<PAGE>
LETTER FROM THE PRESIDENT
===============================================================================
Dear Shareholder:
I am pleased to present Colonial Minnesota Tax-Exempt Fund's annual report
for the 12 months ended January 31, 1995. The Fund pursues its objective through
investments in primarily investment-grade Minnesota municipal bonds.
FUND PERFORMANCE (2/1/94 - 1/31/95)(1)
<TABLE>
<CAPTION>
CLASS A CLASS B
INCEPTION 9/26/86 8/4/92
- -------------------------------------------------------
<S> <C> <C>
Distributions declared
per share $0.413 $0.361
- -------------------------------------------------------
30-day SEC yield on 1/31/95 5.45% 4.97%
- -------------------------------------------------------
Taxable-equivalent yield
on 1/31/95 at the
maximum offering price 10.50% 9.58%
- -------------------------------------------------------
12-month total return, assuming
reinvestment of all distributions
and no sales charge or CDSC -2.92% -3.65%
- -------------------------------------------------------
Net asset value per share
on 1/31/95 $6.84 $6.84
- -------------------------------------------------------
</TABLE>
ECONOMIC/MARKET OVERVIEW
The pace of economic growth during the fiscal year was stronger than
expected, as demonstrated by the preliminary 1994 gross domestic product of
4.0%. This activity generated renewed concerns about inflation, prompting the
Federal Reserve Board to raise short-term interest rates six times to keep
inflation under control. The yield on the bellwether 30-year Treasury bond also
moved higher, increasing from 6.26% to 7.70% from the beginning to the end of
the period, and long-term tax-exempt bonds followed suit.
Because it has a more diverse economy than other midwestern states,
Minnesota never suffered the declines that afflicted many of its neighbors prior
to 1994. As a consequence, its recovery has not been as dramatic. Nevertheless,
the state's economy has been growing. All sectors have shown improvement, with
real estate and finance leading the way. Also, agriculture recovered from the
extensive flooding that had such a negative impact on the sector during 1993.
Although not currently a concern, the possible deregulation of the electric
utility industry may have an impact on Minnesota municipal bonds. Deregulation
would benefit companies with low operating costs, and many of Minnesota's
electric utilities are mid- to high-cost operators.
[PHOTO]
John A. McNeice, Jr.
President
INVESTMENT STRATEGY
Management's strategy was to remain fully invested at all times, with
assets allocated in a diverse selection of Minnesota municipal bonds. On January
31,the Fund owned 116 individual issues in 11 public sectors. More than 90% of
the securities in the portfolio were rated investment grade, with approximately
53% rated Aaa, the highest quality rating available.
Several steps were taken to reduce the impact of interest rate volatility.
Investments were focused on higher quality securities. These performed
especially well as the gap between higher and lower quality bonds widened toward
the end of the fiscal year. The Fund also invested, on a selective basis, in
lower-rated and non-rated bonds. Because of their shorter durations, these
securities may be less sensitive to fluctuating interest rates than some other
municipal bonds.
In anticipation of improved conditions in the municipal bond market during
1995, the Fund's investments in housing bonds were reduced during the final
quarter of 1994. Unlike the performance of most tax-exempt bonds, the
performance of housing bonds tends to decline along with interest rates. These
bonds are backed by their underlying mortgages, and when interest rates move
lower, housing bonds may be prepaid as mortgage refinancing activity increases.
To prepare for the possibility that housing bonds might be called, the portfolio
was structured in a "barbell" configuration. Investments were concentrated in
two types of securities -- housing bonds for income, and zero coupon bonds
(bonds sold at deep discounts from face value in lieu of interest payments),
which can provide attractive total returns during bond market rallies.
Colonial management is optimistic about the long-term prospects for the
municipal bond market. For further information about how you can take advantage
of additional tax-exempt investment opportunities offered by Colonial, please
contact your full-service financial adviser or call Colonial at 1-800-426-3750.
Sincerely,
/s/ John A. McNeice, Jr.
- ------------------------
John A. McNeice, Jr.
President
March 10, 1995
(1)Refer to the footnote on page two.
<PAGE>
REPORT FROM COLONIAL MANAGEMENT
===============================================================================
During Colonial Minnesota Tax-Exempt Fund's fiscal year ended January 31,
1995, developments in the municipal bond market presented mixed messages to
investors. Like most fixed-income investments, these securities felt the impact
of rising interest rates. As prices declined, yields for all municipal bonds
increased.
Although returns in the municipal bond market were lower than we would have
liked, municipal bonds still performed better than comparable U.S. Treasury
securities. Typically, when interest rates rise, bond prices decline, resulting
in higher bond yields. For example, during the fiscal year the yield for a
sample long-term municipal security with a Aaa rating -- the highest quality
rating available -- increased by 1.2 percentage points, from 5.02% to 6.22%.
Although this was a relatively sharp increase, compared to Treasury securities
the rise in municipal yields was quite moderate. Over the same period, the yield
for a comparable Treasury bond increased by almost 1.5 percentage points.
Despite the higher interest rates that plagued municipal bonds, there were
some positive developments in the market's supply/demand dynamic. In fact, over
the long term, these developments should offset the negative impact from 1994's
interest rate increases.
