<PAGE>
[PHOTO OF BUILDING]
COLONIAL NORTH CAROLINA TAX-EXEMPT FUND SEMIANNUAL REPORT
July 31, 1998
Not FDIC Insured
May Lose Value No Bank Guarantee
<PAGE>
COLONIAL NORTH CAROLINA TAX-EXEMPT FUND HIGHLIGHTS
FEBRUARY 1, 1998 - JULY 31, 1998
INVESTMENT OBJECTIVE: Colonial North Carolina Tax-Exempt Fund seeks as high a
level of after-tax total return as is consistent with prudent risk by pursuing
current income exempt from federal and North Carolina state personal income tax
and opportunities for long-term appreciation from a portfolio primarily invested
in investment grade municipal bonds.
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, North Carolina's strong and growing economy, responsible
fiscal management, and significant financial reserves supported the prices of
many of the Fund's holdings during the period." -- Brian Hartford
COLONIAL NORTH CAROLINA TAX-EXEMPT FUND PERFORMANCE
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Inception date 9/1/93 9/1/93 8/1/97
Distributions declared per share(1) $0.184 $0.155 $0.167
SEC yields on 7/31/98(2) 3.94% 3.37% 3.68%
Taxable-equivalent SEC yields(3) 7.07% 6.05% 6.60%
Six-month total returns, assuming reinvestment 1.97% 1.57% 1.73%
of all distributions and no sales charge or
contingent deferred sales charge (CDSC)(4)
Net asset value per share on 7/31/98 $ 7.41 $ 7.41 $ 7.41
</TABLE>
(1) A portion of the Fund's income may be subject to the alternative
minimum tax.
(2) The 30-day SEC yields on July 31, 1998, reflect the portfolio's earning
power, net of expenses, and is expressed as an annualized percentage of
the public offering price at the end of the period. If the Advisor or
Distributor had not waived or borne certain Fund expenses, SEC yields
would have been 3.55% for Class A shares, 2.97% for Class B shares and
2.96% for Class C shares.
(3) Taxable-equivalent SEC yields are based on the combined maximum
effective 44.3% federal and North Carolina state 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.
<TABLE>
<CAPTION>
Quality Breakdown Top Five Sectors
(as of 7/31/98) (as of 7/31/98)
- --------------------------------------- ---------------------------------------
<S> <C> <C> <C>
AAA ............................ 47.1% Refunded ....................... 21.6%
AA ............................. 32.5% Local Appropriated ............. 17.3%
A .............................. 16.0% Multi-Family Housing ........... 11.0%
BBB ............................ 0.8% Hospitals ...................... 7.8%
Non-rated ...................... 1.8% State General Obligations ...... 7.1%
Short-term obligations ......... 1.8%
</TABLE>
Quality and sector breakdowns are calculated as a percentage of total
investments, including short-term obligations. Because the Fund is actively
managed, there can be no guarantee the Fund will continue to maintain these
quality and sector breakdowns in the future.
2
<PAGE>
PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
[PHOTO OF STEPHEN E. GIBSON]
In June 1998, Harold Cogger retired as president of Colonial North Carolina
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 North Carolina
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 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 North Carolina Tax-Exempt
Fund remains a suitable option for their investment portfolios.
Respectfully,
/s/ Stephen E. Gibson
Stephen E. Gibson
President
September 11, 1998
Because market conditions change frequently, there can be no assurance that the
trends discussed above or on the following pages will continue.
3
<PAGE>
PORTFOLIO MANAGEMENT REPORT
BRIAN HARTFORD is portfolio manager of Colonial North Carolina Tax-Exempt Fund.
Mr. Hartford is vice president of Colonial Management Associates, Inc. and is
the Quantitative Risk Manager for Colonial's tax-exempt investments.
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 vascillating 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 multi-family housing authorities. In addition to
providing high income to the Fund, their improved financial performance 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
1.97%, based on net asset value. This placed the Fund above the average for
North Carolina tax-exempt funds as measured by Lipper Analytical Services, Inc.
The average North Carolina fund total return was 1.63%.(1)
4
<PAGE>
NORTH CAROLINA'S APPEAL CONTINUES
North Carolina continued to experience population inflows and corporate
relocations during the period as individuals and businesses were attracted by
the state's favorable climate and relatively low cost of living and doing
business. Over the past several years, economic output has diversified away from
the traditional tobacco and textile industries as high tech, finance and other
service industries have increased their presence. As a result, North Carolina
has evolved from a regional business center to one with a national presence,
particularly in the banking industry. The state's finances have benefited from
this trend, as tax revenue collections through May were running ahead of last
year in all categories, including individual income, corporate income and sales
and use taxes. Financial reserves increased as well, further cushioning the
state from a potential slowdown in economic activity.
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.
