<PAGE>
[PHOTO OF BUILDING]
COLONIAL CALIFORNIA TAX-EXEMPT FUND SEMIANNUAL REPORT
July 31, 1998
NOT FDIC
INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
<PAGE>
COLONIAL CALIFORNIA TAX-EXEMPT FUND HIGHLIGHTS FEBRUARY 1, 1998
- JULY 31, 1998
INVESTMENT OBJECTIVE: Colonial California Tax-Exempt Fund seeks as high a level
of after-tax total return as is consistent with prudent risk by pursuing current
income exempt from federal and California state personal income tax and
opportunities for long-term appreciation from a portfolio primarily invested in
investment-grade municipal bonds.
PORTFOLIO MANAGER COMMENTARY: "The Fund was positioned for a declining interest
rate environment. Interest rates varied considerably, but were essentially
unchanged between the beginning and the end of the period. While the lack of a
strong market direction restrained performance of the portfolio's more interest
rate sensitive bonds, California's strong economy and sound fiscal management
supported the prices of many of the Fund's holdings during the period."
- Gary Swayze
COLONIAL CALIFORNIA TAX-EXEMPT FUND PERFORMANCE
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Inception dates 6/16/86 8/4/92 8/1/97
Distributions declared per share (1) $0.221 $0.191 $0.203
SEC yields on 7/31/98 (2) 3.89% 3.33% 3.63%
Taxable-equivalent SEC yields (3) 7.10% 6.08% 6.63%
Six-month total returns, assuming 1.34% 0.94% 1.10%(4)
reinvestment of all distributions and
no sales charge or contingent deferred
sales charge (CDSC)
Net asset value per share on 7/31/98 $7.60 $7.60 $7.60
</TABLE>
(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, 1998, reflect the portfolio's earning
power, net of expenses, and is expressed as an annualized percentage of the
maximum offering price at the end of the period. If the Distributor had not
waived certain Fund expenses, the SEC yield for Class C shares would have
been 3.33%.
(3) Taxable-equivalent SEC yields are based on the combined maximum effective
45.22% federal and California state income tax rate.
(4) Performance results reflect any voluntary waiver of expenses by the
Distributor. Absent this waiver, performance results would have been lower.
(5) The Fund may at times purchase tax-exempt securities at a discount. Some or
all of this discount may be included in the Fund's ordinary income, and
will be taxable when distributed.
<TABLE>
<CAPTION>
QUALITY BREAKDOWN (as of 7/31/98) TOP FIVE SECTORS (as of 7/31/98)
<S> <C> <C> <C>
AAA 73.1% Local Appropriated 18.0%
AA 3.8% Special Property Tax 17.6%
A 4.3% Refunded/Escrowed 16.3%
BBB 10.1% Local General Obligations 8.3%
Non-rated 7.2% Water & Sewer 6.7%
Short-Term Obligations 1.5%
</TABLE>
Quality and sector breakdowns are calculated as a percentage of total
investments, including short-term obligations. Because the Fund is actively
managed, there can be no guarantee the Fund will continue to maintain these
quality and sector breakdowns in the future.
2
<PAGE>
[PHOTO OF STEPHEN E. GIBSON]
PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
In June 1998, Harold Cogger retired as president of Colonial California
Tax-Exempt Fund. I would like to take this opportunity to thank him for his
guidance over the past few years and wish him well. As the new president of the
Fund, I am pleased to present the semiannual report for Colonial California
Tax-Exempt Fund for the six-month period ended July 31, 1998.
Conditions for fixed-income investments varied during the period. Early on,
interest rates were volatile, based on uncertainty over the effects of the Asian
economic crisis on the U.S. economy. However, reports of stronger-than-expected
economic growth during the spring had investors fearing the Federal Reserve
Board might raise rates. In response, bond prices fell. This environment
prevailed until the final months of the period, when weaker economic numbers
hinting at slower growth encouraged fixed-income investors.
The tax-exempt bond market experienced price volatility similar to that of the
broader U.S. government bond market. Early in the period, declines in long-term
interest rates that occurred in the fourth quarter of 1997 helped stimulate the
supply of municipal bonds. Many issuers rushed to take advantage of low rates to
refinance existing higher-coupon debt, as well as to finance new projects. The
market found it difficult to absorb the unusually large increase in supply, and
prices declined early in 1998. During the six-month period, municipal bond
yields became very attractive in comparison to Treasury bonds. The increased
investor demand that followed helped push municipal bond prices higher towards
the end of July.
For investors seeking competitive levels of tax-free income and the potential
for long-term price appreciation, Colonial California Tax-Exempt Fund remains a
suitable option for their investment portfolios.
Respectfully,
/s/ Stephen E. Gibson
Stephen E. Gibson
President
September 11, 1998
Because market conditions change frequently, there can be no assurance that the
trends discussed above or on the following pages will continue.
3
<PAGE>
PORTFOLIO MANAGER REPORT
GARY SWAYZE is portfolio manager of Colonial California Tax-Exempt Fund and is
vice president of Colonial Management Associates, Inc.
VARIABLE ECONOMIC AND MARKET CONDITIONS PREVAILED
Conditions for fixed-income investments varied during the period as investors
weighed the fundamental strength of the U.S. economy against the potential for
an economic slowdown caused by the crisis in Southeast Asia. Market sentiment
regarding the likelihood of an interest rate increase by the Federal Reserve
Board changed several times during the period. Uncertainty about the domestic
economy's ability to produce continued growth without inflation caused bond
prices to alternately rise and fall for much of the period. Bond prices rallied
modestly near the end of July as the Federal Reserve Board signaled that no
change in interest rates was imminent.
Like the broader bond market, the tax-exempt market also experienced alternately
declining and rising prices. Supply and demand factors contributed to this
volatility. Declines in long-term interest rates during the fourth quarter of
1997 led to an increased supply of municipal bonds that the market initially
found difficult to absorb. However, as prices declined, investor demand
increased again, pushing prices back up during the second half of the period.
FUND WAS POSITIONED TO BENEFIT FROM DECLINING INTEREST RATES
Based on our long-term outlook for low inflation and modest economic growth, we
structured the portfolio to take advantage of a potential decline in interest
rates. During the last half of 1997, the portfolio benefited from its holdings
in discount and non-callable bonds, which tend to perform well in a
declining-rate environment. However, in the most recent six-month period, bond
prices were volatile, reflecting investors' changing expectations about the
strength and direction of the nation's economy. This vacillating bond market had
a somewhat dampening effect on the performance of the Fund's discount and
non-callable holdings. For the six months ended July 31, 1998, the total return
for Class A shares was 1.34%, based on net asset value.
ASIAN WOES MAY IMPACT CALIFORNIA'S ECONOMY
During the period, unemployment rates in California dipped to their lowest level
since 1990. Employment was strong in both the manufacturing and service sectors.
