Registration Nos: 33-12109
811-5030
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 19 [ X ]
--
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 20 [ X ]
--
COLONIAL TRUST V
(Exact Name of Registrant as Specified in Charter)
One Financial Center, Boston, Massachusetts 02111
(Address of Principal Executive Offices)
(617) 426-3750
(Registrant's Telephone Number, including Area Code)
Name and Address of Agent for Service: Copy to:
Arthur O. Stern, Esquire John M. Loder, Esquire
Colonial Management Associates, Inc. Ropes & Gray
One Financial Center One International Place
Boston, Massachusetts 02111 Boston, Massachusetts 02110-2624
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b).
[ X ] on May 31, 1996 pursuant to paragraph (b).
[ ] 60 days after filing pursuant to paragraph (a)(1).
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485.
[ ] 75 days after filing pursuant to paragraph (a)(2).
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new
effective date for a previously filed post-effective
amendment.
STATEMENT PURSUANT TO RULE 24f-2
The Registrant has registered an indefinite number of its shares of beneficial
interest under the Securities Act of 1933 pursuant to Rule 24f-2 under the
Investment Company Act of 1940. On March 22, 1996, the Registrant filed the Rule
24f-2 Notice for Registrant's fiscal year ended January 31, 1996.
<PAGE>
COLONIAL TRUST V
Cross Reference Sheet
Colonial California Tax-Exempt Fund
Colonial Connecticut Tax-Exempt Fund
Colonial Florida Tax-Exempt Fund
Colonial Massachusetts Tax-Exempt Fund
Colonial Michigan Tax-Exempt Fund
Colonial Minnesota Tax-Exempt Fund
Colonial New York Tax-Exempt Fund
Colonial North Carolina Tax-Exempt Fund
Colonial Ohio Tax-Exempt Fund
Item Number of Form N1A Location or Caption in Prospectus
Part A
1. Cover Page
2. Summary of Expenses
3. The Funds' Financial History
4. The Funds' Investment Objective;
Organization and History; How the Funds
Pursue Their Objective and Certain Risk
Factors
5. Cover Page; How the Funds are Managed;
Organization and History; The Funds'
Investment Objective; Back Cover
6. Organization and History; Distributions
and Taxes; How to Buy Shares
7. Summary of Expenses; How to Buy Shares;
How the Funds Value Their Shares; 12b-1
Plans; Cover Page; Back Cover
8. Summary of Expenses; How to Sell Shares;
How to Exchange Shares; Telephone
Transactions
9. Not applicable
May 31, 1996
COLONIAL CALIFORNIA
TAX-EXEMPT FUND
COLONIAL CONNECTICUT
TAX-EXEMPT FUND
COLONIAL FLORIDA
TAX-EXEMPT FUND
COLONIAL MASSACHUSETTS
TAX-EXEMPT FUND
COLONIAL MICHIGAN
TAX-EXEMPT FUND
COLONIAL MINNESOTA
TAX-EXEMPT FUND
COLONIAL NEW YORK
TAX-EXEMPT FUND
COLONIAL NORTH CAROLINA
TAX-EXEMPT FUND
COLONIAL OHIO
TAX-EXEMPT FUND
PROSPECTUS
BEFORE YOU INVEST
Colonial Management Associates, Inc. (Adviser) and your full-service financial
adviser want you to understand both the risks and benefits of mutual fund
investing.
While mutual funds offer significant opportunities and are professionally
managed, they also carry risks including possible loss of principal. Unlike
savings accounts and certificates of deposit, mutual funds are not insured or
guaranteed by any financial institution or government agency.
Please consult your full-service financial adviser to determine how investing in
one of these mutual funds may suit your unique needs, time horizon and risk
tolerance.
Each of Colonial California Tax-Exempt Fund, Colonial Connecticut
Tax-Exempt Fund, Colonial Florida Tax-Exempt Fund, Colonial Massachusetts
Tax-Exempt Fund, Colonial Michigan Tax-Exempt Fund, Colonial Minnesota
Tax-Exempt Fund, Colonial New York Tax-Exempt Fund, Colonial North Carolina
Tax-Exempt Fund and Colonial Ohio Tax-Exempt Fund is a portfolio of Colonial
Trust V (Trust), an open-end management investment company. Each Fund seeks as
high a level of after-tax total return as is consistent with prudent risk, by
pursuing current income exempt from federal and its state's personal income tax
(if any) and opportunities for long-term appreciation from a portfolio primarily
invested in investment grade municipal bonds. The Florida and Michigan Funds'
shares are intended to be exempt from their respective states' intangibles tax.
Each Fund (except the California Fund) is non-diversified. The Funds are managed
by the Adviser, an investment adviser since 1931.
This Prospectus explains concisely what you should know before investing in the
Funds. Read it carefully and retain it for future reference. More detailed
information about each Fund is in the May 31, 1996 Statement of Additional
Information which has been filed with the Securities and Exchange Commission and
is obtainable free of charge by calling the Adviser at 1-800-248-2828. The
Statement of Additional Information is incorporated by reference in (which means
it is considered to be a part of) this Prospectus.
Each Fund offers two classes of shares. Class A shares are offered at net asset
value plus a sales charge imposed at the time of purchase; Class B shares are
offered at net asset value and, in addition, are subject to a distribution fee
and a declining contingent deferred sales charge on redemptions made within six
years after purchase. Class B shares automatically convert to Class A shares
after approximately eight years. See "How to Buy Shares."
Contents Page
Summary of Expenses
The Funds' Financial History
The Funds' Investment Objective
How the Funds Pursue Their Objective and Certain Risk Factors
How the Funds Measure Their Performance
How the Funds are Managed
How the Funds Value Their Shares
Distributions and Taxes
How to Buy Shares
How to Sell Shares
How to Exchange Shares
Telephone Transactions
12b-1 Plans
Organization and History
Appendix
FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED, ENDORSED OR
INSURED BY, ANY BANK OR GOVERNMENT AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
SUMMARY OF EXPENSES
Expenses are one of several factors to consider when investing in a Fund. The
following tables summarize your maximum transaction costs and your annual
expenses for an investment in each Class of each Fund's shares. See "How the
Funds are Managed" and "12b-1 Plans" for more complete descriptions of the
Funds' various costs and expenses.
<TABLE>
<CAPTION>
Shareholder Transaction Expenses(1)(2)
<S> <C> <C>
Class A Class B
Maximum Initial Sales Charge Imposed on a Purchase (as a % of offering price)(3) 4.75% 0.00%(5)
Maximum Contingent Deferred Sales Charge (as a % of offering price)(3) 1.00%(4) 5.00%
</TABLE>
(1) For accounts less than $1,000 an annual fee of $10 may be deducted. See
"How to Sell Shares."
(2) Redemption proceeds exceeding $5,000 sent via federal funds wire will be
subject to a $7.50 charge per transaction.
(3) Does not apply to reinvested distributions.
(4) Only with respect to any portion of purchases of $1 million to $5
million redeemed within approximately 18 months after purchase. See
"How to Buy Shares."
(5) Because of the 0.75% distribution fee applicable to Class B shares,
long-term Class B shareholders may pay more in aggregate sales charges
than the maximum initial sales charge permitted by the National
Association of Securities Dealers, Inc. However, because the Funds'
Class B shares automatically convert to Class A shares after
approximately 8 years, this is less likely for Class B shares than for a
class without a conversion feature.
Annual Operating Expenses (as a % of average net assets)(6)
<TABLE>
<CAPTION>
California Connecticut Florida
Class A Class B Class A Class B Class A Class B
<S> <C> <C> <C> <C> <C> <C>
Management fee
(after waiver) 0.52% 0.52% 0.19% 0.19% 0.08% 0.08%
12b-1 fee(7) 0.13 0.88 0.14 0.89 0.16 0.91
Other expenses
(after waiver) 0.24 0.24 0.26 0.26 0.32 0.32
---- ---- ---- ---- ---- ----
Total operating
expenses (8) 0.89% 1.64% 0.59% 1.34% 0.56% 1.31%
==== ==== ==== ==== ==== ====
</TABLE>
Massachusetts Michigan
Class A Class B Class A Class B
Management fee
(after waiver) 0.51% 0.51% 0.37% 0.37%
12b-1 fee(7) 0.14 0.89 0.13 0.88
Other expenses
(after waiver) 0.24 0.24 0.38 0.38
---- ---- ---- ----
Total operating
expenses (8) 0.89% 1.64% 0.88% 1.63%
==== ==== ==== ====
<TABLE>
<CAPTION>
Minnesota New York North Carolina Ohio
Class A Class B Class A Class B Class A Class B Class A Class B
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management fee
(after waiver) 0.33% 0.33% 0.21% 0.21% 0.00% 0.00% 0.45% 0.45%
12b-1 fees(7) 0.15 0.90 0.15 0.90 0.14 0.89 0.13 0.88
Other expenses
(after waiver) 0.42 0.42 0.29 0.29 0.30 0.30 0.30 0.30
---- ---- ---- ---- ---- ---- ---- ----
Total operating
expenses(8) 0.90% 1.65% 0.65% 1.40% 0.44% 1.19% 0.88% 1.63%
==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
Without voluntary fee waivers/expense limits that the Adviser may discontinue at
anytime, Annual Operating Expenses would be:
<TABLE>
<CAPTION>
Connecticut Florida Massachusetts Michigan
Class A Class B Class A Class B Class A Class B Class A Class B
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management fee 0.52% 0.52% 0.52% 0.52% 0.52% 0.52% 0.52% 0.52%
12b-1 fees(7) 0.14 0.89 0.16 0.91 0.14 0.89 0.13 0.88
Other expenses 0.26 0.26 0.32 0.32 0.24 0.24 0.38 0.38
---- ---- ---- ---- ---- ---- ---- ----
Total operating expenses 0.92% 1.67% 1.00% 1.75% 0.90% 1.65% 1.03% 1.78%
==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
Minnesota New York North Carolina Ohio
Class A Class B Class A Class B Class A Class B Class A Class B
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management fee 0.52% 0.52% 0.52% 0.52% 0.52% 0.52% 0.52% 0.52%
12b-1 fees(7) 0.15 0.90 0.15 0.90 0.14 0.89 0.13 0.88
Other expenses 0.42 0.42 0.29 0.29 0.42 0.42 0.30 0.30
---- ---- ---- ---- ---- ---- ---- ----
Total operating expenses 1.09% 1.84% 0.96% 1.71% 1.08% 1.83% 0.95% 1.70%
==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
<PAGE>
Example
The following Example shows the cumulative expenses attributable to a
hypothetical $1,000 investment in each Class of shares of each Fund for the
periods specified, assuming a 5% annual return, and, unless otherwise noted,
redemption at period end. The 5% return and expenses used in the Example should
not be considered indicative of actual or expected Fund performance or expenses,
both of which will vary.
<TABLE>
<CAPTION>
California Connecticut Florida
Class A Class B Class A Class B Class A Class B
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Period: (9) (9) (9)
1 year $ 56 $ 67 $ 17 $53 $ 64 $ 14 $53 $ 63 $ 13
3 years 75 82 52 66 72 42 65 72 42
5 years 94 109 89 79 93 73 77 92 72
10 years 152 174(10) 174(10) 118 141(10) 141(10) 114 137(10) 137(10)
</TABLE>
<TABLE>
<CAPTION>
Massachusetts Michigan Minnesota
Class A Class B Class A Class B Class A Class B
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Period: (9) (9) (9)
1 year $ 56 $ 67 $ 17 $ 56 $ 67 $ 17 $ 56 $ 67 $ 17
3 years 75 82 52 74 81 51 75 82 52
5 years 94 109 89 94 109 89 95 110 90
10 years 152 174(10) 174(10) 151 173(10) 173(10) 153 175(10) 175(10)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
New York North Carolina Ohio
Class A Class B Class A Class B Class A Class B
Period: (9) (9) (9)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year $ 54 $ 67 $ 14 $ 52 $ 62 $ 12 $ 56 $ 67 $ 17
3 years 67 74 44 61 68 38 74 81 51
5 years 82 97 77 71 85 65 94 109 89
10 years 125 174(10) 174(10) 100 123(10) 123(10) 151 173(10) 173(10)
</TABLE>
Without voluntary fee waivers/expense limits that the Adviser may discontinue at
any time, the amounts in the Example would be:
<TABLE>
<CAPTION>
Connecticut Florida
Class A Class B Class A Class B
Period: (9) (9)
<S> <C> <C> <C> <C> <C> <C>
1 year $ 56 $ 67 $ 17 $ 57 $ 68 $ 18
3 years 75 83 53 78 85 55
5 years 96 111 91 100 115 95
10 years 155 178(10) 178(10) 164 186(10) 186(10)
</TABLE>
<TABLE>
<CAPTION>
Massachusetts Michigan Minnesota
Class A Class B Class A Class B Class A Class B
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Period: (9) (9) (9)
1 year $ 56 $ 67 $ 17 $ 58 $ 68 $ 18 $ 58 $ 69 $ 19
3 years 75 82 52 79 86 56 81 88 58
5 years 95 110 90 102 117 97 105 120 100
10 years 153 176(10) 176(10) 168 190(10) 190(10) 174 196(10) 196(10)
</TABLE>
<TABLE>
<CAPTION>
New York North Carolina Ohio
Class A Class B Class A Class B Class A Class B
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Period: (9) (9) (9)
1 year $ 57 $ 67 $ 17 $ 58 $ 69 $ 19 $ 57 $ 67 $ 17
3 years. 77 84 54 80 87 57 76 83 53
5 years 98 113 93 104 119 99 97 112 92
10 years 159 182(10) 182(10) 173 195(10) 195(10) 158 181(10) 181(10)
</TABLE>
(6) Amounts shown (before voluntary fee waivers/expense limits by the
Adviser) are based on expenses during the fiscal year ended January 31,
1996, except that Management fees (before waiver) reflect a fee
reduction that took effect January 1, 1996.
(7) The 12b-1 fee rate will fluctuate but will not exceed 0.25%.
(8) Effective August 1, 1995, the Adviser agreed to waive its fees and bear
expenses (exclusive of 12b-1 fees, brokerage commissions, interest,
taxes and extraordinary expenses, if any) to the extent such expenses
would otherwise exceed the following annual percentages of average net
assets:
<TABLE>
<CAPTION>
Massachusetts
Michigan
Minnesota
California Connecticut Florida Ohio New York North Carolina
<C> <C> <C> <C> <C> <C>
0.80% 0.45% 0.40% 0.75% 0.50% 0.30%
</TABLE>
(9) Assumes no redemption at period end.
(10) Class B shares automatically convert to Class A shares after
approximately 8 years; therefore years 9 and 10
reflect Class A share expenses.
<PAGE>
THE FUNDS' FINANCIAL HISTORY
The following schedules of financial highlights for a share outstanding
throughout each period have been audited by Price Waterhouse LLP, independent
accountants. Their unqualified reports are included in the Funds' 1996 Annual
Reports, and are incorporated by reference into the Statement of Additional
Information.
<TABLE>
<CAPTION>
CALIFORNIA
------------------------------------------------------------------------------------
Two months ended
Year ended January 31 January 31
-----------------------------------------------------------------------------------
1996 1995 1994 1993(b)
Class A Class B Class A Class B Class A Class B Class A Class B
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of period $6.870 $6.870 $7.660 7.350 $7.350 $7.350 $7.270 $7.270
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a) 0.388 0.334 0.413 0.360 0.434 0.378 0.076 0.067
Net realized and unrealized gain (loss) 0.671 0.671 (0.791) (0.791) 0.315 0.315 0.081 0.081
Total from Investment Operations 1.059 1.005 (0.378) (0.431) 0.749 0.693 0.157 0.148
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.389) (0.335) (0.412) (0.359) (0.439) (0.383) (0.077) (0.068)
Net asset value - End of period $7.540 $7.540 $6.870 $6.870 $7.660 $7.660 $7.350 $7.350
Total return(c)(d) 15.78% 14.94% (4.83)% (5.55)% 10.44% 9.63% 8.70%(e) 1.01%(e)
RATIOS TO AVERAGE NET ASSETS
Expenses 0.89%(f) 1.64%(f) 0.77% 1.52% 0.75% 1.50% 0.65%(g) 1.40%(g)
Net investment income 5.33%(f) 4.58(f) 5.91% 5.16% 5.73% 4.98% 6.29%(g) 5.54%(g)
Fees and expenses waived or borne
by the Adviser 0.01% 0.01% 0.06% 0.06% 0.08% 0.08% 0.21%(g) 0.21%(g)
Portfolio turnover 47% 47% 47% 47% 17% 17% 19%(g) 19%(g)
Net assets at end of period (000) $304,581 $106,925 $301,912 $98,975 $379,987 $104,578 $337,409 $33,819
------- ----------------------------------------
(a) Net of fees and expenses waived or
borne by the Adviser which amounted to $0.001 $0.001 $0.004 $0.004 $0.006 $0.006 $0.002 $0.002
(b) The Fund changed its fiscal year end from November 30 to January 31 in 1992.
(c) Total return at net asset value assuming all distributions
reinvested and no initial sales charge or contingent deferred sales
charge.
(d) Had the Adviser not waived or reimbursed a portion of expenses, total
return would have been reduced.
(e) Not annualized.
(f) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
(g) Annualized.
</TABLE>
<TABLE>
<CAPTION>
CALIFORNIA (CONTINUED)
----------------------------------------------------------------------------------
Period ended
Year ended January 31 November 30
----------------------------------------------------------------------------------
1992 1991 1990 1989 1988 1987 1986(b)
Class A Class B(c) Class A Class A Class A Class A Class A Class A
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of period $7.150 $7.410 $6.940 $7.010 $6.850 $6.530 $7.490 $7.140
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a) 0.467 0.143 0.473 0.490 0.480 0.497 0.515 0.237
Net realized and unrealized gain (loss) 0.109 (0.151) 0.211 (0.065) 0.160 0.316 (0.950) 0.351
Total from Investment Operations 0.576 (0.008) 0.684 0.425 0.640 0.813 (0.435) 0.588
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.456) (0.132) (0.474) (0.492) (0.480) (0.493) (0.514) (0.238)
From net realized gains --- --- --- --- --- --- (0.002) ---
From capital paid in (d) --- --- --- (0.003) --- --- (0.009) ---
Total Distributions Delcared
to Shareholders (0.456) (0.132) (0.474) (0.495) (0.480) (0.493) (0.525) (0.238)
Net asset value - End of period $7.270 $7.270 $7.150 $6.940 $7.010 $6.850 $6.530 $7.490
Total return (f) (e) 8.27% 1.94%(g) 10.18% 6.30% 9.61% 12.74% (6.02)% 8.35%(g)
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.71% 1.46%(h) 0.80% 0.70% 0.95% 0.66% 0.52% --- (h)
Net investment income 6.44% 5.69%(h) 6.69% 7.02% 6.87% 7.28% 7.33% 6.99(h)
Fees and expenses waived or borne
by the Adviser 0.13% 0.13%(h) 0.05% 0.15% 0.15% 0.49% 0.63% 1.08%(h)
Portfolio turnover 12% 12% 11% 22% 40% 106% 94% 31%(h)
Net assets at end of period (000) $324,012 $22,797 $295,459 $221,519 $155,514 $133,317 $113,774 $57,777
----------------------------------
(a) Net of fees and expenses waived or borne
by the Adviser which amounted to $0.010 $0.010 $0.003 $0.010 $0.011 $0.033 $0.044 $0.014
(b) The Fund commenced investment operations on June 16, 1986.
(c) Class B shares were initially offered on August 4, 1992. Per share amounts
reflect activity from that date.
(d) Because of differences between book and tax basis accounting there was no
return of capital for federal income tax purposes.
(e) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(f) Had the Adviser not waived or reimbursed a portion of expenses, total
return would have been reduced.
(g) Not annualized.
(h) Annualized.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONNECTICUT
----------------------------------------------------------------------------------------------
Period ended
Year ended January 31 January 31
----------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
Class A Class B Class A Class B Class A Class B Class A Class B(b) Class A (c)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of period $7.080 $7.080 $7.890 $7.890 $7.420 $7.420 $7.190 $7.200 $7.140
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a) 0.400 0.345 0.418 0.363 0.429 0.372 0.449 0.256 0.118
Net realized and unrealized gain (loss) 0.552 0.552 (0.809) (0.809) 0.465 0.465 0.270 0.257 0.046
Total from Investment Operations 0.952 0.897 (0.391) (0.446) 0.894 0.837 0.719 0.513 0.164
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net investment income (0.402) (0.347) (0.418) (0.363) (0.424) (0.367) (0.452) (0.256) (0.114)
In excess of net investment income --- --- --- --- --- --- (0.002) (0.002) ---
From net realized gains --- --- (0.001) (0.001) --- --- (0.021) (0.021) ---
In excess of net realized gains --- --- --- --- --- --- (0.014) (0.014) ---
Total from Distributions Declared
to Shareholders (0.402) (0.347) (0.419) (0.364) (0.424) (0.367) (0.489) (0.293) (0.114)
Net asset value - End of period $7.630 $7.630 $7.080 $7.080 $7.890 $7.890 $7.420 $7.420 $7.190
Total return(d)(e) 13.77% 12.93% (4.85)% (5.57)% 12.30% 11.49% 10.34% 7.23%(f) 2.31%(f)
RATIOS TO AVERAGE NET ASSETS
Expenses 0.51(g) 1.25(g) 0.32% 1.07% 0.22% 0.97% --- 0.75%(h) --- (h)
Net investment income 5.42(g) 4.68(g) 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 0.42% 0.42% 0.55% 0.55% 0.65% 0.65% 0.90% 0.90% 1.32(h)
Portfolio turnover 13% 13% 22% 22% 5% 5% 4% 4% 53%(h)
Net assets at end of period (000) $80,039 $82,785 $74,616 $73,580 $91,436 $71,791 $63,126 $27,839 $12,349
(a) Net of fees and expenses
waived or borne by the
Adviser which amounted to $0.031 $0.031 $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 contingent deferred
sales charge.
(e) Had the Adviser not waived or reimbursed a portion of expenses, total return would have been reduced.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage arrangements had no impact. Prior years' ratios are net
of benefits
received, if any.
(h) Annualized.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FLORIDA
--------------------------------------------------------------------------------
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
------- ---------------------------------------------
(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
(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.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MASSACHUSETTS
-----------------------------------------------------------------------------
Year ended January 31
-----------------------------------------------------------------------------
1996 1995 1994
Class A Class B Class A Class B Class A Class B
<S> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of period $7.390 $7.390 $8.130 $8.130 $7.700 $7.700
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a) 0.424 0.367 0.444 0.388 0.453 0.395
Net realized and unrealized gain 0.650 0.650 (0.738) (0.738) 0.439 0.439
Total from Investment Operations 1.074 1.017 (0.294) (0.350) 0.892 0.834
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.424) (0.367) (0.446) (0.390) (0.462) (0.404)
From net realized gains --- --- ---- --- --- ---
In excess of net realized gains --- --- ---- --- --- ---
Total Distributions Declared to holders (0.424) (0.367) (0.446) (0.390) (0.462) (0.404)
Net asset value - End of period $8.040 $8.040 $7.390 $7.390 $8.130 $8.130
Total return(c)(d) 14.90% 14.05% (3.49)% (4.21)% 11.86% 11.05%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.85%(f) 1.60%(f) 0.72% 1.47% 0.64% 1.39%
Net investment income 5.49%(f) 4.74%(f) 5.93% 5.18% 5.68% 4.93%
or borne by the Adviser 0.06% 0.06% 0.12% 0.12% 0.21% 0.21%
Portfolio turnover 21% 21% 58% 58% 7% 7%
Net assets at end of period $207,759 $60,651 $193,303 $53,973 $225,636 $51,81
-----------------------------
a) Net of fees and expenses
waived or borne by the
Adviser which amounted to $0.005 $0.005 $0.009 $0.009 $0.016 $0.016
</TABLE>
<TABLE>
<CAPTION>
MASSACHUSETTS (CONTINUED)
-------------------------------------------------------------------------------------------------------
Period ended
Year ended January 31 January 31
--------------------------------------------------------------------------------------- ---------------
1993 1992 1991 1990 1989 1988(h)
Class A Class B Class A Class A Class A Class A Class A
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of period $7.420 $7.450 $7.120 $7.080 $7.190 $7.060 $7.140
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a) 0.481 0.272 0.505 0.523 0.515 0.517 0.407
Net realized and unrealized gain 0.301 0.275 0.295 0.041 (0.107) 0.129 (0.085)
Total from Investment Operations 0.782 0.547 0.800 0.564 0.408 0.646 0.322
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.479) (0.274) (0.500) (0.524) (0.518) (0.516) (0.402)
From net realized gains (0.002) (0.002) --- --- --- --- ---
In excess of net realized gains (0.021) (0.021) --- --- --- --- ---
Total Distributions Declared to holders (0.502) (0.297) (0.500) (0.524) (0.518) (0.516) (0.402)
Net asset value - End of period $7.700 $7.700 $7.420 $7.120 $7.080 $7.190 $7.060
Total return(c)(d) 10.87% 1.11%(e) 11.61% 8.31% 5.86% 9.55% 4.80% (e)
RATIOS TO AVERAGE NET ASSETS
Expenses 0.54% 1.29%(g) 0.46% 0.30% 0.45% 0.22% --- (g)
Net investment income 6.38% 5.63%(g) 6.89% 7.34% 7.17% 7.30% 7.47% (g)
Fees and expense waived
or borne by the Adviser 0.33% 0.33% 0.43% 0.65% 0.89% 1.94% 2.90% (g)
Portfolio turnover 7% 7% 14% 30% 25% 44% 104% (g)
Net assets at end of period $186,526 $17,282 $145,957 $85,301 $42,167 $21,987 $7,563
-----------------------------
a) Net of fees and expenses
waived or borne by the
Adviser which amounted to $0.025 $0.016 $0.032 $0.046 $0.064 $0.137 $0.157
(b) Class B shares were initially offered on June 8, 1992. Per share amounts
reflect activity from that date.
(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 total expenses, total return
would have been reduced.
(e) Not annualized..
(f) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
(g) Annualized.
(h) The Fund commenced investment operations on April 10, 1987.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MICHIGAN
--------------------------------------------------------------------------------------------------
Year ended January 31
--------------------------------------------------------------------------------------------------
1996 1995 1994 1993
Class A Class B Class A Class B Class A Class B Class A Class B(b)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of period $6.660 $6.660 $7.340 $7.340 $6.970 $6.970 $6.730 $6.950
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.368 0.317 0.410 0.359 0.404 0.351 0.405 0.167
Net realized and unrealized gain (loss) 0.484 0.484 (0.689) (0.689) 0.356 0.356 0.250 0.029
Total from Investment Operations 0.852 0.801 (0.279) (0.330) 0.760 0.707 0.655 0.196
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.382) (0.331) (0.401) (0.350) (0.390) (0.337) (0.407) (0.168)
From capital paid in -- -- --- --- --- --- (0.008) (0.008)
Total Distributions Declared to Sharehlders (0.382) (0.331) (0.401) (0.350) (0.390) (0.337) (0.415) (0.176)
Net asset value - End of period $7.130 $7.130 $6.660 $6.660 $7.340 $7.340 $6.970 $6.970
Total return (c)(d) 13.13% 12.30% (3.66)% (4.39)% 11.16% 10.36% 10.04% 0.98%(e)
RATIOS TO AVERAGE NET ASSETS
Expenses 0.80%(f) 1.55%(f) 0.62% 1.37% 0.66% 1.41% 0.88% 1.63%(g)
Net investment income 5.34%(f) 4.59%(f) 6.08% 5.33% 5.61% 4.86% 5.86% 5.11%(g)
Fees and expense waived
or borne by the Adviser 0.25% 0.25% 0.32% 0.32% 0.33% 0.33% 0.32% 0.32%
Portfolio turnover 48% 48% 40% 40% 7% 7% 14% 14%
Net assets at end of period (000) $43,308 $15,236 $41,844 $14,144 $45,570 $15,030 $36,024 $6,670
-----------------------------
(a) Net of fees and expenses
waived or borne by the
Adviser which amounted to $0.017 $0.017 $0.022` $0.022 $0.024 $0.024 $0.022 $0.009
</TABLE>
<TABLE>
<CAPTION>
MICHIGAN (CONTINUED)
--------------------------------------------------------------------------------------------
Period ended
Year ended January 31 January 31
--------------------------------------------------------------------------------------------
1992 1991 1990 1989 1988 1987(h)
Class A Class A Class A Class A Class A Class A
<S> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of period $6.520 $6.520 $6.690 $6.550 $7.260 $7.140
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.432 0.441 0.422 0.438 0.495 0.170
Net realized and unrealized gain (loss) 0.208 (0.001) (0.168) 0.133 (0.709) 0.125
Total from Investment Operations 0.640 0.440 0.254 0.571 (0.214) 0.295
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.430) (0.440) (0.424) (0.431) (0.496)(i) (0.175)(i)
From capital paid in --- --- --- --- --- ---
Total Distributions Declared to Sharehlders (0.430) (0.440) (0.424) (0.431) (0.496) (0.175)
Net asset value - End of period $6.730 $6.520 $6.520 $6.690 $6.550 $7.260
Total return (c)(d) 10.12% 7.01% 3.90% 9.08% (2.68)% 4.18%(e)
RATIOS TO AVERAGE NET ASSETS
Expenses 0.95% 1.00% 1.42% 1.29% 0.38% ---(g)
Net investment income 6.50% 6.79% 6.37% 6.73% 7.38% 6.19%(g)
Fees and expense waived
or borne by the Adviser 0.35% 0.40% 0.30% 0.51% 1.36% 1.93%(g)
Portfolio turnover 5% 18% 16% 57% 58% 31%(g)
Net assets at end of period (000) $28,608 $24,273 $18,870 $20,112 $21,426 $9,679
-----------------------------
(a) Net of fees and expenses
waived or borne by the
Adviser $0.023 $0.026 $0.020 $0.033 $0.089 $0.052
(b) Class B shares were initially offered on August 4, 1992. Per share amounts
reflect activity from that date.
(c) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(d) Had the Adviser not waived or reimbursed a portion of expenses, total return would have been
reduced.
(e) Not annualized.
(f) The benefits derived from custody credits and directed brokerage arrangements had no impact. Prior years' ratios are net of
benefits received, if any.
(g) Annualized.
(h) The Fund commenced investment operations on September 26, 1986.
(i) Because of differences between book and tax basis accounting, there was no
return of capital for federal income tax purposes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MINNESOTA
------------------------------------------------------------------------------------------------------
Year ended January 31
--------------------------------------------------------------------------------------------------
1996 1995 1994 1993
Class A Class B Class A Class B Class A Class B Class A Class B(b)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of period $6.840 $6.840 $7.480 $7.480 $7.160 $7.160 $7.030 $7.210
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a) 0.384 0.332 0.415 0.363 0.419 0.364 0.449 0.191
Net realized and unrealized gain (loss) 0.516 0.516 (0.642) (0.642) 0.323 0.323 0.125 (0.049)
Total from Investment Operations 0.900 0.848 (0.227) (0.279) 0.742 0.687 0.574 0.142
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.390) (0.338) (0.413) (0.361) (0.422) (0.367) (0.444) (0.192)
From net realized gains --- --- --- --- --- --- --- ---
From capital paid in (c) --- --- --- --- --- --- --- ---
Total Distributions Declared to Shareholders (0.390) (0.338) (0.413) (0.361) (0.422) (0.367) (0.444) (0.192)
Net asset value - End of period $7.350 $7.350 $6.840 $6.840 $7.480 $7.480 $7.160 $7.160
Total return (d)(e) 13.50% 12.66% (2.92)% (3.65)% 10.62% 9.81% 8.41% 2.01%(f)
RATIOS TO AVERAGE NET ASSETS
Expenses 0.85%(g) 1.60%(g) 0.72% 1.47% 0.82% 1.57% 0.85% 1.60%(h)
Net investment income 5.41%(g) 4.66%(g) 5.98% 5.23% 5.69% 4.94% 6.33% 5.58(h)
Fees and expense waived
or borne by the Adviser 0.24% 0.24% 0.26% 0.26% 0.20% 0.20% 0.35% 0.35%
Portfolio turnover 42% 42% 26% 26% 9% 9% 5% 5%
Net assets at end of period $36,586 $19,083 $35,846 $14,731 $41,326 $10,317 $35,017 $2,173
-----------------------------
(a) Net of fees and expenses
waived or borne by the
Adviser which amounted to $0.016 $0.016 $0.018 $0.018 $0.015 $0.015 $0.025 $0.009
</TABLE>
<TABLE>
<CAPTION>
MINNESOTA (CONTINUED)
----------------------------------------------------------------------------------
Period ended
Year ended January 31 January 31
-----------------------------------------------------------------------------------
1992 1991 1990 1989 1988 1987(i)
Class A Class A Class A Class A Class A Class A
<S> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of period $6.930 $6.820 $6.850 $6.820 $7.310 $7.140
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a) 0.461 0.467 0.440 0.434 0.499 0.170
Net realized and unrealized gain (loss) 0.098 0.108 (0.032) 0.034 (0.490) 0.175
Total from Investment Operations 0.559 0.575 0.408 0.468 0.009 0.345
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.458) (0.465) (0.438) (0.438) (0.497) (0.175)
From net realized gains --- --- --- --- (0.002) ---
From capital paid in (c) (0.001) --- --- --- --- ---
Total Distributions Declared to Shareholders (0.459) (0.465) (0.438) (0.438) (0.499) (0.175)
Net asset value - End of period $7.030 $6.930 $6.820 $6.850 $6.820 $7.310
Total return (d)(e) 8.33% 8.70% 6.11% 7.15% 0.47% 4.87%(f)
RATIOS TO AVERAGE NET ASSETS
Expenses 0.88% 1.00% 1.41% 1.47% 0.55% ---(h)
Net investment income 6.58% 6.77% 6.40% 6.41% 7.22% 6.16%(h)
Fees and expense waived
or borne by the Adviser 0.42% 0.37% 0.28% 0.39% 1.36% 4.83%(h)
Portfolio turnover 1% 7% 13% 20% 43% 43%(h)
Net assets at end of period $30,676 $24,188 $19,100 $19,721 $17,533 $5,765
-----------------------------
(a) Net of fees and expenses
waived or borne by the
Adviser which amounted to $0.029 $0.026 $0.019 $0.027 $0.094 $0.131
(b) Class B shares were initially offered on August 4, 1992. Per share amounts reflect activity from that date.
(c) Because of differences between book and tax basis accounting, there was no return of capital for federal income tax
purposes.
(d) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred
sales charge.
(e) Had the Adviser not waived or reimbursed a portion of expenses, total return would have been reduced.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage arrangements had no impact. Prior years' ratios are net
of benefits received, if any.
(h) Annualized.
(i) The Fund commenced investment operations on September 26, 1986.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NEW YORK
------------------------------------------------------------------------------------------------
Year ended January 31
------------------------------------------------------------------------------------------------
1996 1995 1994 1993
Class A Class B Class A Class B Class A Class B Class A Class B(b)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of period $6.680 $6.680 $7.500 $7.500 $7.090 $7.090 $6.840 $7.130
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a) 0.401 0.349 0.427 0.376 0.421 0.368 0.438 0.182
Net realized and unrealized gain (loss) 0.576 0.576 (0.834) (0.834) 0.407 0.407 0.260 (0.029)
Total from Investment Operations 0.977 0.925 (0.407) (0.458) 0.828 0.775 0.698 0.153
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.407) (0.355) (0.413) (0.362) (0.418) (0.365) (0.445) (0.190)
In excess of net investment income --- --- --- --- --- --- (0.003) (0.003)
Total Distributions Declared to Shareholder (0.407) (0.355) (0.413) (0.362) (0.418) (0.365) (0.448) (0.193)
Net asset value - End of period $7.250 $7.250 $6.680 $6.680 $7.500 $7.500 $7.090 $7.090
Total return (c)(d) 14.99% 14.15% (5.32)% (6.04)% 11.95% 11.14% 10.50% 1.16%(e)
Expenses 0.58%(f) 1.33%(f) 0.42% 1.17% 0.62% 1.37% 0.96% 1.71%(g)
Net investment income 5.72%(f) 4.97%(f) 6.25% 5.50% 5.68% 4.93% 6.25% 5.50%(g)
or borne by the Adviser 0.38% 0.38% 0.46% 0.46% 0.29% 0.29% 0.06% 0.06%
Portfolio turnover 39% 39% 65% 65% 25% 25% 7% 7%
Net assets at end of period (000) $56,795 $53,505 $53,322 $43,166 $63,527 $45,061 $53,779 $14,743
-----------------------------
(a) Net of fees and expenses
waived or borne by the
Adviser which amounted to $0.026 $0.026 $0.032 $0.032 $0.021 $0.021 $0.004 $0.001
</TABLE>
<TABLE>
<CAPTION>
NEW YORK (CONTINUED)
------------------------------------------------------------------------------------------------
Period ended
Year ended January 31 January 31
-----------------------------------------------------------------------------------------------
1992 1991 1990 1989 1988 1987(h)
Class A Class A Class A Class A Class A Class A
<S> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of period $6.600 $6.590 $6.690 $6.620 $7.310 $7.140
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a) 0.453 0.459 0.441 0.427 0.488 0.175
Net realized and unrealized gain (loss) 0.242 0.013 (0.116) 0.073 (0.687 0.168
Total from Investment Operations 0.695 0.472 0.325 0.500 (0.199) 0.343
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.455) (0.462) (0.425) (0.430) (0.491) (0.173)
In excess of net investment income --- --- --- --- --- ---
Total Distributions Declared to Shareholder (0.455) (0.462) (0.425) (0.430) (0.491) (0.173)
Net asset value - End of period $6.840 $6.600 $6.590 $6.690 $6.620 $7.310
Total return (c)(d) 10.86% 7.42% 4.98% 7.89% (2.44)% 4.83%(e)
RATIOS TO AVERAGE NET ASSETS:
Expenses 1.00% 1.04% 1.46% 1.46% 0.49% ---(g)
Net investment income 6.71% 6.99% 6.62% 6.52% 7.35% 6.27%(g)
Fees and expense waived
or borne by the Adviser 0.14% 0.24% 0.05% 0.10% 1.04% 1.70%(g)
Portfolio turnover 17% 6% 41% 53% 112% 30%(g)
Net assets at end of period (000) $40,233 $31,691 $23,124 $25,360 $26,588 $15,738
-----------------------------
(a) Net of fees and expenses
waived or borne by the
Adviser which amounted to $0.009 $0.016 $0.003 $0.007 $0.070 $0.047
(b) Class B shares were initially offered on August 4, 1992. Per share amounts
reflect activity from that date.
(c) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge. (d) Had the Adviser
not waived or reimbursed a portion of expenses, total return would have been
reduced.
(e) Not annualized.
(f) The benefits derived from custody credits and directed brokerage arrangements had no impact. Prior years' ratios are net of
benefits received, if any.
(g) Annualized.
(h) The Fund commenced investment operations on September 26, 1986.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NORTH CAROLINA
------------------------------------------------------------------
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 $6.680 $6.680 $7.500 $7.500 $7.500 $7.500
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a) 0.386 0.334 0.396 0.345 0.164 0.141
Net realized and unrealized gain (loss) 0.588 0.588 (0.822) (0.822) --- ---
Total from Investment Operations 0.974 0.922 (0.426) (0.477) 0.164 0.141
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.384) (0.332) (0.394) (0.343) (0.164) (0.141)
Net asset value - End of period $7.270 $7.270 $6.680 $6.680 $7.500 $7.500
Total return(c)(d) 14.91% 14.07% (5.55)% (6.27)% 2.22%(e) 1.90%(e)
RATIOS TO AVERAGE NET ASSETS
Expenses 0.33%(f) 1.08(f) 0.12% 0.87% 0.10%(g) 0.85%(g)
Net investment income 5.47%(f) 4.72(f) 5.83% 5.08% 4.91%(g) 4.16%(g)
Fees and expenses waived or borne
by the Adviser 0.76% 0.76% 0.93% 0.93% 1.20%(g) 1.20%(g)
Portfolio turnover 34% 34% 37% 37% 1%(g) 1%(g)
Net assets at end of period (000) $15,813 $18,593 $14,189 $17,169 $13,710 $9,934
------- --------------------------------------------------
(a) Net of fees and expenses
waived or borne by the
Adviser which amounted to $0.053 $0.053 $0.063 $0.063 $0.040 $0.040
(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) Not annualized.
(f) The benefits derived from custody credits and directed brokerage arrangements had no impact. Prior years' ratios are net
of benefits
received, if any.
(g) Annualized.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OHIO
------------------------------------------------------------------------------------------------
Year ended January 31
------------------------------------------------------------------------------------------------
1996 1995 1994 1993
Class A Class B Class A Class B Class A Class B Class A Class B(b)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of period $6.930 $6.930 $7.670 $7.670 $7.290 $7.290 $7.090 $7.330
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a) 0.375 0.321 0.401 0.348 0.406 0.351 0.444 0.185
Net realized and unrealized gain (loss) 0.585 0.585 (0.745) (0.745) 0.389 0.389 0.204 (0.033)
Total from Investment Operations 0.960 0.906 (0.344) (0.397) 0.795 0.740 0.648 0.152
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS:
From net investment income (0.380) (0.326) (0.396) (0.343) (0.411) (0.356) (0.448) (0.192)
From capital paid in --- --- --- --- (0.004) (0.004) --- ---
From net realized gains --- --- --- --- --- --- --- ---
Total Distributions Declared to Shareholde (0.380) (0.326) (0.396) (0.343) (0.415) (0.360) (0.448) (0.192)
Net asset value - End of period $7.510 $7.510 $6.930 $6.930 $7.670 $7.670 $7.290 $7.290
Total return (c)(d) 14.18% 13.34% (4.38)% (5.10)% 11.17% 10.36% 9.41% 0.85%(e)
RATIOS TO AVERAGE NET ASSETS
Expenses 0.85%(f) 1.60%(f) 0.72% 1.47% 0.82% 1.57% 1.00% 1.75%(g)
Net investment income 5.19%(f) 4.44%(f) 5.71% 4.96% 5.34% 4.59% 6.18% 5.43%(g)
or borne by the Adviser 0.11% 0.11% 0.16% 0.16% 0.09% 0.09% 0.03% 0.03%
Portfolio turnover 31% 31% 33% 33% 3% 3% 13% 13%
Net assets at end of period (000) $74,383 $56,160 $72,123 $53,547 $79,394 $51,212 $62,439 $7,293
-----------------------------
(a) Net of fees and expenses
waived or borne by the
Adviser which amounted to $0.008 $0.008 $0.011 $0.011 $0.007 $0.007 $0.002 ----
</TABLE>
<TABLE>
<CAPTION>
OHIO (CONTINUED)
--------------------------------------------------------------------------
Period ended
Year ended January 31 January 31
--------------------------------------------------------------------------
1992 1991 1990 1989 1988 1987(h)
Class A Class A Class A Class A Class A Class A
<S> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of period $6.880 $6.750 $6.850 $6.640 $7.260 $7.140
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a) 0.457 0.462 0.463 0.448 0.499 0.175
Net realized and unrealized gain (loss) 0.208 0.138 (0.114) 0.204 (0.615) 0.120
Total from Investment Operations 0.665 0.600 0.349 0.652 (0.116) 0.295
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.455) (0.470) (0.449) (0.442) (0.503)(i) (0.175)
From capital paid in --- --- --- --- --- ---
--- --- --- --- ---
Total Distributions Declared to Shareholde (0.455) (0.470) (0.449) (0.442) (0.504) (0.175)
Net asset value - End of period $7.090 $6.880 $6.750 $6.850 $6.640 $7.260
Total return (c)(d) 10.00% 9.21% 5.21% 10.22% (1.25)% 4.18%(e)
RATIOS TO AVERAGE NET ASSETS
Expenses 1.00% 1.00% 1.27% 1.28% 0.41% --- (g)
Net investment income 6.57% 6.83% 6.77% 6.74% 7.49% 6.59%(g)
Fees and expense waived
or borne by the Adviser 0.09% 0.15% 0.06% 0.34% 1.12% 1.72%
Portfolio turnover 13% 11% 45% 89% 69% 158%(g)
Net assets at end of period (000) $50,281 $41,158 $27,433 $27,676 $27,320 $13,041
-----------------------------
(a) Net of fees and expenses
waived or borne by the
Adviser which amounted to $0.006 $0.010 $0.004 $0.022 $0.074 $0.045
(b) Class B shares were initially offered on August 4, 1992. Per share amounts
reflect activity from that date.
(c) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(d) Had the Adviser not waived or reimbursed a portion of expenses, total return would have been
reduced.
(e) Not annualized.
(f) The benefits derived from custody credits and directed brokerage arrangements had no impact. Prior years' ratios are net of
benefits received, if any.
(g) Annualized.
(h) The Fund commenced investment operations on September 26, 1986.
(i) Approximately $0.004 per share represents a return of capital for book purposes only.
</TABLE>
Further performance information is contained in each Fund's Annual Report to
shareholders, which is obtainable free of charge by calling 1-800-248-2828.
<PAGE>
THE FUNDS' INVESTMENT OBJECTIVE
Each Fund seeks as high a level of after-tax total return as is consistent with
prudent risk, by pursuing current income exempt from federal and its state's
personal income tax (if any) and opportunities for long-term appreciation from a
portfolio primarily invested in investment grade municipal bonds. The Florida
and Michigan Funds' shares are intended to be exempt from their respective
states' intangibles tax.
HOW THE FUNDS PURSUE THEIR OBJECTIVE AND CERTAIN RISK FACTORS
Each Fund normally invests substantially all of its assets in investment grade
debt securities of any maturity, the interest on which is exempt from federal
income tax and that state's personal income tax (if any), other than any
alternative minimum tax (State Bonds); in the case of the Florida and Michigan
Funds, the State Bonds are exempt from the state intangibles tax. The value of
debt securities (and thus of Fund shares) usually fluctuates inversely to
changes in interest rates. Mutual funds investing in taxable securities may have
higher yields than the Funds. Each Fund under normal circumstances will invest
at least 80% of its assets in its State's Bonds. The Minnesota Fund intends to
invest its assets so that at least 95% of its exempt-interest dividends each
year are derived from certain Minnesota sources, as specified by Minnesota law.
In periods of unusual market conditions, when the Adviser considers it
appropriate, each Fund may temporarily invest up to 50% of its total assets in
assets that are not State Bonds, subject to applicable state requirements. The
Adviser relies on the opinion of bond counsel to each issuer as to the
tax-exempt status of the issue. Each Fund limits investments in State Bonds
subject to individual alternative minimum tax to a maximum of 20% of total
assets. Each Fund normally limits investments in securities that are not State
Bonds to a maximum of 20% of the Fund's total assets, subject to applicable
state requirements. Investment grade securities are those rated at least Baa by
Moody's, BBB by S&P, comparably rated by another national rating service or
unrated but considered similar in quality by the Adviser. Bonds rated BBB or Baa
are considered to have some speculative characteristics and could be more
adversely affected by unfavorable economic developments than higher rated bonds.
Each Fund may invest up to 25% of its net assets in securities-rated below
investment grade (or comparable unrated securities), but not below the
equivalent of CCC by S&P. Each Fund may invest up to 25% of its assets in
unrated State Bonds and other unrated securities, subject to applicable state
requirements. Certain bonds do not pay interest in cash on a current basis.
However, the Funds will accrue and distribute this interest on a current basis,
and may have to sell securities to generate cash for distributions. Certain
variable rate debt securities (known as "inverse floaters") pay interest rates
that move inversely to changes in short-term market interest rates. These
securities' values move inversely to changes in long-term rates. The values of
certain inverse floaters will change substantially more, given a change in
long-term rates, than would a traditional debt security of similar maturity.
There may not always be a sufficient supply of State Bonds to enable the Funds
to achieve their objective. Many bonds have call features and if called, the
Funds may only be able to invest the proceeds at lower yields.
Each Fund may invest, under normal conditions, up to 20% of its total assets in
high quality, short-term obligations of banks or corporations (rated at least
Prime-2 by Moody's, A-2 by S&P, comparably rated by another national rating
service or unrated but considered comparable by the Adviser), the U.S.
government, and repurchase agreements. These investments are subject to federal
and/or state income tax. In addition, gains realized upon the sale of portfolio
securities may be taxable when distributed by the Fund.
Under a repurchase agreement, a Fund buys a security from a bank or dealer,
which is obligated to buy it back at a fixed price and time. The security is
held in a separate account at the Fund's custodian, and constitutes that Fund's
collateral for the bank's or dealer's repurchase obligation. Additional
collateral will be added so that the obligation will at all times be fully
collateralized. However, if the bank or dealer defaults or enters bankruptcy,
the Fund may experience costs and delays in liquidating the collateral, and may
experience a loss if it is unable to demonstrate its rights to the collateral in
a bankruptcy proceeding. Not more than 15% of each Fund's net assets will be
invested in repurchase agreements maturing in more than 7 days and other
illiquid assets.
To participate in the new issues market, each Fund may without limit acquire
securities on a "when-issued" basis by contracting to purchase securities for a
fixed price on a date beyond the customary settlement time with no interest
accruing until settlement. High quality securities in an amount equal to the
when-issued securities are maintained in a segregated account at the custodian.
If made through a dealer, the contract is dependent on the dealer's consummation
of the sale. The dealer's failure could deprive a Fund of an advantageous yield
or price. These contracts may be considered securities and involve risk to the
extent that the value of the underlying security changes prior to settlement. A
Fund may realize short-term profits or losses if the contracts are sold.
Lower Rated Debt Securities. Lower rated debt securities (commonly referred to
as junk bonds) are debt securities which, because of the greater possibility
that the issuers will default, are not investment grade (i.e., are rated below
BBB by Standard & Poor's Corporation (S&P) or below Baa by Moody's Investors
Service (Moody's), or unrated but considered by the Adviser to be of comparable
credit quality).Because of the increased risk of default, these securities
generally have higher nominal interest rates than higher quality securities.
The Funds may purchase bonds in the lowest rating categories (C for Moody's and
D for S&P) and comparable unrated securities. However,the Funds will only
purchase securities rated Ca of lower by Moody's or CC or lower by S&P if the
Adviser believes the quality of such securities is higher than indicated by the
rating.
The values of lower rated securities are more likely to fluctuate directly,
rather than inversely, with changes in interest rates. This is because increases
in interest rates often are associated with an improving economy, which may
translate into an improved ability of the issuers to pay off their bonds
(lowering the risk of default).Lower rated bonds also are generally considered
significantly more speculative and likely to default than higher quality bonds.
Relative to other debt securities, their values tend to be more volatile
because: (i) an economic downturn may more significantly impact their potential
for default, and (ii) the secondary market for such securities may at times be
less liquid or respond more adversely to negative publicity or investor
perceptions, making it more difficult to value or dispose of the securities. The
likelihood that these securities will help the Funds achieve their investment
objective is more dependent on the Adviser's own credit analysis.
Options And Futures. Each Fund may write covered call and put options and
purchase call and put options on debt securities. A call option gives the
purchaser the right to buy a security from, and a put option the right to sell a
security to, the option writer at a specified price, on or before a specified
date. Each Fund will pay a premium when purchasing an option, which reduces the
Fund's return on the underlying security if the option is exercised and results
in a loss if the option expires unexercised. Each Fund will receive a premium
from writing an option, which may increase its return if the option expires or
is closed out at a profit. If the Fund is unable to close out an unexpired
option, the Fund must continue to hold the underlying security until the option
expires. Trading hours for options may differ from the trading hours for the
underlying securities. Thus, significant price movements may occur in the
securities markets that are not reflected in the options market. This may limit
the effectiveness of options as hedging devices.
Each Fund may buy or write options that are not traded on national securities
exchanges and not protected by the Options Clearing Corporation. These
transactions are effected directly with a broker-dealer, and each Fund bears the
risk that the broker-dealer will fail to meet its obligations. The market value
of such options and other illiquid assets will not exceed 15% of each Fund's
total assets.
Index and Interest Rate Futures. For hedging purposed each fund may purchase or
sell (1) intrest rate and tax-exempt bond index futures contracts and (2) put
and call options on such contracts and on such indices. A futures contract
creates an obligation by the seller to deliver and the buyer to take the
delivery of the type of instrument at the time and in the amount specified in
the contract. Although a futures contract calls for delivery (or acceptance) of
the specified instrument, a futures contract is usually closed out before the
settlement date through the purchase (sale) of a comparable contract. If the
initial sale price of the future exceeds (or is less than) the price of the
offsetting purchase, the Fund realizes a gain (or loss). Options on futures
contracts operate in a similar manner to options on securities, except that the
position assumed is in the futures contracts rather than in the security. A Fund
may not purchase or sell futures contracts or purchase related options if
immediately thereafter the sum of the amount of deposits for initial margin or
premiums on the existing futures and related options positions would exceed 5%
of the market value of the Fund's total assets. Transactions in futures and
related options involve the risk of (1) imperfect correlation between the price
movement of the contracts and the underlying securities, (2) significant price
movement in one but not the other market because of different trading hours, (3)
the possible absence of a liquid secondary market at any point in time, and (4)
if the Adviser's prediction on interest rates is inaccurate, the Fund may be
worse off than if it had not hedged.
Borrowing of Money. Each fund may borrow money from banks for temporary or
emergency purposes up to 10% of its net assets; however, the Fund will not
purchase additional portfolio securities while borrowing exceed 5 % of net
assets.
Special Considerations. State Bonds include general obligation bonds (GOs),
revenue bonds (RBs) and industrial revenue bonds (IRBs). GOs are payable from
the issuer's unrestricted revenues and may depend on appropriation by the
applicable legislative body. RBs are payable only from a specified revenue
source, not the unrestricted revenues of the issuer. An IRB generally is payable
only from the revenues of the corporate user of a facility and consequently its
credit rating relates to that of the corporate user. Each Fund may invest more
than 25% of its total assets in IRBs, but intends to limit investments in IRBs
which are based on the credit of private entities in any one industry to 25% or
less.
State Fiscal Conditions. The value of each Fund's shares may be affected by
factors pertaining to its state's economy (which may affect issuer tax revenues)
and the ability of issuers of State Bonds to meet their obligations and may
fluctuate more widely than the value of shares of a portfolio investing in a
number of different states. The availability of federal, state and local aid to
issuers of State Bonds may also affect their ability to meet their obligations.
Payments of principal and interest on RBs and IRBs will depend on the economic
condition of the specific revenue source, which could be affected by economic,
political and demographic conditions in the relevant state. There is no
assurance that any issuer of a State Bond will make full and timely payments of
principal and interest or remain solvent. For example, in December 1994, Orange
County, California filed for protection under the federal bankruptcy laws. A
reduction in the actual or perceived ability of an issuer of State Bonds to meet
its obligations (including a reduction in the rating of its outstanding
securities) could also affect adversely the value and marketability of State
Bonds.
California. From mid-1990 to late 1993, the State of California suffered a
recession with the worst economic, fiscal and budget conditions since the
1930's. Construction, manufacturing (especially aerospace), and financial
services, among others, were severely affected. Job losses were the worst of any
post-war recession.. The recession seriously affected State tax revenues and
caused an increase in expenditures for health and welfare programs.Consequently,
the State has experienced recurring budget deficits, and the ratings of the
State's general obligation bonds were lowered, most recently in July 1994. The
California economy has shown signs of recovery since 1994, with significant job
gains in 1994 and 1995.
It is impossible to predict the time, location or magnitude of a major
earthquake or its effect on the California economy. In January 1994, a major
earthquake struck Los Angeles, causing significant property damage in a
four-county area. The possibility exists that another earthquake could create a
major dislocation of the California economy.
Certain California State Bonds rely on real property taxes as a source of
revenue. In 1978, California voters approved Proposition 13, which limits ad
valorem taxes on real property and restricts the ability of taxing entities to
increase property and restricts the ability of taxing entities to increase
property taxes. California voters subsequently approved measures that limit
spending by the State and local governments. Decreased State revenues may result
in reductions of funds provided to local governments. The effect of these
changes on the ability of issuers of California State Bonds to pay interest and
principal on their obligations remains unclear, and may depend upon whether a
particular bond is a general obligation or limited obligation bond.
Connecticut. The State of Connecticut has a mature economy with primary
dependence on durable goods manufacturing, particularly in defense-related
industries. Significant job losses in this sector coupled with restructurings in
the insurance and other service industries have resulted in the State losing 8%
of its job base between 1989 and 1993. Partially offsetting is the State's
exceptional personal wealth level which, despite the poverty of certain of its
largest cities, continues to rank among the highest in the nation in terms of
per capita income. However, the State's rate of growth of personal income has
lagged behind the nation's rate for several years. In 1992, the State
implemented a personal income tax while cutting certain business and consumption
based taxes with the intent of reducing economic vulnerability and diversifying
the revenue base. These actions have been coupled with a constitutional cap on
the rate of spending growth and have served to stabilize the State's finances
and restore budgetary balance. The outlook for future economic growth is modest
and a return to the growth rates of the 1980s is unlikely.
Florida. The State of Florida continues to experience strong population growth
and good economic performance. The State's economy is becoming more diversified
with foreign trade surpassing tourism as the State's leading industry. Export
industries have benefited from the State's strategic geographic location for
international trade, particularly with Latin America. While the State's growth
has been impressive, continuing strong fiscal and economic performance will be
based on the State's ability to maintain a balance that adequately funds the
additional service and infrastructure needs driven by rapid population growth
while continuing to promote further economic development. Without a personal
income tax, the State's operations are largely dependent on consumption based
taxes which are more vulnerable to general economic conditions.
Massachusetts. The Commonwealth of Massachusetts has a highly developed economy
with a large service sector, particularly in health care and education. Strong
economic growth in the 1980s was halted late in the decade by weakening in the
high technology, real estate and finance sectors, resulting in steady job
losses. While the Commonwealth's economy has turned around over the past five
years, it is unlikely that the growth rates of the 1980's will be matched. This
is due, in part, to large exposure to downsizing defense-related and computer
manufacturing industries. Additionally, the economy is dependent on the health
care sector which could be hurt by continuing consolidation, proposed cuts in
medicare/medicaid funding and other proposed reforms. The Commonwealth has made
progress in stabilizing its fiscal position since 1990. More realistic revenue
expectations and increased efforts to impose spending discipline have resulted
in the elimination of deficit financing, reduced reliance on short-term
financing and four consecutive years of positive fund balances.
Michigan. The State of Michigan is highly industrialized with a strong economic
concentration in motor vehicle production and other durable goods manufacturing.
A significant degree of industrial restructuring took place in the early 1980s,
mitigating the economic impact of the recession in the early 1990s. Positive
economic factors for the State include a stabilizing market share and improving
profitability for the domestic auto manufacturers, increased manufacturing
productivity and minimal exposure to the downsizing defense industry. In
addition, the State has demonstrated its commitment to addressing budget
imbalances and promoting public service efficiencies, resulting in balanced
general fund operations throughout a difficult economic period and enabling the
State to transfer approximately $84.5 million to the State's budget
stabilization fund as of September 30, 1995, the end of the State's 1994-95
fiscal year, bringing the balance in that fund to over $1 billion.
Minnesota. The State of Minnesota's overall economic structure closely parallels
that of the nation as a whole, although manufacturing is modestly more
significant than construction, finance and real estate. The State's natural
resource base is evidenced in its strong positions in food and forestry
products, and the State serves as a major regional commercial center. While the
recession of the early 1990s was less severe in the State than in the nation
overall, the State was not immune to its impact as evidenced by slowdowns in
income and sales tax revenue growth. Because the State relies on a progressive
personal income tax and retail sales tax for general fund revenue, its fiscal
system is sensitive to economic conditions as evidenced by budget deficits 1991
and 1992. The State demonstrated its financial discipline by curing the deficits
through a variety of measures, including a sales tax rate increase and spending
cuts. An improved economy in 1993, 1994 and 1995 has led to stronger revenues
and a more favorable expectation for balanced budget operations.
Under legislation enacted in 1995, if a court determines that Minnesota's
taxation of interest on other state's obligations, while not taxing interest on
its own obligations, discriminatesagainst interstate commerce, the interest on
Minnesota obligations may become taxable. Should an adverse decision be
rendered, the value of the securities purchased by the Minnesota Fund might be
adversely affected, and the value of the shares of the Minnesota Fund might also
be adversely affected. See "Minnesota Tax Considerations" in the Statement of
Additiona Information for a further discussion of the 1995 Minnesota
legislation.
New York. The State of New York enjoys a generally diverse and substantial
economic base and a strong socioeconomic profile with personal income levels
among the highest in the nation. The employment levels in the State have been
adversely affected by the most recent recession as a result of an overweighting
in the service sector, especially in finance, real estate and insurance. The
State's economy has continued to underperform the nation through the current
business cycle. While unemployment appears to have peaked, the State's
unemployment rate continues to be in excess of the national average. Significant
improvement in the labor market is not expected due to current weakness in the
manufacturing, defense sectors and health care. Income levels have suffered as
well, despite the State's strong position relative to the rest of the nation, as
growth rates have been stagnant and have lagged the nation as a whole.
Improvement in this indicator of economic health will be tied to improvement in
the employment level. New York's financial operations have been historically
weak, with chronic budget deficits, untimely budget passage and overly
optimistic revenue assumptions in the face of a protracted economic recession.
Both the State and New York City must overcome substantial budget gaps in fiscal
years 1996 and 1997, which will be difficult given the local politics and
economic health of the State and New York City. Recently enacted multi-year tax
reductions, as well as a November 1995 voter rejection of a constitutional
amendment to reform debt issuance practices, will exacerbate these problems.
North Carolina. Although the State of North Carolina is the tenth largest state
in population, it is primarily a rural state, having only five municipalities
with populations in excess of 100,000. The labor force has undergone significant
change during recent years, transitioning from an agricultural to a service and
goods producing economy. Persons displaced by farm mechanization and farm
consolidations have, in large measure, sought and found employment in other
pursuits. During the period 1985 to 1995, the State labor force grew about 17%.
Per capita income during the period 1980 to 1993 increased by 133.8%. The
current economic profile of the State consists of a combination of industry,
agriculture and tourism. As of June 1995, the State was reported to rank tenth
among the states in non-agricultural employment and eighth in manufacturing
employment. Employment indicators have varied somewhat in the annual periods
since June, 1989, but have remained consistently below the national average. As
of the date of this Prospectus, Moody's rated the State's general obligation
bonds as Aaa and Standard & Poor's rated such bonds AAA. Standard & Poor's also
reaffirmed its stable outlook for the State in January 1994. The State's highest
quality general obligation bond ratings reflect strong economic characteristics,
sound financial performance, and low debt levels.
Ohio. While diversifying more into the service and other
non-manufacturing areas, the State's economy continues to rely to a significant
extent on durable goods manufacturing, largely concentrated in motor vehicles
and equipment, steel, rubber products and household appliances. As a result,
general economic activity, as in many other industrially-developed states, tends
to be more cyclical than in some other states and in the nation as a whole.
However, in recent years the State has benefited from strength in its
traditional manufacturing industries. For the last five years, the State's
unemployment levels have been well below the national rate, reversing the trend
of the 1980's. This economic expansion has resulted in strong financial
performance in the 1993-1995 biennium, enhancing revenues and positioning the
State well for managing cyclical fluctuations during the next weak economic
period.
Non-Diversification. Because of the relatively small number of issuers of
investment grade State Bonds, each Fund (except the California Fund) may
concentrate in the securities of a few issuers which the Adviser considers to be
attractive. This may increase the risk of loss to those Funds. It is also
possible that there will not be a sufficient supply of State Bonds available to
enable each Fund to achieve its objective.
Other. The Funds may not always achieve their investment objective. The Funds'
investment objective and non-fundamental policies may be changed without
shareholder approval. Each Fund will notify investors at least 30 days prior to
any material change in its investment objective. If there is a change in a
Fund's investment objective, shareholders should consider whether the Fund
remains an appropriate investment in light of their financial position and
needs. Shareholders may incur a contingent deferred sales charge if shares are
redeemed in response to a change in objective. Each Fund's fundamental policies
listed in the Statement of Additional Information cannot be changed without the
approval of a majority of that Fund's outstanding voting securities. Additional
information concerning certain of the securities and investment techniques
described above is contained in the Statement of Additional Information.
HOW THE FUNDS MEASURE THEIR PERFORMANCE
Performance may be quoted in sales literature and advertisements. Each Class's
average annual total returns are calculated in accordance with the Securities
and Exchange Commission's formula and assume the reinvestment of all
distributions, the maximum initial sales charge of 4.75% on Class A shares and
the contingent deferred sales charge applicable to the time period quoted on
Class B shares. Other total returns differ from the average annual total return
only in that they may relate to different time periods, may represent aggregate
as opposed to average annual total returns, and may not reflect the initial or
contingent deferred sales charges.
Each Class's yield and tax-equivalent yield, which differ from total
return because they do not consider the change in net asset value, are
calculated in accordance with the Securities and Exchange Commission's
formula. Each Class's distribution rate is calculated by dividing the most
recent month's distribution, annualized, by the maximum offering price of
that Class at the end of the month. Each Class's performance may be
compared to various indices. Quotations from various publications may be
included in sales literature and advertisements. See "Performance
Measures" in the Statement of Additional Information for more
information.
All performance information is historical and does not predict future results.
HOW THE FUNDS ARE MANAGED
The Trustees formulate the Funds' general policies and oversee the Funds'
affairs as conducted by the Adviser.
The Adviser is a subsidiary of The Colonial Group, Inc. Colonial Investment
Services, Inc. (Distributor) is a subsidiary of the Adviser and serves as the
distributor for the Funds' shares. Colonial Investors Service Center, Inc.
(Transfer Agent), an affiliate of the Adviser, serves as the shareholder
services and transfer agent for the Funds. The Colonial Group, Inc. is a direct
subsidiary of Liberty Financial Companies, Inc. which in turn is an
indirect subsidiary of Liberty Mutual Insurance Company (Liberty Mutual).
Liberty Mutual is considered to be the controlling entity of the Adviser and its
affiliates. Liberty Mutual is an underwriter of workers' compensation insurance
and a property and casualty insurer in the U.S.
The Adviser furnishes each Fund with investment management, accounting and
administrative personnel and services, office space and other equipment and
services at the Adviser's expense. For these services, the Funds pay the Adviser
at the following annual percentages of the Funds' combined average daily net
assets: on the first $1 billion of combined average daily net assets, the annual
rate shall be 0.5375% for January through March, 1996, 0.525% for April through
June 1996, 0.5125% for July through September 1996, and 0.5% thereafter: on the
next $1 billion of combined average daily net assets, the annual rate shall be
0.5%; and on the combined average daily net assets in excess of $2 billion, the
annual rate shall be 0.45%.
