<PAGE>
COLONIAL
FLORIDA TAX-EXEMPT FUND
ANNUAL REPORT
JANUARY 31, 1996
<PAGE>
COLONIAL FLORIDA TAX-EXEMPT FUND HIGHLIGHTS
FEBRUARY 1, 1995 - JANUARY 31, 1996
INVESTMENT OBJECTIVE: Colonial Florida Tax-Exempt Fund seeks as high a level of
after-tax total return, as is consistent with prudent risk, by pursuing current
income exempt from federal income tax and opportunities for long-term
appreciation from a portfolio primarily invested in investment grade municipal
bonds. Fund shares are also intended to be exempt from the Florida intangibles
tax.
THE FUND IS DESIGNED TO OFFER:
- High monthly double-tax-free income
- Long-term appreciation
- Diversification and emphasis on quality
PORTFOLIO MANAGER COMMENTARY: "International trade and tourism have helped
Florida's economy expand above the national average. The municipal bonds in your
Fund have been favorably affected by this positive economic trend."
COLONIAL FLORIDA TAX-EXEMPT FUND PERFORMANCE
<TABLE>
<CAPTION>
Class A Class B
<S> <C> <C>
Inception dates 2/1/93 2/1/93
- -------------------------------------------------------------------------------
Distributions declared per share* $ 0.419 $ 0.364
- -------------------------------------------------------------------------------
SEC yields on 1/31/96** 4.59% 4.06%
Taxable-equivalent SEC yields*** 7.60% 6.72%
- -------------------------------------------------------------------------------
12-month total returns, assuming
reinvestment of all distributions and
no sales charge or contingent deferred
sales charge (CDSC) 13.55% 12.72%
- -------------------------------------------------------------------------------
Net asset value per share at 1/31/96 $ 7.62 $ 7.62
</TABLE>
*A portion of the Fund's income may be subject to the alternative minimum tax.
**The 30-day SEC yields on January 31, 1996 reflect the portfolio's earning
power, net of expenses, expressed as an annualized percentage of the maximum
offering price per share at the end of the period. If the Adviser had not waived
or borne certain Fund expenses, SEC yields would have been lower; the yield for
Class A shares would have been 4.16% and the yield for Class B shares would have
been 3.61%.
***Taxable-equivalent SEC yields are based on the maximum effective 39.6%
federal income tax rate.
<TABLE>
<CAPTION>
QUALITY BREAKDOWN
(as of 1/31/96)
<S> <C>
AAA ...................... 58.4%
AA ....................... 17.0%
A ........................ 10.9%
BBB ...................... 2.3%
Non-rated ................ 4.3%
Cash & Equivs ............ 7.1%
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SECTORS
(as of 1/31/96)
<S> <C>
Water & Sewer ............ 13.2%
General Obligations ...... 12.8%
Refunded ................. 11.1%
Hospitals ................ 8.4%
Single-Family Housing .... 8.2%
</TABLE>
Because the Fund is actively managed, quality and sector weightings will change.
2
<PAGE>
PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
[PHOTO]
I am pleased to present your Fund's annual report for the period ended January
31, 1996. First, however, I would like to extend my thanks to President John A.
McNeice, Jr., who is retiring this month after a career with Colonial that
spanned 40 years. We look forward to his continued involvement on the executive
committee of the board of directors at our parent company, Liberty Financial
Companies, Inc.
In my new position, I will direct Colonial's focus on the delivery of superior
investment performance over the long term. To achieve this mission, we will
continue to seek the optimal combination of talented people and effective
investment disciplines.
The receipt of your annual report is a good time to reflect on market conditions
and the performance of your Fund during the past 12 months. Falling interest
rates and minimal inflation helped the economy grow at a comfortable pace in
1995 and created a positive environment for fixed income and municipal
investments. After a difficult 1994, investors who stayed the course during 1995
were amply rewarded.
We expect slow growth and low inflation to continue in 1996, and believe that
further reductions in interest rates may take place later in the year. In the
following pages you'll find detailed information on your Fund's performance as
well as an in-depth discussion with the portfolio manager.
I am enthusiastic about -- and dedicated to achieving -- Colonial's mission of
providing you with competitive investment returns. In my new role, I look
forward to communicating with you regarding your Colonial investment. We
appreciate the opportunity to help you meet your investment goals.
Respectfully,
/s/ Harold W. Cogger
- --------------------
Harold W. Cogger
President
March 13, 1996
Because market conditions change frequently, there can be no assurance that the
trends described here will continue, come to pass, or affect Fund performance.
3
<PAGE>
PORTFOLIO MANAGEMENT REPORT
ROBERT WAAS is a Vice President of Colonial Management Associates, Inc., and
Portfolio Manager of Colonial Florida Tax-Exempt Fund and five other Colonial
tax-exempt funds.
