11098
1/31/89 11295.04 10758.52 11339
4/30/89 11405.92 10864.14 11449
7/31/89 11773.87 11214.61 12006
10/31/89 11756.24 11197.82 11998
1/31/90 11956.78 11388.83 12250
4/30/90 11907.18 11341.59 12273
7/31/90 12551.28 11955.09 12838
10/31/90 12415.57 11825.83 12888
1/31/91 12949.42 12334.33 13382
4/30/91 13326.07 12693.08 13684
7/31/91 13654.82 13006.22 13959
10/31/91 14101.65 13431.83 14457
1/31/92 14452.75 13766.24 14842
4/30/92 14629 13934.12 14984
7/31/92 15545.52 14807.11 15877
10/31/92 15281.01 14555.16 15670
1/31/93 16022.81 15261.73 16301
4/30/93 16602.96 15814.32 16880
7/31/93 16975.74 16169.39 17281
10/31/93 17544.58 16711.21 17876
1/31/94 17923.89 17072.5 18299
4/30/94 16936.61 16132.12 17245
7/31/94 17301.55 16479.72 17605
10/31/94 16666.6 15874.94 17097
1/31/95 17297.61 16475.97 17648
4/30/95 17976.27 17122.4 18392
7/31/95 18299.82 17430.57 18991
10/31/95 19085.49 18178.93 19634
1/31/96 19874.6 18930.56 20305
4/30/96 19187.21 18275.82 19853
7/31/96 19570.73 18641.13 20244
10/31/96 20087.76 19133.6 20754
1/31/97 20357.22 19390.26 21085
4/30/97 20473.31 19500.83 21170
7/31/97 21595.42 20569.64 22319
A hypothetical $10,000 investment in Class B shares made on June 8, 1992
(inception) at NAV would have been valued at $14,004 on July 31, 1997. The same
investment after deducting the applicable contingent deferred sales charge
(CDSC) would have grown to $13,904 on July 31, 1997. 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 4/10/87 6/8/92
NAV MOP NAV w/CDSC
- --------------------------------------------------------------------------------
1 year 8.16% 3.02% 7.36% 2.36%
- --------------------------------------------------------------------------------
5 years 6.86 5.83 6.07 5.76
- --------------------------------------------------------------------------------
10 years 7.86 7.33 -- --
- --------------------------------------------------------------------------------
Since inception 7.69 7.18 6.29 5.98
- --------------------------------------------------------------------------------
Past performance cannot predict future results. Return and value of an
investment will vary, resulting in a gain or loss on sale. All results shown
assume reinvestment of distributions. Net asset value (NAV) returns do not
include sales charges or CDSC. 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 2% since inception.
On August 1, 1997, the Fund began offering Class C shares.
Performance for different share classes will vary based on differences in sales
charges and fees associated with each class.
<PAGE>
INVESTMENT PORTFOLIO
JULY 31, 1997 (UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
MUNICIPAL BONDS - 97.7% PAR VALUE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EDUCATION - 12.9%
EDUCATION - 9.9%
MA State College Building Authority,
Southeastern Massachusetts University,
Series 1995 A,
5.750% 05/01/16 $ 1,250 $ 1,309
MA State Health & Educational
Facilities Authority:
Amherst College, Series E,
6.800% 11/01/21 500 549
Berklee College of Music, Series C,
6.875% 10/01/21 1,000 1,111
Community Colleges Program, Series A,
6.600% 10/01/22 1,250 1,336
Harvard University, Series N,
6.250% 04/01/20 9,250 10,765
Worcester Polytechnical Institute, Series E:
6.625% 09/01/17 500 564
6.750% 09/01/11 500 567
MA State Industrial Finance Agency:
Babson College,
5.375% 10/01/17 2,000 2,035
Series 1992 A,