Construction activity continued to be robust and home sales were also strong,
with prices firm and inventories decreasing. That said, we
4
<PAGE>
expect that the economic crisis in Southeast Asia will restrain the rate of
California's growth over the next few quarters. For example, California is the
largest recipient of direct foreign investment in the nation. This includes
complete or partial purchases of companies and the establishment of new
subsidiaries or joint ventures. Since 1980, Japan has consistently been the
largest foreign investor in California, with investments totaling $34.3 billion
in 1995. Japanese companies have also provided California residents with over
144,000 jobs, the largest of any foreign employer in the state. In addition to
potential losses of foreign investment funds, California's export economy may
shrink. We have already observed a shift in the import/export mix at various
California ports, such as Los Angeles. However, while we expect the state's
growth to slow down somewhat, we do not anticipate that California's economic
revival will be derailed since many of the industries that have propelled the
state's economy should continue to enjoy strong demand from domestic consumers.
This should offset declining demand in the Asian markets.
OUTLOOK FOR A POSITIVE ECONOMIC AND MARKET ENVIRONMENT
Our long-term outlook remains positive. We expect that low inflation and modest
economic growth will continue. Sustained high levels of productivity and global
competition are likely to keep inflation pressure low. The economic slowdown in
Asia should keep the U.S. economy from growing too fast. The current federal
budget surplus may limit the government's need to borrow money, and thus, the
need to issue Treasury securities. This could help create higher demand for
alternative fixed-income investments, including tax-exempt bonds.
Considering these factors, the Fund will remain positioned for a declining
interest rate environment. However, we believe interest rates will continue to
vary in the months to come, given the vast changes occurring in economies
abroad. Nonetheless, indications continue to point towards declining yields for
municipal bonds.
5
<PAGE>
COLONIAL CALIFORNIA TAX-EXEMPT FUND'S INVESTMENT PERFORMANCE VS.
THE LEHMAN BROTHERS MUNICIPAL BOND INDEX
Growth of $10,000 from 7/31/88 - 7/31/98
CLASS A SHARES
Based on NAV and POP
[LINE GRAPH]
CCATF NAV POP Lehman
Jul 31, 88 10000 9525 10000
Oct 31, 88 10374 9881 10369
Jan 31, 89 10647 10142 10594
Apr 28, 89 10771 10260 10697
Jul 31, 89 11192 10661 11218
Oct 31, 89 11177 10646 11210
Jan 31, 90 11341 10803 11445
Apr 30, 90 11396 10854 11467
Jul 31, 90 11870 11306 11995
Oct 31, 90 11843 11281 12042
Jan 31, 91 12242 11660 12503
Apr 30, 91 12504 11910 12785
Jul 31, 91 12771 12164 13043
Oct 31, 91 13206 12579 13507
Jan 31, 92 13493 12852 13867
Apr 30, 92 13630 12982 14000
Jul 31, 92 14367 13685 14835
Oct 30, 92 14085 13416 14641
Jan 29, 93 14667 13970 15230
Apr 30, 93 15116 14398 15772
Jul 30, 93 15381 14650 16146
Oct 29, 93 15893 15138 16702
Jan 31, 94 16198 15429 17098
Apr 29, 94 15170 14449 16112
Jul 29, 94 15415 14682 16449
Oct 31, 94 14897 14190 15975
Jan 31, 95 15415 14683 16489
Apr 28, 95 16067 15304 17184
Jul 31, 95 16334 15558 17744
Oct 31, 95 17088 16276 18345
Jan 31, 96 17848 17000 18971
Apr 30, 96 17337 16513 18550
Jul 31, 96 17719 16877 18914
Oct 31, 96 18195 17331 19391
Jan 31, 97 18380 17507 19700
Apr 30, 97 18391 17517 19780
Jul 31, 97 19597 18666 20854
Oct 31, 97 19705 18769 21038
Jan 30, 98 20412 19442 21692
Apr 30, 98 20142 19186 21620
Jul 31, 98 20685 19702 22103
Growth of a $10,000 investment made on 7/31/88
As of 7/31/98
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
NAV POP NAV W/CDSC NAV W/CDSC
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$20,685 $19,702 $19,782 $19,782 $20,590 $20,590
- ----------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
As of 7/31/98
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
INCEPTION 6/16/86 8/4/92 8/1/97
NAV POP NAV W/CDSC NAV W/CDSC
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 year 5.55% 0.54% 4.75% (0.22)% 5.07% 4.07%
- ------------------------------------------------------------------------------------------
5 years 6.10 5.08 5.31 4.98 6.01 6.01
- ------------------------------------------------------------------------------------------
10 years 7.54 7.02 7.06 7.06 7.49 7.49
- ------------------------------------------------------------------------------------------
</TABLE>
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 contingent deferred sales charges (CDSC). Public
offering price (POP) returns include the maximum sales charge of 4.75% for Class
A shares. The CDSC returns reflect the maximum charges of 5% for one year and 2%
for five years for Class B shares, and 1% for one year for Class C shares.
Performance results reflect any voluntary waivers or reimbursement of Fund
expenses by the Advisor or Distributor. Absent these waivers or reimbursement
arrangements, performance results would have been lower.
Performance for different share classes will vary based on differences in sales
charges and fees associated with each class.
Class B and Class C share (newer class shares) performance information includes
returns of the Fund's Class A shares (the oldest existing fund class) for
periods prior to the inception of the newer class shares. These Class A share
returns are not restated to reflect any expense differential (e.g., Rule 12b-1
fees) between Class A shares and the newer class shares. Had the expense
differential been reflected, the returns for periods prior to the inception of
the newer class shares would have been lower.
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 and do not incur fees or expenses. It is not
possible to invest directly in an index.
6
<PAGE>
INVESTMENT PORTFOLIO
JULY 31, 1998 (UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
MUNICIPAL BONDS - 97.7% PAR VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
EDUCATION - 1.7%
EDUCATION
State Educational Facilities Authority:
Pooled College & University Project,
6.300% 04/01/21 $ 1,000 $ 1,077
Loyola Marymount University,
Series 1997,
5.000% 10/01/22 600 583
Statewide Communities Development Corp.,
J. Paul Getty Trust Center,
5.000% 10/01/23 4,500 4,374
-----------
6,034
-----------
.......................................................................................
HEALTHCARE - 2.1%
HOSPITALS
Contra Costa County,
Merrithew Memorial Hospital,
5.375% 11/01/17 2,000 2,040
Duarte, City of Hope
National Medical Center,
Series 1993,
6.000% 04/01/08 500 526
Riverside County Asset Leasing Corp.,
Riverside County Hospital Project, Series B,
5.700% 06/01/16 2,500 2,700
State Health Facilities Financing Authority,
Catholic Healthcare West, Series 1994-A,
4.750% 07/01/19 2,000 1,881
-----------
7,147
-----------
.......................................................................................