SUPPLY AND DEMAND
As interest rates moved higher, the refinancing activity that had generated
record volumes of municipal securities in 1992 and 1993 subsided -- during 1994
Minnesota's new issue supply was down 51.7%. Colonial management believes this
trend will continue in 1995 -- supply is expected to drop to $2.4 billion, down
from $6.1 billion in 1993. Low supply should be complemented by strong demand
for tax-exempt securities. The combination of coupon payments and maturing bonds
will generate more than $200 billion (out of a total of approximately $1.2
trillion in municipal bonds currently outstanding in the market) that will
likely be reinvested in the municipal market. This supply/demand dynamic should
have a favorable impact on prices.
INVESTMENT OBJECTIVE
The Fund's Trustees recently approved modifying your Fund's investment
objective to more precisely describe the Fund's investment goals and
approach. Please note that the Fund's manager and fundamental policies remain
unchanged. As of 5/31/95, the Fund will seek as high a level of after-tax total
return, as is consistent with prudent risk, by pursuing current income exempt
from federal and Minnesota personal income tax and
opportunities for long-term appreciation from a portfolio primarily invested in
investment-grade municipal bonds.
COMPARISON OF THE CHANGE IN VALUE OF $10,000
Hypothetical investment in Class A shares of Colonial Minnesota
Tax-Exempt Fund, the Lehman Brothers Municipal Bond Index, and
the Lehman Brothers 20-year Municipal Bond Index
9/26/86 - 1/31/95
LEHMAN 20-YEAR: $19,281
LEHMAN MUNICIPAL: $18,373
CLASS A NAV: $16,423
CLASS A MOP: $15,643
<TABLE>
<CAPTION>
CLASS A MOP CLASS A NAV LEHMAN MUNICIPAL LEHMAN 20-YEAR
----------- ----------- ---------------- --------------
<S> <C> <C> <C> <C>
9/86 $ 9,525 $10,000 $10,000 $10,000
12/86 9,740 10,225 10,345 10,349
12/87 9,615 10,095 10,500 10,418
12/88 10,587 11,115 11,566 11,815
12/89 11,445 12,016 12,814 13,201
12/90 12,282 12,894 13,748 14,141
12/91 13,423 14,093 15,418 15,889
12/92 14,410 15,129 16,777 17,509
12/93 15,952 16,748 18,836 20,025
1/95 15,643 16,423 18,373 19,281
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 1/31/95
- ------------------------------------------------------------------------------
CLASS A CLASS B
NAV MOP NAV W/CDSC
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 year -2.92% -7.53% -3.65% -8.22%
5 years 6.51% 5.48% -- --
Since inception 6.12% 5.50% 3.11% 2.01%
- ------------------------------------------------------------------------------
</TABLE>
The Lehman Brothers Municipal Bond Index and the Lehman Brothers 20-year
Municipal Bond Index are unmanaged indexes that track the performance of the
municipal bond market. A portion of the Fund's income may be subject to the
alternative minimum tax. The 30-day SEC yield on 1/31/95, of 5.45% for Class A
shares and 4.97% for Class B shares reflects the portfolio's earning power, net
of expenses, and does not include changes in Fund price. The 30-day SEC yield on
2/28/95 was 5.25% for Class A shares and 4.76% for Class B shares. If the
adviser had not borne certain Fund expenses, total returns for Class A and Class
B shares would have been lower; yield for Class A shares would have been 5.22%,
and yield for Class B shares would have been 4.73%. Taxable-equivalent yields
are based on the maximum combined 48.1% federal and Minnesota income tax rates.
Past performance cannot predict future results. Return and value of an
investment will vary, resulting in a gain or loss on sale. All results shown
assume reinvestment of distributions. Net asset value (NAV) return does not
include sales charges or contingent deferred sales charges (CDSC). Maximum
offering price (MOP) return includes the maximum sales charge of 4.75%. The CDSC
return reflects the applicable sales charge (one year 5.00%, since inception
3.00%). Performance for different share classes will vary based on differences
in sales charges and fees associated with each class.