Robert S. Waas, Vice President of the Adviser, has managed the Connecticut Fund,
Florida Fund, Massachusetts Fund, New York Fund and North Carolina Fund since
1996. Prior to joining the Adviser in July, 1995, Mr. Waas was a portfolio
manager at Van Kampen/American Capital and at the Colonial Penn Group.
Brian M.Hartford, Vice President of the Adviser, has managed the Michigan Fund,
the Minnesota Fund and the Ohio Fund since 1993. Mr. Hartford was a Senior
Municipal Trader of the Adviser from 1991 until 1993, and Manager of the
Analytic Department at Harvard Management Company until 1991.
William C. Loring, Vice President of the Adviser, has managed the California
Fund since its inception and has managed various other Colonial tax-exempt funds
since 1986.
The Adviser also provides pricing and bookkeeping services to each Fund for a
monthly fee of $2,250 per Fund plus a percentage of each Fund's average net
assets over $50 million. The Transfer Agent provides transfer agency and
shareholder services to each Fund for a fee of 0.14% annually of average net
assets plus certain out-of-pocket expenses.
Each of the foregoing fees is subject to any reimbursement or fee waiver or
expense reimbursement to which the Adviser may agree.
The Adviser places all orders for the purchase and sale of portfolio
securities. In selecting broker-dealers, the Adviser may consider research
and brokerage services furnished to it and its affiliates. Subject to
seeking best execution, the Adviser may consider sales of shares of the Funds
(and of certain other Colonial funds) in selecting broker-dealers for portfolio
security transactions.
HOW THE FUNDS VALUE THEIR SHARES
Per share net asset value is calculated by dividing the total value of each
Class's net assets by its number of outstanding shares. Shares of the Funds are
valued as of the close of the New York Stock Exchange (Exchange) each day the
Exchange is open. Portfolio securities for which market quotations are readily
available are valued at market. Short-term investments maturing in 60 days or
less are valued at amortized cost, when it is determined, pursuant to procedures
adopted by the Trustees, that such cost approximates market value. All other
securities and assets are valued at fair value following procedures adopted by
the Trustees.
DISTRIBUTIONS AND TAXES
Each Fund intends to qualify as a "regulated investment
company" under the Internal Revenue Code and to distribute to shareholders
virtually all net income and any net realized gain at least annually.
The Funds generally declare distributions daily and pay them monthly.
Distributions are invested in additional shares of the same Class of the Fund at
net asset value unless the shareholder elects to receive cash. Regardless of the
shareholder's election, distributions of $10 or less will not be paid in cash to
shareholders but will be invested in additional shares of the same Class of the
Fund at net asset value. To change your election, call the Transfer Agent for
information. The Funds' distributions of net income generally will be exempt
from Federal and the relevant State's personal income taxes. However, as
described above under "How the Funds Pursue Their Objective and Certain Risk
Factors," certain investments may produce taxable income, and portfolio
transactions may produce gains a portion of which may be taxable at ordinary
Federal income tax rates. If the Funds make taxable distributions, those
distributions will generally be taxable whether you receive them in cash or in
additional Fund shares, unless you are a tax-exempt institution. Each January,
information on the amount and nature of distributions for the prior year,
including the alternative minimum tax portion, is sent to shareholders.
While each Fund's distributions from income on its State's Bonds are generally
not taxable at the federal level or subject to that Fund's state's personal
income tax, if any, a portion may be included in computing a shareholder's
alternative minimum tax liability. Social security benefits may be taxed as
a result of receiving tax-exempt income. If you receive social security
or railroad retirement benefits, you should consult your tax adviser to
determine what effect, if any, an investment in the Funds may have on the
taxation of your benefits.
The foregoing is a summary of certain income tax consequences of investing in
the Funds. You should consult your tax adviser to determine the effect of an
investment in a Fund on your particular tax situation (including possible
liability for federal alternative minimum tax and for state and local taxes).
HOW TO BUY SHARES
Shares of the Funds are offered continuously. Orders received in good form prior
to the time at which the Funds value their shares (or placed with a financial
service firm before such time and transmitted by the financial service firm
before a Fund processes that day's share transactions) will be processed based
on that day's closing net asset value, plus any applicable initial sales charge.
The minimum initial investment is $1,000; subsequent investments may be as small
as $50. The minimum initial investment for the Colonial Fundamatic program is
$50. Certificates will not be issued for Class B shares and there are some
limitations on the issuance of Class A share certificates. The Funds may refuse
any purchase order for their shares. See the Statement of Additional Information
for more information.
Class A Shares. Class A shares are offered at net asset value plus an initial or
a contingent deferred sales charge as follows:
______Initial Sales Charge_____
Retained
by
Financial
Service
Firm as
as % of % of
---------------------
Amount Offering Offering
Amount Purchased Invested Price Price
Less than $50,000 4.99% 4.75% 4.25%
$50,000 to less than
$100,000 4.71% 4.50% 4.00%
$100,000 to less than
$250,000 3.63% 3.50% 3.00%
$250,000 to less than
$500,000 2.56% 2.50% 2.00%
$500,000 to less than
$1,000,000 2.04% 2.00% 1.75%
$1,000,000 or more 0.00% 0.00% 0.00%
On purchases of $1 million or more, the Distributor pays the financial service
firm a cumulative commission as follows:
Amount Purchased Commission
First $3,000,000 1.00%
Next $2,000,000 0.50%
Over $5,000,000 0.25% (1)
(1) Paid over 12 months but only to the
extent the shares remain outstanding.
Purchases of $1 million to $5 million are subject to a 1.00% contingent deferred
sales charge payable to the Distributor on redemptions within 18 months from the
first day of the month following the purchase. The contingent deferred sales
charge does not apply to the excess of any purchase over $5 million.
Class B Shares. Class B shares are offered at net asset value, without an
initial sales charge, subject to a 0.75% annual distribution fee for
approximately eight years (at which time they automatically convert to Class A
shares not bearing a distribution fee) and a contingent deferred sales charge if
redeemed within six years that declines over time. As shown below, the amount of
the contingent deferred sales charge depends on the number of years after
purchase that the redemption occurs:
Years Contingent Deferred
After Purchase Sales Charge
0-1 5.00%
1-2 4.00%
2-3 3.00%
3-4 3.00%
4-5 2.00%
5-6 1.00%
More than 6 0.00%
Year one ends one year after the end of the month in which the purchase was
accepted and so on. The Distributor pays financial service firms a commission of
4.00% on Class B share purchases.
General. All contingent deferred sales charges are deducted from the amount
redeemed, not the amount remaining in the account, and are paid to the
Distributor. Shares issued upon distribution reinvestment and amounts
representing appreciation are not subject to a contingent deferred sales charge.
The contingent deferred sales charge is imposed on redemptions which result in
the account value falling below its Base Amount (the total dollar value of
purchase payments (including initial sales charges, if any) in the account
reduced by prior redemptions on which a contingent deferred sales charge was
paid and any exempt redemptions). See the Statement of Additional Information
for more information.
Which Class is more beneficial to an investor depends on the amount and intended
length of the investment. Large investments, qualifying for a reduced Class A
sales charge, avoid the distribution fee. Investments in Class B shares have
100% of the purchase invested immediately. Purchases of $250,000 or more must be
for Class A shares. Consult your financial service firm.
Financial service firms may receive different compensation rates for selling
different classes of shares. The Distributor may pay additional compensation to
financial service firms which have made or may make significant sales. See the
Statement of Additional Information for more information.
Special Purchase Programs. The Funds allow certain investors or groups of
investors to purchase shares at a reduced, or without an, initial or contingent
deferred sales charge. These programs are described in the Statement of
Additional Information under "Programs for Reducing or Eliminating Sales
Charges" and "How to Sell Shares."
Shareholder Services. A variety of shareholder services are available. For more
information about these services or your account, call 1-800-345-6611. Some
services are described in the attached account application. A shareholder's
manual explaining all available services will be provided upon request.
HOW TO SELL SHARES
Shares of the Funds may be sold on any day the Exchange is open, either directly
to a Fund or through your financial service firm. Sale proceeds generally are
sent within seven days (usually on the next business day after your request is
received in good form). However, for shares recently purchased by check, the
Fund will send proceeds after 15 days from the date of the purchase.
Selling Shares Directly To A Fund. Send a signed letter of instruction or stock
power form to the Transfer Agent, along with any certificates for shares to be
sold. The sale price is the net asset value (less any applicable contingent
deferred sales charge) next calculated after the particular Fund receives the
request in proper form. Signatures must be guaranteed by a bank, a member firm
of a national stock exchange or another eligible guarantor institution. Stock
power forms are available from financial service firms, the Transfer Agent and
many banks. Additional documentation is required for sales by corporations,
agents, fiduciaries, surviving joint owners and individual retirement account
holders. For details contact:
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Selling Shares Through Financial Service Firms. Financial service firms must
receive requests prior to the time at which the Funds value their shares to
receive that day's price, are responsible for furnishing all necessary
documentation to the Transfer Agent and may charge for this service.
General. The sale of shares is a taxable transaction for income tax purposes and
may be subject to a contingent deferred sales charge. The contingent deferred
sales charge may be waived under certain circumstances. See the Statement of
Additional Information for more information. Under unusual circumstances, a Fund
may suspend repurchases or postpone payment for up to seven days or longer, as
permitted by federal securities law. In June of any year, a Fund may deduct $10
(payable to the Transfer Agent) from accounts valued at less than $1,000 unless
the account value has dropped below $1,000 solely as a result of share value
depreciation. Shareholders will receive 60 days' written notice to increase the
account before the fee is deducted.
HOW TO EXCHANGE SHARES
Exchanges at net asset value may be made among the same class of shares of most
Colonial funds. Shares will continue to age without regard to the exchange for
purposes of conversion and determining the contingent deferred sales charge, if
any, upon redemption. Carefully read the prospectus of the fund into which the
exchange will go before submitting the request. Call 1-800-248-2828 to receive a
prospectus and an exchange authorization form. Call 1-800 422-3737 to exchange
shares by telephone. An exchange is a taxable capital transaction. The exchange
service may be changed, suspended or eliminated on 60 days' written notice.
Class A Shares. An exchange from a money market fund into a non-money market
fund will be at the applicable offering price next determined (including sales
charge), except for amounts on which an initial sales charge was paid. Non-money
market fund shares must be held for five months before qualifying for exchange
to a fund with a higher sales charge, after which exchanges are made at the net
asset value next determined.
Class B Shares. Exchanges of Class B shares are not subject to the contingent
deferred sales charge. However, if shares are redeemed within six years after
the original purchase, a contingent deferred sales charge will be assessed using
the schedule of the fund into which the original investment was made.
TELEPHONE TRANSACTIONS
All shareholders and/or their financial advisers are automatically eligible to
exchange Fund shares and redeem up to $50,000 of Fund shares by calling
1-800-422-3737 toll-free any business day between 9:00 a.m. and the time at
which the Fund values its shares. Telephone redemption privileges for larger
amounts may be elected on the account application. Proceeds and confirmations of
telephone transactions will be mailed or sent to the address of record.
Telephone redemptions are not available on accounts with an address change in
the preceding 30 days. The Transfer Agent will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine and, if it does
not, may be liable for any losses due to unauthorized or fraudulent telephone
transactions. All telephone transactions are recorded. Shareholders and/or their
financial advisers are required to provide their name, address and account
number. Financial advisers are also required to provide their broker number.
Shareholders and/or their financial advisers wishing to redeem or exchange
shares by telephone may experience difficulty in reaching the Fund at its
toll-free telephone number during periods of drastic economic or market changes.
In that event, shareholders and/or their financial advisers should follow the
procedures for redemption or exchange by mail as described above under "How to
Sell Shares." The Adviser, the Transfer Agent and the Fund reserve the right to
change, modify, or terminate the telephone redemption or exchange services at
any time upon prior written notice to shareholders. Shareholders and/or their
financial advisers are not obligated to transact by telephone.
12B-1 PLANS
Under 12b-1 Plans, each Fund pays the Distributor an annual service fee of 0.10%
of each Fund's average net assets for shares outstanding on November 30, 1994,
and 0.25% of average net assets for shares issued thereafter. Each Fund also
pays the Distributor an annual distribution fee of 0.75% of the average net
assets attributed to its Class B shares. Because the Class B shares bear the
additional fee, their dividends will be lower than the dividends of Class A
shares. Class B shares automatically convert to Class A shares, approximately
eight years after the Class B shares were purchased. The multiple class
structure could be terminated should certain Internal Revenue Service rulings be
rescinded. See the Statement of Additional Information for more information. The
Distributor uses the fees to defray the cost of commissions and service fees
paid to financial service firms which have sold Fund shares and to defray other
expenses such as sales literature, prospectus printing and distribution,
shareholder servicing costs, and compensation to wholesalers. Should the fees
exceed the Distributor's expenses in any year, the Distributor would realize a
profit. The Plans also authorize other payments to the Distributor and its
affiliates (including the Adviser) which may be construed to be indirect
financing of sales of Fund shares.
ORGANIZATION AND HISTORY
The Trust is a Massachusetts business trust organized in 1987. Each Fund
represents the entire interest in a separate portfolio of the Trust.
The Trust is not required to hold annual shareholder meetings, but special
meetings may be called for certain purposes. Shareholders receive one vote for
each Fund share. Shares of the Trust vote together except when required by law
to vote separately by fund or by class. Shareholders owning in the aggregate ten
percent of Trust shares may call meetings to consider removal of Trustees. Under
certain circumstances, the Trust will provide information to assist shareholders
in calling such a meeting. See the Statement of Additional Information for more
information.
Under Massachusetts law, shareholders could, under certain circumstances, be
held personally liable for the obligations of the Trust. However, the Trust's
Declaration of Trust (Declaration) disclaims shareholder liability for acts or
obligations of each Fund and the Trust and requires that notice of such
disclaimer be given in each agreement, obligation, or instrument entered into or
executed by each Fund or the Trust's Trustees. The Declaration provides for
indemnification out of Fund property for all loss and expense of any shareholder
held personally liable for the obligations of each Fund. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances (which are considered remote) in which the Fund would
be unable to meet its obligations and the disclaimer was inoperative. The risk
of a particular fund incurring financial loss on account of another fund of the
Trust is also believed to be remote because it would be limited to circumstances
in which the disclaimer was inoperative and the other fund was unable to meet
its obligations.
<PAGE>
APPENDIX
DESCRIPTION OF BOND RATINGS
S&P
AAA The highest rating assigned by S&P indicates an extremely strong capacity to
repay principal and interest.
AA bonds also qualify as high quality. Capacity to repay principal and pay
interest is very strong, and in the majority of instances, they differ from AAA
only in a small degree.
A bonds have a strong capacity to repay principal and interest, although they
are somewhat more susceptible to the adverse effects of changes in circumstances
and economic conditions.
BBB bonds are regarded as having an adequate capacity to repay principal and
interest. Whereas they normally exhibit protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to repay principal and interest than for bonds in the A category.
BB, B, CCC and CC bonds are regarded, on balance, as predominantly speculative
with respect to capacity to pay interest and principal in accordance with the
terms of the obligation. BB indicates the lowest degree of speculation and CC
the highest degree. While likely to have some quality and protection
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
C ratings are reserved for income bonds on which no interest is being paid.
D bonds are in default, and payment of interest and/or principal is in arrears.
Plus(+) or minus (-) are modifiers relative to the standing within the major
rating categories.
MOODY'S
Aaa bonds are judged to be of the best quality. They carry the smallest degree
of investment risk and are generally referred to as "gilt edge". Interest
payments are protected by a large or by an exceptionally stable margin and
principal is secure. While various protective elements are likely to change,
such changes as can be visualized are most unlikely to impair the fundamentally
strong position of such issues.
Aa bonds are judged to be of high quality by all standards. Together with Aaa
bonds they comprise what are generally known as high-grade bonds. They are rated
lower than the best bonds because margins of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risk appear somewhat larger than in Aaa securities.
Those bonds in the Aa through B groups which Moody's believes possess the
strongest investment attributes are designated by the symbol Aa1, A1 and Baa1.
A bonds possess many of the favorable investment attributes and are to be
considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa bonds are considered as medium grade, neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and, in fact, have speculative
characteristics as well.
Ba bonds are judged to have speculative elements: their future cannot be
considered as well secured. Often, the protection of interest and principal
payments may be very moderate, and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position characterizes these
bonds.
B bonds generally lack characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the contract
over any long period of time may be small.
Caa bonds are of poor standing. They may be in default or there may be present
elements of danger with respect to principal or interest.
Ca bonds are speculative in a high degree, often in default or having other
marked shortcomings.
C bonds are the lowest rated class of bonds and can be regarded as having
extremely poor prospects of ever attaining any real investment standing.
<PAGE>
Investment Adviser
Colonial Management Associates, Inc.
One Financial Center
Boston, MA 02111-2621
Distributor
Colonial Investment Services, Inc.
One Financial Center
Boston, MA 02111-2621
Custodian
UMB, n.a.
928 Grand Avenue
Kansas City, MO 64106
Shareholder Services and Transfer Agent
Colonial Investors Service Center, Inc.
One Financial Center
Boston, MA 02111-2621
1-800-345-6611
Independent Accountants
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110-2624
Legal Counsel
Ropes & Gray
One International Place
Boston, MA 02110-2624
Your financial service firm is:
Printed in U.S.A.
May 31,1996
COLONIAL CALIFORNIA
TAX-EXEMPT FUND
COLONIAL CONNECTICUT
TAX-EXEMPT FUND
COLONIAL FLORIDA
TAX-EXEMPT FUND
COLONIAL MASSACHUSETTS
TAX-EXEMPT FUND
COLONIAL MICHIGAN
TAX-EXEMPT FUND
COLONIAL MINNESOTA
TAX-EXEMPT FUND
COLONIAL NEW YORK
TAX-EXEMPT FUND
COLONIAL NORTH CAROLINA
TAX-EXEMPT FUND
COLONIAL OHIO
TAX-EXEMPT FUND
PROSPECTUS
Each of Colonial California Tax-Exempt Fund, Colonial Connecticut Tax-Exempt
Fund, Colonial Florida Tax-Exempt Fund, Colonial Massachusetts Tax-Exempt Fund,
Colonial Michigan Tax-Exempt Fund, Colonial Minnesota Tax-Exempt Fund, Colonial
New York Tax-Exempt Fund, Colonial North Carolina Tax-Exempt Fund and Colonial
Ohio Tax-Exempt Fund seeks as high a level of after-tax total return as is
consistent with prudent risk, by pursuing current income exempt from federal and
its state's personal income tax (if any) and opportunities for long-term
appreciation from a portfolio primarily invested in investment grade municipal
bonds.
For more detailed information about the Funds, call the Adviser at
1-800-248-2828 for the May 31, 1996 Statement of Additional Information.
FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED, ENDORSED OR
INSURED BY, ANY BANK OR GOVERNMENT AGENCY.
<PAGE>
[COLONIAL FLAG LOGO]
Colonial Mutual Funds
_________________________________________________________________
Please send your completed application to:
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, Massachusetts 02105-1722
New Account Application/Revision to Existing Account
To open a new account, complete sections 1, 2, 3, & 7.
To apply for special services for a new or existing account, complete sections
4, 5, 6, or 8 as appropriate.
___ Please check here if this is a revision.
1-----------Account Ownership--------------
Please choose one of the following.
__Individual: Print your name, Social Security #, U.S. citizen status.
__Joint Tenant: Print all names, the Social Security # for the first person,
and his/her U.S. citizen status.
__Uniform Gift to Minors: Names of custodian and minor, minor's Social Security
#, minor's U.S. citizen status.
__Corporation, Association, Partnership: Include full name, Taxpayer I.D. #.
__Trust: Name of trustee, trust title & date, and trust's Taxpayer I.D. #.
______________________________________
Name of account owner
______________________________________
Name of joint account owner
______________________________________
Street address
______________________________________
Street address
______________________________________
City, State, and Zip
______________________________________
Daytime phone number
______________________________________
Social Security # or Taxpayer I.D. #
Are you a U.S. citizen? ___Yes ___No
______________________________________
If no, country of permanent residence
______________________________________
Owner's date of birth
______________________________________
Account number (if existing account)
2 -----Colonial Fund(s) You Are Purchasing--------
Your investment will be made in Class A shares if no class is indicated.
Certificates are not available for Class B or D shares. If no distribution
option is selected, distributions will be reinvested in additional Fund
shares. Please consult your financial adviser to determine which class of
shares best suits your needs.
Fund Fund Fund
________________ ___________________ _____________________
$_______________ $__________________ $____________________
Amount Amount Amount
Class
___ A Shares ___ B Shares (less than $250,000) ___ C Shares (Adjustable Rate
U.S. Government Fund only)
___ D Shares (less than $500,000, available on certain funds; see prospectus)
Method of Payment
Choose one
___Check payable to the Fund
___Bank wired on ____/____/____
(Date) Wire/Trade confirmation #__________________
Ways to Receive Your Distributions
Choose one
___Reinvest dividends and capital gains
___Dividends and capital gains in cash
___Dividends in cash; reinvest capital gains
___Automatic Dividend Diversification See section 5A, inside
___Direct Deposit via Colonial Cash Connection Complete Bank Information
in section 4B. I understand that my bank must be a member of the
Automated Clearing House (ACH).
Distributions of $10.00 or less will automatically be reinvested in additional
fund shares.
3---Your Signature & Taxpayer I.D. Number Certification----
Each person signing on behalf of an entity represents that his/her actions are
authorized.
I have received and read each appropriate Fund prospectus and understand that
its terms are incorporated by reference into this application. I understand that
this application is subject to acceptance. I understand that certain redemptions
may be subject to a contingent deferred sales charge. It is agreed that the
Fund, all Colonial Companies and their officers, directors, agents, and
employees will not be liable for any loss, liability, damage, or expense for
relying upon this application or any instruction believed genuine.
I certify, under penalties of perjury, that:
1. The Social Security # or Taxpayer I.D. # provided is correct.
You must cross out Item 2a, b or c below only if you have been notified by the
Internal Revenue Service (IRS) that you are currently subject to back-up
withholding because of under-reporting interest or dividends on you tax return.
2. I am not subject to back-up withholding because: (a) I am exempt from back-
up withholding, or (b) I have not been notified by the IRS that I am
subject to back-up withholding as a result of a failure to report all
interest or dividends, or (c) the IRS has notified me that I am no longer
subject to back-up withholding.
The Internal Revenue Service does not require your consent to any provision of
this document other than the certifications required to avoid backup
withholdings.
X______________________________________________
Signature
_______________________________________________
Capacity, if applicable Date
X______________________________________________
Signature
_______________________________________________
Capacity, if applicable Date
4--------Ways to Withdraw from Your Fund-------
It may take up to 30 days to activate the following features. Complete only
the section(s) that apply to the features you would like.
A. Systematic Withdrawal Plan (SWP)
You can receive monthly, quarterly, or semiannual checks from your account in
any amount you select, with certain limitations. Your redemption checks can
be sent to you at the address of record for your account, to your bank
account, or to another person you choose. The value of the shares in your
account must be at least $5,000 and you must reinvest all of your
distributions. Checks will be processed on the 10th calendar day of the month
or the following business day. If you receive your SWP payment via electronic
funds transfer (EFT), you may request it to be processed any day of the month.
Withdrawals in excess of 12% annually of your current account value will not be
accepted. Redemptions made in addition to SWP payments may be subject to a
contingent deferred sales charge for Class B or Class D shares. Please consult
your financial or tax adviser before electing this option.
Funds for Withdrawal:
___________________
Name of fund
Withdrawal Amount
Redeem shares from account as follows:
Dollar amount of payment $___________
or
Total annual %_________
Frequency (choose one)
__Monthly __Quarterly __Semiannually
I would like payments to begin _____/_____ (day, if indicating EFT,month).
___________________
Name of fund
Withdrawal Amount
Redeem shares from account as follows:
Dollar amount of payment $___________
or
Total annual %_________
Frequency (choose one)
__Monthly __Quarterly __Semiannually
I would like payments to begin _____/_____ (day,if indicating EFT,month).
Payment Instructions
Send the payment to (choose one):
__My address of record.
__My bank account via EFT. Please complete the Bank Information section below.
All EFT transactions will be made two business days after the processing date.
Your bank must be a member of the Automated Clearing House system.
__The payee listed at right. If more than one payee, provide the name,
address, payment amount, and frequency for other payees (maximum of 5) on
a separate sheet. If you are adding this service to an existing account,
please sign below and have your signature(s) guaranteed.
______________________________________________
Name of payee
______________________________________________
Address of payee
______________________________________________
City
______________________________________________
State Zip
______________________________________________
Payee's bank account number, if applicable
B. Telephone Withdrawal Options
All telephone transaction calls are recorded. These options are not available
for retirement accounts. Please sign below and have your signature(s)
guaranteed.
1. Fast Cash
You are automatically eligible for this service. You or your financial
adviser can withdraw up to $50,000 from your account and have it sent to your
address of record. For your protection, this service is only available on
accounts that have not had an address change within 30 days of the redemption
request.
2. Telephone Redemption
__I would like the Telephone Redemption privilege either by federal fund wire
or EFT. Telephone redemptions over $1,000 will be sent via federal fund wire,
usually on the next business day ($7.50 will be deducted). Redemptions of
$1,000 or less will be sent by check to your designated bank.
3. On-Demand EFT Redemption
__I would like the On-Demand EFT Redemption Privilege. Proceeds paid via EFT
will be credited to your bank account two business days after the process
date. You or your financial adviser may withdraw shares from your fund account
by telephone and send your money to your bank account. If you are adding this
service to an existing account, complete the Bank Information section below
and have all shareholder signatures guaranteed.
Colonial's and the Fund's liability is limited when following telephone
instructions; a shareholder may suffer a loss from an unauthorized transaction
reasonably believed by Colonial to have been authorized.
Bank Information (For Sections A and B Above)
I authorize deposits to the following bank account:
____________________________________________________________
Bank name City Bank account number
____________________________________________________________
Bank street address State Zip Bank routing # (your bank
can provide this)
X__________________________________
Signature of account owner(s)
X__________________________________
Signature of account owner(s) Place signature guarantee here.
5-----Ways to Make Additional Investments--------
These services involve continuous investments regardless of varying share
prices. Please consider your ability to continue purchases through periods of
price fluctuations. Dollar cost averaging does not assure a profit or protect
against loss in declining markets.
A. Automatic Dividend Diversification
Please diversify my portfolio by investing distributions from one fund into
another Colonial fund. These investments will be made in the same share class
and without sales charges. Accounts must be identically registered. I have
carefully read the prospectus for the fund(s) listed below.
____________________________
From fund
____________________________
Account number (if existing)
____________________________
To fund
____________________________
Account number (if existing)
____________________________
From fund
____________________________
Account number (if existing)
____________________________
To fund
____________________________
Account number (if existing)
B. Automated Dollar Cost Averaging
This program allows you to automatically have money from any Colonial fund in
which you have a balance of at least $5,000 exchanged into the same share
class of up to four other identically registered Colonial accounts, on a
monthly basis. The minimum amount for each exchange is $100. Please complete
the section below.
____________________________________
Fund from which shares will be sold
$_________________________
Amount to redeem monthly
1____________________________________
Fund to invest shares in
$_________________________
Amount to invest monthly
2____________________________________
Fund to invest shares in
$_________________________
Amount to invest monthly
C. Fundamatic/On-Demand EFT Purchase Fundamatic automatically transfers the
specified amount from your bank checking account to your Colonial fund account
by electronic funds transfer on any specified day of the month. You will receive
the applicable price two business days after the receipt of your request. Your
bank needs to be a member of the Automated Clearing House System. Please attach
a blank check marked "VOID." Also, complete the section below.
1____________________________________
Fund name
_________________________________
Account number
$_____________________ _________________
Amount to transfer Month to start
2___________________________________
Fund name
________________________________
Account number
$_____________________ _________________
Amount to transfer Month to start
__On-Demand Purchase (will be automatically established if you choose
Fundamatic)
__Fundamatic Frequency
__Monthly or __Quarterly
Check one:
__EFT- Choose any day of the month_____________________
__Paper Draft-Choose either the:
__5th day of the month
__20th day of the month
Authorization to honor checks drawn by Colonial Investors Service Center,
Inc. Do Not Detach. Make sure all depositors on the bank account sign to
the far right. Please attach a blank check marked "VOID" here. See reverse
for bank instructions.
I authorize Colonial to draw on my bank account, by check or electronic funds
transfer, for an investment in a Colonial fund. Colonial and my bank are not
liable for any loss arising from delays or dishonored draws. If a draw is not
honored, I understand that notice may not be given and Colonial may reverse
the purchase and charge my account $15.
______________________________________
Bank name
______________________________________
Bank street address
______________________________________
Bank street address
______________________________________
City State Zip
______________________________________
Bank account number
______________________________________
Bank routing #
X_____________________________________
Depositor's Signature(s)
Exactly as appears on bank records
X_____________________________________
Depositor's Signature(s)
Exactly as appears on bank records
6------------Ways to Reduce Your Sales Charges------------
These services can help you reduce your sales charge while increasing your
share balance over the long term.
A. Right of Accumulation
If you, your spouse or your children own any other shares in other
Colonial funds, you may be eligible for a reduced sales charge. The combined
value of your accounts must be $50,000 or more. Class A shares of money market
funds are not eligible unless purchased by exchange from another Colonial fund.
The sales charge for your purchase will be based on the sum of the purchase(s)
added to the value of all shares in other Colonial funds at the previous
day's public offering price.
__Please link the accounts listed below for Right of Accumulation privileges,
so that this and future purchases will receive any discount for which they
are eligible.
_____________________________________
Name on account
_____________________________________
Account number
_____________________________________
Name on account
_____________________________________
Account number
B. Statement of Intent
If you agree in advance to invest at least $50,000 within 13 months, you'll
pay a lower sales charge on every dollar you invest. If you sign a Statement
of Intent within 90 days after you establish your account, you can receive a
retroactive discount on prior investments. The amount required to receive a
discount varies by fund; see the sales charge table in the "How to Buy Shares"
section of your fund prospectus.
__I want to reduce my sales charge.
I agree to invest $ _______________ over a 13-month period starting
______/______/ 19______ (not more than 90 days prior to this application). I
understand an additional sales charge must be paid if I do not complete this
Statement of Intent.
7-------------Financial Service Firm---------------------
To be completed by a Representative of your financial service firm.
This application is submitted in accordance with our selling agreement with
Colonial Investment Services, Inc. (CISI), the Fund's prospectus, and this
application. We will notify CISI, Inc., of any purchase made under a Statement
of Intent, Right of Accumulation, or Sponsored Arrangement. We guarantee the
signatures on this application and the legal capacity of the signers.
_____________________________________
Representative's name
_____________________________________
Representative's number
_____________________________________
Representative's phone number
_____________________________________
Account # for client at financial
service firm
_____________________________________
Branch office address
_____________________________________
City
_____________________________________
State Zip
_____________________________________
Branch office number
_____________________________________
Name of financial service firm
_____________________________________
Main office address
_____________________________________
Main office address
_____________________________________
City
_____________________________________
State Zip
X____________________________________
Authorized signature
8----------Request for a Combined Quarterly Statement Mailing-----------
Colonial can mail all of your quarterly statements in one envelope. This
option simplifies your record keeping and helps reduce fund expenses.
__I want to receive a combined quarterly mailing for all my accounts. Please
indicate accounts to be linked.______________________
Fundamatic (See Reverse Side)
Applications must be received before the start date for processing.
This program's deposit privilege can be revoked by Colonial without prior
notice if any check is not paid upon presentation. Colonial has no obligation
to notify the shareholder of non-payment of any draw. This program may be
discontinued by Colonial by written notice at least 30 business days prior
to the due date of any draw or by the shareholder at any time.
To the Bank Named on the Reverse Side:
Your depositor has authorized Colonial Investors Service Center, Inc. to
collect amounts due under an investment program from his/her personal checking
account. When you pay and charge the draws to the account of your depositor
executing the authorization payable to the order of Colonial Investors
Service Center, Inc., Colonial Investment Services, Inc., hereby indemnifies
and holds you harmless from any loss (including reasonable expenses) you may
suffer from honoring such draw, except any losses due to your payment of any
draw against insufficient funds.
SH-938B-0396
Part A of Post-Effective Amendment No. 6 filed with the Commission on August
12, 1991 (Colonial Texas Tax-Exempt Fund) is incorporated herein in its
entirety by reference.
<PAGE>
COLONIAL TRUST V
Cross Reference Sheet
Colonial California Tax-Exempt Fund
Colonial Connecticut Tax-Exempt Fund
Colonial Florida Tax-Exempt Fund
Colonial Massachusetts Tax-Exempt Fund
Colonial Michigan Tax-Exempt Fund
Colonial Minnesota Tax-Exempt Fund
Colonial New York Tax-Exempt Fund
Colonial North Carolina Tax-Exempt Fund
Colonial Ohio Tax-Exempt Fund
Location or Caption in Statement of
Item Number of Form N-1A Additional Information
Part B
10. Cover Page
11. Table of Contents
12. Not Applicable
13. Investment Objective and Policies;
Fundamental Investment Policies; Other
Investment Policies; Miscellaneous
Investment Practices; Portfolio Turnover
14. Management of the Colonial Funds; Fund
Charges and Expenses
15. Fund Charges and Expenses
16. Fund Charges and Expenses; Management of
the Colonial Funds
17. Fund Charges and Expenses; Management of
the Colonial Funds
18. Shareholder Meetings
19. How to Buy Shares; Determination of Net
Asset Value; Suspension of Redemptions;
Special Purchase Programs/Investor
Services; Programs for Reducing or
Eliminating Sales Charge; How to Sell
Shares; How to Exchange Shares
20. Taxes
21. Fund Charges and Expenses; Management of
the Colonial Funds
22. Fund Charges and Expenses; Investment
Performance; Performance Measures
23. Independent Accountants
COLONIAL CALIFORNIA TAX-EXEMPT FUND
COLONIAL CONNECTICUT TAX-EXEMPT FUND
COLONIAL FLORIDA TAX-EXEMPT FUND
COLONIAL MASSACHUSETTS TAX-EXEMPT FUND
COLONIAL MICHIGAN TAX-EXEMPT FUND
COLONIAL MINNESOTA TAX-EXEMPT FUND
COLONIAL NEW YORK TAX-EXEMPT FUND
COLONIAL NORTH CAROLINA TAX-EXEMPT FUND
COLONIAL OHIO TAX-EXEMPT FUND
Statement of Additional Information
May 31, 1996
This Statement of Additional Information (SAI) contains information which may be
useful to investors but which is not included in the Prospectus of Colonial
California Tax-Exempt Fund, Colonial Connecticut Tax-Exempt Fund, Colonial
Florida Tax-Exempt Fund, Colonial Massachusetts Tax-Exempt Fund, Colonial
Michigan Tax-Exempt Fund, Colonial Minnesota Tax-Exempt Fund, Colonial New York
Tax-Exempt Fund, Colonial North Carolina Tax-Exempt Fund and Colonial Ohio
Tax-Exempt Fund (Funds). This SAI is not a prospectus and is authorized for
distribution only when accompanied or preceded by the Prospectus of the Funds
dated May 31, 1996. This SAI should be read together with the Prospectus.
Investors may obtain a free copy of the Prospectus from Colonial Investment
Services, Inc., One Financial Center, Boston, MA 02111-2621.
Part 1 of this SAI contains specific information about the Funds. Part 2
includes information about the Colonial funds generally and additional
information about certain securities and investment techniques described in the
Fund's Prospectus.
TABLE OF CONTENTS
Part 1 Page
Definitions
Investment Objectives and Policies of the Funds
Fundamental Investment Policies of the Funds
Other Investment Policies of the Funds
California Tax Considerations
Connecticut Tax Considerations
Florida Tax Considerations
Massachusetts Tax Considerations
Michigan Tax Considerations
Minnesota Tax Considerations
New York Tax Considerations
North Carolina Tax Considerations
Ohio Tax Considerations
Portfolio Turnover
Fund Charges and Expenses
Investment Performance
Custodian
Independent Accountants
Part 2
Miscellaneous Investment Practices
Taxes
Management of the Colonial Funds
Determination of Net Asset Value
How to Buy Shares
Special Purchase Programs/Investor Services
Programs for Reducing or Eliminating Sales Charge
How to Sell Shares
Distributions
How to Exchange Shares
Suspension of Redemptions
Shareholder Meetings
Performance Measures
Appendix I
Appendix II
SP-16/139C-0596
Part 1
COLONIAL CALIFORNIA TAX-EXEMPT FUND
COLONIAL CONNECTICUT TAX-EXEMPT FUND
COLONIAL FLORIDA TAX-EXEMPT FUND
COLONIAL MASSACHUSETTS TAX-EXEMPT FUND
COLONIAL MICHIGAN TAX-EXEMPT FUND
COLONIAL MINNESOTA TAX-EXEMPT FUND
COLONIAL NORTH CAROLINA TAX-EXEMPT FUND
COLONIAL NEW YORK TAX-EXEMPT FUND
COLONIAL OHIO TAX-EXEMPT FUND
Statement of Additional Information
May 31, 1996
DEFINITIONS
"California Fund" or "Fund" Colonial California Tax-Exempt Fund
"Connecticut Fund" or "Fund" Colonial Connecticut Tax-Exempt Fund
"Florida Fund" or "Fund" Colonial Florida Tax-Exempt Fund
"Massachusetts Fund" or "Fund" Colonial Massachusetts Tax-Exempt Fund
"Michigan Fund" or "Fund" Colonial Michigan Tax-Exempt Fund
"Minnesota Fund" or "Fund" Colonial Minnesota Tax-Exempt Fund
"New York Fund" or "Fund" Colonial New York Tax-Exempt Fund
"North Carolina" or "Fund" Colonial North Carolina Tax-Exempt Fund
"Ohio Fund" or "Fund" Colonial Ohio Tax-Exempt Fund
"Trust" Colonial Trust V
"Adviser Colonial Management Associates, Inc., the
Funds' investment
"CISI" Colonial Investment Services, Inc., the Funds'
distributor
"CISC" Colonial Investors Service Center, Inc., the
Funds' shareholder services and transfer agent
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
The Prospectus describes each Fund's investment objectives and policies. Part 1
of this SAI includes additional information concerning, among other things, the
investment policies of the Funds. Part 2 contains additional information about
the following securities and investment techniques that are described or
referred to in the prospectus:
Short-Term Trading
Lower Rated Bonds
Inverse Floaters
Short Sales
Forward Commitments
Repurchase Agreements
Futures Contracts and Related Options (Limited to interest rate
futures, tax-exempt bond index futures, options on such futures and
options on such indices)
Options on Securities-purchasing put options
Participation Interests
Stand-by Commitments
Zero Coupon Securities (Zeros)
Except as described below under "Fundamental Investment Policies," the Funds'
investment policies are not fundamental and the Trustees may change the policies
without shareholder approval.
FUNDAMENTAL INVESTMENT POLICIES OF THE FUNDS
The Investment Company Act of 1940 (Act) provides that a "vote of a majority of
the outstanding voting securities" means the affirmative vote of the lesser of
(1) more than 50% of the outstanding shares of the Fund, or (2) 67% or more of
the shares present at a meeting if more than 50% of the outstanding shares are
represented at the meeting in person or by proxy. The following fundamental
investment policies can not be changed without such a vote.
Each Fund may:
1. Issue senior securities only through borrowing money from banks for
temporary or emergency purposes up to 10% of its net assets (entering
into repurchase agreements and other similar instruments is not
considered the issuance of a senior security); however, the Fund will
not purchase additional portfolio securities while borrowings exceed
5% of net assets;
2. Only own real estate acquired as a result of owning securities and not
more than 5% of total assets;
3. Purchase and sell futures contracts and related options so long as the
total initial margin and premiums on the contracts do not exceed 5% of
its total assets;
4. Underwrite securities issued by others only when disposing of portfolio
securities;
5. Make loans through lending of securities not exceeding 30% of total
assets, through the purchase of debt instruments or similar evidences
of indebtedness typically sold privately to financial institutions and
through repurchase agreements;
6. Not concentrate more than 25% of its total assets in any one industry
or, [California Fund only] with respect to 75% of total assets
purchase any security (other than obligations of the U.S. Government
and cash items including receivables) if as a result more than 5% of
its total assets would then be invested in securities of a single
issuer or purchase the voting securities of an issuer if, as a result
of such purchases the Fund would own more than 10% of the outstanding
voting shares of such issuer;
7. And will, under normal circumstances, invest at least 80% of its total
assets in State Bonds subject to applicable State requirements.
OTHER INVESTMENT POLICIES OF THE FUNDS
As non-fundamental investment policies which may be changed without a
shareholder vote, each Fund may not:
1. Purchase securities on margin, but the Fund may receive short-term credit
to clear securities transactions and may make initial or maintenance
margin deposits in connection with futures transactions;
2. Have a short securities position, unless the Fund owns, or owns rights
(exercisable without payment) to acquire, an equal amount of such
securities;
3. Own securities of any company if the Fund knows that officers and
Trustees of the Trust or officers and directors of the Adviser who
individually own more than 0.5% of such securities together own more
than 5% of such securities;
4. Invest in interests in oil, gas or other mineral exploration or
development programs, including leases;
5. Purchase any security resulting in the Fund having more than 5% of
its total assets invested in securities of companies (including
predecessors) less than three years old, or in industrial development
revenue bonds (IRBs) where the private entity on whose credit the
security is based, directly or indirectly, has a record of less than
three years continuous business operations or relevant business experience
(including predecessors, controlling persons, general partners and
guarantors), unless the security purchased by the Fund is rated by a
nationally recognized rating service;
6. Pledge more than 33% of its total assets;
7. Purchase any security if, as a result of such purchase, more than 10%
of its total assets would be invested in securities which are restricted
as to disposition;
8. Invest more than 15% of its net assets in illiquid assets; and
9. Invest in warrants if, immediately after giving effect to any such
investment, the Fund's aggregate investment in warrants, valued at the
lower of cost or market, would exceed 5% of the value of the Fund's
net assets. Included within that amount, but not to exceed 2% of the
value of the Fund's net assets, may be warrants which are not listed
on the New York Stock Exchange or the American Stock Exchange.
Warrants acquired by the Fund in units or attached to securities will
be deemed to be without value.
Total assets and net assets are determined at current value for purposes of
compliance with investment restrictions and policies. All percentage limitations
will apply at the time of investment and are not violated unless an excess or
deficiency occurs as a result of such investment. For the purpose of the Act
diversification requirement, the issuer is the entity whose revenues support the
security.
CALIFORNIA TAX CONSIDERATIONS
It is the policy of the Fund to meet all applicable requirements of the Internal
Revenue Code (Code) and the California Revenue and Taxation Code for
shareholders to be relieved of the obligation to pay regular federal income
taxes and California personal income tax on amounts distributed to them which
are derived from tax-exempt interest income. That is, the Fund will have at
least 50% of its total assets invested in tax-exempt bonds (and at least 50% of
its total assets invested in California Bonds and U. S. Government obligations
(including obligations of the Commonwealth of Puerto Rico, the United States
Virgin Islands and Guam) whose interest is excluded from income for California
personal income tax purposes) at the end of each quarter.
California law provides that, to the extent distributions by the Fund are
derived from interest on California Bonds (as defined in the Prospectus) and
notes (or on obligations of the United States which pay interest excludable from
income under the Constitution or laws of the United States) and are designated
as such, such distributions shall be exempt from California personal income
taxes. For California personal income tax purposes, distributions derived from
other investments and distributions from any net realized capital gains will be
taxable, whether paid in cash or reinvested in additional shares.
Interest derived from California Bonds is not subject to the California
alternative minimum tax and California personal income tax does not apply to any
portion of Social Security or railroad retirement benefits. Under the Code, a
portion of interest on any indebtedness (including insurance policy loans)
incurred or continued to purchase or carry shares of the Fund which is deemed to
relate to tax-exempt dividends will not be deductible. For California personal
income tax purposes none of such interest will be deductible. Depending on the
circumstances, the Internal Revenue Service or California Franchise Tax Board
may consider shares to have been purchased or carried with borrowed funds even
though the shares are not directly traceable to the borrowed funds. Shareholders
who are, within the meaning of Section 147 of the Code, "substantial users" (or
"related persons" of substantial users) of facilities financed by industrial
development bonds should consult their tax advisers as to whether the Fund is a
desirable investment.
Distributions from investment income and capital gains, including dividends
derived from interest paid on California Bonds, will be subject to California
franchise tax and California corporate income tax.
Special Factors Affecting California Bonds
Certain California State Bonds rely on real property taxes as a source of
revenue. In 1978, an amendment to the California Constitution, Article XIII A,
limited taxes on real property and restricted the ability to increase property
taxes. In 1979, Article XIII B was added to the California Constitution,
significantly limiting spending by state and local government. In June 1982,
voters approved initiative measures which would result in substantial annual
reductions in state revenues. California also revised its system of taxing
corporations which could also result in decreased state revenues. Decreased
state revenues may result in reductions to local governments. The State's
ability to raise revenues and to reduce expenditures to the extent necessary to
balance the budget for any year depends upon, among other things, the State's
economic health and the accuracy of the State's revenue predictions, as well as
the impact of budgetary restrictions.
It is not presently possible to determine the impact of Articles XIII A or XIII
B or any implementing or related legislation on the securities in the Fund's
portfolio or the ability of State or local governments to pay the interest or
principal on the securities.
CONNECTICUT TAX CONSIDERATIONS
Distributions received by shareholders from the Fund that are treated as
exempt-interest dividends for federal income tax purposes are exempt from the
Connecticut personal income tax to the extent that they are derived from
interest on Connecticut Bonds or on the obligations of certain other
governmental entities the interest on which the states are prohibited from
taxing by federal law (including obligations of Guam, the United States Virgin
Islands and the Commonwealth of Puerto Rico), and are designated as such. Other
distributions are subject to the Connecticut personal income tax, except that
those treated as capital gain dividends for federal income tax purposes are not
subject to the tax to the extent derived from the sale or exchange of
Connecticut Bonds. Distributions that are subject to the federal alternative
minimum tax are subject to the net Connecticut minimum tax, with the exception
of those derived from interest on Connecticut Bonds.
Distributions from investment income and capital gains, including dividends
derived from interest paid on Connecticut Bonds, are included in gross income
for purposes of the Connecticut corporation business tax. However, seventy
percent of such distributions, provided that they are treated as dividends for
federal income tax purposes but not as exempt-interest dividends or capital gain
dividends, are deductible for purposes of this tax, but no deduction is allowed
for expenses related thereto.
FLORIDA TAX CONSIDERATIONS
Florida currently has no income tax on individuals. Thus individual shareholders
of the Fund will not be subject to any Florida state income tax on distributions
received from the Fund. However, certain distributions will be taxable to
corporate shareholders which are subject to Florida corporate income tax.
Florida currently imposes an "intangibles tax" at the annual rate of 0.20% on
certain securities and other intangible assets owned by Florida residents.
Certain types of tax-exempt securities of Florida issuers, U.S. Government
Securities and tax-exempt securities issued by certain U.S. territories and
possessions (including the Commonwealth of Puerto Rico, the United States Virgin
Islands and Guam) are exempt from this intangibles tax. The Fund has received a
ruling from Florida authorities that, if on December 31 of any year the Fund's
portfolio consists solely of such exempt assets, the Fund's shares will be
exempt from the Florida intangibles tax payable for the following year. To take
advantage of this exemption in any year, the Fund must sell any non-exempt
assets held in its portfolio prior to December 31. Such sales could result in
capital losses or in the realization of taxable capital gains, as well as
transaction costs that would likely reduce the Fund's investment return and
might exceed any investment return the Fund achieved by investing in non-exempt
assets during the year.
You should consult your tax adviser to determine the precise application of
Florida or other state law to your particular situation.
MASSACHUSETTS TAX CONSIDERATIONS
Distributions received by shareholders from the Fund are exempt from
Massachusetts personal income tax to the extent that they are derived from
interest on Massachusetts Bonds or certain U.S. territories and possessions
(including the Commonwealth of Puerto Rico, the United States Virgin Islands or
Guam) and are designated as such. The Fund believes that gains it realizes on
the sale of certain Massachusetts Bonds are exempt from Massachusetts personal
income taxation and will designate them as such when those gains are distributed
to shareholders.
Distributions from investment income and capital gains, including dividends
derived from interest paid on Massachusetts Bonds, may be subject to
Massachusetts corporate excise tax.
The foregoing is a general summary of the Massachusetts tax consequences of
investing in the Fund. You should consult your tax advisor regarding specific
questions as to federal, state or local taxes.
MICHIGAN TAX CONSIDERATIONS
To the extent that dividends from the Fund are derived from interest on debt
obligations issued by the State of Michigan or its political subdivisions or
certain U.S. territories and possessions (including the Commonwealth of Puerto
Rico, United States Virgin Islands or Guam), the interest on which is excludable
from gross income for purposes of both federal income taxation and Michigan
personal income tax ("Michigan Bonds"), such dividends will be exempt from
Michigan personal income tax and excluded from the taxable income base of the
intangibles tax. For Michigan personal income and intangibles tax purposes,
exempt-interest dividends attributable to any investment in other than Michigan
Bonds or certain obligations of the U.S. will be fully taxable. Distributions
representing capital gains, if any, will be fully taxable for both Michigan
personal income and intangible tax purposes (except that distributions
reinvested in shares of the Fund are excluded from the taxable income base of
the Michigan intangibles tax).
Certain Michigan cities have adopted Michigan's Uniform City Income Tax
Ordinance, which under the Michigan City Income Tax Act is the only income tax
ordinance that may be adopted by cities in Michigan. To the extent that
distributions from the Fund are not subject to Michigan income tax, they are not
subject to any Michigan city's income tax.
You should consult your tax adviser if you are subject to the Michigan Single
Business Tax.
MINNESOTA TAX CONSIDERATIONS
Provided that the Fund qualifies as a separate "regulated investment company"
under the Internal Revenue Code of 1986, as amended (the "Code"), and subject to
the discussion in the paragraph below, shareholders of the Fund who are
individuals, estates or trusts and who are subject to the regular Minnesota
personal income tax, will not be subject to such tax on Fund dividends under
existing law to the extent that such distributions qualify as exempt-interest
dividends under section 852(b)(5) of the Code which are derived from interest
income on tax-exempt obligations of the State of Minnesota or its political or
governmental subdivisions, municipalities, governmental agencies or
instrumentalities (Minnesota Sources). The foregoing will apply, however, only
if the portion of the exempt-interest dividends from Minnesota Sources that is
paid to all shareholders represents 95% or more of the exempt-interest dividends
that are paid by the Fund. If the 95% test is not met, all exempt-interest
dividends that are paid by the Fund will be subject to the regular Minnesota
personal income tax. Even if the 95% test is met, to the extent that
exempt-interest dividends that are paid by the Fund are not derived from
Minnesota Sources, such dividends will be subject to the regular Minnesota
personal income tax. Other distributions of the Fund, including distributions
from net short-term and long-term capital gains, are generally not exempt from
the regular Minnesota personal income tax.
Legislation enacted in 1995 provides that it is the intent of the Minnesota
legislature that interest income on obligations of Minnesota governmental units,
including obligations of the Minnesota Sources described above, and
exempt-interest dividends that are derived from interest income on such
obligations, be included in the net income of individuals, estates, and trusts
for Minnesota income tax purposes if it is judicially determined that the
exemption by Minnesota of such interest or such exempt-interest dividends
unlawfully discriminates against interstate commerce because interest income on
obligations of governmental issuers located in other states, or exempt-interest
dividends derived from such obligations, is so included. This provision applies
to taxable years that begin during or after the calendar year in which such
judicial decision becomes final, regardless of the date on which the obligations
were issued, and other remedies apply for previous taxable years. The United
States Supreme Court recently denied certiorari in an Ohio case which upheld an
exemption for interest income on obligations of Ohio governmental issuers, even
though interest income on obligations of non-Ohio governmental issuers was
subject to tax. However, it cannot be predicted whether a similar case will be
brought in Minnesota or elsewhere, or what the outcome of such case would be.
Shareholders of the Fund who are individuals, estates or trusts may be subject
to the Minnesota alternative minimum tax as a result of the receipt of
exempt-interest dividends that are attributable to certain private activity bond
interest even though derived from Minnesota Sources. In addition, the entire
portion of exempt-interest dividends that is received by such shareholders and
that is derived from sources other than Minnesota sources is subject to the
Minnesota alternative minimum tax. Further, should the 95% test fail to be met,
all of the exempt-interest dividends that are paid by the Fund, including those
derived from Minnesota Sources, will be subject to the Minnesota alternative
minimum tax in the case of shareholders of the Fund who are individuals, estates
or trusts.
Subject to certain limitations that are set forth in the Minnesota rules, Fund
dividends, if any, that are derived from interest on certain United States
obligations are not subject to the regular Minnesota personal income tax or the
Minnesota alternative minimum tax in the case of shareholders of the Fund who
are individuals, estates, or trusts.
Fund distributions, including exempt-interest dividends, are not excluded in
determining the Minnesota franchise tax on corporations, which is measured by
taxable income and alternative minimum taxable income. Fund distributions may
also be taken into account in certain cases in determining the minimum fee that
is imposed on corporations, S corporations and partnerships.
NEW YORK TAX CONSIDERATIONS
New York law provides that, to the extent distributions by a regulated
investment company are derived from interest on debt obligations issued by the
State of New York or its political subdivisions or certain other governmental
entities (for example, the Commonwealth of Puerto Rico, the United States Virgin
Islands or Guam ), the interest on which was excludable from gross income for
purposes of both federal income taxation and New York State or City personal
income taxation (New York Bonds) and designated as such, such distributions
shall be exempt from New York State and City personal income taxes. For federal
income tax purposes, all Fund distributions other than exempt-interest dividends
will be taxable as ordinary income, except that any distributions of net
long-term capital gains will be taxable to shareholders as such, whether
received in cash or shares and regardless of how long shareholders have held
their shares. For New York State and City personal income tax purposes,
distributions derived from investments other than New York Bonds and
distributions from any net short-term capital gains will be taxable as ordinary
income, whether paid in cash or reinvested in additional shares. For New York
State and City personal income tax purposes, distributions of net long-term
capital gains will be taxable at the same rate as ordinary income , whether
received in cash or shares through the reinvestment of distributions .
Distributions by the Fund from investment income and capital gains, including
exempt-interest dividends, are included in a corporation's net investment income
for purposes of calculating such corporation's New York State franchise taxes
and the New York City General Corporation Tax if received by a corporation
subject to those taxes, and will be subject to such taxes to the extent that a
corporation's net investment income is allocated to New York State and/or New
York City. Distributions by the Fund may be subject to state taxes in
statesother than New York and to local taxes in cities other than New York City,
both for individual and corporate shareholders. Also, if the Fund purchases New
York tax-exempt securities at a discount from the price at which they were
originally issued, for federal income tax purposes some or all of this market
discount will be included in the Fund's ordinary income and will be taxable to
shareholders as such when it is distributed to them.
The foregoing is a summary of certain New York State and New York City income
tax consequences of investing in the Fund. Shareholders should consult their tax
adviser to determine the precise effect of an investment in the Fund on their
particular tax situation (including possible liability for federal alternative
minimum tax and state and local taxes).
NORTH CAROLINA TAX CONSIDERATIONS
The State of North Carolina recently repealed its Intangible Personal Property
tax formerly applicable to shares of stock, including shares of certain mutual
funds. The repeal is effective for taxable years beginning after 1994.
Under existing North Carolina law, as long as the Fund qualifies as a separate
"regulated investment company" under the Internal Revenue Code of 1986, as
amended, and 50% or more of the value of the total assets of the Fund at the
close of each quarter of its taxable year consists of obligations whose interest
is exempt from federal income tax, dividends received from the Fund that
represent either (i) interest exempt from federal income tax and received by the
Fund on obligations of North Carolina or its political subdivisions; nonprofit
educational institutions organized or chartered under the laws of North
Carolina; or Guam, Commonwealth of Puerto Rico, or the United States Virgin
Islands, including the governments thereof and their agencies, instrumentalities
and authorities, or (ii) interest received by the Fund on direct obligations of
the United States will be exempt from North Carolina individual, trust and
estate income taxation.
Any capital gains distributed by the Fund (except for capital gains attributable
to the sale by the Fund of an obligation, the profit from which is exempt by a
North Carolina statute) or gains realized by the shareholder from a redemption
or sale of shares of the Fund will be subject to North Carolina individual,
trust or estate income taxation.
Section 23-48 of the North Carolina General Statutes appears to permit any city,
town, school district, county or other taxing district to avail itself of the
provisions of Chapter 9 of the United States Bankruptcy Code, but only with the
consent of the Local Government Commission of the State and of the holders of
such percentage or percentages of the indebtedness of the issuer as may be
required by the Bankruptcy Code (if any such consent is required). Thus,
although limitations apply, in certain circumstances political subdivisions
might be able to seek the protection of the Bankruptcy Code.
Fund shareholders that are corporations are advised to consult their own tax
advisors regarding the North Carolina tax consequences to them of investing in
the Fund.
OHIO TAX CONSIDERATIONS
Provided that the Fund continues to qualify as a regulated investment company
under the Internal Revenue Code of 1986, as amended (Code), and that at all
times at least 50% of the value of the total assets of the Fund consists of
obligations issued by or on behalf of Ohio, political subdivisions thereof or
agencies or instrumentalities of Ohio or its political subdivisions (Ohio
Obligations), or similar obligations of other states or their subdivisions, (i)
distributions with respect to shares of the Fund ("Distributions") will be
exempt from Ohio personal income tax and municipal and school district income
taxes in Ohio, and will be excluded from the net income base of the Ohio
corporation franchise tax to the extent such Distributions are properly
attributable to interest payments on Ohio Obligations or on obligations issued
by the Governments of the Commonwealth of Puerto Rico, the United States Virgin
Islands or Guam (Territorial Obligations), and (ii) Distributions of profit made
on the sale, exchange, or other disposition of Ohio Obligations, including
Distributions of "capital gain dividends," as defined in the Code, properly
attributable to the sale, exchange, or other disposition of Ohio Obligations,
will be exempt from Ohio personal income tax, and municipal and school district
income taxes in Ohio, and will be excluded from the net income base of the Ohio
corporation franchise tax.
Distributions that are properly attributable to interest on obligations of the
United States or its territories or possessions or of any authority, commission,
or instrumentality of the United States that is exempt from state income taxes
under the laws of the United States (including Territorial Obligations) will be
exempt from Ohio personal income tax and municipal and school district income
taxes in Ohio, and will be excluded from the net income base of the Ohio
corporation franchise tax.
However, other Distributions will generally not be exempt from Ohio personal
income tax and municipal and school district income taxes in Ohio, and shares of
the Fund will not be excluded from the net worth base of the Ohio corporation
franchise tax.
PORTFOLIO TURNOVER
Years ended January 31
1996 1995
---- ----
California Fund 47% 47%
Connecticut Fund 13% 22%
Florida Fund 83% 45%
Massachusetts Fund 21% 58%
Michigan Fund 48% 40%
Minnesota Fund 42% 26%
New York Fund 39% 65%
North Carolina 34% 37%
Ohio Fund 31% 33%
FUND CHARGES AND EXPENSES
Under the Funds' management agreement, the Fundspay the Adviser a monthly fee at
the annual rates of the Funds' combined average daily net assets: on the first
$1 billion of combined average daily net assets, the annual rate shall be
0.5375% for January through March, 1996, 0.525% for April through June 1996,
0.5125% for July through September 1996, and 0.5% thereafter: on the next $1
billion of combined average daily net assets, the annual rate shall be 0.51%;
and on the combined average daily net assets in excess of $2 billion, the annual
rate shall be 0.45%.
Recent Fees paid to the Adviser, CISI and CISC (dollars in thousands)
California Fund
Years ended
January 31
1996 1995 1994
---- ---- ----
Management fee (before reduction) $2,207 $2,457 $2,622
Bookkeeping fee 153 161 162
Shareholder service and transfer agent fee 650 671 679
12b-1 fees:
Service fee (a) 496 71 ---
Distribution fee (Class B) 778 762 552
Fees waived or borne by the Adviser (51) (241) (347)
Connecticut Fund
Years ended January 31
1996 1995 1994
---- ---- ----
Management fee (before reduction) $854 $870 $808
Bookkeeping fee 65 63 56
Shareholder service and transfer agent fee 256 240 210
12b-1 fees:
Service fee (a) 200 27 ---
Distribution fee (Class B) 596 540 393
Fees waived or borne by the Adviser (672) (841) (877)
Florida Fund
Years ended January 31
1996 1995
---- ----
Management fee (before reduction) $346 $316
Bookkeeping fee 32 29
Shareholder service and transfer agent fee 103 89
12b-1 fees:
Service fee (a) 89 9
Distribution fee (Class B) 253 236
Fees waived or borne by the Adviser (353) (411)
Massachusetts Fund
Years ended January 31
1996 1995 1994
---- ---- ----
Management fee (before reduction) $1,414 $1,446 $1,474
Bookkeeping fee 101 99 95
Shareholder service and transfer agent fee 419 400 384
12b-1 fees
Service fee (a) 332 45 ---
Distribution fee (Class B) 440 396 265
Fees waived or borne by the Adviser (153) (298) (507)
Michigan Fund
Years ended January 31
1996 1995 1994
---- ---- ----
Management fee (before reduction) $309 $326 $314
Bookkeeping fee 30 30 28
Shareholder service and transfer agent fee 96 96 82
12b-1 fees:
Service fee (a) 69 10 ---
Distribution fee (Class B) 109 112 84
Fees waived or borne by the Adviser (143) (185) (174)
Minnesota Fund
Years ended January 31
1996 1995 1994
---- ---- ----
Management fee (before reduction) $288 $295 $274
Bookkeeping fee 14 28 27
Shareholder service and transfer agent fee 28 88 76
12b-1 fees:
Service fee (a) 68 9 ---
Distribution fee (Class B) 126 99 50
Fees waived or borne by the Adviser (125) (137) (93)
New York Fund
Years ended January 31
1996 1995 1994
---- ---- ----
Management fee (before reduction) $566 $574 $556
Bookkeeping fee 46 45 42
Shareholder service and transfer agent fee 169 159 146
12b-1 fee:
Service fee (a) 136 17 ---
Distribution fee (Class B) 370 330 241
Fees waived or borne by the Adviser (395) (471) (268)
North Carolina Fund
Period September 1, 1993
Year ended (commencement of
January 31 operations) through
1996 1995 January 31, 1994
---- ---- ---------------------
Management fee (before reduction) $186 $165 $32
Bookkeeping fee 27 27 11
Shareholder service and transfer agent fee 59 49 8
12b-1 fees:
Service fee (a) 44 5 ---
Distribution fee (Class B) 142 105 20
Fees waived or borne by the Adviser (261) (271) (65)
Ohio Fund
Years ended January 31
1996 1995 1994
---- ---- ----
Management fee (before reduction) $696 $720 $630
Bookkeeping fee 55 54 46
Shareholder service and transfer agent fee 222 213 170
12b-1 fees
Service fee (a) 156 23 ---
Distribution fee (Class B) 418 399 241
Fees waived or borne by the Adviser (145) (202) (94)
(a) Effective December 31, 1994, each Fund pays CISI monthly a service fee at
the rate of 0.10% of average net assets attributed to shares outstanding on
November 30, 1994 and 0.25% of average net assets attributed to shares issued
thereafter.
Brokerage Commissions (dollars in thousands)
California Fund
Years ended January 31
1996 1995 1994
---- ---- ----
Total commissions $12 $10 $0
Directed transactions(b) 0 0 0
Commissions on directed transactions 0 0 0
Connecticut Fund
1996 1995 1994
---- ---- ----
Total commissions $5 $2 $11
Directed transactions(b) 0 0 0
Commissions on directed transactions 0 0 0
Florida Fund
Years ended January 31
1996 1995 1994
---- ---- ----
Total commissions $4 $4 $3
Directed transactions(b) 0 0 0
Commissions on directed transactions 0 0 0
Massachusetts Fund
Years ended January 31
1996 1995 1994
---- ---- ----
Total commissions $7 $5 $3
Directed transactions(b) 0 0 0
Commissions on directed transactions 0 0 0
Michigan Fund
Years ended January 31
1996 1995 1994
---- ---- ----
Total commissions $3 $2 $1
Directed transactions(b) 0 0 0
Commissions on directed transactions 0 0 0
Minnesota Fund
Years ended January 31
1996 1995 1994
---- ---- ----
Total commissions $2 $0 $0
Directed transactions(b) 0 0 0
Commissions on directed transactions 0 0 0
New York Fund
Years ended January 31
1996 1995 1994
---- ---- ----
Total commissions $5 $3 $1
Directed transactions(b) 0 0 0
Commissions on directed transactions 0 0 0
North Carolina Fund
Period September 1, 1993
Years ended (commencement of operations)
January 31 through January 31,
1996 1995 1994
---- ---- -------------------------
Total Commissions $2 $2 $1
Directed transactions(b) 0 0 0
Commissions on directed transactions 0 0 0
Ohio Fund
Years ended January 31
1996 1995 1994
---- ---- ----
Total commissions $6 $4 $0
Directed transactions(b) 0 0 0
Commissions on directed transactions 0 0 0
(b) See "Management of the Colonial Funds - Portfolio Transactions - Brokerage
and research services" in Part 2 of this SAI.
Trustees Fees
For the fiscal year ended January 31, 1996 and the calendar year ended December
31, 1995, the Trustees received the following compensation for serving as
Trustees:
California Fund
Aggregate Total Compensation
Compensation From Trust and
From Fund or Fund Complex Paid to
The Fiscal Year the Trustees For The
Trustee Ended 1/31/96 Calendar Year Ended 12/31/95 (c)
--------- --------------- --------------------------------
Robert J. Birnbaum (d) $2,294 $71,250
Tom Bleasdale 2,720(e) $98,000(f)
Lora S. Collins 2,296 91,000
James E. Grinnell (d) 2,284 71,250
William D. Ireland, Jr. 3,144 113,000
Richard W. Lowry (d) 2,289 71,250
William E. Mayer 2,527 91,000
James L. Moody, Jr. 2,637(g) 94,500(h)
John J. Neuhauser 2,530 91,000
George L. Shinn 2,864 120,500
Robert L. Sullivan 2,792 101,000
Sinclair Weeks, Jr. 3,111 112,000
(c) At December 31, 1995, the Colonial Funds complex consisted of 33 open-end
and 5 closed-end management investment company portfolios.
