<PAGE>
[graphic omitted]
COLONIAL CONNECTICUT TAX-EXEMPT FUND SEMIANNUAL REPORT
July 31, 1998
-----------------------------
Not FDIC May Lose Value
Insured No Bank Guarantee
-----------------------------
<PAGE>
- --------------------------------------------------------------------------------
COLONIAL CONNECTICUT TAX-EXEMPT FUND HIGHLIGHTS
FEBRUARY 1, 1998 - JULY 31, 1998
INVESTMENT OBJECTIVE: Colonial Connecticut 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 Connecticut 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, Connecticut's strong economy, responsible fiscal
management and financial reserves supported the prices of many of the Fund's
holdings." -- Gary Swayze
COLONIAL CONNECTICUT TAX-EXEMPT FUND PERFORMANCE
CLASS A CLASS B CLASS C
Inception dates 11/1/91 6/8/92 8/1/97
- --------------------------------------------------------------------------------
Distributions declared per share(1) $0.195 $0.164 $0.177
- --------------------------------------------------------------------------------
SEC yields on 7/31/98(2) 3.82% 3.25% 3.55%
- --------------------------------------------------------------------------------
Taxable-equivalent SEC yields(3) 6.62% 5.63% 6.15%
- --------------------------------------------------------------------------------
Six-month total returns, assuming reinvestment 1.62% 1.22% 1.38%
of all distributions and no sales charge or
contingent deferred sales charge (CDSC)(4)
- --------------------------------------------------------------------------------
Net asset value per share on 7/31/98 $7.76 $7.76 $7.76
(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 Advisor or
Distributor had not waived or borne certain Fund expenses, the SEC yields
would have been 3.68% for Class A shares, 3.11% for Class B shares and 3.10%
for Class C shares.
(3) Taxable-equivalent SEC yields are based on the combined maximum effective
42.3% federal and Connecticut income tax rate.
(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 ........................... 56.6% Local General Obligations ..... 22.3%
AA ............................ 29.8% Hospitals ..................... 13.2%
A ............................. 9.8% State General Obligations ..... 12.5%
BBB ........................... 0.9% Single Family ................. 8.6%
Non-rated ..................... 1.9% Special Non-Property Tax ...... 7.1%
Short-term obligations ........ 1.0%
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.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
[Photo of Stephen E. Gibson]
In June 1998, Harold Cogger retired as president of Colonial Connecticut
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 Connecticut
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 Connecticut 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.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT REPORT
GARY SWAYZE is portfolio manager of Colonial Connecticut Tax-Exempt Fund and is
vice president of Colonial Management Associates, Inc. Mr. Swayze assumed
management of the Fund in December 1997.
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. While bond prices
fell in late winter, they began to improve during the spring and into the summer
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 bond 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. Municipal bond prices ended the period close to where they began.
However, there was considerable volatility during the six months. First,
municipal bond prices declined as surprising economic strength prompted
inflation concerns. Later, prices rose as the concerns eased in response to
continued weakness in Southeast Asian economies. This volatility had a somewhat
dampening effect on the Fund's non-callable holdings. For the six months ended
July 31, 1998, the total return for Class A shares was 1.62%, based on net asset
value.
CONNECTICUT'S HEALTHY ECONOMY CONTINUED
Connecticut's economic growth remained among the strongest in the Northeast.
Total employment, job growth, personal income and tax revenue collections
expanded, while the unemployment rate declined to 3.8% in May. An increasingly
diversified economy has reduced Connecticut's historical dependence on defense,
manufacturing and insurance. The state's solid budget position remains dependent
on tax receipt growth, which has benefited from a powerful national economy. In
addition, Connecticut has derived significant income and capital gains tax
revenues from the many residents who commute to New York City. However, as the
state economy approaches full employment and growth in the financial markets
slows down, future revenue gains may be less dramatic. Additionally, tighter
controls on spending may be required to avoid potential budget shortfalls.
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.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
COLONIAL CONNECTICUT TAX-EXEMPT FUND'S INVESTMENT PERFORMANCE VS.