2
<PAGE>
INVESTMENT PORTFOLIO (in thousands) JANUARY 31, 1995
================================================================================
<TABLE>
<CAPTION>
MUNICIPAL BONDS - 99.1% PAR VALUE
- --------------------------------------------------------------
<S> <C> <C>
CONSUMER PRODUCTS - 0.6%
Buffalo, Ruden Manufacturing Inc.,
10.500% 09/01/14. . . . . . $ 300 $ 312
- --------------------------------------------------------------
EDUCATION - 15.1%
Anoka-Hennepin Independent School
District No. 11, Series 1993-C,
5.000% 02/01/09(a) . . . . 1,000 891
Bagley Independent School District
No. 162, Series 1994,
4.850% 02/01/12. . . . . . 750 635
Benson Independent School District
No. 777, Series 1992,
6.000% 02/01/15. . . . . . 500 484
Brainerd Independent School
District No. 181,
7.000% 06/01/11. . . . . . 200 215
Delano Independent School
District No. 879:
7.250% 02/01/09. . . . . . 100 110
7.250% 02/01/10. . . . . . 100 110
Elk River Independent School
District No. 728, Series 1991 A,
7.000% 02/01/11. . . . . . 100 106
Faribault Independent School
District No. 656,
5.750% 06/01/15(b) . . . . 1,500 1,419
Milaca Independent School District
No. 912,
5.500% 02/01/20. . . . . . 740 622
Minneapolis Special School District
No. 1,
7.300% 02/01/09. . . . . . 300 316
Montevideo Independent School
District No. 1, Series 1993,
4.900% 02/01/10. . . . . . 400 350
New York Mills Independent School
District No. 553, Series 1992 A,
6.850% 02/01/18. . . . . . 210 224
Roseau Independent School
District No. 682,
7.000% 02/01/14. . . . . . 200 206
Rosemount Independent School
District No. 196,
Series 1994-B,
(c) 06/01/10. . . . . . 2,765 1,071
State Higher Education Facilities
Authority:
Carlton College, Series 3-L1,
5.750% 11/01/12. . . . . . 500 476
Hamline University, Series 3-K,
6.600% 06/01/08. . . . . . $ 250 $ 257
Wadena Independent School
District No. 819,
5.500% 02/01/13. . . . . . 200 184
--------
7,676
- --------------------------------------------------------------
ELECTRIC- 20.8%
Anoka County, United Power Association,
Series 1987 A,
6.950% 12/01/08. . . . . . 400 418
Bass Brook, Minnesota Power &
Light Co.,
6.000% 07/01/22. . . . . . 800 747
Northern Municipal Power Agency,
Minnesota Power & Light Co.,
Series 1989-A,
7.250% 01/01/16. . . . . . 700 740
Northern Power Electric Agency,
5.500% 01/01/18(a). . . . 1,400 1,265
Southern Minnesota Municipal
Power Agency:
(c) 01/01/27(a) . . . . 18,000 2,295
Series 1993 A:
4.750% 01/01/16(d) . . . . 2,000 1,625
5.000% 01/01/12 . . . . . 750 636
Series A,
5.750% 01/01/18. . . . . . 1,500 1,384
Western Minnesota Municipal
Power Agency:
Series 1983 A,
9.750% 01/01/16. . . . . . 1,000 1,368
Series 1985 A,
9.050% 01/01/00. . . . . . 25 26
--------
10,504
- --------------------------------------------------------------
GENERAL OBLIGATIONS - 1.5%
Chaska, General Obligation, Series 1985,
8.200% 12/01/01. . . . . . 25 25
Minneapolis-St. Paul,
Minneapolis-St. Paul International
Airport, Series 1988,
7.800% 01/01/11. . . . . . 300 324
Rochester,
Series 1990-A,
7.150% 12/01/11. . . . . . 200 213
Virginia, Series 1989-B:
7.500% 02/01/07. . . . . . 100 107
7.500% 02/01/08. . . . . . 100 107
--------
776
- --------------------------------------------------------------
</TABLE>
See notes to financial statements.
3
<PAGE>
INVESTMENT PORTFOLIO - continued
================================================================================
<TABLE>
<CAPTION>
MUNICIPAL BONDS - CONT. PAR VALUE
- --------------------------------------------------------------
<S> <C> <C>
HOSPITALS & HEALTH CARE- 18.8%
Bloomington Health Care Facilities
Development Authority, Masonic Home
Care Center Project,
5.875% 07/01/22. . . . . . $ 500 $ 474
Breckenridge, Franciscan Sisters
Health Care Center, Series 1987 B2,
9.375% 09/01/17. . . . . . 500 557
Burnsville, Fairview Community
Hospital, Series 1982-A,
(c) 05/01/12. . . . . . 2,145 724
Duluth Economic Development
Authority:
Benedictine Health Systems,
St. Mary's Medical Center,
Series 1993 B,
6.000% 02/15/17. . . . . . 500 474
St. Luke's Hospital, Series 1992 A,
6.400% 05/01/12. . . . . . 300 301
The Duluth Clinic, Ltd.,
6.200% 11/01/12. . . . . . 250 249
Mankato, Immanuel St. Joseph's
Hospital, Series 1992 A,
6.300% 08/01/22. . . . . . 250 225
Minneapolis, Lifespan, Inc.,
Series 1988 B,
8.125% 08/01/17. . . . . . 245 263
Minneapolis-St. Paul Housing &
Redevelopment Authority:
Healtheast Project, Series 1993A,
6.625% 11/01/17. . . . . . 250 220
Healthspan, Series 1993-A,
4.750% 11/15/18(a) . . . . 2,000 1,573
St. Paul-Ramsey Medical Center
Project, Series 1993,
5.550% 05/15/23. . . . . . 250 220
Princeton, Fairview Hospital,
Series 1991-C,
6.250% 01/01/21. . . . . . 300 297
Red Wing, River Region Health
Care Facilities, Series 1993-A:
6.400% 09/01/12. . . . . . 200 183
6.500% 09/01/22. . . . . . 300 271
Rochester, Mayo Foundation,
Series 1992 I,
