<PAGE>
LETTER FROM THE PRESIDENT
===============================================================================
Dear Shareholder:
I am pleased to present Colonial Connecticut 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 Connecticut municipal bonds.
<TABLE>
FUND PERFORMANCE (2/1/94 - 1/31/95)(1)
<CAPTION>
CLASS A CLASS B
INCEPTION 11/1/91 6/8/92
- -------------------------------------------------------------------------------
<S> <C> <C>
Distributions declared
per share $0.419 $0.364
- -------------------------------------------------------------------------------
SEC yield on 1/31/95 5.72% 5.29%
- -------------------------------------------------------------------------------
Taxable-equivalent yield
on 1/31/95 at the
maximum offering price 10.23% 9.46%
- -------------------------------------------------------------------------------
12-month total return, assuming
reinvestment of all distributions
and no sales charge or CDSC -4.85% -5.57%
- -------------------------------------------------------------------------------
Net asset value per share
on 1/31/95 $7.08 $7.08
- -------------------------------------------------------------------------------
</TABLE>
ECONOMIC/MARKET OVERVIEW
The pace of economic growth during the fiscal year was much stronger than
expected. This activity, which generated renewed concerns about inflation,
prompted 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. Over the course
of the fiscal year, interest rate increases had the single biggest impact on
Connecticut municipal bonds, resulting in lower prices.
Connecticut's economy improved during 1994, but the recovery was not as
dramatic as for the nation as a whole or other states in the northeast. Of
course, the state had a lot of ground to make up. From 1989 to 1993, 164,000
jobs were lost, or 10% of the total.
Despite its recent problems, Connecticut's fiscal health is sound. It still
has one of the highest per capita income levels in the country, and its overall
wealth helps offset the negative impact of its relatively high debt burden. The
state had budget surpluses for fiscal 1992, 1993, and 1994. Over the first 10
months of 1994 (the most recent period for which data is available), 16,000 new
jobs were created, and the state's unemployment rate of 5.0% as of the end of
November was actually lower than the national average.
One cause for concern is the pledge by Governor Rowland to gradually roll
back the state income tax that had been implemented by his predecessor. To keep
the state's fiscal house in order, revenue reductions will have to be
accompanied by lower expenditures. Management will monitor this situation
closely.
[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 Connecticut municipal bonds, including
high-quality housing, general obligation, and hospital revenue bonds. On January
31, the Fund owned 140 individual issues in 10 public sectors. Over 95% of
portfolio holdings were rated investment grade. Approximately 38% were rated Aaa
- -- the highest quality rating available from the major bond rating agencies.
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 Connecticut 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. 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
Connecticut's new issue supply was down 60.8%. Lead Portfolio Manager Jeffrey
Augustine believes this trend will continue in 1995 -- supply is expected to
drop to $2.9 billion, down from $6.4 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 Connecticut personal income tax and opportunities for long-term appreciation
from a portfolio primarily invested in investment-grade municipal bonds.
<TABLE>
COMPARISON OF THE CHANGE IN VALUE OF $10,000
Hypothetical Investment in Class A shares of Colonial Connecticut
Tax-Exempt Fund, the Lehman Brothers Municipal Bond Index, and the
Lehman Brothers 20-year Municipal Bond Index
11/1/91 - 1/31/95
LEHMAN 20-YEAR: $11,946
LEHMAN MUNICIPAL: $12,207
CLASS A NAV: $12,063
CLASS A MOP: $11,490
<CAPTION>
CLASS A MOP CLASS A NAV LEHMAN MUNICIPAL LEHMAN 20-YEAR
----------- ----------- ---------------- --------------
<S> <C> <C> <C> <C>
10/91 $ 9,525 $10,000 $10,000 $10,000
11/91 9,509 9,983 10,028 10,000
12/91 9,748 10,234 10,244 10,016
1/92 9,745 10,231 10,267 10,229
1/95 11,490 12,063 12,207 11,946
</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 -4.85% -9.37% -5.57% -10.06%
SINCE INCEPTION 5.93% 4.36% 4.68% 3.64%
- ----------------------------------------------------------------------------
<FN>
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 5.72% for Class A
shares and 5.29% 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 5.48% for Class A shares and 5.00% for Class B shares. If the
adviser had not borne certain Fund expenses, total return for Class A and Class
B shares would have been lower; yield for Class A shares would have been 5.21%,
and yield for Class B shares would have been 4.72%. Taxable-equivalent yields
are based on the maximum 44.1% combined federal and Connecticut 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 contingent deferred 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.