Q: HOW DID THE FUND PERFORM RELATIVE TO THE LEHMAN BROTHERS MUNICIPAL BOND INDEX
AND WHY?
A: The Fund earned a total return of 13.55% at net asset value for Class A
shares -- an attractive gain, but lower than the Lehman Municipal Bond Index,
which is comprised of long bonds representing a number of states, not just
Florida. The Index posted a return of 15.06%.
Early in 1995, the Fund was structured defensively and did not benefit fully
from declining interest rates. Most of the portfolio was invested in premium
bonds which are not very sensitive to changes in interest rates and thus did not
participate well in this rally. Of course, if interest rates were to rise,
premium bonds would help minimize potential losses.
Q: HOW DID YOUR INVESTMENT STRATEGY CHANGE DURING THE PERIOD?
A: At mid-year we began pursuing a two-fold strategy: buying non-callable bonds
on one hand, to boost the appreciation potential -- and premium bonds on the
other, to help enhance the yield and reduce volatility. At year end about 39% of
the holdings were in non-callable bonds (up from 16% at the beginning of the
year) and the average coupon increased to 6.02% from 5.76%. We are starting to
see improved performance.
Q: WHAT WAS THE QUALITY OF THE PORTFOLIO?
A: Over 86% of the securities were rated A or higher, and 58% had the highest
quality rating, AAA. Most of the issuance in Florida is high quality. At this
time, we believe that the lower-rated, or unrated, issues do not offer enough
yield premium to compensate for the added risk.
Q: WHAT ARE THE LARGEST SECTORS IN THE FUND?
A: We like electric utilities in Florida due to the lack of excess capacity in
the surrounding states. Overall, we have about 13% in water and sewer. The other
two large sectors are general obligation bonds and refunded.
Q: WHAT IS THE CURRENT ECONOMIC CLIMATE IN FLORIDA?
A: The economy in Florida is expanding above the national average. International
trade and tourism are thriving, and the warm weather has been a strong magnet
during this cold winter in the North.
4
<PAGE>
Q: WHAT IS YOUR OUTLOOK FOR 1996?
A: Given the most recent price declines, we believe the bond market has already
discounted stronger economic growth and higher inflation expectations. We are,
therefore, cautiously optimistic about our interest rate outlook going forward.
Additionally, the fear of tax reform is beginning to subside and municipal bonds
are well positioned to outperform taxable securities.
COLONIAL FLORIDA TAX-EXEMPT FUND'S INVESTMENT PERFORMANCE
Change in Value of $10,000 from 2/93 (inception) to 1/96
Based on Maximum Offering Price (MOP) for Class A Shares
and Applicable Contingent Deferred Sales Charge (CDSC) for Class B Shares
<TABLE>
<CAPTION>
LABEL A B C D E
CFLTEF CLASS A NAV MOP LEHMAN CFLTEF CLASS B
<S> <C> <C> <C> <C>
2/93 10000 9525 10000 2/93
2/93 10359 9867 10361.57 2/93
2/93 10183 9700 10252.08 2/93
2/93 10300 9811 10355.39 2/93
2/93 10363 9871 10413.54 2/93
2/93 10546 10045 10587.68 2/93
2/93 10552 10051 10601.29 2/93
2/93 10777 10265 10822.13 2/93
2/93 10907 10389 10945.54 2/93
2/93 10941 10422 10966.57 2/93
2/93 10822 10308 10869.76 2/93
2/93 11064 10538 11099.26 2/93
2/93 11167 10636 11226.07 2/93
2/93 10834 10319 10935.33 2/93
2/93 10217 9732 10489.94 2/93
2/93 10295 9806 10579.02 2/93
2/93 10385 9892 10670.57 2/93
2/93 10391 9897 10605.31 2/93
2/93 10570 10068 10799.86 2/93
2/93 10547 10046 10837.29 2/93
2/93 10423 9928 10678.31 2/93
2/93 10140 9658 10488.71 2/93
2/93 9941 9469 10298.8 2/93
2/93 10260 9773 10525.52 2/93
2/93 10594 10091 10826.47 2/93
2/93 10947 10427 11141.34 2/93
2/93 11046 10521 11269.39 2/93
2/93 11055 10530 11282.69 2/93
2/93 11336 10797 11642.72 2/93
2/93 11101 10573 11540.96 2/93
2/93 11187 10656 11650.14 2/93
2/93 11254 10720 11797.99 2/93
2/93 11337 10799 11872.53 2/93
2/93 11545 10997 12045.12 2/93
2/93 11784 11225 12245.24 2/93
2/93 11962 11394 12362.77 2/93
2/93 12031 11459 12456.18 2/93
</TABLE>
<TABLE>
<CAPTION>
F G H
NAV MOP LEHMAN
<S> <C> <C>
10000 10000 10000
10352 10352 10361.57
10171 10171 10252.08
10281 10281 10355.39
10338 10338 10413.54
10514 10514 10587.68
10513 10513 10601.29
10731 10731 10822.13
10854 10854 10945.54
10882 10882 10966.57
10757 10757 10869.76
10990 10990 11099.26
11086 11086 11226.07
10748 10748 10935.33