THE LEHMAN BROTHERS MUNICIPAL BOND INDEX
Growth of $10,000 from 11/1/91 - 7/31/98
DATE NAV POP S&P 500 INDEX
- ----------- ------ ------ -------------
Nov. 1, 91 10,000 9,525 10,000
Nov. 31, 91 9,983 9,509 10,027
Dec. 31, 91 10,234 9,748 10,243
Jan. 31, 92 10,231 9,745 10,266
Feb. 28, 92 10,243 9,756 10,269
Mar. 31, 92 10,211 9,726 10,273
Apr. 30, 92 10,295 9,806 10,365
May 29, 92 10,465 9,968 10,487
Jun. 30, 92 10,689 10,173 10,663
Jul. 31, 92 10,999 10,476 10,982
Aug. 31, 92 10,819 10,305 10,875
Sep. 30, 92 10,875 10,359 10,946
Oct. 30, 92 10,679 10,172 10,839
Nov. 30, 92 11,019 10,496 11,033
Dec. 31, 92 11,143 10,613 11,146
Jan. 29, 93 11,290 10,753 11,275
Feb. 26, 93 11,711 11,155 11,683
Mar. 31, 93 11,600 11,049 11,560
Apr. 30, 93 11,718 11,161 11,676
May 28, 93 11,790 11,230 11,742
Jun. 30, 93 12,030 11,458 11,938
Jul. 30, 93 12,052 11,480 11,953
Aug. 31, 93 12,325 11,740 12,202
Sep. 30, 93 12,490 11,896 12,341
Oct. 29, 93 12,481 11,889 12,365
Nov. 30, 93 12,346 11,760 12,256
Dec. 31, 93 12,575 11,978 12,515
Jan. 31, 94 12,678 12,076 12,658
Feb. 28, 94 12,348 11,761 12,330
Mar. 31, 94 11,774 11,215 11,828
Apr. 29, 94 11,831 11,269 11,928
May 31, 94 11,954 11,387 12,031
Jun. 30, 94 11,864 11,301 11,958
Jul. 29, 94 12,119 11,544 12,177
Aug. 31, 94 12,144 11,567 12,219
Sep. 30, 94 11,921 11,354 12,040
Oct. 31, 94 11,613 11,061 11,926
Nov. 30, 94 11,285 10,749 11,612
Dec. 30, 94 11,664 11,110 11,868
Jan. 31, 95 12,062 11,489 12,207
Feb. 28, 95 12,411 11,822 12,562
Mar. 31, 95 12,539 11,943 12,707
Apr. 28, 95 12,547 11,951 12,722
May 31, 95 12,847 12,237 13,128
Jun. 30, 95 12,680 12,078 13,013
Jul. 31, 95 12,723 12,118 13,136
Aug. 31, 95 12,920 12,306 13,303
Sep. 29, 95 13,030 12,411 13,387
Oct. 31, 95 13,229 12,600 13,581
Nov. 30, 95 13,481 12,841 13,807
Dec. 29, 95 13,647 12,998 13,939
Jan. 31, 96 13,723 13,071 14,045
Feb. 29, 96 13,602 12,955 13,950
Mar. 29, 96 13,408 12,771 13,772
Apr. 30, 96 13,395 12,758 13,733
May 31, 96 13,399 12,763 13,727
Jun. 28, 96 13,532 12,890 13,877
Jul. 31, 96 13,665 13,016 14,003
Aug. 30, 96 13,652 13,003 13,999
Sep. 30, 96 13,824 13,167 14,195
Oct. 31, 96 13,959 13,296 14,356
Nov. 29, 96 14,208 13,533 14,619
Dec. 31, 96 14,157 13,484 14,557
Jan. 31, 97 14,200 13,526 14,584
Feb. 28, 97 14,358 13,676 14,817
Mar. 31, 97 14,192 13,518 14,522
Apr. 30, 97 14,292 13,613 14,644
May 30, 97 14,489 13,800 14,864
Jun. 30, 97 14,647 13,951 15,022
Jul. 31, 97 15,001 14,288 15,348
Aug. 29, 97 14,888 14,181 15,294
Sep. 30, 97 15,068 14,352 15,475
Oct. 31, 97 15,170 14,449 15,575
Nov. 28, 97 15,253 14,528 15,667
Dec. 31, 97 15,458 14,723 15,895
Jan. 30, 98 15,621 14,879 16,059
Feb. 27, 98 15,622 14,880 16,064
Mar. 31, 98 15,624 14,881 16,078
Apr. 30, 98 15,524 14,787 16,006
May 29, 98 15,788 15,038 16,259
Jun. 30, 98 15,850 15,079 16,323
Jul. 31, 98 15,874 15,120 16,364
GROWTH OF A $10,000 INVESTMENT MADE ON 11/1/91
AS OF 7/31/98
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
NAV POP NAV w/CDSC NAV w/CDSC
- --------------------------------------------------------------------------------
$15,874 $15,120 $15,165 $15,165 $15,801 $15,801
- --------------------------------------------------------------------------------
Average Annual Total Returns
As of 7/31/98
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
INCEPTION 11/1/91 6/8/92 8/1/97
NAV POP NAV w/CDSC NAV w/CDSC
- --------------------------------------------------------------------------------
1 YEAR 5.82% 0.80% 5.01% 0.01% 5.34% 4.34%
- --------------------------------------------------------------------------------
5 YEARS 5.66 4.64 4.87 4.54 5.57 5.57
- --------------------------------------------------------------------------------
LIFE 7.08 6.31 6.36 6.36 7.01 7.01
- --------------------------------------------------------------------------------
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.