(1)Source: Lipper Analytical Services, Inc. Lipper rankings are based on the
Lipper North Carolina Municipal Debt category. The Fund's Class A share ranking
is in the first quartile for the six-month period (ranked 6th out of 40 funds);
and in the first quartile for the one-year period (ranked 6th out of 39 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.
5
<PAGE>
COLONIAL NORTH CAROLINA TAX-EXEMPT FUND'S INVESTMENT PERFORMANCE VS.
THE LEHMAN BROTHERS MUNICIPAL BOND INDEX
Growth of $10,000 from 9/1/93 - 7/31/98
[LINE GRAPH]
<TABLE>
<CAPTION>
Label A B C
- -------------------------------------------------------------------
Label CNCTEF Preload Postload Lehman
- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Sep 1, 93 10000 9525 10000
2 Sep 30, 93 10070 9592 10114.04
3 Oct 29, 93 10061 9583 10133.47
4 Nov 30, 93 9957 9484 10044.01
5 Dec 31, 93 10164 9681 10256.08
6 Jan 31, 94 10222 9736 10373.26
7 Feb 28, 94 9900 9430 10104.6
8 Mar 31, 94 9315 8872 9693.04
9 Apr 29, 94 9415 8968 9775.35
10 May 31, 94 9529 9076 9859.95
11 Jun 30, 94 9477 9027 9799.65
12 Jul 29, 94 9621 9164 9979.42
13 Aug 31, 94 9667 9208 10014
14 Sep 30, 94 9502 9051 9867.1
15 Oct 31, 94 9253 8814 9691.9
16 Nov 30, 94 9029 8600 9516.42
17 Dec 30, 94 9305 8863 9725.91
18 Jan 31, 95 9654 9195 10004
19 Feb 28, 95 9991 9516 10294.95
20 Mar 31, 95 10111 9631 10413.27
21 Apr 28, 95 10130 9649 10425.56
22 May 31, 95 10397 9903 10758.24
23 Jun 30, 95 10208 9723 10664.21
24 Jul 31, 95 10287 9798 10765.1
25 Aug 31, 95 10377 9884 10901.71
26 Sep 29, 95 10468 9971 10970.59
27 Oct 31, 95 10665 10158 11130.07
28 Nov 30, 95 10892 10375 11314.99
29 Dec 29, 95 11030 10506 11423.6
30 Jan 31, 96 11093 10566 11509.91
31 Feb 29, 96 10973 10451 11432.17
32 Mar 29, 96 10822 10308 11286.12
33 Apr 30, 96 10794 10281 11254.11
34 May 31, 96 10827 10313 11249.82
35 Jun 28, 96 10924 10405 11372.43
36 Jul 31, 96 11019 10496 11475.32
37 Aug 30, 96 11037 10513 11472.75
38 Sep 30, 96 11197 10665 11633.09
39 Oct 31, 96 11309 10772 11764.56
40 Nov 29, 96 11518 10971 11980.06
41 Dec 31, 96 11440 10896 11929.47
42 Jan 31, 97 11457 10913 11952.05
43 Feb 28, 97 11571 11022 12061.8
44 Mar 31, 97 11428 10885 11900.89
45 Apr 30, 97 11510 10964 12000.64
46 May 30, 97 11675 11120 12181.27
47 Jun 30, 97 11791 11231 12311.03
48 Jul 31, 97 12121 11546 12651.99
49 Aug 29, 97 12024 11453 12533.38
50 Sep 30, 97 12158 11581 12682
51 Oct 31, 97 12226 11646 12763.74
52 Nov 28, 97 12328 11743 12838.91
53 Dec 31, 97 12532 11936 13026.11
54 Jan 30, 98 12614 12015 13160.44
55 Feb 27, 98 12596 11998 13164.44
56 Mar 31, 98 12611 12012 13176.16
57 Apr 30, 98 12541 11945 13116.71
58 May 29, 98 12762 12156 13324.2
59 Jun 30, 98 12812 12203 13376.79
60 Jul 31, 98 12863 12252 13410.23
</TABLE>
GROWTH OF A $10,000 INVESTMENT MADE ON 9/1/93
As of 7/31/98
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
CLASS A CLASS B CLASS C
NAV POP NAV w/CDSC NAV w/CDSC
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$12,863 $12,252 $12,396 $12,199 $12,417 $12,417
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
As of 7/31/98
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
CLASS A CLASS B CLASS C
INCEPTION 9/1/93 9/1/93 8/1/97
NAV POP NAV w/CDSC NAV w/CDSC
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 YEAR 6.11% 1.07% 5.30% 0.30% 5.48% 4.48%
- ----------------------------------------------------------------------------
LIFE 5.25 4.22 4.47 4.12 4.50 4.50
- ----------------------------------------------------------------------------
</TABLE>
Past performance cannot predict future results. Returns and value of an
investment will vary, resulting in a gain or loss on sale. All results shown
assume reinvestment of distributions. Net asset value (NAV) returns do not
include sales charges or contingent deferred sales charges (CDSC). Public
offering price (POP) returns include the maximum sales charge of 4.75% for Class
A shares. The CDSC returns reflect the maximum charges of 5% for one year and 2%
for life 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 C share performance information includes returns of the Fund's Class B
shares (the oldest existing Fund class) for periods prior to its inception date.