10130 10130 10489.94
10200 10200 10579.02
10284 10284 10670.57
10283 10283 10605.31
10454 10454 10799.86
10425 10425 10837.29
10295 10295 10678.31
10009 10009 10488.71
9806 9806 10298.8
10115 10115 10525.52
10439 10439 10826.47
10780 10780 11141.34
10870 10870 11269.39
10872 10872 11282.69
11142 11142 11642.72
10904 10904 11540.96
10982 10982 11650.14
11041 11041 11797.99
11116 11116 11872.53
11312 11312 12045.12
11540 11540 12245.24
11707 11707 12362.77
11766 11466 12456.18
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1995 (MOST RECENT QUARTER END)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES
Inception 2/1/93 Inception 2/1/93
NAV MOP NAV W/CDSC
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 year 16.59% 11.05% 15.74% 10.74%
- -----------------------------------------------------------------------------
Since inception 6.34% 4.58% 5.55% 4.62%
- -----------------------------------------------------------------------------
</TABLE>
The Lehman Brothers Municipal Bond Index is a broad-based, unmanaged index that
tracks the performance of the municipal bond market. The performance of the
Index does not reflect fees or expenses associated with an actual investment.
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. NAV return does not include sales charges
or CDSC. MOP return includes the maximum sales charge of 4.75%. The CDSC return
reflects the maximum charge of 5.00% for one year and 3.00% since inception. If
the Adviser had not waived or borne certain Fund expenses, total returns would
have been lower.
Performance for different share classes will vary based on differences in sales
charges and fees associated with each class.
5
<PAGE>
INVESTMENT PORTFOLIO
JANUARY 31, 1996 (IN THOUSANDS)
<TABLE>
<CAPTION>
MUNICIPAL BONDS - 95.3% PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
EDUCATION - 3.6%
Dade County Educational Facilities
Authority, Florida International
University, Series 1993,
5.000% 10/01/16 (a) $1,500 $1,440
North Miami, Johnson & Wales
University, Series 1994 A,
6.100% 04/01/13 1,000 1,016
------
2,456
------
- --------------------------------------------------------------------------------
GENERAL OBLIGATIONS - 12.8%
Broward County, Series 1995,
5.000% 01/01/12 1,000 978
PR Commonwealth of Puerto Rico,
6.500% 07/01/14 (b) 3,000 3,409
State Board of Education Capital Outlay:
Series 1989 A,
7.250% 06/01/23 1,000 1,120
Series 1992 A,
6.400% 06/01/19 3,000 3,206
------
8,713
------
- --------------------------------------------------------------------------------
HEALTH - 10.0%
HOSPITAL - 8.4%
Lee County Hospital Board of Directors,
Lee Memorial Hospital, Series 1992 A,
6.350% 03/26/20 2,500 2,694
Orange County Health Facilities
Authority, Adventist Health Systems,
Series 1995,
5.250% 11/15/20 1,000 970
Palm Beach County Health Facilities
Authority, Good Samaritan Health
Systems, Series 1993,
6.300% 10/01/22 2,000 2,085
------
5,749
------
NURSING HOME - 1.6%
Broward County,
Beverly Enterprises-Florida, Inc.,
9.800% 11/01/10 120 134
Collier County Industrial
Development Authority, Beverly
Enterprises-Florida, Inc., Series 1991,
10.750% 03/01/03 185 216
</TABLE>
6
<PAGE>
Investment Portfolio/January 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Escambia County, Beverly Enterprises-
Florida, Inc., Series 1985,
9.800% 06/01/11 $ 120 $ 133
Leon County, Beverly Enterprises-Florida,
Inc., Series 1985,
9.800% 06/01/11 90 102
Palm Beach County:
Beverly Enterprises-Florida, Inc.,
Series 1984,
10.000% 06/01/11 195 219
Hillcrest Manor Project,
10.250% 12/01/16 195 205
Volusia County Industrial Development
Authority, Beverly Enterprises-Florida, Inc.,
Series 1987,
9.800% 12/01/07 60 63
------
1,072
- --------------------------------------------------------------------------------
HOUSING - 9.6%
MULTI-FAMILY - 1.4%
Clearwater Housing Authority,
Hampton Apartments, Series 1994,
8.250% 05/01/24 575 611
Hialeah Housing Authority,
Series 1991,
9.500% 11/01/21 200 210
State Housing Finance Agency,
Windsong Apartments, Series 1993 C,
9.250% 01/01/19 150 152
------
973
------
SINGLE-FAMILY - 8.2%
Broward County Housing Finance
Authority, Series 1995,
6.700% 02/01/28 2,000 2,070
Duval County Housing Finance
Authority, Series 1988 A,
7.875% 09/01/09 370 394
Orange County Housing Finance Authority,