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
JULY 31, 1998 (UNAUDITED, IN THOUSANDS)
MUNICIPAL BONDS - 97.9% PAR VALUE
- -------------------------------------------------------------------------------
EDUCATION - 6.9%
EDUCATION - 6.1%
State Health & Educational
Facilities Authority:
Connecticut College, Series C-1,
5.500% 07/01/27 $ 1,000 $ 1,038
Hopkins School, Series 1998-A,
4.750% 07/01/23 1,385 1,308
Trinity College, Series C,
6.000% 07/01/12 1,000 1,086
State University System Issue, Series B,
5.250% 11/01/17 2,500 2,532
Trinity College, Series 1998-F,
5.500% 07/01/21 1,000 1,061
Yale University, Series 1992,
IFRN (variable rate),
8.116% 06/10/30 2,500 2,828
--------
9,853
--------
STUDENT LOAN - 0.8%
State Higher Education
Supplemental Loan Authority:
Series 1991-A,
7.200% 11/15/10 745 802
Series 1992-A,
6.375% 11/15/99 415 425
--------
1,227
--------
- -------------------------------------------------------------------------------
HEALTHCARE - 17.8%
HOSPITAL - 13.1%
State Health & Educational
Facilities Authority:
Bridgeport Hospital, Series A,
6.500% 07/01/12 1,000 1,083
Danbury Hospital, Series E,
6.500% 07/01/14 1,400 1,500
Hospital for Specialty Care, Series B,
5.375% 07/01/17 1,500 1,489
Norwalk Hospital, Series D,
6.250% 07/01/12 1,750 1,884
Waterbury Hospital,
7.000% 07/01/20 4,450 4,753
St. Francis Hospital & Medical Center, Series B,
6.125% 07/01/10 1,000 1,079
St. Mary's Hospital, Series E,
5.500% 07/01/13 1,440 1,489
St. Raphael Hospital:
Series E,
6.750% 07/01/13 1,400 1,509
Series 1992-F,
6.200% 07/01/14 750 809
Series 1992-G,
6.200% 07/01/14 225 243
Series 1993-H,
5.250% 07/01/09 3,410 3,616
William W. Backus Hospital, Series C,
6.000% 07/01/12 250 265
Yale-New Haven Hospital:
Series G,
6.500% 07/01/12 500 542
Series 1996-H,
5.500% 07/01/13 1,000 1,050
--------
21,311
--------
NURSING HOME - 4.7%
State Development Authority:
Clintonville Manor Realty, Inc.,
Series 1992,
6.750% 06/20/21 1,490 1,589
Duncaster Inc., Series 1992:
6.700% 09/01/07 500 544
6.750% 09/01/15 2,500 2,703
State Health & Educational
Facilities Authority:
Noble Horizons Project, Series 1993,
5.875% 11/01/12 640 674
Pope John Paul II Center for Health,
6.250% 11/01/13 2,000 2,208
--------
7,718
--------
- -------------------------------------------------------------------------------
HOUSING - 10.6%
MULTI-FAMILY - 2.1%
New Britain Housing Authority,
Nathan Hale Apartments:
Series 1992-A,
6.500% 07/01/02 95 100
Series 1992-B,
6.875% 07/01/24 2,590 2,738
Waterbury Nonprofit Housing Corp.,
Fairmont Heights, Series 1993-A,
6.500% 01/01/26 600 631
--------
3,469
--------
SINGLE-FAMILY - 8.5%
State Housing Finance Authority:
Series 1990-B-4,
7.300% 11/15/03 90 93
Series 1991-C-1,
6.450% 11/15/11 1,325 1,418
Series 1991-C-2,
6.700% 11/15/22 80 86
Series 1991-C,
6.600% 11/15/23 1,580 1,693
Series 1992-B,
6.700% 11/15/12 2,215 2,392
Series 1993-B:
5.650% 05/15/06 550 583
6.200% 05/15/12 5,000 5,311
Sub-Series C-1,
6.350% 05/15/17 1,190 1,269
Series D-2,
5.600% 11/15/21 1,000 1,023
--------
13,868
--------
- --------------------------------------------------------------------------------
OTHER - 1.3%
REFUNDED/ESCROWED (B)
PR Commonwealth of Puerto Rico,
Series 1994,
6.500% 07/01/23 1,500 1,698
State Health & Educational
Facilities Authority:
Lutheran General Health Care System, Series 1989,
7.250% 07/01/04 135 147
New Britain Hospital, Series 1991-A,
7.750% 07/01/22 200 230
--------
2,075
--------
- --------------------------------------------------------------------------------
OTHER REVENUE - 0.6%
PAPER PRODUCTS
Sprague, International Paper Co.