These Class B share returns are not restated to reflect any expense differential
(e.g., rule 12b-1 fees) between Class B shares and Class C shares.
The Lehman Brothers Municipal Bond Index is a broad-based, unmanaged index that
tracks the performance of the municipal bond market. Unlike mutual funds,
indexes are not investments and do not incur fees or expenses. It is not
possible to invest directly in an index.
6
<PAGE>
INVESTMENT PORTFOLIO
JULY 31, 1998 (UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
MUNICIPAL BONDS - 97.0% PAR VALUE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EDUCATION - 9.7%
EDUCATION - 6.4%
East Carolina University,
Series 1994,
6.200% 11/01/15 $ 475 $ 517
State Educational Facilities Finance
Agency, Duke University, Series C,
6.750% 10/01/21 1,235 1,343
Wake Forest University,
5.000% 11/01/17 250 247
------
2,107
------
STUDENT LOAN - 3.3%
State Education Assistance Authority,
Series 1996-C,
6.350% 07/01/16 1,000 1,084
------
- ---------------------------------------------------------------------------------------------
HEALTHCARE - 7.7%
HOSPITALS
Charlotte-Mecklenburg Hospital
Authority:
5.000% 01/15/17 750 737
6.250% 01/01/20 640 688
Series 1996-A,
5.750% 01/15/21 250 263
State Medical Care Commission:
Annie Penn Memorial Hospital,
Series 1998,
5.375% 01/01/22 250 245
Wilson Memorial Hospital,
Series 1997,
(a) 11/01/14 1,380 613
------
2,546
------
- ---------------------------------------------------------------------------------------------
HOUSING - 15.7%
MULTI-FAMILY - 10.9%
Eastern Carolina Regional Housing
Authority, New River Apartments
Jacksonville, Series 1994,
8.250% 09/01/14 250 271
North Wilkesboro Housing
Development Corp.,
Series 1995-A,
6.350% 10/01/22 1,745 1,865
</TABLE>
7
<PAGE>
Investment Portfolio/July 31, 1998
<TABLE>
<CAPTION>
MUNICIPAL BONDS - CONT. PAR VALUE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HOUSING - CONT.
MULTI-FAMILY - CONT.
State Housing Finance Agency,
Series F,
6.600% 07/01/17 $1,340 $1,452
------
3,588
------
SINGLE FAMILY - 4.8%
State Housing Finance Agency:
Series KK,
5.500% 03/01/09 305 320
Series W,
6.450% 09/01/14 485 519
Series 1998,
5.250% 03/01/17 750 749
------
1,588
------
- -------------------------------------------------------------------------------------------------
OTHER - 21.3%
REFUNDED/ESCROWED (b)
Charlotte, Series 1994,
5.800% 02/01/15(c) 1,000 1,093
Cumberland County, Civic Center Project,
Series 1995-A,
6.400% 12/01/24 2,000 2,270
Eastern Municipal Power Agency,
Series 1991-A,
6.500% 01/01/18 1,500 1,780
Lincoln County,
Lincoln County Hospital,
9.000% 05/01/07 255 305
State Municipal Power Agency,
Catawba No. 1, Series 1990,
5.500% 01/01/13 1,000 1,066
Wake County, Series 1993,
5.125% 10/01/13 500 512
------
7,026
------
- -------------------------------------------------------------------------------------------------
TAX-BACKED - 29.9%
LOCAL APPROPRIATED - 17.1%
Chapel Hill, Parking Facilities,
Series 1994,
6.450% 12/01/23 500 549
Charlotte, Cityfair Parking Facility,
Series 1994-A,
6.125% 06/01/10 430 467
Charlotte-Mecklenburg Law Project,
Series 1993-B,
5.375% 06/01/13 700 716
</TABLE>
8
<PAGE>
Investment Portfolio/July 31, 1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumberland County, Civic Center Project,
Series 1998,
5.000% 12/01/18 $1,000 $ 986
Durham County,
Hospital & Office Facilities:
Series 1994,
6.000% 05/01/14 1,000 1,081
Series 1997,
5.000% 05/01/14 500 500
Harnett County,
Harnett County Project,
Series 1994,
6.400% 12/01/14 250 279
Randolph County,
Randolph County Project,
Series 1995,
5.300% 06/01/15 500 509
Rowan County,
Justice Center Project,
Series 1992,
6.250% 12/01/07 500 557
------
5,644
------
LOCAL GENERAL OBLIGATIONS - 2.9%
Mecklenburg County,
Series 1998-B,
4.500% 02/01/16 1,000 941
------
SPECIAL INCOME PROPERTY TAX - 2.3%
Commonwealth of Puerto Rico
Highway & Transportation Authority,
Series W,
5.500% 07/01/09 240 260
State Centennial Authority,
Arena Project,
5.000% 09/01/10(c) 500 509
------
769
------
STATE APPROPRIATED - 0.6%
Commonwealth of Puerto Rico
Public Buildings Authority,
Series 1993-M,
5.700% 07/01/16 200 209
------
</TABLE>
9
<PAGE>
Investment Portfolio/July 31, 1998
<TABLE>
<CAPTION>
MUNICIPAL BONDS - CONT. PAR VALUE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TAX-BACKED - CONT.
