<PAGE>
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COLONIAL MASSACHUSETTS TAX-EXEMPT FUND Semiannual report
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July 31, 1998
[graphic omitted]
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Not FDIC May Lose Value
Insured No Bank Guarantee
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COLONIAL MASSACHUSETTS TAX-EXEMPT FUND HIGHLIGHTS
FEBRUARY 1, 1998 - JULY 31, 1998
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.
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, Massachusetts' strong economy, fiscal management and
financial reserves supported the prices of many of the Fund's holdings."
- Gary Swayze
COLONIAL MASSACHUSETTS TAX-EXEMPT FUND PERFORMANCE
CLASS A CLASS B CLASS C
Inception dates 4/10/87 6/8/92 8/1/97
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Distributions declared per share(1) $0.250 $0.218 $0.231
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SEC yields on 7/31/98(2) 3.78% 3.21% 3.51%
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Taxable-equivalent SEC yields(3) 7.11% 6.04% 6.60%
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Six-month total returns, assuming reinvestment 1.75% 1.35% 1.51%(4)
of all distributions and no sales charge or
contingent deferred sales charge (CDSC)
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Net asset value per share on 7/31/98 $7.99 $7.99 $7.99
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(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
public 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 3.20%.
(3) Taxable-equivalent SEC yields are based on the combined maximum effective
46.8% federal and Massachusetts income tax rate. This rate will decrease to
43.2% for tax years after 1998.
(4) Performance results reflect any voluntary waivers or reimbursements of Fund
expenses by the Advisor or Distributor. Absent these waivers or
reimbursement arrangements, performance results would have been lower.
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.
Quality Breakdown (as of 7/31/98) Top Five Sectors (as of 7/31/98)
- -------------------------------------- --------------------------------------
AAA ............................ 51.9% General Obligations ............ 23.0%
AA ............................. 15.6% Refunded ....................... 15.8%
A .............................. 16.5% Water & Sewer .................. 12.8%
BBB ............................ 5.4% Education ....................... 9.7%
Non-rated ...................... 10.1% Hospital ........................ 8.0%
Short-term obligations ......... 0.5%
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.
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PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
----------------------------
[Photo of Stephen E. Gibson]
----------------------------
In June 1998, Harold Cogger retired as president of Colonial Massachusetts
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 Massachusetts
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 this 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 Massachusetts Tax-Exempt Fund remains
a suitable option for their investment portfolios.
Respectfully,
/s/ 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.
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<PAGE>
PORTFOLIO MANAGEMENT REPORT
GARY SWAYZE is portfolio manager of Colonial Massachusetts 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. Some of our best performing bonds during the period were
securities issued by non-rated nursing homes. In addition to providing high
income to the Fund, improved financial performance of these issuers resulted in
an increase in the prices of the bonds.
For the six months ended July 31, 1998, the total return for Class A shares was
1.75%, based on net asset value. This placed the Fund above average for
Massachusetts tax-exempt funds as measured by Lipper Analytical Services, Inc.
The average Massachusetts fund total return was 1.58%.(1)
NO HALT TO MASSACHUSETTS' ECONOMIC EXPANSION
There has been no visible slowdown to the Commonwealth's economic boom. All
indicators during the period were positive: the unemployment rate continues to
be lower than that of the nation; job creation is strong with almost half a
million jobs added since the peak of the recession in 1991; and consumer
confidence is at an all-time high. This has translated into strong increases for
personal income, as well as corporate and sales tax revenues. We do not have any
cause to believe that the state's expansion will not continue, particularly as
long as the high-tech and financial service industries remain prosperous.
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 do anticipate some variability in
interest rates in the months to come. Therefore, we will continue to actively
manage all aspects of the Fund to decrease the potential negative effects of
rate volatility.
(1) Source: Lipper Analytical Services, Inc. Lipper rankings are based on the
Lipper Massachusetts Municipal Debt category. The Fund's Class A share
ranking is in the second quartile for the six-month period (ranked 22nd out
of 57 funds); in the second quartile for the one-year period (ranked 25th
out of 56 funds); in the first quartile for the five-year period (ranked 6th
out of 27 funds); and in the second quartile for the ten-year period (ranked
6th out of 16 funds). Rankings do not include any sales charges. Performance
for different share classes will vary with fees associated with each class.