(d) Elected as a Trustee of the Colonial Funds complex on April 21, 1995.
(e) Includes $1,466 payable in later years as deferred compensation.
(f) Includes $49,000 payable in later years as deferred compensation.
(g) Total compensation of $2,637 for the fiscal year ended January 31, 1996
will be payable in later years as deferred compensation.
(h) Total compensation of $94,500 for the calendar year ended December 31,
1995 will be payable in later years as deferred compensation.
Connecticut Fund
Aggregate Compensation
From Fund For The Fiscal
Trustee Year Ended 1/31/96
Robert J. Birnbaum $1,338
Tom Bleasdale $1,592(i)
Lora S. Collins 1,341
James E. Grinnell 1,344
William D. Ireland, Jr. 1,837
Richard W. Lowry 1,339
William E. Mayer 1,481
James L. Moody, Jr. 1,534(j)
John J. Neuhauser 1,479
George L. Shinn 1,669
Robert L. Sullivan 1,633
Sinclair Weeks, Jr. 1,817
(i) Includes $917 payable as deferred compensation.
(j) Total compensation of $1,534 for the fiscal year ended January 31,
1996 will be payable in later years as deferred compensation.
Florida Fund
Aggregate Compensation
From Fund For The Fiscal
Trustee Year Ended 1/31/96
Robert J. Birnbaum $989
Tom Bleasdale 1,176(k)
Lora S. Collins 997
James E. Grinnell 990
William D. Ireland, Jr. 1,359
Richard W. Lowry 990
William E. Mayer 1,095
James L. Moody, Jr. 1,136(l)
John J. Neuhauser 1,093
George L. Shinn 1,236
Robert L. Sullivan 1,205
Sinclair Weeks, Jr. 1,345
(k) Includes $677 payable as deferred compensation.
(l) Total compensation of $1,136 for the fiscal year ended January 31,
1996 will be payable in later years as deferred compensation.
Massachusetts Fund
Aggregate Compensation
From Fund For The Fiscal
Trustee Year Ended 1/31/96
Robert J. Birnbaum $1,729
Tom Bleasdale 2,046
Lora S. Collins 1,730
James E. Grinnell 1,728
William D. Ireland, Jr. 2,358
Richard W. Lowry 1,730
William E. Mayer 1,901
James L. Moody, Jr. 1,979(n)
John J. Neuhauser 1,903
George L. Shinn 2,148
Robert L. Sullivan 2,102
Sinclair Weeks, Jr. 2,339
(m) Includes $1,178 payable as deferred compensation.
(n) Total compensation of $1,979 for the fiscal year ended January 31,
1996 will be payable in later years as deferred compensation.
Michigan Fund
Aggregate Compensation
From Fund For The Fiscal
Trustee Year Ended 1/31/96
Robert J. Birnbaum $973
Tom Bleasdale $1,151
Lora S. Collins 971
James E. Grinnell 973
William D. Ireland, Jr. 1,325
Richard W. Lowry 972
William E. Mayer 1,070
James L. Moody, Jr. 1,114
John J. Neuhauser 1,069
George L. Shinn 1,206
Robert L. Sullivan 1,184
Sinclair Weeks, Jr. 1,314
(o) Includes $662 payable as deferred compensation.
(p) Total compensation of $1,114 for the fiscal year ended January 31,
1996 will be payable in later years as deferred compensation.
Minnesota Fund
Aggregate Compensation
From Fund For The Fiscal
Trustee Year Ended 1/31/96
Robert J. Birnbaum $956
Tom Bleasdale 1,135
Lora S. Collins 955
James E. Grinnell 958
William D. Ireland, Jr. 1,304
Richard W. Lowry 956
William E. Mayer 1,053
James L. Moody, Jr. 1,092(r)
John J. Neuhauser 1,053
George L. Shinn 1,187
Robert L. Sullivan 1,165
Sinclair Weeks, Jr. 1,294
(q) Includes $653 payable as deferred compensation.
(r) Total compensation of $1,092 for the fiscal year ended January 31,
1996 will be payable in later years as deferred compensation.
New York Fund
Aggregate Compensation
From Fund For The Fiscal
Trustee Year Ended 1/31/96
Robert J. Birnbaum 1,145
Tom Bleasdale $1,356(s)
Lora S. Collins 1,148
James E. Grinnell 1,139
William D. Ireland, Jr. 1,568
Richard W. Lowry 1,141
William E. Mayer 1,256
James L. Moody, Jr. 1,313
John J. Neuhauser 1,258
George L. Shinn 1,424
Robert L. Sullivan 1,390
Sinclair Weeks, Jr. 1,550
(s) Includes $781 payable as deferred compensation.
(t) Total compensation of $1,313 for the fiscal year ended January 31,
1996 will be payable in later years as deferred compensation.
North Carolina Fund
Aggregate Compensation
From Fund For The Fiscal
Trustee Year Ended 1/31/96
Robert J. Birnbaum $882
Tom Bleasdale 1,051(u)
Lora S. Collins 891
James E. Grinnell 884
William D. Ireland, Jr. 1,213
Richard W. Lowry 885
William E. Mayer 977
James L. Moody, Jr. 1,016(v)
John J. Neuhauser 975
George L. Shinn 1,103
Robert L. Sullivan 1,073
Sinclair Weeks, Jr. 1,202
(u) Includes $604 payable as deferred compensation.
(v) Total compensation of $1,016 for the fiscal year ended January 31,
1996 will be payable in later years as deferred compensation.
Ohio Fund
Aggregate Compensation
From Fund For The Fiscal
Trustee Year Ended 1/31/96
James J. Birnbaum $1,241
Tom Bleasdale 1,474(w)
Lora S. Collins 1,242
James E. Grinnell 1,243
William D. Ireland, Jr. 1,697
Richard D. Lowry 1,241
William E. Mayer 1,368
James L. Moody, Jr. 1,419(x)
John J. Neuhauser 1,369
George L. Shinn 1,544
Robert L. Sullivan 1,509
Sinclair Weeks, Jr. 1,683
(w) Includes $848 payable as deferred compensation.
(x) Total compensation of $1,419 for the fiscal year ended January 31,
1996 will be payable in later years as deferred compensation.
The following table sets forth the amount of compensation paid to Messrs.
Birnbaum, Grinnell and Lowry in their capacities as Trustees or Directors of the
Liberty All-Star Equity Fund and Liberty All-Star Growth Fund, Inc. (formerly
known as The Charles Allmon Trust, Inc.) (together, Liberty Funds I) for service
during the calendar year ended December 31, 1995, and of Liberty Financial Trust
(now known as Colonial Trust VII) and LFC Utilities Trust (together, Liberty
Funds II) for the period January 1, 1995 through March 26, 1995 (y):
Total Compensation Total Compensation
From Liberty Funds II For From Liberty Funds I For
The Period January 1, 1995 The Calendar Year Ended
Trustee through March 26, 1995 December 31, 1995 (z)
------- ---------------------- ---------------------
Robert J. Birnbaum $2,900 $16,675
James E. Grinnell 2,900 22,900
Richard W. Lowry 2,900 26,250 (aa)
(y) On March 27, 1995, four of the portfolios in the Liberty Financial Trust
(now known as Colonial Trust VII) were merged into existing Colonial
funds and a fifth was reorganized into a new portfolio of Colonial Trust
III. Prior to their election as Trustees of the Colonial Funds, Messrs.
Birnbaum, Grinnell and Lowry served as Trustees of Liberty Funds II;
they continue to serve as Trustees or Directors of Liberty Funds I.
(z) At December 31, 1995, the Liberty Funds I were advised by Liberty Asset
Management Company (LAMCO). LAMCO is an indirect wholly-owned subsidiary
of Liberty Financial Companies, Inc. (an intermediate parent of the
Adviser).
(aa) Includes $3,500 paid to Mr. Lowry for service as Trustee of Liberty
Newport World Portfolio (formerly known as Liberty All-Star World
Portfolio) (Liberty Newport) during the calendar year ended December 31,
1995. At December 31, 1995, Liberty Newport was managed by Newport
Pacific Management, Inc. and Stein Roe & Farnham Incorporated, each an
affiliate of the Adviser.
Ownership of the Funds
At April 30, 1996, the officers and Trustees of the Trust as a group owned less
than 1% of the outstanding shares of each of the California, Connecticut,
Florida, Massachusetts, Michigan, Minnesota, New York, North Carolina and Ohio
Funds.
At April 30, 1996, the following shareholders owned 5% or more of the following
Funds' outstanding Class A and Class B shares:
California Fund: Merrill Lynch, Pierce, Fenner & Smith, Inc., Mutual Fund
Operations, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32216
(Class A: 9.12%) (Class B: 8.27%)
Connecticut Fund: Merrill Lynch, Pierce, Fenner & Smith, Inc., Mutual Fund
Operations, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32216
(Class A: 14.43%) (Class B: 20.40%)
Florida Fund: Merrill Lynch, Pierce, Fenner & Smith, Inc., Mutual Fund
Operations, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL, 32216
(Class A: 14.87%) (Class B: 15.39%)
Massachusetts Fund: Merrill Lynch, Pierce, Fenner & Smith, Inc., Mutual Fund
Operations, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32216
(Class A: 5.42%)
Michigan Fund: Merrill Lynch, Pierce, Fenner & Smith, Inc., Mutual Fund
Operations, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32216-0561
(Class A: 10.45%) (Class B: 24.85%)
Minnesota Fund: Merrill Lynch, Pierce, Fenner & Smith, Inc., Mutual Fund
Operations, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32216
(Class B: 9.04%)
New York Fund: Merrill Lynch, Pierce, Fenner & Smith, Inc., Mutual Fund
Operations, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32216
(Class A: 16.58%) (Class B: 20.40%)
North Carolina Fund: Frank M. Drendel, 330 17th Avenue NW, Hickory,
NC 28601-1817 (Class A: 7.24); Merrill Lynch, Pierce, Fenner & Smith, Inc.,
Mutual Fund Operations, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL
32216 (Class B: 7.46%)
Ohio Fund: Merrill Lynch, Pierce, Fenner & Smith, Inc., Mutual Fund
Operations, 4800 Deer Lake Drive E, 3rd Floor, Jacksonville, FL 32216
(Class A: 7.51%)
At April 30, 1996, there were the following number of shareholders of each Fund:
Class A Class B
------- -------
California Fund 5,061 2,277
Connecticut Fund 1,772 1,817
Florida Fund 671 707
Massachusetts Fund 4,253 1,761
Michigan Fund 1,304 408
Minnesota Fund 1,339 644
New York Fund 1,309 1,168
North Carolina Fund 552 524
Ohio Fund 2,484 2,014
Sales Charges (dollars in thousands)
__________________________Class A Shares_______________________
California Fund
Years ended January 31
1996 1995 1994
---- ---- -----
Aggregate initial sales charges on
Fund share sales $270 $483 $1,527
Initial sales charges retained by CISI 34 47 201
Connecticut Fund
Years ended January 31
1996 1995 1994
---- ---- ----
Aggregate initial sales charges on
Fund share sales $279 $370 $1,057
Initial sales charges retained by CISI 30 34 117
Florida Fund
Years ended January 31
1996 1995 1994
---- ---- ----
Aggregate initial charges retained on
Fund share sales $264 $153 $716
Initial sales charges retained by CISI 35 12 33
Massachusetts Fund
Years ended January 31
1996 1995 1994
---- ---- ----
Aggregate initial sales charges on
Fund share sales $396 $634 $1,463
Initial sales charges retained by CISI 51 55 167
Michigan Fund
Years ended January 31
1996 1995 1994
---- ---- ----
Aggregate initial sales charges on
Fund share sales $88 $143 $315
Initial sales charges retained by CISI 10 12 34
Minnesota Fund
Years ended January 31
1996 1995 1994
---- ---- ----
Aggregate initial sales charges on Fund
share sales $75 $143 $308
Initial sales charges retained by CISI 9 12 31
New York Fund
Years ended January 31
1996 1995 1994
---- ---- ----
Aggregate initial sales charges on
Fund share sales $199 $218 $488
Initial sales charges retained by CISI 23 19 52
North Carolina Fund
Period September 1, 1993
(commencement of
operations) through
Years ended January 31 January 31
1996 1995 1994
---- ---- ----
Aggregate initial sales charges on
Fund share sales $71 $235 $309
Initial sales charges retained by CISI 8 18 4
Ohio Fund
Years ended January 31
1996 1995 1994
---- ---- ----
Aggregate initial sales charges on
Fund share sales $126 $247 $696
Initial sales charges retained by CISI 15 21 73
____________________Class B Shares___________________
California Fund
Years ended January 31
1996 1995 1994
---- ---- ----
Aggregate contingent deferred sales
charges (CDSC) on Fund redemptions
retained by CISI $362 $489 $173
Connecticut Fund
Years ended January 31
1996 1995 1994
---- ---- ----
Aggregate CDSC on Fund redemptions
retained by CISI $171 $198 $51
Florida Fund
Years ended January 31
1996 1995 1994
---- ---- ----
Aggregate CDSC on Fund redemptions
retained by CISI $121 $139 $11
Massachusetts Fund
Years ended January 31
1996 1995 1994
---- ---- ----
Aggregate CDSC on Fund redemptions
retained by CISI $242 $169 $61
Michigan Fund
Years ended January 31
1996 1995 1994
---- ---- ----
Aggregate CDSC on Fund redemptions
retained by CISI $44 $68 $5
Minnesota Fund
Years ended January 31
1996 1995 1994
---- ---- ----
Aggregate CDSC on Fund redemptions
retained by CISI $30 $31 $3
New York Fund
Years ended January 31
1996 1995 1994
---- ---- ----
Aggregate CDSC on Fund redemptions
retained by CISI $156 $155 $34
North Carolina Fund
Period September 1, 1993
(commencement of operations)
Year ended January 31 through January 31
1996 1995 1994
---- ---- ----
Aggregate CDSC on Fund redemptions
retained by CISI $78 $35 $0
Ohio Fund
Years ended January 31
1996 1995 1994
---- ---- ----
Aggregate CDSC on Fund redemptions
retained by CISI $221 $181 $29
Distribution Plan, CDSCs and Conversion of Shares
The Funds each offer two classes of shares - Class A and Class B. Each Fund may
in the future offer other classes of shares. The Trustees have approved 12b-1
plans (Plans) for each Fund pursuant to Rule 12b-1 under the Act. Under the
Plans, each Fund pays CISI monthly a service fee at the rate of 0.10% of average
net assets attributed to shares outstanding on November 30, 1994, and 0.25% of
average net assets attributed to shares issued thereafter. The Funds also pay
CISI a distribution fee not to exceed 0.75% of average net assets attributed to
each Fund's Class B shares. CISI may use the entire amount of such fees to
defray the costs of commissions and service fees paid to financial service firms
(FSFs) and for certain other purposes. Since the distribution and service fees
are payable regardless of the amount of CISI's expenses, CISI may realize a
profit from the fees.
The Plans authorize any other payments by the Funds to CISI (and its affiliates
including Colonial) to the extent that such payments might be construed to be
indirectly financing the distribution of each Fund's shares.
The Trustees believe the Plans could be a significant factor in the growth and
retention of each Fund's assets resulting in a more advantageous expense ratio
and increased investment flexibility which could benefit each Fund's
shareholders. The Plans will continue in effect from year to year so long as
continuance is specifically approved at least annually by a vote of the
Trustees, including the Trustees who are not interested persons of the Trust and
have no direct or indirect financial interest in the operation of the Plans or
in any agreements related to the Plans (Independent Trustees), cast in person at
a meeting called for the purpose of voting on the Plans. The Plans may not be
amended to increase the fee materially without approval by vote of a majority of
the outstanding voting securities of the relevant class of shares and all
material amendments of the Plans must be approved by the Trustees in the manner
provided in the foregoing sentence. The Plans may be terminated at any time by
vote of a majority of the Independent Trustees or by vote of a majority of the
outstanding voting securities of the relevant class of shares. The continuance
of the Plans will only be effective if the selection and nomination of the
Trustees who are non-interested Trustees is effected by such non-interested
Trustees.
Class A shares are offered at net asset value plus varying sales charges which
may include a CDSC. Class B shares are offered at net asset value and are
subject to a CDSC if redeemed within six years after the purchase. The CDSCs are
described in the Prospectus.
No CDSC will be imposed on distributions or on amounts which represent an
increase in the value of the shareholders account resulting from capital
appreciation. In determining the applicability and rate of any CDSC, it will be
assumed that a redemption is made first of shares representing capital
appreciation, next of shares representing reinvestment of distributions and
finally of other shares held by the shareholder for the longest period of time.
Approximately eight years after the end of the month in which a Class B share is
purchased, such share and a pro rata portion of any shares issued on the
reinvestment of distributions will be automatically converted into Class A
shares having an equal value, which are not subject to the distribution fee.
Sales-related expenses (dollars in thousands) of CISI relating to the Funds for
the fiscal year ended January 31, 1996 were:
<TABLE>
<CAPTION>
California Fund Connecticut Fund
Class A Class B Class A Class B
<S> <C> <C> <C> <C>
Fees to FSFs $363 $509 $106 $484
Cost of sales material (including printing and 24 23 17 20
mailing expenses)
Allocated Travel, entertainment and other promotional
expenses (including advertising) 56 48 45 51
</TABLE>
<TABLE>
<CAPTION>
Florida Fund Massachusetts Fund
Class A Class B Class A Class B
<S> <C> <C> <C> <C>
Fees to FSFs $53 $273 $288 $407
Cost of sales material (including printing and 20 16 52 22
mailing expenses)
Allocated travel, entertainment and other
promotional expenses (including advertising) 41 32 102 47
</TABLE>
<TABLE>
<CAPTION>
Michigan Fund Minnesota Fund
Class A Class B Class A Class B
<S> <C> <C> <C> <C>
Fees to FSFs $52 $75 $56 $179
Cost of sales material (including printing and 10 7 8 11
mailing expenses)
Allocated travel, entertainment and other
promotional expenses (including advertising) 10 7 17 21
</TABLE>
<TABLE>
<CAPTION>
New York Fund North Carolina Fund
Class A Class B Class A Class B
<S> <C> <C> <C> <C>
Fees to FSFs $82 $431 $23 $131
Cost of sales material (including printing and 15 25 8 11
mailing expenses)
Allocated travel, entertainment and other
promotional expenses (including advertising) 33 52 19 14
</TABLE>
Ohio Fund
Class A Class B
Fees to FSFs $89 $250
Cost of sales material including (printing and 6 10
mailing expenses)
Allocated travel, entertainment and other
promotional expenses (including advertising) 17 25
INVESTMENT PERFORMANCE
The following Funds' Class A and Class B yields for the month ended January 31,
1996, were:
Class A Shares
Yield Tax-Equivalent Yield(bb) Adjusted Yield(cc)
----- ------------------------ ------------------
California Fund 4.37% 8.13% --%
Connecticut Fund 4.62% 8.01% 4.32%
Florida Fund 4.59% 7.60% 4.16%
Massachusetts Fund 4.50% 8.47% 4.46%
Michigan Fund 4.50% 7.81% 4.25%
Minnesota Fund 4.49% 8.12% 4.28%
New York Fund 4.74% 8.93% 4.44%
North Carolina Fund 4.83% 8.67% 4.25%
Ohio Fund 4.34% 7.77% 4.23%
Class B Shares
Yield Tax-Equivalent Yield(bb) Adjusted Yield(cc)
----- ----------------------- ------------------
California Fund 3.83% 7.12% --%
Connecticut Fund 4.09% 7.09% 3.78%
Florida Fund 4.06% 6.72% 3.61%
Massachusetts Fund 3.97% 7.47% 3.93%
Michigan Fund 3.96% 6.87% 3.71%
Minnesota Fund 3.96% 7.17% 3.74%
New York Fund 4.22% 7.93% 3.91%
North Carolina Fund 4.31% 7.74% 3.71%
Ohio Fund 3.80% 6.80% 3.69%
(bb) Calculated using the effective maximum combined federal and state tax
rates.
(cc) Without voluntary expense limit.
The following Funds' average annual total returns at January 31, 1996, were:
Class A Shares
California Fund
Since inception
1 year 5 years 6/16/86 to 1/31/96
------ ------- -------------------
With sales charge of 4.75% 10.29% 6.79% 6.83%
Without sales charge 15.78% 7.83% 7.37%
Connecticut Fund
Since inception
1 year 11/1/91 to 1/31/96
------ ------------------
With sales charge of 4.75% 8.36% 6.50%
Without sales charge 13.77% 7.72%
Florida Fund
Since inception
1 year 2/1/93 to 1/31/96
------ -----------------
With sales charge of 4.75% 8.16% 4.64%
Without sales charge 13.55% 6.36%
Massachusetts Fund
Since inception
1 year 5 years 4/10/87 to 1/31/96
------ ------- -------------------
With sales charge of 4.75% 9.44% 7.89% 7.70%
Without sales charge 14.90% 8.95% 8.30%
Michigan Fund
Since inception
1 year 5 years 9/26/86 to 1/31/96
------ ------- -------------------
With sales charge of 4.75% 7.76% 6.94% 5.96%
Without sales charge 13.13% 7.98% 6.52%
Minnesota Fund
Since inception
1 year 5 years 9/26/86 to 1/31/96
------ ------- -------------------
With sales charge of 4.75% 8.11% 6.40% 6.33%
Without sales charge 13.50% 7.44% 6.88%
New York Fund
Since inception
1 year 5 years 9/26/86 to 1/31/96
------ ------- -------------------
With sales charge of 4.75% 9.53% 7.30% 6.29%
Without sales charge 14.99% 8.35% 6.84%
North Carolina Fund
Since inception
1 year 9/1/93 to 1/31/96
------ ------------------
With sales charge of 4.75% 9.45% 2.30%
Without sales charge 14.91% 4.38%
Ohio Fund
Since inception
1 year 5 years 9/26/86 to 1/31/96
------ ------- -------------------
With sales charge of 4.75% 8.75% 6.83% 6.56%
Without sales charge 14.18% 7.87% 7.12%
Class B Shares
California Fund
Since inception
1 year 8/4/92 to 1/31/96
------ -----------------
With applicable CDSC 9.94% (5.00% CDSC) 4.93% (3.00% CDSC)
Without CDSC 14.94% 5.68%
Connecticut Fund
Since inception
1 year 6/8/92 to 1/31/96
------ -------------------
With applicable CDSC 7.93% (5.00% CDSC) 6.18% (3.00% CDSC)
Without CDSC 12.93% 6.88%
Florida Fund
Since inception
1 year 2/1/93 to 1/31/96
------ -----------------
With applicable CDSC 7.72% (5.00% CDSC) 4.67% (3.00% CDSC)
Without CDSC 12.72% 5.57%
Massachusetts Fund
Since inception
1 year 6/8/92 to 1/31/96
----- -----------------
With applicable CDSC 9.05% (5.00% CDSC) 6.84% (3.00% CDSC)
Without CDSC 14.05% 7.52%
Michigan Fund
Since inception
1 year 8/4/92 to 1/31/96
------ -----------------
With applicable CDSC 7.30% (5.00% CDSC) 5.08% (3.00% CDSC)
Without CDSC 12.30% 5.83%
Minnesota Fund
Since inception
1 year 8/4/92 to 1/31/96
------ -----------------
With applicable CDSC 7.66% (5.00% CDSC) 5.00% (3.00% CDSC)
Without CDSC 12.66% 5.75%
New York Fund
Since inception
1 year 8/4/92 to 1/31/96
------ -----------------
With applicable CDSC 9.15% (5.00% CDSC) 5.06% (3.00% CDSC)
Without CDSC 14.15% 5.81%
North Carolina Fund
Since inception
1 year 9/1/93 to 1/31/96
------ -------------------
With applicable CDSC 9.07% (5.00% CDSC) 2.45%(3.00% CDSC)
Without CDSC 14.07% 3.61%
Ohio Fund
Since inception
1 year 8/4/92 to 1/31/96
------ ------------------
With applicable CDSC 8.34% (5.00% CDSC) 4.91% (3.00% CDSC)
Without CDSC 13.34% 5.66%
The following Funds' Class A and Class B share distribution rates at January 31,
1996, based on the most recent month's distribution, annualized, and the maximum
offering price at the end of the month, were:
Fund Class A Class B
California Fund 4.78% 4.27%
Connecticut Fund 4.88% 4.39%
Florida Fund 5.03% 4.54%
Massachusetts Fund 4.82% 4.31%
Michigan Fund 4.87% 4.38%
Minnesota Fund 4.82% 4.31%
New York Fund 5.20% 4.72%
North Carolina Fund 4.91% 4.41%
Ohio Fund 4.63% 4.11%
See Part 2 of this SAI, "Performance Measures," for how calculations are made.
CUSTODIAN
UMB, n.a.. is the Funds' custodian. The Funds' custodian is responsible for
safeguarding each Fund's cash and securities, receiving and delivering
securities and collecting the Fund's interest and dividends.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP are the Funds' independent accountants providing audit and
tax return preparation services and assistance and consultation in connection
with the review of various SEC filings. The financial statements incorporated by
reference in this SAI have been so incorporated, and the schedules of financial
highlights in the Prospectus have been so included, in reliance upon the report
of Price Waterhouse LLP given on the authority of said firm as experts in
accounting and auditing.
The following Funds' financial statements and Reports of Independent Accountants
appearing on the referenced pages in each of the Fund's January 31, 1996 Annual
Reports are incorporated in this SAI by reference:
Fund Pages
---- -----
California Fund 6-28
Connecticut Fund 6-24
Florida Fund 6-19
Massachusetts Fund 6-26
Michigan Fund 6-21
Minnesota Fund 6-23
New York Fund 6-22
North Carolina Fund 6-19
Ohio Fund 6-24
STATEMENT OF ADDITIONAL INFORMATION
PART 2
The following information applies generally to most Colonial funds. "Colonial
funds" or "funds" include each series of Colonial Trust I, Colonial Trust II,
Colonial Trust III, Colonial Trust IV, Colonial Trust V, Colonial Trust VI and
Colonial Trust VII. In certain cases, the discussion applies to some but not all
of the Colonial funds, and you should refer to your Fund's Prospectus and to
Part 1 of this SAI to determine whether the matter is applicable to your Fund.
You will also be referred to Part 1 for certain data applicable to your Fund.
MISCELLANEOUS INVESTMENT PRACTICES
Part 1 of this Statement lists on page b which of the following investment
practices are available to your Fund.
Short-Term Trading
In seeking the fund's investment objective, the Adviser will buy or sell
portfolio securities whenever it believes it is appropriate. The Adviser's
decision will not generally be influenced by how long the fund may have owned
the security. From time to time the fund will buy securities intending to seek
short-term trading profits. A change in the securities held by the fund is known
as "portfolio turnover" and generally involves some expense to the fund. These
expenses may include brokerage commissions or dealer mark-ups and other
transaction costs on both the sale of securities and the reinvestment of the
proceeds in other securities. If sales of portfolio securities cause the fund to
realize net short-term capital gains, such gains will be taxable as ordinary
income. As a result of the fund's investment policies, under certain market
conditions the fund's portfolio turnover rate may be higher than that of other
mutual funds. The fund's portfolio turnover rate for a fiscal year is the ratio
of the lesser of purchases or sales of portfolio securities to the monthly
average of the value of portfolio securities, excluding securities whose
maturities at acquisition were one year or less. The fund's portfolio turnover
rate is not a limiting factor when the Adviser considers a change in the fund's
portfolio.
Lower Rated Bonds
Lower rated bonds are those rated lower than Baa by Moody's, BBB by S&P, or
comparable unrated securities. Relative to comparable securities of higher
quality:
1. the market price is likely to be more volatile because:
a. an economic downturn or increased interest rates may have a more
significant effect on the yield, price and potential for default;
b. the secondary market may at times become less liquid or respond to
adverse publicity or investor perceptions,
increasing the difficulty in valuing or disposing of the bonds;
c. existing legislation limits and future legislation may further
limit (i) investment by certain institutions or (ii) tax
deductibility of the interest by the issuer, which may adversely
affect value; and
d. certain lower rated bonds do not pay interest in cash on a current
basis. However, the fund will accrue and distribute this interest
on a current basis, and may have to sell securities to generate
cash for distributions.
2. the fund's achievement of its investment objective is more
dependent on the Adviser's credit analysis.
3. lower rated bonds are less sensitive to interest rate changes,
but are more sensitive to adverse economic developments.
Small Companies
Smaller, less well established companies may offer greater opportunities for
capital appreciation than larger, better established companies, but may also
involve certain special risks related to limited product lines, markets, or
financial resources and dependence on a small management group. Their securities
may trade less frequently, in smaller volumes, and fluctuate more sharply in
value than securities of larger companies.
Foreign Securities
The fund may invest in securities traded in markets outside the United States.
Foreign investments can be affected favorably or unfavorably by changes in
currency rates and in exchange control regulations. There may be less publicly
available information about a foreign company than about a U.S. company, and
foreign companies may not be subject to accounting, auditing and financial
reporting standards comparable to those applicable to U.S. companies. Securities
of some foreign companies are less liquid or more volatile than securities of
U.S. companies, and foreign brokerage commissions and custodian fees may be
higher than in the United States. Investments in foreign securities can involve
other risks different from those affecting U.S. investments, including local
political or economic developments, expropriation or nationalization of assets
and imposition of withholding taxes on dividend or interest payments. Foreign
securities, like other assets of the fund, will be held by the fund's custodian
or by a subcustodian or depository. See also "Foreign Currency Transactions"
below.
The fund may invest in certain Passive Foreign Investment Companies (PFICs)
which may be subject to U.S. federal income tax on a portion of any "excess
distribution" or gain (PFIC tax) related to the investment. The PFIC tax is the
highest ordinary income rate, and it could be increased by an interest charge on
the deemed tax deferral.
The fund may possibly elect to include in its income its pro rata share of the
ordinary earnings and net capital gain of PFICs. This election requires certain
annual information from the PFICs which in many cases may be difficult to
obtain. An alternative election would permit the fund to recognize as income any
appreciation (but not depreciation) on its holdings of PFICs as of the end of
its fiscal year.
Zero Coupon Securities (Zeros)
The fund may invest in debt securities which do not pay interest, but instead
are issued at a deep discount from par. The value of the security increases over
time to reflect the interest accreted. The value of these securities may
fluctuate more than similar securities which are issued at par and pay interest
periodically. Although these securities pay no interest to holders prior to
maturity, interest on these securities is reported as income to the fund and
distributed to its shareholders. These distributions must be made from the
fund's cash assets or, if necessary, from the proceeds of sales of portfolio
securities. The fund will not be able to purchase additional income producing
securities with cash used to make such distributions and its current income
ultimately may be reduced as a result.
Step Coupon Bonds (Steps)
The fund may invest in debt securities which do not pay interest for a stated
period of time and then pay interest at a series of different rates for a series
of periods. In addition to the risks associated with the credit rating of the
issuers, these securities are subject to the volatility risk of zero coupon
bonds for the period when no interest is paid.
Pay-In-Kind (PIK) Securities
The fund may invest in securities which pay interest either in cash or
additional securities at the issuer's option. These securities are generally
high yield securities and in addition to the other risks associated with
investing in high yield securities are subject to the risks that the interest
payments which consist of additional securities are also subject to the risks of
high yield securities.
Money Market Instruments
Government obligations are issued by the U.S. or foreign governments, their
subdivisions, agencies and instrumentalities. Supranational obligations are
issued by supranational entities and are generally designed to promote economic
improvements. Certificates of deposits are issued against deposits in a
commercial bank with a defined return and maturity. Banker's acceptances are
used to finance the import, export or storage of goods and are "accepted" when
guaranteed at maturity by a bank. Commercial paper are promissory notes issued
by businesses to finance short-term needs (including those with floating or
variable interest rates, or including a frequent interval put feature).
Short-term corporate obligations are bonds and notes (with one year or less to
maturity at the time of purchase) issued by businesses to finance long-term
needs. Participation Interests include the underlying securities and any related
guaranty, letter of credit, or collateralization arrangement which the fund
would be allowed to invest in directly.
Securities Loans
The fund may make secured loans of its portfolio securities amounting to not
more than the percentage of its total assets specified in Part 1 of this SAI,
thereby realizing additional income. The risks in lending portfolio securities,
as with other extensions of credit, consist of possible delay in recovery of the
securities or possible loss of rights in the collateral should the borrower fail
financially. As a matter of policy, securities loans are made to banks and
broker-dealers pursuant to agreements requiring that loans be continuously
secured by collateral in cash or short-term debt obligations at least equal at
all times to the value of the securities on loan. The borrower pays to the fund
fund an amount equal to any dividends or interest received on securities lent.
The fund retains all or a portion of the interest received on investment of the
cash collateral or receives a fee from the borrower. Although voting rights, or
rights to consent, with respect to the loaned securities pass to the borrower,
the fund retains the right to call the loans at any time on reasonable notice,
and it will do so in order that the securities may be voted by the fund if the
holders of such securities are asked to vote upon or consent to matters
materially affecting the investment. The fund may also call such loans in order
to sell the securities involved.
Forward Commitments
The fund may enter into contracts to purchase securities for a fixed price at a
future date beyond customary settlement time ("forward commitments" and "when
issued securities") if the fund holds until the settlement date, in a segregated
account, cash or high-grade debt obligations in an amount sufficient to meet the
purchase price, or if the fund enters into offsetting contracts for the forward
sale of other securities it owns. Forward commitments may be considered
securities in themselves, and involve a risk of loss if the value of the
security to be purchased declines prior to the settlement date. Where such
purchases are made through dealers, the fund relies on the dealer to consummate
the sale. The dealer's failure to do so may result in the loss to the fund of an
advantageous yield or price. Although the fund will generally enter into forward
commitments with the intention of acquiring securities for its portfolio or for
delivery pursuant to options contracts it has entered into, the fund may dispose
of a commitment prior to settlement if the Adviser deems it appropriate to do
so. The fund may realize short-term profits or losses upon the sale of forward
commitments.
Mortgage Dollar Rolls
In a mortgage dollar roll, the fund sells a mortgage-backed security and
simultaneously enters into a commitment to purchase a similar security at a
later date. The fund either will be paid a fee by the counterparty upon entering
into the transaction or will be entitled to purchase the similar security at a
discount. As with any forward commitment, mortgage dollar rolls involve the risk
that the counterparty will fail to deliver the new security on the settlement
date, which may deprive the fund of obtaining a beneficial investment. In
addition, the security to be delivered in the future may turn out to be inferior
to the security sold upon entering into the transaction. Also, the transaction
costs may exceed the return earned by the fund from the transaction.
Repurchase Agreements
The fund may enter into repurchase agreements. A repurchase agreement
is a contract under which the fund acquires a security for a relatively short
period (usually not more than one week) subject to the obligation of the seller
to repurchase and the fund to resell such security at a fixed time and price
(representing the fund's cost plus interest). It is a fund's present intention
to enter into repurchase agreements only with commercial banks and registered
broker-dealers and only with respect to obligations of the U.S. government or
its agencies or instrumentalities. Repurchase agreements may also be viewed as
loans made by the fund which are collateralized by the securities subject to
repurchase. The Adviser will monitor such transactions to determine that the
value of the underlying securities is at least equal at all times to the total
amount of the repurchase obligation, including the interest factor. If the
seller defaults, the fund could realize a loss on the sale of the underlying
security to the extent that the proceeds of sale including accrued interest are
less than the resale price provided in the agreement including interest. In
addition, if the seller should be involved in bankruptcy or insolvency
proceedings, the fund may incur delay and costs in selling the underlying
security or may suffer a loss of principal and interest if the fund is treated
as an unsecured creditor and required to return the underlying collateral to the
seller's estate.
Reverse Repurchase Agreements
In a reverse repurchase agreement, the fund sells a security and agrees to
repurchase the same security at a mutually agreed upon date and price. A reverse
repurchase agreement may also be viewed as the borrowing of money by the fund
and, therefore, as a form of leverage. The fund will invest the proceeds of
borrowings under reverse repurchase agreements. In addition, the fund will enter
into a reverse repurchase agreement only when the interest income expected to be
earned from the investment of the proceeds is greater than the interest expense
of the transaction. The fund will not invest the proceeds of a reverse
repurchase agreement for a period which exceeds the duration of the reverse
repurchase agreement. The fund may not enter into reverse repurchase agreements
exceeding in the aggregate one-third of the market value of its total assets,
less liabilities other than the obligations created by reverse repurchase
agreements. Each fund will establish and maintain with its custodian a separate
account with a segregated portfolio of securities in an amount at least equal to
its purchase obligations under its reverse repurchase agreements. If interest
rates rise during the term of a reverse repurchase agreement, entering into the
reverse repurchase agreement may have a negative impact on a money market fund's
ability to maintain a net asset value of $1.00 per share.
Options on Securities
Writing covered options. The fund may write covered call options and covered put
options on securities held in its portfolio when, in the opinion of the Adviser,
such transactions are consistent with the fund's investment objective and
policies. Call options written by the fund give the purchaser the right to buy
the underlying securities from the fund at a stated exercise price; put options
give the purchaser the right to sell the underlying securities to the fund at a
stated price.
The fund may write only covered options, which means that, so long as the fund
is obligated as the writer of a call option, it will own the underlying
securities subject to the option (or comparable securities satisfying the cover
requirements of securities exchanges). In the case of put options, the fund will
hold cash and/or high-grade short-term debt obligations equal to the price to be
paid if the option is exercised. In addition, the fund will be considered to
have covered a put or call option if and to the extent that it holds an option
that offsets some or all of the risk of the option it has written. The fund may
write combinations of covered puts and calls on the same underlying security.
The fund will receive a premium from writing a put or call option, which
increases the fund's return on the underlying security if the option expires
unexercised or is closed out at a profit. The amount of the premium reflects,
among other things, the relationship between the exercise price and the current
market value of the underlying security, the volatility of the underlying
security, the amount of time remaining until expiration, current interest rates,
and the effect of supply and demand in the options market and in the market for
the underlying security. By writing a call option, the fund limits its
opportunity to profit from any increase in the market value of the underlying
security above the exercise price of the option but continues to bear the risk
of a decline in the value of the underlying security. By writing a put option,
the fund assumes the risk that it may be required to purchase the underlying
security for an exercise price higher than its then-current market value,
resulting in a potential capital loss unless the security subsequently
appreciates in value.
The fund may terminate an option that it has written prior to its expiration by
entering into a closing purchase transaction in which it purchases an offsetting
option. The fund realizes a profit or loss from a closing transaction if the
cost of the transaction (option premium plus transaction costs) is less or more
than the premium received from writing the option. Because increases in the
market price of a call option generally reflect increases in the market price of
the security underlying the option, any loss resulting from a closing purchase
transaction may be offset in whole or in part by unrealized appreciation of the
underlying security.
If the fund writes a call option but does not own the underlying security, and
when it writes a put option, the fund may be required to deposit cash or
securities with its broker as "margin" or collateral for its obligation to buy
or sell the underlying security. As the value of the underlying security varies,
the fund may have to deposit additional margin with the broker. Margin
requirements are complex and are fixed by individual brokers, subject to minimum
requirements currently imposed by the Federal Reserve Board and by stock
exchanges and other self-regulatory organizations.
Purchasing put options. The fund may purchase put options to protect its
portfolio holdings in an underlying security against a decline in market value.
Such hedge protection is provided during the life of the put option since the
fund, as holder of the put option, is able to sell the underlying security at
the put exercise price regardless of any decline in the underlying security's
market price. For a put option to be profitable, the market price of the
underlying security must decline sufficiently below the exercise price to cover
the premium and transaction costs. By using put options in this manner, the fund
will reduce any profit it might otherwise have realized from appreciation of the
underlying security by the premium paid for the put option and by transaction
costs.
Purchasing call options. The fund may purchase call options to hedge against an
increase in the price of securities that the fund wants ultimately to buy. Such
hedge protection is provided during the life of the call option since the fund,
as holder of the call option, is able to buy the underlying security at the
exercise price regardless of any increase in the underlying security's market
price. In order for a call option to be profitable, the market price of the
underlying security must rise sufficiently above the exercise price to cover the
premium and transaction costs. These costs will reduce any profit the fund might
have realized had it bought the underlying security at the time it purchased the
call option.
Over-the-Counter (OTC) options. The Staff of the Division of Investment
Management of the Securities and Exchange Commission has taken the position that
OTC options purchased by the fund and assets held to cover OTC options written
by the fund are illiquid securities. Although the Staff has indicated that it is
continuing to evaluate this issue, pending further developments, the fund
intends to enter into OTC options transactions only with primary dealers in U.S.
Government Securities and, in the case of OTC options written by the fund, only
pursuant to agreements that will assure that the fund will at all times have the
right to repurchase the option written by it from the dealer at a specified
formula price. The fund will treat the amount by which such formula price
exceeds the amount, if any, by which the option may be "in-the-money" as an
illiquid investment. It is the present policy of the fund not to enter into any
OTC option transaction if, as a result, more than 15% (10% in some cases, refer
to your fund's Prospectus) of the fund's net assets would be invested in (i)
illiquid investments (determined under the foregoing formula) relating to OTC
options written by the fund, (ii) OTC options purchased by the fund, (iii)
securities which are not readily marketable, and (iv) repurchase agreements
maturing in more than seven days.
Risk factors in options transactions. The successful use of the fund's options
strategies depends on the ability of the Adviser to forecast interest rate and
market movements correctly.
When it purchases an option, the fund runs the risk that it will lose its entire
investment in the option in a relatively short period of time, unless the fund
exercises the option or enters into a closing sale transaction with respect to
the option during the life of the option. If the price of the underlying
security does not rise (in the case of a call) or fall (in the case of a put) to
an extent sufficient to cover the option premium and transaction costs, the fund
will lose part or all of its investment in the option. This contrasts with an
investment by the fund in the underlying securities, since the fund may continue
to hold its investment in those securities notwithstanding the lack of a change
in price of those securities.
The effective use of options also depends on the fund's ability to terminate
option positions at times when the Adviser deems it desirable to do so. Although
the fund will take an option position only if Colonialthe Adviser believes there
is a liquid secondary market for the option, there is no assurance that the fund
will be able to effect closing transactions at any particular time or at an
acceptable price.
If a secondary trading market in options were to become unavailable, the fund
could no longer engage in closing transactions. Lack of investor interest might
adversely affect the liquidity of the market for particular options or series of
options. A marketplace may discontinue trading of a particular option or options
generally. In addition, a market could become temporarily unavailable if unusual
events -- such as volume in excess of trading or clearing capability -- were to
interrupt normal market operations.
A marketplace may at times find it necessary to impose restrictions on
particular types of options transactions, which may limit the fund's ability to
realize its profits or limit its losses.
Disruptions in the markets for the securities underlying options purchased or
sold by the fund could result in losses on the options. If trading is
interrupted in an underlying security, the trading of options on that security
is normally halted as well. As a result, the fund as purchaser or writer of an
option will be unable to close out its positions until options trading resumes,
and it may be faced with losses if trading in the security reopens at a
substantially different price. In addition, the Options Clearing Corporation
(OCC) or other options markets may impose exercise restrictions. If a
prohibition on exercise is imposed at the time when trading in the option has
also been halted, the fund as purchaser or writer of an option will be locked
into its position until one of the two restrictions has been lifted. If a
prohibition on exercise remains in effect until an option owned by the fund has
expired, the fund could lose the entire value of its option.
Special risks are presented by internationally-traded options. Because of time
differences between the United States and various foreign countries, and because
different holidays are observed in different countries, foreign options markets
may be open for trading during hours or on days when U.S. markets are closed. As
a result, option premiums may not reflect the current prices of the underlying
interest in the United States.
Futures Contracts and Related Options
Upon entering into futures contracts, in compliance with the SEC's requirements,
cash, cash equivalents or high-grade debt securities, equal in value to the
amount of the fund's obligation under the contract (less any applicable margin
deposits and any assets that constitute "cover" for such obligation), will be
segregated with the fund's custodian. For example, if a fund investing primarily
in foreign equity securities enters into a contract denominated in a foreign
currency, the fund will segregate cash, cash equivalents or high-grade debt
securities equal in value to the difference between the fund's obligation under
the contract and the aggregate value of all readily marketable equity securities
denominated in the applicable foreign currency held by the fund.
A futures contract sale creates an obligation by the seller to deliver the type
of instrument called for in the contract in a specified delivery month for a
stated price. A futures contract purchase creates an obligation by the purchaser
to take delivery of the type of instrument called for in the contract in a
specified delivery month at a stated price. The specific instruments delivered
or taken at settlement date are not determined until on or near that date. The
determination is made in accordance with the rules of the exchanges on which the
futures contract was made. Futures contracts are traded in the United States
only on commodity exchange or boards of trade -- known as "contract markets" --
approved for such trading by the Commodity Futures Trading Commission (CFTC),
and must be executed through a futures commission merchant or brokerage firm
which is a member of the relevant contract market.
Although futures contracts by their terms call for actual delivery or acceptance
of commodities or securities, the contracts usually are closed out before the
settlement date without the making or taking of delivery. Closing out a futures
contract sale is effected by purchasing a futures contract for the same
aggregate amount of the specific type of financial instrument or commodity with
the same delivery date. If the price of the initial sale of the futures contract
exceeds the price of the offsetting purchase, the seller is paid the difference
and realizes a gain. Conversely, if the price of the offsetting purchase exceeds
the price of the initial sale, the seller realizes a loss. Similarly, the
closing out of a futures contract purchase is effected by the purchaser's
entering into a futures contract sale. If the offsetting sale price exceeds the
purchase price, the purchaser realizes a gain, and if the purchase price exceeds
the offsetting sale price, the purchaser realizes a loss.
Unlike when the fund purchases or sells a security, no price is paid or received
by the fund upon the purchase or sale of a futures contract, although the fund
is required to deposit with its custodian in a segregated account in the name of
the futures broker an amount of cash and/or U.S. Government Securities. This
amount is known as "initial margin". The nature of initial margin in futures
transactions is different from that of margin in security transactions in that
futures contract margin does not involve the borrowing of funds by the fund to
finance the transactions. Rather, initial margin is in the nature of a
performance bond or good faith deposit on the contract that is returned to the
fund upon termination of the futures contract, assuming all contractual
obligations have been satisfied. Futures contracts also involve brokerage costs.
Subsequent payments, called "variation margin", to and from the broker (or the
custodian) are made on a daily basis as the price of the underlying security or
commodity fluctuates, making the long and short positions in the futures
contract more or less valuable, a process known as "marking to market."
The fund may elect to close some or all of its futures positions at any time
prior to their expiration. The purpose of making such a move would be to reduce
or eliminate the hedge position then currently held by the fund. The fund may
close its positions by taking opposite positions which will operate to terminate
the fund's position in the futures contracts. Final determinations of variation
margin are then made, additional cash is required to be paid by or released to
the fund, and the fund realizes a loss or a gain. Such closing transactions
involve additional commission costs.
Options on futures contracts. The fund will enter into written options on
futures contracts only when, in compliance with the SEC's requirements, cash or
equivalents equal in value to the commodity value (less any applicable margin
deposits) have been deposited in a segregated account of the fund's custodian.
The fund may purchase and write call and put options on futures contracts it may
buy or sell and enter into closing transactions with respect to such options to
terminate existing positions. The fund may use such options on futures contracts
in lieu of writing options directly on the underlying securities or purchasing
and selling the underlying futures contracts. Such options generally operate in
the same manner as options purchased or written directly on the underlying
investments.
As with options on securities, the holder or writer of an option may terminate
his position by selling or purchasing an offsetting option. There is no
guarantee that such closing transactions can be effected.
The fund will be required to deposit initial margin and maintenance margin with
respect to put and call options on futures contracts written by it pursuant to
brokers' requirements similar to those described above.
Risks of transactions in futures contracts and related options. Successful use
of futures contracts by the fund is subject to the Adviser `s ability to predict
correctly movements in the direction of interest rates and other factors
affecting securities markets.
Compared to the purchase or sale of futures contracts, the purchase of call or
put options on futures contracts involves less potential risk to the fund
because the maximum amount at risk is the premium paid for the options (plus
transaction costs). However, there may be circumstances when the purchase of a
call or put option on a futures contract would result in a loss to the fund when
the purchase or sale of a futures contract would not, such as when there is no
movement in the prices of the hedged investments. The writing of an option on a
futures contract involves risks similar to those risks relating to the sale of
futures contracts.
There is no assurance that higher than anticipated trading activity or other
unforeseen events might not, at times, render certain market clearing facilities
inadequate, and thereby result in the institution, by exchanges, of special
procedures which may interfere with the timely execution of customer orders.
To reduce or eliminate a hedge position held by the fund, the fund may seek to
close out a position. The ability to establish and close out positions will be
subject to the development and maintenance of a liquid secondary market. It is
not certain that this market will develop or continue to exist for a particular
futures contract. Reasons for the absence of a liquid secondary market on an
exchange include the following: (i) there may be insufficient trading interest
in certain contracts or options; (ii) restrictions may be imposed by an exchange
on opening transactions or closing transactions or both; (iii) trading halts,
suspensions or other restrictions may be imposed with respect to particular
classes or series of contracts or options, or underlying securities; (iv)
unusual or unforeseen circumstances may interrupt normal operations on an
exchange; (v) the facilities of an exchange or a clearing corporation may not at
all times be adequate to handle current trading volume; or (vi) one or more
exchanges could, for economic or other reasons, decide or be compelled at some
future date to discontinue the trading of contracts or options (or a particular
class or series of contracts or options), in which event the secondary market on
that exchange (or in the class or series of contracts or options) would cease to
exist, although outstanding contracts or options on the exchange that had been
issued by a clearing corporation as a result of trades on that exchange would
continue to be exercisable in accordance with their terms.
Use by tax-exempt funds of U.S. Treasury security futures contracts and options.
The fund investing in tax-exempt securities issued by a governmental entity may
purchase and sell futures contracts and related options on U.S. Treasury
securities when, in the opinion of the Adviser, price movements in Treasury
security futures and related options will correlate closely with price movements
in the tax-exempt securities which are the subject of the hedge. U.S. Treasury
securities futures contracts require the seller to deliver, or the purchaser to
take delivery of, the type of U.S. Treasury security called for in the contract
at a specified date and price. Options on U.S. Treasury security futures
contracts give the purchaser the right in return for the premium paid to assume
a position in a U.S. Treasury futures contract at the specified option exercise
price at any time during the period of the option.
In addition to the risks generally involved in using futures contracts, there is
also a risk that price movements in U.S. Treasury security futures contracts and
related options will not correlate closely with price movements in markets for
tax-exempt securities.
Index futures contracts. An index futures contract is a contract to buy or sell
units of an index at a specified future date at a price agreed upon when the
contract is made. Entering into a contract to buy units of an index is commonly
referred to as buying or purchasing a contract or holding a long position in the
index. Entering into a contract to sell units of an index is commonly referred
to as selling a contract or holding a short position. A unit is the current
value of the index. The fund may enter into stock index futures contracts, debt
index futures contracts, or other index futures contracts appropriate to its
objective(s). The fund may also purchase and sell options on index futures
contracts.
There are several risks in connection with the use by the fund of index futures
as a hedging device. One risk arises because of the imperfect correlation
between movements in the prices of the index futures and movements in the prices
of securities which are the subject of the hedge. The Adviser will attempt to
reduce this risk by selling, to the extent possible, futures on indices the
movements of which will, in its judgment, have a significant correlation with
movements in the prices of the fund's portfolio securities sought to be hedged.
Successful use of the index futures by the fund for hedging purposes is also
subject to the Adviser's ability to predict correctly movements in the direction
of the market. It is possible that, where the fund has sold futures to hedge its
portfolio against a decline in the market, the index on which the futures are
written may advance and the value of securities held in the fund's portfolio may
decline. If this occurs, the fund would lose money on the futures and also
experience a decline in the value in its portfolio securities. However, while
this could occur to a certain degree, the Adviser believes that over time the
value of the fund's portfolio will tend to move in the same direction as the
market indices which are intended to correlate to the price movements of the
portfolio securities sought to be hedged. It is also possible that, if the fund
has hedged against the possibility of a decline in the market adversely
affecting securities held in its portfolio and securities prices increase
instead, the fund will lose part or all of the benefit of the increased valued
of those securities that it has hedged because it will have offsetting losses in
its futures positions. In addition, in such situations, if the fund has
insufficient cash, it may have to sell securities to meet daily variation margin
requirements.
In addition to the possibility that there may be an imperfect correlation, or no
correlation at all, between movements in the index futures and the securities of
the portfolio being hedged, the prices of index futures may not correlate
perfectly with movements in the underlying index due to certain market
distortions. First, all participants in the futures markets are subject to
margin deposit and maintenance requirements. Rather than meeting additional
margin deposit requirements, investors may close futures contracts through
offsetting transactions which would distort the normal relationship between the
index and futures markets. Second, margin requirements in the futures market are
less onerous than margin requirements in the securities market, and as a result
the futures market may attract more speculators than the securities market.
Increased participation by speculators in the futures market may also cause
temporary price distortions. Due to the possibility of price distortions in the
futures market and also because of the imperfect correlation between movements
in the index and movements in the prices of index futures, even a correct
forecast of general market trends by the Adviser may still not result in a
successful hedging transaction.
Options on index futures. Options on index futures are similar to options on
securities except that options on index futures give the purchaser the right, in
return for the premium paid, to assume a position in an index futures contract
(a long position if the option is a call and a short position if the option is a
put), at a specified exercise price at any time during the period of the option.
Upon exercise of the option, the delivery of the futures position by the writer
of the option to the holder of the option will be accompanied by delivery of the
accumulated balance in the writer's futures margin account which represents the
amount by which the market price of the index futures contract, at exercise,
exceeds (in the case of a call) or is less than (in the case of a put) the
exercise price of the option on the index future. If an option is exercised on
the last trading day prior to the expiration date of the option, the settlement
will be made entirely in cash equal to the difference between the exercise price
of the option and the closing level of the index on which the future is based on
the expiration date. Purchasers of options who fail to exercise their options
prior to the exercise date suffer a loss of the premium paid.
Options on indices. As an alternative to purchasing call and put options on
index futures, the fund may purchase call and put options on the underlying
indices themselves. Such options could be used in a manner identical to the use
of options on index futures.
Foreign Currency Transactions
The fund may engage in currency exchange transactions to protect against
uncertainty in the level of future currency exchange rates.
The fund may engage in both "transaction hedging" and "position hedging". When
it engages in transaction hedging, the fund enters into foreign currency
transactions with respect to specific receivables or payables of the fund
generally arising in connection with the purchase or sale of its portfolio
securities. The fund will engage in transaction hedging when it desires to "lock
in" the U.S. dollar price of a security it has agreed to purchase or sell, or
the U.S. dollar equivalent of a dividend or interest payment in a foreign
currency. By transaction hedging the fund attempts to protect itself against a
possible loss resulting from an adverse change in the relationship between the
U.S. dollar and the applicable foreign currency during the period between the
date on which the security is purchased or sold, or on which the dividend or
interest payment is declared, and the date on which such payments are made or
received.
The fund may purchase or sell a foreign currency on a spot (or cash) basis at
the prevailing spot rate in connection with the settlement of transactions in
portfolio securities denominated in that foreign currency. The fund may also
enter into contracts to purchase or sell foreign currencies at a future date
("forward contracts") and purchase and sell foreign currency futures contracts.
For transaction hedging purposes the fund may also purchase exchange-listed and
over-the-counter call and put options on foreign currency futures contracts and
on foreign currencies. Over-the-counter options are considered to be illiquid by
the SEC staff. A put option on a futures contract gives the fund the right to
assume a short position in the futures contract until expiration of the option.
A put option on currency gives the fund the right to sell a currency at an
exercise price until the expiration of the option. A call option on a futures
contract gives the fund the right to assume a long position in the futures
contract until the expiration of the option. A call option on currency gives the
fund the right to purchase a currency at the exercise price until the expiration
of the option.
When it engages in position hedging, the fund enters into foreign currency
exchange transactions to protect against a decline in the values of the foreign
currencies in which its portfolio securities are denominated (or an increase in
the value of currency for securities which the fund expects to purchase, when
the fund holds cash or short-term investments). In connection with position
hedging, the fund may purchase put or call options on foreign currency and
foreign currency futures contracts and buy or sell forward contracts and foreign
currency futures contracts. The fund may also purchase or sell foreign currency
on a spot basis.
The precise matching of the amounts of foreign currency exchange transactions
and the value of the portfolio securities involved will not generally be
possible since the future value of such securities in foreign currencies will
change as a consequence of market movements in the value of those securities
between the dates the currency exchange transactions are entered into and the
dates they mature.
It is impossible to forecast with precision the market value of portfolio
securities at the expiration or maturity of a forward or futures contract.
Accordingly, it may be necessary for the fund to purchase additional foreign
currency on the spot market (and bear the expense of such purchase) if the
market value of the security or securities being hedged is less than the amount
of foreign currency the fund is obligated to deliver and if a decision is made
to sell the security or securities and make delivery of the foreign currency.
Conversely, it may be necessary to sell on the spot market some of the foreign
currency received upon the sale of the portfolio security or securities if the
market value of such security or securities exceeds the amount of foreign
currency the fund is obligated to deliver.
Transaction and position hedging do not eliminate fluctuations in the underlying
prices of the securities which the owns or intends to purchase or sell. They
simply establish a rate of exchange which one can achieve at some future point
in time. Additionally, although these techniques tend to minimize the risk of
loss due to a decline in the value of the hedged currency, they tend to limit
any potential gain which might result from the increase in value of such
currency.
Currency forward and futures contracts. Upon entering into such contracts, in
compliance with the SEC's requirements, cash, cash equivalents or high-grade
debt securities, equal in value to the amount of the fund's obligation under the
contract (less any applicable margin deposits and any assets that constitute
"cover" for such obligation), will be segregated with the fund's custodian. For
example, if a fund investing primarily in foreign equity securities enters into
a contract denominated in a foreign currency, the fund will segregate cash, cash
equivalents or high-grade debt securities equal in value to the difference
between the fund's obligation under the contract and the aggregate value of all
readily marketable equity securities denominated in the applicable foreign
currency held by the fund.
A forward currency contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract as agreed by the parties, at a price set at the time of
the contract. In the case of a cancelable contract, the holder has the
unilateral right to cancel the contract at maturity by paying a specified fee.
The contracts are traded in the interbank market conducted directly between
currency traders (usually large commercial banks) and their customers. A
contract generally has no deposit requirement, and no commissions are charged at
any stage for trades. A currency futures contract is a standardized contract for
the future delivery of a specified amount of a foreign currency at a future date
at a price set at the time of the contract. Currency futures contracts traded in
the United States are designed and traded on exchanges regulated by the CFTC,
such as the New York Mercantile Exchange.
Forward currency contracts differ from currency futures contracts in certain
respects. For example, the maturity date of a forward contract may be any fixed
number of days from the date of the contract agreed upon by the parties, rather
than a predetermined date in a given month. Forward contracts may be in any
amounts agreed upon by the parties rather than predetermined amounts. Also,
forward contracts are traded directly between currency traders so that no
intermediary is required. A forward contract generally requires no margin or
other deposit.
At the maturity of a forward or futures contract, the fund may either accept or
make delivery of the currency specified in the contract, or at or prior to
maturity enter into a closing transaction involving the purchase or sale of an
offsetting contract. Closing transactions with respect to forward contracts are
usually effected with the currency trader who is a party to the original forward
contract. Closing transactions with respect to futures contracts are effected on
a commodities exchange; a clearing corporation associated with the exchange
assumes responsibility for closing out such contracts.
Positions in currency futures contracts may be closed out only on an exchange or
board of trade which provides a secondary market in such contracts. Although the
fund intends to purchase or sell currency futures contracts only on exchanges or
boards of trade where there appears to be an active secondary market, there is
no assurance that a secondary market on an exchange or board of trade will exist
for any particular contract or at any particular time. In such event, it may not
be possible to close a futures position and, in the event of adverse price
movements, the fund would continue to be required to make daily cash payments of
variation margin.
Currency options. In general, options on currencies operate similarly to options
on securities and are subject to many similar risks. Currency options are traded
primarily in the over-the-counter market, although options on currencies have
recently been listed on several exchanges. Options are traded not only on the
currencies of individual nations, but also on the European Currency Unit
("ECU"). The ECU is composed of amounts of a number of currencies, and is the
official medium of exchange of the European Economic Community's European
Monetary System.
The fund will only purchase or write currency options when the Adviser believes
that a liquid secondary market exists for such options. There can be no
assurance that a liquid secondary market will exist for a particular option at
any specified time. Currency options are affected by all of those factors which
influence exchange rates and investments generally. To the extent that these
options are traded over the counter, they are considered to be illiquid by the
SEC staff.
The value of any currency, including the U.S. dollars, may be affected by
complex political and economic factors applicable to the issuing country. In
addition, the exchange rates of currencies (and therefore the values of currency
options) may be significantly affected, fixed, or supported directly or
indirectly by government actions. Government intervention may increase risks
involved in purchasing or selling currency options, since exchange rates may not
be free to fluctuate in respect to other market forces.
The value of a currency option reflects the value of an exchange rate, which in
turn reflects relative values of two currencies, the U.S. dollar and the foreign
currency in question. Because currency transactions occurring in the interbank
market involve substantially larger amounts than those that may be involved in
the exercise of currency options, investors may be disadvantaged by having to
deal in an odd lot market for the underlying currencies in connection with
options at prices that are less favorable than for round lots. Foreign
governmental restrictions or taxes could result in adverse changes in the cost
of acquiring or disposing of currencies.
There is no systematic reporting of last sale information for currencies and
there is no regulatory requirement that quotations available through dealers or
other market sources be firm or revised on a timely basis. Available quotation
information is generally representative of very large round-lot transactions in
the interbank market and thus may not reflect exchange rates for smaller odd-lot
transactions (less than $1 million) where rates may be less favorable. The
interbank market in currencies is a global, around-the-clock market. To the
extent that options markets are closed while the markets for the underlying
currencies remain open, significant price and rate movements may take place in
the underlying markets that cannot be reflected in the options markets.
Settlement procedures. Settlement procedures relating to the fund's investments
in foreign securities and to the fund's foreign currency exchange transactions
may be more complex than settlements with respect to investments in debt or
equity securities of U.S. issuers, and may involve certain risks not present in
the fund's domestic investments, including foreign currency risks and local
custom and usage. Foreign currency transactions may also involve the risk that
an entity involved in the settlement may not meet its obligations.
Foreign currency conversion. Although foreign exchange dealers do not charge a
fee for currency conversion, they do realize a profit based on the difference
(spread) between prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to the fund at one rate,
while offering a lesser rate of exchange should the fund desire to resell that
currency to the dealer. Foreign currency transactions may also involve the risk
that an entity involved in the settlement may not meet its obligation.
Participation Interests
The fund may invest in municipal obligations either by purchasing them directly
or by purchasing certificates of accrual or similar instruments evidencing
direct ownership of interest payments or principal payments, or both, on
municipal obligations, provided that, in the opinion of counsel to the initial
seller of each such certificate or instrument, any discount accruing on such
certificate or instrument that is purchased at a yield not greater than the
coupon rate of interest on the related municipal obligations will be exempt from
federal income tax to the same extent as interest on such municipal obligations.
The fund may also invest in tax-exempt obligations by purchasing from banks
participation interests in all or part of specific holdings of municipal
obligations. Such participations may be backed in whole or part by an
irrevocable letter of credit or guarantee of the selling bank. The selling bank
may receive a fee from the fund in connection with the arrangement. The fund
will not purchase such participation interests unless it receives an opinion of
counsel or a ruling of the Internal Revenue Service that interest earned by it
on municipal obligations in which it holds such participation interests is
exempt from federal income tax.
Stand-by Commitments
When the fund purchases municipal obligations it may also acquire stand-by
commitments from banks and broker-dealers with respect to such municipal
obligations. A stand-by commitment is the equivalent of a put option acquired by
the fund with respect to a particular municipal obligation held in its
portfolio. A stand-by commitment is a security independent of the municipal
obligation to which it relates. The amount payable by a bank or dealer during
the time a stand-by commitment is exercisable, absent unusual circumstances
relating to a change in market value, would be substantially the same as the
value of the underlying municipal obligation. A stand-by commitment might not be
transferable by the fund, although it could sell the underlying municipal
obligation to a third party at any time.
The fund expects that stand-by commitments generally will be available without
the payment of direct or indirect consideration. However, if necessary and
advisable, the fund may pay for stand-by commitments either separately in cash
or by paying a higher price for portfolio securities which are acquired subject
to such a commitment (thus reducing the yield to maturity otherwise available
for the same securities.) The total amount paid in either manner for outstanding
stand-by commitments held in the fund portfolio will not exceed 10% of the value
of the fund's total assets calculated immediately after each stand-by commitment
is acquired. The fund will enter into stand-by commitments only with banks and
broker-dealers that, in the judgment of the Trust's Board of Trustees, present
minimal credit risks.
Inverse Floaters
Inverse floaters are derivative securities whose interest rates vary inversely
to changes in short-term interest rates and whose values fluctuate inversely to
changes in long-term interest rates. The value of certain inverse floaters will
fluctuate substantially more in response to a given change in long-term rates
than would a traditional debt security. These securities have investment
characteristics similar to leverage, in that interest rate changes have a
magnified effect on the value of inverse floaters.
TAXES
All discussions of taxation at the shareholder level relate to federal taxes
only. Consult your tax adviser for state and local tax considerations and for
information about special tax considerations that may apply to shareholders that
are not natural persons.
Dividends Received Deductions. Distributions will qualify for the corporate
dividends received deduction only to the extent that dividends earned by the
fund qualify. Any such dividends are, however, includable in adjusted current
earnings for purposes of computing corporate alternative minimum tax (AMT).
Return of Capital Distributions. To the extent that a distribution is a return
of capital for federal tax purposes, it reduces the cost basis of the shares on
the record date and is similar to a partial return of the original investment
(on which a sales charge may have been paid). There is no recognition of a gain
or loss, however, unless the return of capital reduces the cost basis in the
shares to below zero.
Funds that invest in U.S. Government Securities. Many states grant tax-free
status to dividends paid to shareholders of mutual funds from interest income
earned by the fund from direct obligations of the U.S. government. Investments
in mortgage-backed securities (including GNMA, FNMA and FHLMC Securities) and
repurchase agreements collateralized by U.S. government securities do not
qualify as direct federal obligations in most states. Shareholders should
consult with their own tax advisers about the applicability of state and local
intangible property, income or other taxes to their fund shares and
distributions and redemption proceeds received from the fund.