6.850% 10/01/27 2,970 3,130
------
5,594
- --------------------------------------------------------------------------------
POLLUTION CONTROL REVENUE - 3.2%
Citrus County, Florida Power Corp.,
Crystal River Power Plant, Series 1992 A,
6.625% 01/01/27 2,000 2,150
- --------------------------------------------------------------------------------
PUBLIC FACILITIES IMPROVEMENT - 4.5%
Palm Beach County Criminal Justice
Facilities, Series 1993,
5.375% 06/01/11 1,250 1,287
</TABLE>
7
<PAGE>
Investment Portfolio/January 31, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
PUBLIC FACILITIES IMPROVEMENT - CONT
State Department of Corrections,
Okeechobee Correctional Facility,
Series 1995,
6.250% 03/01/15 (a) $ 625 $ 673
Tampa Capital Improvement Program,
RaboBank, Series B,
8.375% 10/01/18 1,000 1,089
------
3,049
- --------------------------------------------------------------------------------
PUBLIC INFRASTRUCTURE - 11.6%
AIRPORT - 8.0%
Dade County, Miami International
Airport, Series 1992 B,
6.600% 10/01/22 (a) 5,000 5,469
------
TURNPIKE/TOLL ROAD/BRIDGE - 3.6%
State Turnpike Authority:
Series 1992 A,
6.350% 07/01/22 530 566
Series 1993 A,
5.000% 07/01/19 (c) 2,000 1,902
------
2,468
- --------------------------------------------------------------------------------
REFUNDED/ESCROW/SPECIAL OBLIGATIONS (d) - 11.1%
Altamonte Springs Health
Facilities Authority, Series C1,
5.700% 10/01/12 (c) 1,200 1,285
Jacksonville Electric Authority,
Scherer Four Project, Series 1991 A,
6.750% 10/01/16 1,000 1,129
Orange County Health Facilities
Authority, Series 3,
5.700% 10/01/12 (c) 2,910 3,136
Pasco County Health Facilities
Authority, Series 2,
5.700% 10/01/12 1,915 2,051
------
7,601
- --------------------------------------------------------------------------------
SALES & EXCISE TAX - 2.4%
Tampa Sports Authority, Tampa Bay
Arena Project, Series 1995,
5.750% 10/01/25 1,500 1,609
- --------------------------------------------------------------------------------
TAX ALLOCATION - 5.6%
Jacksonville, Series 1993,
(e) 10/01/09 525 253
Lake County, NRG Recovery Group,
Series 1993 A,
5.950% 10/01/13 1,050 1,033
Orange County, Series 1994 B,
5.750% 10/01/19 2,500 2,563
------
3,849
</TABLE>
8
<PAGE>
Investment Portfolio/January 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
TRANSPORTATION - 2.7%
Dade County Seaport, Series 1995:
5.750% 10/01/15 $ 700 $ 722
6.200% 10/01/09 (c) 1,000 1,104
------
1,826
- --------------------------------------------------------------------------------
UTILITY - 5.0%
CO-GENERATION - 0.8%
Martin County Industrial Development
Authority, Indiantown Co-generation
Project, Series 1994 A,
7.875% 12/15/25 500 573
------
MUNICIPAL ELECTRIC - 4.2%
Jacksonville Electric Authority,
Series 1993-3A,
5.250% 10/01/28 2,000 1,930
State Municipal Power Agency,
Series 1993,
5.100% 10/01/25 1,000 960
------
2,890
- --------------------------------------------------------------------------------
WATER & SEWER - 13.2%
Orlando Utilities Commission,
Series 1989 D,
6.750% 10/01/17 3,750 4,486
Reedy Creek Improvement District,
Series 1994 1,
5.000% 10/01/19 1,000 954
Seacoast Utility Authority, Series 1989 A,
5.500% 03/01/15 1,900 1,964
Seminole County, Series 1992,
6.000% 10/01/19 1,500 1,648
------
9,052
------
TOTAL MUNICIPAL BONDS (cost of $61,550)(f) 65,093
------
SHORT-TERM OBLIGATIONS - 7.3%
- --------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (g)
Dade County Water & Sewer Revenue,
3.050% 10/05/22 3,200 3,200
NC Halifax County Industrial Facilities
& Pollution Control Authority,
Westmoreland Coal Co.,
3.750% 12/01/19 100 100
Pinellas County Health Facilities
Authority, Series 1985,
3.800% 12/01/15 1,700 1,700
------
TOTAL SHORT-TERM OBLIGATIONS 5,000
------
</TABLE>
9
<PAGE>
Investment Portfolio/January 31, 1996
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
OTHER ASSETS & LIABILITIES, NET - (2.6%) (1,753)
- --------------------------------------------------------------------------------
NET ASSETS - 100.0% $68,340
-------
</TABLE>
NOTES TO INVESTMENT PORTFOLIO:
- --------------------------------------------------------------------------------
(a) These securities, or a portion thereof, with a total market value of
$7,232, are being used to collateralize open futures contracts.