Past performance cannot guarantee future results.
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COLONIAL MASSACHUSETTS TAX-EXEMPT FUND'S INVESTMENT PERFORMANCE VS.
THE LEHMAN BROTHERS MUNICIPAL BOND INDEX
Growth of $10,000 from 7/31/88 - 7/31/98
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CLASS A SHARES
Based on NAV and POP
NAV POP LEHMAN
July 31, 1988 $10,000 $ 9,525 $10,000
October 31, 1988 10,357 9,865 10,369
January 31, 1989 10,605 10,101 10,594
April 28, 1989 10,709 10,200 10,697
July 31, 1989 11,055 10,529 11,218
October 31, 1989 11,033 10,514 11,210
January 31, 1990 11,226 10,693 11,445
April 30, 1990 11,180 10,649 11,467
July 31, 1990 11,784 11,225 11,995
October 31, 1990 11,657 11,103 12,042
January 31, 1991 12,158 11,581 12,503
April 30, 1991 11,512 11,918 12,785
July 31, 1991 12,821 12,212 13,043
October 31, 1991 13,240 12,611 13,507
January 31, 1992 13,570 12,925 13,867
April 30, 1992 13,735 13,083 14,000
July 31, 1992 14,596 13,902 14,835
October 30, 1992 14,347 13,666 14,641
January 29, 1993 15,044 14,329 15,230
April 30, 1993 15,589 14,848 15,772
July 30, 1993 15,939 15,181 16,146
October 29, 1993 16,473 15,690 16,702
January 31, 1994 16,829 16,029 17,098
April 29, 1994 15,902 15,146 16,112
July 29, 1994 16,244 15,473 16,449
October 31, 1994 15,648 14,905 15,975
January 31, 1995 16,241 14,469 16,489
April 28, 1995 16,878 16,076 17,184
July 31, 1995 17,182 16,366 17,744
October 31, 1995 17,919 17,068 18,345
January 31, 1996 18,660 17,774 18,971
April 30, 1996 18,015 17,159 18,550
July 31, 1996 18,375 17,502 18,914
October 31, 1996 18,860 17,965 19,391
January 31, 1997 19,113 18,206 19,700
April 30, 1997 19,222 18,309 19,780
July 31, 1997 20,277 19,314 20,854
October 31, 1997 20,431 19,460 21,038
January 30, 1998 21,013 20,015 21,692
April 30, 1998 20,898 19,906 21,620
July 31, 1998 21,382 20,366 22,103
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GROWTH OF A $10,000 INVESTMENT MADE ON 7/31/88
As of 7/31/98
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CLASS A CLASS B CLASS C
NAV POP NAV w/CDSC NAV w/CDSC
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$21,382 $20,366 $20,430 $20,430 $21,284 $21,284
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AVERAGE ANNUAL TOTAL RETURNS
As of 7/31/98
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CLASS A CLASS B CLASS C
INCEPTION 4/10/87 6/8/92 8/1/97
NAV POP NAV w/CDSC NAV w/CDSC
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1 year 5.45% 0.44% 4.65% (0.30)% 4.97% 3.98%
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5 years 6.05 5.02 5.26 4.93 5.95 5.95
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10 years 7.90 7.37 7.41 7.41 7.85 7.85
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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.