Distributions from Tax-Exempt Funds. Each tax-exempt fund will have at least 50%
of its total assets invested in tax-exempt bonds at the end of each quarter so
that dividends from net interest income on tax-exempt bonds will be exempt from
Federal income tax when received by a shareholder. The tax-exempt portion of
dividends paid will be designated within 60 days after year-end based upon the
ratio of net tax-exempt income to total net investment income earned during the
year. That ratio may be substantially different than the ratio of net tax-exempt
income to total net investment income earned during any particular portion of
the year. Thus, a shareholder who holds shares for only a part of the year may
be allocated more or less tax-exempt dividends than would be the case if the
allocation were based on the ratio of net tax-exempt income to total net
investment income actually earned while a shareholder.
The Tax Reform Act of 1986 makes income from certain "private activity bonds"
issued after August 7, 1986, a tax preference item for the AMT at the maximum
rate of 28% for individuals and 20% for corporations. If the fund invests in
private activity bonds, shareholders may be subject to the AMT on that part of
the distributions derived from interest income on such bonds. Other provisions
of the Tax Reform Act affect the tax treatment of distributions for
corporations, casualty insurance companies and financial institutions; interest
on all tax-exempt bonds is included in corporate adjusted current earnings when
computing the AMT applicable to corporations. Seventy-five percent of the excess
of adjusted current earnings over the amount of income otherwise subject to the
AMT is included in a corporation's alternative minimum taxable income.
Dividends derived from any investments other than tax-exempt bonds and any
distributions of short-term capital gains are taxable to shareholders as
ordinary income. Any distributions of net long-term gains will in general be
taxable to shareholders as long-term capital gains regardless of the length of
time fund shares are held.
Shareholders receiving social security and certain retirement benefits may be
taxed on a portion of those benefits as a result of receiving tax-exempt income,
including tax-exempt dividends from the fund.
Special Tax Rules Applicable to Tax-Exempt Funds. Income distributions to
shareholders who are substantial users or related persons of substantial users
of facilities financed by industrial revenue bonds may not be excludable from
their gross income if such income is derived from such bonds. Income derived
from the fund's investments other than tax-exempt instruments may give rise to
taxable income. The fund's shares must be held for more than six months in order
to avoid the disallowance of a capital loss on the sale of fund shares to the
extent of tax-exempt dividends paid during that period. A shareholderwho borrows
money to purchase the fund's shares will not be able to deduct the interest paid
with respect to such borrowed money.
Sales of Shares. In general, any gain or loss realized upon a taxable
disposition of shares by a shareholder will be treated as long-term capital gain
or loss if the shares have been held for more than twelve months, and otherwise
as short-term capital gain or loss assuming such shares are held as a capital
asset. However, any loss realized upon a taxable disposition of shares held for
six months or less will be treated as long-term, rather than short-term, capital
loss to the extent of any long-term capital gain distributions received by the
shareholder with respect to those shares. All or a portion of any loss realized
upon a taxable disposition of shares will be disallowed if other shares are
purchased within 30 days before or after the disposition. In such a case, the
basis of the newly purchased shares will be adjusted to reflect the disallowed
loss.
Backup Withholding. Certain distributions and redemptions may be subject to a
31% backup withholding unless a taxpayer identification number and certification
that the shareholder is not subject to the withholding is provided to the Ffund.
This number and form may be provided by either a Form W-9 or the accompanying
application. In certain instances, CISC may be notified by the Internal Revenue
Service that a shareholder is subject to backup withholding.
Excise Tax. To the extent that the Fund does not annually distribute
substantially all taxable income and realized gains, it is subject to an excise
tax. The Adviser, intends to avoid this tax except when the cost of processing
the distribution is greater than the tax.
Tax Accounting Principles. To qualify as a "regulated investment company," the
fund must (a) derive at least 90% of its gross income from dividends, interest,
payments with respect to securities loans, gains from the sale or other
disposition of securities or foreign currencies or other income (including but
not limited to gains from options, futures or forward contracts) derived with
respect to its business of investing in such securities or currencies; (b)
derive less than 30% of its gross income from the sale or other disposition of
certain assets held less than three months; (c) diversify its holdings so that,
at the close of each quarter of its taxable year, (i) at least 50% of the value
of its total assets consists of cash, cash items, U.S. Government securities,
and other securities limited generally with respect to any one issuer to not
more than 5% of the total assets of the fund and not more than 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of the
value of its assets is invested in the securities of any issuer (other than U.S.
Government securities).
Futures Contracts. Accounting for futures contracts will be in accordance with
generally accepted accounting principles. The amount of any realized gain or
loss on the closing out of a futures contract will result in a capital gain or
loss for tax purposes. In addition, certain futures contracts held by the fund
(so-called "Section 1256 contracts") will be required to be "marked-to-market"
(deemed sold) for federal income tax purposes at the end of each fiscal year.
Sixty percent of any net gain or loss recognized on such deemed sales or on
actual sales will be treated as long-term capital gain or loss, and the
remainder will be treated as short-term capital gain or loss.
However, if a futures contract is part of a "mixed straddle" (i.e., a straddle
comprised in part of Section 1256 contracts), a fund may be able to make an
election which will affect the character arising from such contracts as
long-term or short-term and the timing of the recognition of such gains or
losses. In any event, the straddle provisions described below will be applicable
to such mixed straddles.
Special Tax Rules Applicable to "Straddles". The straddle provisions of the Code
may affect the taxation of the fund's options and futures transactions and
transactions in securities to which they relate. A "straddle" is made up of two
or more offsetting positions in "personal property," including debt securities,
related options and futures, equity securities, related index futures and, in
certain circumstances, options relating to equity securities, and foreign
currencies and related options and futures.
The straddle rules may operate to defer losses realized or deemed realized on
the disposition of a position in a straddle, may suspend or terminate the fund's
holding period in such positions, and may convert short-term losses to long-term
losses in certain circumstances.
Foreign Currency-Denominated Securities and Related Hedging Transactions. The
fund's transactions in foreign currency-denominated debt securities, certain
foreign currency options, futures contracts and forward contracts may give rise
to ordinary income or loss to the extent such income or loss results from
fluctuations in the value of the foreign currency concerned.
If more than 50% of the fund's total assets at the end of its fiscal year are
invested in securities of foreign corporate issuers, the fund may make an
election permitting its shareholders to take a deduction or credit for federal
tax purposes for their portion of certain foreign taxes paid by the fund. The
Adviser will consider the value of the benefit to a typical shareholder, the
cost to the fund of compliance with the election, and incidental costs to
shareholders in deciding whether to make the election. A shareholder's ability
to claim such a foreign tax credit will be subject to certain limitations
imposed by the Code, as a result of which a shareholder may not get a full
credit for the amount of foreign taxes so paid by the fund. Shareholders who do
not itemize on their federal income tax returns may claim a credit (but no
deduction) for such foreign taxes.
Certain securities are considered to be Passive Foreign Investment Companies
(PFICS) under the Code, and the fund is liable for any PFIC-related taxes.
MANAGEMENT OF THE COLONIAL FUNDS (in this section, and the following sections
entitled "Trustees and Officers," "The Management Agreement," "Administration
Agreement," "The Pricing and Bookkeeping Agreement," "Portfolio Transactions,"
"Investment decisions," and "Brokerage and research services," the "Adviser"
refers to Colonial Management Associates, Inc.) The Adviser is the investment
adviser to each of the Colonial funds (except for Colonial Municipal Money
Market Fund, Colonial Global Utilities Fund and Colonial Newport Tiger Fund -see
Part I of each Fund's respective SAI for a description of the investment
adviser). The Adviser is a subsidiary of The Colonial Group, Inc. (TCG), One
Financial Center, Boston, MA 02111. TCG is a direct subsidiary of Liberty
Financial Companies, Inc. (Liberty Financial), which in turn is a direct
subsidiary of LFC Holdings, Inc., which in turn is a direct subsidiary of
Liberty Mutual Equity Corporation, which in turn is a wholly-owned subsidiary of
Liberty Mutual Insurance Company (Liberty Mutual). Liberty Mutual is an
underwriter of workers' compensation insurance and a property and casualty
insurer in the U.S. Liberty Financial's address is 600 Atlantic Avenue, Boston,
MA 02210. Liberty Mutual's address is 175 Berkeley Street, Boston, MA 02117.
Trustees and Officers (this section applies to all of the Colonial funds)
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Name and Address Age Position with Fund Principal Occupation During Past Five Years
---------------- --- ------------------ -------------------------------------------
<S> <C> <C> <C> <C>
Robert J. Birnbaum(1) (2) 68 Trustee Retired since 1994 (formerly Special Counsel, Dechert
313 Bedford Road Price & Rhoads from September, 1988 to December, 1993)
Ridgewood, NJ 07450
Tom Bleasdale 65 Trustee Retired since 1993 (formerly Chairman of the Board and
1508 Ferncroft Tower Chief Executive Officer, Shore Bank & Trust Company from
Danvers, MA 01923 1992-1993), is a Director of The Empire Company since
June, 1995 (3)
Lora S. Collins 60 Trustee Attorney with Kramer, Levin, Naftalis, Nessen, Kamin &
919 Third Avenue Frankel since September, 1986 (3)
New York, NY 10022
James E. Grinnell (1) (2) 66 Trustee Private Investor since November, 1988
22 Harbor Avenue
Marblehead, MA 01945
William D. Ireland, Jr. 72 Trustee Retired since 1990, is a Trustee of certain charitable
103 Springline Drive and non-charitable organizations since February, 1990 (3)
Vero Beach, FL 32963
Richard W. Lowry (1) (2) 59 Trustee Private Investor since August, 1987
10701 Charleston Drive
Vero Beach, FL 32963
William E. Mayer* 55 Trustee Dean, College of Business and Management, University of
College Park, MD 20742 Maryland since October, 1992 (formerly Dean, Simon
Graduate School of Business, University of Rochester from
October, 1991 to July, 1992 (3)
James L. Moody, Jr. 64 Trustee Chairman of the Board, Hannaford Bros., Co. since May,
1984 (formerly Chief Executive Officer, Hannaford Bros.
Co. from May, 1973 to May, 1992) (3)
John J. Neuhauser 52 Trustee Dean, Boston College School of Management since 1978 (3)
140 Commonwealth Avenue
Chestnut, Hill MA 02167
George L. Shinn 73 Trustee Financial Consultant since 1989 (formerly Chairman, Chief
The First Boston Corp. Executive Officer and Consultant, The First Boston
Tower Forty Nine Corporation from 1983 to July, 1991) (3)
12 East 49th Street
New York, NY 10017
Robert L. Sullivan 68 Trustee Self-employed Management Consultant since January, 1989
7121 Natelli Woods Lane (3)
Bethesda, MD 20817
Sinclair Weeks, Jr. 72 Trustee Chairman of the Board, Reed & Barton Corporation since
Bay Colony Corporate Ctr. 1987 (3)
Suite 4550
1000 Winter Street
Waltham, MA 02154
Harold W. Cogger 59 President President of Colonial funds since March, 1996
(formerly Vice (formerly Vice President from July, 1993 to March,
President) 1996); is President since July, 1993, Chief Executive
Officer since March, 1995 and Director
since March, 1984 of the Adviser (formerly Executive
Vice President of the Adviser from
October, 1989 to July, 1993);
President since October, 1994, Chief
Executive Officer since March, 1995
and Director since October, 1981 of
TCG; Executive Vice President and
Director, Liberty Financial (3)
Peter L. Lydecker 41 Controller Controller of Colonial funds since June, 1993 (formerly
(formerly Assistant Controller from March, 1985 to June, 1993);
Assistant Vice President of the Adviser since June, 1993
Controller) (formerly Assistant Vice President of the Adviser from
August, 1988 to June, 1993) (3)
Davey S. Scoon 49 Vice President Vice President of Colonial funds since June, 1993, is
Executive Vice President since July, 1993 and Director
since March, 1985 of the Adviser (formerly Senior Vice
President and Treasurer of the Adviser from March, 1985
to July, 1993); Executive Vice President and Chief
Operating Officer, TCG since March, 1995 (formerly Vice
President - Finance and Administration of TCG from
November, 1985 to March, 1995) (3)
Richard A. Silver 49 Treasurer and Treasurer and Chief Financial Officer of Colonial funds
Chief Financial since July, 1993 (formerly Controller from July, 1980
Officer to July, 1993), is Senior Vice President and Director
(formerly since April, 1988 and Treasurer and Chief Financial
Controller) Officer since July, 1993 of the Adviser (formerly
Assistant Treasurer from January, 1978
to July, 1993); Treasurer and Chief
Financial Officer of TCG since July, 1993
(formerly Assistant Treasurer of TCG
from January, 1985 to July, 1993) (3)
Arthur O. Stern 56 Secretary Secretary of Colonial funds since 1985, is Director
since 1985, Executive Vice President since July, 1993,
General Counsel, Clerk and Secretary since March, 1985
of the Adviser; Executive Vice President, Legal since
March, 1995 and Clerk since March, 1985 of TCG
(formerly Executive Vice President, Compliance from
March, 1995 to March, 1996 and Vice President - Legal
of TCG from March, 1985 to March, 1995) (3)
</TABLE>
(1) Elected to the Colonial Funds complex on April 21, 1995.
(2) On April 3, 1995, and in connection with the merger of TCG with a
subsidiary of into Liberty Financial which occurred on March 27, 1995,
Liberty Financial Trust (LFT) changed its name to Colonial Trust VII.
Prior to the merger, each of Messrs. Birnbaum, Grinnell, and Lowry was
a Trustee of LFT. Mr. Birnbaum has been a Trustee of LFT since
November, 1994. Each of Messrs. Grinnell and Lowry has been a Trustee
of LFT since August, 1991. Each of Messrs. Grinnell and Lowry continue
to serve as Trustees under the new name, Colonial Trust VII, along with
each of the other Colonial Trustees named above. The Colonial Trustees
were elected as Trustees of Colonial Trust VII effective April 3, 1995.
(3) Elected as a Trustee or officer of the LFC Utilities Trust, the master
fund in Colonial Global Utilities Fund, a series of Colonial Trust III
(LFC Portfolio) on March 27, 1995 in connection with the merger of TCG
with a subsidiary of Liberty Financial.
* Trustees who are "interested persons" (as defined in the Investment
Company Act of 1940) of the fund or the Adviser.
The address of the officers of each Colonial Fund is One Financial Center,
Boston, MA 02111.
The Trustees serve as trustees of all Colonial funds for which each Trustee will
receive an annual retainer of $45,000 and attendance fees of $7,500 for each
regular joint meeting and $1,000 for each special joint meeting. Committee
chairs receive an annual retainer of $5,000. Committee members receive an annual
retainer of $1,000 and $1,000 for each special meeting attended. Two-thirds of
the Trustee fees are allocated among the Colonial funds based on the fund's
relative net assets and one-third of the fees are divided equally among the
Colonial funds.
The Adviser and/or its affiliate, Colonial Advisory Services, Inc. (CASI), has
rendered investment advisory services to investment company, institutional and
other clients since 1931. The Adviser currently serves as investment adviser and
administrator for 30 open-end and 5 closed-end management investment company
portfolios, and is the administrator for 3 open-end management investment
company portfolios (collectively, Colonial funds). Trustees and officers of the
Trust, who are also officers of the Adviser or its affiliates will benefit from
the advisory fees, sales commissions and agency fees paid or allowed by the
Trust. More than 30,000 financial advisers have recommended Colonial funds to
over 800,000 clients worldwide, representing more than $15.5 billion in assets.
The Agreement and Declaration of Trust (Declaration) of the Trust provides that
the Trust will indemnify its Trustees and officers against liabilities and
expenses incurred in connection with litigation in which they may be involved
because of their offices with the Trust but that such indemnification will not
relieve any officer or Trustee of any liability to the Trust or its shareholders
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of his or her duties. The Trust, at its expense, provides liability
insurance for the benefit of its Trustees and officers.
The Management Agreement (this section does not apply to the Colonial Municipal
Money Market Fund, Colonial Global Utilities Fund or Colonial Newport Tiger
Fund) Under a Management Agreement (Agreement), the Adviser has contracted to
furnish each fund with investment research and recommendations or fund
management, respectively, and accounting and administrative personnel and
services, and with office space, equipment and other facilities. For these
services and facilities, each Colonial fund pays a monthly fee based on the
average of the daily closing value of the total net assets of each fund for such
month.
The Adviser's compensation under the Agreement is subject to reduction in any
fiscal year to the extent that the total expenses of each fund for such year
(subject to applicable exclusions) exceed the most restrictive applicable
expense limitation prescribed by any state statute or regulatory authority in
which the Trust's shares are qualified for sale. The most restrictive expense
limitation applicable to a Colonial fund is 2.5% of the first $30 million of the
Trust's average net assets for such year, 2% of the next $70 million and 1.5% of
any excess over $100 million.
Under the Agreement, any liability of the Adviser to the fund and its
shareholders is limited to situations involving the Adviser's own willful
misfeasance, bad faith, gross negligence or reckless disregard of duties.
The Agreement may be terminated with respect to the fund at any time on 60 days'
written notice by the or by the Trustees of the Trust or by a vote of a majority
of the outstanding voting securities of the fund. The Agreement will
automatically terminate upon any assignment thereof and shall continue in effect
from year to year only so long as such continuance is approved at least annually
(i) by the Trustees of the Trust or by a vote of a majority of the outstanding
voting securities of the fund and (ii) by vote of a majority of the Trustees who
are not interested persons (as such term is defined in the 1940 Act) of the
Adviser or the Trust, cast in person at a meeting called for the purpose of
voting on such approval.
The Adviser pays all salaries of officers of the Trust. The Trust pays all
expenses not assumed by the Adviser including, but not limited to, auditing,
legal, custodial, investor servicing and shareholder reporting expenses. The
Trust pays the cost of typesetting for its Prospectuses and the cost of printing
and mailing any Prospectuses sent to shareholders. CISI pays the cost of
printing and distributing all other Prospectuses.
The Agreement provides that the Adviser shall not be subject to any liability to
the Trust or to any shareholder of the Trust for any act or omission in the
course of or connected with rendering services to the Trust in the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of its
duties on the part of the Adviser.
Administration Agreement (this section applies only to the Colonial Municipal
Money Market Fund, Colonial Global Utilities Fund and Colonial Newport Tiger
Fund and their respective Trusts) Under an Administration Agreement with each
Fund, Adviser, in its capacity as the Administrator to each Fund, has contracted
to perform the following administrative services:
(a) providing office space, equipment and clerical personnel;
(b) arranging, if desired by the respective Trust, for its
Directors, officers and employees to
serve as Trustees, officers or agents of each Fund;
(c) preparing and, if applicable, filing all documents
required for compliance by each Fund with
applicable laws and regulations;
(d) preparation of agendas and supporting documents for and
minutes of meetings of Trustees,
committees of Trustees and shareholders;
(e) coordinating and overseeing the activities of each Fund's
other third-party service providers; and
(f) maintaining certain books and records of each Fund.
With respect to the Colonial Municipal Money Market Fund, the Administration
Agreement for this Fund provides for the following services in addition to the
services referenced above:
(g) monitoring compliance by the Fund with Rule 2a-7 under the
Investment Company Act of 1940 (the "1940 Act") and
reporting to the Trustees from time to time with respect
thereto; and
(h) monitoring the investments and operations of the SR&F
Municipal Money Market Portfolio (Municipal Money Market
Portfolio) in which Colonial Municipal Money Market Fund
is invested and the LFC Portfolio and reporting to the
Trustees from time to time with respect thereto.
The Administration Agreement has a one year term. The Adviser is paid a monthly
fee at the annual rate of average daily net assets set forth in Part 1 of this
Statement of Additional Information.
The Pricing and Bookkeeping Agreement
The Adviser provides pricing and bookkeeping services to each Colonial fund
pursuant to a Pricing and Bookkeeping Agreement. The Pricing and Bookkeeping
Agreement has a one-year term. The Adviser, in its capacity as the Administrator
to each of Colonial Municipal Money Market Fund and Colonial Global Utilities
Fund, is paid an annual fee of $18,000, plus 0.0233% of average daily net assets
in excess of $50 million. For each of the other Colonial funds (except for
Colonial Newport Tiger Fund), the Adviser is paid monthly a fee of $2,250 by
each fund, plus a monthly percentage fee based on net assets of the fund equal
to the following:
1/12 of 0.000% of the first $50 million;
1/12 of 0.035% of the next $950 million;
1/12 of 0.025% of the next $1 billion;
1/12 of 0.015% of the next $1 billion; and
1/12 of 0.001% on the excess over $3 billion
The Adviser provides pricing and bookkeeping services to Colonial Newport Tiger
Fund for an annual fee of $27,000, plus 0.035% of Colonial Newport Tiger Fund's
average net assets over $50 million.
Stein Roe & Farnham Incorporated, the investment adviser of each of the
Municipal Money Market Portfolio and LFC Portfolio, provides pricing and
bookkeeping services to each Portfolio for a fee of $25,000 plus 0.0025%
annually of average daily net assets of each Portfolio over $50 million.
Portfolio Transactions
The following sections entitled "Investment decisions" and "Brokerage and
research services" do not apply to Colonial Municipal Money Market Fund,
Colonial U.S. Fund for Growth and Colonial Global Utilities Fund. For each of
these funds, see Part 1 of its respective SAI. The Adviser of Colonial Newport
Tiger Fund follows the same procedures as those set forth under "Brokerage and
research services."
Investment decisions. The Adviser acts as investment adviser to each of the
Colonial funds (except for the Colonial Municipal Money Market Fund, Colonial
Global Utilities Fund and Colonial Newport Tiger Fund, each of which is
administered by the Adviser, and Colonial U.S. Fund for Growth for which
investment decisions have been delegated by the Adviser to State Street Bank and
Trust Company, the fund's sub-adviser) (as defined under Management of the Fund
herein). The Adviser's affiliate, CASI, advises other institutional, corporate,
fiduciary and individual clients for which CASI performs various services.
Various officers and Trustees of the Trust also serve as officers or Trustees of
other Colonial funds and the other corporate or fiduciary clients of the
Adviser. The Colonial funds and clients advised by the Adviser or the funds
administered by the Adviser sometimes invest in securities in which the Fund
also invests and sometimes engage in covered option writing programs and enter
into transactions utilizing stock index options and stock index and financial
futures and related options ("other instruments"). If the Fund, such other
Colonial funds and such other clients desire to buy or sell the same portfolio
securities, options or other instruments at about the same time, the purchases
and sales are normally made as nearly as practicable on a pro rata basis in
proportion to the amounts desired to be purchased or sold by each. Although in
some cases these practices could have a detrimental effect on the price or
volume of the securities, options or other instruments as far as the Fund is
concerned, in most cases it is believed that these practices should produce
better executions. It is the opinion of the Trustees that the desirability of
retaining the Adviser as investment adviser to the Colonial funds outweighs the
disadvantages, if any, which might result from these practices.
The portfolio managers of Colonial International Fund for Growth, a series of
Colonial Trust III, will use the trading facilities of Stein Roe & Farnham
Incorporated, an affiliate of the Adviser, to place all orders for the purchase
and sale of this fund's portfolio securities, futures contracts and foreign
currencies.
Brokerage and research services. Consistent with the Rules of Fair Practice of
the National Association of Securities Dealers, Inc., and subject to seeking
"best execution" (as defined below) and such other policies as the Trustees may
determine, the Adviser may consider sales of shares of the Colonial funds as a
factor in the selection of broker-dealers to execute securities transactions for
a Colonial fund.
The Adviser places the transactions of the Colonial funds with broker-dealers
selected by the Adviser and, if applicable, negotiates commissions.
Broker-dealers may receive brokerage commissions on portfolio transactions,
including the purchase and writing of options, the effecting of closing purchase
and sale transactions, and the purchase and sale of underlying securities upon
the exercise of options and the purchase or sale of other instruments. The
Colonial funds from time to time also execute portfolio transactions with such
broker-dealers acting as principals. The Colonial funds do not intend to deal
exclusively with any particular broker-dealer or group of broker-dealers.
Except as described below in connection with commissions paid to a clearing
agent on sales of securities, it is Colonialthe Adviser's policy always to seek
best execution, which is to place the Colonial funds' transactions where the
Colonial funds can obtain the most favorable combination of price and execution
services in particular transactions or provided on a continuing basis by a
broker-dealer, and to deal directly with a principal market maker in connection
with over-the-counter transactions, except when it is believed that best
execution is obtainable elsewhere. In evaluating the execution services of,
including the overall reasonableness of brokerage commissions paid to, a
broker-dealer, consideration is given to, among other things, the firm's general
execution and operational capabilities, and to its reliability, integrity and
financial condition.
Subject to such practice of always seeking best execution, securities
transactions of the Colonial funds may be executed by broker-dealers who also
provide research services (as defined below) to the Adviser and the Colonial
funds. The Adviser may use all, some or none of such research services in
providing investment advisory services to each of its investment company and
other clients, including the fund. To the extent that such services are used by
the Adviser, they tend to reduce the Adviser's expenses. In the Adviser's
opinion, it is impossible to assign an exact dollar value for such services.
Subject to such policies as the Trustees may determine, the Adviser may cause
the Colonial funds to pay a broker-dealer which provides brokerage and research
services to the Adviser an amount of commission for effecting a securities
transaction, including the sale of an option or a closing purchase transaction,
for the Colonial funds in excess of the amount of commission which another
broker-dealer would have charged for effecting that transaction. As provided in
Section 28(e) of the Securities Exchange Act of 1934, "brokerage and research
services" include advice as to the value of securities, the advisability of
investing in, purchasing or selling securities and the availability of
securities or purchasers or sellers of securities; furnishing analyses and
reports concerning issues, industries, securities, economic factors and trends
and portfolio strategy and performance of accounts; and effecting securities
transactions and performing functions incidental thereto (such as clearance and
settlement). The Adviser must determine in good faith that such greater
commission is reasonable in relation to the value of the brokerage and research
services provided by the executing broker-dealer viewed in terms of that
particular transaction or the Adviser's overall responsibilities to the Colonial
funds and all its other clients.
The Trustees have authorized the Adviser to utilize the services of a clearing
agent with respect to all call options written by Colonial funds that write
options and to pay such clearing agent commissions of a fixed amount per share
(currently 1.25 cents) on the sale of the underlying security upon the exercise
of an option written by a fund. The Trustees may further authorize the Adviser
to depart from the present policy of always seeking best execution and to pay
higher brokerage commissions from time to time for other brokerage and research
services as described above in the future if developments in the securities
markets indicate that such would be in the interests of the shareholders of the
Colonial funds.
Principal Underwriter
CISI is the principal underwriter of the Trust's shares. CISI has no obligation
to buy the Colonial funds' shares, and purchases the Colonial funds shares only
upon receipt of orders from authorized FSFs or investors.
Investor Servicing and Transfer Agent
CISC is the Trust's investor servicing agent (transfer, plan and dividend
disbursing agent), for which it receives fees which are paid monthly by the
Trust. The fee paid to CISC is based on the average daily net assets of each
Colonial fund plus reimbursement for certain out-of-pocket expenses. See "Fund
Charges and Expenses" in Part 1 of this SAI for information on fees received by
CISC. The agreement continues indefinitely but may be terminated by 90 days'
notice by the Fund or Colonial funds to CISC or generally by 6 months' notice by
CISC to the Fund or Colonial funds. The agreement limits the liability of CISC
to the Fund or Colonial funds for loss or damage incurred by the Fund or
Colonial funds to situations involving a failure of CISC to use reasonable care
or to act in good faith in performing its duties under the agreement. It also
provides that the Fund or Colonial funds will indemnify CISC against, among
other things, loss or damage incurred by CISC on account of any claim, demand,
action or suit made on or against CISC not resulting from CISC's bad faith or
negligence and arising out of, or in connection with, its duties under the
agreement.
DETERMINATION OF NET ASSET VALUE
Each Colonial fund determines net asset value (NAV) per share for each Class as
of the close of the New York Stock Exchange (Exchange) (generally 4:00 p.m.
Eastern time, 3:00 p.m. Chicago time) each day the Exchange is open. Currently,
the Exchange is closed Saturdays, Sundays and the following holidays: New Year's
Day, Presidents' Day, Good Friday, Memorial Day, the Fourth of July, Labor Day,
Thanksgiving and Christmas. Funds with portfolio securities which are primarily
listed on foreign exchanges may experience trading and changes in NAV on days on
which such Fund does not determine NAV due to differences in closing policies
among exchanges. This may significantly affect the NAV of the Fund's redeemable
securities on days when an investor cannot redeem such securities. The net asset
value of the Municipal Money Market Portfolio will not be determined on days
when the Exchange is closed unless, in the judgment of the Municipal Money
Market Portfolio's Board of Trustees, the net asset value of the Municipal Money
Market Portfolio should be determined on any such day, in which case the
determination will be made at 3:00 p.m., Chicago time. Debt securities generally
are valued by a pricing service which determines valuations based upon market
transactions for normal, institutional-size trading units of similar securities.
However, in circumstances where such prices are not available or where the
Adviser deems it appropriate to do so, an over-the-counter or exchange bid
quotation is used. Securities listed on an exchange or on NASDAQ are valued at
the last sale price. Listed securities for which there were no sales during the
day and unlisted securities are valued at the last quoted bid price. Options are
valued at the last sale price or in the absence of a sale, the mean between the
last quoted bid and offering prices. Short-term obligations with a maturity of
60 days or less are valued at amortized cost pursuant to procedures adopted by
the Trustees. The values of foreign securities quoted in foreign currencies are
translated into U.S. dollars at the exchange rate for that day. Portfolio
positions for which there are no such valuations and other assets are valued at
fair value as determined in good faith under the direction of the Trust's
Trustees.
Generally, trading in certain securities (such as foreign securities) is
substantially completed each day at various times prior to the close of the
Exchange. Trading on certain foreign securities markets may not take place on
all business days in New York, and trading on some foreign securities markets
takes place on days which are not business days in New York and on which the
Fund's NAV is not calculated. The values of these securities used in determining
the NAV are computed as of such times. Also, because of the amount of time
required to collect and process trading information as to large numbers of
securities issues, the values of certain securities (such as convertible bonds,
U.S. government securities, and tax-exempt securities) are determined based on
market quotations collected earlier in the day at the latest practicable time
prior to the close of the Exchange. Occasionally, events affecting the value of
such securities may occur between such times and the close of the Exchange which
will not be reflected in the computation of each Colonial fund's NAV. If events
materially affecting the value of such securities occur during such period, then
these securities will be valued at their fair value following procedures
approved by the Trust's Trustees.
(The following two paragraphs are applicable only to Colonial Newport Tiger Fund
- "Adviser" in these two paragraphs refers to the Fund's Adviser which is
Newport Fund Management, Inc.)
Trading in securities on stock exchanges and over -the-counter markets in the
Far East is normally completed well before the close of the business day in New
York. Trading on Far Eastern securities markets may not take place on all
business days in New York, and trading on some Far Eastern securities markets
does take place on days which are not business days in New York and on which the
Fund's NAV is not calculated.
The calculation of the Fund's NAV accordingly may not take place
contemporaneously with the determination of the prices of the Fund's portfolio
securities used in such calculations. Events affecting the values of portfolio
securities that occur between the time their prices are determined and the close
of the Exchange (when the Fund's NAV is calculated) will not be reflected in the
Fund's calculation of NAV unless the Adviser, acting under procedures
established by the Board of Trustees of the Trust, deems that the particular
event would materially affect the Fund's NAV, in which case an adjustment will
be made. Assets or liabilities initially expressed in terms of foreign
currencies are translated prior to the next determination of the NAV of the
Fund's shares into U.S. dollars at prevailing market rates.
Amortized Cost for Money Market Funds (this section currently applies only to
Colonial Government Money Market Fund, a series of Colonial Trust II- see
"Amortized Cost for Money Market Funds" under "Other Information Concerning the
Portfolio" in Part 1 of the SAI of Colonial Municipal Money Market Fund for
information relating to the Municipal Money Market Portfolio)
Money market funds generally value their portfolio securities at amortized cost
according to Rule 2a-7 under the 1940 Act.
Portfolio instruments are valued under the amortized cost method, whereby the
instrument is recorded at cost and thereafter amortized to maturity. This method
assures a constant NAV but may result in a yield different than that of the same
portfolio under the market value method. The Trust's Trustees have adopted
procedures intended to stabilize a money market fund's NAV per share at $1.00.
When a money market fund's market value deviates from the amortized cost of
$1.00, and results in a material dilution to existing shareholders, the Trust's
Trustees will take corrective action to: realize gains or losses; shorten the
portfolio's maturity; withhold distributions; redeem shares in kind; or convert
to the market value method (in which case the NAV per share may differ from
$1.00). All investments will be determined pursuant to procedures approved by
the Trust's Trustees to present minimal credit risk.
See the Statement of Assets and Liabilities in the shareholder report of the
Colonial Government Money Market Fund for a specimen price sheet showing the
computation of maximum offering price per share of Class A shares.
HOW TO BUY SHARES
The Prospectus contains a general description of how investors may buy shares of
the Fund and tables of charges. This SAI contains additional information which
may be of interest to investors.
The Fund will accept unconditional orders for shares to be executed at the
public offering price based on the NAV per share next determined after the order
is placed in good order. The public offering price is the NAV plus the
applicable sales charge, if any. In the case of orders for purchase of shares
placed through FSFs, the public offering price will be determined on the day the
order is placed in good order, but only if the FSF receives the order prior to
the time at which shares are valued and transmits it to the Fund before the Fund
processes that day's transactions. If the FSF fails to transmit before the Fund
processes that day's transactions, the customer's entitlement to that day's
closing price must be settled between the customer and the FSF. If the FSF
receives the order after the time at which the Fund values its shares, the price
will be based on the NAV determined as of the close of the Exchange on the next
day it is open. If funds for the purchase of shares are sent directly to CISC,
they will be invested at the public offering price next determined after receipt
in good order. Payment for shares of the Fund must be in U.S. dollars; if made
by check, the check must be drawn on a U.S. bank.
The Fund receives the entire NAV of shares sold. For shares subject to an
initial sales charge, CISI's commission is the sales charge shown in the Fund's
Prospectus less any applicable FSF discount. The FSF discount is the same for
all FSFs, except that CISI retains the entire sales charge on any sales made to
a shareholder who does not specify a FSF on the Investment Account Application
("Application"). CISI generally retains 100% of any asset-based sales charge
(distribution fee) or contingent deferred sales charge. Such charges generally
reimburse CISI for any up-front and/or ongoing commissions paid to FSFs.
Checks presented for the purchase of shares of the Fund which are returned by
the purchaser's bank or checkwriting privilege checks for which there are
insufficient funds in a shareholder's account to cover redemption will subject
such purchaser or shareholder to a $15 service fee for each check returned.
Checks must be drawn on a U.S. bank and must be payable in U.S. dollars.
CISC acts as the shareholder's agent whenever it receives instructions to carry
out a transaction on the shareholder's account. Upon receipt of instructions
that shares are to be purchased for a shareholder's account, the designated FSF
will receive the applicable sales commission. Shareholders may change FSFs at
any time by written notice to CISC, provided the new FSF has a sales agreement
with CISI.
Shares credited to an account are transferable upon written instructions in good
order to CISC and may be redeemed as described under "How to Sell Shares" in the
Prospectus. Certificates will not be issued for Class A shares unless
specifically requested and no certificates will be issued for Class B, C, D, T
or Z shares. The Colonial money market funds will not issue certificates.
Shareholders may send any certificates which have been previously acquired to
CISC for deposit to their account.
SPECIAL PURCHASE PROGRAMS/INVESTOR SERVICES
The following special purchase programs/investor services may be changed or
eliminated at any time.
Fundamatic Program. As a convenience to investors, shares of most Colonial funds
may be purchased through the Colonial Fundamatic Program. Preauthorized monthly
bank drafts or electronic funds transfer for a fixed amount of at least $50 are
used to purchase a Colonial fund's shares at the public offering price next
determined after CISI receives the proceeds from the draft (normally the 5th or
the 20th of each month, or the next business day thereafter). If your
fFundamatic purchase is by electronic funds transfer, you may request the
Fundamatic purchase for any day. Further information and application forms are
available from FSFs or from CISI.
Automated Dollar Cost Averaging (Classes A, B and D). Colonial's Automated
Dollar Cost Averaging program allows you to exchange $100 or more on a monthly
basis from any Colonial fund in which you have a current balance of at least
$5,000 into the same class of shares of up to four other Colonial funds.
Complete the Automated Dollar Cost Averaging section of the Application. The
designated amount will be exchanged on the third Tuesday of each month. There is
no charge for exchanges made pursuant to the Automated Dollar Cost Averaging
program. Exchanges will continue so long as your Colonial fund balance is
sufficient to complete the transfers. Your normal rights and privileges as a
shareholder remain in full force and effect. Thus you can buy any fund, exchange
between the same Class of shares of funds by written instruction or by telephone
exchange if you have so elected and withdraw amounts from any fund, subject to
the imposition of any applicable CDSC.
Any additional payments or exchanges into your Colonial fund will extend the
time of the Automated Dollar Cost Averaging program.
An exchange is a capital sale transaction for federal income tax purposes.
You may terminate your program, change the amount of the exchange (subject to
the $100 minimum), or change your selection of funds, by telephone or in
writing; if in writing by mailing your instructions to Colonial Investors
Service Center, Inc. P.O. Box 1722, Boston, MA 02105-1722.
You should consult your FSF or investment adviser to determine whether or not
the Automated Dollar Cost Averaging program is appropriate for you.
CISI offers several plans by which an investor may obtain reduced initial or
contingent deferred sales charges . These plans may be altered or discontinued
at any time. See "Programs For Reducing or Eliminating Sales Charges" for more
information.
Tax-Sheltered Retirement Plans. CISI offers prototype tax-qualified plans,
including Individual Retirement Accounts, and Pension and Profit-Sharing Plans
for individuals, corporations, employees and the self-employed. The minimum
initial Retirement Plan investment in these funds is $25. The First National
Bank of Boston is the Trustee and charges a $10 annual fee. Detailed information
concerning these Retirement Plans and copies of the Retirement Plans are
available from CISI.
Consultation with a competent financial and tax adviser regarding these Plans
and consideration of the suitability of fund shares as an investment under the
Employee Retirement Income Security Act of 1974 or otherwise is recommended.
Telephone Address Change Services. By calling CISC, shareholders or their FSF of
record may change an address on a recorded telephone line. Confirmations of
address change will be sent to both the old and the new addresses. Telephone
redemption privileges are suspended for 30 days after an address change is
effected.
Colonial cash connection. Dividends and any other distributions, including
Systematic Withdrawal Plan (SWP) payments, may be automatically deposited to a
shareholder's bank account via electronic funds transfer. Shareholders wishing
to avail themselves of this electronic transfer procedure should complete the
appropriate sections of the Application.
Automatic dividend diversification. The automatic dividend diversification
reinvestment program (ADD) generally allows shareholders to have all
distributions from a fund automatically invested in the same class of shares of
another Colonial fund. An ADD account must be in the same name as the
shareholder's existing Open Account with the particular fund. Call CISC for more
information at 1-800- 422-3737.
PROGRAMS FOR REDUCING OR ELIMINATING SALES CHARGES
Right of Accumulation and Statement of Intent (Class A and Class T shares only)
(Class T shares can only be purchased by the shareholders of Colonial Newport
Tiger Fund who already own Class T shares). Reduced sales charges on Class A and
T shares can be effected by combining a current purchase with prior purchases of
Class A, B, C, D, T and Z shares of the Colonial funds. The applicable sales
charge is based on the combined total of:
1. the current purchase; and
2. the value at the public offering price at the close of business on
the previous day of all Colonial funds' Class A shares held by the
shareholder (except shares of any Colonial money market fund, unless
such shares were acquired by exchange from Class A shares of another
Colonial fund other than a money market fund and Class B, C, D, T
and Z shares).
CISI must be promptly notified of each purchase which entitles a shareholder to
a reduced sales charge. Such reduced sales charge will be applied upon
confirmation of the shareholder's holdings by CISC. A Colonial fund may
terminate or amend this Right of Accumulation.
Any person may qualify for reduced sales charges on purchases of Class A and T
shares made within a thirteen-month period pursuant to a Statement of Intent
("Statement"). A shareholder may include, as an accumulation credit toward the
completion of such Statement, the value of all Class A, B, C D, T and Z shares
held by the shareholder on the date of the Statement in Colonial funds (except
shares of any Colonial money market fund, unless such shares were acquired by
exchange from Class A shares of another non-money market Colonial fund). The
value is determined at the public offering price on the date of the Statement.
Purchases made through reinvestment of distributions do not count toward
satisfaction of the Statement.
During the term of a Statement, CISC will hold shares in escrow to secure
payment of the higher sales charge applicable to Class A or T shares actually
purchased. Dividends and capital gains will be paid on all escrowed shares and
these shares will be released when the amount indicated has been purchased. A
Statement does not obligate the investor to buy or a fund to sell the amount of
the Statement.
If a shareholder exceeds the amount of the Statement and reaches an amount which
would qualify for a further quantity discount, a retroactive price adjustment
will be made at the time of expiration of the Statement. The resulting
difference in offering price will purchase additional shares for the
shareholder's account at the applicable offering price. As a part of this
adjustment, the FSF shall return to CISI the excess commission previously paid
during the thirteen-month period.
If the amount of the Statement is not purchased, the shareholder shall remit to
CISI an amount equal to the difference between the sales charge paid and the
sales charge that should have been paid. If the shareholder fails within twenty
days after a written request to pay such difference in sales charge, CISC will
redeem that number of escrowed Class A shares to equal such difference. The
additional amount of FSF discount from the applicable offering price shall be
remitted to the shareholder's FSF of record.
Additional information about and the terms of Statements of Intent are available
from your FSF, or from CISC at 1-800- 345-6611.
Colonial Asset Builder Investment Program (this section currently applies only
to the Class A shares of Colonial Growth Shares Fund and The Colonial Fund, each
a series of Colonial Trust III). A reduced sales charge applies to a purchase of
certain Colonial funds' Class A shares under a statement of intent for the
Colonial Asset Builder Investment Program. The Program offer may be withdrawn at
any time without notice. A completed Program may serve as the initial investment
for a new Program, subject to the maximum of $4,000 in initial investments per
investor. Shareholders in this program are subject to a 5% sales charge. CISC
will escrow shares to secure payment of the additional sales charge on amounts
invested if the Program is not completed. Escrowed shares are credited with
distributions and will be released when the Program has ended. Shareholders are
subject to a 1% fee on the amount invested if they do not complete the Program.
Prior to completion of the Program, only scheduled Program investments may be
made in a Colonial fund in which an investor has a Program account. The
following services are not available to Program accounts until a Program has
ended:
Systematic Withdrawal Plan Share Certificates
Sponsored Arrangements Exchange Privilege
$50,000 Fast Cash Colonial Cash Connection
Right of Accumulation Automatic Dividend
Diversification
Telephone Redemption Reduced Sales Charges for
any "person"
Statement of Intent
*Exchanges may be made to other Colonial funds offering the Program.
Because of the unavailability of certain services, this Program may not be
suitable for all investors.
The FSF receives 3% of the investor's intended purchases under a Program at the
time of initial investment and 1% after the 24th monthly payment. CISI may
require the FSF to return all applicable commissions paid with respect to a
Program terminated within six months of inception, and thereafter to return
commissions in excess of the FSF discount applicable to shares actually
purchased.
Since the Asset Builder plan involves continuous investment regardless of the
fluctuating prices of funds shares, investors should consult their FSF to
determine whether it is appropriate. The Plan does not assure a profit nor
against loss in declining markets.
Reinstatement Privilege. An investor who has redeemed Class A, B, D or T shares
may, upon request, reinstate within one year a portion or all of the proceeds of
such sale in shares of the same Class of any Colonial fund at the NAV next
determined after CISC receives a written reinstatement request and payment. Any
CDSC paid at the time of the redemption will be credited to the shareholder upon
reinstatement. The period between the redemption and the reinstatement will not
be counted in aging the reinstated shares for purposes of calculating any CDSC
or conversion date. Investors who desire to exercise this privilege should
contact their FSF or CISC. Shareholders may exercise this Privilege an unlimited
number of times. Exercise of this privilege does not alter the Federal income
tax treatment of any capital gains realized on the prior sale of fund shares,
but to the extent any such shares were sold at a loss, some or all of the loss
may be disallowed for tax purposes. Consult your tax adviser.
Privileges of Colonial Employees or Financial Service Firms (in this section,
the "Adviser" refers to Colonial Management Associates, Inc.). Class A shares of
certain funds may be sold at NAV to the following individuals whether currently
employed or retired: Trustees of funds advised or administered by the Adviser ;
directors, officers and employees of the the Adviser , CISI and other companies
affiliated with the Adviser l; registered representatives and employees of FSFs
(including their affiliates) that are parties to dealer agreements or other
sales arrangements with CISI; and such persons' families and their beneficial
accounts.
Sponsored Arrangements. Class A and Class T shares (Class T shares can only be
purchased by the shareholders of Colonial Newport Tiger Fund who already own
Class T shares) of certain funds may be purchased at reduced or no sales charge
pursuant to sponsored arrangements, which include programs under which an
organization makes recommendations to, or permits group solicitation of, its
employees, members or participants in connection with the purchase of shares of
the fund on an individual basis. The amount of the sales charge reduction will
reflect the anticipated reduction in sales expense associated with sponsored
arrangements. The reduction in, sales expense, and therefore the reduction in
sales charge will vary depending on factors such as the size and stability of
the organization's group, the term of the organization's existence and certain
characteristics of the members of its group. The Colonial funds reserve the
right to revise the terms of or to suspend or discontinue sales pursuant to
sponsored plans at any time.
Class A and Class T shares (Class T shares can only be purchased by the
shareholders of Colonial Newport Tiger Fund who already own Class T shares) of
certain funds may also be purchased at reduced or no sales charge by clients of
dealers, brokers or registered investment advisers that have entered into
agreements with CISI pursuant to which the Colonial funds are included as
investment options in programs involving fee-based compensation arrangements.
Net Asset Value Exchange Privilege (in this section, the "Adviser" refers to
Colonial Management Associates, Inc.). Class A shares of certain funds may also
be purchased at reduced or no sales charge by investors moving from another
mutual fund complex or a discretionary account and by participants in certain
retirement plans. In lieu of the commissions described in the Prospectus, the
Adviser will pay the FSF a quarterly service fee which is the service fee
established for each applicable Colonial fund.
Waiver of Contingent Deferred Sales Charges (CDSCs) (in this section, the
"Adviser" refers to Colonial Management Associates, Inc.) (Classes A, B, and D)
CDSCs may be waived on redemptions in the following situations with the proper
documentation:
1. Death. CDSCs may be waived on redemptions within one year following
the death of (i) the sole shareholder on an individual account,(ii)
a joint tenant where the surviving joint tenant is the deceased's
spouse, or (iii) the beneficiary of a Uniform Gifts to Minors Act
(UGMA), Uniform Transfers to Minors Act (UTMA) or other custodial
account. If, upon the occurrence of one of the foregoing, the
account is transferred to an account registered in the name of the
deceased's estate, the CDSC will be waived on any redemption from
the estate account occurring within one year after the death.
If the Class B shares are not redeemed within one
year of the death, they will remain subject to the applicable
CDSC, when redeemed from the transferee's account. If the account
is transferred to a new registration and then a redemption is
requested, the applicable CDSC will be charged.
2. Systematic Withdrawal Plan (SWP). CDSCs may be waived on
redemptions occurring pursuant to a monthly,
quarterly or semi-annual SWP established with the Adviser, to the
extent the redemptions do not exceed, on an annual basis, 12% of
the account's value, so long as at the time of the first SWP
redemption the account had had distributions reinvested for a
period at least equal to the period of the SWP (e.g., if
it is a quarterly SWP, distributions must have been reinvested at
least for the three month period prior to the first SWP
redemption); otherwise CDSCs will be charged on SWP redemptions
until this requirement is met; this requirement does not apply if
the SWP is set up at the time the account is established, and
distributions are being reinvested. See below under "Investors
Services" - Systematic Withdrawal Plan.
3. Disability. CDSCs may be waived on redemptions occurring within one
year after the sole shareholder on an individual account or a joint
tenant on a spousal joint tenant account becomes disabled (as
defined in Section 72(m)(7) of the Internal Revenue Code). To be
eligible for such waiver, (i) the disability must arise after the
purchase of shares and (ii) the disabled shareholder must have been
under age 65 at the time of the initial determination of
disability. If the account is transferred to a new registration and
then a redemption is requested, the applicable CDSC will be
charged.
4. Death of a trustee. CDSCs may be waived on redemptions occurring
upon dissolution of a revocable living or grantor trust following
the death of the sole trustee where (i) the grantor of the trust is
the sole trustee and the sole life beneficiary, (ii) death occurs
following the purchase and (iii) the trust document provides for
dissolution of the trust upon the trustee's death. If the account
is transferred to a new registration (including that of a successor
trustee), the applicable CDSC will be charged upon any subsequent
redemption.
5. Returns of excess contributions. CDSCs may be waived on redemptions
required to return excess contributions made to retirement plans or
individual retirement accounts, so long as the FSF agrees to return
the applicable portion of any commission paid by Colonial.
6. Qualified Retirement Plans. CDSCs may be waived on redemptions
required to make distributions from qualified retirement plans
following (i) normal retirement (as stated in the Plan document) or
(ii) separation from service. CDSCs also will be waived on SWP
redemptions made to make required minimum distributions from
qualified retirement plans that have invested in Colonial funds for
at least two years.
The CDSC also may be waived where the FSF agrees to return all or an agreed upon
portion of the commission earned on the sale of the shares being redeemed.
HOW TO SELL SHARES
Shares may also be sold on any day the Exchange is open, either directly to the
Fund or through the shareholder's . Sale proceeds generally are sent within
seven days (usually on the next business day after your request is received in
good form). However, for shares recently purchased by check, the Fund will send
proceeds only after the check has cleared (which may take up to 15 days).
To sell shares directly to the Fund, send a signed letter of instruction or
stock power form to CISC, along with any certificates for shares to be sold. The
sale price is the net asset value (less any applicable contingent deferred sales
charge) next calculated after the Fund receives the request in proper form.
Signatures must be guaranteed by a bank, a member firm of a national stock
exchange or another eligible guarantor institution. Stock power forms are
available from FSFs, CISC, and many banks. Additional documentation is required
for sales by corporations, agents, fiduciaries, surviving joint owners and
individual retirement account holders. Call CISC for more information
1-800-345-6611.
FSFs must receive requests before the time at which the Fund's shares are valued
to receive that day's price, are responsible for furnishing all necessary
documentation to CISC and may charge for this service.
Systematic Withdrawal Plan
If a shareholder's Account Balance is at least $5,000, the shareholder may
establish a (SWP). A specified dollar amount or percentage of the then current
net asset value of the shareholder's investment in any Colonial fund designated
by the shareholder will be paid monthly, quarterly or semi-annually to a
designated payee. The amount or percentage the shareholder specifies generally
may not, on an annualized basis, exceed 12% of the value, as of the time the
shareholder makes the election of the shareholder's investment. Withdrawals from
Class B and Class D shares of the fund under a SWP will be treated as
redemptions of shares purchased through the reinvestment of fund distributions,
or, to the extent such shares in the shareholder's account are insufficient to
cover Plan payments, as redemptions from the earliest purchased shares of such
fund in the shareholder's account. No CDSCs apply to a redemption pursuant to a
SWP of 12% or less, even if, after giving effect to the redemption, the
shareholder's Account Balance is less than the shareholder's base amount.
Qualified plan participants who are required by Internal Revenue Code regulation
to withdraw more than 12%, on an annual basis, of the value of their Class B and
Class D share account may do so but will be subject to a CDSC ranging from 1% to
5% of the amount withdrawn. If a shareholder wishes to participate in a SWP, the
shareholder must elect to have all of the shareholder's income dividends and
other fund distributions payable in shares of the fund rather than in cash.
A shareholder or a shareholder's FSF of record may establish a SWP account by
telephone on a recorded line. However, SWP checks will be payable only to the
shareholder and sent to the address of record. SWPs from retirement accounts
cannot be established by telephone.
A shareholder may not establish a SWP if the shareholder holds shares in
certificate form. Purchasing additional shares (other than through dividend and
distribution reinvestment) while receiving SWP payments is ordinarily
disadvantageous because of duplicative sales charges. For this reason, a
shareholder may not maintain a plan for the accumulation of shares of the fund
(other than through the reinvestment of dividends) and a SWP at the same time.
SWP payments are made through share redemptions, which may result in a gain or
loss for tax purposes, may involve the use of principal and may eventually use
up all of the shares in a shareholder's account.
A fund may terminate a shareholder's SWP if the shareholder's Account Balance
falls below $5,000 due to any transfer or liquidation of shares other than
pursuant to the SWP. SWP payments will be terminated on receiving satisfactory
evidence of the death or incapacity of a shareholder. Until this evidence is
received, CISC will not be liable for any payment made in accordance with the
provisions of a SWP.
The cost of administering SWPs for the benefit of shareholders who participate
in them is borne by the fund as an expense of all shareholders.
Shareholders whose positions are held in "street name" by certain FSFs may not
be able to participate in a SWP. If a shareholder's Fund shares are held in
"street name", the shareholder should consult his or her FSF to determine
whether he or she may participate in a SWP.
Telephone Redemptions. All shareholders and/or their financial advisers are
automatically eligible to redeem up to $50,000 of the fund's shares by calling
1-800-422-3737 toll free any business day between 9:00 a.m. and the close of
trading of the Exchange (normally 4:00 p.m. Eastern time). Telephone redemption
privileges for larger amounts may be elected on the Application. CISC will
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine. Telephone redemptions are not available on accounts with
an address change in the preceding 30 days and proceeds and confirmations will
only be mailed or sent to the address of record. Shareholders and/or their
financial advisers will be required to provide their name, address and account
number. Financial advisers will also be required to provide their broker number.
All telephone transactions are recorded. A loss to a shareholder may result from
an unauthorized transaction reasonably believed to have been authorized. No
shareholder is obligated to execute the telephone authorization form or to use
the telephone to execute transactions.
Checkwriting (in this section, the "Adviser" refers to Colonial Management
Associates, Inc.) (Available only on the Class A and Class C shares of certain
Colonial funds) Shares may be redeemed by check if a shareholder completed an
Application and Signature Card. The Adviser will provide checks to be drawn on
The First National Bank of Boston (the "Bank"). These checks may be made payable
to the order of any person in the amount of not less than $500 nor more than
$100,000. The shareholder will continue to earn dividends on shares until a
check is presented to the Bank for payment. At such time a sufficient number of
full and fractional shares will be redeemed at the next determined net asset
value to cover the amount of the check. Certificate shares may not be redeemed
in this manner.
Shareholders utilizing checkwriting drafts will be subject to the Bank's rules
governing checking accounts. There is currently no charge to the shareholder for
the use of checks. The shareholder should make sure that there are sufficient
shares in his or her open account to cover the amount of any check drawn since
the net asset value of shares will fluctuate. If insufficient shares are in the
shareholder's Open Account, the check will be returned marked "insufficient
funds" and no shares will be redeemed; the shareholder will be charged a $15
service fee for each check returned. It is not possible to determine in advance
the total value of an open account because prior redemptions and possible
changes in net asset value may cause the value of an open account to change.
Accordingly, a check redemption should not be used to close an open account.
Non cash Redemptions. For redemptions of any single shareholder within any
90-day period exceeding the lesser of $250,000 or 1% of a Colonial fund's net
asset value, a Colonial fund may make the payment or a portion of the payment
with portfolio securities held by that Colonial fund instead of cash, in which
case the redeeming shareholder may incur brokerage and other costs in selling
the securities received.
DISTRIBUTIONS
Distributions are invested in additional shares of the same Class of the fund at
net asset value unless the shareholder elects to receive cash. Regardless of the
shareholder's election, distributions of $10 or less will not be paid in cash,
but will be invested in additional shares of the same Class of the Fund at net
asset value. Undelivered distribution checks returned by the post office will be
invested in your account.
Shareholders may reinvest all or a portion of a recent cash distribution without
a sales charge. A shareholder request must be received within 30 calendar days
of the distribution. A shareholder may exercise this privilege only once. No
charge is currently made for reinvestment.
Shares of most funds that pay daily dividends will normally earn dividends
starting with the date the fund receives payment for the shares and will
continue through the day before the shares are redeemed, transferred or
exchanged. The daily dividends for Colonial Municipal Money Market Fund will be
earned starting with the day after that fund receives payments for the shares.
HOW TO EXCHANGE SHARES
Shares of the Fund may be exchanged for the same class of shares of the other
continuously offered Colonial funds (with certain exceptions) on the basis of
the NAVs per share at the time of exchange. Class T and Z shares may be
exchanged for Class A shares of the other Colonial funds. The prospectus of each
Colonial fund describes its investment objective and policies, and shareholders
should obtain a prospectus and consider these objectives and policies carefully
before requesting an exchange. Shares of certain Colonial funds are not
available to residents of all states. Consult CISC before requesting an
exchange.
By calling CISC, shareholders or their FSF of record may exchange among accounts
with identical registrations, provided that the shares are held on deposit.
During periods of unusual market changes and shareholder activity, shareholders
may experience delays in contacting CISC by telephone to exercise the telephone
exchange privilege. Because an exchange involves a redemption and reinvestment
in another Colonial fund, completion of an exchange may be delayed under unusual
circumstances, such as if the fund suspends repurchases or postpones payment for
the fund shares being exchanged in accordance with federal securities law. CISC
will also make exchanges upon receipt of a written exchange request and, share
certificates, if any. If the shareholder is a corporation, partnership, agent,
or surviving joint owner, CISC will require customary additional documentation.
Prospectuses of the other Colonial funds are available from the Colonial
Literature Department by calling 1-800-248-2828.
A loss to a shareholder may result from an unauthorized transaction reasonably
believed to have been authorized. No shareholder is obligated to use the
telephone to execute transactions.
You need to hold your Class A and Class T shares for five months before
exchanging to certain funds having a higher maximum sales charge. Consult your
FSF or CISC. In all cases, the shares to be exchanged must be registered on the
records of the fund in the name of the shareholder desiring to exchange.
Shareholders of the other Colonial open-end funds generally may exchange their
shares at NAV for the same class of shares of the fund.
An exchange is a capital sale transaction for federal income tax purposes. The
exchange privilege may be revised, suspended or terminated at any time.
SUSPENSION OF REDEMPTIONS
A Colonial fund may not suspend shareholders' right of redemption or postpone
payment for more than seven days unless the Exchange is closed for other than
customary weekends or holidays, or if permitted by the rules of the SEC during
periods when trading on the Exchange is restricted or during any emergency which
makes it impracticable for the fund to dispose of its securities or to determine
fairly the value of its net assets, or during any other period permitted by
order of the SEC for protection of investors.
SHAREHOLDER MEETINGS
As described under the caption "Organization and History" in the Prospectus of
each Colonial fund, the fund will not hold annual shareholders' meetings. The
Trustees may fill any vacancies in the Board of Trustees except that the
Trustees may not fill a vacancy if, immediately after filling such vacancy, less
than two-thirds of the Trustees then in office would have been elected to such
office by the shareholders. In addition, at such times as less than a majority
of the Trustees then in office have been elected to such office by the
shareholders, the Trustees must call a meeting of shareholders. Trustees may be
removed from office by a written consent signed by a majority of the outstanding
shares of the Trust or by a vote of the holders of a majority of the outstanding
shares at a meeting duly called for the purpose, which meeting shall be held
upon written request of the holders of not less than 10% of the outstanding
shares of the Trust. Upon written request by the holders of 1% of the
outstanding shares of the Trust stating that such shareholders of the Trust, for
the purpose of obtaining the signatures necessary to demand a shareholder's
meeting to consider removal of a Trustee, request information regarding the
Trust's shareholders, the Trust will provide appropriate materials (at the
expense of the requesting shareholders). Except as otherwise disclosed in the
Prospectus and this SAI, the Trustees shall continue to hold office and may
appoint their successors.
At any shareholders' meetings that may be held, shareholders of all series would
vote together, irrespective of series, on the election of Trustees or the
selection of independent accountants, but each series would vote separately from
the others on other matters, such as changes in the investment policies of that
series or the approval of the management agreement for that series.
PERFORMANCE MEASURES
Total Return
Standardized average annual total return. Average annual total return is the
actual return on a $1,000 investment in a particular class of shares of the
fund, made at the beginning of a stated period, adjusted for the maximum sales
charge or applicable CDSC for the class of shares of the fund and assuming that
all distributions were reinvested at NAV, converted to an average annual return
assuming annual compounding.
Nonstandardized total return. Nonstandardized total returns differ from
standardized average annual total returns only in that they may relate to
nonstandardized periods, represent aggregate rather than average annual total
returns or in that the sales charge or CDSC is not deducted.
Yield
Money market. A money market fund's yield and effective yield is computed in
accordance with the SEC's formula for money market fund yields.
Non money market. The yield for each class of shares is determined by (i)
calculating the income (as defined by the SEC for purposes of advertising yield)
during the base period and subtracting actual expenses for the period (net of
any reimbursements), and (ii) dividing the result by the product of the average
daily number of shares of the Colonial fund entitled to dividends for the period
and the maximum offering price of the fund on the last day of the period, (iii)
then annualizing the result assuming semi-annual compounding. Tax-equivalent
yield is calculated by taking that portion of the yield which is exempt from
income tax and determining the equivalent taxable yield which would produce the
same after tax yield for any given federal and state tax rate, and adding to
that the portion of the yield which is fully taxable. Adjusted yield is
calculated in the same manner as yield except that expenses voluntarily borne or
waived by Colonial have been added back to actual expenses.
Distribution rate. The distribution rate for each class of shares is calculated
by annualizing the most current period's distributions and dividing by the
maximum offering price on the last day of the period. Generally, the fund 's
distribution rate reflects total amounts actually paid to shareholders, while
yield reflects the current earning power of the fund's portfolio securities (net
of the fund's expenses). The fund's yield for any period may be more or less
than the amount actually distributed in respect of such period.
The fund may compare its performance to various unmanaged indices published by
such sources as listed in Appendix II.
The fund may also refer to quotations, graphs and electronically transmitted
data from sources believed by Colonialthe Adviser to be reputable, and
publications in the press pertaining to a fund's performance or to the Adviser
or its affiliates , including comparisons with competitors and matters of
national and global economic and financial interest. Examples include Forbes,
Business Week, MONEY Magazine, The Wall Street Journal, The New York Times, The
Boston Globe, Barron's National Business & Financial Weekly, Financial Planning,
Changing Times, Reuters Information Services, Wiesenberger Mutual Funds
Investment Report, Lipper Analytical Services Corporation, Morningstar, Inc.,
Sylvia Porter's Personal Finance Magazine, Money Market Directory, SEI Funds
Evaluation Services, FTA World Index and Disclosure Incorporated.
All data is based on past performance and does not predict future results.
APPENDIX I
DESCRIPTION OF BOND RATINGS
S&P
AAA The highest rating assigned by S&P indicates an extremely strong capacity to
repay principal and interest.
AA bonds also qualify as high quality. Capacity to repay principal and pay
interest is very strong, and in the majority of instances, they differ from AAA
only in small degree.
A bonds have a strong capacity to repay principal and interest, although they
are somewhat more susceptible to the adverse effects of changes in circumstances
and economic conditions.
BBB bonds are regarded as having an adequate capacity to repay principal and
interest. Whereas they normally exhibit protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to repay principal and interest than for bonds in the A category.
BB, B, CCC, and CC bonds are regarded, on balance, as predominantly speculative
with respect to capacity to pay interest and principal in accordance with the
terms of the obligation. BB indicates the lowest degree of speculation and CC
the highest degree. While likely to have some quality and protection
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
C ratings are reserved for income bonds on which no interest is being paid.
D bonds are in default, and payment of interest and/or principal is in arrears.
Plus(+) or minus (-) are modifiers relative to the standing within the major
rating categories.
Provisional Ratings. The letter "p" indicates that the rating is provisional. A
provisional rating assumes the successful completion of the project being
financed by the debt being rated and indicates that payment of debt service
requirements is largely or entirely dependent upon the successful and timely
completion of the project. This rating, however, although addressing credit
quality subsequent to completion of the project, makes no comments on the
likelihood of, or the risk of default upon failure of, such completion. The
investor should exercise his own judgment with respect to such likelihood and
risk.
Municipal Notes:
SP-1. Notes rated SP-1 have very strong or strong capacity to pay principal and
interest. Those issues determined to possess overwhelming safety characteristics
are designated as SP-1+.
SP-2. Notes rated SP-2 have satisfactory capacity to pay principal and interest.
Notes due in three years or less normally receive a note rating. Notes maturing
beyond three years normally receive a bond rating, although the following
criteria are used in making that assessment:
Amortization schedule (the larger the final maturity relative to other
maturities, the more likely the issue will be rated as a note).
Source of payment (the more dependent the issue is on the market for
its refinancing, the more likely it will be rated as a note).
Demand Feature of Variable Rate Demand Securities:
S&P assigns dual ratings to all long-term debt issues that have as part of their
provisions a demand feature. The first rating addresses the likelihood of
repayment of principal and interest as due, and the second rating addresses only
the demand feature. The long-term debt rating symbols are used for bonds to
denote the long-term maturity, and the commercial paper rating symbols are
usually used to denote the put (demand) option (for example, AAA/A-1+).
Normally, demand notes receive note rating symbols combined with commercial
paper symbols (for example, SP-1+/A-1+).
Commercial Paper:
A. Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are further refined with
the designations 1, 2, and 3 to indicate the relative degree to safety.
A-1. This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are designed A-1+.
Corporate Bonds:
The description of the applicable rating symbols and their meanings is
substantially the same as the Municipal Bond ratings set forth above.
MOODY'S
Aaa bonds are judged to be of the best quality. They carry the smallest degree
of investment risk and are generally referred to as "gilt edge". Interest
payments are protected by a large or by an exceptionally stable margin and
principal is secure. While various protective elements are likely to change,
such changes as can be visualized are most unlikely to impair a fundamentally
strong position of such issues.
Aa bonds are judged to be of high quality by all standards. Together with Aaa
bonds they comprise what are generally known as high-grade bonds. They are rated
lower than the best bonds because margins of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risk appear somewhat larger than in Aaa securities. Those bonds in the
Aa through B groups that Moody's believes possess the strongest investment
attributes are designated by the symbol Aa1, A1 and Baa1.