(b) This security, or a portion thereof, has been purchased on a delayed
delivery basis for settlement at a future date beyond the customary
settlement time.
(c) These securities, or a portion thereof, with a market value of $4,081, are
being used to collateralize the delayed delivery purchase indicated in note
(b) above.
(d) The Fund has been informed that each issuer has placed direct obligations
of the U.S. Government in an irrevocable trust, solely for the payment of
the interest and principal.
(e) Zero coupon bond.
(f) Cost for federal income tax purposes is the same.
(g) Variable rate demand notes are considered short-term obligations. Interest
rates change periodically on specified dates. These securities are payable
on demand and are secured by either letters of credit or other credit
support agreements from banks. The rates listed are as of January 31, 1996.
Short futures contracts open at January 31, 1996:
<TABLE>
<CAPTION>
Par value Unrealized
covered by Expiration depreciation
Type contracts month at 1/31/96
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Municipal bond $4,900 March $12
</TABLE>
See notes to financial statements.
10
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
JANUARY 31, 1996
(in thousands except for per share amounts and footnotes)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value (cost $61,551) $ 65,093
Short-term obligations 5,000
--------
70,093
Cash $ 103
Receivable for:
Interest 1,152
Investments sold 553
Fund shares sold 226
Deferred organization expenses 19
Other 1 2,054
------- --------
Total Assets 72,147
LIABILITIES
Payable for:
Investments purchased 3,387
Distributions 278
Fund shares repurchased 122
Variation margin on futures 12
Accrued:
Deferred Trustees fees 1
Other 7
--------
Total Liabilities 3,807
--------
NET ASSETS $ 68,340
--------
Net asset value & redemption price per share -
Class A ($32,599/4,280) $ 7.62
--------
Maximum offering price per share - Class A
($7.62/0.9525) $ 8.00
--------
Net asset value & offering price per share -
Class B ($35,741/4,693) $ 7.62
--------
COMPOSITION OF NET ASSETS
Capital paid in $ 68,027
Undistributed net investment income 66
Accumulated net realized loss (3,283)
Net unrealized appreciation (depreciation) on:
Investments 3,542
Open futures contracts (12)
--------
$ 68,340
--------
</TABLE>
(a) On sales of $50,000 or more the offering price is reduced.
(b) Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
See notes to financial statements.
11
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JANUARY 31, 1996
(in thousands)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest $ 3,790
EXPENSES
Management fee $ 346
Service fee - Class A 46
Service fee - Class B 43
Distribution fee - Class B 253
Transfer agent 103
Bookkeeping fee 32
Trustees fee 14
Custodian fee 4
Audit fee 13
Legal fee 8
Registration fee 10
Reports to shareholders 2
Amortization of deferred
organization expenses 10
Other 7
-------
891
Fees and expenses waived or borne
by the Adviser (353) 538
------- -------
Net Investment Income 3,252
-------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain (loss) on:
Investments 900
Closed futures contracts (2,541)
-------
Net Realized Loss (1,641)
Net unrealized appreciation during
the period on:
Investments 5,816
Open futures contracts 427
-------
Net Unrealized Appreciation 6,243
-------
Net Gain 4,602
-------
Net Increase in Net Assets from Operations $ 7,854
-------
</TABLE>
See notes to financial statements.
12
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
(in thousands) Year ended January 31
---------------------------
INCREASE (DECREASE) IN NET ASSETS 1996 1995
<S> <C> <C>
Operations:
Net investment income $ 3,252 $ 3,075
Net realized loss (1,641) (1,324)
Net unrealized appreciation (depreciation) 6,243 (4,781)
-------- --------
Net Increase (Decrease) from Operations 7,854 (3,030)
Distributions:
From net investment income - Class A (1,724) (1,413)
From net investment income - Class B (1,662) (1,574)
-------- --------
4,468 (6,017)
-------- --------
Fund Share Transactions:
Receipts for shares sold - Class A 9,795 14,281
Value of distributions reinvested - Class A 641 540
Cost of shares repurchased - Class A (7,453) (8,635)
-------- --------
2,983 6,186
-------- --------
Receipts for shares sold - Class B 7,068 8,694
Value of distributions reinvested - Class B 567 579
Cost of shares repurchased - Class B (5,360) (6,143)
-------- --------
2,275 3,130
-------- --------
Net Increase from Fund Share Transactions 5,258 9,316
-------- --------
Total Increase 9,726 3,299
NET ASSETS
Beginning of period 58,614 55,315
-------- --------
End of period (including undistributed
net investment income of $66 and $169,
respectively) $ 68,340 $ 58,614
-------- --------
NUMBER OF FUND SHARES
Sold - Class A 1,327 2,002
Issued for distributions reinvested - Class A 87 75
Repurchased - Class A (1,005) (1,209)
-------- --------
409 868
-------- --------
Sold - Class B 959 1,192
Issued for distributions reinvested - Class B 77 81
Repurchased - Class B (725) (868)
-------- --------
311 405
-------- --------
</TABLE>
See notes to financial statements.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996
NOTE 1. ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
ORGANIZATION: Colonial Florida Tax-Exempt Fund (the Fund), a series of Colonial
Trust V, is a non-diversified portfolio of a Massachusetts business trust,
registered under the Investment Company Act of 1940, as amended, as an open-end,
management investment company. The Fund's investment objective is to seek as
high a level of after-tax total return, as is consistent with prudent risk. 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 preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies that are consistently followed by the Fund in
the preparation of its financial statements.