Project, Series A,
5.700% 10/01/21 1,000 1,029
--------
RESOURCE RECOVERY - 5.3%
DISPOSAL - 3.3%
State Development Authority:
Pfizer Inc. Project, Series 1994,
7.000% 07/01/25 2,000 2,313
Sewer Sludge Disposal Facilities,
Series 1996,
8.250% 12/01/06 1,360 1,433
State Disposal Facility,
Netco Waterbury Ltd.,
Series 1995,
9.375% 06/01/16 1,450 1,698
--------
5,444
--------
RESOURCE RECOVERY - 2.0%
Bristol Resource Recovery Facility
Operation Committee, Ogden Martin
Systems, Inc., Series 1995,
6.500% 07/01/14 1,500 1,655
State Resource Recovery Authority,
American Re-Fuel Co.,
Series 1992-A,
6.450% 11/15/22 1,425 1,528
--------
3,183
--------
- --------------------------------------------------------------------------------
TAX BACKED - 49.0%
LOCAL GENERAL OBLIGATION - 22.1%
Bethel,
6.500% 02/15/09 1,220 1,424
Bridgeport, Series 1996-A,
6.500% 09/(a)08 3,000 3,477
Bridgeport, Series A,
6.250% 03/01/12 2,465 2,829
Danbury:
Series 1992,
5.625% 08/15/11 690 755
Series 1994:
4.500% 02/01/12 1,280 1,252
4.500% 02/01/13 1,280 1,244
East Haddam, Series 1991,
6.300% 06/15/09 260 280
Farmington, Series 1993:
5.700% 01/15/12 590 646
5.700% 01/15/13 570 624
Granby, Series 1993:
6.500% 04/01/09 200 234
6.550% 04/01/10 175 206
Griswold, Series 1992,
6.000% 04/15/09 410 442
Hamden, Series 1992:
6.000% 10/01/11 425 459
6.000% 10/01/12 425 459
Hartford County Metropolitan District:
5.625% 02/01/11 600 653
5.625% 02/01/12 600 651
5.625% 02/01/13 600 651
Series 1991,
6.200% 11/15/10 220 253
Series 1993:
5.200% 12/01/12 600 629
5.200% 12/01/13 500 523
Montville, Series 1993,
6.300% 03/01/12 335 386
New Britain:
Series 1992,
6.000% 02/01/08 400 445
Series 1993-A,
6.000% 10/01/12 2,000 2,253
Series 1993-B,
6.000% 03/01/12 1,000 1,123
North Branford:
6.200% 02/15/11 195 208
6.200% 02/15/12 225 240
Norwich, Series 1994:
5.750% 09/15/13 875 944
5.750% 09/15/14 870 936
Plainfield, Series 1992,
6.375% 08/01/11 500 545
Somers:
6.000% 01/15/11 125 132
6.250% 01/15/08 270 287
South Windsor, Series 1992,
6.200% 09/01/10 495 531
Stamford:
Series 1992,
6.125% 11/01/11 1,050 1,151
Series 1995:
5.250% 03/15/14 590 630
5.250% 03/15/14 2,160 2,212
Series 1998,
5.250% 07/15/13 1,500 1,550
State Regional School District No.14,
Series 1991,
6.100% 12/15/06 285 319
State Regional School District No.5:
Series 1992,
6.300% 03/01/10 400 432
Series 1993,
5.600% 02/15/12 150 159
Torrington, Series 1992,
6.400% 05/15/10 750 815
Vernon, Series 1988,
7.100% 10/15/03 250 284
Waterbury, Series 1993,
5.375% 04/15/08 750 783
West Haven, Series 1993-B,
5.400% 06/01/10 705 731
Westbrook, Series 1992:
6.300% 03/15/12 265 306
6.400% 03/15/09 630 730
--------
35,823
--------
SPECIAL NON-PROPERTY TAX - 7.0%
PR Commonwealth of Puerto Rico
Highway & Transportation Authority,
Series W,
5.500% 07/01/09 1,110 1,203
State:
Series 1992-B
6.125% 09/01/12 5,100 5,786
Series 1996-B,
6.000% 10/01/06 1,000 1,112
Series 1996-C,
6.000% 10/01/06 2,000 2,225
State Special Tax Obligation,
Transportation Infrastructure,
Series 1994-B,
6.000% 10/01/09 1,000 1,103
--------
11,429
--------
SPECIAL PROPERTY TAX - 0.7%
State, Second Injury Fund,
Series 1996-A,
6.000% 01/01/06 1,100 1,214
--------
PR Commonwealth of Puerto Rico
Public Buildings Authority:
Series 1993-M,
5.700% 07/01/16 3,300 3,449
Series B,
5.000% 07/01/13 1,000 1,008
State Certificates of Participation,
Middletown Courthouse Project,
6.250% 12/15/13 850 913
State Development Authority,
Series 1993-A,
5.250% 11/15/11 750 783
State Health & Educational
Facilities Authority,
American Health Foundation/Windsor Project,
7.125% 11/01/24 2,000 2,293
State, Middleton Courthouse Project:
6.250% 12/15/09 1,685 1,816
6.250% 12/15/10 750 807
6.250% 12/15/12 100 107
--------
11,176
--------
STATE GENERAL OBLIGATION - 12.3%
PR Commonwealth of Puerto Rico:
Aqueduct & Sewer Authority,
Series 1995,
6.000% 07/01/07 2,750 3,061
Highway & Transportation Authority, Series X,