A bonds possess many of the favorable investment attributes and are to be
considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present that
suggest a susceptibility to impairment sometime in the future.
Baa bonds are considered as medium grade, neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact, have speculative
characteristics as well.
Ba bonds are judged to have speculative elements: their future cannot be
considered as well secured. Often, the protection of interest and principal
payments may be very moderate, and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position characterizes these
bonds.
B bonds generally lack characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the contract
over any long period of time may be small.
Caa bonds are of poor standing. They may be in default or there may be present
elements of danger with respect to principal or interest.
Ca bonds are speculative in a high degree, often in default or having other
marked shortcomings.
C bonds are the lowest rated class of bonds and can be regarded as having
extremely poor prospects of ever attaining any real investment standing.
Conditional Ratings. Bonds for which the security depends upon the completion of
some act or the fulfillment of some condition are rated conditionally. These are
bonds secured by (a) earnings of projects under construction, (b) earnings of
projects unseasoned in operating experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting
conditions attach. Parenthetical rating denotes probable credit stature upon
completion of construction or elimination of basis of condition.
Note: Those bonds in the Aa, A, Baa, Ba, and B groups which Moody's believes
possess the strongest investment attributes are designated by the symbols Aa 1,
A 1, Baa 1, Ba 1, and B 1.
Municipal Notes:
MIG 1. This designation denotes best quality. There is present strong protection
by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.
MIG 2. This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
MIG 3. This designation denotes favorable quality. All security elements are
accounted for, but there is lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well established.
Demand Feature of Variable Rate Demand Securities:
Moody's may assign a separate rating to the demand feature of a variable rate
demand security. Such a rating may include:
VMIG 1. This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.
VMIG 2. This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
VMIG 3. This designation denotes favorable quality. All security elements are
accounted for, but there is lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well established.
Commercial Paper:
Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment capacity of rated issuers:
Prime-1 Highest Quality
Prime-2 Higher Quality
Prime-3 High Quality
If an issuer represents to Moody's that its Commercial Paper obligations are
supported by the credit of another entity or entities, Moody's, in assigning
ratings to such issuers, evaluates the financial strength of the indicated
affiliated corporations, commercial banks, insurance companies, foreign
governments, or other entities, but only as one factor in the total rating
assessment.
Corporate Bonds:
The description of the applicable rating symbols (Aaa, Aa, A) and their meanings
is identical to that of the Municipal Bond ratings as set forth above, except
for the numerical modifiers. Moody's applies numerical modifiers 1, 2, and 3 in
the Aa and A classifications of its corporate bond rating system. The modifier 1
indicates that the security ranks in the higher end of its generic rating
category; the modifier 2 indicates a midrange ranking; and the modifier 3
indicates that the issuer ranks in the lower end of its generic rating category.
APPENDIX II
1995
<TABLE>
<CAPTION>
SOURCE CATEGORY
<S> <C> <C>
Donoghue Tax-Free Funds 3.39
Donoghue U.S. Treasury Funds 5.19
Dow Jones Industrials 36.95
Morgan Stanley Capital International EAFE Index 11.22
Morgan Stanley Capital International EAFE GDP Index 11.16
Libor Six-month Libor N/A
Lipper Adjustable Rate Mortgage 4.73
Lipper California Municipal Bond Funds 18.32
Lipper Connecticut Municipal Bond Funds 16.58
Lipper Closed End Bond Funds 20.83
Lipper Florida Municipal Bond Funds 17.84
Lipper General Bond Fund 20.83
Lipper General Municipal Bonds 16.84
Lipper General Short-Term Tax-Exempt Bonds 7.43
Lipper Global Funds 16.05
Lipper Growth Funds 30.79
Lipper Growth & Income Funds 30.82
Lipper High Current Yield Bond Funds 16.44
Lipper High Yield Municipal Bond Debt 15.98
Lipper Fixed Income Funds 15.19
Lipper Insured Municipal Bond Average 17.59
Lipper Intermediate Muni Bonds 12.89
Lipper Intermediate (5-10) U.S. Government Funds 15.75
Lipper Massachusetts Municipal Bond Funds 16.82
Lipper Michigan Municipal Bond Funds 16.89
Lipper Mid Cap Funds 32.04
Lipper Minnesota Municipal Bond Funds 15.39
Lipper U.S. Government Money Market Funds 5.26
Lipper Natural Resources 18.80
Lipper New York Municipal Bond Funds 16.73
Lipper North Carolina Municipal Bond Funds 17.51
Lipper Ohio Municipal Bond Funds 16.81
Lipper Small Company Growth Funds 31.55
Lipper U.S. Government Funds 17.34
Lipper Pacific Region Funds-Ex-Japan 1.95
Shearson Lehman Composite Government Index 18.33
Shearson Lehman Government/Corporate Index 19.25
Shearson Lehman Long-term Government Index 30.90
S&P 500 S&P 37.54
S&P Utility Index S&P 42.39
S&P Barra Growth 38.13
S&P Barra Value 37.00
S&P Midcap 400 28.56
First Boston High Yield Index 17.38
Swiss Bank 10 Year U.S. Government (Corporate Bond) 22.24
Swiss Bank 10 Year United Kingdom (Corporate Bond) 16.19
Swiss Bank 10 Year France (Corporate Bond) 26.72
Swiss Bank 10 Year Germany (Corporate Bond) 25.74
Swiss Bank 10 Year Japan (Corporate Bond) 17.83
Swiss Bank 10 Year Canada (Corporate Bond) 25.04
Swiss Bank 10 Year Australia (Corporate Bond) 19.42
Morgan Stanley Capital International 10 Year Hong Kong (Equity) 23.83
Morgan Stanley Capital International 10 Year Belgium (Equity) 20.67
Morgan Stanley Capital International 10 Year Austria (Equity) 10.85
Morgan Stanley Capital International 10 Year France (Equity) 15.30
Morgan Stanley Capital International 10 Year Netherlands (Equity) 19.33
Morgan Stanley Capital International 10 Year Japan (Equity) 12.82
Morgan Stanley Capital International 10 Year Switzerland (Equity) 17.06
Morgan Stanley Capital International 10 Year United Kingdom (Equity) 15.02
Morgan Stanley Capital International 10 Year Germany (Equity) 10.66
Morgan Stanley Capital International 10 Year Italy (Equity) 7.78
Morgan Stanley Capital International 10 Year Sweden (Equity) 19.43
Morgan Stanley Capital International 10 Year United States (Equity) 14.82
Morgan Stanley Capital International 10 Year Australia (Equity) 15.13
Morgan Stanley Capital International 10 Year Norway (Equity) 10.72
Morgan Stanley Capital International 10 Year Spain (Equity) 17.91
Morgan Stanley Capital International World GDP Index 18.14
Morgan Stanley Capital International Pacific Region Funds Ex-Japan 12.95
Inflation Consumer Price Index N/A
FHLB-San Francisco 11th District Cost-of-Funds Index N/A
Federal Reserve Six-Month Treasury Bill N/A
Federal Reserve One-Year Constant-Maturity Treasury Rate N/A
Federal Reserve Five-Year Constant-Maturity Treasury Rate N/A
Frank Russell & Co. Russell 2000 28.45
Frank Russell & Co. Russell 1000 Value 38.35
Frank Russell & Co. Russell 1000 Growth 37.19
Bloomberg NA NA
Credit Lyonnais NA NA
Statistical Abstract of the U.S. NA NA
World Economic Outlook NA NA
</TABLE>
*in U.S. currency
<PAGE>
INVESTMENT PORTFOLIO (California)
JANUARY 31, 1996 (IN THOUSANDS)
<TABLE>
<CAPTION>
MUNICIPAL BONDS - 98.1% PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
CERTIFICATES OF PARTICIPATION - 5.2%
Alameda County, Capital Projects, Series 1989,
(a) 06/15/14 $ 2,185 $ 776
Anderson Certificates of Participation,
7.900% 12/01/11 610 659
Bishop, Escalon & Lemoore Cities,
Certificates of Participation, Series 1991-A,
7.700% 05/01/11 700 751
Compton Certificates of Participation,
Civic Center Project, Series 1989-B,
7.500% 08/01/15 1,000 1,067
Fresno Unified School District, Certificates
of Participation, Phase Six, Series 1991-A,
7.200% 05/01/11 1,000 1,086
Los Angeles County, Certificates of
Participation, Series 1991, RIB (variable rate),
8.976% 05/01/15 1,000 1,026
Modesto, Community Center Project,
Series 1993-A,
5.000% 11/01/23 2,235 2,132
Nevada County, Certificates of Participation,
Western Nevada County Solid Waste
Management System, Series 1991,
7.500% 06/01/21 1,000 1,032
San Mateo County Board of Education,
Series 1991,
7.100% 05/01/21 750 792
Special Districts Finance Authority,
Certificates of Participation, Series 1988-A,
8.400% 07/01/05 1,775 1,941
Statewide Communities Development Corp.,
J. Paul Getty Trust Center,
5.000% 10/01/23 (b) 10,560 10,124
-------
21,386
-------
--------------------------------------------------------------------------------
EDUCATION - 2.9%
Alum Rock Unified Elementary School
District, Series 1991:
(a) 09/01/11 1,925 715
(a) 09/01/12 1,565 536
(a) 09/01/14 1,000 294
</TABLE>
6
<PAGE>
Investment Portfolio/January 31, 1996
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Antioch Unified School District,
Series 1991-A:
(a) 07/01/11 (c) $ 5,175 $ 1,818
(a) 07/01/16 5,000 1,212
Benicia Unified School District,
Series 1994-C,
6.450% 06/01/19 3,870 4,281
University of California,
Series 1989-C,
5.000% 09/01/23 3,500 3,268
-------
12,124
-------
--------------------------------------------------------------------------------
GENERAL OBLIGATIONS - 9.1%
Alum Rock Unified Elementary School
District, Series 1991,
(a) 09/01/15 1,825 499
Central Unified School District,
(a) 03/01/18 20,065 5,944
Grossmont Unified School District,
Capital Project, Series 1991,
(a) 11/15/06 (c) 4,500 2,632
PR Commonwealth of Puerto Rico,
Series 1995:
5.650% 07/01/15 1,000 1,057
6.500% 07/01/14 (d) 2,000 2,272
Rocklin, Unified School District,
Series 1991-C,
(a) 07/01/20 6,920 1,765
State of California:
5.125% 10/01/17 7,710 7,421
5.500% 04/01/12 (c) 2,770 2,839
5.750% 03/01/19 10,000 10,187
10.000% 02/01/10 2,000 2,932
-------
37,548
-------
--------------------------------------------------------------------------------
HEALTH - 1.9%
HOSPITAL
Duarte, City of Hope National Medical Center,
Series 1993,
6.000% 04/01/08 500 503
San Bernadino County, Sisters of Charity,
Series 1991-A,
7.000% 07/01/21 500 551
State Health Facilities Financing Authority:
Catholic Healthcare West, Series 1994-A,
4.750% 07/01/19 (c) 2,000 1,810
</TABLE>
7
<PAGE>
Investment Portfolio/January 31, 1996
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
HEALTH - CONT.
Hospitals - cont.
Kaiser Permanente, Series 1993-C,
5.600% 05/01/33 $ 5,000 $ 4,862
-------
7,726
-------
--------------------------------------------------------------------------------
HOUSING - 3.2%
MULTI-FAMILY - 0.1%
Santa Rosa, Chanate Lodge Projects,
Series 1992,
6.625% 12/01/02 360 364
-------
SINGLE-FAMILY - 3.1%
Delta County Home Mortgage Finance
Authority, Series 1992-A,
6.750% 12/01/25 3,000 3,067
PR Puerto Rico Housing Finance Corp.,
Series B,
7.650% 10/15/22 615 654
Southern California Home Financing Authority:
Series A,
7.625% 10/01/22 1,450 1,513
Series 1990-A,
7.625% 10/01/23 555 588
State Housing Finance Agency:
Series B,
8.600% 08/01/19 2,550 2,687
Series 1991-C,
7.450% 08/01/11 245 260
Series 1990-D,
7.750% 08/01/10 965 1,025
State Rural Home Mortgage Finance
Authority, Series 1995-B,
7.750% 09/01/27 2,500 2,925
Stockton, Mortgage-Backed Security
Program, Series 1990-A,
7.400% 08/01/05 40 42
-------
12,761
-------
--------------------------------------------------------------------------------
MELLO - ROOS/1915 ACT - 4.8%
Alameda County, Marina Village
Assessment District, Series 1989-1,
7.650% 09/02/10 1,000 1,030
Carlsbad Unified School District, Community
Facility District No. 5, Series 1990,
7.650% 09/01/14 1,000 1,024
</TABLE>
8
<PAGE>
Investment Portfolio/January 31, 1996
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Carson, Series 1992,
7.375% 09/02/22 $ 980 $ 1,040
Corona Community Facility District,
Foothill Ranch, Series 1990 A-1,
8.350% 09/01/20 1,000 1,020
Costa Mesa Public Financing,
Series 1991-A,
7.100% 08/01/21 890 813
Elk Grove Unified School District,
Community Facilities District No. 1,
Series 1995,
6.500% 12/01/24 4,055 4,790
Fairfield Improvement Bond,
Series 1990,
8.000% 09/02/11 240 247
Folsom Willow Creek,
8.250% 12/01/06 400 422
Los Angeles County, Harbor Boulevard,
8.375% 09/02/18 1,000 1,031
Murrieta County Water District,
Series 1991,
8.300% 10/01/21 1,000 1,094
Placentia, Community Facilities District,
7.900% 09/01/15 1,000 928
Riverside Unified School District,
Community Facilities District No. 2,
Series 1993-A,
7.250% 09/01/18 1,000 1,033
Sacramento Unified School,
Community Facilities District No. 1,
Series B,
7.300% 09/01/13 1,760 1,923
Stockton Community Facilities District,
Series 2,
7.750% 08/01/15 1,000 1,051
West Covina Redevelopment Agency,
Community Facilities District No. 1,
Series 1989,
7.800% 09/01/22 1,000 1,049
Woodland East Main Street Assessment,
Series1990-1,
7.900% 09/02/15 1,450 1,494
-------
19,989
-------
--------------------------------------------------------------------------------
PUBLIC FACILITIES IMPROVEMENT - 11.6%
Beverly Hills Public Financing Authority,
Series 1993-A,
5.650% 06/01/15 (b) 5,000 5,069
</TABLE>
9
<PAGE>
Investment Portfolio/January 31, 1996
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
PUBLIC FACILITIES IMPROVEMENT - CONT
Concord Redevelopment Agency,
Central Concord Project, Series 1988-3,
8.000% 07/01/18 $ 25 $ 28
Long Beach, Fleet Services Project,
Series 1992-A,
6.600% 05/01/14 2,000 2,090
Los Angeles County Public Works
Financing Authority,
5.000% 03/01/17 5,000 4,656
Oakland Refunding Revenue, Series 1988-A,
7.600% 08/01/21 1,995 2,190
PR Commonwealth of Puerto Rico,
Public Buildings Authority, Series 1993-M,
stepped coupon, (5.700% 07/01/98)
3.750% 07/01/16 (e) 2,250 2,160
Rancho Mirage Joint Powers
Financing Authority, Series 1991-A,
7.500% 04/01/17 455 490
Riverside Public Financing Authority,
Series 1991-A,
8.000% 02/01/18 410 432
San Jose Redevelopment Agency,
Series 1993,
5.000% 08/01/21 10,000 9,425
Santa Ana Financing Authority,
Police Holding Facility, Series 1994-A,
6.250% 07/01/18 6,035 6,804
State Public Capital Improvements
Financing Authority:
Series 1988-A,
8.500% 03/01/18 3,500 3,749
Series 1988-B,
8.100% 03/01/18 (c) 4,800 5,190
State Public Works Board:
Secretary of State & State Archives,
Series 1992-A,
6.500% 12/01/08 1,000 1,150
State Prisons, Series 1993-A,
5.250% 12/01/13 (b) 2,500 2,509
VI Virgin Islands Public Financing,
Series 1992-A,
7.250% 10/01/18 1,000 1,074
Watsonville Mammoth Lakes,
Series B,
7.875% 06/01/11 500 549
-------
47,565
-------
--------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
Investment Portfolio/January 31, 1996
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
PUBLIC INFRASTRUCTURE - 3.7%
Airports - 0.7%
Los Angeles International Airport,
Series 1995-D,
5.500% 05/15/15 $ 3,025 $ 3,033
-------
Turnpikes/Toll Roads/Bridges - 3.0%
Foothill Eastern Transportation Corridor
Agency, Series 1995-A,
5.000% 01/01/35 10,000 8,350
PR Commonwealth of Puerto Rico
Highway & Transportation Authority,
Series W,
5.500% 07/01/09 580 602
San Joaquin Hills Transportation
Corridor Agency, Series 1993,
(a) 01/01/20 15,400 3,407
-------
12,359
-------
--------------------------------------------------------------------------------
REFUNDED/ESCROW/SPECIAL OBLIGATION (f) - 10.9%
Central School District,
San Bernadino County, Series A,
7.050% 05/01/16 750 847
Commerce Joint Powers Financing
Authority, Multiple Project Loans,
Series A,
8.000% 03/01/21 30 36
Desert Hospital, Series 1990,
8.100% 07/01/20 1,750 2,067
Empire Union School District,
Mello-Roos Financing, Series 1990-A,
7.400% 10/01/15 1,000 1,164
Fontana Public Financing Authority,
North Fontana Redevelopment, Series 1991-A,
7.750% 12/01/20 785 944
Glendora Public Financing Authority,
Series B,
7.625% 09/01/10 850 969
La Quinta Redevelopment Agency,
Series 1990,
8.400% 09/01/12 1,000 1,199
Local Government Power Authority,
Anaheim Redevelopment Agency,
Series 1986-A,
8.200% 09/01/15 4,500 5,057
Los Angeles Convention & Exhibit
Center, Series 1985,
9.000% 12/01/20 500 677
</TABLE>
11
<PAGE>
Investment Portfolio/January 31, 1996
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
REFUNDED/ESCROW/SPECIAL OBLIGATION (f) - CONT
Los Angeles County Transportation,
Metro Train, Series 1991-A,
6.900% 07/01/21 $ 1,000 $ 1,154
Los Angeles Department of Water &
Power:
Series 1986,
7.375% 04/15/24 40 41
Series 1988,
7.900% 05/01/28 2,340 2,586
Los Angeles Waste Water System,
Series 1991-A,
7.100% 02/01/21 400 443
Monterey Redevelopment Agency,
Series A:
9.250% 11/01/10 500 562
9.250% 11/01/11 250 282
9.250% 11/01/12 750 848
Moreno Valley Unified School District,
7.400% 09/01/16 20 24
Northern California Power Agency,
Hydroelectric Project No. 1,
Series 1986 B-2,
8.000% 07/01/24 1,750 1,918
Orange County Community Facility:
District Number 87-3 Mello-Roos,
7.800% 08/15/15 2,000 2,345
District 87-4, Series 1990-A,
8.000% 08/15/15 1,000 1,179
Pomona, Series 1990-B,
7.500% 08/01/23 1,000 1,289
PR Commonwealth of Puerto Rico,
Electric Power Authority:
Series 1989-N,
7.000% 07/01/07 635 709
Series 1991,
7.300% 07/01/20 1,200 1,386
Rancho Mirage Joint Powers
Financing Authority, Series 1991-A,
7.500% 04/01/17 1,545 1,812
Redbud Hospital District,
Series 1986,
7.900% 06/01/11 175 181
Riverside County, Series 1989-A,
7.800% 05/01/21 2,500 3,341
Riverside Public Financing Authority,
Series A,
8.000% 02/01/18 590 701
</TABLE>
12
<PAGE>
Investment Portfolio/January 31, 1996
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Rocklin, Stanford Ranch Community
Facilities District, Series 1990,
8.100% 11/01/15 $ 1,000 $ 1,188
Sacramento City Financing Authority,
Series 1991,
6.800% 11/01/20 2,500 2,888
State Educational Facilities Authority,
Westmont College, Series 1985-A,
9.200% 12/01/00 40 45
State Health Facilities Finance Authority:
Children's Hospital of Los Angeles,
Series 1991-A,
7.125% 06/01/21 2,000 2,325
Sisters of Providence,
8.375% 10/01/07 2,500 2,741
State Public Works,
University of California, Series 1990-A,
7.000% 09/01/15 1,625 1,859
-------
44,807
-------
--------------------------------------------------------------------------------
SALES & EXCISE TAX - 1.7%
Los Angeles County Metropolitan
Transportation Authority,
Series 1995-A,
5.000% 07/01/25 5,000 4,731
Riverside County Transportation
Commission, Sales Tax Revenue,
Series A,
6.000% 06/01/09 (d) 2,000 2,200
-------
6,931
-------
--------------------------------------------------------------------------------
SOLID WASTE - 2.9%
Miscellaneous Disposal
Pollution Control Financing Authority, North
California Recycling Center, Series 1991-A,
6.750% 07/01/17 1,000 1,000
Sacramento County Sanitation District
Financing Authority, Series 1993,
4.750% 12/01/23 12,000 10,860
-------
11,860
-------
--------------------------------------------------------------------------------
TAX ALLOCATION - 12.6%
Brea Redevelopment Agency, Project AB,
Series 1993,
6.125% 08/01/13 2,920 3,124
Cerritos Public Financing Authority,
Los Coyotes Redevelopment Project,
Series 1993-A,
6.500% 11/01/23 2,000 2,325
</TABLE>
13
<PAGE>
Investment Portfolio/January 31, 1996
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
TAX ALLOCATION - CONT
Commerce Joint Powers Financing
Authority, Multiple Project Loans,
Series 1991-A,
8.000% 03/01/21 $ 970 $ 1,038
Contra Costa County Public Financing
Authority, Series 1992-A,
7.100% 08/01/22 1,000 1,059
Elk Grove Unified School District,
Community Facilities District No. 1,
Series 1995,
(a) 12/01/18 2,720 775
Elk Grove University School, District No. 1,
6.500% 12/01/08 1,000 1,155
Emeryville Public Finance Authority,
Emeryville Redevelopment, Series 1993-A,
6.500% 05/01/21 2,000 2,083
Folsom Redevelopment Agency, Central
Folsom Project Area, Series 1987-A,
8.600% 02/01/13 400 424
Glendora Public Financing Authority,
Series B,
7.625% 09/01/10 150 156
Los Angeles County Transportation
Authority, Series 1993-A,
5.000% 07/01/21 3,150 2,949
Moulton Niguel, Series 1993,
5.250% 09/01/13 (c) 11,000 10,849
Oakland Redevelopment Agency,
Central District Project, Series 1992,
5.500% 02/01/14 7,400 7,641
Pomona Public Financing Authority,
Southwest Pomona Redevelopment Project,
Series 1994-L,
5.750% 02/01/20 3,800 3,610
Richmond Joint Powers Financing
Authority, Series 1990-A,
7.700% 10/01/10 940 1,022
Santa Fe Springs Redevelopment Agency,
Consolidated Project, Series 1992-A,
6.400% 09/01/22 7,275 7,848
Santa Margarita, Series 1994-B,
7.250% 08/01/13 (c) 2,000 2,450
Seaside Redevelopment Agency,
Gateway Project, Series 1986,
8.500% 08/01/06 105 108
Soledad Redevelopment Agency, Series 1992,
7.400% 11/01/12 970 1,048
</TABLE>
14
<PAGE>
Investment Portfolio/January 31, 1996
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Torrance, Downtown Redevelopment
Project, Series 1992,
7.125% 09/01/21 $ 1,000 $ 1,056
Westminster Redevelopment Agency,
Project No. 1, Series 1993,
6.200% 08/01/23 1,000 995
-------
51,715
-------
--------------------------------------------------------------------------------
UTILITY - 10.1%
Co-Generation - 1.6%
Sacramento Co-Generation Authority,
Procter & Gamble Project, Series 1995,
6.500% 07/01/21 6,500 6,719
-------
Joint Power Authority - 0.5%
Southern California Public Power Authority,
5.000% 07/01/15 2,150 2,053
-------
Municipal Electric - 8.0%
Colton Public Financing Authority,
Electric System Imports, Series 1995,
7.500% 10/01/20 3,000 3,060
Imperial Irrigation District, Electric
System Project, Series 1994,
6.000% 11/01/15 3,000 3,165
Los Angeles Department of
Water & Power, Series 1993-2,
5.000% 10/15/33 5,000 4,588
Northern California Power Agency,
Hydroelectric Project No. 1:
Series 1991-E,
7.150% 07/01/24 1,470 1,551
Series 1992-A,
5.500% 07/01/23 (c) 11,000 10,973
PR Puerto Rico Electric Power Authority:
Series 1989-N,
7.000% 07/01/07 365 397
Series 1989-O,
(a) 07/01/17 2,490 738
Reading Electric System,
RIB (variable rate), Series 1992-A,
8.801% 07/01/22 750 962
Sacramento Municipal Utilities District,
Series 1993-D,
5.250% 11/15/20 7,500 7,331
-------
32,765
-------
</TABLE>
15
<PAGE>
Investment Portfolio/January 31, 1996
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
WATER & SEWER - 17.5%
Contra Costa Water District, Series 1994-G,
5.500% 10/01/19 (c) $12,500 $12,578
Covina Water System Improvement Project,
Series 1991,
7.300% 04/01/16 1,000 1,059
Fresno Sewer Revenue,
Series 1993-A:
5.250% 09/01/19 4,000 3,990
6.000% 09/01/09 1,525 1,672
6.000% 09/01/10 1,420 1,548
Hemet Public Financing Authority,
Series 1992-A,
6.500% 02/01/12 1,500 1,558
Irvine Ranch Water District, Joint
Powers Agency, Series 1988-II,
8.250% 08/15/23 5,500 5,947
Los Angeles County Sanitation District
Finance Authority, Series 1993-A,
5.000% 10/01/23 14,300 13,442
Los Angeles Waste Water Systems,
Series 1993-D,
6.000% 11/01/14 1,545 1,630
Metropolitan Water District:
RIB (variable rate),
7.560% 08/05/22 2,000 2,132
Series 1995-A,
5.700% 07/01/11 2,000 2,082
Mojave Water Agency,
Morongo Basin Pipeline:
Series 1991,
6.950% 09/01/21 1,000 1,100
Series 1992,
6.600% 09/01/13 800 853
PR Puerto Rico Aqueduct & Sewer Authority:
Series 1995,
6.000% 07/01/09 1,250 1,352
Series 1995,
6.250% 07/01/13 2,750 3,028
San Diego Sewer Redevelopment, Series 1993,
5.000% 05/15/23 5,000 4,644
State Department Water Resources,
Central Valley Project:
Series J2,
6.125% 12/01/13 3,000 3,139
Series L,
5.500% 12/01/23 5,000 5,006
Tehachapi Water & Sewer District,
8.200% 11/01/20 2,000 2,233
</TABLE>
16
<PAGE>
Investment Portfolio/January 31, 1996
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Turlock Irrigation:
6.000% 01/01/11 (d) $ 1,000 $ 1,086
6.000% 01/01/12 (d) 500 542
Turlock Irrigation District, Series 1991,
7.300% 01/01/11 1,500 1,577
--------
72,198
--------
TOTAL MUNICIPAL BONDS (cost of $373,472) (g) 403,903
--------
SHORT-TERM OBLIGATIONS - 1.4%
--------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (h)
CA Honey Lake Power,
3.700% 09/01/18 100 100
CA State Health Facilities Financing
Authority, St. Francis Memorial Hospital,
Series B,
3.250% 11/01/19 1,800 1,800
NY New York City, Series D,
2.950% 02/01/20 2,000 2,000
NY State Energy Research & Development
Authority, Niagara Mohawk Project,
3.900% 12/01/23 1,800 1,800
--------
TOTAL SHORT-TERM OBLIGATIONS 5,700
--------
OTHER ASSETS & LIABILITIES, NET - 0.5% 1,903
--------------------------------------------------------------------------------
NET ASSETS - 100.0% $411,506
--------
</TABLE>
NOTES TO INVESTMENT PORTFOLIO:
--------------------------------------------------------------------------------
(a) Zero coupon bond.
(b) These securities, or a portion thereof, with a total market value of $6,509
are being used to collateralize the delayed delivery purchases indicated
in note (d) below.
(c) These securities, or a portion thereof, with a total market value of $49,730
are being used to collateralize open futures contracts.
(d) These securities have been purchased on a delayed delivery basis for
settlement at a future date beyond the customary settlement time.
(e) Shown parenthetically is the interest rate to be paid and the date the Fund
will begin accruing this rate.
(f) The Fund has been informed that the issuer has placed direct obligations
of the U.S. Government in an irrevocable trust, solely for the payment
of the interest and principal.
(g) Cost for federal income tax purposes is the same.
17
<PAGE>
NOTES TO INVESTMENT PORTFOLIO - CONT:
--------------------------------------------------------------------------------
(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, 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 bonds $365 March $109
</TABLE>
Acronym Name
RIB Residual Interest Bonds
See notes to financial statements.
18
<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 $373,472) $ 403,903
Short-term obligations 5,700
---------
409,603
Receivable for:
Investments sold $ 7,012
Interest 6,929
Fund shares sold 170
Other 21 14,132
-------- ---------
Total Assets 423,735
LIABILITIES
Payable for:
Investments purchased 9,333
Distributions 1,657
Fund shares repurchased 682
Variation margin on futures 91
Payable to custodian bank 435
Accrued:
Deferred Trustees fees 3
Other 28
--------
Total Liabilities 12,229
---------
NET ASSETS $ 411,506
---------
Net asset value & redemption price per share -
Class A ($304,581/40,391) $ 7.54(a)
---------
Maximum offering price per share - Class A
($7.54/0.9525) $ 7.92(b)
---------
Net asset value & offering price per share -
Class B ($106,925/14,180) $ 7.54
---------
COMPOSITION OF NET ASSETS
Capital paid in $ 389,569
Undistributed net investment income 28
Accumulated net realized loss (8,413)
Net unrealized appreciation (depreciation) on:
Investments 30,431
Open futures contracts (109)
---------
$ 411,506
---------
</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.
19
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JANUARY 31, 1996
<TABLE>
<CAPTION>
(in thousands)
<S> <C> <C>
INVESTMENT INCOME
Interest $ 25,444
EXPENSES
Management fee $ 2,207
Service fee - Class A 371
Service fee - Class B 125
Distribution fee - Class B 778
Transfer agent 650
Bookkeeping fee 153
Trustees fee 30
Custodian fee 46
Audit fee 38
Legal fee 12
Registration fee 10
Reports to shareholders 12
Other 31
--------
4,463
Fees waived by the Adviser (51) 4,412
-------- --------
Net Investment Income 21,032
--------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain (loss) on:
Investments 7,413
Closed futures contracts (8,154)
--------
Net Realized Loss (741)
Net unrealized appreciation during
the period on:
Investments 37,089
Open futures contracts 1,606
--------
Net Unrealized Appreciation 38,695
--------
Net Gain 37,954
--------
Net Increase in Net Assets from Operations $ 58,986
--------
</TABLE>
See notes to financial statements.
20
<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 $ 21,032 $ 24,886
Net realized loss (741) (5,120)
Net unrealized appreciation (depreciation) 38,695 (45,638)
--------- ---------
Net Increase (Decrease) from Operations 58,986 (25,872)
Distributions:
From net investment income - Class A (16,481) (19,603)
From net investment income - Class B (4,822) (5,218)
--------- ---------
37,683 (50,693)
--------- ---------
Fund Share Transactions:
Receipts for shares sold - Class A 15,423 22,581
Value of distributions reinvested - Class A 7,161 8,857
Cost of shares repurchased - Class A (48,031) (70,189)
--------- ---------
(25,447) (38,751)
--------- ---------
Receipts for shares sold - Class B 11,772 22,661
Value of distributions reinvested - Class B 2,530 2,741
Cost of shares repurchased - Class B (15,919) (19,636)
--------- ---------
(1,617) 5,766
--------- ---------
Net Decrease from Fund Share Transactions (27,064) (32,985)
--------- ---------
Total Increase (Decrease) 10,619 (83,678)
NET ASSETS
Beginning of period 400,887 484,565
--------- ---------
End of period (including undistributed
net investment income
of $28 and $257, respectively) $ 411,506 $ 400,887
--------- ---------
NUMBER OF FUND SHARES
Sold - Class A 2,147 3,184
Issued for distributions reinvested - Class A 995 1,265
Repurchased - Class A (6,670) (10,141)
--------- ---------
(3,528) (5,692)
--------- ---------
Sold - Class B 1,634 3,198
Issued for distributions reinvested - Class B 351 392
Repurchased - Class B (2,203) (2,845)
--------- ---------
(218) 745
--------- ---------
</TABLE>
See notes to financial statements.
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996
NOTE 1. ACCOUNTING POLICIES
--------------------------------------------------------------------------------
ORGANIZATION: Colonial California Tax-Exempt Fund (the Fund), a series of
Colonial Trust V, is a 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 significant
accounting policies 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 sales 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 fee and 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 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 by the
service
22
<PAGE>
Notes to Financial Statements/January 31, 1996
--------------------------------------------------------------------------------
fee applicable to both 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.
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.
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.
23
<PAGE>
Notes to Financial Statements/January 31, 1996
--------------------------------------------------------------------------------
NOTE 2. FEES AND COMPENSATION PAID TO AFFILIATES - CONT.
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 $33,649 on
sales of the Fund's Class A shares and received contingent deferred sales
charges (CDSC) of $361,503 on Class B share redemptions.
The Fund has adopted a 12b-1 plan which requires it to pay 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 0.80% annually of
the Fund's average net assets. Through July 31, 1995, the expense limit was
0.75% 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 $189,225,728 and
$229,882,861, respectively.
Unrealized appreciation (depreciation) at January 31, 1996, based on cost of
investments for both financial statement and federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation $ 30,985,046
Gross unrealized depreciation (554,029)
------------
Net unrealized appreciation $ 30,431,017
------------
</TABLE>
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:
24
<PAGE>
Notes to Financial Statements/January 31, 1996
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year of Capital loss
expiration carryforward
-------------- -------------------
<S> <C>
1998 $ 421,000
1999 409,000
2003 4,419,000
----------
$5,249,000
----------
</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 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 amount recognized in the Fund's Statement of
Assets and Liabilities at any given time.
25
<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
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 $ 6.870 $ 6.870 $ 7.660 $ 7.660 $ 7.350 $ 7.350
--------- --------- --------- --------- --------- ---------
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS:
<S> <C> <C> <C> <C> <C> <C>
Net investment
income (a) 0.388 0.334 0.413 0.360 0.434 0.378
Net realized and
unrealized gain (loss) 0.671 0.671 (0.791) (0.791) 0.315 0.315
--------- --------- --------- --------- --------- ---------
Total from Investment
Operations 1.059 1.005 (0.378) (0.431) 0.749 0.693
--------- --------- --------- --------- --------- ---------
<CAPTION>
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
<S> <C> <C> <C> <C> <C> <C>
From net
investment income (0.389) (0.335) (0.412) (0.359) (0.439) (0.383)
--------- --------- --------- --------- --------- ---------
Net asset value -
End of period $ 7.540 $ 7.540 $ 6.870 $ 6.870 $ 7.660 $ 7.660
--------- --------- --------- --------- --------- ---------
Total return(d)(e) 15.78% 14.94% (4.83)% (5.55)% 10.44% 9.63%
--------- --------- --------- --------- --------- ---------
<CAPTION>
RATIOS TO AVERAGE NET ASSETS
<S> <C> <C> <C> <C> <C> <C>
Expenses 0.89%(g) 1.64%(g) 0.77% 1.52% 0.75% 1.50%
Net investment income 5.33%(g) 4.58%(g) 5.91% 5.16% 5.73% 4.98%
Fees and expenses
waived or borne
by the Adviser 0.01% 0.01% 0.06% 0.06% 0.08% 0.08%
Portfolio turnover 47% 47% 47% 47% 17% 17%
Net assets at end
of period (000) $ 304,581 $ 106,925 $ 301,912 $ 98,975 $ 379,987 $ 104,578
</TABLE>
(a) Net of fees and expenses waived or borne by the Adviser which amounted to:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
$0.001 $0.001 $0.004 $0.004 $0.006 $0.006
</TABLE>
(b) The Fund changed its fiscal year end from November 30 to January 31 in 1992.
(c) Class B shares were initially offered on August 4, 1992. Per share amounts
reflect activity from that date.
(d) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(e) Had the Adviser not waived or reimbursed a portion of expenses, total return
would have been reduced.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
(h) Annualized.
26
<PAGE>
FINANCIAL HIGHLIGHTS - CONTINUED
<TABLE>
<CAPTION>
Two months
ended
January 31 (b) Year ended November 30
--------------------- -----------------------------------
1993 1992 1991
Class A Class B Class A Class B (c) Class A
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 7.270 $ 7.270 $ 7.150 $ 7.410 $ 6.940
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
<S> <C> <C> <C> <C> <C>
Net investment
income (a) 0.076 0.067 0.467 0.143 0.473
Net realized and
unrealized gain (loss) 0.081 0.081 0.109 (0.151) 0.211
--------- --------- --------- --------- ---------
Total from Investment
Operations 0.157 0.148 0.576 (0.008) 0.684
--------- --------- --------- --------- ---------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
<S> <C> <C> <C> <C> <C>
From net
investment income (0.077) (0.068) (0.456) (0.132) (0.474)
--------- --------- --------- --------- ---------
Net asset value -
End of period $ 7.350 $ 7.350 $ 7.270 $ 7.270 $ 7.150
--------- --------- --------- --------- ---------
Total return(d)(e) 8.70% (f) 1.01% (f) 8.27% 1.94% (f) 10.18%
--------- --------- --------- --------- ---------
RATIOS TO AVERAGE NET ASSETS
<S> <C> <C> <C> <C> <C>
Expenses 0.65% (h) 1.40% (h) 0.71% 1.46% (h) 0.80%
Net investment income 6.29% (h) 5.54% (h) 6.44% 5.69% (h) 6.69%
Fees and expenses
waived or borne
by the Adviser 0.21% (h) 0.21% (h) 0.13% 0.13% (h) 0.05%
Portfolio turnover 19% (h) 19% (h) 12% 12% 11%
Net assets at end
of period (000) $ 337,409 $ 33,819 $ 324,012 $ 22,797 $ 295,459
</TABLE>
(a) Net of fees and expenses waived or borne by the Adviser which amounted to:
<TABLE>
<S> <C> <C> <C> <C> <C>
$0.002 $0.002 $0.010 $0.010 $0.003
</TABLE>
(b) The Fund changed its fiscal year end from November 30 to January 31 in 1992.
(c) Class B shares were initially offered on August 4, 1992. Per share amounts
reflect activity from that date.
(d) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(e) Had the Adviser not waived or reimbursed a portion of expenses, total return
would have been reduced.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
(h) Annualized.
--------------------------------------------------------------------------------
Federal income tax information (unaudited)
All of the distributions will be treated as exempt income for federal income
tax purposes.
--------------------------------------------------------------------------------
27
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
T0 THE TRUSTEES OF COLONIAL TRUST V AND THE SHAREHOLDERS OF
COLONIAL CALIFORNIA 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 California 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
5
<PAGE>
INVESTMENT PORTFOLIO (Connecticut)
JANUARY 31, 1996 (IN THOUSANDS)
<TABLE>
<CAPTION>
MUNICIPAL BONDS - 98.2% PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
EDUCATION - 5.9%
State Health & Educational
Facilities Authority:
Connecticut State University, Series 1995-A,
5.125% 11/01/10 $1,145 $1,152
Kent School, Series 1995-B,
5.400% 07/01/23 1,300 1,300
The Taft School, Series 1993-B:
5.250% 07/01/13 350 346
5.400% 07/01/20 1,750 1,739
Trinity College, Series C,
6.000% 07/01/12 1,000 1,055
Yale University:
Series K,
6.375% 07/01/13 500 518
Series 1992-R, RIB (variable rate),
7.791% 06/10/30 2,500 2,638
State Regional School District No.5:
Series 1992,
6.300% 03/01/10 400 430
Series 1993,
5.600% 02/15/12 150 155
State Regional School District No.14,
Series 1991,
6.100% 12/15/06 285 315
------
9,648
------
................................................................................
GENERAL OBLIGATIONS - 24.8%
Brookfield, Series 1992:
6.000% 09/15/09 240 264
6.000% 09/15/10 235 258
Danbury:
Series 1992,
5.625% 08/15/11 690 725
Series 1994:
4.500% 02/01/12 1,280 1,182
4.500% 02/01/13 1,280 1,171
East Haddam, Series 1991,
6.300% 06/15/09 (a) 260 277
</TABLE>
6
<PAGE>
Investment Portfolio/January 31, 1996
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Granby, Series 1993:
6.500% 04/01/09 (a) $ 200 $ 230
6.550% 04/01/10 175 202
Griswold, Series 1992,
6.000% 04/15/09 (a) 410 436
Groton, Series Lot A,
5.750% 01/15/07 (a) 285 302
Hamden, Series 1992:
6.000% 10/01/11 425 449
6.000% 10/01/12 425 447
Hartford County Metropolitan District:
5.625% 02/01/11 600 629
5.625% 02/01/12 600 626
5.625% 02/01/13 600 628
Series 1993:
5.200% 12/01/12 600 595
5.200% 12/01/13 600 591
Montville, Series 1993,
6.300% 03/01/12 335 378
New Britain:
Series 1992,
6.000% 02/01/08 (a) 400 438
Series 1993-A,
6.000% 10/01/12 2,000 2,187
North Branford:
6.200% 02/15/11 195 206
6.200% 02/15/12 225 238
Norwich, Series 1994:
5.750% 09/15/13 875 908
5.750% 09/15/14 870 899
PR Commonwealth of Puerto Rico,
Series 1994,
6.500% 07/01/23 2,000 2,157
Plainfield, Series 1992,
6.375% 08/01/11 500 543
Somers:
6.000% 01/15/11 125 132
6.250% 01/15/08 270 290
South Windsor, Series 1992,
6.200% 09/01/10 495 526
Southington, Series 1993,
5.000% 06/15/13 210 206
Stamford:
Series 1992,
6.125% 11/01/11 1,050 1,133
Series 1995,
5.250% 03/15/14 2,750 2,764
</TABLE>
7
<PAGE>
Investment Portfolio/January 31, 1996
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MUNICIPAL BONDS - CONT. PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
GENERAL OBLIGATIONS - CONT.
State:
Series 1989-B,
(b) 11/01/09 $1,450 $ 718
Series 1992-A1,
(b) 05/15/12 524 222
Series 1993-A,
5.600% 11/15/10 1,000 1,039
Series 1993-B:
5.400% 03/15/09 100 104
5.400% 09/15/09 4,500 4,657
Series 1995-B,
5.375% 10/01/15 5,000 4,963
State Development Authority,
Series 1993-A,
5.250% 11/15/11 750 751
Torrington:
Series 1992,
6.400% 05/15/10 750 809
Series 1993:
5.400% 04/15/10 725 739
5.400% 04/15/11 725 735
Vernon, Series 1988,
7.100% 10/15/03 250 293
Waterbury, Series 1993,
5.375% 04/15/08 (a) 750 773
West Haven, Series 1993-B:
5.400% 06/01/10 705 719
5.400% 06/01/11 740 751
Westbrook, Series 1992:
6.300% 03/15/12 265 298
6.400% 03/15/09 (a) 630 710
-------
40,298
-------
................................................................................
HEALTH - 20.9%
HOSPITALS - 13.7%
State Health & Educational
Facilities Authority:
Bridgeport Hospital, Series A,
6.500% 07/01/12 1,000 1,096
Danbury Hospital:
Series E,
6.500% 07/01/14 1,400 1,507
Series F,
5.375% 07/01/17 1,500 1,504
Manchester Memorial Hospital,
Series 1993-D,
5.750% 07/01/22 (a) 400 409
Middlesex Hospital, Series G,
6.250% 07/01/22 1,250 1,327
</TABLE>
8
<PAGE>
Investment Portfolio/January 31, 1996
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
New Britain Hospital, Series 1991-A,
7.750% 07/01/22 $ 200 $ 216
Norwalk Hospital, Series D:
6.250% 07/01/12 1,750 1,875
6.250% 07/01/22 1,000 1,061
St. Francis Medical Center:
Series B:
6.125% 07/01/10 1,000 1,063
6.200% 07/01/22 1,000 1,057
Series 1993-C,
5.000% 07/01/13 (a) 4,500 4,382
St. Raphael Hospital:
Series E,
6.750% 07/01/13 1,400 1,528
Series 1992-F,
6.200% 07/01/14 750 799
Series 1992-G,
6.200% 07/01/14 225 240
Series 1993-H,
5.250% 07/01/09 (a) 3,410 3,482
William W. Backus Hospital, Series C,
6.000% 07/01/12 250 252
Yale-New Haven Hospital, Series G,
6.500% 07/01/12 500 547
-------
22,345
-------
NURSING HOMES - 7.2%
State Development Authority:
Clintonville Manor Realty, Inc.,
Series 1992,
6.750% 06/20/21 1,490 1,563
Duncaster Inc., Series 1992:
6.700% 09/01/07 500 546
6.750% 09/01/15 2,500 2,681
State Health & Educational
Facilities Authority:
AHF/Windsor Nursing Home Project,
7.125% 11/01/24 2,000 2,260
Mansfield Center for Nursing, Series 1993,
6.000% 11/01/22 1,250 1,284
Noble Horizons Nursing Home,
Series 1993:
5.875% 11/01/12 640 662
6.000% 11/01/22 600 616
Pope John Paul II Center for Health,
6.250% 11/01/13 2,000 2,128
-------
11,740
-------
</TABLE>
9
<PAGE>
Investment Portfolio/January 31, 1996
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MUNICIPAL BONDS - CONT. PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
HOUSING - 14.2%
MULTI-FAMILY - 11.6%
New Britain Housing Authority,
Nathan Hale Apartments:
Series 1992-A,
6.500% 07/01/02 $ 135 $ 145
Series 1992-B,
6.875% 07/01/24 2,590 2,749
State Housing Finance Authority:
Series 1991-C,
6.600% 11/15/23 1,590 1,669
Series 1991 C-1,
6.450% 11/15/11 1,325 1,380
Series 1991 C-2,
6.700% 11/15/22 110 114
Series 1992-B,
6.700% 11/15/12 2,700 2,886
Series 1993-B:
5.650% 05/15/06 550 575
6.200% 05/15/12 5,000 5,175
Series 1994 D-1,
6.625% 05/15/24 500 529
Series F-2,
6.200% 05/15/18 3,000 3,056
Waterbury Nonprofit Housing Corp.,
Fairmont Heights, Series 1993-A,
6.500% 01/01/26 600 626
-------
18,904
-------
SINGLE-FAMILY - 2.6%
State Housing Finance Authority:
Series B-2,
6.750% 05/15/22 2,500 2,622
Series 1990 B-4,
7.300% 11/15/03 225 240
Series C-1,
6.350% 05/15/17 1,250 1,309
-------
4,171
-------
.................................................................................
PUBLIC FACILITIES IMPROVEMENT - 5.3%
Farmington, Series 1993:
5.700% 01/15/12 590 633
5.700% 01/15/13 570 610
PR Commonwealth of Puerto Rico,
Public Buildings Authority, Series 1993-M,
stepped coupon, (5.700% 07/01/98)
3.750% 07/01/16 (c) 3,300 3,168
</TABLE>
10
<PAGE>
Investment Portfolio/January 31, 1996
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
State Certificates of Participation,
Middletown Courthouse Project:
6.250% 12/15/09 $1,685 $1,828
6.250% 12/15/10 750 812
6.250% 12/15/12 100 107
6.250% 12/15/13 850 914
State Development Authority,
Jewish Community of New Haven,
Series 1992,
6.600% 09/01/17 500 547
-----
8,619
-----
................................................................................
PUBLIC INFRASTRUCTURE - 0.7%
TURNPIKES/TOLL ROADS/BRIDGES
PR Commonwealth of
Puerto Rico Highway & Transportation Authority,
Series W,
5.500% 07/01/09 1,110 1,152
-----
................................................................................
REFUNDED/ESCROW/SPECIAL OBLIGATIONS (d) - 0.8%
State Health & Educational
Facilities Authority:
Lawrence & Memorial Hospitals, Series C,
6.250% 07/01/22 400 450
Lutheran General Health Care System, Series 1989,
7.250% 07/01/04 (a) 185 217
Stratford, General Obligation,
Series 1992,
7.300% 03/01/12 500 578
-----
1,245
-----
................................................................................
SOLID WASTE - 6.0%
MISCELLANEOUS DISPOSAL - 0.9%
State Disposal Facility,
Waterbury Project,
Series 1995,
9.375% 06/01/16 1,500 1,517
-----
RESOURCE RECOVERY - 5.1%
Bristol Resource Recovery Facility,
Ogden Martin Systems, Inc., Series 1995,
6.500% 07/01/14 1,500 1,599
State Development Authority,
Pfizer Inc. Project, Series 1994,
7.000% 07/01/25 2,000 2,272
</TABLE>
11
<PAGE>
Investment Portfolio/January 31, 1996
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
SOLID WASTE - CONT.
RESOURCE RECOVERY - CONT.
American Re-Fuel Co.:
Series 1988-A,
8.000% 11/15/15 $2,500 $2,750
Series 1992-A,
6.450% 11/15/22 1,425 1,493
State Resource Recovery Authority:
Series 1985-B,
7.300% 11/15/12 200 211
------
8,325
------
................................................................................
STUDENT LOAN - 0.9%
State Higher Education
Supplemental Loan Authority:
Series 1991-A,
7.200% 11/15/10 855 920
Series 1992-A,
6.375% 11/15/99 465 493
------
1,413
------
................................................................................
TRANSPORTATION - 4.8%
State Special Tax Obligation,
Transportation Infrastructure:
Series 1991-B,
6.250% 10/01/09 2,500 2,709
Series 1992-B,
6.125% 09/01/12 4,600 5,089
------
7,798
------
................................................................................
UTILITY - 5.2%
INVESTOR OWNED - 2.3%
State Development Authority,
New England Power Co.,
Series 1985,
7.250% 10/15/15 3,450 3,748
------
JOINT POWER AUTHORITY - 1.1%
State Municipal Electric Energy
Cooperative, Series 1993-A,
5.000% 01/01/18 1,750 1,687
------
MUNICIPAL ELECTRIC - 1.8%
PR Commonwealth of Puerto Rico,
Electric Power Authority, Series 1994-T,
5.500% 07/01/20 3,000 2,981
------
</TABLE>
12
<PAGE>
Investment Portfolio/January 31, 1996
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
WATER & SEWER - 8.7%
Hartford County Metropolitan
District, Series 1991,
6.200% 11/15/10 $ 220 $ 249
New Britain,
Series 1993-B,
6.000% 03/01/12 1,000 1,092
South Central Regional Water Authority,
Series 11,
5.750% 08/01/12 3,500 3,644
State Clean Water Fund:
Series 1991,
7.000% 01/01/11 1,850 2,077
Series 1992,
6.125% 02/01/12 3,730 4,000
Series 1993,
5.875% 04/01/09 1,000 1,094
Series 1994,
5.800% 06/01/16 1,000 1,052
State Development Authority,
Bridgeport Hydraulic Co., Series B,
5.500% 06/01/28 1,000 1,009
--------
14,217
--------
TOTAL INVESTMENTS (cost of $149,680)(e) 159,808
--------
SHORT-TERM OBLIGATIONS - 1.0 %
--------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (f)
MI Farmington Botsford Hospital,
3.850% 02/15/16 100 100
NC Craven County Industrial Facilities,
3.850% 05/01/11 800 800
NY New York City Municipal Water
Finance Authority,
Series 1995-A,
3.800% 06/15/25 500 500
OH Twinsburg,
United Stationers Supply Co.,
Series 1986,
3.900% 12/01/11 300 300
--------
TOTAL SHORT-TERM OBLIGATIONS 1,700
--------
OTHER ASSETS & LIABILITIES, NET - 0.8 % 1,316
--------------------------------------------------------------------------------
NET ASSETS - 100.0% $162,824
========
</TABLE>
13
<PAGE>
Investment Portfolio/January 31, 1996
--------------------------------------------------------------------------------
NOTES TO INVESTMENT PORTFOLIO:
--------------------------------------------------------------------------------
(a) These securities, with a total market value of $11,656, are being used to
collateralize open futures contracts.
(b) Zero coupon bond.
(c) Shown parenthetically is the interest rate to be paid and the date the Fund
will begin accruing this rate.
(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) Cost for federal income tax purposes is the same.
(f) 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 Expiration depreciation
Type by contracts month at 1/31/96
------------------------------------------------------------------------------
<S> <C> <C>
Municipal bond $8,000 March $46
</TABLE>
Acronym Name
------- ----------------------
RIB Residual Interest Bond
See notes to financial statements.
14
<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 $149,680) $ 159,808
Short-term obligations 1,700
---------
161,508
Cash $ 20
Receivable for:
Interest 2,121
Fund shares sold 215
Deferred organization expenses 3
Other 1 2,360
------- ---------
Total Assets 163,868
LIABILITIES
Payable for:
Distributions 646
Fund shares repurchased 362
Variation margin on futures 20
Payable to Adviser 5
Accrued:
Deferred Trustees fees 2
Other 9
-------
Total Liabilities 1,044
---------
NET ASSETS $ 162,824
=========
Net asset value & redemption price per share -
Class A ($80,039/10,496) $7.63
=========
Maximum offering price per share - Class A
($7.63/0.9525) $8.01 (a)
=========
Net asset value & offering price per share -
Class B ($82,785/10,857) $7.63 (b)
=========
COMPOSITION OF NET ASSETS
Capital paid in $ 159,430
Undistributed net investment income 52
Accumulated net realized loss (6,740)
Net unrealized appreciation (depreciation) on:
Investments 10,128
Open futures contracts (46)
---------
$ 162,824
=========
</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.
15
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JANUARY 31, 1996
<TABLE>
<CAPTION>
(in thousands)
<S> <C> <C>
INVESTMENT INCOME
Interest $ 9,383
EXPENSES
Management fee $ 854
Service fee - Class A 101
Service fee - Class B 99
Distribution fee - Class B 596
Transfer agent 256
Bookkeeping fee 65
Trustees fee 18
Custodian fee 9
Audit fee 32
Legal fee 8
Registration fee 5
Reports to shareholders 5
Amortization of deferred
organization expenses 3
Other 13
-------
2,064
Fees waived by the Adviser (672) 1,392
------- -------
Net Investment Income 7,991
-------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized loss on:
Investments (78)
Closed futures contracts (2,859)
-------
Net Realized Loss (2,937)
Net unrealized appreciation during
the period on:
Investments 14,061
Open futures contracts 521
-------
Net Unrealized Gain 14,582
-------
Net Gain 11,645
-------
Net Increase in Net Assets from Operations $19,636
=======
</TABLE>
See notes to financial statements.
16
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended
(in thousands) January 31
------------------------
INCREASE (DECREASE) IN NET ASSETS 1996 1995
-------- --------
<S> <C> <C>
Operations:
Net investment income $ 7,991 $ 8,394
Net realized loss (2,937) (2,357)
Net unrealized appreciation (depreciation) 14,582 (15,133)
-------- --------
Net Increase (Decrease) from Operations 19,636 (9,096)
Distributions:
From net investment income - Class A (4,306) (4,752)
From net investment income - Class B (3,736) (3,634)
From net realized gains - Class A - (12)
From net realized gains - Class B - (9)
-------- --------
11,594 (17,503)
-------- --------
Fund Share Transactions:
Receipts for shares sold - Class A 12,024 9,992
Value of distributions reinvested - Class A 2,577 2,706
Cost of shares repurchased - Class A (14,939) (19,845)
-------- --------
(338) (7,147)
-------- --------
Receipts for shares sold - Class B 10,077 16,129
Value of distributions reinvested - Class B 2,318 2,236
Cost of shares repurchased - Class B (9,023) (8,746)
-------- --------
3,372 9,619
-------- --------
Net Increase from Fund Share Transactions 3,034 2,472
-------- --------
Total Increase (Decrease) 14,628 (15,031)
NET ASSETS
Beginning of period 148,196 163,227
-------- --------
End of period (including undistributed
net investment income of $52 and $91,
respectively) $162,824 $148,196
======== ========
NUMBER OF FUND SHARES
Sold - Class A 1,635 1,375
Issued for distributions reinvested - Class A 350 376
Repurchased - Class A (2,028) (2,800)
-------- --------
(43) (1,049)
-------- --------
Sold - Class B 1,370 2,223
Issued for distributions reinvested - Class B 315 311
Repurchased - Class B (1,221) (1,240)
-------- --------
464 1,294
-------- --------
</TABLE>
See notes to financial statements.
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996
NOTE 1. ACCOUNTING POLICIES
--------------------------------------------------------------------------------
ORGANIZATION: Colonial Connecticut 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 fee and the Class B
distribution fee), realized and unrealized gains (losses), are allocated to each
18
<PAGE>
Notes to Financial Statements/January 31, 1996
--------------------------------------------------------------------------------
class proportionately on a daily basis for purposes of determining the net asset
value of each class.
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 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.
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:
19
<PAGE>
Notes to Financial Statements/January 31, 1996
--------------------------------------------------------------------------------
NOTE 2. FEES AND COMPENSATION PAID TO AFFILIATES - CONT.
--------------------------------------------------------------------------------
<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.
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 $30,459 on
sales of the Fund's Class A shares and received contingent deferred sales
charges (CDSC) of $171,016 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 0.45% annually of
the Fund's average net assets. Through July 31, 1995, the expense limit was
0.30% 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.
20
<PAGE>
Notes to Financial Statements/January 31, 1996
--------------------------------------------------------------------------------
NOTE 3. PORTFOLIO INFORMATION
--------------------------------------------------------------------------------
INVESTMENT ACTIVITY: During the year ended January 31, 1996, purchases and sales
of investments, other than short-term obligations, were $20,597,170 and
$21,844,343, respectively.
Unrealized appreciation (depreciation) at January 31, 1996, based on cost of
investment for both financial statement and federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation $10,255,925
Gross unrealized depreciation (128,119)
-----------
Net unrealized appreciation $10,127,806
===========
</TABLE>
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> <C>
2003 $2,374,000
2004 2,209,000
----------
$4,583,000
==========
</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 the value of portfolio securities due
to anticipated changes in interest rates and/or market conditions, for duration
management, or when the transactions are economically appropriate to the
reduction of risk inherent in the management of the Fund and not for trading
purposes. The use of futures contracts and options involves certain risks, which
include (1) imperfect correlation between the price movement of the instruments
and the underlying securities, (2) inability to close out positions due to
different trading hours or the temporary absence of a liquid market for either
the instruments 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.
21
<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
Class A Class B Class A Class B
------- -------- ------- -------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 7.080 $ 7.080 $ 7.890 $ 7.890
------- -------- ------- -------
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income (a) 0.400 0.345 0.418 0.363
Net realized and
unrealized gain (loss) 0.552 0.552 (0.809) (0.809)
------- -------- ------- -------
Total from Investment
Operations 0.952 0.897 (0.391) (0.446)
------- -------- ------- -------
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net investment income (0.402) (0.347) (0.418) (0.363)
In excess of net investment income -- -- -- --
From net realized gains -- -- (0.001) (0.001)
In excess of net realized gains -- -- -- --
------- -------- ------- -------
Total from Distributions
Declared to Shareholders (0.402) (0.347) (0.419) (0.364)
------- -------- ------- -------
Net asset value - End of period $ 7.630 $ 7.630 $ 7.080 $ 7.080
======= ======== ======= =======
Total return (d)(e) 13.77% 12.93% (4.85)% (5.57)%
======= ======== ======= =======
RATIOS TO AVERAGE NET ASSETS
Expenses 0.51 (g) 1.25 (g) 0.32% 1.07%
Net investment income 5.42 (g) 4.68 (g) 5.81% 5.06%
Fees and expenses waived
or borne by the Adviser 0.42% 0.42% 0.55% 0.55%
Portfolio turnover 13% 13% 22% 22%
Net assets at end
of period (000) $80,039 $82,785 $74,616 $73,580
(a) Net of fees and expenses waived or borne by the
Adviser which amounted to....................... $ 0.031 $ 0.031 $ 0.039 $ 0.039
(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 contingent deferred sales charge.
(e) Had the Adviser not waived or reimbursed a portion of expenses, total
return would have been reduced.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
(h) Annualized.
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Period ended
Year ended January 31 January 31
------------------------------------------------------ ------------
1994 1993 1992
Class A Class B Class A Class B (b) Class A (c)
------- ------- ------- ------- ------------
<C> <C> <C> <C> <C>
$ 7.420 $ 7.420 $ 7.190 $ 7.200 $ 7.140
------- ------- ------- ------- -------
0.429 0.372 0.449 0.256 0.118
0.465 0.465 0.270 0.257 0.046
------- ------- ------- ------- -------
0.894 0.837 0.719 0.513 0.164
------- ------- ------- ------- -------
(0.424) (0.367) (0.452) (0.256) (0.114)
-- -- (0.002) (0.002) --
-- -- (0.021) (0.021) --
-- -- (0.014) (0.014) --
------- ------- ------- ------- -------
(0.424) (0.367) (0.489) (0.293) (0.114)
------- ------- ------- ------- -------
$ 7.890 $ 7.890 $ 7.420 $ 7.420 $ 7.190
======= ======= ======= ======= =======
12.30% 11.49% 10.34% 7.23% (f) 2.31 (f)
======= ======= ======= ======= =======
0.22% 0.97% -- 0.75% (h) --
5.48% 4.73% 6.00% 5.25% (h) 4.68 (h)
0.65% 0.65% 0.90% 0.90% (h) 1.32 (h)
5% 5% 4% 4% 53%(h)
$91,436 $71,791 $63,126 $27,839 $12,349
$ 0.051 $ 0.051 $ 0.067 $ 0.042 $ 0.033
</TABLE>
--------------------------------------------------------------------------------
Federal income tax information (unaudited)
All of the distributions will be treated as exempt income
for federal income tax purposes.
23
<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, 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, provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
March 13, 1996
5
<PAGE>
INVESTMENT PORTFOLIO (Florida)
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
5
<PAGE>
INVESTMENT PORTFOLIO (Massachusetts)
JANUARY 31, 1996 (IN THOUSANDS)
<TABLE>
<CAPTION>
MUNICIPAL BONDS - 99.0% PAR VALUE
------------------------------------------------------------------------
<S> <C> <C>
CERTIFICATES OF PARTICIPATION - 0.1%
Massachusetts Bay Transportation
Authority, Series 1988,
7.750% 01/15/06 $ 250 $ 297
-------
------------------------------------------------------------------------
CONSTRUCTION - 0.0%
BUILDING CONSTRUCTION
State Industrial Finance Agency,
Series 1987 G,
7.875% 05/01/07 100 101
-------
------------------------------------------------------------------------
EDUCATION - 15.8%
State College Building Authority:
Series 1994 A,
7.500% 05/01/14 1,825 2,304
Southeastern University,
Series 1995 A,
5.750% 05/01/16 1,250 1,294
State Health & Educational
Facilities Authority:
Amherst College, Series E,
6.800% 11/01/21 500 550
Bentley College, Series I,
6.125% 07/17/17 1,250 1,317
Berkley College of Music, Series C,
6.875% 10/01/21 1,000 1,106
Boston College, Series K:
5.250% 06/01/18 6,000 5,955
5.250% 06/01/23 5,850 5,762
Boston University, Series 1991 L,
RIB, (variable rate),
9.092% 10/01/31 1,000 1,157
Community Colleges Program, Series A,
6.600% 10/01/22 1,250 1,337
Harvard University:
Series M,
5.500% 12/01/15 1,500 1,534
Series N,
6.250% 04/01/20 9,250 10,776
Suffolk University, Series B:
6.250% 07/01/12 1,000 1,054
6.350% 07/01/22 1,000 1,049
Tufts University, Series 1988 D,
7.700% 08/01/08 400 442
</TABLE>
6
<PAGE>
Investment Portfolio/January 31, 1996
------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Worcester Polytechnical Institute, Series E,
6.625% 09/01/17 $ 500 $ 542
6.750% 09/01/11 500 547
State Industrial Finance Agency:
Babson College,
Series 1992 A,
6.375% 10/01/09 1,000 1,100
Concord Academy,
Series 1991,
6.900% 09/01/21 400 446
Emerson College,
Series 1991 A,
8.900% 01/01/18 500 564
Milton Academy,
Series 1993 B,
5.250% 09/01/19 1,000 984
Phillips Academy,
Series 1993,
5.375% 09/01/23 2,050 2,060
University of Massachusetts
Building Authority,
Series 1991 A,
7.200% 05/01/04 400 469
-------
42,349
-------
------------------------------------------------------------------------
GENERAL OBLIGATIONS - 11.4%
Amherst,
Series 1992,
6.500% 01/15/12 695 749
Andover, Andover Old Town Hall,
Series 1989,
7.700% 12/15/04 1,255 1,407
Boston,
Series 1992 A,
6.500% 07/01/12 1,340 1,459
Fall River,
7.200% 06/01/10 1,250 1,408
Groveland,
Series 1991,
6.900% 06/15/08 (a) 250 277
Haverhill,
8.200% 08/15/09 935 1,051
Holyoke,
School Project Loan,
7.650% 08/01/09 500 548
Lowell,
8.400% 01/15/09 1,000 1,169
Mansfield,
6.700% 01/15/11 1,000 1,085
Nantucket, Series 1991,
6.800% 12/01/11 1,000 1,119
</TABLE>
7
<PAGE>
Investment Portfolio/January 31, 1996
------------------------------------------------------------------------
<TABLE>
<CAPTION>
MUNICIPAL BONDS - CONT. PAR VALUE
------------------------------------------------------------------------
<S> <C> <C>
GENERAL OBLIGATIONS - CONT
Nauset Regional School District:
Series A:
6.400% 06/15/09 $ 220 $ 236
6.400% 06/15/10 220 235
Series B:
6.400% 09/15/09 260 279
6.400% 09/15/10 260 279
Peabody:
6.900% 08/01/07 485 538
6.950% 08/01/08 500 555
PR Commonwealth of Puerto Rico,
Series 1994,
6.500% 07/01/23 5,000 5,394
Southern Berkshire Regional
School District,
7.000% 04/15/11 500 569
State:
Series 1990 A,
7.250% 06/01/96 500 506
Series 1990 B,
7.000% 07/01/09 4,385 5,213
Series 1991 B:
(b) 06/01/07 450 260
6.500% 08/01/11 2,000 2,167
Series 1991 C,
6.500% 08/01/11 1,250 1,355
Series 1992 B,
6.500% 08/01/08 1,000 1,141
Swansea,
School Project Loan:
6.800% 01/15/09 250 268
6.800% 01/15/10 125 134
6.800% 01/15/11 210 225
Weymouth,
Series 1992:
6.700% 06/15/09 200 214
6.700% 06/15/10 200 214
6.700% 06/15/11 155 166
6.700% 06/15/12 140 149
Woburn,
7.200% 04/01/04 130 144
-------
30,513
-------
------------------------------------------------------------------------
HEALTH - 17.1%
HOSPITALS - 13.2%
State Health & Educational
Facilities Authority,
Addison Gilbert Hospital, Series 1993 C,
5.750% 07/01/14 2,000 1,892
</TABLE>
8
<PAGE>
Investment Portfolio/January 31, 1996
------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Berkshire Health System, Series C,
6.000% 10/01/20 $1,000 $ 927
Beth Israel Hospital, Series D,
7.800% 07/01/14 250 271
Beverly Hospital, Series D,
7.300% 07/01/13 1,000 1,104
Capital Asset Program, Series 1989 F,
7.300% 10/01/18 750 844
Charlton Memorial Hospital, Series B:
7.250% 07/01/07 500 551
7.250% 07/01/13 500 534
Children's Hospital, Series E:
5.500% 10/01/19 3,500 3,474
6.200% 10/01/16 2,000 2,092
Dana Farber Cancer Institute:
Series 1992 F,
6.000% 12/01/15 1,000 1,052
Series 1995 C:
5.500% 12/01/27 6,000 5,663
6.650% 12/01/15 250 261
Holyoke Hospital, Series B,
6.000% 07/01/23 2,000 2,052
Lahey Clinic, Series 1993 B,
5.375% 07/01/23 5,100 5,087
Lowell General Hospital, Series 1991 A,
8.400% 06/01/11 500 561
Massachusetts General Hospital, Series F,
6.250% 07/01/20 2,500 2,653
Medical Center of Central Mass., Series A,
7.000% 07/01/12 1,000 1,070
St. Elizabeth's Hospital, Series E,
9.746% 08/15/21 1,000 1,179
Spaulding Rehabilitation Hospital, Series A,
7.625% 07/01/21 400 431
University Hospital, Series C,
7.250% 07/01/19 1,000 1,125
Valley Regional Health System, Series 1994,
5.750% 07/01/18 2,000 2,030
State Industrial Finance Agency,
Harvard Community Health Plan, Inc.,
Series 1988 B,
8.125% 10/01/17 640 696
-------
35,549
-------
NURSING HOMES - 3.9%
Boston,
St. Joseph Nursing Care Center, Inc.