STATE GENERAL OBLIGATIONS - 7.0%
Commonwealth of Puerto Rico
Aqueduct & Sewer Authority,
Series 1995,
6.250% 07/01/12 $ 1,000 $ 1,134
Commonwealth of Puerto Rico,
Series 1996,
6.500% 07/01/14 1,000 1,168
-------
2,302
-------
- -------------------------------------------------------------------------------------------------------
UTILITY - 12.7%
INVESTOR OWNED - 3.2%
Wake County Industrial Facilities &
Pollution Control Financing Authority,
Carolina Power & Light Co., Series 1983,
6.900% 04/01/09 1,010 1,072
-------
JOINT POWER AUTHORITY - 5.0%
Eastern Municipal Power Agency,
Series 1996-A,
5.700% 01/01/16 300 317
State Municipal Power Agency,
Catawba Electric No. 1,
Series 1998-A,
5.500% 01/01/15 1,250 1,331
-------
1,648
-------
MUNICIPAL ELECTRIC - 2.9%
University of North Carolina at Chapel Hill,
(a) 08/01/13 2,000 952
-------
WATER & SEWER - 1.6%
Asheville, Series 1996,
5.625% 08/01/16(c) 500 526
-------
TOTAL INVESTMENTS (cost of $30,299) (d) 32,002
-------
SHORT-TERM OBLIGATIONS - 1.8%
- -------------------------------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (e)
NM Farmington,
Arizona Public Service Co.,
Four Corners Project, Series 1994-B,
3.700% 09/01/24 600 600
-------
</TABLE>
10
<PAGE>
Investment Portfolio/July 31, 1998
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
OTHER ASSETS & LIABILITIES, NET - 1.2% $ 390
- --------------------------------------------------------------------------------
NET ASSETS - 100% $ 32,992
========
</TABLE>
NOTES TO INVESTMENT PORTFOLIO:
- --------------------------------------------------------------------------------
(a) Zero coupon bond.
(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) These securities, or a portion thereof, with a total market value of
$2,128, are being used to collateralize open futures contracts.
(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. This security is
payable on demand and is secured by either letters of credit or other
credit support agreements from banks. The rate listed is as of July 31,
1998.
Futures contracts open at July 31, 1998:
<TABLE>
<CAPTION>
Par value Unrealized
covered by Expiration appreciation
Type contracts month at 07/31/98
- ------------------------------------------------------------
<S> <C> <C> <C>
Treasury Bond 1,200 September $ 1
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
JULY 31, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
(in thousands except for per share amounts and footnotes)
ASSETS
Investments at value (cost $30,299) $ 32,002
Short-term obligations 600
--------
32,602
Receivable for:
Interest $ 369
Fund shares sold 12
Other 84 465
-------- --------
Total Assets 33,067
LIABILITIES
Payable for:
Distributions 42
Fund shares repurchased 28
Accrued:
Deferred Trustees fees 1
Other 4
--------
Total Liabilities 75
--------
NET ASSETS $ 32,992
--------
Net asset value & redemption price per share -
Class A ($15,944/2,152) $ 7.41(a)
--------
Maximum offering price per share - Class A
($7.41/0.9525) $ 7.78(b)
--------
Net asset value & offering price per share -
Class B ($16,818/2,270) $ 7.41(a)
--------
Net asset value & offering price per share -
Class C ($230/31) $ 7.41(a)
--------
COMPOSITION OF NET ASSETS
Capital paid in $ 32,460
Overdistributed net investment income (10)
Accumulated net realized loss (1,162)
Net unrealized appreciation on:
Investments 1,703
Open futures contracts 1
--------
$ 32,992
========
</TABLE>
(a) Redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
(b) On sales of $50,000 or more the offering price is reduced.