5.750% 11/15/21. . . . . . 1,000 902
St. Louis:
Healthsystem, Inc., Series 1993-A,
5.200% 07/01/23(a) . . . . 2,670 2,229
Methodist Hospital, Series 1990-A,
7.250% 07/01/15. . . . . . 300 324
--------
9,486
- --------------------------------------------------------------
HOUSING - 19.0%
MULTI-FAMILY - 9.9%
Burnsville,
Coventry Court Apartments,
7.500% 09/01/17. . . . . . $ 500 $ 511
Chisago & Stearns Counties,
7.050% 09/01/27 . . . . . . 1,500 1,515
Eden Prairie, Preserve Place
Apartments,
8.000% 07/01/28. . . . . . 650 665
Lakeville, Southfork
Apartment Project, Series 1989 A,
9.875% 02/01/20. . . . . . 200 196
Minneapolis Community Development
Agency, Home Ownership Mortgage,
7.875% 07/01/17. . . . . . 635 649
Minneapolis, Seward Towers,
Series 1990,
7.375% 12/20/30. . . . . . 300 301
Minnetonka, Cedar Hills East Project,
Series 1985,
7.500% 12/01/27. . . . . . 300 311
Robbinsdale, Copperfield Hill,
Series 1985,
9.250% 12/01/18. . . . . . 350 350
State Housing Finance Agency,
Series 1991 A,
6.950% 02/01/14. . . . . . 300 304
White Bear Lake, Birch Lake
Townhomes Project,
Series 1988-A,
9.750% 07/15/19. . . . . . 200 205
--------
5,007
- --------------------------------------------------------------
SINGLE-FAMILY - 9.1%
Dakota & Washington Counties
Housing & Redevelopment Authority:
Series 1986,
7.200% 12/01/09 . . . . . 90 93
Series 1988,
8.150% 09/01/16 . . . . . 235 240
Minneapolis, Riverplace Project,
Series 1987-A,
7.100% 01/01/20 . . . . . 255 259
St. Paul Housing Board,
Series 1987 C,
8.875% 11/01/18 . . . . . 505 528
Moorhead Residential Mortgage,
7.100% 08/01/11 . . . . . 20 22
</TABLE>
See notes to financial statements.
4
<PAGE>
INVESTMENT PORTFOLIO - continued
================================================================================
<TABLE>
<CAPTION>
MUNICIPAL BONDS - CONT. PAR VALUE
- --------------------------------------------------------------
<S> <C> <C>
HOUSING - CONT.
SINGLE-FAMILY - CONT.
State Housing Finance Agency:
Series L,
6.700% 07/01/20. . . . . . $ 1,000 $ 985
Series 1987 A,
8.500% 02/01/17. . . . . . 25 26
Series 1987 C,
9.000% 08/01/18. . . . . . 600 613
Series 1988 C,
8.500% 07/01/19. . . . . . 95 99
Series 1988 D,
8.050% 08/01/18. . . . . . 240 244
Series 1992 C2,
6.150% 07/01/23. . . . . . 435 396
Series 1992 D2:
5.850% 07/01/11. . . . . . 440 410
5.950% 01/01/17. . . . . . 435 399
Washington County Housing &
Redevelopment Authority:
Cottages of Aspen Project,
9.250% 06/01/22. . . . . . 200 191
Series 1986,
7.600% 12/01/11. . . . . . 110 110
--------
4,615
- --------------------------------------------------------------
IN-SUBSTANCE DEFEASED (E) - 11.6%
Centennial Independent School
District No. 12, Series 1991-A,
7.150% 02/01/11. . . . . . 100 107
East Central Solid Waste
Commission, Series 1990 B,
7.600% 06/01/07(a) . . . . 400 425
Fairbault County:
7.400% 04/01/06. . . . . . 65 68
7.400% 04/01/07. . . . . . 125 131
7.400% 04/01/09. . . . . . 25 26
7.400% 04/01/10. . . . . . 150 157
Minneapolis, Lifespan, Inc.:
Series 1987 A,
8.125% 04/01/17. . . . . . 300 323
Series 1987 B,
9.125% 12/01/14. . . . . . 200 223
Minneapolis-St. Paul Housing &
Redevelopment Authority:
Health One Group, Series 1990-C,
8.000% 08/15/19. . . . . . 500 567
New London-Spicer Independent
School District No. 345,
Series 1991,
6.600% 02/01/16 . . . . . $ 200 $ 211
Northfield, St. Olaf College,
Series 1988,
8.000% 10/01/18 . . . . . . 600 650
Owatonna Independent School
District No. 761, Series 1990:
7.100% 02/01/09 . . . . . . 115 123
7.100% 02/01/10 . . . . . . 120 128
7.100% 02/01/11 . . . . . . 130 139
Owatonna Public Utilities Revenue,
6.750% 01/01/16 . . . . . . 500 529
Rockford Independent School
District No. 883,
7.100% 12/15/10 . . . . . . 400 427
Southern Minnesota Municipal
Power Agency, Series 1985-A,
7.000% 01/01/18 . . . . . . 405 412
St. Cloud Hospital, Series 1990-B,
7.000% 07/01/20 . . . . . . 150 164
St. Louis Park, Methodist Hospital,
Series 1990-C,
7.250% 07/01/18 . . . . . . 165 181
State Higher Educational Facilities,
St. Thomas College, Series 2-0,
7.600% 10/01/07 . . . . . . 200 214
University of Minnesota,
Series 1986-A:
7.625% 02/01/05 . . . . . . 500 523
7.750% 02/01/10 . . . . . . 50 52
University of St. Thomas, Series 3 C,
7.100% 09/01/10 . . . . . . 100 109
--------
5,889
- --------------------------------------------------------------
NURSING HOMES - 0.5%
Roseville, Care Institute, Inc.,
Series 1993,
7.750% 11/01/23 . . . . . . 300 272
- --------------------------------------------------------------
POLLUTION CONTROL REVENUE - 1.3%
State Public Facilities Authority:
Series 1989-A,
7.000% 03/01/09 . . . . . . 100 105
Series 1990-A,
7.100% 03/01/12 . . . . . . 300 317
Series 1991 A,
6.950% 03/01/13 . . . . . . 200 211
--------
633
- --------------------------------------------------------------
</TABLE>
See notes to investment portfolio.