SECURITY VALUATION AND TRANSACTIONS: Debt securities generally are valued by a
pricing service based upon market transactions for normal, institutional-size
trading units of similar securities. When management deems it appropriate, an
over-the-counter or exchange bid quotation is used.
Futures contracts are valued based on the difference between the last sale price
and the opening price of the contract.
Options are valued at the last reported sale price, or in the absence of a sale,
the mean between the last quoted bid and asking price.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
Portfolio positions 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, sold or mature.
Cost is determined and gains (losses) are based upon the specific identification
method for both financial statement and federal income tax purposes.
The Fund may trade securities on other than normal settlement terms. This may
increase the risk if the other party to the transaction fails to deliver and
causes the Fund to subsequently invest at less advantageous prices.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS: All income,
expenses (other than the Class A and Class B service fees and 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.
14
<PAGE>
Notes to Financial Statements/January 31, 1996
- -------------------------------------------------------------------------------
Class A and 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 service fee applicable to Class A and Class B and 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.
DEFERRED ORGANIZATION EXPENSE: The Fund incurred expenses of $47,925 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.
DISTRIBUTIONS TO SHAREHOLDERS: The Fund declares and records distributions daily
and pays monthly.
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforwards) under income tax regulations.
NOTE 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 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>
Effective January 1, 1996, the management fee applicable to the Trust is being
reduced based on the following schedule for the first $1 billion in combined
average net assets:
<TABLE>
<CAPTION>
Cumulative Annualized
Effective Date Reduction
---------------------------- ----------------------
<S> <C>
January 1, 1996 0.0125%
April 1, 1996 0.0250%
July 1, 1996 0.0375%
October 1, 1996 0.0500%
</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.
15
<PAGE>
Notes to Financial Statements/January 31, 1996
- -------------------------------------------------------------------------------
NOTE 2. FEES AND COMPENSATION PAID TO AFFILIATES - CONT.
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: Colonial Investment
Services, Inc. (the Distributor), an affiliate of the Adviser, is the Fund's
principal underwriter. During the year ended January 31, 1996, the Fund has been
advised that the Distributor retained net underwriting discounts of $34,714 on
sales of the Fund's Class A shares and received contingent deferred sales
charges (CDSC) of $120,643 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 Fund's average net assets
attributable to Class B shares. The plan also requires the payment of a service
fee to the Distributor as follows:
<TABLE>
<CAPTION>
Valuation of shares Annual
outstanding on the 20th of Fee
each month which were issued Rate
-----------------------------------------------------------------
<S> <C>
Prior to November 30, 1994 0.10%
On or after December 1, 1994 0.25%
</TABLE>
The CDSC and the fees received from the 12b-1 plan are used principally as
repayment to the Distributor for amounts paid by the Distributor to dealers who
sold such shares.
EXPENSE LIMITS: Effective August 1, 1995, 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 0.40% annually of
the Fund's average net assets. Through July 31, 1995, the expense limit was
0.20% 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
- -------------------------------------------------------------------------------
INVESTMENT ACTIVITY: During the year ended January 31, 1996, purchases and sales
of investments, other than short-term obligations, were $52,443,027 and
$52,580,500, respectively.