</TABLE>
2
<PAGE>
INVESTMENT PORTFOLIO (in thousands) JANUARY 31, 1995
===============================================================================
<TABLE>
<CAPTION>
MUNICIPAL BONDS - 99.1% PAR VALUE
- -------------------------------------------------------------------------------
<S> <C> <C>
EDUCATION - 4.8%
State Health & Educational Facilities
Authority:
Family Education Loan Program,
Series A,
7.200% 11/15/10 . . . . . . . . . . . . . . . . . $ 915 $ 941
Lutheran General Health Care System,
7.250% 07/01/04 . . . . . . . . . . . . . . . . . 200 221
The Taft School, Series 1993 B:
5.250% 07/01/13 . . . . . . . . . . . . . . . . . 350 300
5.400% 07/01/20 . . . . . . . . . . . . . . . . . 1,750 1,474
Trinity College, Series C,
6.000% 07/01/12 . . . . . . . . . . . . . . . . . 1,000 969
Yale University:
Series K,
6.375% 07/01/13 . . . . . . . . . . . . . . . . . 500 502
Series 1992 R, RIB (variable rate),
6.402% 06/10/30(a). . . . . . . . . . . . . . . . 2,500 2,212
Supplemental Loan Authority,
Series 1993 A,
6.375% 11/15/99 . . . . . . . . . . . . . . . . . 485 491
-------
7,110
- -------------------------------------------------------------------------------
ELECTRIC - 6.6%
Commonwealth of Puerto Rico,
Electric Power Authority, Series T,
5.500% 07/01/20 . . . . . . . . . . . . . . . . . 5,000 4,306
State Development Authority,
New England Power Co.,
7.250% 10/15/15 . . . . . . . . . . . . . . . . . 3,450 3,614
State Municipal Electric Energy
Cooperative, Series A,
5.000% 01/01/18(a) . . . . . . . . . . . . . . . . 2,250 1,887
-------
9,807
- -------------------------------------------------------------------------------
GENERAL OBLIGATIONS - 25.7%
Commonwealth of Puerto Rico:
5.500% 07/01/08 . . . . . . . . . . . . . . . . . 3,330 3,184
5.500% 07/01/13 . . . . . . . . . . . . . . . . . 1,850 1,653
Series 1993,
3.785% 07/01/08(b). . . . . . . . . . . . . . . . 1,250(c) 461
Series 1994,
6.500% 07/01/23 . . . . . . . . . . . . . . . . . 2,000 2,000
Brookfield, Series 1992:
6.000% 09/15/09 . . . . . . . . . . . . . . . . . 240 239
6.000% 09/15/10 . . . . . . . . . . . . . . . . . 235 233
Cromwell, Series 1991,
5.250% 12/15/08 . . . . . . . . . . . . . . . . . 100 91
Danbury:
4.500% 02/01/12 . . . . . . . . . . . . . . . . . 1,280 1,045
4.500% 02/01/13 . . . . . . . . . . . . . . . . . 1,280 1,032
5.625% 08/15/11 . . . . . . . . . . . . . . . . . 690 651
East Haddam,
6.300% 06/15/09 . . . . . . . . . . . . . . . . . 260 261
Granby, Series 1993:
6.500% 04/01/09 . . . . . . . . . . . . . . . . . 200 209
6.550% 04/01/10 . . . . . . . . . . . . . . . . . 175 183
Griswold, Series 1992,
6.000% 04/15/09 . . . . . . . . . . . . . . . . . 410 407
Groton,
5.750% 01/15/07 . . . . . . . . . . . . . . . . . 285 278
Hamden, Series 1992:
6.000% 10/01/11 . . . . . . . . . . . . . . . . . 425 414
6.000% 10/01/12 . . . . . . . . . . . . . . . . . 425 414
Hartford:
5.625% 02/01/11 . . . . . . . . . . . . . . . . . 600 567
5.625% 02/01/12 . . . . . . . . . . . . . . . . . 600 566
5.625% 02/01/13 . . . . . . . . . . . . . . . . . 600 565
Hartford County Metropolitan
District, Series 1993:
5.200% 12/01/12 . . . . . . . . . . . . . . . . . 600 533
5.200% 12/01/13 . . . . . . . . . . . . . . . . . 600 528
Montville, Series 1993,
6.300% 03/01/12 . . . . . . . . . . . . . . . . . 335 343
New Britain, Series 1992,
6.000% 02/01/08 . . . . . . . . . . . . . . . . . 400 401
Series 1993 A,
6.000% 10/01/12 . . . . . . . . . . . . . . . . . 2,000 1,965
North Branford:
6.200% 02/15/11. . . . . . . . . . . . . . . . . 195 195
6.200% 02/15/12. . . . . . . . . . . . . . . . . 225 224
Norwich:
5.750% 09/15/13. . . . . . . . . . . . . . . . . 875 829
5.750% 09/15/14. . . . . . . . . . . . . . . . . 870 818
Plainfield, Series 1992,
6.375% 08/01/11. . . . . . . . . . . . . . . . . 500 506
Somers:
6.000% 01/15/11. . . . . . . . . . . . . . . . . 125 123
6.250% 01/15/08. . . . . . . . . . . . . . . . . 270 276
South Windsor, Series 1992,
6.200% 09/01/10. . . . . . . . . . . . . . . . . 495 496
Southington, Series 1993,
5.000% 06/15/13. . . . . . . . . . . . . . . . . 210 183
Stamford, Series 1992,
6.125% 11/01/11. . . . . . . . . . . . . . . . . 1,050 1,047
State Development Authority,
Series 1993 A,
5.250% 11/15/11. . . . . . . . . . . . . . . . . 750 654
State General Obligation:
Series 1989 B,
(d) 11/01/09. . . . . . . . . . . . . . . . . . . 1,450 593
Series 1992 A1,
(d) 05/15/12. . . . . . . . . . . . . . . . . . . 524 181
</TABLE>
See notes to investment portfolio.
3
<PAGE>
INVESTMENT PORTFOLIO - continued
===============================================================================
<TABLE>
<CAPTION>
MUNICIPAL BONDS - CONT. PAR VALUE
- -------------------------------------------------------------------------------
<S> <C> <C>
GENERAL OBLIGATIONS - CONT.
Series 1992 A,
6.500% 03/15/12. . . . . . . . . . . . . $ 500 $ 531
Series 1993 A,
5.600% 11/15/10. . . . . . . . . . . . . 1,000 944
Series 1993 B:
5.400% 03/15/09. . . . . . . . . . . . . 100 93
5.400% 09/15/09(a) . . . . . . . . . . . 4,500 4,191
State Regional School District No. 5:
Series 1992,
6.300% 03/01/10. . . . . . . . . . . . . 400 404
Series 1993,
5.600% 02/15/12. . . . . . . . . . . . . 150 141
State Regional School District
No. 14, Woodbury & Bethlehem,
Series 1991,
6.100% 12/15/06. . . . . . . . . . . . . 285 290
Stratford,
7.300% 03/01/12. . . . . . . . . . . . . 500 551
Torrington:
Series 1992,
6.400% 05/15/10. . . . . . . . . . . . . 750 763
Series 1993:
5.400% 04/15/10. . . . . . . . . . . . . 725 670
5.400% 04/15/11. . . . . . . . . . . . . 725 668
Vernon, Series 1988,
7.100% 10/15/03. . . . . . . . . . . . . 250 279
Waterbury, Series 1993,
5.375% 04/15/08. . . . . . . . . . . . . 750 710
Westbrook, Series 1992:
6.300% 03/15/12. . . . . . . . . . . . . 265 269