5
<PAGE>
INVESTMENT PORTFOLIO - continued
================================================================================
<TABLE>
<CAPTION>
MUNICIPAL BONDS - CONT. PAR VALUE
- --------------------------------------------------------------
<S> <C> <C>
PUBLIC FACILITIES & IMPROVEMENT - 4.2%
Brooklyn Park, TL Systems Corp.,
Series 1991,
10.000% 09/01/16. . . . . . $ 270 $ 266
Cloquet, Diamond Brands Inc.,
9.000% 06/01/02. . . . . . 700 717
Metropolitan Council,
Hubert H. Humphrey Metrodome,
Series 1992,
6.000% 10/01/09. . . . . . 300 291
Minneapolis Community Development
Agency:
Series 1987-III,
8.625% 12/01/27. . . . . . 260 273
Series 1991-1,
8.000% 12/01/16. . . . . . 250 261
St. Paul Housing & Redevelopment,
7.750% 07/01/06. . . . . . 290 297
--------
2,105
- --------------------------------------------------------------
TRANSPORTATION - 3.9%
Duluth Seaway Port Authority,
Series A,
5.750% 12/01/16. . . . . . 1,500 1,322
St. Paul Port Authority:
Series 1983-C,
9.750% 12/01/96. . . . . . 25 25
Series 1985-F,
9.125% 12/01/14. . . . . . 650 602
--------
1,949
- --------------------------------------------------------------
WASTE DISPOSAL- 1.2%
Hennepin County, Series 1987-A,
8.200% 11/01/09. . . . . . 300 317
Hubbard County, Potlach Corp.,
Series 1989,
7.375% 08/01/13. . . . . . 285 296
--------
613
- --------------------------------------------------------------
WATER & SEWER - 0.6%
St. Paul Sewer, Series 1988-A,
8.000% 12/01/08. . . . . . 250 273
- --------------------------------------------------------------
Total investments (cost $50,953) (f) 50,110
- --------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 1.8%
VARIABLE RATE DEMAND NOTES (G)
IL Health Facilities, Palos,
4.250% 12/01/15. . . . . . 900 900
- --------------------------------------------------------------
OTHER ASSETS & LIABILITIES, NET - (0.9)% (433)
- --------------------------------------------------------------
NET ASSETS - 100.0% $ 50,577
- --------------------------------------------------------------
</TABLE>
See notes to financial statements.
Notes to investment portfolio:
(a) These securities, or a portion thereof, with a market value of $7,833,
are being used to collateralize open futures contracts.
(b) This security has been purchased on a delayed delivery basis, for
settlement at a future date beyond the customary settlement time.
(c) Zero coupon bond.
(d) This security, with a market value of $1,625, is being used to
collateralize the delayed delivery purchase indicated in note (b) above.
(e) 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.
(f) Cost for federal income tax purposes is $50,935.
(g) Variable rate demand notes are considered short-term obligations.
Interest rates change periodically on specified dates. These securities
are payable on demand and are secured by either letters of credit or
other credit support agreements from banks. The rates listed are as of
January 31, 1995.
Short futures contracts open at January 31, 1995:
<TABLE>
<CAPTION>
Par value Unrealized
covered Expiration depreciation
Type contract month at 1/31/95
- ---------------------------------------------------------------
<S> <C> <C> <C>
Treasury bonds $6,800 March $253
- ---------------------------------------------------------------
</TABLE>
6
<PAGE>
FINANCIAL STATEMENTS
================================================================================
<TABLE>
<CAPTION>
STATEMENT OF ASSETS & LIABILITIES
January 31, 1995
(in thousands except for per share amounts and footnote)
- --------------------------------------------------------------------------------
<S> <C>
Assets
Investments at value (cost $50,953)............................. $50,110
Short-term investments.......................................... 900
-------
51,010
Receivable for:
Interest.......................................... $ 761
Investments sold.................................. 350
Fund shares sold.................................. 58
Other................................................ 88 1,257
------- -------
Total assets........................................... 52,267
Liabilities
Payable for:
Investments purchased............................. 1,404
Distributions..................................... 235
Variation margin on futu.......................... 32
Fund shares repurchased........................... 8
Accrued:
Deferred Trustees fees............................ 5
Other............................................. 6
-------
Total liabilities...................................... 1,690
-------
Net assets...................................................... $50,577
=======
Net asset value & redemption price per share -
Class A ($35,846/5,242)..................................... $ 6.84
-------
Maximum offering price per share - Class A
($6.84/0.9525)............................................... $ 7.18*
-------
Net asset value & offering price per share -
Class B ($14,731/2,154)..................................... $ 6.84
-------
Composition of net assets
Capital paid in.............................................. $52,372
Undistributed net investment income.......................... 39
Accumulated net realized loss................................ (738)
Net unrealized depreciation on:
Investments................................................ (843)
Open futures contracts..................................... (253)
-------
................................................................ $50,577
=======
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year ended January 31, 1995
(in thousands)
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Interest........................................................ $ 3,492
EXPENSES
Management fee....................................... $ 295
Service fee.......................................... 9
Distribution fee - Class B........................... 99
Transfer agent....................................... 88
Bookkeeping fee...................................... 28
Trustees fees........................................ 10
Custodian fee........................................ 7
Audit fee............................................ 32
Legal fee............................................ 6
Registration fees.................................... 22
Reports to shareholders.............................. 6
Other................................................ 8
..................................................... 610
-------
Fees waived by the adviser........................... (137) 473
------- -------
Net investment income................................... 3,019
-------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON PORTFOLIO POSITIONS
Net realized gain (loss) on :
Investments........................................ (77)
Closed futures contracts........................... 107
-------
Net realized gain.......................................... 30
Net unrealized depreciation
during the period on:
Investments........................................ (4,524)
Open futures contracts............................. (253)
-------
Net unrealized depreciation................................ (4,777)
-------
Net loss................................................ (4,747)
-------
Net decrease in net assets from
operations................................................... $(1,728)
=======
</TABLE>
* On sales of $50,000 or more the offering price is reduced.