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<PAGE>
INVESTMENT PORTFOLIO
JULY 31, 1998 (UNAUDITED, IN THOUSANDS)
MUNICIPAL BONDS - 97.3% PAR VALUE
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EDUCATION - 12.6%
EDUCATION - 9.5%
State College Building Authority,
Southeastern University,
Series 1995 A,
5.750% 05/01/16 $1,250 $ 1,323
State Health & Educational Facilities Authority:
Amherst College, Series E,
6.800% 11/01/21 500 550
Bentley College, Series 1998 J,
5.000% 07/01/23 1,550 1,505
Community Colleges Program, Series A,
6.600% 10/01/22 1,250 1,390
Harvard University, Series N,
6.250% 04/01/20 2,250 2,626
Northeastern University, Series 1998 G,
5.000% 10/01/22 3,840 3,730
Stonehill College, Series 1998 G,
5.250% 07/01/28 1,000 1,001
State Industrial Finance Agency:
Babson College, Series 1992 A,
6.375% 10/01/09 1,000 1,098
Cambridge Friends School, Series 1998,
5.750% 09/01/18 1,000 1,017
College of the Holy Cross,
5.500% 03/01/05 1,375 1,467
Concord Academy, Series 1997,
5.500% 09/01/27 1,250 1,254
Emerson College, Series 1991 A,
8.900% 01/01/18 500 547
St John's High School, Series 1998,
5.700% 06/01/18 1,000 1,029
Tabor Academy, Series 1998,
5.400% 12/01/18 1,000 1,002
Tufts University, Series 1998 H,
5.000% 02/15/18 1,500 1,465
Wentworth Institute of Technology,
Series 1998,
5.750% 10/01/28 1,650 1,677
---------
22,681
---------
STUDENT LOAN - 3.1%
New England Educational Loan Marketing
Corp., Series 1993-A,
5.700% 07/01/05 5,000 5,244
State Educational Financing Authority,
Issue E,
5.650% 07/01/10 2,000 2,117
---------
7,361
---------
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HEALTHCARE - 13.3%
HOSPITAL - 7.8%
State Health & Educational Facilities Authority:
Berkshire Health System, Series C,
6.000% 10/01/20 1,000 1,039
Catholic Health East, Series 1998 B,
5.000% 11/15/28 1,000 956
Children's Hospital, Series E,
6.200% 10/01/16 2,000 2,162
Dana-Farber Cancer Institute:
Series C,
6.650% 12/01/15 250 270
Series 1995 G1,
5.500% 12/01/27 5,000 5,106
Hallmark Health Systems, Series 1997 A,
5.000% 07/01/27 1,000 956
Milford-Whitinsville Regional Hospital, Series C,
5.375% 07/15/28 500 483
Newton-Wellsley Hospital, Series 1997 G,
6.000% 07/01/12 1,000 1,095
Spaulding Rehabilitation Hospital, Series A,
7.625% 07/01/21 400 409
The Medical Center of Central Mass., Series A,
7.000% 07/01/12 1,000 1,084
University Hospital, Series C,
7.250% 07/01/19 1,000 1,080
Youville House Project,
5.950% 02/15/17 500 530
State Industrial Finance Agency,
Massachusetts Biomedical Research Corp.:
Series A-2,
(a) 08/01/08 2,000 1,243
Series 1989 A2,
(a) 08/01/10 4,000 2,200
---------
18,613
---------
INTERMEDIATE CARE FACILITIES - 0.2%
State Health & Educational
Facilities Authority,
Corporation for Independent Living,
8.100% 07/01/18 290 326
---------
LIFECARE - 0.9%
State Industrial Development
Finance Authority,
Springhouse, Inc., Series 1988,
5.875% 07/01/18 1,200 1,200
State Industrial Finance Agency,
Reeds Landing Project,
7.750% 10/01/00 1,000 1,015
---------
2,215
---------
NURSING HOME - 4.4%
Boston,
St. Joseph Nursing Care Center, Inc.,
Series 1990,
10.000% 01/01/20(b) 485 528
State Health & Educational
Facilities Authority,
Deutsches Altenheim, Inc., Series A,
7.700% 11/01/31 970 1,038
State Industrial Finance Agency:
American Health Foundation Inc.,
Series 1989, 10.125% 03/0119(c) 1,740 1,305
Belmont Home Care,
Series 1995 A, 9.270% 01/01/25 2,000 2,318
Chelsea Jewish Nursing Home, Series A,
6.500% 08/01/37 1,000 1,111
GF/Massachusetts Inc.,
Series 1994, 8.300% 07/01/23 2,415 2,729
Seacoast Nursing Home,
Series 1991, 9.625% 12/01/21 1,285 1,476
---------