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JULY 31, 1998
(UNAUDITED)
<TABLE>
<S> <C> <C>
(in thousands)
INVESTMENT INCOME
Interest $ 900
EXPENSES
Management fee $ 83
Service fee 27
Distribution fee - Class B 63
Distribution fee - Class C 1
Transfer agent 22
Bookkeeping fee 14
Trustees fee 7
Custodian fee 1
Audit fee 10
Legal fee 2
Registration fee 14
Reports to shareholders 3
Amortization of deferred
organization expenses 3
Other 6
-----
256
Fees waived by the Adviser (66)
Fees waived by the Distributor - Class C (a) 190
----- -----
Net Investment Income 710
-----
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain on:
Investments 134
Closed futures contracts 19
-----
Net Realized Gain 153
Net unrealized depreciation
during the period on:
Investments (285)
Open futures contracts (6)
-----
Net Unrealized Depreciation (291)
-----
Net Loss (138)
-----
Increase in Net Assets from Operations $ 572
=====
</TABLE>
(a) Rounds to less than one.
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
(Unaudited)
Six months Year ended
(in thousands) ended July 31 January 31
---------------------------
INCREASE (DECREASE) IN NET ASSETS 1998 1998 (a)
<S> <C> <C>
Operations:
Net investment income $ 710 $ 1,584
Net realized gain 153 122
Net unrealized appreciation (depreciation) (291) 1,359
-------- --------
Net Increase from Operations 572 3,065
Distributions:
From net investment income - Class A (393) (839)
In excess of net investment income - Class A (7) -
From net investment income - Class B (349) (744)
In excess of net investment income - Class B (6) -
From net investment income - Class C (4) (2)
In excess of net investment income - Class C (b) -
-------- --------
(187) 1,480
-------- --------
Fund Share Transactions:
Receipts for shares sold - Class A 494 1,398
Value of distributions reinvested - Class A 244 487
Cost of shares repurchased - Class A (1,129) (2,710)
-------- --------
(391) (825)
-------- --------
Receipts for shares sold - Class B 639 1,432
Value of distributions reinvested - Class B 190 368
Cost of shares repurchased - Class B (1,262) (2,630)
-------- --------
(433) (830)
-------- --------
Receipts for shares sold - Class C 68 171
Value of distributions reinvested - Class C 4 2
Cost of shares repurchased - Class C (16) -
-------- --------
56 173
-------- --------
Net Decrease from Fund
Share Transactions (768) (1,482)
-------- --------
Total Decrease (955) (2)
NET ASSETS
Beginning of period 33,947 33,949
-------- --------
End of period (net of overdistributed
and including undistributed net investment
income of $10 and $35, respectively) $ 32,992 $ 33,947
======== ========
</TABLE>
(a) Class C shares were initially offered on August 1, 1997.
(b) Rounds to less than one.
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS CONT.
<TABLE>
<CAPTION>
(Unaudited)
Six months Year ended
ended July 31 January 31
----------------------------
(in thousands) 1998 1998 (a)
<S> <C> <C>
NUMBER OF FUND SHARES
Sold - Class A 67 193
Issued for distributions reinvested - Class A 33 67
Repurchased - Class A (153) (374)
------------- ----------
(53) (114)
------------- ----------
Sold - Class B 86 198
Issued for distributions reinvested - Class B 26 50
Repurchased - Class B (171) (366)
------------- ----------
(59) (118)
------------- ----------
Sold - Class C 9 23
Issued for distributions reinvested - Class C 1 (b)
Repurchased - Class C (2) -
------------- ----------
8 23
------------- ----------
</TABLE>
(a) Class C shares were initially offered on August 1, 1997.
(b) Rounds to less than one.
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1998 (UNAUDITED)
NOTE 1. INTERIM FINANCIAL STATEMENTS
In the opinion of management of Colonial North Carolina Tax-Exempt Fund (the
Fund), a series of Colonial Trust V, the accompanying financial statements
contain all normal and recurring adjustments necessary for the fair presentation
of the financial position of the Fund at July 31, 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 North Carolina state
personal income tax and opportunities for long-term appreciation from a
portfolio primarily invested in investment grade municipal bonds. The Fund may
issue an unlimited number of shares. The Fund offers 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.
16
<PAGE>
Notes to Financial Statements/July 31, 1998
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.
DEFERRED ORGANIZATION EXPENSES: The Fund incurred $31,806 of expenses in
connection with its organization, initial registration with the Securities and
Exchange Commission and various states, and the initial public offering of its
shares. These expenses were deferred and were amortized on a straight-line basis
over five years.
DISTRIBUTIONS TO SHAREHOLDERS: The Fund declares and records distributions daily
and pays monthly.
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforwards) under income tax regulations.
17
<PAGE>
Notes to Financial Statements/July 31, 1998
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:
<TABLE>
<CAPTION>
Average Net Assets Annual Fee Rate
------------------ ---------------
<S> <C>
First $2 billion 0.50%
Over $2 billion 0.45%
</TABLE>
BOOKKEEPING FEE: The Adviser provides bookkeeping and pricing services for
$27,000 per year plus 0.035% of the Fund's average net assets over $50 million.