6.400% 03/15/09. . . . . . . . . . . . . 630 649
West Haven, Series 1993 B:
5.375% 06/01/08. . . . . . . . . . . . . 630 589
5.400% 06/01/09. . . . . . . . . . . . . 665 621
5.400% 06/01/10. . . . . . . . . . . . . 705 653
5.400% 06/01/11. . . . . . . . . . . . . 740 680
-------
38,044
- -------------------------------------------------------------------------------
HOSPITALS & HEALTH CARE - 15.5%
State Health & Educational
Facilities Authority:
Bridgeport Hospital, Series A,
6.500% 07/01/12. . . . . . . . . . . . . 1,000 1,014
Danbury Hospital, Series E,
6.500% 07/01/14. . . . . . . . . . . . . 1,400 1,417
Lawrence & Memorial Hospitals:
Series C:
6.250% 07/01/22. . . . . . . . . . . . . 400 422
6.375% 07/01/12. . . . . . . . . . . . . 1,000 1,062
Series 1993 D,
5.000% 07/01/22(a) . . . . . . . . . . . 1,500 1,207
Manchester Memorial Hospital,
Series 1993 D,
5.750% 07/01/22. . . . . . . . . . . . . 400 363
Middlesex Hospital, Series G,
6.250% 07/01/22. . . . . . . . . . . . . 1,250 1,219
New Britain Hospital, Series 1991 A,
7.750% 07/01/22. . . . . . . . . . . . . 200 201
Norwalk Hospital, Series D,
6.250% 07/01/12. . . . . . . . . . . . . 1,750 1,741
6.250% 07/01/22. . . . . . . . . . . . . 1,000 975
Pope John Paul II Health Center,
6.250% 11/01/13. . . . . . . . . . . . . 2,000 1,880
St. Francis Hospital, Series B:
6.125% 07/01/10(a) . . . . . . . . . . . 1,000 989
6.200% 07/01/22. . . . . . . . . . . . . 1,000 969
Series 1993 C,
5.000% 07/01/13(a) . . . . . . . . . . . 4,500 3,825
St. Raphael Hospital:
Series E,
6.750% 07/01/13. . . . . . . . . . . . . 1,400 1,445
Series 1992 F,
6.200% 07/01/14. . . . . . . . . . . . . 750 739
Series 1992 G,
6.200% 07/01/14. . . . . . . . . . . . . 225 222
Series 1993 H,
5.250% 07/01/09(a)(e) . . . . . . . . . 3,410 3,141
William W. Backus Hospital, Series C,
6.000% 07/01/12. . . . . . . . . . . . . 250 219
-------
23,050
- -------------------------------------------------------------------------------
HOUSING - 14.0%
MULTI-FAMILY -7.1%
New Britain Housing Authority,
Nathan Hale Apartments:
Series 1992 A,
6.500% 07/01/02. . . . . . . . . . . . . 145 150
Series 1992 B,
6.875% 07/01/24. . . . . . . . . . . . . 2,590 2,619
State Housing Finance Authority:
Series 1992 A-1,
5.850% 11/15/16. . . . . . . . . . . . . 2,000 1,827
Series 1993 B:
5.650% 05/15/06. . . . . . . . . . . . . 550 530
6.200% 05/15/12. . . . . . . . . . . . . 5,000 4,844
Waterbury Nonprofit Housing Corp.,
Fairmont Heights, Series 1993 A,
6.500% 01/01/26. . . . . . . . . . . . . 600 597
-------
10,567
=======
</TABLE>
See notes to investment portfolio.
4
<PAGE>
INVESTMENT PORTFOLIO - continued
===============================================================================
<TABLE>
<CAPTION>
MUNICIPAL BONDS - CONT. PAR VALUE
- -------------------------------------------------------------------------------
<S> <C> <C>
HOUSING - CONT.