HOUSING - 5.8%
ASSISTED LIVING/SENIOR - 0.4%
Abageskaton Gold River Lodge,
6.375% 11/15/28 1,400 1,377
-----------
MULTI-FAMILY - 0.1%
Santa Rosa, Chanate Lodge Project,
Series 1992,
6.625% 12/01/02 210 222
-----------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/July 31, 1998
---------------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
HOUSING - CONT.
SINGLE FAMILY - 5.3%
Commonwealth of Puerto Rico Housing Finance Corp.,
Series B,
7.650% 10/15/22 $ 335 $ 355
Southern California
Home Financing Authority:
7.625% 10/01/22 935 971
Series 1990 A,
7.625% 10/01/23 380 399
State Housing Finance Agency:
Series A-1, Class I,
5.950% 08/01/16 3,000 3,165
Series B,
8.600% 08/01/19 2,365 2,417
Series 1990 D,
7.750% 08/01/10 635 672
Series 1997 B,
6.000% 08/01/16 1,600 1,692
State Rural Home Mortgage Finance Authority:
Series A-2,
7.000% 09/01/29 3,795 4,305
Series 1995 B,
7.750% 09/01/26 2,375 2,760
Series 1998 B-4,
5.750% 12/01/29 1,675 1,843
Stockton, Series 1990 A,
7.400% 08/01/05 30 31
-----------
18,610
-----------
.......................................................................................
OTHER - 17.8%
POOL/BOND BANK - 1.0%
State Public Capital Improvements
Financing Authority,
Joint Powers Agency, Series 1988 A,
8.500% 03/01/18 3,500 3,582
-----------
REFUNDED/ESCROWED (a) - 16.8%
Alum Rock Unified Elementary School
District,
(b) 09/01/15 1,825 606
Carlsbad Unified School District,
Community Facility District No. 5,
Series 1990,
7.650% 09/01/14 1,000 1,061
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/July 31, 1998
---------------------------------------------------------------------------------------
<S> <C> <C>
Colton Public Financing Authority,
Series 1995,
7.500% 10/01/20 $ 3,000 $ 3,495
Commerce Joint Powers Financing Authority:
Multiple Project Loans,
Series 1991 A,
8.000% 03/01/21 1,000 1,116
Desert Hospital, Certificate of
Participation, Series 1990,
8.100% 07/01/20 1,750 1,921
Empire Union School District,
Mello-Roos Financing, Series 1990 A,
7.400% 10/01/15 1,000 1,094
Fontana Public Financing Authority,
North Fontana Redevelopment,
Series 1991 A,
7.750% 12/01/20 785 889
Fresno Unified School District, Phase VI,
Series 1991 A,
7.200% 05/01/11 1,000 1,101
Glendora Public Financing Authority,
Series B,
7.625% 09/01/10 850 902
La Quinta Redevelopment Agency,
Series 1990,
8.400% 09/01/12 1,000 1,110
Local Government Power Authority,
Anaheim Redevelopment Agency,
Series 1986 A,
8.200% 09/01/15 4,500 4,606
Los Angeles Convention & Exhibit Center,
Series 1985,
9.000% 12/01/20 500 650
Los Angeles County Transportation,
Metro Train Series 1991 A,
6.900% 07/01/21 1,000 1,100
Mojave Water Agency,
Morongo Basin Pipeline,
Series 1991,
6.950% 09/01/21 1,000 1,106
Moreno Valley Unified School District,
7.400% 09/01/16 20 22
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/July 31, 1998
---------------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
OTHER - CONT.
REFUNDED/ESCROWED (a) - CONT.
Murrietta County Water District,
Series 1991,
8.300% 10/01/21 $ 1,000 $ 1,144
Orange County Community Facility:
District 87-4,
Series 1990 A,
8.000% 08/15/15 1,000 1,100
District 87-3, Mello-Roos,
7.800% 08/15/15 2,000 2,193
Pomona, Series 1990 B,
7.500% 08/01/23 1,000 1,298
PR Commonwealth of Puerto Rico,
Series 1991
7.300% 07/01/20 1,200 1,298
PR Commonwealth of Puerto Rico Electric
Power Authority, Series 1989 N,
7.000% 07/01/07 635 663
Rancho Mirage Joint Powers
Financing Authority,
Series 1991 A,
7.500% 04/01/17 1,545 1,708
Riverside County, Series 1989 A,
7.800% 05/01/21 2,500 3,359
Riverside Public Financing Authority,
Series A,
8.000% 02/01/18 590 657
Rocklin, Stanford Ranch Community Facilities,
District, Series 1990,
8.100% 11/01/15 1,000 1,109
Sacramento City Financing Authority,
Series 1991,
6.800% 11/01/20 2,500 2,763
Sacramento Unified School,
Community Facilities District No. 1,
Series B,
7.300% 09/01/13 1,760 2,011
San Joaquin Hills Transportation
Corridor Agency, Series 1993,
(b) 01/01/20 15,400 5,129
Santa Fe Springs Redevelopment Agency,
Consolidated Redevelopment Project,
Series 1992 A,
6.400% 09/01/22 4,585 5,070
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/July 31, 1998
---------------------------------------------------------------------------------------
<S> <C> <C>
Soledad Redevelopment Agency Project,
Series 1992,
7.400% 11/01/12 $ 935 $ 1,070
State Health Facilities Financing Authority,
Children's Hospital of Los Angeles,
Series 1991 A
7.125% 06/01/21 2,000 2,205
State Pollution Control Financing Authority,
North California Recycling Center,
Series 1991 A,
6.750% 07/01/17 1,000 1,105
Stockton Community Facilities District,
Series 2,
7.750% 08/01/15 1,000 1,094
Watsonville Mammoth Lakes,
Series B,
7.875% 06/01/11 500 560
Westminster Redevelopment Agency,
Project No. 1,
Series 1993,
6.200% 08/01/23 1,000 1,098
Virgin Islands Public Financing,
Series 1992 A,
7.250% 10/01/18 1,000 1,139
-----------
58,552
-----------
.......................................................................................
TAX-BACKED - 54.5%
LOCAL APPROPRIATED - 17.9%
Alameda County Capital
Projects:
Series 1989,
(b) 06/15/14 2,185 973
Series 1997,
5.000% 06/01/22 500 486
Anaheim Public Financing Authority,
Series C,
6.000% 09/01/14 3,500 3,946
Anderson Water, Certificate of Participation,
7.900% 12/01/11 610 646
Bishop, Escalon & Lemoore Cities,
Series 1991 A,
7.700% 05/01/11 700 747
Compton Civic Center Project,
5.500% 09/01/15 3,000 3,037
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/July 31, 1998
---------------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
TAX-BACKED - CONT.