Unrealized appreciation (depreciation) at January 31, 1996, based on cost of
investments for both financial statement and federal income tax purposes was
approximately:
<TABLE>
<S> <C>
Gross unrealized appreciation $ 3,573,000
Gross unrealized depreciation (31,000)
-------------
Net unrealized appreciation $ 3,542,000
--------------
</TABLE>
16
<PAGE>
Notes to Financial Statements/January 31, 1996
- -------------------------------------------------------------------------------
CAPITAL LOSS CARRYFORWARDS:
At January 31, 1996, 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>
2002 $ 22,000
2003 573,000
2004 1,485,000
------------
$ 2,080,000
------------
</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 may invest in municipal and Treasury bond futures contracts and
purchase and write options on futures. The Fund will invest in these instruments
to hedge against the effects of changes in value of portfolio securities due to
anticipated changes in interest rates and/or market conditions, for duration
management, or when the transactions are economically appropriate to the
reduction of risk inherent in the management of the Fund and not for trading
purposes. The use of futures contracts and options involves certain risks, which
include (1) imperfect correlation between the price movement of the instruments
and the underlying securities, (2) inability to close out positions due to
different trading hours or the temporary absence of a liquid market for either
the instrument or the underlying securities or (3) an inaccurate prediction by
the Adviser of the future direction of interest rates. Any of these risks may
involve amounts exceeding the amount recognized in the Fund's Statement of
Assets and Liabilities at any given time.
17
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
Year ended January 31
-----------------------------------------------------------------------------
1996 1995 1994(b)
Class A Class B Class A Class B Class A Class B
------- ------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 7.100 $ 7.100 $ 7.930 $ 7.930 $ 7.500 $ 7.500
------- ------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income (a) 0.404 0.351 0.423 0.369 0.434 0.378
Net realized and
unrealized gain (loss) 0.535 0.533 (0.839) (0.839) 0.420 0.420
------- ------- ----------- ----------- ----------- -----------
Total from investment
operations 0.939 0.884 (0.416) (0.470) 0.854 0.798
------- ------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net
investment income (0.419) (0.364) (0.414) (0.360) (0.424) (0.368)
------- ------- ----------- ----------- ----------- -----------
Net asset value -
End of period $ 7.620 $ 7.620 $ 7.100 $ 7.100 $ 7.930 $ 7.930
------- ------- ----------- ----------- ----------- -----------
Total return (c)(d) 13.55% 12.72% (5.11)% (5.83)% 11.66% 10.85%
------- ------- ----------- ----------- ----------- -----------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.45%(e) 1.18%(e) 0.22% 0.97% 0.05% 0.80%
Net investment income 5.45%(e) 4.72%(e) 5.92% 5.17% 5.40% 4.65%
Fees and expenses
waived or borne
by the Adviser 0.55% 0.55% 0.73% 0.73% 0.88% 0.88%
Portfolio turnover 83% 83% 45% 45% 19% 19%
Net assets at end
of period (000) $32,599 $35,741 $ 27,498 $ 31,116 $ 23,802 $ 31,513
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
(a) Net of fees and expenses waived or borne
by the Adviser which amounted to:
$ 0.040 $ 0.040 $ 0.052 $ 0.052 $ 0.071 $ 0.071
</TABLE>
(b) The Fund commenced investment operations on February 1, 1993.
(c) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(d) Had the Adviser not waived or reimbursed a portion of expenses, total
return would have been reduced.
(e) The benefits derived from custodian credits and brokerage arrangements had
no impact. Prior years' ratios are net of benefits received, if any.
18
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
T0 THE TRUSTEES OF COLONIAL TRUST V AND THE SHAREHOLDERS OF
COLONIAL FLORIDA 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 Florida Tax-Exempt Fund (a
series of Colonial Trust V) at January 31, 1996, 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, 1996 by correspondence with the custodian and brokers, and the
application of alternative auditing procedures where confirmations from brokers
were not received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
March 13, 1996
19
<PAGE>
SHAREHOLDER SERVICES
TO MAKE INVESTING EASIER
Colonial has one of the most extensive selections of shareholder services
available. Your financial adviser can help you arrange for any of these
services, or you can call Colonial directly at 1-800-345-6611.
AFFORDABLE ADDITIONAL INVESTMENTS: Add to your account with as little as $50;
$25 for an IRA account.
FREE EXCHANGES*: Exchange all or part of your account into the same share class
of another Colonial fund, by phone or mail, as your needs change over time.
EASY ACCESS TO YOUR MONEY*: Make withdrawals from your account by phone, by mail
or, for certain funds, by check.
ONE-YEAR REINSTATEMENT PRIVILEGE: If you need access to your money, but then
choose to return it to Colonial within one year, you can reinvest in any
Colonial fund of the same share class without any penalty or sales charge.
FUNDAMATIC: Make periodic investments as low as $50 from your checking account
to your Colonial account.
SYSTEMATIC WITHDRAWAL PLAN (SWP): Receive monthly, quarterly, or semiannual
payments via check or bank transmission. There is a $5,000 account value
required, but no minimum for the payment amount. The maximum annual withdrawal
is 12% of account balance at time SWP is established. SWPs by check are
processed on the 10th of each month.
AUTOMATED DOLLAR COST AVERAGING: Transfer money on a monthly basis from any
Colonial fund with a balance of $5,000 into the same share class of up to four
other Colonial funds. Minimum for each transfer is $100.