TRANSFER AGENT FEE: Colonial Investors Service Center, Inc. (the Transfer
Agent), an affiliate of the Adviser, provides shareholder services for a monthly
fee equal to 0.13% annually of the Fund's average net assets and receives
reimbursement for certain out-of-pocket expenses.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES: Liberty Funds
Distributor, Inc., formerly Liberty Financial Investments, Inc., (the
Distributor) a subsidiary of the Adviser, is the Fund's principal underwriter.
For the six months ended July 31, 1998, the Fund has been advised that the
Distributor retained net underwriting discounts of $2,165 on sales of the Fund's
Class A shares and received contingent deferred sales charges (CDSC) of none,
$19,338, and none 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% of the Fund's average net assets
attributable to Class B and Class C shares. The Distributor has voluntarily
agreed, until further notice, to waive a portion of the Class C share
distribution fee so that it does not exceed 0.45% annually. The plan also
requires the payment of a service fee to the Distributor as follows:
<TABLE>
<CAPTION>
Valuation of shares Annual
outstanding on the 20th of Fee
each month which were issued Rate
---------------------------- ------
<S> <C>
Prior to November 30, 1994 0.10%
On or after December 1, 1994 0.25%
</TABLE>
The CDSC and the fees received from the 12b-1 plan are used principally as
repayment to the Distributor for amounts paid by the Distributor to dealers who
sold such shares.
18
<PAGE>
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 $4,863,640 and
$5,089,873, respectively.
Unrealized appreciation (depreciation) at July 31, 1998, based on cost of
investments for both financial statement and federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation $ 1,744,740
Gross unrealized depreciation (42,019)
-----------
Net unrealized appreciation $ 1,702,721
===========
</TABLE>
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:
<TABLE>
<CAPTION>
Year of Capital loss
expiration carryforward
---------- ------------
<S> <C>
2003 $ 63,000
2004 735,000
2005 124,000
-------------
$ 922,000
=============
</TABLE>
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.
19
<PAGE>
Notes to Financial Statements/July 31, 1998
NOTE 4. PORTFOLIO INFORMATION - CONT.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
The Fund may purchase or sell municipal and Treasury bond futures contracts and
purchase and write options on futures. The Fund will invest in these instruments
to hedge against the effects of changes in the value of portfolio securities due
to anticipated changes in interest rates and/or market conditions, for duration
management, or when the transactions are economically appropriate to the
reduction of risk inherent in the management of the Fund and not for trading
purposes. The use of futures contracts and options involves certain risks, which
include (1) imperfect correlation between the price movement of the instruments
and the underlying securities, (2) inability to close out positions due to
different trading hours or the temporary absence of a liquid market for either
the instrument or the underlying securities or (3) an inaccurate prediction by
the Adviser of the future direction of interest rates. Any of these risks may
involve amounts exceeding the amount recognized in the Fund's Statement of
Assets and Liabilities at any given time.
NOTE 5. LINE OF CREDIT
The Fund may borrow up to 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.
20
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
(Unaudited)
Six months ended July 31
----------------------------------------------------
1998
Class A Class B Class C
--------------- --------------- ------------
<S> <C> <C> <C>
Net asset value -
Beginning of period $ 7.450 $ 7.450 $ 7.450
--------------- --------------- ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income (a) 0.174 0.145 0.157(b)
Net realized and
unrealized loss (0.030) (0.030) (0.030)
--------------- --------------- ------------
Total from Investment
Operations 0.144 0.115 0.127
--------------- --------------- ------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net
investment income (0.174) (0.146) (0.157)
In excess of net
investment income (0.010) (0.009) (0.010)
--------------- --------------- ------------
Total Distributions
Declared to Shareholders (0.184) (0.155) (0.167)
--------------- --------------- ------------
Net asset value -
End of period $ 7.410 $ 7.410 $ 7.410
=============== =============== ============
Total return (c)(d)(e) 1.97% 1.57% 1.73%
=============== =============== ============
RATIOS TO AVERAGE NET ASSETS
Expenses (f)(g) 0.76% 1.51% 1.21%(b)
Net investment
income (f)(g) 4.68% 3.93% 4.23%(b)
Fees and expenses waived
or borne by the
Adviser (f)(g) 0.40% 0.40% 0.40%
Portfolio turnover (e) 13% 13% 13%
Net assets at end
of period (000) $ 15,944 $ 16,818 $ 230
(a) Net of fees and expenses waived or borne by the Adviser which amounted to:
$ 0.015 $ 0.015 $ 0.015
</TABLE>
(b) Net of fees waived by the Distributor which amounted to $0.011 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
agreements had no impact.