Series 1990,
10.000% 01/01/20(c) 495 549
</TABLE>
9
<PAGE>
Investment Portfolio/January 31, 1996
-------------------------------------------------------------------------
<TABLE>
<CAPTION>
MUNICIPAL BONDS - CONT. PAR VALUE
-------------------------------------------------------------------------
<S> <C> <C>
HEALTH - CONT
NURSING HOMES - CONT
State Health & Educational
Facilities Authority:
Corporation for Independent Living,
8.100% 07/01/18 $ 300 $ 306
Deutsches Altenheim, Inc., Series A,
7.700% 11/01/31 985 1,075
Fairview Extended Care Service, Inc., Series A,
10.250% 01/01/21 500 573
State Industrial Finance Agency:
American Health Foundation Inc.,
Series 1989,
10.125% 03/01/19 1,805 1,911
Belmont Home Care,
Series 1995 A,
9.270% 01/01/25 2,000 2,128
GF/Massachusetts Inc.,
Series 1994,
8.300% 07/01/23 2,500 2,481
Seacoast Nursing Home,
Series 1991,
9.625% 12/01/21 1,260 1,399
-------
10,422
-------
-------------------------------------------------------------------------
HOUSING - 9.0%
ASSISTED LIVING/SENIOR - 0.4%
State Industrial Finance Agency,
Heights Crossing Ltd.,
Series 1995,
6.000% 02/01/15 1,125 1,129
-------
MULTI - FAMILY - 5.3%
Boston-Mount Pleasant
Development Corp.,
Section 8 Assisted, Series A,
6.750% 08/01/23 1,700 1,783
Framingham Housing Authority,
Beaver Terrace Apartments,
Series 1992 A,
6.600% 08/20/16 655 676
State Housing Finance Agency:
Series 1987 B,
8.500% 08/01/20 10 10
Series 1988 B,
8.100% 08/01/23 455 478
Series 1989 A,
7.600% 12/01/16 690 736
Series 1990 A,
8.150% 02/01/29 135 145
Series 1992 C,
6.875% 11/15/11 3,000 3,236
</TABLE>
10
<PAGE>
Investment Portfolio/January 31, 1996
-------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Series 1993 A,
6.100% 06/01/26 $2,340 $ 2,352
Series 1994 A,
6.750% 07/01/28 4,500 4,731
-------
14,147
-------
SINGLE - FAMILY - 3.3%
State Housing Finance Agency:
Series 3,
7.875% 06/01/14 400 415
Series 5,
8.375% 06/01/15 500 523
Series 6,
8.100% 12/01/14 495 520
Series 7,
8.100% 06/01/20 420 440
Series 8,
7.700% 06/01/17 575 609
Series 9,
8.100% 12/01/21 500 526
Series 12,
7.600% 12/01/13 250 263
Series 13,
7.950% 06/01/23 1,455 1,542
Series 18,
7.350% 12/01/16 1,000 1,070
Series 1987 4,
7.375% 06/01/14 705 727
Series 1987 A,
9.000% 12/01/18 215 225
Series 1988 A,
8.400% 08/01/21 1,210 1,254
Series 1989 A:
8.200% 08/01/15 245 254
8.200% 08/01/27 330 349
-------
8,717
-------
-------------------------------------------------------------------------
PUBLIC ADMINISTRATION - 0.4%
JUSTICE & PUBLIC ORDER
Plymouth County Correctional Facility,
Series A,
7.000% 04/01/22 1,000 1,099
-------
-------------------------------------------------------------------------
PUBLIC FACILITIES IMPROVEMENT - 0.8%
PR Commonwealth of Puerto Rico,
Public Buildings Authority, Series 1993-M,
stepped coupon, (5.700% 07/01/98)
3.750% 07/01/16(d) 2,000 1,920
</TABLE>
11
<PAGE>
Investment Portfolio/January 31, 1996
------------------------------------------------------------------------
<TABLE>
<CAPTION>
MUNICIPAL BONDS - CONT. PAR VALUE
------------------------------------------------------------------------
<S> <C> <C>
PUBLIC FACILITIES IMPROVEMENT - CONT
VI Virgin Islands Public Finance
Authority,
Series 1992 A,
7.000% 10/01/02 $ 250 $ 274
------
2,194
------
-----------------------------------------------------------------------
PUBLIC INFRASTRUCTURE - 3.3%
TURNPIKES/TOLL ROADS/BRIDGES
PR Commonwealth of Puerto Rico
Highway & Transportation Authority,
Series W,
5.500% 07/01/09 660 685
State Turnpike Authority,
Series 1993 A:
5.000% 01/01/20 6,000 5,633
5.125% 01/01/23 2,500 2,422
------
8,740
------
-----------------------------------------------------------------------
REFUNDED/ESCROW/SPECIAL OBLIGATIONS (e) - 7.6%
Bay Transportation Authority,
General Transportation System,
Series 1990-B,
7.875% 03/01/21 4,000 4,740
Boston Water & Sewer Commission,
Series 1991 A,
7.000% 11/01/18 2,700 3,132
Leominster,
7.500% 04/01/09(a) 1,075 1,234
Lynn,
7.850% 01/15/11 1,000 1,219
Palmer,
Series 1990 B,
7.700% 10/01/10 1,000 1,170
State College Building Authority,
Southeastern University,
Series 1986 A,
7.800% 05/01/16 650 670
State Health & Educational
Facilities Authority:
Carney Hospital, Series C,
7.750% 07/01/14 500 583
Cooley Dickinson Hospital, Series A,
7.125% 11/15/18 1,920 2,270
Framingham Union Hospital, Series B,
8.500% 07/01/20 1,000 1,190
Mt. Auburn Hospital, Series 1988 A,
7.875% 07/01/18 250 277
St. John's Hospital, Series 1990 B,
8.375% 12/01/20 500 601
</TABLE>
12
<PAGE>
Investment Portfolio/January 31, 1996
------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Winchester Hospital, Series C,
7.550% 07/01/11 $ 500 $588
State Housing Finance Agency,
Series A,
8.700% 05/15/14 235 265
State Industrial Finance Agency,
Mary Ann Morse Nursing Home, Inc.:
Series 1991 I,
0.000% 01/01/21 925 1,178
University of Lowell Building
Authority,
Series 1987 A,
7.600% 11/01/11 200 217
University of Massachusetts
Building Authority:
Series 1976 A,
7.500% 05/01/11 100 122
Series 1986 A,
7.500% 05/01/11 500 515
Worcester,
6.900% 05/15/07 415 482
------
20,453
------
-------------------------------------------------------------------
RETAIL TRADE - 0.7%
APPAREL & ACCESSORY STORES
State Industrial Finance Agency,
House of Bianchi Inc.,
8.750% 06/01/18 1,760 1,868
------
-------------------------------------------------------------------
SOLID WASTE - 1.3%
LAND FILLS - 0.9%
State Industrial Finance Agency,
Peabody Monofill Associates, Inc.,
Series 1995,
9.000% 09/01/05 2,300 2,475
------
MISCELLANEOUS DISPOSAL - 0.2%
Boston Industrial Development
Finance Authority,
Jet-A-Way, Inc.,
10.500% 01/01/11 400 455
------
RESOURCE RECOVERY - 0.2%
Agawam,
Springfield Resource Recovery Project,
Series 1986,
8.500% 12/01/08 500 528
------
-------------------------------------------------------------------
</TABLE>
13
<PAGE>
Investment Portfolio/January 31, 1996
<TABLE>
<CAPTION>
----------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
----------------------------------------------------------
TRANSPORTATION - 11.0%
Massachusetts Bay Transportation
Authority:
<S> <C> <C> <C>
Series 1991 A,
7.000% 03/01/21 $1,500 $1,828
Series 1992 B:
5.500% 03/01/21(a) 5,000 4,931
6.200% 03/01/16 3,700 4,098
Series 1994 A:
7.000% 03/01/10 5,000 5,919
7.000% 03/01/11 4,270 5,049
7.000% 03/01/14 1,250 1,500
State Industrial Finance Agency,
Series 1990,
9.000% 10/01/20 485 590
State Port Authority:
Series 1992 B,
6.000% 07/01/23 1,000 1,040
Series 1993 B,
5.000% 07/01/18 5,000 4,681
------ ------
29,636
------
----------------------------------------------------------
UTILITY - 6.2%
JOINT POWER AUTHORITY - 4.3%
State Municipal Wholesale
Electric Co.:
Series 1992 C,
6.625% 07/01/10 1,435 1,555
Series 1994 A,
5.000% 07/01/17 5,000 4,794
Series 1994 A, RIB, (variable rate)
5.447% 07/01/16 4,000 3,675
Series 1994 B,
5.000% 07/01/17 1,500 1,438
------
11,462
-------
MUNICIPAL ELECTRIC - 1.9%
PR Commonwealth of Puerto Rico
Electric Power Authority,
Series 1994 T,
5.500% 07/01/20 5,000 4,969
------
----------------------------------------------------------
WATER & SEWER - 14.3%
Boston Water & Sewer Commission:
Series 1992 A,
5.750% 11/01/13 1,000 1,049
Series 1993 A,
5.250% 11/01/19 4,750 4,673
State Industrial Finance Agency,
Massachusetts Environmental Services,
Series 1994 A,
8.750% 11/01/21 3,000 3,128
</TABLE>
14
<PAGE>
Investment Portfolio/January 31, 1996
-----------------------------------------------------------
<TABLE>
<S> <C> <C>
State Water Pollution Abatement Trust,
Massachusetts Water Resources Authority:
Series 1992 A:
6.500% 07/15/09 $ 2,000 $ 2,278
6.500% 07/15/19 5,000 5,788
Series 1992 B,
5.500% 11/01/15 5,000 4,931
Series 1993 B,
5.500% 03/01/17 1,000 1,006
Series 1993 C:
5.250% 12/01/15 2,750 2,716
5.250% 12/01/15 1,000 1,008
5.250% 12/01/20 5,025 4,855
Series 1995 A,
5.000% 08/01/14 1,500 1,446
Series 1995 B,
6.250% 12/01/13 5,000 5,613
------
38,491
------
TOTAL MUNICIPAL BONDS (cost of $238,582)(f) 265,594
-------
SHORT - TERM OBLIGATIONS - 0.2%
-----------------------------------------------------------
VARIABLE RATE DEMAND NOTES (g)
State Health & Educational
Facilities Authority,
Series 1985 D,
3.650% 01/01/35 600 600
-------
OTHER ASSETS & LIABILITIES, NET - 0.8% 2,216
-----------------------------------------------------------
NET ASSETS - 100% $268,410
--------
</TABLE>
NOTES TO INVESTMENT PORTFOLIO:
------------------------------------------------------------
(a) These securities, or a portion thereof, with a total market value
of $5,456, are being used to collateralize open futures
contracts.
(b) Zero coupon bond.
(c) This is a restricted security which was acquired on April 2, 1990
at a cost of $495. This security represents 0.2% of the Fund's
net assets at January 31, 1996.
(d) Shown parenthetically is the interest rate to be paid and the
date the Fund will begin accruing this rate.
(e) The Fund has been informed that each issuer has placed direct
obligations of the U.S. Government in an irrevocable trust,
solely for the payment of the interest and principal.
(f) Cost for federal income tax purposes is approximately 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.
15
<PAGE>
Investment Portfolio/January 31, 1996
--------------------------------------------------------------------
NOTES TO INVESTMENT PORTFOLIO - CONT.
--------------------------------------------------------------------
Short futures contracts open at January 31, 1996:
<TABLE>
<CAPTION>
Par value Unrealized
covered by Expiration appreciation
Type contracts month at 1/31/96
-------------------------------------------------------------------
<S> <C> <C> <C>
Municipal bond $ 3,700 March $7
</TABLE>
ACRONYM NAME
----------- -------------------------------
RIB Residual Interest Bond
See notes to financial statements.
16
<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 $238,582) $ 265,594
Short-term obligations 600
---------
266,194
Receivable for:
Interest $ 3,407
Fund shares sold 151
Other 51 3,609
--------- ---------
Total Assets 269,803
LIABILITIES
Payable for:
Distributions 1,098
Fund shares repurchased 256
Variation margin on futures 9
Payable to adviser 15
Accrued:
Deferred Trustees fees 2
Other 13
--------
Total Liabilities 1,393
---------
NET ASSETS $ 268,410
---------
Net asset value & redemption price per share -
Class A ($207,759/25,836) $ 8.04
---------
Maximum offering price per share - Class A
($8.04/0.9525) $ 8.44(a)
---------
Net asset value & offering price per share -
Class B ($60,651/7,542) $ 8.04(b)
---------
COMPOSITION OF NET ASSETS
Capital paid in $ 247,302
Undistributed net investment income 34
Accumulated net realized loss (5,945)
Net unrealized appreciation on:
Investments 27,012
Open futures contracts 7
---------
$ 268,410
---------
</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.
17
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JANUARY 31, 1996
(in thousands)
<TABLE>
INVESTMENT INCOME
<S> <C> <C>
Interest $ 16,637
EXPENSES
Management fee $ 1,414
Service fee - Class A 258
Service fee - Class B 74
Distribution fee - Class B 440
Transfer agent 419
Bookkeeping fee 101
Trustees fee 22
Custodian fee 13
Audit fee 34
Legal fee 8
Registration fee 11
Reports to shareholders 7
Other 25
--------
2,826
Fees waived by the Adviser (153) 2,673
-------- --------
Net Investment Income 13,964
--------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain (loss) on:
Investments 2,218
Closed futures contracts (3,572)
--------
Net Realized Loss (1,354)
Net unrealized appreciation during the period on:
Investments 22,566
Open futures contracts 955
--------
Net Unrealized Gain 23,521
--------
Net Gain 22,167
--------
Net Increase in Net Assets from Operations $ 36,131
--------
</TABLE>
See notes to financial statements.
18
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended
(in thousands) January 31
----------------------
INCREASE (DECREASE) IN NET ASSETS 1996 1995
--------- -------
<S> <C> <C>
Operations:
Net investment income $ 13,964 $ 14,749
Net realized loss (1,354) (2,999)
Net unrealized appreciation (depreciation) 23,521 (22,859)
-------- ---------
Net Increase (Decrease) from Operations 36,131 (11,109)
Distributions:
From net investment income - Class A (11,196) (12,074)
From net investment income - Class B (2,783) (2,748)
-------- ---------
22,152 (25,931)
-------- ---------
Fund Share Transactions:
Receipts for shares sold - Class A 20,583 23,448
Value of distributions reinvested - Class A 6,014 6,522
Cost of shares repurchased - Class A (29,356) (41,484)
-------- ---------
(2,759) (11,514)
-------- ---------
Receipts for shares sold - Class B 8,695 13,955
Value of distributions reinvested - Class B 1,601 1,534
Cost of shares repurchased - Class B (8,555) (8,223)
-------- ---------
1,741 7,266
-------- ---------
Net Decrease from Fund Share Transaction (1,018) (4,248)
-------- ---------
Total Increase (Decrease) 21,134 (30,179)
NET ASSETS
Beginning of period 247,276 277,455
------- ---------
End of period (including undistributed
net investment income of $34 and $31,
respectively) $ 268,410 $ 247,276
--------- ---------
NUMBER OF FUND SHARES
Sold - Class A 2,677 3,110
Issued for distributions reinvested - Class A 780 872
Repurchased - Class A (3,796) (5,556)
-------- ---------
(339) (1,574)
-------- ---------
Sold - Class B 1,132 1,841
Issued for distributions reinvested - Class B 208 205
Repurchased - Class B (1,106) (1,111)
-------- ---------
234 935
-------- ---------
</TABLE>
See notes to financial statements.
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996
NOTE 1. ACCOUNTING POLICIES
-------------------------------------------------------------------------------
ORGANIZATION: Colonial Massachusetts 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 investment objective of the Fund 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 significant
accounting policies 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 Class B
distribution fee), realized and unrealized gains (losses) are allocated to
20
<PAGE>
Notes to Financial Statements/January 31, 1996
-------------------------------------------------------------------------------
each class proportionately on a daily basis for purposes of determining the net
asset value of each class.
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 shares 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.
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
-------------------- ---------------
<C> <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
-------------------- --------------
<C> <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.
21
<PAGE>
Notes to Financial Statements/January 31, 1996
-------------------------------------------------------------------------------
NOTE 2. FEES AND COMPENSATION PAID TO AFFILIATES
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 $50,799 on
sales of the Fund's Class A shares and received contingent deferred sales
charges (CDSC) of $241,822 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
---------------------------- ------
<C> <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 0.75% annually of
the Fund's average net assets. Through July 31, 1995 the expense limit was 0.70%
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 $53,892,104 and
$58,091,771, respectively.
Unrealized appreciation (depreciation) at January 31, 1996, based on cost of
investments for federal income tax purposes was:
<TABLE>
<CAPTION>
<S> <C>
Gross unrealized appreciation $ 27,099,649
Gross unrealized depreciation (88,163)
-------------
Net unrealized appreciation $ 27,011,486
-------------
</TABLE>
22
<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
---------- ------------
<C> <C>
2002 $ 173,000
2003 1,749,000
2004 1,201,000
-------------
$3,123,000
=============
</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 instruments 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.
23
<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
Class A Class B Class A Class B
-------- --------- -------- --------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 7.390 $ 7.390 $ 8.130 $ 8.130
-------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.424 0.367 0.444 0.388
Net realized and
unrealized gain (loss) 0.650 0.650 (0.738) (0.738)
-------- -------- -------- --------
Total from Investment
Operations 1.074 1.017 (0.294) (0.350)
-------- -------- -------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.424) (0.367) (0.446) (0.390)
From net realized gains -- -- -- --
In excess of net realized gains -- -- -- --
-------- -------- -------- --------
Total from Distributions
Declared to Shareholders (0.424) (0.367) (0.446) (0.390)
-------- -------- -------- --------
Net asset value -
End of period $ 8.040 $ 8.040 $ 7.390 $ 7.390
-------- -------- -------- --------
Total return (c)(d) 14.90% 14.05% (3.49)% (4.21)%
-------- -------- -------- --------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.85%(f) 1.60%(f) 0.72% 1.47%
Net investment income 5.49%(f) 4.74%(f) 5.93% 5.18%
Fees and expenses waived
or borne by the Adviser 0.06% 0.06% 0.12% 0.12%
Portfolio turnover 21% 21% 58% 58%
Net assets at end
of period (000) $207,759 $ 60,651 $193,303 $ 53,973
(a) Net of fees and expenses waived or borne by the Adviser
which amounted to .................... $ 0.005 $ 0.005 $ 0.009 $ 0.009
</TABLE>
(b) Class B shares were initially offered on June 8, 1992. Per share amounts
reflect activity from that date.
(c) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(d) Had the Adviser not waived or reimbursed a portion of expenses, total
return would have been reduced.
(e) Not annualized.
(f) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
(g) Annualized.
24
<PAGE>
FINANCIAL HIGHLIGHTS - continued
Year ended January 31
-------------------------------------------------------------------------
1994 1993 1992
Class A Class B Class A Class B(b) Class A
-------- ------- ------- --------- -------
$ 7.700 $ 7.700 $ 7.420 $ 7.450 $ 7.120
-------- ------- -------- ------- --------
0.453 0.395 0.481 0.272 0.505
0.439 0.439 0.301 0.275 0.295
-------- ------- -------- ------- --------
0.892 0.834 0.782 0.547 0.800
-------- ------- -------- ------- --------
(0.462) (0.404) (0.479) (0.274) (0.500)
(0.002) (0.002)
--- --- (0.021) (0.021) -
-------- ------- -------- ------- --------
(0.462) (0.404) (0.502) (0.297) (0.500)
-------- ------- -------- ------- --------
$ 8.130 $ 8.130 $ 7.700 $ 7.700 $ 7.420
-------- ------- -------- ------- --------
11.86% 11.05% 10.87% 1.11(e) 11.61%
--------- ---------- -------- ------- --------
0.64% 1.39% 0.54% 1.29(g) 0.46%
5.68% 4.93% 6.38% 5.63(g) 6.89%
0.21% 0.21% 0.33% 0.33% 0.43%
7% 7% 7% 7% 14%
$225,636 $ 51,819 $186,526 $ 17,282 $145,957
$ 0.016 $ 0.016 $ 0.025 $ 0.016 $ 0.032
--------------------------------------------------------------
Federal income tax information (unaudited) All of the distributions will be
treated as exempt income for federal income tax purposes.
25
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
T0 THE TRUSTEES OF COLONIAL TRUST V AND THE SHAREHOLDERS OF
COLONIAL MASSACHUSETTS 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 Massachusetts 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, provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
March 13, 1996
5
<PAGE>
INVESTMENT PORTFOLIO (Michigan)
JANUARY 31, 1996 (IN THOUSANDS)
<TABLE>
<CAPTION>
MUNICIPAL BONDS - 99.2% PAR VALUE
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EDUCATION - 6.9%
Romulus Township School District,
Series 1993:
(a) 05/01/18 $ 3,985 $ 1,191
(a) 05/01/21 2,075 513
Western Michigan University,
Series 1993-A,
5.000% 07/15/21 2,500 2,366
--------
4,070
--------
--------------------------------------------------------------------------------------
GENERAL OBLIGATIONS - 24.9%
Big Rapids Public School District,
Series 1995,
5.625% 05/01/25 (b) 3,000 3,022
Chippewa Valley Schools,
Series 1993,
5.000% 05/01/21 2,500 2,363
Grand Ledge Public School District,
Series 1995,
5.375% 05/01/24 2,500 2,459
Grand Rapids Community College,
5.000% 05/01/14 770 721
Kent County,
Series 1987,
8.400% 11/01/10 750 807
Mona Shores School District,
Series 1995,
5.500% 05/01/14 2,400 2,430
Okemos Public School District,
Series 1993,
(a) 05/01/12 500 210
Pontiac,
Series 1987,
8.300% 06/01/99 250 267
PR Commonwealth of Puerto Rico,
Series 1995,
5.650% 07/01/15 500 529
Williamston Community School District,
Series 1996,
5.500% 05/01/25 1,725 1,785
--------
14,593
--------
--------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
Investment Portfolio/January 31, 1996
<TABLE>
--------------------------------------------------------------------------------------
<CAPTION>
HEALTH - 22.4% PAR VALUE
<S> <C> <C> <C> <C>
HOSPITALS - 20.8%
Dickinson County
Memorial Hospital System,
Series 1994,
8.125% 11/01/24 $ 550 $ 605
Kalamazoo Hospital Finance Authority:
Borgess Medical Center,
Series 1994-A:
5.250% 06/01/17 1,000 978
6.250% 06/01/14 (b) 1,785 1,986
Bronson Methodist Hospital,
Series 1992-A,
6.250% 05/15/12 1,500 1,568
Royal Oak Hospital Finance Authority,
William Beaumont Hospital,
Series 1993-G,
5.250% 11/15/19 2,500 2,353
Saginaw Hospital Finance Authority,
Saginaw General Hospital,
Series 1989,
7.625% 10/01/19 175 187
State Hospital Finance Authority:
Central Michigan Community Hospital,
Series 1993-A,
6.000% 10/01/08 500 514
Crittenton Hospital,
Series 1992-A,
6.700% 03/01/07 750 816
Daughters of Charity-Providence,
Series 1991,
7.000% 11/01/21 1,000 1,085
Detroit Medical Center,
1988-A,
8.125% 08/15/12 50 54
Henry Ford Health System,
Series 1992-A,
5.750% 09/01/17 2,000 2,020
--------
12,166
--------
NURSING HOMES - 1.6%
Cheboygan County Economic
Development Corp.,
Metro Health Foundation Project,
Series 1993,
10.000% 11/01/22 (c) 600 420
</TABLE>
7
<PAGE>
Investment Portfolio/January 31, 1996
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
HEALTH - CONT.
NURSING HOMES - CONT.
Warren Economic Development Corp.,
Autumn Woods Project, Series 1992,
6.900% 12/20/22 $ 500 $ 542
-------
962
-------
--------------------------------------------------------------------------------
HOUSING - 10.7%
MULTI-FAMILY - 9.4%
Grand Rapids Building Authority:
Series A,
7.625% 09/01/23 1,500 1,652
Series 1993,
5.500% 04/01/13 1,000 1,028
Redford Township Building Authority,
Series 1992,
6.500% 11/01/13 675 705
State Housing Development Authority,
Series 1994-D,
6.850% 06/01/26 2,000 2,100
-------
5,485
-------
SINGLE-FAMILY - 1.3%
State Housing Development Authority:
Series 1990-A,
7.700% 04/01/23 500 526
Series 1991-B,
7.050% 10/01/12 225 241
-------
767
-------
--------------------------------------------------------------------------------
MANUFACTURING - 2.3%
PAPER PRODUCTS - 1.5%
State Strategic Fund:
Blue Water Fiber Project, Series 1994,
8.000% 01/01/12 360 347
Great Lakes Pulp & Fibre Project,
Series 1994,
10.250% 12/01/16 500 515
-------
862
-------
PRIMARY SMELTING - 0.8%
Monroe County,
North Star Steel Co., Series A,
6.875% 07/01/08 470 473
-------
--------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
Investment Portfolio/January 31, 1996
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
PUBLIC FACILITIES IMPROVEMENT - 9.0%
Detroit Convention Facilities,
Cobo Hall Expansion Project,
Series 1993,
5.250% 09/30/12 $1,000 $ 941
PR Commonwealth of Puerto Rico,
Public Building Authority, Series 1993-M,
stepped coupon, (5.700% 07/01/98)
3.750% 07/01/16(d) 750 720
Series 1995-A,
6.250% 07/01/14 1,200 1,361
State Municipal Bond Authority,
Local Government Loan Program:
Series 1992-D,
6.650% 05/01/12 1,000 1,093
Series 1994-G,
(a) 05/01/19 2,000 555
Series 1994-G,
(a) 05/01/20 1,855 482
VI Public Finance Authority,
Series 1992-A,
7.000% 10/01/02 125 137
------
5,289
------
................................................................................
PUBLIC INFRASTRUCTURE - 1.8%
AIRPORTS
Wayne Charter County,
Detroit Metropolitan Airport,
Series 1994 B,
6.125% 12/01/24 1,000 1,043
------
................................................................................
REFUNDED/ESCROW/SPECIAL OBLIGATIONS (e) - 2.4%
Rockford Public Schools, Series 1990,
7.375% 05/01/19 250 284
Western Townships Utilities Authority,
Series 1989,
8.200% 01/01/18 1,000 1,108
------
1,392
------
................................................................................
STATE & COMMUNITY LEASE - 1.4%
Detroit Economic Development Corp.,
E.H. Associates Limited Partnership,
Series 1992,
7.000% 06/01/12 750 815
------
</TABLE>
9
<PAGE>
Investment Portfolio/January 31, 1996
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
TAX ALLOCATION - 1.5%
Battle Creek, Downtown Tax Revenue,
7.650% 05/01/22 $ 750 $ 859
-------
................................................................................
UTILITY - 7.9%
INVESTOR OWNED - 1.9%
St. Clair County Economic
Development Corp.,
Detroit Edison Co., Series 1993-AA,
6.400% 08/01/24(b) 1,000 1,101
-------
MUNICIPAL ELECTRIC - 6.0%
State Strategic Fund,
Detroit Edison Co.:
Series 1994-AA,
5.875% 04/01/24 1,000 1,023
Series 1994-BB,
7.000% 05/01/21 2,000 2,490
-------
3,513
-------
................................................................................
WATER & SEWER - 8.0%
Detroit Sewer Disposal,
Series 1995-B,
5.250% 07/01/21 1,000 981
Detroit Water Supply:
Series 1995-A,
5.500% 07/01/25 1,000 994
Series 1995-B,
5.550% 07/01/12(b) 1,250 1,298
Oakland County,
Pebble Creek Drainage District,
5.000% 05/01/11 300 284
PR Commonwealth of Puerto Rico,
Aqueduct & Sewer Authority,
Series 1995,
6.250% 07/01/12 1,000 1,103
-------
4,660
-------
TOTAL MUNICIPAL BONDS (cost of $54,284) 58,050
-------
<CAPTION>
OPTIONS - 0.0% CONTRACTS
--------------------------------------------------------------------------------
<S> <C> <C>
March 1996 Municipal Bond Puts,
Strike price 117, expiration 3/20/96 (cost of $40) 32 12
-------
TOTAL INVESTMENTS - 99.2% (cost of $54,324) (f) 58,062
-------
</TABLE>
10
<PAGE>
Investment Portfolio/January 31, 1996
<TABLE>
<S> <C> <C>
--------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 0.3%
--------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (g)
Flint Hospital Building Authority,
Hurley Medical Center,
Series 1995-B,
3.300% 07/01/15 $ 200 $ 200
-------
OTHER ASSETS & LIABILITIES, NET - 0.5% 282
--------------------------------------------------------------------------------
NET ASSETS - 100.0% $58,544
-------
</TABLE>
NOTES TO INVESTMENT PORTFOLIO:
--------------------------------------------------------------------------------
(a) Zero coupon bond.
(b) These securities, or a portion thereof, with a total market value of $6,417
are being used to collateralize open futures contracts.
(c) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. This security may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At January 31,
1996, the value of this security amounted to $420 or 0.7% of net assets.
(d) Shown parenthetically is the interest rate to be paid and the date the Fund
will begin accruing this rate.
(e) The Fund has been informed that each issuer has placed direct obligations of
the U.S. Government in an irrevocable trust, solely for the payment of the
interest and principal.
(f) Cost for federal income tax purposes is the same.
(g) Variable rate demand notes are considered short-term obligations. Interest
rates change periodically on specified dates. This security is payable on
demand and is secured by either letters of credit or other credit support
agreements from banks. The rate listed is as of January 31, 1996.
Short futures contracts open at January 31, 1996:
<TABLE>
<CAPTION>
Par value Unrealized
covered Expiration depreciation
Type by contracts month at 1/31/96
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Municipal bond $4,000 March $8
</TABLE>
See notes to financial statements.
11
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
JANUARY 31, 1996
<TABLE>
<CAPTION>
<S> <C> <C>
(in thousands except for per share amounts and footnotes)
ASSETS
Investments at value (cost $54,324) $ 58,062
Short-term obligations 200
---------
58,262
Receivable for:
Interest 755
Fund shares sold 12
Other 28 795
--------- ---------
Total Assets 59,057
LIABILITIES
Payable for:
Fund shares repurchased 247
Distributions 242
Variation margin on futures 10
Payable to adviser 10
Accrued:
Deferred Trustees fees 1
Other 3
---------
Total Liabilities 513
---------
NET ASSETS $ 58,544
---------
Net asset value & redemption price per share -
Class A ($43,308/6,072) $7.13
---------
Maximum offering price per share - Class A
($7.13/0.9525) $7.49(a)
---------
Net asset value & offering price per share -
Class B ($15,236/2,136) $7.13(b)
---------
COMPOSITION OF NET ASSETS
Capital paid in $ 56,106
Undistributed net investment income 18
Accumulated net realized loss (1,310)
Net unrealized appreciation (depreciation) on:
Investments 3,738
Open futures contracts (8)
---------
$ 58,544
---------
</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.
12
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JANUARY 31, 1996
<TABLE>
<CAPTION>
<S> <C> <C>
(in thousands)
INVESTMENT INCOME
Interest $ 3,507
EXPENSES
Management fee $ 309
Service fee - Class A 52
Service fee - Class B 17
Distribution fee - Class B 109
Transfer agent 96
Bookkeeping fee 30
Trustees fee 15
Custodian fee 14
Audit fee 32
Legal fee 7
Registration fee 12
Reports to shareholders 8
Other 6
---------
707
Fees waived by the adviser (143) 564
--------- ---------
Net Investment Income 2,943
---------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain (loss) on:
Investments 1,289
Closed futures contracts (2,005)
---------
Net Realized Loss (716)
Net unrealized appreciation during the period on:
Investments 4,393
Open futures contracts 351
---------
Net Unrealized Appreciation 4,744
---------
Net Gain 4,028
---------
Net Increase in Net Assets from Operations $ 6,971
---------
</TABLE>
See notes to financial statements.
13
<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 $ 2,943 $ 3,384
Net realized gain (loss) (716) 404
Net unrealized appreciation (depreciation) 4,744 (6,303)
--------- ---------
Net Increase (Decrease) from Operations 6,971 (2,515)
Distributions:
From net investment income - Class A (2,375) (2,541)
From net investment income - Class B (697) (770)
--------- ---------
3,899 (5,826)
--------- ---------
Fund Share Transactions:
Receipts for shares sold - Class A 2,362 4,363
Value of distributions reinvested - Class A 1,345 1,397
Cost of shares repurchased - Class A (5,144) (5,158)
--------- ---------
(1,437) 602
--------- ---------
Receipts for shares sold - Class B 1,668 3,284
Value of distributions reinvested - Class B 361 379
Cost of shares repurchased - Class B (1,935) (3,051)
--------- ---------
94 612
--------- ---------
Net Increase (Decrease) from Fund Share Transactions (1,343) 1,214
--------- ---------
Total Increase (Decrease) 2,556 (4,612)
NET ASSETS
Beginning of period 55,988 60,600
--------- ---------
End of period (including undistributed net
investment income of $18 and $134, respectively) $ 58,544 $ 55,988
--------- ---------
NUMBER OF FUND SHARES
Sold - Class A 343 638
Issued for distributions reinvested - Class A 196 208
Repurchased - Class A (749) (773)
--------- ---------
(210) 73
--------- ---------
Sold - Class B 242 480
Issued for distributions reinvested - Class B 53 56
Repurchased - Class B (282) (461)
--------- ---------
13 75
--------- ---------
</TABLE>
See notes to financial statements.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996
NOTE 1. ACCOUNTING POLICIES
ORGANIZATION: Colonial Michigan 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 significant
accounting policies 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 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.
15
<PAGE>
Notes to Financial Statements/January 31, 1996
NOTE 1. ACCOUNTING POLICIES - CONT.
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.
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>
16
<PAGE>
Notes to Financial Statements/January 31, 1996
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: 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 $9,871 on
sales of the Fund's Class A shares and received contingent deferred sales
charges (CDSC) of $43,544 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 0.75% annually of
the Fund's average net assets. Through July 31, 1995 the expense limit was 0.60%
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
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 $27,115,243 and
$29,993,644, respectively.
17
<PAGE>
Notes to Financial Statements/January 31, 1996
NOTE 3. PORTFOLIO INFORMATION - CONT.
Unrealized appreciation (depreciation) at January 31, 1996, based on cost of
investments for both financial statement and federal income tax purposes was:
<TABLE>
<CAPTION>
<S> <C>
Gross unrealized appreciation $4,004,190
Gross unrealized depreciation (266,071)
----------
Net unrealized appreciation $3,738,119
==========
</TABLE>
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>
1997 $131,000
1998 49,000
1999 98,000
2003 196,000
--------
$474,000
========
</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.
18
<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
Class A Class B Class A Class B
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 6.660 $ 6.660 $ 7.340 $ 7.340
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.368 0.317 0.410 0.359
Net realized and
unrealized gain (loss) 0.484 0.484 (0.689) (0.689)
------- ------- ------- -------
Total from Investment
Operations 0.852 0.801 (0.279) (0.330)
------- ------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.382) (0.331) (0.401) (0.350)
From capital paid in -- -- -- --
------- ------- ------- -------
Total Distributions
Declared to Shareholders (0.382) (0.331) (0.401) (0.350)
------- ------- ------- -------
Net asset value -
End of period $ 7.130 $ 7.130 $ 6.660 $ 6.660
======= ======= ======= =======
Total return (b)(c) 13.13% 12.30% (3.66)% (4.39)%
======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS
Expenses 0.80%(d) 1.55%(d) 0.62% 1.37%
Net investment income 5.34%(d) 4.59%(d) 6.08% 5.33%
Fees and expenses waived
or borne by the Adviser 0.25% 0.25% 0.32% 0.32%
Portfolio turnover 48% 48% 40% 40%
Net assets at end
of period (000) $43,308 $15,236 $41,844 $14,144
(a) Net of fees and expenses waived or borne by the Adviser which amounted to:
$ 0.017 $ 0.017 $ 0.022 $ 0.022
(b) Total return at net asset value assuming all distributions reinvested and no initial sales charge or
contingent deferred sales charge.
(c) Had the Adviser not waived or reimbursed a portion of expenses, total return would have been reduced.
(d) The benefits derived from custody and directed brokerage arrangements had no impact. Prior years'
ratios are net of benefits received, if any.
</TABLE>
--------------------------------------------------------------------------------
Federal income tax information (unaudited)
All of the distributions will be treated as exempt income
for federal income tax purposes.
--------------------------------------------------------------------------------
19
<PAGE>
FINANCIAL HIGHLIGHTS - CONTINUED
<TABLE>
<CAPTION>
Year ended January 31
-----------------------------------------------------------
1994 1993 1992
Class A Class B Class A Class B(b) Class A
------- ------- ------- ---------- -------
<S> <C> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 6.970 $ 6.970 $ 6.730 $ 6.950 $ 6.520
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.404 0.351 0.405 0.167 0.432
Net realized and
unrealized gain (loss) 0.356 0.356 0.250 0.029 0.208
------- ------- ------- ------- -------
Total from Investment
Operations 0.760 0.707 0.655 0.196 0.640
------- ------- ------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.390) (0.337) (0.407) (0.168) (0.430)
From capital paid in -- -- (0.008) (0.008) --
------- ------- ------- ------- -------
Total Distributions
Declared to Shareholders (0.390) (0.337) (0.415) (0.176) (0.430)
------- ------- ------- ------- -------
End of period $ 7.340 $ 7.340 $ 6.970 $ 6.970 $ 6.730
======= ======= ======= ======= =======
Total return (c)(d) 11.16% 10.36% 10.04% 0.98%(e) 10.12%
======= ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.66% 1.41% 0.88% 1.63%(f) 0.95%
Net investment income 5.61% 4.86% 5.86% 5.11%(f) 6.50%
Fees and expenses waived
or borne by the Adviser 0.33% 0.33% 0.32% 0.32%(f) 0.35%
Portfolio turnover 7% 7% 14% 14% 5%
Net assets at end
of period (000) $45,570 $15,030 $36,024 $ 6,670 $28,608
(a) Net of fees and expenses waived or borne by the Adviser which amounted to:
0.024 0.024 0.022 0.009 0.023
(b) Class B shares were initially offered on August 4, 1992. Per share amounts reflect activity from that date.
(c) Total return at net asset value assuming all distributions reinvested and no initial sales charge or
contingent deferred sales charge.
(d) Had the Adviser not waived or reimbursed a portion of expenses, total return would have been reduced.
(e) Not annualized.
(f) Annualized.
</TABLE>
20
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
T0 THE TRUSTEES OF COLONIAL TRUST V AND THE SHAREHOLDERS OF
COLONIAL MICHIGAN 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 Michigan 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, provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
March 13, 1996
5
<PAGE>
INVESTMENT PORTFOLIO (Minnesota)
JANUARY 31, 1996 (IN THOUSANDS)
<TABLE>
<CAPTION>
MUNICIPAL BONDS - 96.9% PAR VALUE
-----------------------------------------------------------------------------
<S> <C> <C>
EDUCATION - 2.5%
Montevideo Independent School
District No. 129, Series 1993,
4.900% 02/01/10 $ 400 $ 389
Roseau Independent School
District No. 682, Series 1991,
7.000% 02/01/14 200 216
State Higher Education Facilities
Authority:
Carleton College, Series 3-L1,
5.750% 11/01/12 500 501
Hamline University, Series 3 K,
6.600% 06/01/08 250 271
------
1,377
------
................................................................................
FINANCE, INSURANCE & REAL ESTATE - 1.0%
REAL ESTATE
St. Paul Port Authority,
Series 1985 F,
9.125% 12/01/14 650 549
------
................................................................................
GENERAL OBLIGATION - 29.1%
Bagley Independent School District
No. 162, Series 1994,
4.850% 02/01/12 750 712
Faribault Independent School
District No. 656, Series 1995,
5.750% 06/01/15 (a) 1,500 1,547
Frazee Independent School District
No. 23, Series 1996 A,
5.000% 02/01/16 (b) 2,000 1,927
Minneapolis Refunded Sports Arena,
5.125% 10/01/20 (c) 2,000 1,965
Minneapolis-St. Paul Metropolitan
Airports Commission, Series 7,
7.800% 01/01/11 (b) 300 328
Rosemount Independent School
District No. 196, Series 1994 B,
(d) 06/01/10 (b) 2,765 1,313
St. Paul Independent School
District No. 625, Series 1995 C,
5.250% 02/01/16 2,475 2,466
</TABLE>
6
<PAGE>
Investment Portfolio/January 31, 1996
------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
State, Series 1995,
5.250% 08/01/14 $6,000 $ 5,940
-------
16,198
-------
..............................................................................
HEALTH - 14.8%
HOSPITAL
Mankato,
Immanual-St. Joseph's Hospital,
Series 1992 A,
6.300% 08/01/22 250 257
Minneapolis-St. Paul Housing &
Redevelopment Authority, Healthspan,
Series 1993 A,
4.750% 11/15/18 4,410 4,051
Princeton, Fairview Hospital,
Series 1991 C,
6.250% 01/01/21 300 320
St. Louis Park, Healthsystem, Inc.,
Series 1993 A,
5.200% 07/01/23 3,420 3,339
St. Paul Housing & Redevelopment
Authority, Healtheast Project, Series 1993 A,
6.625% 11/01/17 250 254
-------
8,221
-------
..............................................................................
HOUSING - 12.2%
ASSISTED LIVING/SENIOR - 0.5%
Roseville, Care Institute, Inc.,
Series 1993,
7.750% 11/01/23 300 294
-------
MULTI-FAMILY - 4.3%
Eden Prairie, Preserve Place Apartments,
Series 1987,
8.000% 07/01/28 650 676
Lakeville, Southfork Apartment Project,
Series 1989 A,
9.875% 02/01/20 200 204
Minneapolis, Riverplace Project,
Series 1987 A,
7.100% 01/01/20 255 265
Red Wing Health Care Facility,
River Region Group,
Series 1993 A:
6.400% 09/01/12 200 205
6.500% 09/01/22 300 306
</TABLE>
7
<PAGE>
Investment Portfolio/January 31, 1996
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
HOUSING - CONT.
Robbinsdale, Copperfield Hill,
Series 1985,
9.250% 12/01/18 $ 350 $ 351
Washington County Housing &
Redevelopment Authority,
Cottages of Aspen, Series 1992,
9.250% 06/01/22 195 201
White Bear Lake, Birch Lake Townhomes
Project, Series 1989 A,
9.750% 07/15/19 200 202
------
2,410
------
Single Family - 7.4%
Chisago & Stearns Counties,
Series 1994 B,
7.050% 09/01/27 1,500 1,614
Dakota County Housing &
Redevelopment Authority,
Series 1986,
7.200% 12/01/09 85 89
Minneapolis Community Development
Agency:
7.750% 07/01/06 290 297
7.875% 07/01/17 635 651
Minneapolis-St. Paul Housing
Board, Series 1987 C,
8.875% 11/01/18 440 463
State Housing Finance Agency:
Series 1987 A,
8.500% 02/01/17 25 26
Series 1987 C,
9.000% 08/01/18 600 620
Series 1988 C,
8.500% 07/01/19 85 89
Series 1988 D,
8.050% 08/01/18 190 199
Washington County Housing &
Redevelopment Authority,
City of Cottage Grove, Series 1986,
7.600% 12/01/11 85 85
------
4,133
------
................................................................................
MANUFACTURING - 3.0%
Food & Kindred Products - 1.3%
Cloquet, Diamond Brands, Inc.,
9.000% 06/01/02 700 712
------
</TABLE>
8
<PAGE>
Investment Portfolio/January 31, 1996
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
MEASURING & ANALYZING INSTRUMENTS - 0.6%
Brooklyn Park, TL Systems Corp.,
Series 1991,
10.000% 09/01/16 $ 265 $ 338
------
TRANSPORTATION EQUIPMENT - 1.1%
Buffalo, Von Ruden Manufacturing, Inc.,
Series 1989,
10.500% 09/01/14 550 593
------
..............................................................................
POLLUTION CONTROL REVENUE - 1.2%
State Public Facilities Authority,
Water Pollution Control:
Series 1989 A,
7.000% 03/01/09 100 109
Series 1990 A,
7.100% 03/01/12 300 331
Series 1991 A,
6.950% 03/01/13 200 223
------
663
------
..............................................................................
PUBLIC FACILITIES IMPROVEMENT - 1.0%
Metropolitan Council,
Hubert H. Humphrey Metrodome,
Series 1992,
6.000% 10/01/09 300 316
Minneapolis Community Development
Agency, Series 1991-1,
8.000% 12/01/16 250 268
------
584
------
..............................................................................
PUBLIC INFRASTRUCTURE - 3.8%
AIRPORT
State, Duluth Airport,
Series 1995 B,
6.250% 08/01/14 2,000 2,125
------
..............................................................................
REFUNDED/ESCROW/PUBLIC OBLIGATION - 9.2%
Brainerd Independent School District No. 181,
Series 1991 A,
7.000% 06/01/11 200 227
Burnsville, Fairview Community Hospital,
Series 1982 A,
(d) 05/01/12 (b) 2,145 912
</TABLE>
9
<PAGE>
Investment Portfolio/January 31, 1996
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
REFUNDED/ESCROW/PUBLIC OBLIGATION - CONT.
Dakota & Washington Counties
Housing & Redevelopment Authority,
Series 1988,
8.150% 09/01/16 $235 $311
Delano Independent School
District No. 879,
Series 1990:
7.250% 02/01/09 100 115
7.250% 02/01/10 100 115
Fairbault County,
Series 1988:
7.400% 04/01/06 65 68
7.400% 04/01/07 125 130
7.400% 04/01/09 25 26
7.400% 04/01/10 150 156
Minneapolis, Lifespan, Inc.,
Series 1988 B,
8.125% 08/01/17 245 273
Moorhead Residential,
7.100% 08/01/11 20 24
New York Mills Independent School
District No. 553, Series 1992 A,
6.850% 02/01/18 210 238
Owatonna Independent School
District No. 761, Series 1990:
7.100% 02/01/09 115 125
7.100% 02/01/10 120 131
7.100% 02/01/11 130 142
Rockford Independent School
District No. 883, Series A,
7.100% 12/15/10 400 435
Southern Minnesota Municipal
Power Agency, Series 1992 A,
5.750% 01/01/18 500 540
St. Cloud Hospital,
Series 1990 B,
7.000% 07/01/20 150 173
St. Louis Park, Methodist Hospital,
Series 1990 C,
7.250% 07/01/18 165 189
St. Paul, Series 1988 A,
8.000% 12/01/08 250 277
</TABLE>
10
<PAGE>
Investment Portfolio/January 31, 1996
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
State Higher Education Facilities Authority,
University of St. Thomas:
Series 2 O,
7.600% 10/01/07 $ 200 $ 218
Series 3 C,
7.100% 09/01/10 100 114
Virginia, Series 1989 A:
7.500% 02/01/07 100 107
7.500% 02/01/08 100 107
------
5,153
------
...............................................................................
SOLID WASTE - 1.9%
Miscellaneous Disposal - 0.6%
Hubbard County, Potlatch Corp.,
Series 1987 A,
7.375% 08/01/13 285 308
------
Resource Recovery - 1.3%
Anoka County, United Power Association,
Series 1987 A,
6.950% 12/01/08 400 437
Hennepin County, Series 1987 A,
8.200% 11/01/09 300 310
------
747
------
...............................................................................
TAX ALLOCATION - 0.5%
Minneapolis Community Development
Agency, Series 1987 III,
8.625% 12/01/27 260 276
------
...............................................................................
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES- 2.8%
Transportation
Duluth Seaway Port Authority,
Cargill Inc., Series 1993 A,
5.750% 12/01/16 1,500 1,511
St. Paul Port Authority, Series 1983 C,
9.750% 12/01/96 25 25
------
1,536
------
..............................................................................
UTILITY - 13.9%
Joint Power Authority
Northern Municipal Power Agency,
Minnesota Power & Light Co.,
Series 1989 A,
7.250% 01/01/16 700 753
</TABLE>
11
<PAGE>
Investment Portfolio/January 31, 1996
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
------------------------------------------------------------------------------
<S> <C> <C>
UTILITY - CONT.
Southern Minnesota Municipal
Power Agency:
Series 1993 A:
4.750% 01/01/16 (b) $ 2,000 $ 1,852
5.000% 01/01/12 750 723
Series 1994 A,
(d) 01/01/27 15,500 2,867
Western Minnesota Municipal
Power Agency,
Series 1983 A,
9.750% 01/01/16 (a) 1,000 1,518
-------
7,713
-------
..............................................................................
WATER & SEWER - 0.0%
Chaska, Series 1985,
8.200% 12/01/01 25 25
-------
TOTAL MUNICIPAL BONDS (cost of $50,619) 53,955
-------
PURCHASED OPTIONS - 0.0% CONTRACTS
------------------------------------------------------------------------------
March 1996 Municipal Bond Put,
Strike price 117, Expiration 03-20-96
(cost of $41) 33 13
-------
TOTAL INVESTMENTS - 96.9% (cost of $50,660) (e) 53,968
-------
SHORT-TERM OBLIGATIONS - 5.4%
------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (f)
MI Flint Hospital Building Authority,
Hurley Medical Center,
Series 1995 B,
3.300% 07/01/15 1,400 1,400
MS Perry County,
Leaf River Forest Project,
3.450% 03/01/02 1,600 1,600
-------
TOTAL SHORT-TERM OBLIGATIONS 3,000
-------
OTHER ASSETS & LIABILITIES, NET - (2.3)% (1,299)
------------------------------------------------------------------------------
NET ASSETS - 100% $55,669
-------
</TABLE>
12
<PAGE>
Investment Portfolio/January 31, 1996
--------------------------------------------------------------------------------
NOTES TO INVESTMENT PORTFOLIO:
--------------------------------------------------------------------------------
(a) These securities, or a portion thereof, with a total market value of
$2,306, are being used to collateralize the delayed delivery purchases
indicated in note (c) below.
(b) These securities, or a portion thereof, with a total market value of
$4,432, are being used to collateralize open futures contracts.
(c) This security has been purchased on a delayed delivery basis for
settlement at a future date beyond the customary settlement time.
(d) Zero coupon bond.
(e) Cost for federal income tax purposes is approximately the same.
(f) 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 bonds $3,000 March $ 5
</TABLE>
See notes to financial statements.
13
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
JANUARY 31, 1996
<TABLE>
<CAPTION>
(in thousands except for per share amounts and footnotes)
<S> <C> <C>
ASSETS
Investments at value (cost $50,660) $53,968
Short-term obligations 3,000
-------
56,968
Receivable for:
Interest $ 824
Fund shares sold 119
Investments sold 20
Other 11 974
------ --------
Total Assets 57,942
LIABILITIES
Payable for:
Investments purchased 1,957
Distributions 223
Fund shares purchased 73
Variation margin on futures 8
Accrued:
Deferred Trustees fees 1
Other 11
------
Total Liabilities 2,273
-------
NET ASSETS $55,669
-------
Net asset value & redemption price per share -
Class A ($36,586/4,980) $ 7.35
-------
Maximum offering price per share - Class A
($7.35/0.9525) $ 7.72 (a)
-------
Net asset value & offering price per share -
Class B ($19,083/2,597) $ 7.35 (b)
-------
COMPOSITION OF NET ASSETS
Capital paid in $53,314
Overdistributed net investment income (7)
Accumulated net realized loss (941)
Net unrealized appreciation (depreciation) on:
Investments 3,308
Open future contracts (5)
-------
$55,669
-------
</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.
14
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JANUARY 31, 1996
<TABLE>
<CAPTION>
(in thousands)
<S> <C> <C>
INVESTMENT INCOME
Interest $3,341
EXPENSES
Management fee $ 288
Service fee - Class A 47
Service fee - Class B 21
Distribution fee - Class B 126
Transfer agent 91
Bookkeeping fee 28
Trustees fee 14
Custodian fee 10
Audit fee 32
Legal fee 22
Registration fee 7
Reports to shareholders 7
Other 13
------
706
Fees waived by the Adviser (125) 581
------ ------
Net Investment Income 2,760
------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain (loss) on:
Investments 961
Closed futures contracts (1,494)
------
Net Realized Loss (533)
Net unrealized appreciation during
the period on:
Investments 4,151
Open futures contracts 248
------
Net Unrealized Appreciation 4,399
------
Net Gain 3,866
------
Net Increase in Net Assets from Operations $6,626
------
</TABLE>
See notes to financial statements.
15
<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 $ 2,760 $ 3,019
Net realized gain (loss) (533) 30
Net unrealized appreciation (depreciation) 4,399 (4,777)
-------- --------
Net Increase (Decrease) from Operations 6,626 (1,728)
Distributions:
From net investment income - Class A (2,013) (2,325)
From net investment income - Class B (799) (681)
-------- --------
3,814 (4,734)
-------- --------
Fund Share Transactions:
Receipts for shares sold - Class A 4,070 4,991
Value of distributions reinvested - Class A 1,372 1,606
Cost of shares repurchased - Class A (7,317) (8,415)
-------- --------
(1,875) (1,818)
-------- --------
Receipts for shares sold - Class B 4,070 6,114
Value of distributions reinvested - Class B 536 430
Cost of shares repurchased - Class B (1,453) (1,058)
-------- --------
3,153 5,486
-------- --------
Net Increase from Fund Share Transactions 1,278 3,668
-------- --------
Total Increase (Decrease) 5,092 (1,066)
NET ASSETS
Beginning of period 50,577 51,643
-------- --------
End of period (net of overdistributed and
including undistributed net investment
income of $7 and $39, respectively) $ 55,669 $ 50,577
======== ========
NUMBER OF FUND SHARES
Sold - Class A 574 708
Issued for distributions reinvested - Class A 194 232
Repurchased - Class A (1,030) (1,226)
-------- --------
(262) (286)
-------- --------
Sold - Class B 573 869
Issued for distributions reinvested - Class B 75 62
Repurchased - Class B (205) (157)
-------- --------
443 774
-------- --------
</TABLE>
See notes to financial statements.
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996
NOTE 1. ACCOUNTING POLICIES
--------------------------------------------------------------------------------
ORGANIZATION: Colonial Minnesota 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 disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from these estimates. The following significant accounting
policies 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 fee and the Class B
distribution
17
<PAGE>
Notes to Financial Statements/ January 31, 1996
--------------------------------------------------------------------------------
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 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 by the
service fee applicable to Class A and Class B shares and 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. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carry-forwards) 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> <C>
January 1, 1996 0.0125%
April 1, 1996 0.0250%
July 1, 1996 0.0375%
October 1, 1996 0.0500%
</TABLE>
18
<PAGE>
Notes to Financial Statements/ January 31, 1996
--------------------------------------------------------------------------------
NOTE 2. FEES AND COMPENSATION PAID TO AFFILIATES - CONT.
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: 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 $9,108 on
sales of the Funds Class A shares and received contingent deferred sales charges
(CDSC) of $30,194 on Class B share redemption's.
The Fund has adopted a 12b-1 plan which requires it to pay to the Distributor a
distribution fee 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 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 0.75% annually of the Fund's average net
assets. Through July 31, 1995, the expense limit was 0.70% 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 $22,083,049 and
$23,694,551, respectively. Unrealized appreciation (depreciation) at January 31,
1996, based on cost of investments for federal income tax purposes was:
19
<PAGE>
Notes to Financial Statements/January 31,1995
--------------------------------------------------------------------------------
NOTE 3. PORTFOLIO INFORMATION - CONT.
<TABLE>
<S> <C>
Gross unrealized appreciation $3,527,269
Gross unrealized depreciation (219,145)
----------
Net unrealized appreciation $3,308,124
----------
</TABLE>
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>
1997 $298,000
1999 4,000
2001 8,000
2002 39,000
--------
$349,000
--------
</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 instruments 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.
20
<PAGE>
FINANCIAL HIGHLIGHTS FINANCIAL HIGHLIGHTS - continued
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
Year ended January 31
-------------------------------------------------------
1996 1995
Class A Class B Class A Class B
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 6.840 $ 6.840 $ 7.480 $ 7.480
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.384 0.332 0.415 0.363
Net realized and
unrealized gain (loss) 0.516 0.516 (0.642) (0.642)
------- ------- ------- -------
Total from Investment
Operations 0.900 0.848 (0.227) (0.279)
------- ------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net
investment income (0.390) (0.338) (0.413) (0.361)
From capital paid in --- --- --- ---
------- ------- ------- -------
Total Distributions
Declared to Shareholders (0.390) (0.338) (0.413) (0.361)
------- ------- ------- -------
Net asset value -
End of period $ 7.350 $ 7.350 $ 6.840 $ 6.840
======= ======= ======= =======
Total return (d)(e) 13.50% 12.66% (2.92)% (3.65)%
======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS
Expenses 0.85% (g) 1.60% (g) 0.72% 1.47%
Net investment income 5.41% (g) 4.66% (g) 5.98% 5.23%
Fees and expenses
waived or borne by the Adviser 0.24% 0.24% 0.26% 0.26%
Portfolio turnover 42% 42% 26% 26%
Net assets at end
of period (000) $36,586 $19,083 $35,846 $14,731
(a) Net of fees and expenses waived
or borne by the Adviser which
amounted to $ 0.016 $ 0.016 $ 0.018 $ 0.018
(b) Class B shares were initially offered on August 4, 1992. Per share
amounts reflect activity from that date.
(c) Because of differences between book and tax basis accounting, there was
no return of capital for federal income tax purposes.
(d) Total return at net asset value assuming all distributions reinvested
and no initial sales charge or contingent deferred sales charge.
(e) Had the Adviser not waived or reimbursed a portion of expenses, total
return would have been reduced.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
(h) Annualized.
</TABLE>
21
<PAGE>
FINANCIAL HIGHLIGHTS -- Continued
<TABLE>
<CAPTION>
Year ended January 31
---------------------------------------------------------------------
1994 1993 1992
Class A Class B Class A Class B (b) Class A
------- ------- ------- ------- -------
<C> <C> <C> <C> <C>
$ 7.160 $ 7.160 $ 7.030 $ 7.210 $ 6,930
------- ------- ------- ------- -------
0.419 0.364 0.449 0.191 0.461
0.323 0.323 0.125 (0.049) 0.098
------- ------- ------- ------- -------
0.742 0.687 0.574 0.142 0.559
------- ------- ------- ------- -------
(0.422) (0.367) (0.444) (0.192) (0.458)
--- --- --- --- (0.001) (c)
------- ------- ------- ------- -------
(0.422) (0.367) (0.444) (0.192) (0.459)
------- ------- ------- ------- -------
$ 7.480 $ 7.480 $ 7.160 $ 7.160 $ 7.030
======= ======= ======= ======= =======
10.62% 9.81% 8.41% 2.01%(f) 8.38%
======= ======= ======= ======= =======
0.82% 1.57% 0.85% 1.60%(h) 0.88%
5.69% 4.94% 6.33% 5.58%(h) 6.58%
0.20% 0.20% 0.35% 0.35%(h) 0.42%
9% 9% 5% 5% 1%
$41,326 $10,317 $35,017 $ 2,173 $30,676
$ 0.015 $ 0.015 $ 0.025 $ 0.009 $ 0.029
</TABLE>
--------------------------------------------------------------------------------
Federal income tax information (unaudited)
All of the distributions will be treated as exempt income for federal income tax
purposes
---------------------------------------------------------------------------
22
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
T0 THE TRUSTEES OF COLONIAL TRUST V AND THE SHAREHOLDERS OF
COLONIAL MINNESOTA TAX-EXEMPT FUND
In our opinion, the accompanying statement of assets and liabilities,
including the investment portfolio, and the related statements of operations and
of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Colonial Minnesota Tax-Exempt Fund
(a series of Colonial Trust V) at January 31, 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
5
<PAGE>
INVESTMENT PORTFOLIO (North Carolina)
JANUARY 31, 1996 (IN THOUSANDS)
<TABLE>
<CAPTION>
MUNICIPAL BONDS - 97.9% PAR VALUE
---------------------------------------------------------------------------------
<S> <C> <C>
CERTIFICATES OF PARTICIPATION - 8.3%
Charlotte:
Charlotte-Mecklenburg Law Project,
Series 1993-B,
5.375% 06/01/2013 $ 700 $ 711
------
Cityfair Parking Facility,
Series 1994-A,
6.125% 06/01/2010 430 458
Durham County,
Hospital & Office Facilities,
Series 1994,
6.000% 05/01/2014 1,000 1,049
Randolph County,
Randolph County Project,
Series 1995,
5.300% 06/01/2015 640 635
------
2,852
------
.................................................................................
EDUCATION - 1.5%
East Carolina University,
Series 1994,
6.200% 11/01/2015 475 512
------
.................................................................................
GENERAL OBLIGATIONS - 15.4%
Lincoln County,
Series 1994,
5.100% 06/01/2010 600 610
Mecklenburg County,
Series 1994,
5.500% 04/01/2012 1,000 1,036
Onslow County,
Series 1995,
5.700% 03/01/2016 500 519
Orange County,
Series 1994,
5.500% 02/01/2014 490 499
PR Commonwealth of Puerto Rico:
6.500% 07/01/2014 (a) 1,000 1,136
Series 1994,
6.500% 07/01/2023 500 539
State,
Series 1994-A,
4.750% 02/01/2013 1,000 954
------
5,293
------
---------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
Investment Portfolio/January 31, 1996
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
HEALTH - 13.8%
HOSPITALS
Charlotte-Mecklenburg Hospital
Authority,
Series 1992,
6.250% 01/01/2020 $ 1,500 $ 1,564
Lincoln County,
Lincoln County Hospital,
9.000% 05/01/2007 300 374
New Hanover County,
New Hanover Regional Medical Center,
Series 1993,
4.750% 10/01/2013 500 470
Pitt County,
Pitt Memorial Hospital,
Series 1995,
5.250% 12/01/2021 1,000 956
State Medical Care Commission:
Presbyterian Health Services Corp.,
Series 1993,
5.500% 10/01/2020 360 355
St. Joseph's Hospital Project,
Series 1994,
5.100% 10/01/2014 555 538
Wake County,
Series 1993,
5.125% 10/01/2013 500 491
------
4,748
------
.................................................................................
HOUSING - 15.3%
MULTI-FAMILY - 13.8%
Durham,
Durham Hosiery Mill Project,
Series 1987,
7.500% 08/01/2029 1,575 1,725
Eastern Carolina Regional Housing
Authority, Jacksonville New River
Apartments, Series 1994,
8.250% 09/01/2014 250 255
North Wilkesboro Housing
Development Corp.,
Series 1995-A,
6.350% 10/01/2022 1,745 1,804
State Housing Finance Agency,
Series 1994,
5.450% 09/01/2024 1,000 967
------
4,751
------
</TABLE>
7
<PAGE>
Investment Portfolio/January 31, 1996
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MUNICIPAL BONDS - CONT. PAR VALUE
---------------------------------------------------------------------------------
<S> <C> <C>
HOUSING - CONT.
SINGLE-FAMILY - 1.5%
State Housing Finance Agency,
Series W,
6.450% 09/01/2014 $ 485 $ 510
------
.................................................................................
MANUFACTURING - 2.1%
PAPER PRODUCTS
Martin County,
Weyerhaeuser Co.,
Series 1993,
5.650% 12/01/2023 750 738
------
.................................................................................