5.500% 07/01/13 3,000 3,225
Series 1998,
4.875% 07/01/23 2,500 2,414
State:
Series A,
6.250% 05/15/06 1,000 1,124
Series 1990-B,
(c) 11/15/10 1,450 813
Series 1993-A,
5.600% 11/15/10 1,000 1,071
Series 1993-B,
5.400% 09/15/09 3,000 3,234
Series 1995-B,
5.375% 10/01/15 5,000 5,147
--------
20,089
--------
UTILITY - 6.4%
JOINT POWER AUTHORITY - 0.7%
State Municipal Electric Energy
Cooperative, Series 1996-A,
5.000% 01/01/09 1,040 1,074
--------
WATER & SEWER - 5.7%
South Central Regional Water Authority,
Series 11,
5.750% 08/01/12 2,000 2,138
State Clean Water Fund:
Series 1991,
7.000% 01/01/11 1,850 2,007
Series 1992,
6.125% 02/01/12 3,730 4,033
Series 1993,
5.875% 04/01/09 1,000 1,115
--------
9,293
--------
TOTAL MUNICIPAL BONDS (cost of $147,519) 159,275
--------
OPTIONS - 0.0% CONTRACTS
- -------------------------------------------------------------------------------
September 1998 Treasury Bond Call:
Strike price 124, expiration 9/18/98
(cost of $43) 40 11
--------
TOTAL INVESTMENTS (cost of $147,562)(d) 159,286
--------
SHORT TERM OBLIGATIONS - 1.0% PAR
- -------------------------------------------------------------------------------
VARIABLE SERIES DEMAND NOTES (e)
FL Pinellas County Health Facilities
Authority,
Series 1985,
3.700% 12/01/15 100 100
ID State Health Facilities Authority,
St. Lukes Regional Medical Facility,
Series 1995,
3.700% 05/01/22 1,100 1,100
MS Perry County,
Leaf River Forest Project,
3.700% 03/01/02 200 200
NC Craven County Industrial Facilities &
Pollution Control Financing Authority,
John Hancock Resource Recovery, Inc.,
3.800% 05/01/11 100 100
NM Farmington,
Arizona Public Service Co.,
Four Corners Project, Series 1994 B,
3.700% 09/01/24 100 100
--------
TOTAL SHORT TERM OBLIGATIONS 1,600
--------
OTHER ASSETS & LIABILITIES, NET - 1.1% 1,809
- -------------------------------------------------------------------------------
NET ASSETS - 100.0% $162,695
========
NOTES TO INVESTMENT PORTFOLIO:
- ------------------------------------------------------------------------------
(a) These securities, or a portion thereof, with a total market value of $3,477
are being used to collateralize open calls on futures.
(b) The Fund has been informed that each issuer has placed direct obligations of
the U.S. Government in an irrevocable trust, solely for the payment of the
interest and principal.
(c) Zero coupon bond.
(d) Cost for federal income tax purposes is the same.
(e) Variable rate demand notes are considered short-term obligations. Interest
rates change periodically on specified dates. These securities are payable
on demand and are secured by either letters of credit or other credit
support agreements from banks. The rates listed are as of July 31, 1998.
Acronym Name
------- ----
IFRN Inverse Floating Rate Note
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
JULY 31, 1998 (UNAUDITED)
(in thousands except for per share amounts and footnotes)
ASSETS
Investments at value (cost $147,562) $159,286
Short-term obligations 1,600
--------
160,886
Receivable for:
Interest $ 2,045
Investments sold 142
Fund shares sold 106 2,293
--------
Total Assets 163,179
LIABILITIES
Payable for:
Fund shares repurchased 240
Distributions 210
Accrued:
Deferred Trustees fees 4
Other 30
-------
Total Liabilities 484
--------
NET ASSETS $162,695
========
Net asset value & redemption price per share -
Class A ($78,577/10,120) $7.76(a)
========
Maximum offering price per share - Class A
($7.76/0.9525) $8.15(b)
========
Net asset value & offering price per share -
Class B ($83,358/10,736) $7.76(a)
========
Net asset value & offering price per share -
Class C ($760/98) $7.76(a)
========
COMPOSITION OF NET ASSETS
Capital paid in $156,605
Overdistributed net investment income (175)
Accumulated net realized loss (5,459)
Net unrealized appreciation 11,724
--------
$162,695
========
(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.