LOW COST IRAS: Choose from a broad range of retirement plans, including IRAs.
* Redemptions and exchanges are made at the next determined net asset value
after the request is received by Colonial. Proceeds may be more or less than
your original cost. The exchange privilege may be terminated at any time.
Investors who purchase Class B or Class D shares (for applicable funds), or $1
million or more of Class A shares, may be subject to a contingent deferred sales
charge.
20
<PAGE>
HOW TO REACH COLONIAL
BY PHONE OR BY MAIL
BY TELEPHONE
COLONIAL CUSTOMER CONNECTION - 1-800-345-6611
For 24-hour account information, call from your touch-tone phone. (Rotary
callers will be automatically connected to a representative during business
hours.) A recorded message will guide you through the menu:
For fund prices, dividends, and capital gains information.......... press 1
For account information............................................ press 2
To speak to a Colonial representative.............................. press 3
For yield and total return information............................. press 4
For duplicate statements or new supply of checks................... press 5
To order duplicate tax forms and year-end statements............... press 6
(February through May)
To review your options at any time during your call................ press *
To speak with a shareholder services representative about your account, call
Monday to Friday, 8:00 am to 8:00 pm ET, and Saturdays from February through
mid-April, 10:00 am to 2:00 pm ET.
COLONIAL TELEPHONE TRANSACTION DEPARTMENT - 1-800-422-3737
To purchase, exchange, or sell shares by telephone, call Monday to Friday, 9:00
am to 8:00 pm ET. Transactions received after the close of the New York Stock
Exchange will receive the next business day's closing price.
COLONIAL LITERATURE DEPARTMENT - 1-800-248-2828
To request literature on any Colonial fund, call Monday to Friday, 8:30 am to
6:30 pm ET.
BY MAIL
COLONIAL INVESTORS SERVICE CENTER, INC.
P.O. BOX 1722
BOSTON, MA 02105-1722
21
<PAGE>
SHAREHOLDER COMMUNICATIONS
TO KEEP YOU INFORMED
To make recordkeeping easy and keep you up-to-date on the performance of your
investments, you can expect to receive the following information about your
Colonial account:
TRANSACTION CONFIRMATIONS: Each time you make a purchase, sale, or exchange, you
receive a confirmation statement within just a few days.
QUARTERLY STATEMENTS: Every three months, if any transactions are made that
affect your share balance, this statement reports on your account activity
during the quarter (including any reinvestment of dividends). This statement
also provides year-to-date information.
COLONIAL SHAREHOLDER NEWS: Mailed with your quarterly account statements, this
newsletter highlights timely investment strategies, portfolio manager
commentary, and shareholder service updates.
TAX FORMS AND YEAR-END TAX GUIDE: Easy-to-use forms and timely information are
designed to make tax reporting simpler. (Usually mailed in January.)
AVERAGE COST BASIS STATEMENTS: If you sold or exchanged shares during the year,
this statement may help you calculate your gain/loss for tax purposes. (Usually
mailed in February.)
22
<PAGE>
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial Florida Tax-Exempt Fund is:
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Colonial Florida 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.
This report has been prepared for shareholders of Colonial Florida Tax-Exempt
Fund. This report may also be used as sales literature when preceded or
accompanied by the current prospectus which provides details of sales charges,
investment objectives, and operating policies of the Fund.
23
<PAGE>
[LOGO] COLONIAL
MUTUAL FUNDS
Mutual Funds for
Planned Portfolios
- -------------------------------------------------------------------------------
TRUSTEES
ROBERT J. BIRNBAUM
Trustee (formerly Special Counsel, Dechert, Price & Rhoads; President and Chief
Operating Officer, New York Stock Exchange, Inc.)
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
JAMES E. GRINNELL
Private Investor (formerly Senior Vice President-Operations, The Rockport
Company)
WILLIAM D. IRELAND, JR.
Trustee (formerly Chairman of the Board, Bank of New England-Worcester)
RICHARD W. LOWRY
Private Investor (formerly Chairman and Chief Executive Officer, U.S. Plywood
Corporation)
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 (formerly Management Consultant, Saatchi and Saatchi
Consulting Ltd. and Principal and International Practice Director, Management
Consulting, Peat Marwick Main & Co.)
SINCLAIR WEEKS, JR.
Chairman of the Board, Reed & Barton Corporation
-------------------------------------
NOT FDIC- MAY LOSE VALUE
INSURED NO BANK GUARANTEE
-------------------------------------
COLONIAL INVESTMENT SERVICES, INC., Distributor (C) 1996
One Financial Center, Boston, Massachusetts 02111-2621, 617-426-3750
FL-02/842B-0196 (3/96)
- -------------------------------------------------------------------------------
[RECYCLE LOGO] Printed on recycled paper