See notes to financial statements.
7
<PAGE>
FINANCIAL STATEMENTS - continued
================================================================================
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
(in thousands)
- --------------------------------------------------------------------------------
Year ended January 31
------------------------
1995 1994
-------- --------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income............................................................ $ 3,019 $ 2,549
Net realized gain................................................................ 30 59
Net unrealized appreciation (depreciation)....................................... (4,777) 1,870
-------- --------
Net increase (decrease) from operations.................................... (1,728) 4,478
Distributions
From net investment income - Class A............................................. (2,325) (2,234)
From net investment income - Class B............................................. (681) (322)
-------- --------
(4,734) 1,922
-------- --------
Fund share transactions
Receipts for shares sold - Class A............................................... 4,991 9,283
Value of distributions reinvested - Class A...................................... 1,606 1,500
Cost of shares repurchased - Class A............................................. (8,415) (6,138)
-------- --------
(1,818) 4,645
-------- --------
Receipts for shares sold - Class B............................................... 6,114 8,211
Value of distributions reinvested - Class B...................................... 430 180
Cost of shares repurchased - Class B............................................. (1,058) (505)
-------- --------
5,486 7,886
-------- --------
Net increase from Fund share transactions.................................. 3,668 12,531
-------- --------
Total increase (decrease)............................................ (1,066) 14,453
-------- --------
NET ASSETS
Beginning of period.............................................................. 51,643 37,190
-------- --------
End of period (including undistributed
net investment income of $39 and $23, respectively)............................. $ 50,577 $ 51,643
======== ========
NUMBER OF FUND SHARES
Sold - Class A................................................................... 708 1,266
Issued for distributions reinvested - Class A.................................... 232 204
Repurchased - Class A............................................................ (1,226) (835)
-------- --------
(286) 635
-------- --------
Sold - Class B................................................................... 869 1,118
Issued for distributions reinvested - Class B.................................... 62 27
Repurchased - Class B............................................................ (157) (68)
-------- --------
774 1,077
-------- --------
Net increase in shares outstanding......................................... 488 1,712
Outstanding at
Beginning of period........................................................... 6,908 5,196
-------- --------
End of period................................................................. 7,396 6,908
======== ========
</TABLE>
See notes to financial statements.
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS
================================================================================
NOTE 1. ACCOUNTING POLICIES
Colonial Minnesota Tax-Exempt Fund (the Fund), a series of Colonial Trust
V, is a Massachusetts business trust, registered under the Investment Company
Act of 1940, as amended, as a non-diversified, open-end, management investment
company. The Fund may issue an unlimited number of shares. The Fund offers Class
A shares sold with a front-end sales charge and Class B shares which are subject
to an annual distribution fee and a contingent deferred sales charge. Class B
shares will convert to Class A shares when they have been outstanding
approximately eight years. The following significant accounting policies are
consistently followed by the Fund in the preparation of its financial statements
and conform to generally accepted accounting principles.
- --------------------------------------------------------------------------------
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.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
Portfolio positions which cannot be valued as set forth above are valued at
fair value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased or sold.
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 distribution fee), realized
and unrealized gains (losses) are allocated to each class proportionately on a
daily basis for purposes of determining the net asset value of each class.
Class B per share data and ratios are calculated by adjusting the expense
and net investment income per share data and ratios for the Fund for the entire
period by the distribution fee applicable to Class B shares only.
- --------------------------------------------------------------------------------
FEDERAL INCOME TAXES
Consistent with the Fund's policy to qualify as a regulated investment
company and to distribute all of its taxable and tax-exempt income, no federal
income tax has been accrued.
- --------------------------------------------------------------------------------
INTEREST INCOME, DEBT DISCOUNT AND PREMIUM
Interest income is recorded on the accrual basis. Original issue discount
is accreted to interest income over the life of a security with a corresponding
increase in the cost basis; market discount is not accreted. Premium is
amortized against interest income with a corresponding decrease in the cost
basis.