6.375% 10/01/09 1,000 1,097
Series 1997 A,
5.250% 10/01/27 1,000 1,004
College of the Holy Cross,
5.500% 03/01/05 1,375 1,471
Emerson College, Series 1991 A,
8.900% 01/01/18 500 556
Worcester Polytechnical Institute,
5.125% 09/01/27 1,790 1,781
---------
24,145
---------
STUDENT LOAN - 3.0%
MA Educational Finance Authority,
5.650% 07/01/10 2,000 2,075
New England Educational Loan Marketing
Corp., Student Loan, Series 1993-A,
5.700% 07/01/05 5,000 5,219
---------
7,294
---------
- -------------------------------------------------------------------------------------------------
HEALTHCARE - 13.4%
HOSPITALS - 8.8%
MA Health & Educational Facilities Authority:
Berkshire Health System, Series C,
6.000% 10/01/20 1,000 1,008
Capital Asset Program, Series 1989 F,
7.300% 10/01/18 750 825
Charlton Memorial Hospital, Series B:
7.250% 07/01/07 500 555
7.250% 07/01/13 500 555
Children's Hospital, Series E,
6.200% 10/01/16 2,000 2,108
Dana-Farber Cancer Institute:
Series C,
6.650% 12/01/15 250 269
Series 1995 G1,
5.500% 12/01/27 6,000 6,022
Medical Center of Central Mass., Series A,
7.000% 07/01/12 1,000 1,085
New England Deaconess Hospital,
7.200% 04/01/22 2,500 2,734
Newton-Wellesley Hospital, Series 1997 G,
6.000% 07/01/12 1,000 1,095
Spaulding Rehabilitation Hospital, Series A,
7.625% 07/01/21 400 418
University Hospital, Series C,
7.250% 07/01/19 1,000 1,098
Youville House,
5.950% 02/15/17 500 523
MA Industrial Finance Agency,
Massachusetts Biomedical Research Corp.,
Series 1989 A2,
(a) 08/01/08 2,000 1,152
(a) 08/01/10 4,000 2,035
---------
21,482
---------
INTERMEDIATE CARE FACILITIES - 0.1%
MA Health & Educational
Facilities Authority,
Corporation for Independent Living,
8.100% 07/01/18 295 320
---------
LIFECARE - 0.4%
MA Industrial Finance Agency,
Reeds Landing Project,
7.750% 10/01/00 1,000 1,022
---------
NURSING HOME - 4.1%
Boston,
St. Joseph Nursing Care Center, Inc.,
Series 1990,
10.000% 01/01/20 (b) 490 536
State Health & Educational
Facilities Authority:
Deutsches Altenheim, Inc., Series A,
7.700% 11/01/31 975 1,055
Fairview Extended Care Service, Inc.,
Series A,
10.250% 01/01/21 500 589
State Industrial Finance Agency:
American Health Foundation Inc.,
Series 1989,
10.125% 03/01/19 1,765 1,588
Belmont Home Care,
Series 1995 A,
9.270% 01/01/25 2,000 2,260
GF/Massachusetts Inc.,
Series 1994,
8.300% 07/01/23 2,445 2,509
Seacoast Nursing Home, Series 1991,
9.625% 12/01/21 1,260 1,402
---------
9,939
---------
- -------------------------------------------------------------------------------------------------
HOUSING - 8.1%
MULTI - FAMILY - 4.9%
Boston,
Mt. Pleasant Housing Development Corp.,
Series A,
6.750% 08/01/23 1,655 1,752
State Housing Finance Agency:
Series 1988 A,
8.400% 08/01/21 1,210 1,262
Series 1989 A,
7.600% 12/01/16 675 715
Series 1990 A,
8.150% 02/01/29 135 144
Series 1992 C,
6.875% 11/15/11 3,000 3,255
Series 1994 A,
6.750% 07/01/28 4,500 4,838
---------
11,966
---------
SINGLE - FAMILY - 3.2%
MA Housing Finance Agency:
Series 3,
7.875% 06/01/14 400 409
Series 5,
8.375% 06/01/15 500 514
Series 6,
8.100% 12/01/14 495 514
Series 7,
8.100% 06/01/20 420 436
Series 8,
7.700% 06/01/17 575 601
Series 9,
8.100% 12/01/21 500 525
Series 12,
7.600% 12/01/13 250 266
Series 13,
7.950% 06/01/23 1,255 1,344
Series 18,
7.350% 12/01/16 1,000 1,066
Series 1987 4,
7.375% 06/01/14 705 723
Series 1987 A,