10,505
---------
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HOUSING - 4.4%
MULTI-FAMILY - 2.2%
Boston,
Mt. Pleasant Housing Development Corp.,
Series A,
6.750% 08/01/23 1,630 1,727
State Housing Finance Agency:
Series 1990 A,
8.150% 02/01/29 135 143
Series 1992 C,
6.875% 11/15/11 3,000 3,264
---------
5,134
---------
SINGLE FAMILY - 2.2%
State Housing Finance Agency:
Series 8,
7.700% 06/01/17 575 588
Series 9,
8.100% 12/01/21 285 293
Series 13,
7.950% 06/01/23 1,180 1,243
Series 18,
7.350% 12/01/16 1,000 1,058
Series 1997,
5.600% 06/01/30 2,000 2,031
---------
5,213
---------
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OTHER - 15.5%
REFUNDED/ESCROWED (d)
Commonwealth of Puerto Rico,
Series 1994,
6.500% 07/01/23 5,000 5,658
Fall River,
7.200% 06/01/10(e) 1,250 1,379
Holyoke,
School Project Loan,
7.650% 08/01/09 500 559
Leominster,
7.500% 04/01/09 1,075 1,158
Lynn,
7.850% 01/15/11 1,000 1,154
Mansfield,
6.700% 01/15/11 1,000 1,101
Massachusetts Bay Transportation Authority,
General Transportation System,
Series 1990-B,
7.875% 03/01/21(e) 4,000 4,449
State:
Series 1991 B,
6.500% 08/01/11 1,140 1,241
Series 1991 C,
6.500% 08/01/11 800 870
State Health & Educational
Facilities Authority:
Berklee College of Music, Series C,
6.875% 10/01/21 1,000 1,103
Capital Asset Program, Series 1989 F,
7.300% 10/01/18 750 805
Charlton Memorial Hospital, Series B:
7.250% 07/01/07 500 553
7.250% 07/01/13 500 553
Cooley Dickinson Hospital, Series A,
7.125% 11/15/18 1,850 2,116
Deaconess Hospital,
7.200% 04/01/22 2,500 2,744
Fairview Extended Care Service, Inc., Series A,
10.250% 01/01/21 500 584
Framingham Union Hospital, Series B,
8.500% 07/01/20 1,000 1,104
Lowell General Hospital, Series 1991 A,
8.400% 06/01/11 500 566
St. John's Hospital, Series 1990 B,
8.375% 12/01/20 500 558
Winchester Hospital, Series C,
7.550% 07/01/11 500 556
Worcester Polytechnic Institute, Series E:
6.625% 09/01/17 500 554
6.750% 09/01/11 500 557
State Industrial Finance Agency,
Mary Ann Morse Nursing Home, Inc.:
Series 1990,
9.000% 10/01/20 475 532
Series 1991 I,
10.000% 01/01/21 925 1,075
State Turnpike Authority,
Series 1993 A,
5.000% 01/01/20 5,000 5,012
University of Massachusetts
Building Authority,
Series 1976 A,
7.500% 05/01/11 95 113
Virgin Islands Public Finance
Authority,
Series 1992 A,
7.000% 10/01/02 250 278
---------
36,932
---------
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OTHER REVENUE - 0.7%
INDUSTRIAL
State Industrial Finance Agency,
House of Bianchi, Inc.,
8.750% 06/01/18 1,700 1,751
---------
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RESOURCE RECOVERY - 2.1%
DISPOSAL - 1.9%
Boston Industrial Development
Finance Authority,
Jet-A-Way, Inc.,
10.500% 01/01/11 200 225
State Industrial Finance Agency:
Massachusetts Environmental Services,
Series 1994 A,
8.750% 11//01/21(c) 2,935 2,348
Peabody Monofill Associates, Inc.,
Series 1995,
9.000% 09/01/05 1,845 2,050
---------
4,623
---------
RESOURCE RECOVERY - 0.2%
Agawam,
Springfield Resource Recovery Project,
Series 1986,
8.500% 12/01/08 475 486
---------
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TAX-BACKED - 29.7%
LOCAL APPROPRIATED - 0.5%
Plymouth County Correctional Facility,
Series A,
7.000% 04/01/22 1,000 1,115
---------
LOCAL GENERAL OBLIGATIONS - 7.7%
Amherst-Pelham Regional School District,
Series 1998,
5.500% 05/15/13 1,300 1,369
Boston,
Series 1992 A,
6.500% 07/01/12(e) 4,340 4,789
Frontier Regional School District,
Series 1998,
5.500% 06/15/14 1,500 1,578
Haverhill,
5.000% 06/15/17(e) 2,000 1,976
Holyoke,
Series 1996 A,
6.000% 06/15/07 1,345 1,481
Lowell,
8.400% 01/15/09 1,000 1,120
Nantucket,