- -------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
The Fund declares and records distributions daily and pays monthly.
The amount and character of income and gains to be distributed are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles.
- --------------------------------------------------------------------------------
NOTE 2. 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. Through June 30, 1994,
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS - continued
================================================================================
this fee was 0.60% annually of the Fund's average net assets. Effective July 1,
1994, the monthly fee is based on each Fund's pro rata portion of the combined
average net assets of Trust V as follows:
<TABLE>
<CAPTION>
Average Net Assets Annual Fee Rate
------------------ ---------------
<S> <C>
First $1 billion 0.55%
Next $1 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
Colonial Investors Service Center, Inc. (the Transfer Agent), an affiliate
of the Adviser, provides shareholder services for a monthly fee equal to 0.14%
annually of the Fund's average net assets and receives a reimbursement for
certain out of pocket expenses.
- --------------------------------------------------------------------------------
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES
The Adviser, through Colonial Investment Services, Inc. (the Distributor),
is the Fund's principal underwriter. During the year ended January 31, 1995,
the Distributor retained net underwriting discounts of $11,627 on sales of the
Fund's Class A shares and received contingent deferred sales charges (CDSC) of
$30,726 on Class B share redemptions.
The Fund has adopted a 12b-1 plan which requires the payment of a
distribution fee to the Distributor equal to 0.75% annually of the average net
assets attributable to Class B shares. Effective December 1, 1994, the plan was
amended to include payment by the Fund of a service fee, applicable to both
Class A and Class B, 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
asrepayment to the Distributor for amounts paid by the Distributor to dealers
who sold such shares.
- --------------------------------------------------------------------------------
EXPENSE LIMITS
The Adviser has agreed, until further notice to waive fees and bear certain
Fund expenses to the extent that total expenses (exclusive of service and
distribution fees, brokerage commissions, interest, taxes, and extraordinary
expenses, if any) exceed 0.70% 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 3. PORTFOLIO INFORMATION
During the year ended January 31, 1995 purchases and sales of investments,
other than short-term obligations, were $17,755,216 and $13,139,778,
respectively.
Unrealized appreciation (depreciation) at January 31, 1995, based on cost of
investments for federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation........................ $ 1,286,592
Gross unrealized depreciation........................ (2,112,149)
-----------
Net unrealized depreciation....................... $ (825,557)
</TABLE> ===========
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS - continued
================================================================================
CAPITAL LOSS CARRYFORWARDS
At January 31, 1995, 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>
1996.............. $396,000
1997.............. 298,000
1999.............. 4,000
2001.............. 8,000
2002.............. 39,000
--------
$745,000
========
</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.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
The Fund sells municipal and Treasury bond futures contracts to manage
overall portfolio interest rate exposure and not for trading purposes. The use
of futures contracts involves certain risks, which include (1) imperfect
correlation between the price movement of the contracts 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 contract 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 initial or variation margin recorded in the Fund's Statement of
Assets and Liabilities at any given time.
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION (UNAUDITED)
All of the distributions will be treated as exempt income for federal
income tax purposes.
11
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31
-----------------------------------------------------------------------------
1995 1994 1993
-------------------- ------------------ ------------------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B (b)
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning
of period...................... $7.480 $7.480 $7.160 $7.160 $7.030 $7.210
------- ------- ------- ------- ------- ------
Income (loss) from investment
operations:
Net investment income (a)...... 0.415 0.363 0.419 0.364 0.449 0.191
Net realized and unrealized
gain(loss) on investments.... (0.642) (0.642) 0.323 0.323 0.125 (0.049)
------- ------- ------- ------- ------- ------
Total from investment
operations................... (0.227) (0.279) 0.742 0.687 0.574 0.142
------- ------- ------- ------- ------- ------
Less distributions declared
to shareholders:
From net investment income..... (0.413) (0.361) (0.422) (0.367) (0.444) (0.192)
From capital paid in (c)....... -- -- -- -- -- --
------- ------- ------- ------- ------- ------
Total distributions
declared to shareholders..... (0.413) (0.361) (0.422) (0.367) (0.444) (0.192)
------- ------- ------- ------- ------- ------
Net asset value - End of period.. $6.840 $6.840 $7.480 $7.480 $7.160 $7.160
======= ======= ======= ======= ======= ======
Total return (d)(e).............. (2.92)% (3.65)% 10.62% 9.81% 8.41% 2.01%(g)
======= ======= ======= ======= ======= ======
Ratios to average net assets:
Expenses....................... 0.72% (f) 1.47%(f) 0.82% 1.57% 0.85% 1.60%(h)
Net investment income.......... 5.98% 5.23% 5.69% 4.94% 6.33% 5.58%(h)
Fees and expenses waived
or borne by the adviser........ 0.26% 0.26% 0.20% 0.20% 0.35% 0.35%
Portfolio turnover............... 26% 26% 9% 9% 5% 5%
Net assets at end of period
(000).......................... $35,846 $14,731 $41,326 $10,317 $35,017 $2,173
(a) Net of fees and expenses
waived or borne by the
adviser which amounted to.... $0.018 $0.018 $0.015 $0.015 $0.025 $0.009
(b) Class B shares were initially offered on August 4, 1992. Per share amounts
reflect activity from that date.