SINGLE-FAMILY - 6.9%
State Housing Finance Authority:
6.350% 05/15/17. . . . . . . . . . . . . $1,250 $ 1,214
Series B2,
6.750% 05/15/22. . . . . . . . . . . . . 2,500 2,516
Series D1,
6.625% 05/15/24. . . . . . . . . . . . . 500 498
Series 1990 B-4,
7.300% 11/15/03. . . . . . . . . . . . . 225 235
Series 1991-C,
6.600% 11/15/23. . . . . . . . . . . . . 1,590 1,588
Series 1991 C-1,
6.450% 11/15/11. . . . . . . . . . . . . 1,325 1,328
Series 1991 C-2,
6.700% 11/15/22. . . . . . . . . . . . . 110 109
Series 1992 B,
6.700% 11/15/12. . . . . . . . . . . . . 2,700 2,751
-------
10,239
- -------------------------------------------------------------------------------
NURSING HOMES - 6.3%
State Development Authority:
Clintonville Manor Realty,
6.750% 06/20/21. . . . . . . . . . . . . 1,490 1,494
Duncaster Inc., Series 1992:
6.700% 09/01/07. . . . . . . . . . . . . 500 522
6.750% 09/01/15. . . . . . . . . . . . . 2,500 2,475
Mansfield Center for Nursing,
6.000% 11/01/22. . . . . . . . . . . . . 1,250 1,108
Noble Horizons Nursing Home:
5.875% 11/01/12. . . . . . . . . . . . . 640 579
6.000% 11/01/22. . . . . . . . . . . . . 600 535
Windsor Nursing Home Project,
7.125% 11/01/24. . . . . . . . . . . . . 2,000 2,062
Yale New Haven Hospital,
Series G,
6.500% 07/01/12. . . . . . . . . . . . . 500 507
-------
9,282
- -------------------------------------------------------------------------------
PUBLIC FACILITY & IMPROVEMENT - 7.5%
Commonwealth of Puerto Rico, Public
Building Authority, Series L,
5.750% 07/01/16. . . . . . . . . . . . . 2,000 1,810
Farmington, General Obligation,
Series 1993:
5.700% 01/15/12. . . . . . . . . . . . . 590 572
5.700% 01/15/13. . . . . . . . . . . . . 570 549
State Certificates of Participation,
Middletown Courthouse Project:
6.250% 12/15/09(a) . . . . . . . . . . . 1,685 1,698
6.250% 12/15/10. . . . . . . . . . . . . 750 754
6.250% 12/15/12. . . . . . . . . . . . . 100 101
6.250% 12/15/13. . . . . . . . . . . . . 850 854
State Development Authority,
Jewish Community of New Haven,
Series 1992,
6.600% 09/01/17. . . . . . . . . . . . . $ 500 $ 508
State Resource Recovery Authority:
Series 1985 B,
7.300% 11/15/12. . . . . . . . . . . . . 200 211
State Resource Recovery Authority,
American Ref-Fuel Co.:
Series 1988 A,
8.000% 11/15/15. . . . . . . . . . . . . 2,500 2,700
Series 1992 A,
6.450% 11/15/22. . . . . . . . . . . . . 1,425 1,318
-------
11,075
- -------------------------------------------------------------------------------
TRANSPORTATION - 6.2%
Commonwealth of Puerto Rico,
Highway & Transportation Authority:
4.040% 07/01/09(b) . . . . . . . . . . . 415(c) 162
5.500% 07/01/09. . . . . . . . . . . . . 1,110 1,009
State Special Tax Obligation,
Transportation Infrastructure:
Series 1991 B,
6.250% 10/01/09. . . . . . . . . . . . . 2,500 2,516
Series 1992 B,
6.125% 09/01/12. . . . . . . . . . . . . 4,600 4,537
Series 1993 A,
5.375% 09/01/08. . . . . . . . . . . . . 1,000 914
-------
9,138
- -------------------------------------------------------------------------------
WASTE DISPOSAL - 0.9%
Bristol Resource Recovery Facility,
Ogden Martin Systems,
6.500% 07/01/14(f) . . . . . . . . . . . 1,500 1,371
- -------------------------------------------------------------------------------
WATER & SEWER - 11.6%
Hartford County Metropolitan
District, General Obligation,
Series 1991,
6.200% 11/15/10. . . . . . . . . . . . . 220 221
New Britain, General Obligation,
Series 1993 B,
6.000% 03/01/12. . . . . . . . . . . . . 1,000 983
South Central Regional Water
Authority, Series 10 A:
5.750% 08/01/12(a) . . . . . . . . . . . 3,500 3,299
5.875% 08/01/12. . . . . . . . . . . . . 1,000 1,024
State Clean Water Fund:
Series 1991,
7.000% 01/01/11. . . . . . . . . . . . . 1,850 1,956
Series 1992,
6.125% 02/01/12. . . . . . . . . . . . . 3,630 3,594
</TABLE>
See notes to investment portfolio.
5
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO - continued
===============================================================================
<CAPTION>
MUNICIPAL BONDS - CONT. PAR VALUE
- -------------------------------------------------------------------------------
<S> <C> <C>
WATER & SEWER - CONT.