9.000% 12/01/18 215 221
Series 1987 B,
8.500% 08/01/20 10 10
Series 1988 B,
8.100% 08/01/23 455 477
Series 1989 A:
8.200% 08/01/15 245 257
8.200% 08/01/27 330 347
---------
7,710
---------
- -------------------------------------------------------------------------------------------------
OTHER - 7.9%
PUBLIC FACILITIES - 0.5%
Plymouth County Correctional Facility,
Series A,
7.000% 04/01/22 1,000 1,110
---------
REFUNDED/ESCROW/SPECIAL OBLIGATIONS (C) - 7.4%
Fall River,
7.20 6/01/10 (d) 1,250 1,408
Leominster,
7.504/01/09 (d) 1,075 1,188
Lynn,
7.850% 01/15/11 1,000 1,183
MA Bay Transportation Authority,
General Transportation System,
Series 1990-B,
7.803/01/21 (d) 4,000 4,565
Palmer,
Series 1990 B,
7.700% 10/01/10 1,000 1,125
State Health & Educational
Facilities Authority:
Carney Hospital, Series C,
7.750% 07/01/14 500 559
Cooley Dickinson Hospital, Series A,
7.125% 11/15/18 1,885 2,184
Framingham Union Hospital, Series B,
8.500% 07/01/20 1,000 1,138
Lowell General Hospital, Series 1991 A,
8.400% 06/01/11 500 583
St. John's Hospital, Series 1990 B,
8.375% 12/01/20 500 575
Winchester Hospital, Series C,
7.550% 07/01/11 500 569
MA Industrial Finance Agency:
Mary Ann Morse Nursing Home, Inc.,
Series 1990,
9.000% 10/01/20 480 557
Series 1991 B,
6.500% 08/01/11 1,140 1,257
Series 1991 I,
10.000% 01/01/21 925 1,118
University of Massachusetts
Building Authority, Series 1976 A,
7.500% 05/01/11 95 113
---------
18,122
---------
- -------------------------------------------------------------------------------------------------
OTHER REVENUE - 0.7%
MANUFACTURING - 0.7%
MA Industrial Finance Agency,
House of Bianchi Inc.,
8.750% 06/01/18 1,700 1,704
---------
- -------------------------------------------------------------------------------------------------
RESOURCE RECOVERY - 2.5%
MISCELLANEOUS DISPOSAL - 2.3%
Boston Industrial Development
Finance Authority, Jet-A-Way, Inc.,
10.500% 01/01/11 300 334
MA Industrial Finance Agency:
Massachusetts Environmental Services,
Series 1994 A,
8.750% 11/01/21 2,970 2,911
Peabody Monofill Associates, Inc.,
Series 1995,
9.000% 09/01/05 2,205 2,437
---------
5,682
---------
RESOURCE RECOVERY - 0.2%
Agawam,
Springfield Resource Recovery Project,
Series 1986,
8.500% 12/01/08 500 515
---------
TAX-BACKED - 29.7%
LOCAL GENERAL OBLIGATIONS - 23.1%
Boston, Series 1992 A,
6.500% 07/01/12 4,340 4,763
Haverhill,
5.000% 06/15/17 2,000 1,960
Holyoke:
School Project Loan,
7.650% 08/01/09 500 551
Series 1996 A,
6.000% 06/15/07 1,345 1,490
Lowell,
8.400% 01/15/09 1,000 1,151
MA Bay Transportation Authority:
Series A,
5.750% 08/01/08 3,000 3,274
Series B,
7.000% 07/01/09 4,385 5,284
Series 1991 A,
7.000% 03/01/21 1,500 1,877
Series 1991 B,
6.500% 08/01/11 860 923
Series 1991 C,
6.500% 08/01/11 1,250 1,342
Series 1992 B:
6.200% 03/01/16 3,700 4,163
6.500% 08/01/08 1,000 1,158
Series 1994 A:
7.00 3/01/10(d) 5,000 6,025
7.000% 03/01/11 4,270 5,210
7.000% 03/01/14 1,250 1,527
Series 1996 A,
6.000% 11/01/06 1,000 1,104
Series 1988,
7.750% 01/15/06 250 293
Mansfield,
6.700% 01/15/11 1,000 1,098
Milford, Series 1996,
5.000% 08/15/15 1,390 1,380
Nantucket, Series 1991,
6.800% 12/01/11 2,675 2,996
PR Commonwealth of Puerto Rico,
Series 1994,
6.500% 07/01/23 5,000 5,469
Southern Berkshire Regional School District,
7.000% 04/15/11 500 569
Swansea, School Project Loan:
6.800% 01/15/09 250 269
6.800% 01/15/10 125 135