(c) Because of differences between book and tax basis accounting, there was no
return of capital for federal income tax purposes.
(d) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or CDSC.
(e) Had the adviser not waived or reimbursed a portion of expenses total return
would have been reduced.
(f) Includes service fee since its inception on December 1, 1994, of 0.02%
(not annualized).
(g) Not annualized.
(h) Annualized.
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31
---------------------
1992 1991
-------- -------
CLASS A CLASS A
-------- -------
<S> <C> <C>
Net asset value - Beginning
of period...................... $6.930 $6.820
------- -------
Income (loss) from investment
operations:
Net investment income (a)...... 0.461 0.467
Net realized and unrealized
gain(loss) on investments.... 0.098 0.108
------- -------
Total from investment
operations................... 0.559 0.575
------- -------
Less distributions declared
to shareholders:
From net investment income..... (0.458) (0.465)
From capital paid in (c)....... (0.001) --
------- -------
Total distributions
declared to shareholders..... (0.459) (0.465)
------- -------
Net asset value - End of period.. $7.030 $6.930
======= =======
Total return (d)(e).............. 8.33% 8.70%
======= =======
Ratios to average net assets:
Expenses....................... 0.88% 1.00%
Net investment income.......... 6.58% 6.77%
Fees and expenses waived
or borne by the adviser........ 0.42% 0.37%
Portfolio turnover............... 1% 7%
Net assets at end of period
(000).......................... $30,676 $24,188
(a) Net of fees and expenses
waived or borne by the
adviser which amounted to.... $0.025 $0.009
(b) Class B shares were initially offered on August 4, 1992. Per share amounts
reflect activity from that date.
(c) Because of differences between book and tax basis accounting, there was no
return of capital for federal income tax purposes.
(d) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or CDSC.
(e) Had the adviser not waived or reimbursed a portion of expenses total return
would have been reduced.
(f) Includes service fee since its inception on December 1, 1994, of 0.02%
(not annualized).
(g) Not annualized.
(h) Annualized.
</TABLE>
12
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
===============================================================================
TO THE TRUSTEES OF COLONIAL TRUST V AND THE SHAREHOLDERS OF COLONIAL MINNESOTA
TAX-EXEMPT FUND
In our opinion, the accompanying statement of assets and liabilities,
including the investment portfolio, and the related statements of operations and
of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Colonial Minnesota Tax-Exempt Fund
(a series of Colonial Trust V) at January 31, 1995, the results of its
operations, the changes in its net assets and the financial highlights for the
periods indicated, in conformity with generally accepted accounting principles.
These financial statements and the financial highlights (hereafter referred to
as "financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of portfolio positions
at January 31, 1995 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
March 10, 1995
13
<PAGE>
TRUSTEES
===============================================================================
TOM BLEASDALE
Trustee (formerly Chairman of the Board and Chief Executive Officer, Shore Bank
& Trust Company)
LORA S. COLLINS
Attorney, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
WILLIAM D. IRELAND, JR.
Trustee (formerly Chairman of the Board, Bank of New England - Worcester)
JOHN A. MCNEICE, JR.
Chairman of the Board, Chief Executive Officer and Director, The Colonial Group,
Inc. and Colonial Management Associates, Inc.
WILLIAM E. MAYER
Dean, College of Business and Management, University of Maryland (formerly Dean,
Simon Graduate School of Business, University of Rochester; Chairman and Chief
Executive Officer, C.S. First Boston Merchant Bank; and President and Chief
Executive Officer, The First Boston Corporation)
JAMES L. MOODY, JR.
Chairman of the Board, Hannaford Bros. Co. (formerly Chief Executive Officer,
Hannaford Bros. Co.)
JOHN J. NEUHAUSER
Dean, Boston College School of Management
GEORGE L. SHINN
Financial Consultant (formerly Chairman, Chief Executive Officer and Consultant,
The First Boston Corporation)
ROBERT L. SULLIVAN
Management Consultant
SINCLAIR WEEKS, JR.
Chairman of the Board, Reed & Barton Corporation
14
<PAGE>
===============================================================================
ABOUT OUR COVER...
[GRAPHIC] The symbol on the cover of this Report represents
the Fund's primary investment focus on municipal
bonds.
===============================================================================
Colonial Minnesota Tax-Exempt Fund mails one shareholder report to each
shareholder address. If you would like more than one report, please call our
Literature Department at 1-800-248-2828 and additional reports will be sent to
you.
SHAREHOLDER SERVICES AND TRANSFER AGENT
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
This material may be used with potential investors if it is preceded or
accompanied by a current Fund prospectus containing more complete information
including fees, risks, and expenses.
15
<PAGE>
[GRAPHIC] COLONIAL
MUTUAL FUNDS
[GRAPHIC]
COLONIAL
MINNESOTA
TAX-EXEMPT FUND
=====================================
ANNUAL REPORT
JANUARY 31, 1995
[GRAPHIC] COLONIAL
MUTUAL FUNDS
[RECYCLE LOGO] [SOY BASED INK ICON]
COLONIAL INVESTMENT SERVICES (C)1995
One Financial Center, Boston, Massachusetts 02111-2621
Printed on recycled paper
MN-02/640A-0195