<PAGE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JULY 31, 1998
(UNAUDITED
(in thousands)
INVESTMENT INCOME
Interest $ 4,511
EXPENSES
Management fee $ 410
Service fee 138
Distribution fee - Class B 316
Distribution fee - Class C 1
Transfer agent 121
Bookkeeping fee 33
Trustees fee 8
Audit fee 10
Legal fee 3
Custodian fee 3
Registration fee 11
Reports to shareholders 5
Other 7
------
$1,066
Fees waived by the Adviser (118)
Fees waived by the Distributor - Class C (a) 948
------ --------
Net Investment Income 3,563
--------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS Net realized gain
on:
Investments 370
Closed futures contracts 18
------
Net Realized Gain 388
Net unrealized depreciation during
the period on:
Investments (1,572)
Open futures contracts (10)
------
Net Unrealized Depreciation (1,582)
--------
Net Loss (1,194)
--------
Increase in Net Assets from Operations $ 2,369
========
(a) Rounds to less than one.
See notes to financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(Unaudited)
Six months
ended Year ended
(in thousands) July 31 January 31
---------- ----------
INCREASE (DECREASE) IN NET ASSETS 1998 1998(a)
Operations:
Net investment income $ 3,563 $ 7,401
Net realized gain 388 435
Net unrealized appreciation (depreciation) (1,582) 6,692
-------- --------
Net Increase from Operations 2,369 14,528
Distributions:
From net investment income - Class A (1,876) (3,900)
In excess of net investment income - Class A (116) (29)
From net investment income - Class B (1,674) (3,548)
In excess of net investment income - Class B (103) (26)
From net investment income - Class C (13) (7)
In excess of net investment income - Class C (1) (b)
-------- --------
(1,414) 7,018
-------- --------
Fund Share Transactions:
Receipts for shares sold - Class A 4,160 9,611
Value of distributions reinvested - Class A 1,228 2,170
Cost of shares repurchased - Class A (6,159) (9,203)
-------- --------
(771) 2,578
-------- --------
Receipts for shares sold - Class B 5,440 9,466
Value of distributions reinvested - Class B 1,179 2,088
Cost of shares repurchased - Class B (6,909) (12,234)
-------- --------
(290) (680)
-------- --------
Receipts for shares sold - Class C 277 494
Value of distributions reinvested - Class C 9 4
Cost of shares repurchased - Class C (1) (25)
-------- --------
285 473
-------- --------
Net Increase (Decrease) from Fund Share
Transactions (776) 2,371
-------- --------
Total Increase (Decrease) (2,190) 9,389
NET ASSETS
Beginning of period 164,885 155,496
-------- --------
End of period (net of overdistributed
net investment income of
$175 and $12, respectively) $162,695 $164,885
======== ========
(a) Class C shares were initially offered on August 1, 1997.
(b) Rounds to less than one.
See notes to financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS - CONT.
(Unaudited)
Six months
ended Year ended
July 31 January 31
---------- ---------
1998 1998(a)
NUMBER OF FUND SHARES
Sold - Class A 535 1,262
Issued for distributions reinvested - Class A 158 285
Repurchased - Class A (793) (1,210)
---- ------
(100) 337
---- ------
Sold - Class B 700 1,239
Issued for distributions reinvested - Class B 152 275
Repurchased - Class B (889) (1,608)
---- ------
(37) (94)
---- ------
Sold - Class C 36 64
Issued for distributions reinvested - Class C 1 (b)
Repurchased - Class C (b) (3)
---- ------
37 61
---- ------
(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 Connecticut 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 Connecticut 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.
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.
Futures contracts are valued based on the difference between the last sale price
and the opening price of the contract.
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 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:
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 Investments, Inc. (the
Distributor), a subsidiary of the Adviser, is the Fund's principal underwriter.
During the six months ended July 31, 1998, the Fund has been advised that the
Distributor retained net underwriting discounts of $12,994 on sales of the
Fund's Class A shares and received contingent deferred sales charges (CDSC) of
$2, $65,720 and $4 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 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.
Notes to Financial Statements/July 31, 1998
- -----------------------------------------------------------------------
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 0.60% annually of the Fund's average net
assets.
OTHER: The Fund pays no compensation to its officers, all of whom are
employees of the Adviser.
The Fund's Trustees may participate in a deferred compensation plan which may be
terminated at any time. Obligations of the plan will be paid solely out of the
Fund's assets.