LOCAL APPROPRIATED - CONT.
Grossmont Unified High School District,
1991 Capital Projects,
(b) 11/15/06 $ 4,500 $ 3,104
Los Angeles Convention & Exhibition
Authority, Series 1993 A,
6.125% 08/15/11 5,000 5,689
Los Angeles County Public Works
Financing Authority, Series A,
5.250% 09/01/14 3,740 3,819
Modesto, Community Center Project,
Series 1993 A,
5.000% 11/01/23 2,235 2,219
Pasadena Civic Improvement Corp.,
Series 1996,
5.250% 02/01/16 3,020 3,051
Rancho Mirage Joint Powers Financing
Authority, Civic Center, Series 1991 A,
7.500% 04/01/17 455 494
Riverside County, Historic Courthouse Project,
5.750% 11/01/17 2,255 2,415
Sacramento City Financing Authority,
Series A,
5.375% 11/01/14 4,000 4,215
Sacramento County, Public Facilities Project,
5.375% 02/01/19 6,000 6,109
San Mateo County Board of Education,
Series 1991,
7.100% 05/01/21 750 780
Santa Ana Financing Authority,
Police Holding Facility, Series 1994 A,
6.250% 07/01/18 6,035 6,974
Santa Clara County Financing Authority,
Series A,
5.000% 11/15/17 3,500 3,445
Stanislaus County, Series A,
5.250% 05/01/18 4,000 4,024
Tehachapi Water and Sewer District,
8.200% 11/01/20 2,000 2,165
Victor Elementary School District,
Series 1996,
6.450% 05/01/18 3,345 3,929
-----------
62,267
-----------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/July 31, 1998
---------------------------------------------------------------------------------------
<S> <C> <C>
LOCAL GENERAL OBLIGATIONS - 8.2%
Benicia Unified School District:
Series A,
(b) 08/01/16 $ 1,355 $ 541
Series 1994 C,
6.450% 06/01/19 3,870 4,412
Cabrillo Unified School District,
Series 1996 A,
(b) 08/01/15 3,000 1,268
Central School District,
San Bernardino County, Series A,
7.050% 05/01/16 750 816
Central Unified School District,
(b) 03/01/18 20,065 7,343
East Whittier City School District,
Series A,
5.750% 08/01/17 1,675 1,826
Fillmore Unified School District,
Series A:
(b) 07/01/11 950 508
(b) 07/01/12 980 493
(b) 07/01/17 650 247
Franklin-McKinley School District,
Series A,
5.250% 07/01/16 1,705 1,727
Los Angeles Unified School District,
Series A,
5.000% 07/01/21 5,000 4,867
Rocklin Unified School District,
Series 1991 C,
(b) 07/01/20 6,920 2,223
Simi Valley Unified School District,
Series 1997,
5.250% 08/01/22 925 952
Whisman School District,
Series 1996 A:
(b) 08/01/15 1,595 674
(b) 08/01/16 1,645 656
-----------
28,553
-----------
SPECIAL NON-PROPERTY TAX - 2.5%
Los Angeles County Metropolitan
Transportation Authority, Series 1995 A,
5.000% 07/01/25 2,500 2,424
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/July 31, 1998
---------------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
TAX-BACKED - CONT.
SPECIAL NON-PROPERTY TAX - CONT.
PR Commonwealth of Puerto Rico
Highway & Transportation Authority:
Series W,
5.500% 07/01/09 $ 580 $ 629
Series 1996 Y,
6.250% 07/01/12 3,000 3,458
Riverside County Transportation
Commission, Series 1996 A,
6.000% 06/01/09 2,000 2,253
-----------
8,764
-----------
SPECIAL PROPERTY TAX - 16.8%
Anaheim Public Financing Authority,
Series A,
5.250% 02/01/18 3,000 3,026
Carson, Series 1992,
7.375% 09/02/22 935 1,003
Cerritos Public Financing Authority,
Los Coyotes Redevelopment Project,
Series 1993 A,
6.500% 11/01/23 2,000 2,409
Concord Redevelopment Agency,
Central Concord Project, Series 1988-3,
8.000% 07/01/18 25 26
Contra Costa County Public Financing
Authority, Series 1992 A,
7.100% 08/01/22 1,000 1,095
Corona Community Facility District,
Foothill Ranch, Series 1990 A-1,
8.350% 09/01/20 1,000 1,021
Costa Mesa Public Financing,
Series 1991 A,
7.100% 08/01/21 890 938
Elk Grove Unified School District,
Community Facilities,
Series 1995:
(b) 12/01/18 2,720 958
6.500% 12/01/08 1,000 1,165
6.500% 12/01/24 4,055 4,902
Fontana Redevelopment Agency,
Jurupa Hills Project, Series 1997 A,
5.500% 10/01/27 1,400 1,417
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/July 31, 1998
---------------------------------------------------------------------------------------
<S> <C> <C>
La Mirada Redevelopment Agency,
Civic Theater Project, Series 1998,
5.700% 10/01/20 $ 1,000 $ 1,001
Los Angeles Community Redevelopment Agency,
Hollywood Redevelopment Project, Series 1998 C,
5.375% 07/01/18 1,665 1,735
Oakland Redevelopment Agency, Central
District Redevelopment Project, Series 1992,
5.500% 02/01/14 8,400 8,971
Rancho Cucamonga Redevelopment Agency,
Series 1996,
5.250% 09/01/16 4,000 4,044
Richmond Joint Powers Financing
Authority, Series 1990 A,
7.700% 10/01/10 870 939
Riverside County Public Financing Authority:
Series 1991 A,
8.000% 02/01/18 410 441
Redevelopment Projects, Series A,
5.250% 10/01/16 3,120 3,098
Riverside Unified School District,
Community Facilities District No. 2,
Series 1993 A,
7.250% 09/01/18 1,000 1,078
San Diego, Miramar Ranch North,
Series 1998,
5.375% 09/01/13 2,830 2,949
San Jose Redevelopment Agency,
Merged Area Redevelopment Project:
Series 1993,
5.000% 08/01/21 1,500 1,458
Series 1998,
5.000% 08/01/21 8,665 8,434
Santa Fe Springs Redevelopment Agency,
Consolidated Redevelopment Project,
Series 1992 A,
6.400% 09/01/22 2,690 2,942
Santa Margarita/Dana Point Authority,
Series 1994 B,
7.250% 08/01/13 2,000 2,512
Torrance Redevelopment Agency,
Downtown Redevelopment Project,
Series 1992,
7.125% 09/01/21 1,000 1,083
-----------
58,645
-----------
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/July 31, 1998
---------------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
TAX-BACKED - CONT.