6.800% 01/15/11 210 225
VI Virgin Islands Public Finance
Authority, Series 1992 A,
7.000% 10/01/02 250 272
Weymouth, Series 1992:
6.700% 06/15/09 200 216
6.700% 06/15/10 200 216
6.700% 06/15/11 155 167
6.700% 06/15/12 140 150
Worcester, Series C,
5.750% 10/01/13 1,000 1,055
---------
56,312
---------
SALES & EXCISE TAX - 3.5%
MA State Special Obligation,
Highway Improvement Loan Act,
Series 1992 A,
6.000% 06/01/13 1,500 1,560
PR Commonwealth of Puerto Rico
Highway & Transportaion Authority:
Series W,
5.500% 07/01/09 660 708
Series 1996 Z,
6.250% 07/01/05 5,500 6,160
---------
8,428
---------
STATE APPROPRIATED - 3.1%
PR Commonwealth of Puerto Rico
Public Buildings Authority, Series 1993 M:
5.600% 07/01/08 2,500 2,722
stepped coupon, (5.700% 07/01/98)
3.07/01/16 (e) 2,000 2,005
State College Building Authority,
Series 1994 A,
7.500% 05/01/14 1,825 2,327
University of Massachusetts
Building Authority,
Series 1991 A,
7.200% 05/01/04 400 462
---------
7,516
---------
- -------------------------------------------------------------------------------------------------
TRANSPORTATION - 3.9%
TRANSPORTATION - 1.9%
MA Port Authority,
Series 1993 B,
5.000% 07/01/18 5,000 4,731
---------
TURNPIKE/TOLL ROAD/BRIDGE - 2.0%
MA Turnpike Authority, Series 1993 A,
5.000% 01/01/20 5,000 4,781
---------
UTILITY - 18.5%
INVESTOR OWNED - 0.7%
State Industrial Finance Agency,
Nantucket Electric Co., Series 1996 A,
6.750% 07/01/05 1,400 1,599
---------
JOINT POWER AUTHORITY - 3.5%
MA Municipal Wholesale
Electric Co.:
Series 1994 A,
5.000% 07/01/17 5,000 4,800
RIB, (variable rate)
6.158% 07/01/16 4,000 3,770
---------
8,570
---------
MUNICIPAL ELECTRIC - 1.5%
PR Commonwealth of Puerto Rico
Electric Power Authority:
Series 1989 O,
5.000% 07/01/12 2,000 1,940
Series 1995 Y,
7.000% 07/01/07 1,500 1,809
---------
3,749
---------
WATER & SEWER - 12.8%
Boston Water & Sewer Commission:
Series 1992 A,
5.750% 11/01/13 1,000 1,079
Series 1993 A,
5.250% 11/01/19 4,750 4,786
MA Water Pollution Abatement Trust:
Massachusetts Water Resources Authority,
Series 1995 A,
5.000% 08/01/14 1,500 1,479
New Bedford Loan Program,
Series 1996 A,
6.000% 02/01/06 1,000 1,098
MA Water Resources Authority:
Series 1992 A,
6.500% 07/15/09 2,000 2,310
6.500% 07/15/19 5,000 5,863
Series 1993 C:
5.250% 12/01/15 3,750 3,826
5.250% 12/01/20 5,025 4,987
Series 1995 B,
6.250% 12/01/13 5,000 5,825
---------
31,253
---------
TOTAL INVESTMENTS (cost of $215,735) (f) 237,950
---------
SHORT - TERM OBLIGATIONS - 2.9% PAR VALUE
- -------------------------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (g)
CA Irvine Ranch Water District,
3.500% 01/01/21 $ 700 $ 700
IN State Health & Educational
Facilities Authority,
Series 1985 D,
3.650% 01/01/35 2,700 2,700
MA State Health Facilities
Financing Authority,
Series 1992,
3.650% 12/01/02 200 200
WI Health Facilities Authority,
Fransican Health Care:
Series A-1,
3.550% 01/01/16 600 600
Series A-2,
3.550% 01/01/16 2,800 2,800
---------
TOTAL SHORT - TERM OBLIGATIONS 7,000
---------
OTHER ASSETS & LIABILITIES, NET - (0.6)% (1,589)
- -------------------------------------------------------------------------------------------------
NET ASSETS - 100% $ 243,361
=========
NOTES TO INVESTMENT PORTFOLIO:
- -------------------------------------------------------------------------------------------------
(a) Zero coupon bond.