Series 1991,
6.800% 12/01/11 2,675 2,951
Southern Berkshire Regional
School District,
7.000% 04/15/11 500 560
Swansea,
School Project Loan:
6.800% 01/15/09 250 276
6.800% 01/15/10 125 138
6.800% 01/15/11 210 232
Weymouth,
Series 1992:
6.700% 06/15/09 200 217
6.700% 06/15/10 200 217
6.700% 06/15/11 155 168
6.700% 06/15/12 140 151
Worcester,
Series C,
5.750% 10/01/13 1,000 1,069
---------
18,292
---------
SPECIAL NON-PROPERTY TAX - 3.9%
Commonwealth of Puerto Rico
Highway & Transportation Authority:
Series W,
5.500% 07/01/09 660 715
Series 1996 Z,
6.250% 07/01/05 5,500 6,136
Martha's Vineyard Land Bank,
Series 1998,
5.125% 05/01/18 1,265 1,264
State,
Series A,
5.500% 06/01/13 1,000 1,069
---------
9,184
---------
STATE APPROPRIATED - 2.7%
Commonwealth of Puerto Rico
Public Buildings Authority,
Series 1993 M:
5.600% 07/01/08 1,500 1,632
5.700% 07/01/16 2,000 2,091
State College Building Authority,
Series 1994 A,
7.500% 05/01/14 1,825 2,341
University of Massachusetts
Building Authority,
Series 1991 A,
7.200% 05/01/04 400 452
---------
6,516
---------
STATE GENERAL OBLIGATIONS - 14.9%
Massachusetts Bay Transportation Authority:
Series D,
5.750% 03/01/13 2,000 2,141
Series 1988,
7.750% 01/15/06 250 293
Series 1991 A,
7.000% 03/01/21 1,500 1,849
Series 1992 B,
6.200% 03/01/16 3,700 4,224
Series 1994 A:
7.000% 03/01/10 5,000 6,048
7.000% 03/01/11 4,270 5,176
7.000% 03/01/14 1,250 1,534
State:
Series A,
5.750% 08/01/08 3,000 3,299
Series B,
7.000% 07/01/09 4,385 5,297
Series 1991 B,
6.500% 08/01/11 860 928
Series 1991 C,
6.500% 08/01/11 450 485
Series 1992 B,
6.500% 08/01/08 1,000 1,168
Series 1996 A,
6.000% 11/01/06 1,000 1,109
Series 1997 B,
5.125% 06/01/12 2,000 2,041
---------
35,592
---------
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TRANSPORTATION - 2.2%
AIRPORT - 0.9%
State Port Authority,
Series 1998 A,
5.500% 07/01/16 2,000 2,085
---------
TOLL FACILITIES - 1.3%
State Turnpike Authority:
Series A,
5.125% 01/01/23 1,000 985
Series C,
(a) 01/01/18 5,825 2,150
---------
3,135
---------
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UTILITY - 16.8%
INVESTOR OWNED - 0.7%
State Industrial Finance Agency,
Nantucket Electric Co.,
Series 1996 A,
6.750% 07/01/05 1,400 1,582
---------
JOINT POWER AUTHORITY - 2.9%
State Municipal Wholesale
Electric Co., Series 1994 A:
5.000% 07/01/17 5,000 4,904
IFRN(variable rate) 6.302% 07/01/16 2,000 1,975
---------
6,879
---------
MUNICIPAL ELECTRIC - 0.7%
Commonwealth of Puerto Rico
Electric Power Authority,
Series 1995 Y,
7.000% 07/01/07 1,500 1,774
---------
WATER & SEWER - 12.5%
Boston Water & Sewer Commission:
Series 1992 A,
5.750% 11/01/13 1,000 1,092
Series 1993 A,
5.250% 11/01/19 4,750 4,848
State Water Pollution Abatement Trust,
New Bedford Loan Program,
Series 1996 A,
6.000% 02/01/06 1,000 1,098
State Water Resources Authority:
Series 1992 A:
6.500% 07/15/09 2,000 2,315
6.500% 07/15/19 5,000 5,895
Series 1993 C:
5.250% 12/01/15 1,000 1,037
5.250% 12/01/15 2,750 2,832
5.250% 12/01/20 5,025 5,005
Series 1995 B,
6.250% 12/01/13 5,000 5,768
---------
29,890
--------
TOTAL INVESTMENTS (cost of $212,799)(f) 231,884
---------
SHORT-TERM OBLIGATIONS - 0.5%
- --------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (g)
Ma State Health & Educational
Facilities Authority,
Series 1985 D,
2.350% 01/01/35 1,200 1,200
---------
OTHER ASSETS & LIABILITIES, NET - 2.2% 5,297
- --------------------------------------------------------------------------------
NET ASSETS - 100.0% $ 238,381
=========
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 $485. This security represents 0.2% of the Fund's net assets as
of July 31, 1998.