NOTE 4. PORTFOLIO INFORMATION
- --------------------------------------------------------------------------------
Investment activity: During the six months ended July 31, 1998, purchases and
sales of investments, other than short-term obligations, were $6,807,202 and
$7,758,370, 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 $11,835,845
Gross unrealized depreciation (111,987)
-----------
Net unrealized appreciation $11,723,858
===========
CAPITAL LOSS CARRYFORWARDS: At January 31, 1998, capital loss carryforwards
available (to the extent provided in regulations) to offset future realized
gains were approximately as follows:
Year of Capital loss
expiration carryforward
---------- ------------
2003 $ 1,133,000
2004 2,209,000
-----------
$ 3,342,000
===========
Expired capital loss carryforwards, if any, are recorded as a reduction of
capital paid in.
To the extent loss carryforwards are used to offset any future realized gains,
it is unlikely that such gains would be distributed since they may be taxable to
shareholders as ordinary income.
OTHER: There are certain risks arising from geographic concentration in any
state. Certain revenue or tax related events in a state may impair the ability
of certain issuers of municipal securities to pay principal and interest on
their obligations.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
The Fund may purchase or sell municipal and Treasury bond futures contracts and
purchase and write options on futures. The Fund will invest in these instruments
to hedge against the effects of changes in the value of portfolio securities due
to anticipated changes in interest rates and/or market conditions, for duration
management, or when the transactions are economically appropriate to the
reduction of risk inherent in the management of the Fund and not for trading
purposes. The use of futures contracts and options involves certain risks which
include (1) imperfect correlation between the price movement of the instruments
and the underlying securities, (2) inability to close out a position due to
different trading hours, or the temporary absence of a liquid market for either
the instrument or the underlying securities or (3) an inaccurate prediction by
the Adviser of the future direction of interest rates. Any of these risks may
involve amounts exceeding the variation margin recognized in the Fund's
Statement of Assets and Liabilities at any given time.
NOTE 5. LINE OF CREDIT
- --------------------------------------------------------------------------------
The Fund may borrow up to 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 $ 7.830 $ 7.830 $ 7.830
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income(a) 0.198 0.167 0.180(b)
Net realized and
unrealized loss (0.073) (0.073) (0.073)
------- ------- -------
Total from Investment
Operations 0.125 0.094 0.107
------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net
investment income (0.184) (0.154) (0.167)
In excess of net
investment income (0.011) (0.010) (0.010)
------- ------- -------
Total Distributions
Declared to Shareholders (0.195) (0.164) (0.177)
------- ------- -------
Net asset value -
End of period $ 7.760 $ 7.760 $ 7.760
------- ------- -------
Total return(c)(d) 1.62%(e) 1.22%(e) 1.38%(e)
======= ======= =======
RATIOS TO AVERAGE NET ASSETS
Expenses(f)(g) 0.77% 1.52% 1.22%(b)
Net investment
income(f)(g) 4.73% 3.98% 4.28%(b)
Fees and expenses waived
or borne by the
Adviser(f)(g) 0.14% 0.14% 0.14%
Portfolio turnover (e) 4% 4% 4%
Net assets at end
of period (000) $78,577 $83,358 $ 760
(a) Net of fees and expenses waived or borne by the Adviser which amounted to:
$ 0.006 $ 0.006 $ 0.006
(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) Had the Adviser and Distributor not waived or reimbursed a portion of
expenses, total return would have been reduced.
(e) Not annualized
(f) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(g) Annualized
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS - CONT.
<CAPTION>
Year ended January 31
----------------------------------------------------------------------------
1998 1997
Class A Class B Class C(b) Class A Class B
------- ------- ---------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 7.490 $ 7.490 $7.710 $ 7.630 $ 7.630
------- ------- ------ ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income(a) 0.385 0.328 0.(c) 0.393 0.338
Net realized and
unrealized gain (loss) 0.344 0.344 0.124 (0.141) (0.141)
------- ------- ------ ------- -------
Total from Investment
Operations 0.729 0.672 0.297 0.252 0.197
------- ------- ------ ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net
investment income (0.386) (0.330) (0.177) (0.392) (0.337)
In excess of net
investment income (0.003) (0.002) -- -- --
------- ------- ------ ------- -------
Total Distributions
Declared to Shareholders (0.389) (0.332) (0.177) (0.392) (0.337)
------- ------- ------ ------- -------
Net asset value -
End of period $ 7.830 $ 7.830 $7.830 $ 7.490 $ 7.490
======= ======= ====== ======= =======
Total return(d)(e) 10.00% 9.19% 3.90%(f) 3.48% 2.71%
======= ======= ====== ======= =======
RATIOS TO AVERAGE NET ASSETS
Expenses 0.63%(g) 1.37%(g) 1.09%(c)(h)(g) 0.59%(g) 1.34%(g)
Net investment
income 5.04%(g) 4.29%(g) 4.48%(c)(h)(g) 5.28%(g) 4.53%(g)
Fees and expenses waived
or borne by the
Adviser 0.29%(g) 0.29%(g) 0.28%(h)(g) 0.31%(g) 0.31%(g)
Portfolio turnover 12% 12% 12% 21% 21%
Net assets at end
of period (000) $ 80,035 $ 84,370 $ 480 $74,059 $81,437
(a) Net of fees and expenses waived or borne by the Adviser which amounted to:
$ 0.022 $ 0.022 $0.021 $ 0.023 $ 0.023
(b) Class C shares 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 $0.012 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) Had the Adviser and Distributor not waived or reimbursed a portion of expenses, total return would have been
reduced.