(g) Annualized.
21
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
Year ended January 31
-------------------------------------------
1998
Class A Class B Class C (b)
--------- --------- ---------
<S> <C> <C> <C>
Net asset value -
Beginning of period $ 7.120 $ 7.120 $ 7.350
--------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income (a) 0.373 0.319 0.168(c)
Net realized and
unrealized gain (loss) 0.327 0.327 0.100
--------- --------- ---------
Total from Investment
Operations 0.700 0.646 0.268
--------- --------- ---------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net
investment income (0.370) (0.316) (0.168)
--------- --------- ---------
Net asset value -
End of period $ 7.450 $ 7.450 $ 7.450
========= ========= =========
Total return (d)(e) 10.10% 9.28% 3.69%(f)
========= ========= =========
RATIOS TO AVERAGE NET ASSETS
Expenses 0.49%(g) 1.24%(g) 0.96%(c)(g)(h)
Net investment
income 5.11%(g) 4.36%(g) 4.55%(c)(g)(h)
Fees and expenses waived
or borne by the
Adviser 0.64%(g) 0.64%(g) 0.63%(g)(h)
Portfolio turnover 23% 23% 23%
Net assets at end
of period (000) $ 16,425 $ 17,348 $ 174
(a) Net of fees and expenses waived or borne by the Adviser which amounted to:
$ 0.047 $ 0.047 $ 0.047
</TABLE>
(b) Class C shares were initially offered on August 1, 1997. Per share
amounts reflect activity from that date.
(c) Net of fees waived by the Distributor which amounted to $0.011 per
share and 0.30%.
(d) Total return at net asset value assuming all distributions reinvested
and no initial sales charge or contingent deferred sales charge.
(e) Had the Adviser and Distributor not waived or reimbursed a portion of
expenses, total return would have been reduced.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements had an impact of 0.01% and $0.001 per share.
(h) Annualized.
(i) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
22
<PAGE>
FINANCIAL HIGHLIGHTS - Cont.
<TABLE>
<CAPTION>
Year ended January 31
- ------------------------------------------------------------------------------------
1997 1996
Class A Class B Class A Class B
- --------------- --------------- --------------- ---------------
<S> <C> <C> <C>
$ 7.270 $ 7.270 $ 6.680 $ 6.680
- --------------- --------------- --------------- ---------------
0.376 0.322 0.386 0.334
(0.150) (0.150) 0.588 0.588
- --------------- --------------- --------------- ---------------
0.226 0.172 0.974 0.922
- --------------- --------------- --------------- ---------------
(0.376) (0.322) (0.384) (0.332)
- --------------- --------------- --------------- ---------------
$ 7.120 $ 7.120 $ 7.270 $ 7.270
=============== =============== =============== ===============
(3.29)% (2.51)% 14.91% 14.07%
=============== =============== =============== ===============
0.45%(i) 1.20%(i) 0.33%(i) 1.08%(i)
5.29%(i) 4.54%(i) 5.47%(i) 4.72%(i)
0.66%(i) 0.66%(i) 0.76%(i) 0.76%(i)
38% 38% 34% 34%
$ 16,522 $ 17,427 $ 15,813 $ 18,593
$ 0.047 $ 0.047 $ 0.053 $ 0.053
</TABLE>
23
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
Year ended Period ended
January 31 January 31
-----------------------------------
- -------------------------------------
1995 1994 (b)
Class A Class B Class
A Class B
--------------- --------------- ---------------
- --------------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 7.500 $ 7.500 $ 7.500
$ 7.500
--------------- --------------- ---------------
- --------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income (a) 0.396 0.345
0.164 0.141
Net realized and
unrealized gain (loss) (0.822) (0.822)
- - -
--------------- --------------- ---------------
- --------------
Total from Investment
Operations (0.426) (0.477)
0.164 0.141
--------------- --------------- ---------------
- --------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net
investment income (0.394) (0.343)
(0.164) (0.141)
--------------- --------------- ---------------
- --------------
Net asset value -
End of period $ 6.680 $ 6.680 $ 7.500
$ 7.500
=============== =============== ===============
==============
Total return (c)(d) (5.55%) (6.27%)
2.22%(e) 1.90%(e)
=============== =============== ===============
==============
RATIOS TO AVERAGE NET ASSETS
Expenses 0.12% 0.87%
0.10%(f) 0.85%(f)
Net investment
income 5.83% 5.08%
4.91%(f) 4.16%(f)
Fees and expenses waived
or borne by the
Adviser 0.93% 0.93%
1.20%(f) 1.20%(f)
Portfolio turnover 37% 37%
1%(f) 1%(f)
Net assets at end
of period (000) $ 14,189 $ 17,169 $ 13,710
$ 9,934
0.063 0.063
0.040 0.040
</TABLE>
(a) Net of fees and expenses waived or borne by the Adviser which amounted
to:
(b) The Fund commenced investment operations on September 1, 1993.