PUBLIC FACILITIES IMPROVEMENT - 13.8%
Charlotte, Convention Facilities Project,
Series 1993-C,
5.250% 12/01/2013 (b) 1,550 1,546
Cumberland County,
Civic Center Project,
Series 1995-A,
6.400% 12/01/2024 (b) 2,000 2,175
Harnett County,
Harnett County Projects,
Series 1994,
6.400% 12/01/2014 250 271
PR Commonwealth of
Puerto Rico Public
Buildings Authority,
Series 1993-M,
stepped coupon,
(5.700% 07/01/98)
3.750% 07/01/2016 (c) 200 192
Rowan County,
Justice Center Project,
Series 1992,
6.250% 12/01/2007 500 556
------
4,740
------
.................................................................................
PUBLIC INFRASTRUCTURE - 0.7%
TURNPIKE/TOLL ROAD/BRIDGE
PR Commonwealth of Puerto Rico
Highway & Transportation Authority,
Series W,
5.500% 07/01/2009 240 249
------
.................................................................................
REFUNDED/ESCROW/SPECIAL OBLIGATIONS (d) - 3.1%
State Municipal Power Agency,
Catawba No. 1, Series 1990,
5.500% 01/01/2013 1,000 1,055
------
.................................................................................
TRANSPORTATION - 1.6%
Chapel Hill, Parking Facilities,
Series 1994,
6.450% 12/01/2023 500 536
------
---------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
Investment Portfolio/January 31, 1996
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
UTILITY - 7.2%
JOINT POWER AUTHORITY - 2.2%
State Municipal Power Agency,
Catawba No.1,
Series 1992,
5.750% 01/01/2020 $ 750 $ 754
-------
MUNICIPAL ELECTRIC - 5.0%
Concord Utilities System,
5.500% 12/01/2019 1,200 1,216
PR Commonwealth of Puerto Rico
Electric Power Authority,
Series 1994-T,
6.000% 07/01/2016 500 516
-------
1,732
-------
.................................................................................
WATER & SEWER - 15.1%
Charlotte Water & Sewer, Series 1994,
5.800% 02/01/2015 (b) 1,000 1,056
Fayetteville Public Works Commission,
Series 1993,
4.750% 03/01/2014 (b) 1,500 1,399
Mount Holly Water & Sewer, Series 1993,
4.900% 03/01/2012 120 116
PR Commonwealth of Puerto Rico
Aqueduct & Sewer Authority,
Series 1995,
6.250% 07/01/2012 1,000 1,103
Wilmington Water, Series 1994,
5.700% 06/01/2015 500 516
Winston-Salem, Solid Waste Management
Project, Series 1995-A,
5.500% 04/01/2016 1,000 1,019
-------
5,209
-------
TOTAL MUNICIPAL BONDS (cost of $32,149 ) (e) 33,680
-------
SHORT-TERM OBLIGATIONS - 2.6%
---------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (f)
Craven County Industrial Facilities,
3.850% 05/01/2011 700 700
Halifax County Industrial Facilities
& Pollution Control Authority,
Westmoreland Coal Co.,
3.750% 12/01/2019 200 200
-------
TOTAL SHORT-TERM OBLIGATIONS 900
-------
OTHER ASSETS & LIABILITIES, NET - (0.5)% (174)
---------------------------------------------------------------------------------
NET ASSETS - 100% $34,406
=======
</TABLE>
9
<PAGE>
NOTES TO INVESTMENT PORTFOLIO:
(a) This security has been purchased on a delayed delivery basis for
settlement at a future date beyond the customary settlement time.
(b) These securities, or a portion thereof, with a total market value of
$5,943, are being used to collateralize the delayed delivery purchase
indicated in note (a) above and open futures contracts.
(c) Shown parenthetically is the interest rate to be paid and the date
the Fund will begin accruing this rate.
(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) Cost for federal income tax purposes is $32,177.
(f) 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 2,900 March $ 12
</TABLE>
See notes to financial statements.
10
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
JANUARY 31, 1996
<TABLE>
<CAPTION>
(in thousands except for per share amounts and footnotes)
ASSETS
<S> <C> <C>
Investments at value (cost $32,149) $ 33,680
Short-term obligations 900
--------
34,580
Cash $ 135
Receivable for:
Interest 511
Fund shares sold 506
Expense reimbursement due from Adviser 4
Deferred organization expenses 16
Other 1 1,173
------- --------
Total Assets 35,753
LIABILITIES
Payable for:
Investments purchased 1,129
Distributions 137
Fund shares repurchased 69
Variation margin on futures 7
Accrued:
Deferred Trustees fees 1
Other 4
-------
Total Liabilities 1,347
--------
NET ASSETS $ 34,406
========
Net asset value & redemption price per share -
Class A ($15,813/2,174) 7.27
--------
Maximum offering price per share - Class A
($7.27/0.9525) 7.63(a)
--------
Net asset value & offering price per share -
Class B ($18,593/2,557) 7.27(b)
--------
COMPOSITION OF NET ASSETS
Capital paid in $ 34,469
Undistributed net investment income 22
Accumulated net realized loss (1,604)
Net unrealized appreciation (depreciation) on:
Investments 1,531
Open futures contracts (12)
--------
$ 34,406
========
</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
<TABLE>
<CAPTION>
(in thousands)
INVESTMENT INCOME
<S> <C> <C>
Interest $ 2,001
EXPENSES
Management fee $ 186
Service fee - Class A 19
Service fee - Class B 25
Distribution fee - Class B 142
Transfer agent 59
Bookkeeping fee 27
Trustees fee 13
Custodian fee 2
Audit fee 12
Legal fee 8
Registration fee 8
Reports to shareholders 4
Amortization of deferred
organization expenses 6
Other 5
516
------
Fees and expenses waived or borne
by the Adviser (261) 255
------ -------
Net Investment Income 1,746
-------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized loss on:
Investments (185)
Closed futures contracts (982)
------
Net Realized Loss (1,167)
Net unrealized appreciation during
the period on:
Investments 3,884
Open futures contracts 147
------
Net Unrealized Appreciation 4,031
-------
Net Gain 2,864
-------
Net Increase in Net Assets from Operations $ 4,610
=======
</TABLE>
See notes to financial statements.
12
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended
(in thousands) January 31
INCREASE (DECREASE) IN NET ASSETS 1996 1995
Operations:
<S> <C> <C>
Net investment income $ 1,746 $ 1,603
Net realized loss (1,167) (392)
Net unrealized appreciation (depreciation) 4,031 (2,626)
-------- --------
Net Increase (Decrease) from Operations 4,610 (1,415)
Distributions:
From net investment income - Class A (852) (889)
From net investment income - Class B (894) (707)
-------- --------
2,864 (3,011)
-------- --------
Fund Share Transactions:
Receipts for shares sold - Class A 3,464 7,134
Value of distributions reinvested - Class A 493 560
Cost of shares repurchased - Class A (3,623) (5,510)
-------- --------
334 2,184
-------- --------
Receipts for shares sold - Class B 3,082 10,193
Value of distributions reinvested - Class B 468 420
Cost of shares repurchased - Class B (3,700) (2,072)
-------- --------
(150) 8,541
-------- --------
Net Increase from Fund Share Transactions 184 10,725
-------- --------
Total Increase 3,048 7,714
NET ASSETS
Beginning of period 31,358 23,644
-------- --------
End of period (including undistributed net
investment income of $22 and $12, respectively) $ 34,406 $ 31,358
-------- --------
NUMBER OF FUND SHARES
Sold - Class A 495 1,035
Issued for distributions reinvested - Class A 70 83
Repurchased - Class A (516) (821)
-------- --------
49 297
-------- --------
Sold - Class B 440 1,500
Issued for distributions reinvested - Class B 67 63
Repurchased - Class B (521) (317)
-------- --------
(14) 1,246
-------- --------
</TABLE>
See notes to financial statements.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996
NOTE 1. ACCOUNTING POLICIES
ORGANIZATION: Colonial North Carolina 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.
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.
14
<PAGE>
Notes to Financial Statements/January 31, 1996
FEDERAL INCOME TAXES: Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable and tax-exempt
income, no federal income tax has been accrued.
INTEREST INCOME, DEBT DISCOUNT AND PREMIUM: Interest income is recorded on the
accrual basis. Original issue discount is accreted to interest income over the
life of a security with a corresponding increase in the cost basis; market
discount is not accreted. Premium is amortized against interest income with a
corresponding decrease in the cost basis.
DEFERRED ORGANIZATION EXPENSES: The Fund incurred $31,806 of expenses in
connection with its organization, initial registration with the Securities and
Exchange Commission and various states, and the initial public offering of its
shares. These expenses were deferred and 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>
15
<PAGE>
Notes to Financial Statements/January 31, 1996
NOTE 2. FEES AND COMPENSATION PAID TO AFFILIATES - CONT.
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: 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 $8,238 on
sales of the Fund's Class A shares and received contingent deferred sales
charges (CDSC) of $78,200 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 outstanding on
the 20th of each month which were issued Annual Fee 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 0.30% annually of
the Fund's average net assets. Through July 31, 1995, the expense limit was
0.10% 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
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 $11,385,640 and
$12,578,775, respectively.
16
<PAGE>
Notes to Financial Statements/January 31, 1996
Unrealized appreciation (depreciation) at January 31, 1996, based on cost of
investments for federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation $ 1,609,949
Gross unrealized depreciation (107,147)
-----------
Net unrealized appreciation $ 1,502,802
===========
</TABLE>
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>
2003 $230,000
2004 735,000
--------
$965,000
========
</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>
Period ended
Year ended January 31 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 $ 6.680 $ 6.680 $ 7.500 $ 7.500 $ 7.500 $ 7.500
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.386 0.334 0.396 0.345 0.164 0.141
Net realized and
unrealized gain (loss) 0.588 0.588 (0.822) (0.822) -- --
------- ------- ------- ------- ------- -------
Total from Investment
Operations 0.974 0.922 (0.426) (0.477) 0.164 0.141
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net
investment income (0.384) (0.332) (0.394) (0.343) (0.164) (0.141)
------- ------- ------- ------- ------- -------
Net asset value -
End of period $ 7.270 $ 7.270 $ 6.680 $ 6.680 $ 7.500 $ 7.500
------- ------- ------- ------- ------- -------
Total return (c)(d) 14.91% 14.07% (5.55)% (6.27)% 2.22%(e) 1.90%(e)
------- ------- ------- ------- ------- -------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.33%(f) 1.08%(f) 0.12% 0.87% 0.10%(g) 0.85%(g)
Net investment income 5.47%(f) 4.72%(f) 5.83% 5.08% 4.91%(g) 4.16%(g)
Fees and expenses waived
or borne by the Adviser 0.76% 0.76% 0.93% 0.93% 1.20%(g) 1.20%(g)
Portfolio turnover 34% 34% 37% 37% 1%(g) 1%
Net assets at end
of period (000) $15,813 $18,593 $14,189 $17,169 $13,710 $ 9,934
(a) Net of fees and expenses waived or borne by the Adviser which amounted to:
0.053 0.053 0.063 0.063 0.040 0.040
(b) The Fund commenced investment operations on September 1, 1993.
(c) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred
sales charge.
(d) Had the Adviser not waived or reimbursed a portion of expenses, total return would have been reduced.
(e) Not annualized.
(f) The benefits derived from custody credits and directed brokerage arrangements had no impact. Prior years' ratios are net
of benefits received, if any.
(g) Annualized.
</TABLE>
--------------------------------------------------------------------------------
Federal income tax information (unaudited)
All of the distributions will be treated as exempt income for federal income tax
purposes.
--------------------------------------------------------------------------------
18
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
T0 THE TRUSTEES OF COLONIAL TRUST V AND THE SHAREHOLDERS OF
COLONIAL NORTH CAROLINA 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 North Carolina 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
5
--------------------------------------------------------------------------------
<PAGE>
INVESTMENT PORTFOLIO (New York)
JANUARY 31, 1996 (IN THOUSANDS)
<TABLE>
<CAPTION>
MUNICIPAL BONDS - 97.5% PAR VALUE
-------------------------------------------------------------------------------------------
<S> <C> <C> <C>
EDUCATION - 21.2%
Monroe County Industrial
Development Agency, Roberts
Wesleyan College,
7.400% 09/01/11 $ 750 $ 828
State Dormitory Authority:
City University System:
Series 1990-C,
7.500% 07/01/10 1,500 1,798
Series 1993-A:
5.750% 07/01/13 1,000 1,011
6.000% 07/01/20 2,000 2,085
Series 1995-A,
5.625% 07/01/16 5,000 5,025
State University System:
Series 1985-A,
7.800% 12/01/05 185 199
Series 1993-A:
5.250% 05/15/21 5,320 4,996
5.375% 05/15/16 3,000 2,843
Series 1995-A,
6.500% 05/15/06 3,000 3,285
University of New York,
Series 1990 B,
7.500% 05/15/11 1,000 1,205
---------
23,275
---------
------------------------------------------------------------------------------------------
HEALTH - 3.3%
HOSPITAL - 1.7%
State Certificate of Participation,
Office of Mental Health,
8.300% 09/01/12 1,000 1,074
State Medical Care Facilities
Finance Agency,
Vassar Brothers Hospital,
Series 1987-A,
8.250% 11/01/13 740 790
---------
1,864
---------
Human Services Providers - 1.4%
State Medical Care Facilities
Finance Agency:
Series 1987-A,
8.875% 08/15/07 270 293
Series 1990-B,
7.875% 08/15/08 250 285
</TABLE>
6
<PAGE>
<TABLE>
Investment Portfolio/January 31, 1996
------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Series 1991-D,
7.400% 02/15/18 $ 820 $ 917
---------
1,495
---------
NURSING HOME - 0.2%
State Dormitory Authority,
Menorah Campus, Series 1991-A,
7.400% 02/01/31 245 277
---------
------------------------------------------------------------------------------------------
HOUSING - 7.6%
MULTI-FAMILY - 5.2%
Hudson Housing Development Corp.,
Providence Hall-Schuyler
Court Project,
Series 1992-A,
6.500% 01/01/22 750 782
New York City Housing Development
Corp., Multi-family Housing,
Series 1993-A,
6.550% 10/01/15 1,500 1,558
Nyack Housing Assistance Corp.,
Nyack Plaza Apartments,
7.375% 06/01/21(a) 1,375 1,385
State Housing Finance Agency,
Multi-family Housing,
Series 1989-B,
7.550% 11/01/29(b) 235 249
New York City, Series 1990-A,
8.000% 11/01/08 250 284
Yorktown Housing Corp.,
Beaveridge Apartments,
7.375% 06/01/21(a) 1,447 1,457
---------
5,715
---------
SINGLE-FAMILY - 2.4%
State Mortgage Finance Agency:
Series BB-2,
7.950% 10/01/15 570 596
Series EE-1,
8.050% 04/01/16 825 891
Series MM-1,
7.950% 10/01/21 1,000 1,085
Series 10-A,
8.100% 04/01/14 105 111
---------
2,683
---------
------------------------------------------------------------------------------------------
MANUFACTURING - 5.5%
CHEMICALS - 1.1%
Monroe County Industrial
Development Agency,
Yorkmill Realty,
9.500% 12/01/06 1,145 1,192
---------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/January 31, 1996
------------------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MANUFACTURING - CONT.
Machinery & Computer Chips - 0.6%
Monroe County Industrial Development
Agency, Accede Mold & Tool Co.,
10.750% 11/01/07 $ 590 $ 621
---------
PAPER PRODUCTS - 0.9%
New York City Industrial
Development Agency,
Visy Paper, Inc., Series 1995,
7.950% 01/01/28 1,000 1,024
---------
POLLUTION CONTROL REVENUE - 2.9%
Onondaga County Industrial
Development Authority, Bristol-Myers
Squibb Co., Series 1994,
5.750% 03/01/24 (b) 3,000 3,210
---------
------------------------------------------------------------------------------------------
PUBLIC FACILITIES IMPROVEMENT - 12.4%
Albany Parking Authority, Green and
Hudson Garage Project, Series 1991-A,
7.150% 09/15/16 250 270
New York City Industrial
Development Agency, United States
Tennis Association,
Tennis Center Project,
6.375% 11/15/14 (b) 1,500 1,625
State Dormitory Authority,
Suffolk County
Future Income Growth,
Series 1991-A,
9.500% 04/15/14 1,000 1,169
State Urban Development Corp.,
Correctional Facilities:
Series 4,
5.375% 01/01/23 5,000 4,725
Series 1993-A,
5.500% 01/01/14 3,000 2,966
Series 1995,
5.750% 04/01/12 1,750 1,783
Triborough Bridge & Tunnel
Authority, Javits Convention
Center Project, Series E,
7.250% 01/01/10 1,000 1,154
---------
13,692
---------
------------------------------------------------------------------------------------------
PUBLIC INFRASTRUCTURE - 5.5%
Turnpike/Toll Road/Bridge - 5.5%
Triborough Bridge & Tunnel Authority:
Series A,
4.750% 01/01/19 1,500 1,378
</TABLE>
8
<PAGE>
<TABLE>
Investment Portfolio/January 31, 1996
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Series L:
8.000% 01/01/07 $ 1,000 $1,087
8.125% 01/01/12 1,100 1,199
Series Y,
6.000% 01/01/12 1,750 1,927
Series 1993 B,
(c) 01/01/21 2,000 520
---------
6,111
---------
---------------------------------------------------------------------------------------------------------------------
REFUNDED/ESCROW/SPECIAL OBLIGATION (d) - 1.8%
State Dormitory Authority, State
University of New York, Series 1991-A,
7.250% 05/15/18 (b) 1,000 1,185
State Medical Care Facilities
Finance Agency, Series 1990-B,
7.875% 08/15/08 225 265
Syracuse Industrial Development
Authority, Parking Facilities,
Series 1990-A,
7.700% 06/01/15 500 568
---------
2,018
---------
---------------------------------------------------------------------------------------------------------------------
SERVICES - 1.1%
Business Services
United Nations Development Corp.,
Series 1992-A,
6.000% 07/01/07 1,125 1,212
---------
---------------------------------------------------------------------------------------------------------------------
SOLID WASTE - 1.2%
Miscellaneous Disposal - 0.7%
St. Lawrence County Solid Waste
Disposal Authority, Series 1987,
8.875% 01/01/08 750 792
---------
Resource Recovery - 0.5%
Babylon Industrial Development
Agency, Ogden Martin Systems,
Series 1985-B,
8.500% 01/01/19 495 561
---------
---------------------------------------------------------------------------------------------------------------------
TAX ALLOCATION - 8.7%
State Energy Research & Development
Authority, Series 1993-B, RIB, (variable rate),
8.528% 04/01/20 1,500 1,727
State Local Government Assistance:
Series 1993 C,
5.500% 04/01/17 2,000 2,033
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/January 31, 1996
------------------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TAX ALLOCATION - CONT.
Series 1993 E:
5.000% 04/01/21 $ 5,000 $ 4,713
6.000% 04/01/14 1,000 1,091
---------
9,564
---------
------------------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 13.8%
AIR TRANSPORTATION - 2.0%
New York City Industrial
Development Agency, American
Airlines,
6.900% 08/01/24 2,000 2,153
---------
TRANSPORTATION - 11.8%
Metropolitan Transportation Authority,
Transportation Facilities:
Series O:
5.500% 07/01/17 3,200 3,124
5.750% 07/01/13 4,000 4,045
Series 7:
(c) 07/01/14 8,430 2,929
4.750% 07/01/19 1,000 876
State Port Authority, Series 1985,
5.375% 03/01/28 2,000 2,015
---------
12,989
---------
------------------------------------------------------------------------------------------
UTILITY - 12.5%
INVESTOR OWNED - 3.7%
State Energy Research & Development
Authority, Brooklyn Gas Co.:
Series 1989-A,
6.750% 02/01/24 3,000 3,233
Series 1991-B, RIB, (variable rate),
9.949% 07/15/26 700 882
---------
4,115
---------
MUNICIPAL ELECTRIC - 8.8%
State Energy Research &
Development Authority, Consolidated
Edison Project:
5.250% 08/15/20(b) 4,000 3,915
Series 1991-A,
7.500% 01/01/26 500 548
Series 1992-A,
6.750% 01/15/27(b) 5,000 5,281
---------
9,744
---------
</TABLE>
10
<PAGE>
<TABLE>
Investment Portfolio/January 31, 1996
------------------------------------------------------------------------------------------
<S> <C> <C>
WATER & SEWER - 2.9%
State Environmental Facilities
Corp., Series 1990-A,
7.500% 06/15/12 $ 1,000 $ 1,130
Suffolk County Water Authority,
Series 1992 B,
5.625% 06/01/16(b) 2,000 2,035
---------
3,165
---------
TOTAL MUNICIPAL BONDS (cost of $97,737)(e) 107,472
---------
SHORT-TERM OBLIGATIONS - 1.7%
----------------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (f)
New York City,
Series C,
3.850% 10/01/23 1,000 1,000
New York City Municipal Water,
Series 1995 A,
3.800% 06/15/25 700 700
State,
Series 1994 A4,
3.750% 08/01/21 200 200
---------
TOTAL SHORT-TERM OBLIGATIONS 1,900
---------
OTHER ASSETS & LIABILITIES, NET - 0.8% 928
----------------------------------------------------------------------------------------
NET ASSETS - 100.0% $ 110,300
---------
</TABLE>
NOTES TO INVESTMENT PORTFOLIO:
-------------------------------------------------------------------------------
(a) Security is exempt from registration under Rule 144A of the Securities Act
of 1993. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At year end, the
value of these securities amounted to $2,842 or 2.6% of net assets.
(b) These securities, or a portion thereof, with a total market value of
$15,838, are being used to collateralize open futures contracts.
(c) Zero coupon bond.
(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) Cost for federal income tax purposes is the same.
(f) 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.
11
<PAGE>
Investment Portfolio/January 31, 1996
-------------------------------------------------------------------------------
NOTES TO INVESTMENT PORTFOLIO: - CONT.
-------------------------------------------------------------------------------
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 $ 10,100 March $ 21
</TABLE>
<TABLE>
<CAPTION>
Acronym Name
------- ----
<S> <C>
RIB Residual Interest Bond
</TABLE>
See notes to financial statements.
12
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
JANUARY 31, 1996
<TABLE>
<CAPTION>
(in thousands except for per share amounts and footnotes)
ASSETS
<S> <C> <C>
Investments at value (cost $97,737) $ 107,472
Short-term obligations 1,900
-----------
109,372
Receivable for:
Interest $ 1,327
Fund shares sold 192
Expense reimbursement
due from Adviser 3
Other 70 1,592
---------- ----------
Total Assets 110,964
LIABILITIES
Payable for:
Distributions 470
Fund shares repurchased 160
Variation margin on futures 25
Accrued:
Deferred Trustees fees 2
Other 7
----------
Total Liabilities 664
----------
NET ASSETS $ 110,300
----------
Net asset value & redemption price per share -
Class A ($56,795/7,839) $ 7.25
----------
Maximum offering price per share - Class A
($7.25/0.9525) $ 7.61(a)
----------
Net asset value & offering price per share -
Class B ($53,505/7,384) $ 7.25(b)
----------
COMPOSITION OF NET ASSETS
Capital paid in $ 106,133
Undistributed net investment income 120
Accumulated net realized loss (5,667)
Net unrealized appreciation (depreciation) on:
Investments 9,735
Open futures contracts (21)
----------
$ 110,300
----------
</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.
13
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JANUARY 31, 1996
<TABLE>
<CAPTION>
(in thousands)
INVESTMENT INCOME
<S> <C> <C>
Interest $ 6,616
EXPENSES
Management fee $ 566
Service fee - Class A 72
Service fee - Class B 64
Distribution fee - Class B 370
Transfer agent 169
Bookkeeping fee 46
Trustees fee 15
Custodian fee 8
Audit fee 32
Legal fee 6
Registration fee 7
Reports to shareholders 5
Other 14
----------
1,374
Fees waived by the Adviser (395) 979
---------- ---------
Net Investment Income 5,637
---------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO
POSITIONS
Net realized gain (loss) on:
Investments 1,116
Closed futures contracts (3,021)
----------
Net Realized Loss (1,905)
Net unrealized appreciation (depreciation) during
the period on:
Investments 10,108
Open futures contracts 416
----------
Net Unrealized Appreciation 10,524
---------
Net Gain 8,619
---------
Net Increase in Net Assets from Operations $ 14,256
---------
</TABLE>
See notes to financial statements.
14
<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 $ 5,637 $ 5,998
Net realized loss (1,905) (3,374)
Net unrealized appreciation (depreciation) 10,524 (9,199)
--------- ---------
Net Increase (Decrease) from Operations 14,256 (6,575)
Distributions:
From net investment income - Class A (3,241) (3,470)
From net investment income - Class B (2,495) (2,334)
--------- ---------
8,520 (12,379)
--------- ---------
Fund Share Transactions:
Receipts for shares sold - Class A 8,444 7,297
Value of distributions reinvested - Class A 1,635 1,733
Cost of shares repurchased - Class A (11,130) (12,138)
--------- ---------
(1,051) (3,108)
--------- ---------
Receipts for shares sold - Class B 11,109 9,456
Value of distributions reinvested - Class B 1,431 1,395
Cost of shares repurchased - Class B (6,197) (7,464)
--------- ---------
6,343 3,387
--------- ---------
Net Increase from Fund Share Transactions 5,292 279
--------- ---------
Total Increase (Decrease) 13,812 (12,100)
NET ASSETS
Beginning of period 96,488 108,588
--------- ---------
End of period (including undistributed net
investment income of $120 and $199,
respectively) $ 110,300 $ 96,488
--------- ---------
NUMBER OF FUND SHARES
Sold - Class A 1,214 1,059
Issued for distributions reinvested - Class A 234 254
Repurchased - Class A (1,597) (1,792)
--------- ---------
(149) (479)
--------- ---------
Sold - Class B 1,599 1,373
Issued for distributions reinvested - Class B 205 205
Repurchased - Class B (886) (1,117)
--------- ---------
918 461
--------- ---------
</TABLE>
See notes to financial statements.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996
NOTE 1. ACCOUNTING POLICIES
-------------------------------------------------------------------------------
ORGANIZATION: Colonial New York 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.
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
16
<PAGE>
Notes to Financial Statements/January 31, 1996
-------------------------------------------------------------------------------
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.
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.
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.
17
<PAGE>
Notes to Financial Statements/January 31, 1996
-------------------------------------------------------------------------------
NOTE 2. FEES AND COMPENSATION PAID TO AFFILIATES - CONT.
-------------------------------------------------------------------------------
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 $23,142 on
sales of the Fund's Class A shares and received contingent deferred sales
charges (CDSC) of $155,723 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 0.50% annually of the
Fund's average net assets. Through July 31, 1995, the expense limit was 0.40% 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 $43,100,700
and $39,817,408, respectively.
Unrealized appreciation (depreciation) at January 31, 1996, based on cost of
investments for both financial statement and federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation $9,740,596
Gross unrealized depreciation (5,610)
----------
Net unrealized appreciation $9,734,986
==========
</TABLE>
18
<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>
1997 228,000
1998 26,000
1999 37,000
2003 187,000
2004 3,211,000
-----------
$ 3,689,000
===========
</TABLE>
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.
19
<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
Class A Class B Class A Class B
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 6.680 $ 6.680 $ 7.500 $ 7.500
----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.401 0.349 0.427 0.376
Net realized and
unrealized gain (loss) 0.576 0.576 (0.834) (0.834)
----------- ----------- ----------- -----------
Total from Investment
Operations 0.977 0.925 (0.407) (0.458)
----------- ----------- ----------- -----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.407) (0.355) (0.413) (0.362)
From capital paid in -- -- -- --
----------- ----------- ----------- -----------
Total Distributions
Declared to Shareholders (0.407) (0.355) (0.413) (0.362)
----------- ----------- ----------- -----------
Net asset value -
End of period $ 7.250 $ 7.250 $ 6.680 $ 6.680
=========== =========== =========== ===========
Total return (c)(d) 14.99% 14.15% (5.32)% (6.04)%
=========== =========== =========== ===========
RATIOS TO AVERAGE NET ASSETS
Expenses 0.58(f) 1.33(f) 0.42% 1.17%
Net investment income 5.72(f) 4.97(f) 6.25% 5.50%
Fees and expenses waived
or borne by the adviser 0.38% 0.38% 0.46% 0.46%
Portfolio turnover 39% 39% 65% 65%
Net assets at end
of period (000) $ 56,795 $ 53,505 $ 53,322 $ 43,166
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
(a) Net of fees and expenses
waived or borne by the
Adviser which amounted to... $ 0.026 $ 0.026 $ 0.032 $ 0.032
</TABLE>
(b) Class B shares were initially offered on August 4, 1992. Per share amounts
reflect activity from that date.
(c) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(d) Had the Adviser not waived or reimbursed a portion of expenses, total
return would have been reduced.
(e) Not annualized.
(f) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
(g) Annualized.
20
<PAGE>
FINANCIAL HIGHLIGHTS - CONTINUED
<TABLE>
<CAPTION>
Year ended January 31
-------------------------------------------------------------------------------
1994 1993 1992
Class A Class B Class A Class B (b) Class A
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value - $ 7.090 $ 7.090 $ 6.840 $ 7.130 $ 6.600
Beginning of period ----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS: 0.421 0.368 0.438 0.182 0.453
Net investment income (a)
Net realized and 0.407 0.407 0.260 (0.029) 0.242
unrealized gain (loss) ----------- ----------- ----------- ----------- -----------
Total from Investment 0.828 0.775 0.698 0.153 0.695
Operations ----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: (0.418) (0.365) (0.445) (0.190) (0.455)
From net investment income -- -- (0.003) (0.003) --
From capital paid in ----------- ----------- ----------- ----------- -----------
Total Distributions (0.418) (0.365) (0.448) (0.193) (0.455)
Declared to Shareholders ----------- ----------- ----------- ----------- -----------
Net asset value - $ 7.500 $ 7.500 $ 7.090 $ 7.090 $ 6.840
End of period ----------- ----------- ----------- ----------- -----------
11.95% 11.14% 10.50% 1.16%(e) 10.86%
Total return (c)(d) ----------- ----------- ----------- ----------- -----------
RATIOS TO AVERAGE NET ASSETS 0.62% 1.37% 0.96% 1.71%(g) 1.00%
Expenses 5.68% 4.93% 6.25% 5.50%(g) 6.71%
Net investment income
Fees and expenses waived 0.29% 0.29% 0.06% 0.06%(g) 0.14%
or borne by the adviser 25% 25% 7% 7% 17%
Portfolio turnover
Net assets at end $ 63,527 $ 45,061 $ 53,779 $ 14,743 $ 40,233
of period (000)
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
(a) Net of fees and expenses... $ 0.021 $ 0.021 $ 0.004 $ 0.001 $ 0.009
waived or borne by the
Adviser which amounted to
</TABLE>
-------------
Federal income tax information (unaudited)
All of the distributions will be treated as exempt income for federal income
tax purposes.
21
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
T0 THE TRUSTEES OF COLONIAL TRUST V AND THE SHAREHOLDERS OF
COLONIAL NEW YORK 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 New York 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, provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
March 13, 1996
5
<PAGE>
INVESTMENT PORTFOLIO (Ohio)
JANUARY 31, 1996 (IN THOUSANDS)
<TABLE>
<CAPTION>
MUNICIPAL BONDS - 100.0% PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
CONSTRUCTION - 0.8%
BUILDING CONSTRUCTION
State Economic Development Financing
Commission, Burrows Paper Corp.,
Series 1991,
7.450% 06/01/03 $ 975 $ 1,108
--------
................................................................................
EDUCATION - 8.5%
Miami University, Series 1993:
5.600% 12/01/13 500 514
(a) 12/01/09 400 193
State Higher Education Facilities
Commission:
Case Western Reserve,
Series 1994:
6.125% 10/01/15 1,505 1,686
6.250% 10/01/17 4,340 4,932
Oberlin College, Series 1993,
5.375% 10/01/15 1,000 995
Ohio Dominican College, Series 1994,
6.625% 12/01/14 1,500 1,617
Wright State University, Series 1993,
5.150% 05/01/11(b) 1,095 1,097
--------
11,034
--------
................................................................................
GENERAL OBLIGATIONS - 27.2%
Adams County,
7.250% 12/01/11 500 550
Adams County Local School District,
Series 1995:
7.000% 12/01/15(b)(c) 3,000 3,660
5.250% 12/01/21(b) 2,800 2,730
Cleveland, Series 1993,
5.375% 09/01/11(b) 1,300 1,334
Columbus School District,
Series 1993-1,
(a) 12/01/05 2,400 1,506
Crooksville, Exempted Village School
District,
7.375% 12/01/07 25 29
</TABLE>
6
<PAGE>
Investment Portfolio/January 31, 1996
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MUNICIPAL BONDS - CONT. PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
GENERAL OBLIGATIONS - CONT.
Cuyahoga County,
Jail Facilities:
Series 1993 A,
(a) 10/01/12 $1,000 $ 421
Series 1993,
5.250% 10/01/13 3,000 2,981
Series 1995,
5.250% 11/15/15 3,000 2,977
Franklin County, Series 1993,
5.375% 12/01/20 2,000 2,005
Gahanna-Jefferson City,
School District:
(a) 12/01/10 840 391
Series 1993,
(a) 12/01/11 795 348
Hilliard School District, Series 1995-A,
(a) 12/01/12 2,505 1,033
Kings County Local School District,
Series 1995,
7.500% 12/01/16 2,110 2,703
Lakewood Water Systems Revenue,
Series 1995,
5.500% 12/01/15 1,000 1,021
Massillon City School District,
Series 1994:
(a) 12/01/08 1,000 534
(a) 12/01/09 1,000 499
(a) 12/01/11 1,000 445
Mentor, Series 1991,
7.150% 12/01/11 1,000 1,112
Olmstead Falls Local School District,
Series 1995,
5.850% 12/15/17 2,000 2,078
Pickerington Local School District,
5.375% 12/01/19 2,500 2,472
PR Commonwealth of Puetro Rico,
Series 1995,
5.650% 07/01/15 1,000 1,058
Richland County, Series 1995,
6.950% 12/01/11 275 318
Shaker Heights School District,
Series 1990-A,
7.100% 12/15/10 750 918
Southwestern City School District,
5.000% 12/01/13 1,000 964
State Infrastructure:
Series 1992,
6.100% 08/01/12 380 422
Series 1994,
4.800% 08/01/13 1,000 953
</TABLE>
7
<PAGE>
Investment Portfolio/January 31, 1996
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MUNICIPAL BONDS - CONT. PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
GENERAL OBLIGATIONS - CONT.
Tri-County North Local School District,
8.125% 12/01/06 $ 75 $ 91
--------
35,553
--------
................................................................................
HEALTH - 13.8%
HOSPITALS - 11.3%
Akron, Bath & Copley Townships, Summa Health
Systems, Series 1993-A,
5.500% 11/15/13 2,500 2,412
Cuyahoga County, Meridian Health Systems:
Series 1991,
7.000% 08/15/23 500 536
Series 1995,
6.250% 08/15/24 1,000 1,047
Franklin County,
Doctor's Hospital, Series 1993:
5.875% 12/01/13 1,000 991
5.875% 12/01/23 1,000 976
Holy Cross Health System,
Series 1991,
6.750% 06/01/19 500 541
Geauga County Hospital
Association, Series 1988,
8.750% 11/15/13 600 639
Green Springs Health Care Facilities,
St. Francis Health Care Center,
Series 1994 A,
7.000% 05/15/04 700 753
Hamilton County:
Children's Hospital Medical Center,
Series 1993 F,
5.200% 05/15/09(b) 1,000 996
Sisters of Charity Health Care System, Inc.,
Series 1992 A,
6.250% 05/15/14 500 530
Lucas County, The Toledo Hospital,
Series 1993,
5.000% 11/15/22 3,000 2,824
Miami County, Upper Valley
Medical Center, Inc., Series 1987-A,
8.375% 05/01/13 500 529
Montgomery County,
St. Elizabeth Medical Center,
8.100% 07/01/18 500 571
Stark County, Doctor's Hospital, Inc.,
Series 1993,
6.000% 04/01/24 1,500 1,365
--------
14,710
--------
</TABLE>
8
<PAGE>
Investment Portfolio/January 31, 1996
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MUNICIPAL BONDS - CONT. PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
HEALTH - CONT.
NURSING HOME - 2.5%
Cuyahoga County, Judson Retirement Community,
Series 1989,
8.875% 11/15/19 $ 500 $ 537
Franklin County, Columbus West Health Care Co.,
Series 1986,
10.000% 09/01/16 100 95
Greene County, Fairview Extended Care Services, Inc.,
Series 1990-A,
10.125% 01/01/11 225 255
Lucas County, Gericare, Inc.,
Series 1988-B,
10.500% 06/01/18 500 490
Marion County, United Church Homes, Inc.,
Series 1993,
6.375% 11/15/10 1,000 1,006
Montgomery County, Grafton Oaks Limited Partners,
Series 1986,
9.750% 12/01/16 (d) 735 698
Westerville, Health Care & Retirement Corp. of America,
Series 1989,
10.000% 01/01/08 215 221
--------
3,302
--------
................................................................................
HOUSING - 4.8%
MULTI-FAMILY - 3.9%
Columbus-Beckley Housing Corp.,
Section 8 Assisted Project,:
7.375% 07/15/21 1,364 1,421
7.375% 10/15/21 1,326 1,345
Montgomery County,
Connifers Housing Project,
Series 1986,
8.450% 06/01/28 1,000 1,055
State Capital Corp. for Housing,
Series 1990-A,
7.500% 01/01/24 1,000 1,070
State Housing Finance Agency,
Detroit Terrace, Series 1985,
10.150% 10/20/11 170 179
--------
5,070
--------
SINGLE-FAMILY - 0.9%
State Housing Finance Agency:
Series A2, RIB (variable rate),
9.839% 03/24/31 600 646
Series 1994 B2,
6.700% 03/01/25 500 523
--------
1,169
--------
................................................................................
</TABLE>
9
<PAGE>
Investment Portfolio/January 31, 1996
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MUNICIPAL BONDS - CONT. PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
MINING - 0.4%
METAL MINING
Cuyahoga County, Joy Technologies, Inc.,
Series 1992,
8.750% 09/15/07 $ 500 $ 546
--------
................................................................................
POLLUTION CONTROL REVENUE - 1.2%
State Air Quality Development
Authority, Series B,
5.625% 11/15/29 1,500 1,521
--------
................................................................................
PUBLIC ADMINISTRATION - 0.6%
ECONOMIC PROGRAMS
State Development Financing
Commission, Sponge, Inc. Project,
Series 1989 5A,
8.375% 06/01/14 725 803
................................................................................
PUBLIC FACILITIES IMPROVEMENT - 7.1%
Fairborn Library Improvement,
Series 1991,
7.200% 10/01/11(b) 1,170 1,331
PR Commonwealth of Puerto Rico,
Public Buildings Authority, Series 1993-M,
stepped coupon, (5.700% 07/01/98)
3.750% 07/01/16(e) 2,500 2,400
State Building Authority, William Green Building,
Series 1993-A,
4.750% 04/01/14 5,750 5,355
VI Virgin Islands Public Finance,
Authority, Series 1992-A,
7.000% 10/01/02 125 137
--------
9,223
--------
................................................................................
PUBLIC INFRASTRUCTURE - 1.5%
AIRPORT - 1.2%
Cleveland, Hopkins International
Airport, Series 1990-B,
7.250% 01/01/20 500 544
Dayton, James M. Cox, International Airport,
Series 1995,
5.250% 12/01/15 1,000 995
--------
1,539
--------
TURNPIKE/TOLL ROAD/BRIDGE - 0.3%
PR Commonwealth of Puerto Rico,
Highway & Transportation Authority,
Series W,
5.500% 07/01/09(b) 410 426
--------
................................................................................
</TABLE>
10
<PAGE>
Investment Portfolio/January 31, 1996
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MUNICIPAL BONDS - CONT. PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
REFUNDED/ESCROW/SPECIAL OBLIGATION (f) - 5.7%
Canton,
7.875% 12/01/08 $ 500 $ 567
Cleveland School District,
Series 1991,
8.250% 12/01/08 500 613
Cuyahoga County, Jail Facilities,
Series 1991,
7.000% 10/01/13 1,000 1,159
Deaconess Hospital of Cleveland,
Series 1985-C,
7.450% 10/01/18 500 584
Delaware County, Library District,
Series 1990,
7.250% 11/01/10 250 289
Fostoria Sewer Systems,
Series 1993,
5.350% 12/01/23 1,735 1,880
Franklin County,
Holy Cross Health System Corp.,
Series 1990 B,
7.650% 06/01/10 500 579
Lake County Water Systems,
Series 1987-2,
8.125% 12/01/10 1,000 1,096
Toledo Waterworks,
Series 1988 B,
7.750% 11/15/17 280 314
Warren,
Series 1988,
8.625% 11/15/13 250 286
--------
7,367
--------
................................................................................
RETAIL TRADE- 0.5%
MISCELLANEOUS RETAIL
Lake County Economic Development,
North Madison Properties,
Series 1993:
8.069% 09/01/01 395 406
8.819% 09/01/11 200 214
--------
620
--------
................................................................................
SERVICES - 0.2%
HOTELS, CAMPS & LODGING
Athens County, Athens Inn, Inc.
Series 1986,
8.625% 11/01/11 250 259
--------
................................................................................
</TABLE>
11
<PAGE>
Investment Portfolio/January 31, 1996
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MUNICIPAL BONDS - CONT. PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
SOLID WASTE - 1.2%
MISCELLANEOUS DISPOSAL
State Water Development Authority,
North Star BHP Steel Co. Ltd.,
Series 1995,
6.450% 09/01/20 $1,500 $ 1,573
--------
................................................................................
UTILITY - 8.8%
CO-GENERATION - 1.6%
State Air Quality Development
Authority,
JMG Funding Ltd., Series 1994,
6.375% 01/01/29 2,000 2,133
--------
MUNICIPAL ELECTRIC - 7.2%
Cleveland Public Power System,
Series 1994-A:
(a) 11/15/12 2,250 936
(a) 11/15/13 2,000 782
Hamilton County Gas Systems:
Series A,
5.000% 10/15/18 2,000 1,912
Series 1993-A,
4.750% 10/15/23 1,750 1,603
Hilliard School District, Series A,
5.000% 12/01/20(g) 1,800 1,717
Municipal Electricity Generation Agency,
Belleville Hydroelectric Project,
Series 1993,
5.375% 02/15/24 1,930 1,925
State Air Quality Development
Authority, Toledo Edison Co.,
Series 1990-B,
8.000% 05/15/19 500 530
--------
9,405
--------
................................................................................
WATER & SEWER - 17.7%
Bellefontaine, Storm Water Utilities, Series I,
7.050% 06/01/11 250 273
Clermont County, Sewer Systems,
Series 1993,
5.200% 12/01/21 1,750 1,697
Cleveland Waterworks, Series 1993-G,
5.500% 01/01/21(b) 8,750 9,155
Hamilton County Sewer Systems:
Series 1993-A,
5.000% 12/01/14 1,000 963
Series 1995-A,
5.500% 12/01/17 3,800 3,847
Lakewood, Water & Sewer Systems Revenue,
5.850% 07/01/20 2,405 2,576
</TABLE>
12
<PAGE>
Investment Portfolio/January 31, 1996
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MUNICIPAL BONDS - CONT. PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
WATER & SEWER - CONT.
Montgomery County,
Moraine-Beaver Creek Sewer System,
Series 1993,
5.300% 11/15/08 $ 495 $ 512
PR Commonwealth of Puerto Rico,
Aqueduct & Sewer Authority,
Series 1995:
6.250% 07/01/12 1,000 1,103
6.250% 07/01/13 1,500 1,652
State Water Development Authority,
Series 1990 I,
6.000% 12/01/16 1,000 1,100
Toledo, Water Revenue, Series 1988-B,
7.750% 11/15/17 220 242
--------
23,120
--------
TOTAL MUNICIPAL BONDS (cost of $121,558) 130,481
--------
<CAPTION>
<S> <C> <C>
OPTIONS - 0.0% CONTRACTS
--------------------------------------------------------------------------------
March 1996 Municipal Bond Put,
Strike price 117, Expiration 03-20-96
(cost of $74) 60 23
--------
TOTAL INVESTMENTS - 100.0% (cost of $121,632) (h) 130,504
--------
SHORT-TERM OBLIGATIONS - 0.5%
--------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (i)
Twinsburg, United Stationers Supply Co.,
Series 1986,
3.900% 12/01/11 700 700
OTHER ASSETS & LIABILITIES, NET - (0.5)% (661
--------------------------------------------------------------------------------
NET ASSETS - 100.0 % $130,543
========
</TABLE>
NOTES TO INVESTMENT PORTFOLIO:
--------------------------------------------------------------------------------
(a) Zero coupon bond.
(b) These securities, or a portion thereof, with a total market value of
$13,158, are being used to collateralize open futures contracts.
(c) These securities, or a portion thereof, with a total market value of $1,881,
are being used to collateralize the delayed delivery purchase indicated in
note (g) below.
(d) Non income producing.
(e) Shown parenthetically is the interest rate to be paid and the date the Fund
will begin accruing this rate.
(f) 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.
13
<PAGE>
Investment Portfolio/January 31, 1996
--------------------------------------------------------------------------------
NOTES TO INVESTMENT PORTFOLIO - CONT.
(g) 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.
(h) Cost for federal income tax purposes is the same.
(i) 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 bonds $9,400 March $17
</TABLE>
Acronym Name
----------- --------------------------
RIB Residual Interest Bond
See notes to financial statements.
14
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
JANUARY 31, 1996
(in thousands except for per share amounts and footnotes)
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS
Investments at value (cost $121,632) $130,504
Short-term obligations 700
--------
131,204
Cash $ 57
Receivable for:
Interest 1,492
Fund shares sold 153
Other 11
------
Total Assets 1,713
--------
LIABILITIES 132,917
Payable for:
Investments purchased 1,709
Distributions 494
Fund shares repurchased 119
Variation margin on futures 24
Payable to Adviser 16
Accrued:
Deferred Trustees fees 2
Other 10
------
Total Liabilities 2,374
--------
NET ASSETS $130,543
========
Net asset value & redemption price per share -
Class A ($74,383/9,907) $7.51
========
Maximum offering price per share - Class A
($7.51/0.9525) $7.88 (a)
========
Net asset value & offering price per share -
Class B ($56,160/7,479) $7.51 (b)
========
COMPOSITION OF NET ASSETS
Capital paid in $125,183
Overdistributed net investment income (52)
Accumulated net realized loss (3,443)
Net unrealized appreciation (depreciation) on:
Investments 8,872
Open futures contracts (17)
--------
$130,543
========
</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.
15
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JANUARY 31, 1996
<TABLE>
<CAPTION>
(in thousands)
<S> <C> <C>
INVESTMENT INCOME
Interest $ 7,786
EXPENSES
Management fee $ 696
Service fee - Class A 91
Service fee - Class B 65
Distribution fee - Class B 418
Transfer agent 222
Bookkeeping fee 55
Trustees fee 17
Custodian fee 16
Audit fee 32
Legal fee 17
Registration fee 9
Reports to shareholders 6
Other 10
-------
1,654
Fees waived by the Adviser (145) 1,509
------- -------
Net Investment Income 6,277
-------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain (loss) on:
Investments 1,493
Closed futures contracts (4,070)
-------
Net Realized Loss (2,577)
Net unrealized appreciation during
the period on:
Investments 12,171
Open futures contracts 798
-------
Net Unrealized Appreciation 12,969
-------
Net Gain 10,392
-------
Net Increase in Net Assets from Operations $16,669
=======
</TABLE>
See notes to financial statements.
16
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended
(in thousands) January 31
--------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS 1996 1995
Operations:
Net investment income $ 6,277 $ 6,875
Net realized gain (loss) (2,577) 503
Net unrealized appreciation (depreciation) 12,969 (13,752)
-------- --------
Net Increase (Decrease) from Operations 16,669 (6,374)
Distributions:
From net investment income - Class A (3,859) (4,183)
From net investment income - Class B (2,516) (2,598)
-------- --------
10,294 (13,155)
-------- --------
Fund Share Transactions:
Receipts for shares sold - Class A 3,598 7,374
Value of distributions reinvested - Class A 2,300 2,438
Cost of shares repurchased - Class A (9,496) (9,299)
-------- --------
(3,598) 513
-------- --------
Receipts for shares sold - Class B 5,505 13,206
Value of distributions reinvested - Class B 1,561 1,655
Cost of shares repurchased - Class B (8,889) (7,155)
-------- --------
(1,823) 7,706
-------- --------
Net Increase (Decrease) from Fund Share
Transactions (5,421) 8,219
-------- --------
Total Increase (Decrease) 4,873 (4,936)
NET ASSETS
Beginning of period 125,670 130,606
-------- --------
End of period (net of overdistributed and
including undistributed net investment
income of $52 and $42, respectively) $130,543 $125,670
======== ========
NUMBER OF FUND SHARES
Sold - Class A 500 1,035
Issued for distributions reinvested - Class A 319 347
Repurchased - Class A (1,318) (1,328)
-------- --------
(499) 54
-------- --------
Sold - Class B 765 1,845
Issued for distributions reinvested - Class B 216 236
Repurchased - Class B (1,228) (1,033)
-------- --------
(247) 1,048
-------- --------
</TABLE>
See notes to financial statements.
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996
NOTE 1. ACCOUNTING POLICIES
--------------------------------------------------------------------------------
ORGANIZATION: Colonial Ohio 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
which are 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.
18
<PAGE>
Notes to Financial Statements/January 31, 1996
--------------------------------------------------------------------------------
Class A and Class B per share data and ratios are calculated by adjusting the
expenses 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.
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.
19
<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 $14,689 on
the sales of the Fund's Class A shares and received contingent deferred sale
charges (CDSC) of $220,708 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 0.75% annually of
the Fund's average net assets. Through July 31, 1995, the expense limit was
0.70% 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 $40,249,052 and
$48,455,828, respectively.
20
<PAGE>
Notes to Financial Statements/January 31, 1996
--------------------------------------------------------------------------------
Unrealized appreciation (depreciation) at January 31, 1996, based on cost of
investments for both financial statements and federal income tax purposes was
approximately:
<TABLE>
<S> <C>
Gross unrealized appreciation $9,234,000
Gross unrealized depreciation (362,000)
----------
Net unrealized appreciation $8,872,000
==========
</TABLE>
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>
1998 $ 78,000
1999 8,000
2001 21,000
2002 112,000
2004 1,035,000
----------
$1,254,000
==========
</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 the value of portfolio securities due
to anticipated changes in interest rates and/or market conditions, for duration
management, or when the transactions are economically appropriate to the
reduction of risk inherent in the management of the Fund and not for trading
purposes. The use of futures contracts and options involves certain risks which
include (1) imperfect correlation between the price movement of the instruments
and the underlying securities, (2) inability to close out a position due to
different trading hours or the temporary absence of a liquid market for either
the instrument or the underlying securities or (3) an inaccurate prediction by
the Adviser of the future direction of interest rates. Any of these may involve
amounts exceeding the amount recognized in the Fund's Statement of Assets and
Liabilities at any given time.
21
<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
Class A Class B Class A Class B
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 6.930 $ 6.930 $ 7.670 $ 7.670
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.375 0.321 0.401 0.348
Net realized and
unrealized gain (loss) 0.585 0.585 (0.745) (0.745)
------- ------- ------- -------
Total from Investment
Operations 0.960 0.906 (0.344) (0.397)
------- ------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net
investment income (0.380) (0.326) (0.396) (0.343)
From capital paid in -- -- -- --
------- ------- ------- -------
Total Distributions
Declared to
Shareholders (0.380) (0.326) (0.396) (0.343)
------- ------- ------- -------
Net asset value -
End of period $ 7.510 $ 7.510 $ 6.930 $ 6.930
======= ======= ======= =======
Total return (c)(d) 14.18% 13.34% (4.38)% (5.10)%
======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS
Expenses 0.85%(f) 1.60%(f) 0.72% 1.47%
Net investment income 5.19%(f) 4.44%(f) 5.71% 4.96%
Fees and expenses
waived or borne
by Adviser 0.11% 0.11% 0.16% 0.16%
Portfolio turnover 31% 31% 33% 33%
Net assets at end
of period (000) $74,383 $56,160 $72,123 $53,547
(a) Net of fees and expenses waived or borne by the Adviser which amounted to:
$ 0.008 $ 0.008 $ 0.011 $ 0.011
</TABLE>
(b) Class B shares were initially offered on August 4, 1992. Per share amounts
reflect activity from that date.
(c) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(d) Had the Adviser not waived or reimbursed a portion of expenses, total return
would have been reduced.
(e) Not annualized.
(f) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
(g) Annualized.
22
<PAGE>
FINANCIAL HIGHLIGHTS - continued
Year ended January 31
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1993 1992
Class A Class B Class A Class B (b) Class A
------- ------- ------- ----------- -------
<S> <C> <C> <C> <C>
$ 7.290 $ 7.290 $ 7.090 $ 7.330 $ 6.880
------- ------- ------- ------- -------
0.406 0.351 0.444 0.185 0.457
0.389 0.389 0.204 (0.033) 0.208
------- ------- ------- ------- -------
0.795 0.740 0.648 0.152 0.665
------- ------- ------- ------- -------
(0.411) (0.356) (0.448) (0.192) (0.455)
(0.004) (0.004) -- -- --
------- ------- ------- ------- -------
(0.415) (0.360) (0.448) (0.192) (0.455)
------- ------- ------- ------- -------
$ 7.670 $ 7.670 $ 7.290 $ 7.290 $ 7.090
======= ======= ======= ======= =======
11.17% 10.36% 9.41% 0.85%(e) 10.00%
======= ======= ======= ======= =======
0.82% 1.57% 1.00% 1.75%(g) 1.00%
5.34% 4.59% 6.18% 5.43%(g) 6.57%
0.09% 0.09% 0.03% 0.03%(g) 0.09%
3% 3% 13% 13% 13%
$79,394 $51,212 $62,439 $ 7,293 $50,281
$ 0.007 $ 0.007 $ 0.002 -- $ 0.006
--------------------------------------------------------------------------------
</TABLE>
Federal income tax information (unaudited)
All of the distributions will be treated as exempt income for federal income tax
purposes.
23
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
T0 THE TRUSTEES OF COLONIAL TRUST V AND THE SHAREHOLDERS OF COLONIAL OHIO
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 Ohio 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
<PAGE>
Part B of Post-Effective Amendment No. 6 filed with the Commission on August
12, 1991 (Colonial Texas Tax-Exempt Fund) is incorporated herein in its
entirety by reference.
<PAGE>
Part C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Part A
Summary of Expenses
The Funds' Financial History
Summary of Expenses (for Colonial Texas Tax-Exempt Fund,
incorporated by reference to Part A of Post-Effective
Amendment No. 6 filed with the Commission on August 12,
1991)
The Funds' Financial History (Not applicable for Colonial
Texas Tax-Exempt Fund)
Included in Part B
Colonial California Tax-Exempt Fund (CCATEF) Investment portfolio,
January 31, 1996 Statement of assets and liabilities, January 31, 1996
Statement of operations, Year ended January 31, 1996 Statement of
changes in net assets, Years ended January 31, 1996 and 1995 Notes to
Financial Statements Financial Highlights Report of Independent
Accountants
Colonial Connecticut Tax-Exempt Fund (CCTTEF) Investment portfolio,
January 31, 1996 Statement of assets and liabilities, January 31, 1996
Statement of operations, Year ended January 31, 1996 Statement of
changes in net assets, Years ended January 31, 1996 and 1995 Notes to
Financial Statements Financial Highlights Report of Independent
Accountants
Colonial Florida Tax-Exempt Fund (CFLTEF) Investment portfolio,
January 31, 1996 Statement of assets and liabilities, January 31, 1996
Statement of operations, Year ended January 31, 1996 Statement of
changes in net assets, Years ended January 31, 1996 and 1995 Notes to
Financial Statements Financial Highlights Report of Independent
Accountants
Colonial Massachusetts Tax-Exempt Fund (CMATEF) Investment portfolio,
January 31, 1996 Statement of assets and liabilities, January 31, 1996
Statement of operations, Year ended January 31, 1996 Statement of
changes in net assets, Years ended January 31, 1996 and 1995 Notes to
Financial Statements Financial Highlights Report of Independent
Accountants
Colonial Michigan Tax-Exempt Fund (CMITEF) Investment portfolio,
January 31, 1996 Statement of assets and liabilities, January 31, 1996
Statement of operations, Year ended January 31, 1996 Statement of
changes in net assets, Years ended January 31, 1996 and 1995 Notes to
Financial Statements Financial Highlights Report of Independent
Accountants
Colonial Minnesota Tax-Exempt Fund (CMNTEF) Investment portfolio,
January 31, 1996 Statement of assets and liabilities, January 31, 1996
Statement of operations, Year ended January 31, 1996 Statement of
changes in net assets, Years ended January 31, 1996 and 1995 Notes to
Financial Statements Financial Highlights Report of Independent
Accountants
Colonial New York Tax-Exempt Fund (CNYTEF) Investment portfolio,
January 31, 1996 Statement of assets and liabilities, January 31, 1996
Statement of operations, Year ended January 31, 1996 Statement of
changes in net assets, Years ended January 31, 1996 and 1995 Notes to
Financial Statements Financial Highlights Report of Independent
Accountants
Colonial North Carolina Tax-Exempt Fund (CNCTEF) Investment portfolio,
January 31, 1996 Statement of assets and liabilities, January 31, 1996
Statement of operations, Year ended January 31, 1996 Statement of
changes in net assets, Years ended January 31, 1996 and 1995 Notes to
Financial Statements Financial Highlights Report of Independent
Accountants
Colonial Ohio Tax-Exempt Fund (COHTEF)
Investment portfolio, January 31, 1996
Statement of assets and liabilities, January 31, 1996 Statement of
operations, Year ended January 31, 1996 Statement of changes in net
assets, Years ended January 31, 1996 and 1995 Notes to Financial
Statements Financial Highlights Report of Independent Accountants
Not applicable for Colonial Texas Tax-Exempt Fund (CTXTEF)
(b) Exhibits:
1. (a) Agreement and Declaration of Trust (1)
(b) Amendment No. 1 to the Agreement and Declaration of
Trust (2)
(c) Amendment No. 2 to the Agreement and Declaration of
Trust (9)
(d) Amendment No. 3 to the Agreement and Declaration of
Trust (12)
2. Amended By-Laws (2/16/96)
3. Not Applicable
4. Form of Specimen Share Certificate (12)
5. Form of Management Agreement between Colonial Trust
V and Colonial Management Associates, Inc.(17)
6. (a) Form of Distributor's Contract with Colonial
Investment Services, Inc. (incorporated herein by
reference to Exhibit 6 (i)(b) to Post-Effective
Amendment No. 39 to the Registration Statement of
Colonial Trust I, Registration Nos. 2-41251 &
811-2214, filed with the Commission on April 20,
1995)
(b) Form of Selling Agreement with Colonial Investment
Services (incorporated herein by reference to
Exhibit 6(b) to Post-Effective Amendment No. 87 to
the Registration Statement of Colonial Trust III,
Registration Nos. 2-15184 and 811-881, filed with
the Commission on February 9, 1994)
(c) Form of Bank and Bank Affiliated Selling Agreement
(incorporated herein by reference to Exhibit 6(c) to
Post-Effective Amendment No. 5 to the Registration
Statement of Colonial Trust VI, Registration Nos.
35-45117 and 811-6529, filed with the Commission on
October 11, 1994)
(d) Investment Account Application (incorporated herein
by reference to Prospectus)
(e) Mutual Fund Agreement with NCNB Securities, Inc.,
and Colonial Investment Services, Inc. (Incorporated
herein by reference to Exhibit 6(f) to
Post-Effective Amendment No. 23 to the Registration
Statement of Colonial Massachusetts Tax-Exempt Trust
Registration Nos. 33-12109 and 811-5030 filed with
the Commission on May 11, 1989)
(f) Colonial Fundamatic Check Program Application (9)
(g) Form of Asset Retention Agreement (incorporated
herein by reference to Exhibit 6(e) to
Post-Effective Amendment No. 5 to the Registration
Statement of Colonial Trust VI, Registration Nos.
33-45117 and 811-6529 filed with the Commission on
October 11, 1994)
7. Not Applicable
8. (a) Form of proposed Custody Agreement with United
Missouri Bank, n.a. (incorporated herein by reference
to Exhibit 8(j) to Post-Effective Amendment No. 36 to
the Registration Statement of Colonial Trust IV,
Registration Nos. 2-62492 & 811-2865, filed with the
Commission on March 12, 1993)
(b) Sub-Custodian Agreement between State Street Bank and
Trust Company and The First National Bank of Boston (3)
(c) Sub-Custodian Agreement between State Street Bank and
Trust Company and Irving Trust Company (incorporated
herein by reference to Exhibit 8.(c) to Post-Effective
Amendment No. 2 to the Registration Statement of
Colonial California Tax-Exempt Trust, Registration
Nos. 33-2640 and 811-4557, filed with the Commission
on January 29, 1988)
9. (a) Form of Amended and Restated Shareholders' Servicing
and Transfer Agent Agreement with Colonial Investors
Service Center, Inc. (f/k/a/ Citadel Service Company,
Inc.) and Colonial Management Associates, Inc.
(incorporated by reference to Exhibit 9.(a) to
Post-Effective Amendment No. 5 to the Registration
Statement of Colonial Trust VI, Registration Nos.
33-45117 and 811-6529, filed with the Commission on
October 11, 1994)
(b) Form of Amendment No. 1 to the Amended and Restated
Shareholders' Servicing and Transfer Agent Agreement
(13)
(c) Form of Amendment No. 2 to the Amended and Restated
Shareholders' Servicing and Transfer Agent Agreement
(14)
(d) Form of Pricing and Bookkeeping Agreement (13)
(e) Form of Agreement and Plan of Reorganization (CCATEF,
CMITEF, CMNTEF, CNYTEF, COHTEF) (12)
(f) Credit Agreement
10. Opinion and Consent of Counsel (CMATEF) (2)
(a) Opinion and Consent of Counsel (CCATEF) (incorporated
herein by reference to Exhibit 10. to Pre-Effective
Amendment No. 1 to the Registration Statement of
Colonial California Tax-Exempt Trust, Registration
Nos. 811-4557 and 33-2640, filed with the Commission
on March 13, 1986)
(b) Opinion and Consent of Counsel (CMITEF) (incorporated
herein by reference to Exhibit 10. to Pre-Effective
Amendment No. 1 to the Registration Statement of
Colonial Michigan Tax-Exempt Trust, Registration Nos.
811-4793 and 33-7842, filed with the Commission on
September 25, 1986)
(c) Opinion and Consent of Counsel (CMNTEF) (incorporated
herein by reference to Exhibit 10. to Pre-Effective
Amendment No. 1 to the Registration Statement of
Colonial Minnesota Tax-Exempt Trust, Registration Nos.
811-4794 and 33-7944, filed with the Commission on
September 25, 1986)
(d) Opinion and Consent of Counsel (CNYTEF) (incorporated
herein by reference to Exhibit 10. to Pre-Effective
Amendment No. 1 to the Registration Statement of
Colonial New York Tax-Exempt Trust, Registration Nos.
811-4792 and 33-7931, filed with the Commission on
September 25, 1986)
(e) Opinion and Consent of Counsel (COHTEF) (incorporated
herein by reference to Exhibit 10. to Pre-Effective
Amendment No. 1 to the Registration Statement of
Colonial Ohio Tax-Exempt Trust, Registration Nos.
811-4795 and 33-7943, filed with the Commission on
September 25, 1986)
11. Consent of Independent Accountants for CCATEF, CCTTEF,
CCFLTEF, CMATEF, CMITEF, CMNTEF, CNYTEF, CNCTEF, COHTEF
12. Not Applicable
13. Investment letter of Colonial Management Associates,
Inc. (CMATEF) (2)
(a) Investment letter of Colonial Management Associates,
Inc. (CMITEF) (incorporated herein by reference to
Exhibit 13. to Pre-Effective Amendment No. 1 to the
Registration Statement of Colonial Michigan Tax-Exempt
Trust, Registration Nos. 811-4793 and 33-7842, filed
with the Commission on September 25, 1986)
(b) Investment letter of Colonial Management Associates,
Inc. (CMNTEF) (incorporated herein by reference to
Exhibit 13. to Pre-Effective Amendment No. 1 to the
Registration Statement of Colonial Minnesota
Tax-Exempt Trust, Registration Nos. 811-4794 and
33-7944, filed with the Commission on September 25,
1986)
(c) Investment letter of Colonial Management Associates,
Inc. (CNYTEF) (incorporated herein by reference to
Exhibit 13. to Pre-Effective Amendment No. 1 to the
Registration Statement of Colonial New York Tax-Exempt
Trust, Registration Nos. 811-4792 and 33-7931, filed
with the Commission on September 25, 1986)
(d) Investment letter of Colonial Management Associates,
Inc. (COHTEF) (incorporated herein by reference to
Exhibit 13. to Pre-Effective Amendment No. 1 to the
Registration Statement of Colonial Ohio Tax-Exempt
Trust, Registration Nos. 811-4795 and 33-7943, filed
with the Commission on September 25, 1986)
14. Not Applicable
15. Distribution Plan adopted pursuant to Section 12b-1 of the
Investment Company Act of 1940 (incorporated herein by
reference to Exhibit 6.(a) hereto.