(c) This issuer is in default of certain debt covenants. Income is not being
accrued.
(d) The Fund has been informed that each issuer has placed direct
obligations of the U.S. Government in an irrevocable trust, solely for
the payment of the interest and principal.
(e) These securities, or a portion thereof, with a total market value of
$12,593, are being used to collateralize open futures contracts.
(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, 1998.
Futures contracts open at July 31, 1998:
Par value Unrealized
covered by Expiration appreciation
Type contracts month at 7/31/98
- --------------------------------------------------------------------------------
Treasury Bond $ 6,500 September $ 9
Acronym Name
-------------- --------------------------
IFRN Inverse Floating Rate Note
See notes to financial statements.
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
JULY 31, 1998 (UNAUDITED)
(in thousands except for per share amounts and footnotes)
ASSETS
Investments at value (cost $212,799) $231,884
Short-term obligations 1,200
--------
233,084
Receivable for:
Investments sold $2,997
Interest 2,954
Fund shares sold 102
Variation margin on futures 2
Other 38 6,093
------ --------
Total Assets 239,177
LIABILITIES
Payable for:
Distributions 322
Fund shares repurchased 288
Accrued:
Deferred Trustees fees 2
Other 184
------
Total Liabilities 796
--------
NET ASSETS $238,381
========
Net asset value & redemption price per share -
Class A ($178,793/22,376) $7.99(a)
========
Maximum offering price per share - Class A
($7.99/0.9525) $8.39(b)
========
Net asset value & offering price per share -
Class B ($59,039/7,389) $7.99(a)
========
Net asset value & offering price per share -
Class C ($549/69) $7.99(a)
========
COMPOSITION OF NET ASSETS
Capital paid in $219,565
Overdistributed net investment income (269)
Accumulated net realized loss (9)
Net unrealized appreciation on:
Investments 19,085
Open futures contracts 9
--------
$238,381
========
(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 inancial statements.
<PAGE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JULY 31, 1998
(UNAUDITED)
(in thousands)
INVESTMENT INCOME
Interest $ 6,804
EXPENSES
Management fee $ 599
Service fee 196
Distribution fee - Class B 222
Distribution fee - Class C 1
Transfer agent 173
Bookkeeping fee 47
Trustees fee 10
Custodian fee 3
Audit fee 12
Legal fee 16
Registration fee 9
Reports to shareholders 5
Other 8
-------
1,301
Fees waived by the Distributor - Class C (a) 1,301
------- -------
Net Investment Income 5,503
-------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain on:
Investments 1,455
Closed futures contracts 126
-------
Net Realized Gain 1,581
Net unrealized depreciation
during the period on:
Investments (3,157)
Open futures contracts (49)
-------
Net Unrealized Depreciation (3,206)
-------
Net Loss (1,625)
-------
Increase in Net Assets from Operations $ 3,878
=======
(a) Rounds to less than one
See notes to financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(Unaudited)
Six months Year ended
(in thousands) ended July 31 January 31
------------- -----------
INCREASE (DECREASE) IN NET ASSETS 1998 1998(a)
Operations:
Net investment income $ 5,503 $ 11,710
Net realized gain 1,581 3,978
Net unrealized appreciation (depreciation) (3,206) 6,779
-------- --------
Net Increase from Operations 3,878 22,467
Distributions:
From net investment income - Class A (4,301) (9,280)
In excess of net investment income - Class A (226) (69)
In excess of realized gains - Class A (1,056) (1,262)
From net investment income - Class B (1,193) (2,595)
In excess of net investment income - Class B (62) (19)
In excess of realized gains - Class B (348) (413)
From net investment income - Class C (8) (4)
In excess of net investment income - Class C (b) (b)
In excess of realized gains - Class C (3) (2)
-------- --------
(3,319) 8,823
-------- --------
Fund Share Transactions:
Receipts for shares sold - Class A 7,008 11,290
Value of distributions reinvested - Class A 3,394 5,823
Cost of shares repurchased - Class A (11,832) (25,244)
-------- --------
(1,430) (8,131)
-------- --------
Receipts for shares sold - Class B 3,802 5,337
Value of distributions reinvested - Class B 1,062 1,809
Cost of shares repurchased - Class B (4,168) (9,319)
-------- --------
696 (2,173)
-------- --------
Receipts for shares sold - Class C 343 200
Value of distributions reinvested - Class C 8 4
Cost of shares repurchased - Class C (4) (b)
-------- --------
347 204
-------- --------
Net Decrease from Fund Share
Transactions (387) (10,100)
-------- --------
Total Decrease (3,706) (1,277)
NET ASSETS
Beginning of period 242,087 243,364
-------- --------
End of period (net of overdistributed
net investment income of $269
and $28, respectively) $238,381 $242,087
======== ========
(a) Class C shares were initially offered on August 1, 1997.