Series 1993,
5.875% 04/01/09 . . . . . . . . . . . . . . . . . $1,000 $ 986
Series 1994,
5.800% 06/01/16 . . . . . . . . . . . . . . . . . 1,000 939
State Development Authority:
Bridgeport Hydraulic Co., Series B,
5.500% 06/01/28 . . . . . . . . . . . . . . . . . 1,000 871
Pfizer Inc. Project,
7.000% 07/01/25 . . . . . . . . . . . . . . . . . 2,000 2,067
State Development Authority,
Stamford Water Co., Series 1993,
5.300% 09/01/28 . . . . . . . . . . . . . . . . . 1,500 1,271
--------
17,211
- -------------------------------------------------------------------------------
Total investments (cost $150,827) (g) 146,894
- -------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 1.0%
- -------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (H)
IL Health Facilities Authority,
Elmhurst Hospital,
4.100% 01/01/20. . . . . . . . . . . . . 100 100
NY Triborough Bridge & Tunnel Authority,
3.400% 01/01/24. . . . . . . . . . . . . 700 700
WY Green River,
4.200% 06/01/07. . . . . . . . . . . . . 700 700
- -------------------------------------------------------------------------------
Total short-term obligations 1,500
- -------------------------------------------------------------------------------
OTHER ASSETS & LIABILITIES, NET - (0.1)% (198)
- -------------------------------------------------------------------------------
NET ASSETS - 100.0% $148,196
- -------------------------------------------------------------------------------
<FN>
Notes to investment portfolio:
(a) These securities, or a portion thereof, with a market value of $18,514, are
being used to collateralize open future contracts.
(b) These securities are variable rate instruments; on July 1, 1998, they will
change to fixed rate instruments. Interest income is accrued daily on the
notional amounts at the applicable interest rate.
(c) Notional amount.
(d) Zero coupon bond.
(e) This security, or a portion thereof, with a market value of $1,474, is being
used to collateralize the delayed delivery purchase indicated in note (f)
below.
(f) This security has been purchased on a delayed delivery basis, for settlement
at a future date beyond the customary settlement time.
(g) Cost for federal income tax purposes is the same.
(h) 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.
</TABLE>
<TABLE>
Short futures contracts open at January 31, 1995:
<CAPTION>
Par value Unrealized
covered by Expiration depreciation
Type contracts month at 1/31/95
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Municipal bond $13,800 March $494
Treasury bond $ 3,200 March $ 73
- -------------------------------------------------------------------------------
</TABLE>
Acronym Name
--------------------- -----------------------
RIB Residual Interest Bonds
See notes to investment portfolio.
6
<PAGE>
FINANCIAL STATEMENTS
===============================================================================
<TABLE>
STATEMENT OF ASSETS & LIABILITIES
January 31, 1995
(in thousands except for per share amounts and footnote)
- -------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments at value (cost $150,827)......................... $146,894
Short-term investments....................................... 1,500
--------
148,394
Receivable for:
Interest.................................. $2,079
Investments sold.......................... 828
Fund shares sold.......................... 356
Deferred organization expenses............... 6 3,269
------ --------
Total assets........................................ 151,663
LIABILITIES
Payable for:
Investments purchased..................... 1,500
Distributions............................. 691
Fund shares repurchased................... 638
Variation margin on futures............... 93
Payable to custodian......................... 506
Payable to adviser........................... 8
Accrued:
Deferred Trustees fees.................... 2
Other........................................ 29
------
Total liabilities................................... 3,467
--------
NET ASSETS................................................... $148,196
--------
Net asset value & redemption price per share -
Class A ($74,616/10,539)................................. $ 7.08
--------
Maximum offering price per share - Class A
($7.08/0.9525)............................................ $ 7.43*
--------
Net asset value & offering price per share -
Class B ($73,580/10,393)................................. $ 7.08
--------
COMPOSITION OF NET ASSETS
Capital paid in........................................... $156,406
Undistributed net investment income....................... 91
Accumulated net realized loss............................. (3,801)
Net unrealized depreciation on:
Investments............................................. (3,933)
Open futures contracts.................................. (567)
--------
$148,196
========
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
Year ended January 31, 1995
(in thousands)
- -------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest..................................................... $ 9,422
EXPENSES
Management fee............................... $ 870
Service fee.................................. 27
Distribution fee - Class B................... 540
Transfer agent............................... 240
Bookkeeping fee.............................. 63
Trustees fees................................ 17
Custodian fee................................ 7
Audit fee.................................... 31
Legal fee.................................... 13
Registration fees............................ 30
Reports to shareholders...................... 7
Amortization of deferred
organization expense........................ 4
Other........................................ 20
1,869
--------
Fees waived by the adviser................... (841) 1,028
-------- --------
Net investment income................................ 8,394
--------
NET REALIZED AND UNREALIZED LOSS
ON PORTFOLIO POSITIONS
Net realized loss on:
Investments................................ (2,176)
Closed futures contracts................... (181)
--------
Net realized loss....................................... (2,357)
--------
NET UNREALIZED DEPRECIATION
DURING THE PERIOD ON:
Investments................................ (14,889)
Open futures contracts..................... (244)
--------
Net unrealized depreciation............................. (15,133)
--------
Net loss............................................. (17,490)
Net decrease in net assets from --------
operations................................................ $ (9,096)
========
<FN>
* On sales of $50,000 or more the offering price is reduced.