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Selected data for a share of each class outstanding throughout each period are as follows:
<CAPTION>
Year ended January 31
-----------------------------------------------------------------------------------------
1996 1995 1994
Class A Class B Class A Class B Class A Class B
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$ 7.080 $ 7.080 $ 7.890 $ 7.890 $ 7.420 $ 7.420
------- ------- ------- ------- ------- -------
0.400 0.345 0.418 0.363 0.429 0.372
0.552 0.552 (0.809) (0.809) 0.465 0.465
------- ------- ------- ------- ------- -------
0.952 0.897 (0.391) (0.446) 0.894 0.837
------- ------- ------- ------- ------- -------
(0.402) (0.347) (0.418) (0.363) (0.424) (0.367)
-- -- (0.001) (0.001) -- --
------- ------- ------- ------- ------- -------
(0.402) (0.347) (0.419) (0.364) (0.424) (0.367)
------- ------- ------- ------- ------- -------
$ 7.630 $ 7.630 $ 7.080 $ 7.080 $ 7.890 $ 7.890
======= ======= ======= ======= ======= =======
13.77% 12.93% (4.85)% (5.57)% 12.30% 11.49%
======= ======= ======= ======= ======= =======
0.51%(g) 1.25%(g) 0.32%(g) 1.07%(g) 0.22% 0.97%
5.42%(g) 4.68%(g) 5.81%(g) 5.06%(g) 5.48% 4.73%
0.42%(g) 0.42%(g) 0.55%(g) 0.55%(g) 0.65% 0.65%
13% 13% 22% 22% 5% 5%
$80,039 $82,785 $74,616 $73,580 $91,436 $71,791
$ 0.031 $ 0.031 $ 0.039 $ 0.039 $ 0.051 $ 0.051
(f) Not annualized
(g) The benefits derived from custody credits and directed brokerage arrangements had no impact. Prior years'
ratios are net of benefits received, if any.
(h) Annualized
</TABLE>
<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 Colonial Investors Service Center 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.
<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 Financial Investments,
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>
SHAREHOLDER COMMUNICATIONS
TO KEEP YOU INFORMED
To make recordkeeping easy and keep you up-to-date on the performance of your
investments, you can expect to receive the following information about your
account:
TRANSACTION CONFIRMATIONS: Each time you make a purchase, sale or exchange, you
receive a confirmation statement within just a few days.
QUARTERLY STATEMENTS: Every three months, if any transactions are made that
affect your share balance, this statement reports on your account activity
during the quarter (including any reinvestment of dividends). This statement
also provides year-to-date information.
LIBERTY FUNDS DISTRIBUTOR INVESTOR OPPORTUNITIES: Mailed with your quarterly
account statements, this newsletter highlights timely investment strategies,
portfolio manager commentary and shareholder service updates.
TAX FORMS AND YEAR-END TAX GUIDE: Easy-to-use forms and timely information are
designed to make tax reporting simpler. (Usually mailed in January.)
AVERAGE COST BASIS STATEMENTS: If you sold or exchanged shares during the year,
this statement may help you calculate your gain/loss for tax purposes. (Usually
mailed in February.)
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IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial Connecticut Tax-Exempt Fund is:
Liberty Funds Services, Inc.*
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Colonial Connecticut Tax-Exempt Fund mails one shareholder report to each
shareholder address. If you would like more than one report, please call
Colonial at 1-800-426-3750 and additional reports will be sent to you.
This report has been prepared for shareholders of Colonial Connecticut
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 with the
most recent copy of Liberty Funds Distributors 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.
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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] LIBERTY
COLONIAL FUNDS o STEIN ROE ADVISOR FUNDS o NEWPORT FUNDS
Liberty Funds Distributor, Inc. (C)1998
One Financial Center, Boston, MA 02111-2621, 1-800-426-3750
Visit us at www.libertyfunds.com
CT-03/737F-0798 (9/98) 98/932