(b) Rounds to less than one. Statement of Changes continued on following page.
See notes to financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS - CONT.
(Unaudited)
Six months Year ended
ended July 31 January 31
------------- -----------
(in thousands) 1998 1998(a)
NUMBER OF FUND SHARES
Sold - Class A 874 1,430
Issued for distributions reinvested - Class A 423 733
Repurchased - Class A (1,473) (3,198)
-------- --------
(176) (1,035)
-------- --------
Sold - Class B 473 674
Issued for distributions reinvested - Class B 132 228
Repurchased - Class B (518) (1,174)
-------- --------
87 (272)
-------- --------
Sold - Class C 43 25
Issued for distributions reinvested - Class C 1 1
Repurchased - Class C (1) (b)
-------- --------
43 26
-------- --------
(a) Class C shares were initially offered on August 1, 1997.
(b) Rounds to less than one.
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1998 (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, 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 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 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 and 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.
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 (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 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 all of the funds constituting 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 0.13% 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 Investment 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 $15,933 on sales of the
Fund's Class A shares and received contingent deferred sales charges (CDSC) of
none, $56,238, and $40 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 to waive, until further notice, a portion of the Class C share
distribution fee so that it will not exceed 0.45% annually. 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 month ended July 31, 1998, 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, 1998, purchases and
sales of investments, other than short-term obligations were $19,200,480 and
$19,294,739, respectively.
Unrealized appreciation (depreciation) at July 31, 1998, based on cost of
investments for both financial statement and federal income tax purposes was:
Gross unrealized appreciation $ 20,145,762
Gross unrealized depreciation (1,060,918)
------------
Net unrealized appreciation $ 19,084,844
============
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 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, 1998.
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are
as follows:
(Unaudited)
Six months ended July 31
-------------------------------------------
1998
Class A Class B Class C
------------ ------------ ------------
Net asset value -
Beginning of period $ 8.100 $ 8.100 $ 8.100
-------- -------- --------
INCOME FROM
INVESTMENT OPERATIONS:
Net investment
income 0.195 0.163 0.176(b)
Net realized and
unrealized gain (loss) (0.055) (0.055) (0.055)
-------- -------- --------
Total from Investment
Operations 0.140 0.108 0.121
-------- -------- --------
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net
investment income (0.193) (0.162) (0.175)
In excess of
net investment income (0.010) (0.009) (0.009)
In excess of
net realized gains (0.047) (0.047) (0.047)
-------- -------- --------
Total Distributions
Declared to Shareholders (0.250) (0.218) (0.231)
-------- -------- --------
Net asset value -
End of period $ 7.990 $ 7.990 $ 7.990
-------- -------- --------
Total return(c) 1.75%(d) 1.35%(d) 1.51%(d)(e)
======== ======== ========
RATIOS TO AVERAGE NET ASSETS
Expenses (f) 0.90%(g) 1.65%(g) 1.35%(b)(g)
Net investment income (f) 4.78%(g) 4.03%(g) 4.33%(b)(g)
Portfolio turnover 8%(d) 8%(d) 8%(d)
Net assets at end
of period (000) $178,793 $ 59,039 $ 549
(a) Class C shares were initially offered on August 1, 1997. Per share amounts
reflect activity from that date.
(b) Net of fees waived by the Distributor which amounted to $0.012 per share and
0.30%.