</TABLE>
See notes to financial statements.
7
<PAGE>
FINANCIAL STATEMENTS - continued
===============================================================================
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(in thousands)
- -----------------------------------------------------------------------------------------------
<CAPTION>
Year ended January 31
----------------------
1995 1994
-------- --------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income.............................................. $ 8,394 $ 6,998
Net realized loss.................................................. (2,357) (1,274)
Net unrealized appreciation (depreciation)......................... (15,133) 8,706
-------- --------
Net increase (decrease) from operations...................... (9,096) 14,430
Distributions
From net investment income - Class A............................... (4,752) (4,473)
From net investment income - Class B............................... (3,634) (2,436)
From net realized gains - Class A.................................. (12) --
From net realized gains - Class B.................................. (9) --
-------- --------
(17,503) 7,521
-------- --------
Fund share transactions
Receipts for shares sold - Class A................................. 9,992 31,742
Value of distributions reinvested - Class A........................ 2,706 2,404
Cost of shares repurchased - Class A............................... (19,845) (10,595)
-------- --------
(7,147) 23,551
-------- --------
Receipts for shares sold - Class B................................. 16,129 42,004
Value of distributions reinvested - Class B........................ 2,236 1,476
Cost of shares repurchased - Class B............................... (8,746) (2,290)
-------- --------
9,619 41,190
-------- --------
Net increase from Fund share transactions.................... 2,472 64,741
-------- --------
Total increase (decrease).............................. (15,031) 72,262
NET ASSETS
Beginning of period................................................ 163,227 90,965
-------- --------
End of period (including undistributed
net investment income of $91 and $80, respectively)............... $148,196 $163,227
======== ========
NUMBER OF FUND SHARES
Sold - Class A..................................................... 1,375 4,135
Issued for distributions reinvested - Class A...................... 376 312
Repurchased - Class A.............................................. (2,800) (1,370)
-------- --------
(1,049) 3,077
-------- --------
Sold - Class B..................................................... 2,223 5,450
Issued for distributions reinvested - Class B...................... 311 191
Repurchased - Class B.............................................. (1,240) (296)
-------- --------
1,294 5,345
-------- --------
Net increase in shares outstanding........................... 245 8,422
Outstanding at
Beginning of period............................................. 20,687 12,265
-------- --------
End of period................................................... 20,932 20,687
======== ========
</TABLE>
See notes to financial statements.
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS
===============================================================================
NOTE 1. ACCOUNTING POLICIES
Colonial Connecticut 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.
- -------------------------------------------------------------------------------
DEFERRED ORGANIZATION EXPENSES
The Fund incurred $17,793 of expenses in connection with its organization,
initial registration with the Securities and Exchange Commission and with
various states, and the initial public offering of its shares. These expenses
were deferred and are being amortized on a straight-line basis over five years.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS - continued
===============================================================================
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, 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 $33,572 on sales of the
Fund's Class A shares and received contingent deferred sales charges (CDSC) of
$198,104 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. The plan also requires 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 as
repayment to the Distributor for amounts paid by the Distributor to dealers who
sold such shares.
- -------------------------------------------------------------------------------
EXPENSE LIMITS
The Adviser has agreed, until further notice to waive fees and bear certain
Fund expenses to the extent that total expenses (exclusive of service and
distribution fees, brokerage commissions, interest, taxes, and extraordinary
expenses, if any) exceed 0.30% 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 $38,486,847 and
$33,660,362, respectively.