STATE APPROPRIATED - 4.6%
PR Commonwealth of Puerto Rico, Public
Buildings Authority, Series 1993 M,
5.700% 07/01/16 $ 2,250 $ 2,352
State Public Works Board:
Department of Corrections Corcoran II Project,
Series 1996 A,
5.250% 01/01/21 4,000 4,002
Secretary of State & State Archives, Series 1992 A,
6.500% 12/01/08 1,000 1,162
State Prisons, Series 1993 A,
5.000% 12/01/19 6,000 5,992
Various State Prisons Projects, Series 1993 A,
5.250% 12/01/13 2,500 2,613
-----------
16,121
-----------
STATE GENERAL OBLIGATIONS - 4.5% PR Commonwealth of Puerto Rico:
6.500% 07/01/14 2,000 2,368
Aqueduct & Sewer Authority:
6.000% 07/01/09 1,250 1,408
6.250% 07/01/13 2,750 3,175
Series 1995,
5.650% 07/01/15 1,000 1,089
State of California:
5.500% 04/01/12 2,770 2,977
10.000% 02/01/10 2,000 2,931
Series 1995,
10.000% 10/01/06 1,185 1,629
-----------
15,577
-----------
.......................................................................................
TRANSPORTATION - 3.5%
AIRPORT - 0.9%
Los Angeles Department of Airports,
Los Angeles International Airport,
Series 1995 D,
5.500% 05/15/15 3,025 3,105
------------
TRANSPORTATION - 2.6%
Los Angeles Habor Department,
Series 1996 B,
5.375% 11/01/19 8,750 8,835
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/July 31, 1998
---------------------------------------------------------------------------------------
<S> <C> <C>
UTILITY - 12.3%
INDIVIDUAL POWER PRODUCER - 2.0%
Sacramento Cogeneration Authority,
Procter & Gamble Project, Series 1995,
6.500% 07/01/21 $ 6,500 $ 7,100
-----------
INVESTOR OWNED - 1.5%
State Pollution Control Finance Authority,
San Diego Gas & Electric Co., Series 1996 A,
5.900% 06/01/14 4,650 5,114
-----------
MUNICIPAL ELECTRIC - 2.1%
PR Commonwealth of Puerto Rico Electric
Power Authority:
Series 1989 N,
7.000% 07/01/07 365 380
Series 1989 O,
(b) 07/01/17 2,490 953
Reading, Electric Systems,
IFRN (variable rate), Series 1992 A,
9.106% 07/08/22 750 979
Sacramento Municipal Utilities District:
Series 1993 G,
6.500% 09/01/13 1,500 1,770
Series K,
5.700% 07/01/17 1,500 1,629
Turlock Irrigation District,
Series 1996 A:
6.000% 01/01/11 1,000 1,123
6.000% 01/01/12 500 562
-----------
7,396
-----------
WATER & SEWER - 6.7%
Big Bear Lake, Series 1996,
6.000% 04/01/15 1,350 1,518
Compton, Sewer Revenue,
Series 1998,
5.375% 09/01/23 1,320 1,296
Contra Costa Water District,
Series 1994 G,
5.000% 10/01/24 5,000 4,850
Fresno, Series 1995 A:
6.000% 09/01/09 1,525 1,721
6.000% 09/01/10 1,420 1,604
Metropolitan Water District
IFRN (variable rate),
7.680% 08/05/22 2,000 2,223
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/July 31, 1998
---------------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
---------------------------------------------------------------------------------------
<S> <C> <C>
UTILITY - CONT.
WATER & SEWER - CONT.
Mojave Water Agency Morongo Basin,
5.800% 09/01/22 $ 4,000 $ 4,257
San Diego County Water Authority,
Series 1997 A,
5.750% 05/01/11 2,100 2,316
Santa Maria, Series A,
(b) 08/01/14 2,000 885
State Department of Water Resources,
Central Valley Project, Series 1996 O,
4.750% 12/01/25 2,750 2,574
-----------
23,244
-----------
TOTAL MUNICIPAL BONDS (cost of $314,240) 340,245
-----------
OPTIONS - 0.0% CONTRACTS
---------------------------------------------------------------------------------------
September 1998 Treasury Bond Put,
Strike price 116, Expiration 08/22/98
(cost of $204) 25,600 4
-----------
TOTAL INVESTMENTS - (cost of $314,444) (c) 340,249
-----------
SHORT TERM OBLIGATIONS - 1.5% PAR
---------------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (d)
FL Pinellas County Health Facilities
Authority, Series 1985,
3.700% 12/01/15 $ 1,100 1,100
ID State Health Facilities Authority,
St. Lukes Regional Medical Facility,
Series 1995,
3.700% 05/01/22 300 300
IL State Educational Facilities Authority,
3.800% 12/01/25 300 300
MS Perry County, Leaf River Project,
3.700% 03/01/02 1,400 1,400
NM Farmington, Arizona Public Service Co.,
Four Corners Project, Series 1994 B,
3.700% 09/01/24 1,600 1,600
NY Niagara Mohawk Series 1985 A,
3.850% 07/01/15 400 400
-----------
TOTAL SHORT-TERM OBLIGATIONS 5,100
-----------
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/July 31, 1998
---------------------------------------------------------------------------------------
<S> <C>
OTHER ASSETS & LIABILITIES, NET - 0.8% 2,864
---------------------------------------------------------------------------------------
NET ASSETS - 100% $348,213
-----------
</TABLE>
NOTES TO INVESTMENT PORTFOLIO:
------------------------------------------------------------------------
(a) 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.
(b) Zero coupon bond.
(c) Cost for federal income tax purposes is the same. (d) 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, 1998.
<TABLE>
<CAPTION>
Acronym Name
------------ ----------------------------------
<S> <C> <C>
IFRN Inverse Floating Rate Note
</TABLE>
See notes to financial statements.
19
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
JULY 31, 1998 (UNAUDITED)
(in thousands except for per share amounts and footnotes)
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS
Investments at value (cost $314,444) $ 340,249
Short-term obligations 5,100
----------
345,349
Receivable for:
Interest $5,529
Investments sold 318
Fund shares sold 211
Other 62 6,120
------- ----------
Total Assets 351,469
LIABILITIES
Payable for:
Investments purchased 2,379
Distributions 459
Fund shares repurchased 389
Accrued:
Deferred trustees fees 7
Other 22
-------
Total Liabilities 3,256
----------
NET ASSETS $ 348,213
----------
Net asset value & redemption price per share -
Class A ($246,335/32,429) $7.60 (a)
----------
Maximum offering price per share - Class A
($7.60/0.9525) $7.98 (b)
----------
Net asset value & offering price per share -
Class B ($98,373/12,950) $7.60 (a)
----------
Net asset value & offering price per share -
Class C ($3,505/461) $7.60 (a)
----------
COMPOSITION OF NET ASSETS
Capital paid in $ 324,887
Overdistributed net investment income (319)
Accumulated net realized loss (2,160)
Net unrealized appreciation 25,805
----------
$ 348,213
----------
</TABLE>
(a) Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
(b) On sales of $50,000 or more the offering price is reduced.