(c) Total return at net asset value assuming all distributions reinvested
and no initial sales charge or contingent deferred sales charge.
(d) Had the Adviser not waived or reimbursed a portion of expenses, total
return would have been reduced.
(e) Not annualized.
(f) Annualized.
24
<PAGE>
SHAREHOLDER SERVICES
TO MAKE INVESTING EASIER
Your Fund has one of the most extensive selections of shareholder services
available. Your financial advisor can help you arrange for any of these
services, or you can call us directly at 1-800-345-6611.
AFFORDABLE ADDITIONAL INVESTMENTS: Add to your account with as little as $50 on
most funds; $25 for an IRA account.
FREE EXCHANGES(1): Exchange all or part of your account into the same share
class of another fund distributed by Liberty Funds Distributor, Inc. by phone or
mail.
EASY ACCESS TO YOUR MONEY(1): Make withdrawals from your account by phone, by
mail or, for certain funds, by check.
ONE-YEAR REINSTATEMENT PRIVILEGE: If you need access to your money, but
then choose to return it within one year, you can reinvest in any fund
distributed by Liberty Funds Distributor of the same share class without any
penalty or sales charge.
FUNDAMATIC: Make periodic investments as low as $50 from your checking account
to your Fund account.
SYSTEMATIC WITHDRAWAL PLAN (SWP): Receive monthly, quarterly or semiannual
payments via check or bank transmission. There is a $5,000 account value
required, but no minimum for the payment amount. The maximum annual withdrawal
is 12% of account balance at time SWP is established. SWPs by check are
processed on the 10th calendar day of each month unless the 10th falls on a
non-business day or the first business day of the week. If this occurs, the
processing date will be the previous business day. Dividends and capital gains
must be reinvested.
AUTOMATED DOLLAR COST AVERAGING: Transfer money on a monthly basis from any fund
with a balance of $5,000 into the same share class of up to four other funds
distributed by Liberty Funds Distributor. Minimum for each transfer is $100.
RETIREMENT PLANS: Choose from a broad range of retirement plans,
including IRAs.
(1) Redemptions and exchanges are made at the next determined net asset value
after the request is received by the Transfer Agent. Proceeds may be more or
less than your original cost. The exchange privilege may be terminated at any
time. Exchanges are not available on all funds. Investors who purchase Class B
or C shares, or $1 million or more of Class A shares, may be subject to a
contingent deferred sales charge.
25
<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
26
<PAGE>
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial North Carolina Tax-Exempt Fund is:
Liberty Funds Services, Inc.*
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Colonial North Carolina Tax-Exempt Fund mails one shareholder report to each
shareholder address. If you would like more than one report, please call
1-800-426-3750 and additional reports will be sent to you.
This report has been prepared for shareholders of Colonial North Carolina
Tax-Exempt Fund. This report may also be used as sales literature when preceded
or accompanied by the current prospectus which provides details of sales
charges, investment objectives and operating policies of the Fund 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.
27
<PAGE>
TRUSTEES
ROBERT J. BIRNBAUM
Consultant (formerly Special Counsel, Dechert, Price & Rhoads; President and
Chief Operating Officer, New York Stock Exchange, Inc.; President, American
Stock Exchange, Inc.)
TOM BLEASDALE
Retired (formerly Chairman of the Board and Chief Executive Officer, Shore Bank
& Trust Company)
LORA S. COLLINS
Attorney (formerly Attorney, Kramer, Levin, Naftalis, & Frankel)
JAMES E. GRINNELL
Private Investor (formerly Senior Vice President-Operations, The Rockport
Company)
RICHARD W. LOWRY
Private Investor (formerly Chairman and Chief Executive Officer, U.S. Plywood
Corporation)
WILLIAM E. MAYER
Partner, Development Capital, L.L.C. (formerly Dean, College of Business and
Management, University of Maryland; Dean, Simon Graduate School of Business,
University of Rochester; Chairman and Chief Executive Officer, CS First Boston
Merchant Bank; and President and Chief Executive Officer, The First Boston
Corporation)
JAMES L. MOODY, JR.
Retired (formerly Chairman of the Board, Chief Executive Officer and Director,
Hannaford Bros. Co.)
JOHN J. NEUHAUSER
Dean, Boston College School of Management
ROBERT L. SULLIVAN
Retired Partner, KPMG Peat Marwick LLP (formerly Management Consultant, Saatchi
and Saatchi Consulting Ltd. and Principal and International Practice Director,
Management Consulting, Peat Marwick Main & Co.)
[LIBERTY LOGO] Liberty
COLONIAL FUNDS - STEIN ROE ADVISOR FUNDS - 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 NC-03/740F-0798 M (9/98) 98/936