(b) This is a restricted security which was acquired on April 2, 1990 at a cost of $490. This
security represents 0.2% of the Fund's net assets as of July 31, 1997.
(c) The Fund has been informed that each issuer has placed direct obligations of the U.S. Governmen
in an irrevocable trust, solely for the payment of the interest and principal.
(d) These securities, or a portion thereof, with a total market value of $13,186, are being used to
collateralize open futures contracts.
(e) Shown parenthetically is the interest rate to be paid and the date the Fund will begin accruing this rate.
(f) Cost for federal income tax purposes is the same.
(g) Variable rate demand notes are considered short-term obligations. Interest rates change periodically on
specified dates. These securities are payable on demand and are secured by either letters of credit or
other credit support agreements from banks. The rates listed are as of July 31, 1997.
Short futures contracts open at July 31, 1997:
Unrealized
Par value appreciation
covered by Expiration (depreciation)
Type contracts month at 7/31/97
- -------------------------------------------------------------------------------------------------
Municipal Bond $ 5,900 September $ (249)
Municipal Bond $ 1,600 December 15
---------
$ (234)
=========
Acronym Name
---------------- ----------------------
RIB Residual Interest Bond
</TABLE>
See notes to financial statements
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
JULY 31, 1997 (UNAUDITED)
(in thousands except for per share amounts and footnotes)
ASSETS
Investments at value (cost $215,735) $237,950
Short-term obligations 7,000
--------
244,950
Receivable for:
Interest $ 3,028
Fund shares sold 248
Investments sold 25
Other 12 3,313
-------- --------
Total Assets 248,263
LIABILITIES
Payable for:
Investments purchased 3,273
Distributions 1,052
Fund shares repurchased 565
Variation margin on futures 8
Accrued:
Deferred Trustees fees 4
-------
Total Liabilities 4,902
--------
NET ASSETS $243,361
========
Net asset value & redemption price per share -
Class A ($182,699/22,635) $ 8.07
========
Maximum offering price per share - Class A
($8.07/0.9525) $ 8.47(a)
========
Net asset value & offering price per share -
Class B ($60,662/7,515) $ 8.07(b)
========
COMPOSITION OF NET ASSETS
Capital paid in $222,126
Undistributed net investment income 59
Accumulated net realized loss (805)
Net unrealized appreciation (depreciation) on:
Investments 22,215
Open futures contracts (234)
--------
$243,361
========
(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.