See notes to financial statements.
20
<PAGE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JULY 31, 1998
(UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C> <C>
Interest $ 9,708
EXPENSES
Management fee $ 875
Service fee 263
Distribution fee - Class B 371
Distribution fee - Class C 2
Transfer agent 259
Bookkeeping fee 66
Audit fee 16
Trustees fee 12
Legal fee 3
Custodian fee 4
Registration fee 13
Reports to shareholders 5
Other 12
------
1,901
Fees waived by the Distributor - Class C 3 1,904
------ --------
Net Investment Income 7,804
--------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain 1,538
Net unrealized depreciation (5,247)
--------
Net Loss (3,709)
--------
Increase in Net Assets from Operations $ 4,095
--------
</TABLE>
See notes to financial statements.
21
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
(Unaudited)
Six months Year
ended ended
(in thousands) July 31 January 31
------- ----------
INCREASE (DECREASE) IN NET ASSETS 1998 1998 (a)
<S> <C> <C>
Operations:
Net investment income $ 7,804 $ 16,823
Net realized gain 1,538 3,009
Net unrealized appreciation (depreciation) (5,247) 17,005
--------- ---------
Net Increase from Operations 4,095 36,837
Distributions:
From net investment income - Class A (5,814) (12,766)
In excess of net investment income - Class A (328) (22)
From net realized gains - Class A -- (2,150)
In excess of net realized gains - Class A (1,054) (134)
From net investment income - Class B (1,941) (4,231)
In excess of net investment income - Class B (110) (7)
From net realized gains - Class B -- (855)
In excess of net realized gains - Class B (420) (53)
From net investment income - Class C (49) (8)
In excess of net investment income - Class C (3) --
From net realized gains - Class C -- (5)
In excess of net realized gains - Class C (15) --
--------- ---------
(5,639) 16,606
--------- ---------
Fund Share Transactions:
Receipts for shares sold - Class A 6,795 17,872
Value of distributions reinvested - Class A 3,621 6,896
Cost of shares repurchased - Class A (15,888) (44,923)
--------- ---------
(5,472) (20,155)
--------- ---------
Receipts for shares sold - Class B 6,399 6,656
Value of distributions reinvested - Class B 1,505 2,880
Cost of shares repurchased - Class B (9,598) (13,410)
--------- ---------
(1,694) (3,874)
--------- ---------
Receipts for shares sold - Class C 3,149 631
Value of distributions reinvested - Class C 58 10
Cost of shares repurchased - Class C (244) (89)
--------- ---------
2,963 552
--------- ---------
Net Decrease from Fund Share Transactions (4,203) (23,477)
--------- ---------
Total Decrease (9,842) (6,871)
NET ASSETS
Beginning of period 358,055 364,926
--------- ---------
End of period (net of overdistributed
net investment income of $319 and
$7, respectively) $ 348,213 $ 358,055
--------- ---------
</TABLE>
(a) Class C shares were initially offered on August 1, 1997.
See notes to financial statements.
22
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS - CONT.
<TABLE>
<CAPTION>
(Unaudited)
Six months Year
ended ended
(in thousands) July 31 January 31
------- ----------
NUMBER OF FUND SHARES 1998 1998 (a)
<S> <C> <C>
Sold - Class A 891 2,386
Issued for distributions reinvested - Class A 474 918
Repurchased - Class A (2,081) (5,994)
------ ------
(716) (2,690)
------ ------
Sold - Class B 838 889
Issued for distributions reinvested - Class B 197 383
Repurchased - Class B (1,255) (1,792)
------ ------
(220) (520)
------ ------
Sold - Class C 413 83
Issued for distributions reinvested - Class C 8 1
Repurchased - Class C (32) (12)
------ ------
389 72
------ ------
</TABLE>
(a) Class C shares were initially offered on August 1, 1997.
See notes to financial statements.
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1998 (UNAUDITED)
NOTE 1. INTERIM FINANCIAL STATEMENTS
In the opinion of management of Colonial California Tax-Exempt Fund, (the Fund),
a series of Colonial Trust V, the accompanying financial statements contain all
normal and recurring adjustments necessary for the fair presentation of the
financial position of the Fund at July 31, 1998, and the results of its
operations, the changes in its net assets and the financial highlights for the
six months then ended.
NOTE 2. ACCOUNTING POLICIES
ORGANIZATION: The Fund is a diversified portfolio of a Massachusetts business
trust, registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company. The Fund's investment objective is to
seek as high a level of after-tax total return, as is consistent with prudent
risk, by pursuing current income exempt from federal and California state
personal income tax 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 three classes of shares:
Class A, Class B, and Class C. Class A shares are sold with a front-end sales
charge and a 1.00% contingent deferred sales charge on redemptions made within
eighteen months on an original purchase of $1 million to $5 million. Class B
shares are subject to an annual distribution fee and a contingent deferred sales
charge. Class B shares will convert to Class A shares when they have been
outstanding approximately eight years. Class C shares are subject to a
contingent deferred sales charge on redemptions made within one year after
purchase and an annual distribution fee.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies that are consistently followed by the Fund in
the preparation of its financial statements.
SECURITY VALUATION AND TRANSACTIONS: 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.
24
<PAGE>
Notes to Financial Statements/July 31, 1998
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
Portfolio positions for which market quotations are not readily available are
valued at fair value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains and 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 and Class C distribution fees) and realized and
unrealized gains (losses), are allocated to each class proportionately on a
daily basis for purposes of determining the net asset value of each class.
Class B and Class C 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 and Class C 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
25
<PAGE>
Notes to Financial Statements/July 31, 1998
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES - CONT.
and other services and office facilities for a monthly fee based on the Fund's
pro-rata portion of the combined average net assets of the funds constituting
Trust V as follows:
<TABLE>
<CAPTION>
Average Net Assets Annual Fee Rate
<S> <C> <C>
First $2 billion 0.50%
Over $2 billion 0.45%
</TABLE>
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 0.13% annually of the Fund's average net assets and receives
reimbursement for certain out-of-pocket expenses.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES: Liberty Funds
Distributor, Inc., formerly Liberty Financial Investments, Inc. (the
Distributor), a subsidiary of the Adviser, is the Fund's principal underwriter.
For the six months ended July 31, 1998, the Fund has been advised that the
Distributor retained net underwriting discounts of $92,033 on sales of the
Fund's Class A shares and received contingent deferred sales charges (CDSC) of
none, $128,548, and $1,907 on Class A, Class B and Class C share redemptions,
respectively.