Unrealized appreciation (depreciation) at January 31, 1995, based on cost
of investments for both financial statement and federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation................................ $ 1,479,155
Gross unrealized depreciation................................ (5,411,748)
-----------
Net unrealized depreciation............................. $(3,932,593)
===========
</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>
2003...... $2,374,000
</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>
===============================================================================
<TABLE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are as follows:
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
PERIOD ENDED
YEAR ENDED JANUARY 31 JANUARY 31
------------------------------------------------------------------- ------------
1995 1994 1993 1992
-------------------- ------------------- ------------------- -----------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B(b) CLASS A(c)
------- ------- -------- ------- ------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning
of period................................... $ 7.890 $ 7.890 $ 7.420 $ 7.420 $ 7.190 $ 7.200 $ 7.140
------- ------- -------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income (a)................... 0.418 0.363 0.429 0.372 0.449 0.256 0.118
Net realized and
unrealized gain (loss) on investments..... (0.809) (0.809) 0.465 0.465 0.270 0.257 0.046
------- ------- -------- ------- ------- ------- -------
Total from investment operations.......... (0.391) (0.446) 0.894 0.837 0.719 0.513 0.164
------- ------- -------- ------- ------- ------- -------
Less distributions declared to shareholders:
From net investment income.................. (0.418) (0.363) (0.424) (0.367) (0.452) (0.256) (0.114)
In excess of net investment
income.................................... -- -- -- -- (0.002) (0.002) --
(0.001) (0.001) -- -- (0.021) (0.021) --
From net realized gains..................... -- -- -- -- (0.014) (0.014) --
In escess of net realized gains............. ------- ------- -------- ------- ------- ------- -------
Total from distributions
declared to shareholders.................. (0.419) (0.364) (0.424) (0.367) (0.489) (0.293) (0.114)
------- ------- -------- ------- ------- ------- -------
Net asset value - End of period............... $ 7.080 $ 7.080 $ 7.890 $ 7.890 $ 7.420 $ 7.420 $ 7.190
------- ------- -------- ------- ------- ------- -------
Total return(d)(e)............................ (4.85)% (5.57)% 12.30% 11.49% 10.34% 7.23%(g) 2.31%(g)
------- ------- -------- ------- ------- ------- -------
Ratios to average net assets
Expenses.................................... 0.32%(f) 1.07%(f) 0.22% 0.97% -- 0.75%(h) --
Net investment income....................... 5.81% 5.06% 5.48% 4.73% 6.00% 5.25%(h) 4.68%(h)
Fees and expenses waived
or borne by the adviser................... 0.55% 0.55% 0.65% 0.65% 0.90% 0.90% 1.32%(h)
Portfolio turnover............................ 22% 22% 5% 5% 4% 4% 53%(h)
Net assets at end of period (000)............. $74,616 $73,580 $91,436 $ 71,791 $63,126 $27,839 $12,349
<FN>
(a) Net of fees and expenses
borne by the adviser which
amounted to.............................. $0.039 $ 0.039 $ 0.051 $ 0.051 $ 0.067 $ 0.042 $ 0.033
(b) Class B shares were initially offered on June 8, 1992. Per share amounts reflect
activity from that date.
(c) The Fund commenced investment operations on November 1, 1991.
(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
(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
CONNECTICUT 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 Connecticut 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)
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)
JOHN A. MCNEICE, JR.
Chairman of the Board, Chief Executive Officer and Director, The Colonial Group,
Inc. and Colonial Management Associates, Inc.
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...
The symbol on the cover of this Report represents the Fund's primary investment
focus on municipal bonds.
- -------------------------------------------------------------------------------
Colonial Connecticut 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>
[LOGO] COLONIAL
MUTUAL FUNDS
[GRAPHIC]
COLONIAL
CONNECTICUT
TAX-EXEMPT FUND
===============================================================================
ANNUAL REPORT
JANUARY 31, 1995
[LOGO] COLONIAL
MUTUAL FUNDS
[GRAPHIC]
[RECYCLE LOGO]
[SOY INK LOGO]
COLONIAL INVESTMENT SERVICES (C)1995
One Financial Center, Boston, Massachusetts 02111-2621
Printed on recycled paper
CT-02/636A-0195