<PAGE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JULY 31, 1997
(UNAUDITED)
(in thousands)
INVESTMENT INCOME
Interest $ 7,292
EXPENSES
Management fee $ 601
Service fee 188
Distribution fee - Class B 218
Transfer agent 190
Bookkeeping fee 47
Trustees fee 11
Custodian fee 6
Audit fee 12
Legal fee 2
Registration fee 6
Reports to shareholders 4
Other 9 1,294
------- --------
Net Investment Income 5,998
-------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain on:
Investments 1,556
Closed futures contracts 47
-------
Net Realized Gain 1,603
Net unrealized appreciation (depreciation) during
the period on:
Investments 6,830
Open futures contracts (370)
-------
Net Unrealized Gain 6,460
--------
Net Gain 8,063
--------
Net Increase in Net Assets from Operations $ 14,061
========
See notes to financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(Unaudited)
Six months
ended Year ended
(in thousands) July 31 January 31
--------- ----------
INCREASE (DECREASE) IN NET ASSETS 1997 1997
--------- ---------
Operations:
Net investment income $ 5,998 $ 12,889
Net realized gain 1,603 3,643
Net unrealized appreciation (depreciation) 6,460 (11,498)
--------- ---------
Net Increase from Operations 14,061 5,034
Distributions:
From net investment income - Class A (4,798) (10,187)
From net investment income - Class B (1,337) (2,652)
--------- ---------
7,926 (7,805)
--------- ---------
Fund Share Transactions:
Receipts for shares sold - Class A 6,985 13,570
Value of distributions reinvested - Class A 2,515 5,460
Cost of shares repurchased - Class A (16,973) (36,490)
--------- ---------
(7,473) (17,460)
--------- ---------
Receipts for shares sold - Class B 2,766 7,193
Value of distributions reinvested - Class B 761 1,553
Cost of shares repurchased - Class B (3,983) (8,527)
--------- ---------
(456) 219
--------- ---------
Net Decrease from Fund Share
Transactions (7,929) (17,241)
--------- ---------
Total Decrease (3) (25,046)
NET ASSETS
Beginning of period 243,364 268,410
--------- ---------
End of period (including undistributed
net investment income of $59 and $169,
respectively) $ 243,361 $ 243,364
========= =========
NUMBER OF FUND SHARES
Sold - Class A 894 1,752
Issued for distributions reinvested - Class A 322 700
Repurchased - Class A (2,168) (4,701)
--------- ---------
(952) (2,249)
--------- ---------
Sold - Class B 353 929
Issued for distributions reinvested - Class B 97 201
Repurchased - Class B (509) (1,098)
--------- ---------
(59) 32
--------- ---------
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1997 (UNAUDITED)
NOTE 1. INTERIM FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
In the opinion of management of Colonial Massachusetts 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 Massachusetts 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 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.
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.
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 $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 $14,816
on sales of the Fund's Class A shares and received contingent deferred sales
charges (CDSC) of $77,368 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.
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 0.75% annually of the Fund's average net
assets.
For the six months ended July 31, 1997, the Fund's operating expenses did not
exceed the 0.75% 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, 1997, purchases and
sales of investments, other than short-term obligations, were $14,936,183 and
$30,305,464, 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 $ 22,432,413
Gross unrealized depreciation (217,883)
-------------
Net unrealized appreciation $ 22,214,530
=============
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
---------- -------------
2004 $ 889,000
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.
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, 1997.
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each
period are as follows:
<TABLE>
<CAPTION>
(Unaudited)
Six months ended Year ended
July 31 January 31
----------------------------------- --------------------------------
1997 1997
Class A Class B Class A Class B
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 7.810 $ 7.810 $ 8.040 $ 8.040
------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.204 0.175 0.415 0.357
Net realized and
unrealized gain (loss) 0.263 0.263 (0.234) (0.234)
------------ ------------ ------------ ------------
Total from Investment
Operations 0.467 0.438 0.181 0.123
------------ ------------ ------------ ------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net
investment income (0.207) (0.178) (0.411) (0.353)
------------ ------------ ------------ ------------
Net asset value -
End of period $ 8.070 $ 8.070 $ 7.810 $ 7.810
============ ============ ============ ============
Total return (b)(c) 6.08(d) 5.69(d) 2.43% 1.66%
============ ============ ============ ============
RATIOS TO AVERAGE NET ASSETS
Expenses 0.90%(e)(f) 1.65%(e)(f) 0.90%(e) 1.65%(e)
Net investment income 5.18%(e)(f) 4.43%(e)(f) 5.32%(e) 4.57%(e)
Fees and expenses
waived or borne
by the Adviser 0.00%(e)(f) 0.00%(e)(f) 0.00%(e) 0.0%(e)
Portfolio turnover 6%(d) 6%(d) 29% 29%
Net assets at end
of period (000) $ 182,699 $ 60,662 $ 184,221 $ 59,143
(a) Net of fees and expenses waived or borne by the Adviser which amounted to:
$ 0.000 $ 0.000 $ 0.000 $ 0.000
(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.