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 and Class C shares. The Distributor has voluntarily
agreed, until further notice, to waive a portion of the Class C share
distribution fee so that it does not exceed 0.45% annually. The plan also
requires the payment of a service fee to the Distributor as follows:
<TABLE>
<CAPTION>
Valuation of shares Annual
outstanding on the 20th of Fee
each month which were issued Rate
---------------------------- ----
<S> <C>
Prior to November 30, 1994 0.10%
On or after December 1, 1994 0.25%
</TABLE>
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 0.80% annually of the Fund's average net
assets.
26
<PAGE>
Notes to Financial Statements/July 31, 1998
For the six months ended July 31, 1998, the Fund's operating expenses did not
exceed the 0.80% expense limit.
OTHER: The Fund pays no compensation to its officers, all of whom are employees
of the Adviser.
The Fund's Trustees may participate in a deferred compensation plan which may be
terminated at any time. Obligations of the plan will be paid solely out of the
Fund's assets.
NOTE 4. PORTFOLIO INFORMATION
INVESTMENT ACTIVITY: For the six months ended July 31, 1998, purchases and sales
of investments, other than short-term obligations, were $20,282,501 and
$24,588,499, respectively.
Unrealized appreciation (depreciation) at July 31, 1998, based on cost of
investments for both financial statement and federal income tax purposes was:
<TABLE>
<CAPTION>
<S> <C>
Gross unrealized appreciation $26,123,974
Gross unrealized depreciation (318,575)
------------
Net unrealized appreciation $25,805,399
------------
</TABLE>
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 33 1/3% of its net assets under a line of credit for
temporary or emergency purposes. Any borrowings bear interest at one of
27
<PAGE>
Notes to Financial Statements/July 31, 1998
NOTE 5. LINE OF CREDIT - CONT.
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 for the
six months ended July 31, 1998.
28
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
(Unaudited)
Six months ended July 31
1998
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Net asset value -
Beginning of period $ 7.720 $ 7.720 $ 7.720
--------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income 0.181 0.151 0.163 (a)
Net realized and
unrealized loss (0.080) (0.080) (0.080)
--------- ------- -------
Total from Investment
Operations 0.101 0.071 0.083
--------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.178) (0.150) (0.161)
In excess of net investment
income (0.010) (0.008) (0.009)
In excess of net realized
gains (0.033) (0.033) (0.033)
--------- ------- -------
Total Distributions
Declared to Shareholders (0.221) (0.191) (0.203)
--------- ------- -------
Net asset value -
End of period $ 7.600 $ 7.600 $ 7.600
========= ======= =======
Total return (b)(c) 1.34% 0.94% 1.10% (d)
========= ======= =======
RATIOS TO AVERAGE NET ASSETS
Expenses (e)(f) 0.87% 1.62% 1.32% (a)
Net investment
income (e)(f) 4.68% 3.93% 4.23% (a)
Portfolio turnover (c) 6% 6% 6%
Net assets at end
of period (000) $246,335 $98,373 $ 3,505
</TABLE>
(a) Net of fees waived by the Distributor which amounted to $0.011 per share
and 0.30%.
(b) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(c) Not annualized.
(d) Had the Distributor not waived a portion of the Distribution fee, total
return would have been reduced.
(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(f) Annualized.
29
<PAGE>
FINANCIAL HIGHLIGHTS - Cont.
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
Year ended January 31
1998
Class A Class B Class C (b)
------- ------- ------- ---
<S> <C> <C> <C>
Net asset value -
Beginning of period $ 7.370 $ 7.370 $ 7.660
--------- --------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income (a) 0.366 0.310 0.164 (c)
Net realized and
unrealized gain (loss) 0.426 0.426 0.132
--------- --------- -------
Total from Investment
Operations 0.792 0.736 0.296
--------- --------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.369) (0.313) (0.167)
In excess of net investment
income (0.004) (0.004) --
From net realized gains (0.068) (0.068) (0.069)
In excess of net realized
gains (0.001) (0.001) --
--------- --------- -------
Total Distributions
Declared to Shareholders (0.442) (0.386) (0.236)
--------- --------- -------
Net asset value -
End of period $ 7.720 $ 7.720 $ 7.720
========= ========= =======
Total return (d) 11.05% 10.23% 3.93% (e)(f)
========= ========= =======
RATIOS TO AVERAGE NET ASSETS
Expenses (h) 0.87% 1.62% 1.32% (c)(i)
Net investment
income (h) 4.92% 4.17% 4.32% (c)(i)
Fees and expenses waived
or borne by the Adviser (h) -- -- --
Portfolio turnover 31% 31% 31%
Net assets at end
of period (000) $255,838 $101,657 $ 560
</TABLE>
(a) Net of fees and expenses waived or borne by the Adviser which amounted to:
$ - $ - $ -
(b) Class C shares were initially offered on August 1, 1997. Per share amounts
reflect activity from that date.
(c) Net of fees waived by the Distributor which amounted to $0.011 per share
and 0.30%.
(d) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(e) Not annualized.
30
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
<TABLE>
<CAPTION>
Year ended January 31
1997 1996
Class A Class B Class A Class B
------- ------- ------- -------
<S> <C> <C> <C> <C>
$ 7.540 $ 7.540 $ 6.870 $ 6.870
--------- --------- --------- ---------
0.386 0.331 0.388 0.334
(0.173) (0.173) 0.671 0.671
--------- --------- --------- ---------
0.213 0.158 1.059 1.005
--------- --------- --------- ---------
(0.383) (0.328) (0.389) (0.335)
- - - -
- - - -
- - - -
--------- --------- --------- ---------
(0.383) (0.328) (0.389) (0.335)
--------- --------- --------- ---------
$ 7.370 $ 7.370 $ 7.540 $ 7.540
--------- --------- --------- ---------
2.98% 2.21% 15.78%(g) 14.94%(g)
--------- --------- --------- ---------
0.88% 1.63% 0.89% 1.64%
5.23% 4.48% 5.33% 4.58%
- - 0.01% 0.01%
25% 25% 47% 47%
$264,053 $100,873 $304,581 $106,925
$ - $ - $ 0.001 $ 0.001
</TABLE>
(f) Had the Distributor not waived a portion of the Distribution fee, total
return would have been reduced.
(g) Had the Adviser not waived or reimbursed a portion of expenses, total
return would have been reduced.
(h) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(i) Annualized.