(c) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(d) Not annualized
(e) Had the Distributor not waived a portion of the distribution fee, total
return would have been reduced.
(f) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(g) Annualized
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Year ended January 31
---------------------------------------
1998
Class A Class B Class C(a)
-------- -------- --------
$ 7.810 $ 7.810 $ 8.070
-------- -------- --------
0.403 0.344 0.180(b)
0.352 0.352 0.090
-------- -------- --------
0.755 0.696 0.270
-------- -------- --------
(0.406) (0.347) (0.180)
(0.003) (0.003) (0.004)
(0.056) (0.056) (0.056)
-------- -------- --------
(0.465) (0.406) (0.240)
-------- -------- --------
$ 8.100 $ 8.100 $ 8.100
-------- -------- --------
9.94% 9.13% 3.40%(d)
-------- -------- --------
0.90% 1.65% 1.37%(b)(g)
5.05% 4.30% 4.47%(b)(g)
14% 14% 14%
$182,721 $ 59,160 $ 206
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Selected data for a share of each class outstanding throughout each period are
as follows:
Year ended January 31
----------------------------------------------
1997 1996
Class A Class B Class A Class B
------- ------- ------- -------
Net asset value -
Beginning of period $ 8.040 $ 8.040 $ 7.390 $ 7.390
------- ------- ------- -------
INCOME FROM
INVESTMENT OPERATIONS:
Net investment
income(a) 0.415 0.357 0.424 0.367
Net realized and
unrealized gain (loss) (0.234) (0.234) 0.650 0.650
------- ------- ------- -------
Total from Investment
Operations 0.181 0.123 1.074 1.017
------- ------- ------- -------
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net
investment income (0.411) (0.353) (0.424) (0.367)
------- ------- ------- -------
Net asset value -
End of period $ 7.810 $ 7.810 $ 8.040 $ 8.040
------- ------- ------- -------
Total return(b)(c) 2.43% 1.66% 14.90% 14.05%
======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS
Expenses 0.90%(d) 1.65%(d) 0.85%(d) 1.60%(d)
Net investment income 5.32%(d) 4.57%(d) 5.49%(d) 4.74%(d)
Fees and expenses waived
or borne by the
Adviser 0.00%(d) 0.00%(d) 0.06%(d) 0.06%(d)
Portfolio turnover 29% 29% 21% 21%
Net assets at end
of period (000) $184,221 $59,143 $207,759 $60,651
$ 0.000 $ 0.000 $ 0.005 $ 0.005
(a) Net of fees and expenses waived or borne by the Adviser which amounted to:
(b) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(c) Had the Adviser not waived or reimbursed a portion of expenses, total return
would have been reduced.
(d) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Year ended January 31
-------------------------------------------
1995 1994
Class A Class B Class A Class B
------- ------- ------- -------
$ 8.130 $ 8.130 $ 7.700 $ 7.700
------- ------- ------- -------
0.444 0.388 0.453 0.395
(0.738) (0.738) 0.439 0.439
------- ------- ------- -------
(0.294) (0.350) 0.892 0.834
------- ------- ------- -------
(0.446) (0.390) (0.462) (0.404)
------- ------- ------- -------
$ 7.390 $ 7.390 $ 8.130 $ 8.130
------- ------- ------- -------
(3.49%) (4.21%) 11.86% 11.05%
======= ======= ======= =======
0.72% 1.47% 0.64% 1.39%
5.93% 5.18% 5.68% 4.93%
0.12% 0.12% 0.21% 0.21%
58% 58% 7% 7%
$193,303 $53,973 $225,636 $51,819
$ 0.009 $ 0.009 $ 0.016 $ 0.016
<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:
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 *
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
<PAGE>
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial Massachusetts Tax-Exempt Fund is:
Liberty Funds Services, 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
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 and the most
recent copy of Liberty Funds Distributor's Performance Update.
*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.
<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.)
[Logo] L I B E R T Y
COLONIAL FUNDS o STEIN ROE ADVISOR FUNDS o NEWPORT FUNDS
Liberty Funds Distributor, Inc. (R)1998
One Financial Center, Boston, MA 02111-2621, 1-800-426-3750
Visit us at www.libertyfunds.com
MA-03/739F-0798 M (9/98) 98/926
- --------------------------------------------------------------------------------