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS - continued
Year ended January 31
- -------------------------------------------------------------------------------
1996 1995
Class A Class B Class A Class B
------------ ------------ ------------ ------------
[S] [C] [C] [C]
$ 7.390 $ 7.390 $ 8.130 $ 8.130
------- ------- ------- -------
0.424 0.367 0.444 0.388
0.650 0.650 (0.738) (0.738)
------- ------- ------- -------
1.074 1.017 (0.294) (0.350)
------- ------- ------- -------
(0.424) (0.367) (0.446) (0.390)
------- ------- ------- -------
$ 8.040 $ 8.040 $ 7.390 $ 7.390
======= ======= ======= =======
14.90% 14.05% (3.49%) (4.21%)
======= ======= ======= =======
0.85%(e) 1.60%(e) 0.72% 1.47%
5.49%(e) 4.74%(e) 5.93% 5.18%
0.06%(e) 0.06%(e) 0.12% 0.12%
21% 21% 58% 58%
$207,759 $60,651 $ 193,303 $53,973
$ 0.005 $ 0.005 $ 0.009 $ 0.009
<PAGE>
FINANCIAL HIGHLIGHTS - continued
Selected data for a share of each class outstanding throughout each
period are as follows:
<TABLE>
<CAPTION>
Year ended January 31
--------------------------------------------------------------------------------
1994 1993
Class A Class B Class A Class B (b)
------------ ------------ ------------ ------------
Net asset value -
<S> <C> <C> <C> <C>
Beginning of period $ 7.700 $ 7.700 $ 7.420 $ 7.450
------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.453 0.395 0.481 0.272
Net realized and
unrealized gain (loss) 0.439 0.439 0.301 0.275
------------ ------------ ------------ ------------
Total from Investment
Operations 0.892 0.834 0.782 0.547
------------ ------------ ------------ ------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net
investment income (0.462) (0.404) (0.479) (0.274)
From net realized gains -- -- (0.002) (0.002)
In excess of net
realized gains -- -- (0.021) (0.021)
------------ ------------ ------------ ------------
Total Distributions
Declared to Shareholders (0.462) (0.404) (0.502) (0.297)
------------ ------------ ------------ ------------
Net asset value -
End of period $ 8.130 $ 8.130 $ 7.700 $ 7.700
============ ============ ============ ============
Total return (c)(d) 11.86% 11.05% 10.87% 1.11%(e)
============ ============ ============ ============
RATIOS TO AVERAGE NET ASSETS
Expenses 0.64% 1.39% 0.54% 1.29%(f)
Net investment income 5.68% 4.93% 6.38% 5.63%(f)
Fees and expenses
waived or borne
by the Adviser 0.21% 0.21% 0.33% 0.33%
Portfolio turnover 7% 7% 7% 7%
Net assets at end
of period (000) $ 225,636 $ 51,819 $ 186,526 $ 17,282
(a) Net of fees and expenses waived or borne by the Adviser which amounted to:
$ 0.016 $ 0.016 $ 0.025 $ 0.016
(b) Class B shares were initially offered on June 8, 1992. Per share amounts
reflect activity from that date.
(c) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(d) Had the Adviser not waived or reimbursed a portion of expenses, total
return would have been reduced.
(e) Not annualized.
(f) Annualized.
</TABLE>
<PAGE>
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial Massachusetts Tax-Exempt Fund is:
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Colonial Massachusetts 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 Massachusetts
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.
<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 (C) 1997
A Liberty Financial Company (NYSE: L)
One Financial Center, Boston, Massachusetts 02111-2621, 617-426-3750
MA-03/983D-0797 M (9/97)