31
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
Year ended January 31
1995 1994
Class A Class B Class A Class B
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 7.660 $ 7.660 $ 7.350 $ 7.350
--------- -------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income (a) 0.413 0.360 0.434 0.378
Net realized and
unrealized gain (loss) (0.791) (0.791) 0.315 0.315
--------- -------- --------- ---------
Total from Investment
Operations (0.378) (0.431) 0.749 0.693
--------- -------- --------- ---------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment
income (0.412) (0.359) (0.439) (0.383)
--------- -------- --------- ---------
Net asset value -
End of period $ 6.870 $ 6.870 $ 7.660 $ 7.660
========= ======== ========= =========
Total return (b) (c) (4.83%) (5.55%) 10.44% 9.63%
========= ======== ========= =========
RATIOS TO AVERAGE NET ASSETS
Expenses 0.77% 1.52% 0.75% 1.50%
Net investment
income 5.91% 5.16% 5.73% 4.98%
Fees and expenses
waived or borne
by the Adviser 0.06% 0.06% 0.08% 0.08%
Portfolio turnover 47% 47% 17% 17%
Net assets at end
of period (000) $301,912 $98,975 $379,987 $104,578
</TABLE>
(a) Net of fees and expenses waived or borne by the Adviser which amounted to:
$ 0.004 $ 0.004 $ 0.006 $ 0.006
(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.
32
<PAGE>
SHAREHOLDER SERVICES
TO MAKE INVESTING EASIER
Your Fund has one of the most extensive selections of shareholder services
available. Your financial advisor can help you arrange for any of these
services, or you can call us directly at 1-800-345-6611.
AFFORDABLE ADDITIONAL INVESTMENTS: Add to your account with as little as $50 on
most funds; $25 for an IRA account.
FREE EXCHANGES(1): Exchange all or part of your account into the same share
class of another fund distributed by Liberty Funds Distributor, Inc. by phone or
mail.
EASY ACCESS TO YOUR MONEY(1): Make withdrawals from your account by phone, by
mail or, for certain funds, by check.
ONE-YEAR REINSTATEMENT PRIVILEGE: If you need access to your money, but then
choose to return it within one year, you can reinvest in any fund distributed by
Liberty Funds Distributor of the same share class without any penalty or sales
charge.
FUNDAMATIC: Make periodic investments as low as $50 from your checking account
to your Fund account.
SYSTEMATIC WITHDRAWAL PLAN (SWP): Receive monthly, quarterly or semiannual
payments via check or bank transmission. There is a $5,000 account value
required, but no minimum for the payment amount. The maximum annual withdrawal
is 12% of account balance at time SWP is established. SWPs by check are
processed on the 10th calendar day of each month unless the 10th falls on a
non-business day or the first business day of the week. If this occurs, the
processing date will be the previous business day. Dividends and capital gains
must be reinvested.
AUTOMATED DOLLAR COST AVERAGING: Transfer money on a monthly basis from any fund
with a balance of $5,000 into the same share class of up to four other funds
distributed by Liberty Funds Distributor. Minimum for each transfer is $100.
RETIREMENT PLANS: Choose from a broad range of retirement plans, including IRAs.
(1) Redemptions and exchanges are made at the next determined net asset value
after the request is received by the Transfer Agent. Proceeds may be more or
less than your original cost. The exchange privilege may be terminated at any
time. Exchanges are not available on all funds. Investors who purchase Class B
or C shares, or $1 million or more of Class A shares, may be subject to a
contingent deferred sales charge.
33
<PAGE>
HOW TO REACH US
BY PHONE OR BY MAIL
BY TELEPHONE
CUSTOMER CONNECTION - 1-800-345-6611
For 24-hour account information, call from your touch-tone phone. (Rotary
callers will be automatically connected to a representative during business
hours.) A recorded message will guide you through the menu:
<TABLE>
<CAPTION>
<S> <C>
For fund prices, dividends and capital gains information ........................ press 1
For account information ......................................................... press 2
To speak to a service representative ............................................ press 3
For yield and total return information .......................................... press 4
For duplicate statements or new supply of checks ................................ press 5
To order duplicate tax forms and year-end statements ............................ press 6
(February through May)
To review your options at any time during your call ............................. press *
</TABLE>
To speak with a shareholder services representative about your account, call
Monday to Friday, 8:00 a.m. to 8:00 p.m. ET, and Saturdays from February through
mid-April, 10:00 a.m. to 2:00 p.m. ET.
TELEPHONE TRANSACTION DEPARTMENT - 1-800-422-3737
To purchase, exchange or sell shares by telephone, call Monday to Friday, 9:00
a.m. to 7:00 p.m. ET. Transactions received after the close of the New York
Stock Exchange will receive the next business day's closing price.
LITERATURE - 1-800-426-3750
To request literature on any fund distributed by Liberty Funds Distributor,
Inc., call Monday to Friday, 8:30 a.m. to 6:30 p.m. ET.
BY MAIL
LIBERTY FUNDS SERVICES, INC.
P.O. BOX 1722
BOSTON, MA 02105-1722
34
<PAGE>
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial California Tax-Exempt Fund is:
Liberty Funds Services, Inc.*
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Colonial California Tax-Exempt Fund mails one shareholder report to each
shareholder address. If you would like more than one report, please call
1-800-426-3750 and additional reports will be sent to you.
This report has been prepared for shareholders of Colonial California Tax-Exempt
Fund. This report may also be used as sales literature when preceded or
accompanied by the current prospectus which provides details of sales charges,
investment objectives and operating policies of the Fund.
*Effective October 1, 1998, Colonial Investors Service Center, Inc. -- the
Transfer Agent for Colonial, Stein Roe Advisor and Newport Funds -- will change
its name to Liberty Funds Services, Inc.
35
<PAGE>
TRUSTEES
ROBERT J. BIRNBAUM
Consultant (formerly Special Counsel, Dechert, Price & Rhoads; President and
Chief Operating Officer, New York Stock Exchange, Inc.; President, American
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, & Frankel)
JAMES E. GRINNELL
Private Investor (formerly Senior Vice President - Operations, The Rockport
Company)
RICHARD W. LOWRY
Private Investor (formerly Chairman and Chief Executive Officer, U.S. Plywood
Corporation)
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, Chief Executive Officer and Director,
Hannaford Bros. Co.)
JOHN J. NEUHAUSER
Dean, Boston College School of Management
ROBERT L. SULLIVAN
Retired Partner, KPMG Peat Marwick LLP (formerly Management Consultant, Saatchi
and Saatchi Consulting Ltd. and Principal and International Practice Director,
Management Consulting, Peat Marwick Main & Co.)
[LIBERTY LOGO] L I B E R T Y
COLONIAL FUNDS - STEIN ROE ADVISOR FUNDS - NEWPORT FUNDS
LIBERTY FUNDS DISTRIBUTOR, INC. @1998
ONE FINANCIAL CENTER, BOSTON, MA 02111-2621, 1-800-426-3750
VISIT US AT www.libertyfunds.com
CA-03/738F-0798 (9/98)98/925