16.(a)(1) Calculation of Performance Information (CCATEF)
(a)(2) Calculation of Yield (CCATEF)
16.(b)(1) Calculation of Performance Information (CCTTEF)
(b)(2) Calculation of Yield (CCTTEF)
16.(c)(1) Calculation of Performance Information (CFLTEF)
(c)(2) Calculation of Yield (CFLTEF)
16.(d)(1) Calculation of Performance Information (CMATEF)
(d)(2) Calculation of Yield (CMATEF)
16.(e)(1) Calculation of Performance Information (CMITEF)
(e)(2) Calculation of Yield (CMITEF)
16.(f)(1) Calculation of Performance Information (CMNTEF)
(f)(2) Calculation of Yield (CMNTEF)
16.(g)(1) Calculation of Performance Information (CNYTEF)
(g)(2) Calculation of Yield (CNYTEF)
16.(h)(1) Calculation of Performance (CNCTEF)
(h)(2) Calculation of Yield (CNCTEF)
16.(i)(1) Calculation of Performance (COHTEF)
(i)(2) Calculation of Yield (COHTEF)
17.(a) Financial Data Schedule (Class A) (CCATEF)
(b) Financial Data Schedule (Class B) (CCATEF)
(c) Financial Data Schedule (Class A)(CCTTEF)
(d) Financial Data Schedule (Class B)(CCTTEF)
(e) Financial Data Schedule (Class A)(CFLTEF)
(f) Financial Data Schedule (Class B)(CFLTEF)
(g) Financial Data Schedule (Class A)(CMATEF)
(h) Financial Data Schedule (Class B)(CMATEF)
(i) Financial Data Schedule (Class A)(CMITEF)
(j) Financial Data Schedule (Class B)(CMITEF)
(k) Financial Data Schedule (Class A)(CMNTEF)
(l) Financial Data Schedule (Class B)(CMNTEF)
(m) Financial Data Schedule (Class A)(CNYTEF)
(n) Financial Data Schedule (Class B)(CNYTEF)
(o) Financial Data Schedule (Class A)(CNCTEF)
(p) Financial Data Schedule (Class B)(CNCTEF)
(q) Financial Data Schedule (Class A)(COHTEF)
(r) Financial Data Schedule (Class B)(COHTEF)
18. Power of Attorney for: Robert J. Birnbaum, Tom
Bleasdale, Lora S. Collins, James E. Grinnell,
William D. Ireland, Jr., Richard W. Lowry, William
E. Mayer, James L. Moody, Jr., John J. Neuhauser,
George L. Shinn, Robert L. Sullivan and Sinclair
Weeks, Jr. (incorporated herein by reference to
Exhibit 18 to Post-Effective Amendment No. 42 to the
Registration Statement of Colonial Trust IV,
Registration Nos. 2-62492 and 811-2865, filed with
the Commission via EDGAR on March 22, 1996)
---------------------------------
(1) Incorporated by reference to the Registrant's
Registration Statement on Form N-1A (File Nos.
33-12109 and 811-5030), filed on February 19, 1987.
(2) Incorporated by reference to Pre-Effective Amendment
No. 1 to the Registration Statement filed on April
10, 1987.
(3) Incorporated by reference to Post-Effective
Amendment No. 1 to the Registration Statement filed
on October 6, 1987.
(4) Incorporated by reference to Post-Effective
Amendment No. 2 to the Registration Statement filed
on March 31, 1988.
(5) Incorporated by reference to Post-Effective
Amendment No. 3 to the Registration Statement filed
on or about May 15, 1989.
(6) Incorporated by reference to Post-Effective
Amendment No. 4 to the Registration Statement filed
on or about April 3, 1990.
(7) Incorporated by reference to Post-Effective
Amendment No. 5 to the Registration Statement filed
on or about May 15, 1991.
(8) Incorporated by reference to Post-Effective
Amendment No. 6 to the Registration Statement filed
on or about August 12, 1991.
(9) Incorporated by reference to Post-Effective
Amendment No. 7 to the Registration Statement filed
on or about October 10, 1991.
(10) Incorporated by reference to Post-Effective
Amendment No. 8 to the Registration Statement filed
on or about March 20, 1992.
(11) Incorporated by reference to Post-Effective
Amendment No. 9 to the Registration Statement filed
on or about April 3, 1992.
(12) Incorporated by reference to Post-Effective
Amendment No. 10 to the Registration Statement filed
on or about June 5, 1992.
(13) Incorporated by reference to Post-Effective
Amendment No. 11 to the Registration Statement filed
on or about November 13, 1992.
(14) Incorporated by reference to Post-Effective
Amendment No. 13 to the Registration Statement filed
on or about May 13, 1993.
(15) Incorporated by reference to Post-Effective
Amendment No. 14 to the Registration Statement filed
on or about June 7, 1993.
(16) Incorporated by reference to Post-Effective
Amendment No. 17 to the Registration Statement filed
on or about April 1, 1994.
(17) Incorporated by reference to Post-Effective
Amendment No. 18 to the Registration Statement filed
on or about May 22, 1995
Item 25. Persons Controlled by or Under Common Control with Registrant
None
Item 26. Number of Holders of Securities
(1) (2)
Title of Class Number of Record Holders at April 30, 1996
-------------- ------------------------------------------
Shares of beneficial 5,061 Class A (CCATEF)
Interest 2,277 Class B
Shares of beneficial 1,772 Class A (CCTTEF)
Interest 1,817 Class B
Shares of beneficial 671 Class A (CFLTEF)
Interest 707 Class B
Shares of beneficial 4,253 Class A (CMATEF)
Interest 1,761 Class B
Shares of beneficial 1,304 Class A (CMITEF)
Interest 408 Class B
Shares of beneficial 1,339 Class A (CMNTEF)
Interest 644 Class B
Shares of beneficial 1,309 Class A (CNYTEF)
Interest 1,168 Class B
Shares of beneficial 552 Class A (CNCTEF)
Interest 524 Class B
Shares of beneficial 2,484 Class A (COHTEF)
Interest 2,014 Class B
Item 27. Indemnification
See Article VIII of Amendment No. 3 to the Agreement and
Declaration of Trust filed as Exhibit 1 (c) hereto.
Item 28. Business and Other Connections of Investment Adviser
The following sets forth business and other connections of each
director and officer of Colonial Management Associates, Inc. (see
next page):
ITEM 28.
--------
Registrant's investment adviser, Colonial Management Associates, Inc., is
registered as an investment adviser under the Investment Advisers Act of 1940
(1940 Act). Colonial Advisory Services, Inc. (CASI), an affiliate of Colonial
Management Associates, Inc., is also registered as an investment adviser under
the 1940 Act. As of the end of its fiscal year, December 31, 1995, CASI had
one institutional, corporate or other account under management or supervision,
the market value of which was approximately $31.4 million. As of the end of
its fiscal year, December 31, 1995, Colonial Management Associates, Inc. was
the investment adviser and/or administrator to 38 mutual funds in the Colonial
Group of Funds, the market value of which investment companies was
approximately $16,439.3 million. Colonial Investment Services, Inc., a
subsidiary of Colonial Management Associates, Inc., is the principal
underwriter and the national distributor of all of the funds in the Colonial
Group of Funds, including the Registrant.
The following sets forth the business and other connections of each
director and officer of Colonial Management Associates, Inc.:
(1) (2) (3) (4)
Name and principal
business
addresses* Affiliation
of officers and with Period is through 3/1/96. Other
directors of investment business, profession, vocation or
investment adviser adviser employment connection Affiliation
------------------ ---------- -------------------------------- -----------
Archer, Joseph A. V.P.
Berliant, Allan V.P.
Bertocci, Bruno V.P. Stein Roe Global Capital Mngmt. Principal
Bissonette, Michael V.P. Colonial Advisory Services, V.P.
Inc.
Boatman, Bonny E. Dir.;
Sr.V.P.;
IPC Mbr.
Campbell, Kimberly V.P.
Carnabucci,
Dominick V.P.
Carroll, Sheila A. Sr.V.P.;
Dir.
Citrone, Frank V.P.
Cogger, Harold W. Dir.;Pres.; The Colonial Group, Inc. Dir.; Pres.;
Chairman; CEO; Chrm.
CEO;IPC Mbr. Colonial Trusts I through VII Pres.
Exe. Cmte. Colonial High Income
Municipal Trust Pres.
Colonial InterMarket Income
Trust I Pres.
Colonial Intermediate High
Income Fund Pres.
Colonial Investment Grade
Municipal Trust Pres.
Colonial Municipal Income
Trust Pres.
Liberty Financial Exec V.P.;
Companies, Inc. Dir.
Colonial Advisory Services, Dir. Chrm.,
Inc. CEO & Pres.
Colonial Investors Service
Center, Inc. Dir.
Collins, Anne V.P.
Conlin, Nancy V.P.; Colonial Investors Service
Asst. Center, Inc. Asst. Clerk
Sec.; The Colonial Group, Inc. Asst. Clerk
Asst Colonial Advisory Services,
Clerk and Inc. Asst. Clerk
Counsel Colonial Investment Services,
Inc. Asst. Clerk
Colonial Trusts I through VII Asst. Sec.
Colonial High Income
Municipal Trust Asst. Sec.
Colonial InterMarket Income
Trust I Asst. Sec.
Colonial Intermediate High
Income Fund Asst. Sec.
Colonial Investment Grade
Municipal Trust Asst. Sec.
Colonial Municipal Income
Trust Asst. Sec.
Cordes, Susan V.P.
Daniszewski, V.P. Colonial Investment Services,
Joseph J. Inc. V.P.
DiSilva, Linda V.P.
Ericson, Carl C. Dir; Sr. Colonial Intermediate High
V.P. Income Fund V.P.
Colonial Advisory Services,
Inc. V.P.
Evans, C. Frazier Dir.; Colonial Investment Services,
Sr.V.P. Inc. Sr. V.P.
Feingold, Andrea S. V.P. Colonial Intermediate High
Income Fund V.P.
Colonial Advisory Services,
Inc. V.P.
Finnemore, V.P. Colonial Advisory Services,
Leslie W. Inc. V.P.
Gerokoulis, V.P. Colonial Investment Services,
Stephen A. Inc. Sr. V.P.
Harasimowicz, V.P. Colonial Investment Services,
Stephen Inc. V.P.
Harris, David V.P. Stein Roe Global Capital Mngmt. Principal
Hartford, Brian V.P.
Haynie, James P. V.P. Colonial Advisory Services,
Inc. V.P.
Johnson, Gordon V.P.
Koonce, Michael H. V.P.; Colonial Trusts I through VII Asst. Sec.
Asst. Colonial High Income
Sec.; Municipal Trust Asst. Sec.
Asst. Colonial InterMarket Income
Clerk & Trust I Asst. Sec.
Counsel Colonial Intermediate High
Income Fund Asst. Sec.
Colonial Investment Grade
Municipal Trust Asst. Sec.
Colonial Municipal Income
Trust Asst. Sec.
Colonial Investment Services,
Inc. Asst. Clerk
Colonial Investors Service
Center, Inc. Asst. Clerk
The Colonial Group, Inc. Asst. Clerk
Colonial Advisory Services,
Inc. Asst. Clerk
Lennon, John E. V.P. Colonial Advisory Services,
Inc. V.P.
Lenzi, Sharon V.P.
Lilienfeld, V.P.
Jonathan
Loring, William C. V.P.
Lydecker, Peter L. V.P.; Colonial Trusts I through VII Controller
Asst. Colonial High Income
Treasurer Municipal Trust Controller
Colonial InterMarket Income
Trust I Controller
Colonial Intermediate High
Income Fund Controller
Colonial Investment Grade
Municipal Trust Controller
Colonial Municipal Income
Trust Controller
MacKinnon, Dir.;
Donald S. Sr.V.P.
McCue, Gerard A. V.P. Colonial Advisory Services,
Inc. V.P.
McGregor, Dir.; Colonial Investment Services, Pres.; CEO;
Jeffrey L. Sr.V.P. Inc. Dir.
O'Brien, David V.P.
O'Neill, Charles A. Sr.V.P.; Colonial Investment Services,
Dir. Inc. Exec. V.P.
Peters, Helen F. Dir.; Colonial Advisory Services,
Sr.V.P.; Inc. Sr. V.P.
IPC Mbr.
Rao, Gita V.P.
Rie, Daniel Sr.V.P.; Colonial Advisory Services,
IPC Mbr.; Inc. Sr. V.P.
Dir.
Scoon, Davey S. Dir.; Colonial Advisory Services,
Exe.V.P.; Inc. Dir.
IPC Mbr.; Colonial High Income
Exec. Comm. Municipal Trust V.P.
Mbr. Colonial InterMarket Income
Trust I V.P.
Colonial Intermediate High
Income Fund V.P.
Colonial Investment Grade
Municipal Trust V.P.
Colonial Municipal Income
Trust V.P.
Colonial Trusts I through VII V.P.
Colonial Investors Service Dir; Pres.
Center, Inc.
The Colonial Group, Inc. COO; Ex. V.P.
Seibel, Sandra L. V.P.
Shore, Janet V.P. and Colonial High Income
Compliance Municipal Trust Asst. Sec.
Offr.; Colonial InterMarket Income
IPC Mbr. Trust I Asst. Sec.
Colonial Intermediate High
Income Fund Asst. Sec.
Colonial Investment Grade
Municipal Trust Asst. Sec.
Colonial Municipal Income
Trust Asst. Sec.
Colonial Trusts I through VII Asst. Sec.
Colonial Investment Services,
Inc. Asst. Clerk
Silver, Richard A. Dir.; Colonial Advisory Services,
Sr.V.P.; Inc. Treasurer
Treasurer Colonial High Income Treasurer &
& CFO Municipal Trust CFO
Colonial InterMarket Income Treasurer &
Trust I CFO
Colonial Intermediate High Treasurer &
Income Fund CFO
Colonial Investment Grade Treasurer &
Municipal Trust CFO
Colonial Municipal Income Treasurer &
Trust CFO
Colonial Trusts I through VII Treasurer &
CFO
Colonial Investors Service Treasurer
Center, Inc.
The Colonial Group, Inc. Treasurer &
CFO
Colonial Investment Services, Treasurer,
Inc. CFO & Dir.
Stern, Arthur O. Exe.V.P.; Colonial Advisory Services,
Dir.; Inc. Clerk
Sec.; Colonial High Income
Clrk. & Municipal Trust Secretary
Gnrl. Colonial InterMarket Income
Counsel; Trust I Secretary
IPC Mbr. Colonial Intermediate High
Income Fund Secretary
Colonial Investment Grade
Municipal Trust Secretary
Colonial Municipal Income
Trust Secretary
Colonial Trusts I through VII Secretary
Colonial Investors Service
Center, Inc. Clerk
The Colonial Group, Inc. Exec. V.P.;
Clerk; General
Counsel
Colonial Investment Services, Dir., Chrmn.
Inc. Counsel; Clrk.
Stevens, Richard V.P.
Waas, Robert S. V.P.
Wallace, John V.P.- Corp. Colonial Advisory Services,
Finance and Inc. Controller
Controller
------------------------------------------------
*The Principal address of all of the officers and
directors of the investment adviser is One Financial
Center, Boston, MA 02111.
Item 29 Principal Underwriter
------- ---------------------
(a) Colonial Investment Services, Inc. a subsidiary of Colonial
Management Associates, Inc., Registrant's principal
underwriter, also acts in the same capacity to Colonial Trust I,
Colonial Trust II, Colonial Trust III, Colonial
Trust V, Colonial Trust VI and Colonial Trust VII; and
sponsor for Colony Growth Plans (public offering of which were
discontinued June 14, 1971).
(b) The table below lists each director or officer of the principal
underwriter named in the answer to Item 21.
(1) (2) (3)
Name and Principal Position and Offices Positions and
Business Address* with Principal Offices with
Underwriter Registrant
------------------ ------------------- --------------
Ballou, Rich Regional V.P. None
Balzano, Christine R. V.P. None
Barsokas, David Regional V.P. None
Cairns, David Regional V.P. None
Chrzanowski, Regional V.P. None
Daniel
Clapp, Elizabeth A. V.P. None
Daniszewski, V.P. None
Joseph J.
Davey, Cynthia Sr. V.P. None
Donovan, John Regional V.P. None
Eckelman, Bryan Sr. V.P. None
Eldridge, Kenneth Sr. V.P. None
Emerson, Kim P. Regional V.P. None
Erickson, Cynthia G. V.P. None
Evans, C. Frazier Sr. V.P. None
Feldman, David Regional V.P. None
Flaherty, Michael Regional V.P. None
Gerokoulis, Sr. V.P. None
Stephen A.
Goldberg, Matthew Regional V.P. None
Hannon, Lisa Regional V.P. None
Harasimowicz, V.P. None
Stephen
Hayes, Mary V.P. None
Elizabeth
Hodgkins, Joseph Regional V.P. None
Karagiannis, Sr. V.P. None
Marilyn
Kavolius, Mark Regional V.P. None
Kelley, Terry M. Regional V.P. None
Kelson, David W. Sr. V.P. None
Kilkenny Ann R. Sr. V.P. None
Lloyd, Judith H. Sr. V.P. None
McGregor, Jeffrey L. Director, CEO, None
President, COO
Meriwether, Jan V.P.
Murphy, Robert F. Sr. V.P. None
O'Neill, Charles A. Exec. V.P. None
Palmer, Laura V.P. None
Potter, Cheryl Regional V.P. None
Reed, Christopher B. Regional V.P. None
Ross, Gary J. Regional V.P. None
Scott, Michael W. Sr. V.P. None
Silver, Richard A. Director, Treasurer, Treasurer, CFO
CFO
Sorrells, Sr. V.P. None
Elizabeth
Stern, Arthur O. Clerk and Secretary
Counsel, Dir.,
Chairman
VanEtten, Keith H. V.P. None
Villanova, Paul Regional V.P. None
Wallace, John V.P. None
--------------------------
* The address for each individual is One Financial Center, Boston, MA
02111.
<PAGE>
Item 30. Location of Accounts and Records
The Trust's accounts and records required to be maintained by Section
31(a) of the Investment Company Act of 1940 and the Rules thereunder
are in the physical possession of the following:
Registrant:
Rule 31a-1(b),(4)
Rule 31a-2(a),(1)
Colonial Management Associates, Inc.
One Financial Center, Boston, Massachusetts 02111
Rule 31a-1(b), (1), (2), (3), (5), (6), (7), (8), (9), (10),
(11), (12)
Rule 31a-1(d),(f)
Rule 31a-2(a),(1),(2),(c),(e)
Colonial Investment Services, Inc.
One Financial Center, Boston, Massachusetts 02111
Rule 31a-1(d)
Rule 31a-2(c)
UMB, n.a.
928 Grand Avenue, Kansas City, Missouri 64106
Rule 31a-1(b), (2), (3)
Rule 31a-2(a), (2)
Colonial Investors Service Center, Inc.
P.O. Box 1722, Boston, Massachusetts 02105-1722
Rule 31a-1(b),(2)
Rule 31a-2(a),(2)
Item 31. Management Services
See Item 5(c) as discussed in Part A and Item 16(d) as discussed in
Part B.
Item 32. Undertakings
(1) The Registrant hereby undertakes to promptly call a meeting of
shareholders for the purpose of voting upon the question of
removal of any trustee when requested in writing to do so by the
record holders of not less than 10 per cent of the Registrant's
outstanding shares and to assist its shareholders in the
communicating with other shareholders in accordance with the
requirements of Section 16(c) of the Investment Company Act of
1940.
(2) The Registrant undertakes to comply with Section 16(c) of the
Investment Company Act of 1940 as though such provisions of the
Act were applicable to the Fund, except that the request
referred to in the third full paragraph thereof may only be made
by shareholders who hold in the aggregate at least 1% of the
outstanding shares of the Fund, regardless of the net asset
value of shares held by such requesting shareholders.
(3) The Registrant hereby undertakes to furnish free of charge to
each person to whom a prospectus is delivered, a copy of the
applicable series' annual report to shareholders containing the
information required by Item 5A of Form N-1A.
<PAGE>
************
NOTICE
A copy of the Agreement and Declaration of Trust, as amended, of Colonial
Trust V (Trust) is on file with the Secretary of The Commonwealth of
Massachusetts and notice is hereby given that this amendment to the Trust's
Registration Statement has been executed on behalf of the Trust by an officer of
the Trust as an officer and by its Trustees as trustees and not individually and
the obligations of or arising out of this Registration Statement are not binding
upon any of the Trustees, officers or shareholders individually but are binding
only upon the assets and property of the Trust.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all the requirements
for effectiveness of the Registration Statement pursuant to Rule 485(b) and has
duly caused this Post-Effective Amendment No. 19 to its Registration Statement
under the Securities Act of 1933 and Amendment No. 20 to its Registration
Statement under the Investment Company Act of 1940, to be signed in this City of
Boston and The Commonwealth of Massachusetts on the
20th day of May, 1996.
COLONIAL TRUST V
By: /s/ HAROLD W. COGGER
Harold W. Cogger, President
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment has been signed below by the following persons in their capacities and
on the date indicated.
SIGNATURES TITLE DATE
HAROLD W. COGGER President May 20, 1996
Harold W. Cogger
RICHARD A. SILVER Treasurer and Chief May 20, 1996
Richard A. Silver Financial Officer
PETER L. LYDECKER Controller May 20, 1996
Peter L. Lydecker
ROBERT J. BIRNBAUM Trustee
Robert J. Birnbaum
TOM BLEASDALE Trustee
Tom Bleasdale
LORA S. COLLINS
Lora S. Collins Trustee
JAMES E. GRINNELL
James E. Grinnell Trustee
WILLIAM D. IRELAND, JR. Trustee
William D. Ireland, Jr.
RICHARD W. LOWRY Trustee
Richard W. Lowry
WILLIAM E. MAYER Trustee
William E. Mayer
JAMES L. MOODY, JR. Trustee
James L. Moody, Jr.
JOHN J. NEUHAUSER Trustee
John J. Neuhauser
GEORGE L. SHINN Trustee MICHAEL H. KOONCE
George L. Shinn Michael H. Koonce
Attorney-in-fact
May 20, 1996
ROBERT L. SULLIVAN Trustee
Robert L. Sullivan
SINCLAIR WEEKS, JR. Trustee
Sinclair Weeks, Jr.
<PAGE>
EXHIBIT INDEX
Exhibit
2. Amended By-Laws (2/16/96)
9.(f) Credit Agreement
11. Consent of Independent Accountants for CCATEF, CCTTEF,
CFLTEF, CMATEF, CMITEF, CMNTEF, CNYTEF, CNCTEF and COHTEF
16.(a)(1) Calculation of Performance Information (CCATEF)
(a)(2) Calculation of Yield (CCATEF)
(b)(1) Calculation of Performance Information (CCTTEF)
(b)(2) Calculation of Yield (CCTTEF)
(c)(1) Calculation of Performance Information (CFLTEF)
(c)(2) Calculation of Yield (CFLTEF)
(d)(1) Calculation of Performance Information (CMATEF)
(d)(2) Calculation of Yield (CMATEF)
(e)(1) Calculation of Performance Information (CMITEF)
(e)(2) Calculation of Yield (CMITEF)
(f)(1) Calculation of Performance Information(CMNTEF)
(f)(2) Calculation of Yield (CMNTEF)
(g)(1) Calculation of Performance Information(CNYTEF)
(g)(2) Calculation of Yield (CNYTEF)
(h)(1) Calculation of Performance Information(CNCTEF)
(h)(2) Calculation of Yield (CNCTEF)
(i)(1) Calculation of Performance Information (COHTEF)
(i)(2) Calculation of Yield (COHTEF)
17.(a) Financial Data Schedule (Class A) (CCATEF)
(b) Financial Data Schedule (Class B) (CCATEF)
(c) Financial Data Schedule (Class A)(CCTTEF)
(d) Financial Data Schedule (Class B)(CCTTEF)
(e) Financial Data Schedule (Class A)(CFLTEF)
(f) Financial Data Schedule (Class B)(CFLTEF)
(g) Financial Data Schedule (Class A)(CMATEF)
(h) Financial Data Schedule (Class B)(CMATEF)
(i) Financial Data Schedule (Class A)(CMITEF)
(j) Financial Data Schedule (Class B)(CMITEF)
(k) Financial Data Schedule (Class A)(CMNTEF)
(l) Financial Data Schedule (Class B)(CMNTEF)
(m) Financial Data Schedule (Class A)(CNYTEF)
(n) Financial Data Schedule (Class B)(CNYTEF)
(o) Financial Data Schedule (Class A)(CNCTEF)
(p) Financial Data Schedule (Class B)(CNCTEF)
(q) Financial Data Schedule (Class A)(COHTEF)
(r) Financial Data Schedule (Class B)(COHTEF)
Amended 10/09/92- Section 11
Amended 2/16/96- Section 3.1, paragraph 2
BY-LAWS
OF
COLONIAL TRUST V
Section 1. Agreement and Declaration of Trust and Principal Office
1.1 Agreement and Declaration of Trust. These By-Laws shall be subject to
the Agreement and Declaration of Trust, as from time to time in effect
(the "Declaration of Trust"), of Colonial Trust V, a Massachusetts
business trust established by the Declaration of Trust (the "Trust").
1.2 Principal Office of the Trust. The principal office of the Trust shall
be located in Boston, Massachusetts.
Section 2. Shareholders
2.1 Shareholder Meetings. A meeting of the shareholders of the Trust or of
any one or more series or classes of shares may be called at any time
by the Trustees, by the president or, if the Trustees and the president
shall fail to call any meeting of shareholders for a period of 30 days
after written application of one or more shareholders who hold at least
10% of all outstanding shares of the Trust, if shareholders of all
series are required under the Declaration of Trust to vote in the
aggregate and not by individual series at such meeting, or of any
series or class, if shareholders of such series or class are entitled
under the Declaration of Trust to vote by individual series or class at
such meeting, then such shareholders may call such meeting. If the
meeting is a meeting of the shareholders of one or more series or
classes of shares, but not a meeting of all shareholders of the Trust,
then only the shareholders of such one or more series or classes shall
be entitled to notice of and to vote at the meeting. Each call of a
meeting shall state the place, date, hour and purpose of the meeting.
2.2 Place of Meetings. All meetings of the shareholders shall be held at
the principal office of the Trust, or, to the extent permitted by the
Declaration of Trust, at such other place within the United States as
shall be designated by the Trustees or the president of the Trust.
2.3 Notice of Meetings. A written notice of each meeting of shareholders,
stating the place, date and hour and the purposes of the meeting, shall
be given at least seven days before the meeting to each shareholder
entitled to vote thereat by leaving such notice with him or her or at
his or her residence or usual place of business or by mailing it,
postage prepaid, and addressed to such shareholder at his or her
address as it appears in the records of the Trust. Such notice shall be
given by the secretary or an assistant secretary or by an officer
designated by the Trustees. No notice of any meeting of shareholders
need be given to a shareholder if a written waiver of notice, executed
before or after the meeting by such shareholder or his or her attorney
thereunto duly authorized, is filed with the records of the meeting.
2.4 Ballots. No ballot shall be required for any election unless
requested by a shareholder present or represented at the meeting
and entitled to vote in the election.
2.5 Proxies. Shareholders entitled to vote may vote either in person or by
proxy in writing dated not more than six months before the meeting
named therein, which proxies shall be filed with the secretary or other
person responsible to record the proceedings of the meeting before
being voted. Unless otherwise specifically limited by their terms, such
proxies shall entitle the holders thereof to vote at any adjournment of
such meeting but shall not be valid after the final adjournment of such
meeting. The placing of a shareholder's name on a proxy pursuant to
telephonic or electronically transmitted instructions obtained pursuant
to procedures reasonably designed to verify that such instructions have
been authorized by such shareholder shall constitute execution of such
proxy by or on behalf of such shareholder.
Section 3. Trustees
3.1 Committees and Advisory Board. The Trustees may appoint from their
number an executive committee and other committees. Except as the
Trustees may otherwise determine, any such committee may make rules for
conduct of its business. The Trustees may appoint an advisory board to
consist of not less than two nor more than five members. The members of
the advisory board shall be compensated in such manner as the Trustees
may determine and shall confer with and advise the Trustees regarding
the investments and other affairs of the Trust. Each member of the
advisory board shall hold office until the first meeting of the
Trustees following the next meeting of the shareholders and until his
or her successor is elected and qualified, or until he or she sooner
dies, resigns, is removed or becomes disqualified, or until the
advisory board is sooner abolished by the Trustees.
In addition, the Trustees may appoint a Dividend Committee of not less
than three persons, who may (but need not) be Trustees.
No special compensation shall be payable to members of the Dividend
Committee. Each member of the Dividend Committee will hold office until
the successors are elected and qualified or until the member dies,
resigns, is removed, becomes disqualified or until the Committee is
abolished by the Trustees.
3.2 Regular Meetings. Regular meetings of the Trustees may be held without
call or notice at such places and at such times as the Trustees may
from time to time determine, provided that notice of the first regular
meeting following any such determination shall be given to absent
Trustees.
3.3 Special Meetings. Special meetings of the Trustees may be held at any
time and at any place designated in the call of the meeting, when
called by the president or the treasurer or by two or more Trustees,
sufficient notice thereof being given to each Trustee by the secretary
or an assistant secretary or by the officer or one of the Trustees
calling the meeting.
3.4 Notice. It shall be sufficient notice to a Trustee to send notice by
mail at least forty-eight hours or by telegram at least twenty-four
hours before the meeting addressed to the Trustee at his or her usual
or last known business or residence address or to give notice to him or
her in person or by telephone at least twenty-four hours before the
meeting. Notice of a meeting need not be given to any Trustee if a
written waiver of notice, executed by him or her before or after the
meeting, is filed with the records of the meeting, or to any Trustee
who attends the meeting without protesting prior thereto or at its
commencement the lack of notice to him or her. Neither notice of a
meeting nor a waiver of a notice need specify the purposes of the
meeting.
3.5 Quorum. At any meeting of the Trustees one-third of the Trustees then
in office shall constitute a quorum; provided, however, a quorum shall
not be less than two. Any meeting may be adjourned from time to time by
a majority of the votes cast upon the question, whether or not a quorum
is present, and the meeting may be held as adjourned without further
notice.
Section 4. Officers and Agents
4.1 Enumeration; Qualification. The officers of the Trust shall be a
president, a treasurer, a secretary and such other officers, if any, as
the Trustees from time to time may in their discretion elect or
appoint. The Trust may also have such agents, if any, as the Trustees
from time to time may in their discretion appoint. Any officer may be
but none need be a Trustee or shareholder. Any two or more offices may
be held by the same person.
4.2 Powers. Subject to the other provisions of these By-Laws, each officer
shall have, in addition to the duties and powers herein and in the
Declaration of Trust set forth, such duties and powers as are commonly
incident to his or her office as if the Trust were organized as a
Massachusetts business corporation and such other duties and powers as
the Trustees may from time to time designate, including without
limitation the power to make purchases and sales of portfolio
securities of the Trust pursuant to recommendations of the Trust's
investment adviser in accordance with the policies and objectives of
that series of shares set forth in its prospectus and with such general
or specific instructions as the Trustees may from time to time have
issued.
4.3 Election. The president, the treasurer and the secretary shall be
elected annually by the Trustees. Other elected officers are elected
by the Trustees. Assistant officers are appointed by the elected
officers.
4.4 Tenure. The president, the treasurer and the secretary shall hold
office until their respective successors are chosen and qualified, or
in each case until he or she sooner dies, resigns, is removed or
becomes disqualified. Each other officer shall hold office at the
pleasure of the Trustees. Each agent shall retain his or her authority
at the pleasure of the Trustees.
4.5 President and Vice Presidents. The president shall be the chief
executive officer of the Trust. The president shall preside at all
meetings of the shareholders and of the Trustees at which he or she is
present, except as otherwise voted by the Trustees. Any vice president
shall have such duties and powers as shall be designated from time to
time by the Trustees.
4.6 Treasurer and Controller. The treasurer shall be the chief financial
officer of the Trust and subject to any arrangement made by the
Trustees with a bank or trust company or other organization as
custodian or transfer or shareholder services agent, shall be in charge
of its valuable papers and shall have such other duties and powers as
may be designated from time to time by the Trustees or by the
president. Any assistant treasurer shall have such duties and powers as
shall be designated from time to time by the Trustees.
The controller shall be the chief accounting officer of the Trust and
shall be in charge of its books of account and accounting records. The
controller shall be responsible for preparation of financial statements
of the Trust and shall have such other duties and powers as may be
designated from time to time by the Trustees or the president.
4.7 Secretary and Assistant Secretaries. The secretary shall record all
proceedings of the shareholders and the Trustees in books to be kept
therefor, which books shall be kept at the principal office of the
Trust. In the absence of the secretary from any meeting of shareholders
or Trustees, an assistant secretary, or if there be none or he or she
is absent, a temporary clerk chosen at the meeting shall record the
proceedings thereof in the aforesaid books.
Section 5. Resignations and Removals
Any Trustee, officer or advisory board member may resign at any time by
delivering his or her resignation in writing to the president, the treasurer or
the secretary or to a meeting of the Trustees. The Trustees may remove any
officer elected by them with or without cause by the vote of a majority of the
Trustees then in office. Except to the extent expressly provided in a written
agreement with the Trust, no Trustee, officer, or advisory board member
resigning, and no officer or advisory board member removed shall have any right
to any compensation for any period following his or her resignation or removal,
or any right to damages on account of such removal.
Section 6. Vacancies
A vacancy in any office may be filled at any time. Each successor shall hold
office for the unexpired term, and in the case of the president, the treasurer
and the secretary, until his or her successor is chosen and qualified, or in
each case until he or she sooner dies, resigns, is removed or becomes
disqualified.
Section 7. Shares of Beneficial Interest
7.1 Share Certificates. No certificates certifying the ownership of shares
shall be issued except as the Trustees may otherwise authorize. In the
event that the Trustees authorize the issuance of share certificates,
subject to the provisions of Section 7.3, each shareholder shall be
entitled to a certificate stating the number of shares owned by him or
her, in such form as shall be prescribed from time to time by the
Trustees. Such certificate shall be signed by the president or a vice
president and by the treasurer or an assistant treasurer. Such
signatures may be facsimiles if the certificate is signed by a transfer
agent or by a registrar, other than a Trustee, officer or employee of
the Trust. In case any officer who has signed or whose facsimile
signature has been placed on such certificate shall have ceased to be
such officer before such certificate is issued, it may be issued by the
Trust with the same effect as if he or she were such officer at the
time of its issue.
In lieu of issuing certificates for shares, the Trustees or the
transfer agent may either issue receipts therefor or keep accounts upon
the books of the Trust for the record holders of such shares, who shall
in either case be deemed, for all purposes hereunder, to be the holders
of certificates for such shares as if they had accepted such
certificates and shall be held to have expressly assented and agreed to
the terms hereof.
7.2 Loss of Certificates. In the case of the alleged loss or destruction or
the mutilation of a share certificate, a duplicate certificate may be
issued in place thereof, upon such terms as the Trustees may prescribe.
7.3 Discontinuance of Issuance of Certificates. The Trustees may at any
time discontinue the issuance of share certificates and may, by
written notice to each shareholder, require the surrender of share
certificates to the Trust for cancellation. Such surrender and
cancellation shall not affect the ownership of shares in the Trust.
Section 8. Record Date and Closing Transfer Books
The Trustees may fix in advance a time, which shall not be more than 90 days
before the date of any meeting of shareholders or the date for the payment of
any dividend or making of any other distribution to shareholders, as the record
date for determining the shareholders having the right to notice and to vote at
such meeting and any adjournment thereof or the right to receive such dividend
or distribution, and in such case only shareholders of record on such record
date shall have such right, notwithstanding any transfer of shares on the books
of the Trust after the record date; or without fixing such record date the
Trustees may for any of such purposes close the transfer books for all or any
part of such period.
Section 9. Seal
The seal of the Trust shall, subject to alteration by the Trustees, consist of a
flat-faced circular die with the word "Massachusetts" together with the name of
the Trust and the year of its organization, cut or engraved thereon; but, unless
otherwise required by the Trustees, the seal shall not be necessary to be placed
on, and its absence shall not impair the validity of, any document, instrument
or other paper executed and delivered by or on behalf of the Trust.
Section 10. Execution of Papers
Except as the Trustees may generally or in particular cases authorize the
execution thereof in some other manner, all deeds, leases, transfers, contracts,
bonds, notes, checks, drafts and other obligations made, accepted or endorsed by
the Trust shall be signed, and all transfers of securities standing in the name
of the Trust shall be executed, by the president or by one of the vice
presidents or by the treasurer or by whomsoever else shall be designated for
that purpose by the vote of the Trustees and need not bear the seal of the
Trust.
Section 11. Fiscal Year
Except as from time to time otherwise provided by the Trustees, President,
Secretary, Controller or Treasurer, the fiscal year of the Trust shall end on
January 31.
Section 12. Amendments
These By-Laws may be amended or repealed, in whole or in part, by a majority of
the Trustees then in office at any meeting of the Trustees, or by one or more
writings signed by such a majority.
CREDIT AGREEMENT
Dated as of April 29, 1996
among
THE INVESTMENT COMPANIES PARTY HERETO,
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent,
and
THE OTHER BANKS PARTY HERETO
Arranged by
BA SECURITIES, INC.
TABLE OF CONTENTS
Page
I DEFINITIONS AND INTERPRETATION.............................. 1
1.1. Defined Terms......................................... 1
1.2. Interpretation........................................ 1
1.3. Accounting Terms...................................... 2
1.4. Assumptions Regarding Structure....................... 3
1.5. Authority of Adviser; Adviser Disclaimer.............. 3
II THE CREDITS................................................ 4
2.1. Amounts and Terms of Commitments...................... 4
2.2. Notes................................................. 4
2.3. Procedure for Borrowing............................... 4
2.4. Conversion and Continuation Elections................. 5
2.5. Voluntary Termination or Reduction of Commitments..... 7
2.6. Prepayments........................................... 7
2.7. Repayment............................................. 8
2.8. Interest.............................................. 8
2.9. Fees.................................................. 8
2.10. Computation of Fees and Interest...................... 9
2.11. Payments............................................. 10
2.12. Payments by the Banks to the Agent................... 10
2.13. Sharing of Payments, etc............................. 11
2.14. Source of Repayment.................................. 12
2.15. Swing Loans.......................................... 12
III TAXES, YIELD PROTECTION AND ILLEGALITY................... 14
3.1. Taxes................................................ 14
3.2. Illegality........................................... 15
3.3. Increased Costs and Reduction of Return.............. 16
3.4. Funding Losses....................................... 16
3.5. Inability to Determine Rates......................... 17
3.6. Certificates of Banks................................ 18
3.7. Substitution of Banks................................ 18
3.8. Survival............................................. 18
IV CONDITIONS TO BORROWING................................... 18
4.1. Conditions of Initial Loan........................... 18
4.2. All Borrowings....................................... 20
V REPRESENTATIONS AND WARRANTIES............................. 21
5.1. Existence............................................ 21
5.2. Authorization........................................ 22
5.3. No Conflicts......................................... 22
5.4. Validity and Binding Effect.......................... 22
5.5. No Default........................................... 22
5.6. Financial Statements................................. 22
5.7. Litigation........................................... 23
5.8. Liens................................................ 23
5.9. Partnerships......................................... 23
5.10. Purpose.............................................. 23
5.11. Compliance and Government Approvals.................. 24
5.12. Pension and Welfare Plans............................ 24
5.13. Taxes................................................ 24
5.14. Subsidiaries; Investments............................ 24
5.15. Full Disclosure...................................... 24
5.16. Investment Policies.................................. 24
5.17. Tax Status........................................... 24
5.18. Regulations G, U and X............................... 25
5.19. Status of Loans...................................... 25
VI COVENANTS................................................. 25
6.1. Financial Statements and Other Reports............... 25
6.2. Notices.............................................. 26
6.3. Existence............................................ 27
6.4. Nature of Business................................... 28
6.5. Books, Records and Access............................ 28
6.6. Insurance............................................ 28
6.7. Investment Policies and Restrictions................. 28
6.8. Taxes................................................ 29
6.9. Compliance........................................... 29
6.10. Pension Plans........................................ 29
6.11. Merger, Purchase and Sale............................ 29
6.12. Asset Coverage Ratio................................. 30
6.13. Liens................................................ 30
6.14. Guaranties........................................... 31
6.15. Other Agreements..................................... 31
6.16. Transactions with Related Parties.................... 31
6.17. Other Indebtedness................................... 31
6.18. Changes to Organization Documents, etc............... 32
6.19. Violation of Investment Restrictions, etc............ 32
6.20. Proceeds of Loans.................................... 32
6.21. Adviser.............................................. 32
6.22. Service Providers to Trust........................... 32
VII EVENTS OF DEFAULT........................................ 32
7.1. Events of Default..................................... 32
7.2. Remedies.............................................. 35
VIII THE AGENT............................................... 35
8.1. Appointment and Authorization........................ 35
8.2. Delegation of Duties................................. 35
8.3. Liability of Agent................................... 36
8.4. Reliance by Agent.................................... 36
8.5. Notice of Default.................................... 37
8.6. Credit Decision...................................... 37
8.7. Indemnification of Agent............................. 38
8.8. Agent in Individual Capacity......................... 38
8.9. Successor Agent...................................... 38
8.10. Withholding Tax...................................... 39
IX MISCELLANEOUS PROVISIONS.................................. 40
9.1. Amendments and Waivers............................... 40
9.2. Notices.............................................. 41
9.3. No Waiver; Cumulative Remedies....................... 42
9.4. Costs and Expenses................................... 42
9.5. Funds Indemnification................................ 43
9.6. Payments Set Aside................................... 44
9.7. Successors and Assigns............................... 44
9.8. Confidentiality...................................... 45
9.9. Set-off.............................................. 46
9.10. Notification of Addresses, Lending Offices, etc...... 47
9.11. Counterparts......................................... 47
9.12. Survival............................................. 47
9.13. Disclaimer........................................... 47
9.14. Severability......................................... 47
9.15. No Third Parties Benefited........................... 47
9.16. Governing Law and Jurisdiction....................... 48
9.17. Waiver of Jury Trial................................. 48
9.18. Entire Agreement..................................... 48
SCHEDULE I Definitions
SCHEDULE II Commitments and Pro Rata Shares
SCHEDULE III Offshore and Domestic Lending Offices, Addresses for Notices
EXHIBIT 2.2 Form of Note
EXHIBIT 2.3 Form of Loan Request
EXHIBIT 2.4 Form of Continuation/Conversion Notice
EXHIBIT 2.14 Form of Allocation Notice
EXHIBIT 4.1(c)-1 Form of Opinion of Counsel to the Funds
EXHIBIT 4.1(c)-2 Form of Opinion of Counsel to the Agent
EXHIBIT 5.7-1 Schedule of Litigation
EXHIBIT 5.7-2 Schedule of Contingent Liabilities
EXHIBIT 6.1 Form of Borrowing Base Certificate
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of April 29, 1996, is made by and among
each of the investment companies (each, a "Trust") as are or may become party
hereto on behalf of the Funds listed on the signature pages hereto or hereafter
added hereto, the various banks (as defined in Section 2(a)(5) of the Act) as
are or may become party hereto (collectively, the "Banks") (none of which is
affiliated (as defined in the Act) with any of the Trusts or Colonial Management
Associates, Inc.), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
("BofA"), as agent (in such capacity, the "Agent") for the Banks.
W I T N E S S E T H:
WHEREAS, the Trusts are open-end management investment companies registered
under the Act that are comprised of Funds;
WHEREAS, the Trusts, on behalf of their Funds, desire to obtain Commitments
from the Banks pursuant to which Loans, in a maximum aggregate principal amount
at any one time outstanding not to exceed $200,000,000, will be made to such
Funds from time to time prior to the Commitment Termination Date;
WHEREAS, the Banks are willing, on the terms and subject to the conditions
hereinafter set forth, to extend such Commitments and make such Loans to the
Funds; and
WHEREAS, the proceeds of the Loans will be used for the Funds' temporary
liquidity purposes as allowed under the Act.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I DEFINITIONS AND INTERPRETATION
1.1. Defined Terms. Unless a clear contrary intention appears, terms
defined in Schedule I have the same respective meanings when used in this
Agreement.
1.2. Interpretation. In this Agreement, unless a clear contrary intention
appears:
(a) the singular number includes the plural number and vice versa;
(b) reference to any Person includes such Person's successors and assigns
but, if applicable, only if such successors and assigns are permitted by this
Agreement, and reference to a Person in a particular capacity excludes such
Person in any other capacity or individually;
(c) reference to any gender includes each other gender;
(d) reference to any agreement (including this Agreement), document or
instrument means such agreement, document or instrument as amended or modified
and in effect from time to time in accordance with the terms thereof and, if
applicable, the terms hereof and the other Credit Documents and reference to any
promissory note includes any promissory note which is an extension or renewal
thereof or a substitute or replacement therefor;
(e) reference to any applicable law means such applicable law as amended,
modified, codified, replaced or reenacted, in whole or in part, and in effect
from time to time, including rules and regulations promulgated thereunder, and
reference to any section or other provision of any applicable law means that
provision of such applicable law from time to time in effect and constituting
the substantive amendment, modification, codification, replacement or
reenactment of such section or other provision;
(f) reference to any Article, Section, Annex, Schedule or Exhibit means
such Article or Section hereof or Annex, Schedule or Exhibit hereto;
(g) "hereunder", "hereof", "hereto" and words of similar import shall be
deemed references to this Agreement as a whole and not to any particular
Article, Section or other provision hereof;
(h) "including" (and with the correlative meaning "include") means
including without limiting the generality of any description preceding such
term;
(i) "or" is not exclusive; and
(j) relative to the determination of any period of time, "from" means "from
and including" and "to" and "through" mean "to but excluding".
1.3. Accounting Terms. In this Agreement, unless expressly otherwise
provided, accounting terms shall be construed and interpreted, and accounting
determinations and computations shall be made, in accordance with GAAP.
1.4. Assumptions Regarding Structure. The parties acknowledge and agree
that the Trusts are comprised of one or more separate Funds and that such Funds
are not separately existing legal entities entitled to enter into contractual
agreements or to execute instruments, and for these reasons, the relevant Trusts
are executing this Agreement and the relevant Notes on behalf of their specified
respective Funds.
1.5. Authority of Adviser; Adviser Disclaimer. Each of the Funds hereby
confirms that the Adviser has been duly authorized to act on behalf of such Fund
for purposes of this Agreement and the relevant Notes and to take all actions
which such Fund is entitled or required to take hereunder or thereunder,
including, without limitation, requesting the making, continuation or conversion
of Loans on behalf of a Fund pursuant to Section 2, reducing or terminating the
Commitments as to one or more Funds, and executing and delivering Loan Requests,
Borrowing Base Certificates and any and all other certificates, reports,
financial information and notices required to be delivered to the Agent
hereunder. Notwithstanding the foregoing or anything to the contrary contained
in this Agreement, the parties hereto acknowledge and agree that (a) in taking
any such action hereunder or under a Note, the Adviser is acting solely in its
capacity as investment adviser for the Funds and not in its individual capacity,
(b) neither the Adviser nor any of its officers, employees or agents (with the
Adviser, collectively, "Adviser Persons") shall have any liability whatsoever
for any action taken or omitted to be taken by any of them in connection with
this Agreement or any Note nor shall any of them be bound by or liable for any
indebtedness, liability or obligation hereunder or under any Note and (c) no
Adviser Person shall be responsible in any manner to the Banks for the truth,
completeness or accuracy of any statement, representation, warranty or
certification contained in this Agreement or in any information, report,
certificate or other document furnished by the Adviser on behalf of any Trust or
Fund in connection with this Agreement, including, without limitation, any Loan
Request, any Borrowing Base Certificate, and any certificate or notice furnished
pursuant to Section 6.1 or 6.2 hereof; provided that, in the case of clauses (b)
and (c) above, the conduct of the Adviser Persons or any of them did not
constitute gross negligence or willful misconduct.
ARTICLE II
THE CREDITS
2.1. Amounts and Terms of Commitments. Each Bank severally agrees, on the
terms and conditions set forth herein, to make Loans to the Funds from time to
time on any Business Day during the period from the Closing Date to the
Commitment Termination Date equal to its Pro Rata Share of the aggregate amount
of the Borrowing requested by any Fund to be made on such day. The Commitment of
each Bank and the outstanding principal amount of Loans (including Swing Loans)
made by each Bank hereunder shall not exceed at any time the aggregate amount
set forth on Schedule II (such amount as the same may be reduced under Section
2.5 or as a result of one or more assignments as permitted herein, the Bank's
"Commitment"); provided, however, that, after giving effect to any Borrowing,
the aggregate principal amount of all outstanding Loans shall not at any time
exceed the Commitment Amount, and provided that the aggregate principal amount
of all Loans outstanding from time to time to any Fund shall not exceed the
Borrowing Base for such Fund. Within the limits of each Bank's Commitment, and
subject to the other terms and conditions hereof, a Fund may borrow under this
Section 2.1, repay under the terms hereof and reborrow under this Section 2.1.
Subject to the terms of Section 2.15, a Fund may request and BAI may make a
Swing Loan to a Fund.
2.2. Notes. The Loans made by each Bank under its Commitment to each Fund
shall be evidenced by a Note in the form of Exhibit 2.2. Each such Bank shall
endorse on the schedules annexed to its Note the date, amount and maturity of
each Loan made by it and the amount of each payment of principal made by the
Fund with respect thereto. Each such Bank is irrevocably authorized by each Fund
to endorse its Note, and each Bank's record shall be conclusive absent manifest
error; provided, however, that the failure of a Bank to make, or an error in
making, a notation thereon with respect to any Loan shall not limit or otherwise
affect the obligations of the Fund hereunder or under any such Note to such
Bank.
2.3. Procedure for Borrowing. (a) Each Borrowing shall be made upon the
borrowing Fund's irrevocable written notice delivered to the Agent in the form
of a loan request ("Loan Request") substantially in the form of Exhibit 2.3
hereto (which notice must be received on a Business Day by the Agent prior to
9:00 a.m. (San Francisco time) (i) one Business Day prior to the requested
Borrowing Date, in the case of Offshore Rate Loans, and (ii) on the Borrowing
Date for which a Loan is requested, in the case of Base Rate Loans or Federal
Funds Rate Loans, specifying:
(A) the amount of the Borrowing, which shall be in an aggregate minimum
amount of $1,000,000 or any multiple of $1,000,000 in excess thereof;
(B) the requested Borrowing Date, which shall be a Business Day;
(C) the Type of Loans comprising the Borrowing; and
(D) the duration of the Interest Period applicable to such Loans included
in such notice. If the Loan Request fails to specify the duration of the
Interest Period for any Borrowing comprised of Offshore Rate Loans, such
Interest Period shall be two weeks.
In the event that more than one Loan Request is delivered on any Business
Day, the Agent shall, for purposes of ensuring that the aggregate of the
then-outstanding Loans and the Loans which are the subject of the Loan Requests
will not exceed the Commitment Amount, process the Loan Requests in the order of
receipt.
(b) The Agent will promptly notify each Bank of its receipt of any Loan
Request and of the amount of such Bank's Pro Rata Share of that Borrowing.
(c) Each Bank will make the amount of its Pro Rata Share of each Borrowing
available to the Agent for the account of the borrowing Fund at the Agent's
Payment Office by 11:00 a.m. (San Francisco time) on the Borrowing Date
requested by the borrowing Fund in funds immediately available to the Agent for
deposit to the account which the Agent shall from time to time specify by notice
to the Banks. The proceeds of all such Loans will then be made available to the
Fund by the Agent in accordance with written instructions provided to the Agent
by the Fund in like funds as received by the Agent. No Bank's obligation to make
any Loan shall be affected by any other Bank's failure to make any Loan.
(d) After giving effect to any Borrowing, there may not be more than 10
different Interest Periods in effect as to all the Funds.
2.4. Conversion and Continuation Elections. (a) A Fund may, upon
irrevocable written notice to the Agent in accordance with Section 2.4(b):
(i) elect, as of any Business Day, in the case of Base Rate Loans or
Federal Funds Rate Loans, or as of the last day of the applicable Interest
Period, in the case of any other Type of Loans, to convert any such Loans (or
any part thereof in an amount not less than $1,000,000 or that is in an integral
multiple of $1,000,000 in excess thereof) into Loans of any other Type; or
(ii) elect, as of the last day of the applicable Interest Period, to
continue any Loans having Interest Periods expiring on such day (or any part
thereof in an amount not less than $1,000,000 or that is in an integral multiple
of $1,000,000 in excess thereof);
provided, that if at any time the aggregate amount of Offshore Rate Loans
in respect of any Borrowing is reduced by payment, prepayment or conversion of
part thereof to be less than $1,000,000, such Offshore Rate Loans shall
automatically convert into Base Rate Loans, and on and after such date, the
right of the Fund to continue such Loans as, and convert such Loans into,
Offshore Rate Loans shall terminate.
Notwithstanding anything to the contrary, no Loan shall be outstanding for
a period of more than two weeks, and there shall be no more than two Interest
Periods in respect of an Offshore Rate Loan.
(b) A Fund shall deliver a Conversion/Continuation Notice to be received by
the Agent not later than 9:00 a.m. (San Francisco time) at least (i) one
Business Day in advance of the Conversion/Continuation Date, if the Loans are to
be converted into or continued as Offshore Rate Loans, and (ii) on the
Conversion/Continuation Date, if the Loans are to be continued or converted into
Base Rate Loans or Federal Funds Rate Loans, specifying:
(A) the proposed Conversion/Continuation Date;
(B) the aggregate amount of Loans to be converted or continued;
(C) the Type of Loans resulting from the proposed conversion or
continuation; and
(D) other than in the case of conversions into Base Rate Loans or Federal
Funds Rate Loans, the duration of the requested Interest Period.
(c) The Agent will promptly notify each Bank of its receipt of a
Conversion/Continuation Notice. All conversions and continuations shall be made
ratably according to the respective outstanding principal amounts of the Loans
with respect to which the notice was given held by each Bank.
(d) Unless the Majority Banks otherwise agree, during the existence of a
Default, a Fund may not elect to have a Loan converted into or continued as an
Offshore Rate Loan.
2.5. Voluntary Termination or Reduction of Commitments. The Funds may, upon
not less than five Business Days' prior notice to the Agent, terminate the
Commitments, or permanently reduce the Commitments by an aggregate minimum
amount of $3,000,000 or any multiple of $1,000,000 in excess thereof; unless,
after giving effect thereto and to any prepayments of Loans made on the
effective date thereof, the then-outstanding principal amount of the Loans would
exceed the amount of the Commitment Amount then in effect. Once reduced in
accordance with this Section, the Commitment Amount may not be increased. Any
reduction of the Commitment Amount shall be applied to each Bank according to
its Pro Rata Share. All accrued commitment fees to but not including the
effective date of any termination of Commitments shall be paid on the effective
date of such termination. All accrued commitment fees to but not including the
effective date of any reduction of Commitments shall be paid on the last
Business Day of the then-current calendar quarter.
2.6. Prepayments. (a) If at any time the outstanding balance of a Fund's
Indebtedness shall exceed the then-current Borrowing Base of such Fund and at
such time there are Loans outstanding to such Fund, such Fund shall immediately
prepay the outstanding principal amount of such Loans in an amount equal to such
excess, together with interest accrued thereon and amounts required under
Section 3.4.
(b) Subject to Section 3.4, a Fund may, at any time or from time to time,
upon not less than three Business Days' irrevocable notice to the Agent, ratably
prepay Loans, in whole or in part, in minimum amounts of $1,000,000 or any
multiple of $1,000,000 in excess thereof. Such notice of prepayment shall
specify the date and amount of such prepayment and the Type(s) of Loans to be
prepaid. If such notice is given by a Fund, such Fund shall make such prepayment
to the Agent, and the payment amount specified in such notice shall be due and
payable on the date specified therein, together with, in the case of the
prepayment of Offshore Rate Loans, accrued interest to each such date on the
amount prepaid and any amounts required pursuant to Section 3.4.
(c) The Agent will promptly notify each Bank of its receipt of any such
notice and of such Bank's Pro Rata Share of such prepayment.
(d) Each prepayment of any Loans pursuant to this Section shall be without
premium or penalty, except as may be required by Section 3.4. No voluntary
prepayment of principal of any Loans shall cause a reduction in the Commitment
Amount.
2.7. Repayment. Each Fund shall repay to the Agent for the benefit of the
Banks on the Commitment Termination Date the aggregate principal amount of its
Loans outstanding on such date without liability for any Loan(s) made to any
other Fund.
2.8. Interest. (a) Each Loan shall bear interest on the outstanding
principal amount thereof from the applicable Borrowing Date at a rate per annum
equal to the Federal Funds Rate, the Offshore Rate or the Base Rate, as the case
may be, (and subject to a Fund's right to convert to other Type(s) of Loans
under Section 2.4), plus the Applicable Margin.
(b) Interest on each Loan shall be paid in arrears on each Interest Payment
Date. Interest shall also be paid on the date of any prepayment of Offshore Rate
Loans under Section 2.6 for the portion of the Loans so prepaid and upon payment
(including prepayment) in full thereof, and during the existence of any Event of
Default, interest shall be paid on demand of the Agent at the request or with
the consent of the Majority Banks.
Notwithstanding subsection (a) of this Section, if any amount of principal
of or interest on any Loan, or any other amount payable hereunder or under any
other Credit Document, is not paid in full when due (whether at stated maturity
or by acceleration, demand or otherwise), the Fund agrees to pay interest on
such unpaid principal or other amount from the date such amount becomes due
until the date such amount is paid in full, and after as well as before any
entry of judgment thereon to the extent permitted by law, payable on demand at a
fluctuating rate per annum equal to the Base Rate plus 2%.
(c) Anything herein to the contrary notwithstanding, the obligations of any
Fund to any Bank hereunder shall be subject to the limitation that payments of
interest shall not be required for any period for which interest is computed
hereunder, to the extent (but only to the extent) that contracting for or
receiving such payment by such Bank would be contrary to the provisions of any
law applicable to such Bank limiting the highest rate of interest that may be
lawfully contracted for, charged or received by such Bank, and in such event the
Fund shall pay such Bank interest at the highest rate permitted by applicable
law.
2.9. Fees. (a) Arrangement, Agency Fees. Subject to the Allocation Notice
requirements of Section 2.14(a), each Fund shall pay an arrangement fee to the
Arranger for the Arranger's own account, and shall pay an agency fee to the
Agent for the Agent's own account, as required by the letter agreement ("Fee
Letter") among the Adviser, the Arranger and the Agent dated January 24, 1996.
(b) Commitment Fees. Subject to the Allocation Notice requirements of
Section 2.14(a), each Fund shall pay to the Agent for the account of each Bank a
commitment fee on the average daily unused portion of such Bank's Commitments,
computed on a quarterly basis in arrears on the last Business Day of each
calendar quarter based upon the daily utilization for that quarter as calculated
by the Agent, equal to .05% per annum. For purposes of calculation of the
commitment fee under this Section 2.9(b), outstanding Swing Loans shall not be
deemed as Loan usage under the Banks' Commitments. Such commitment fee shall
accrue from the date of this Agreement to the Commitment Termination Date and
shall be due and payable quarterly in arrears on the last Business Day of each
March, June, September and December commencing on June 28, 1996 through the
Commitment Termination Date, with the final payment to be made on the Commitment
Termination Date. All accrued commitment fees to but not including the effective
date of any termination of Commitments shall be paid on the effective date of
such termination. All accrued commitment fees to but not including the effective
date of any reduction of Commitments shall be paid on the last Business Day of
the then-current calendar quarter, with such quarterly payment being calculated
on the basis of the period from such reduction date to such quarterly payment
date. The commitment fees provided in this subsection shall accrue at all times
after the above-mentioned commencement date, including at any time during which
one or more conditions in Article IV are not met.
2.10. Computation of Fees and Interest. (a) All computations of interest
for Base Rate Loans when the Base Rate is determined by BofA's "reference rate"
shall be made on the basis of a year of 365 or 366 days, as the case may be, and
actual days elapsed. All other computations of fees and interest shall be made
on the basis of a 360-day year and actual days elapsed (which results in more
interest being paid than if computed on the basis of a 365- or 366-day year).
Interest and fees shall accrue during each period during which interest or such
fees are computed from the first day thereof to the last day thereof.
(b) Each determination of an interest rate by the Agent shall be conclusive
and binding on the relevant Fund and the Banks in the absence of manifest error.
The Agent will, at the request of a relevant Fund or any Bank, deliver to such
Fund or Bank, as the case may be, a statement showing the quotations used by the
Agent in determining any interest rate and the resulting interest rate.
2.11. Payments. (a) All payments to be made by a Fund shall be made without
set-off, recoupment or counterclaim. Except as otherwise expressly provided
herein, all such payments shall be made to the Agent for the account of the
Banks at the Agent's Payment Office and shall be made in Dollars and in
immediately available funds no later than 11:00 a.m. (San Francisco time) on the
date specified herein. The Agent will promptly distribute to each Bank its Pro
Rata Share (or other applicable share as expressly provided herein) of such
payment in like funds as received. Any payment received by the Agent later than
11:00 a.m. (San Francisco time) shall be deemed to have been received on the
following Business Day, and any applicable interest or fee shall continue to
accrue.
(b) Subject to the provisions set forth in the definition of "Interest
Period" herein, whenever any payment is due on a day other than a Business Day,
such payment shall be made on the following Business Day, and such extension of
time shall in such case be included in the computation of interest or fees, as
the case may be.
(c) Unless the Agent receives notice from a Fund prior to the date on which
any payment is due to the Banks that such Fund will not make such payment in
full as and when required, the Agent may assume that the Fund has made such
payment in full to the Agent on such date in immediately available funds, and
the Agent may (but shall not be so required), in reliance upon such assumption,
distribute to each Bank on such due date an amount equal to the amount then due
such Bank. If and to the extent the Fund has not made such payment in full to
the Agent, each Bank shall repay to the Agent on demand such amount distributed
to such Bank, together with interest thereon at the Federal Funds Rate for each
day from the date such amount is distributed to such Bank until the date repaid.
2.12. Payments by the Banks to the Agent. (a) Unless the Agent receives
notice from a Bank on or prior to the Closing Date or, with respect to any
Borrowing after the Closing Date, at least one Business Day prior to the date of
such Borrowing, that such Bank will not make available as and when required
hereunder to the Agent for the account of the relevant Fund the amount of that
Bank's Pro Rata Share of the Borrowing, the Agent may assume that each Bank has
made such amount available to the Agent in immediately available funds on the
Borrowing Date and the Agent may (but shall not be so required), in reliance
upon such assumption, make available to the Fund on such date a corresponding
amount. If and to the extent any Bank shall not have made its full amount
available to the Agent in immediately available funds and the Agent in such
circumstances has made available to the relevant Fund such amount, that Bank
shall on the Business Day following such Borrowing Date make such amount
available to the Agent, together with interest at the Federal Funds Rate for
each day during such period. A notice of the Agent submitted to any Bank with
respect to amounts owing under this subsection (a) shall be conclusive, absent
manifest error. If such amount is so made available, such payment to the Agent
shall constitute such Bank's Loan on the date of Borrowing for all purposes of
this Agreement. If such amount is not made available to the Agent on the
Business Day following the Borrowing Date, the Agent will notify the Fund of
such failure to fund, and upon demand by the Agent, the relevant Fund shall pay
such amount to the Agent for the Agent's account, together with interest thereon
for each day elapsed since the date of such Borrowing, at a rate per annum equal
to the interest rate applicable at the time to the Loans comprising such
Borrowing.
(b) The failure of any Bank to make any Loan on any Borrowing Date shall
not relieve any other Bank of any obligation hereunder to make a Loan on such
Borrowing Date, but no Bank shall be responsible for the failure of any other
Bank to make the Loan to be made by such other Bank on any Borrowing Date.
2.13. Sharing of Payments, etc. If, other than as expressly provided
elsewhere herein, any Bank shall obtain on account of the Loans made by it any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off or otherwise) in excess of its Pro Rata Share, such Bank shall
immediately (a) notify the Agent of such fact and (b) purchase from the other
Banks such participations in the Loans made by them as shall be necessary to
cause such purchasing Bank to share the excess payment pro rata with each of
them; provided, however, that if all or any portion of such excess payment is
thereafter recovered from the purchasing Bank, such purchase shall to that
extent be rescinded and each other Bank shall repay to the purchasing Bank the
purchase price paid therefor, together with an amount equal to such paying
Bank's ratable share (according to the proportion of (i) the amount of such
paying Bank's required repayment to the purchasing Bank to (ii) the total amount
so recovered from the purchasing Bank) of any interest or other amount paid or
payable by the purchasing Bank in respect of the total amount so recovered. Each
Fund agrees that any Bank so purchasing a participation from another Bank may,
to the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off with respect to such participation) as fully as
if such Bank were the direct creditor of the relevant Fund in the amount of such
participation. The Agent will keep records (which shall be conclusive and
binding in the absence of manifest error) of participations purchased under this
Section and will in each case notify the Banks following any such purchases or
repayments.
2.14. Source of Repayment. (a) Notwithstanding any other provision of this
Agreement, the parties agree that the assets and liabilities of each series of a
Trust are separate and distinct from the assets and liabilities of each other
series of that Trust and that no series of a Trust shall be liable or shall be
charged for any debt, obligation, liability, fee or expense arising under this
Agreement, the Notes or out of or in connection with any transaction other than
one entered into by or on behalf of itself. The Funds shall (i) as provided in
Section 4.1(g), (ii) to the extent feasible, at least five Business Days in
advance of a date on which a payment in respect of a debt, obligation,
liability, fee or expense arising hereunder (other than principal of or interest
on a Loan) shall be due and payable and (iii) upon request of the Agent, cause
to be provided to the Agent an Allocation Notice; provided, however, should the
Funds fail to deliver to the Agent an Allocation Notice with respect to such
amounts within five Business Days following a request for the same by the Agent,
the Funds shall be liable therefor to the Agent and/or the Banks in the
proportion set forth in the Allocation Notice most recently delivered to the
Agent.
(b) The parties hereto acknowledge that the Trust Agreement for each Trust
is on file with the Secretary of State of The Commonwealth of Massachusetts and
the Clerk of the City of Boston. With respect to each Trust, the parties hereby
agree that this Agreement is not executed on behalf of the trustees of such
Trust as individuals; that the obligations of any Fund of such Trust under this
Agreement, its Notes and any claims, obligations or liabilities arising
hereunder are not binding on any of the trustees, officers or shareholders of
such Trust individually but are binding upon only the assets and property of
such Fund; and that no Fund or series of a Trust will be held liable for the
obligations or liabilities of any other Fund or series of that Trust.
(c) Nothing in this Section 2.14 shall affect the Banks' rights against
Adviser Persons as provided in Section 1.5.
2.15. Swing Loans. (a) BAI may elect in its sole discretion to make
revolving loans of a Base Rate Loan Type (the "Swing Loan(s)") to a Fund solely
for BAI's own account from time to time on or after the Closing Date and prior
to the Commitment Termination Date up to an aggregate principal amount at any
one time outstanding not to exceed the lesser of (i) $50,000,000 or (ii) the
maximum aggregate principal amount relating to BAI's Commitment available and
permitted under Section 2.1. BAI may make Swing Loans (subject to the conditions
precedent set forth in Section 4.2), provided that BAI has received notice no
later than 11:00 a.m. (San Francisco time) either (i) by facsimile transmission
of a Loan Request in writing or (ii) by telephone notice from an Authorized
Officer of the relevant Fund for funding of a Swing Loan on the Business Day on
which such Swing Loan is requested to be made. The relevant Fund shall
simultaneously also give telephonic notice to the Agent of such Loan Request for
a Swing Loan and the Agent shall promptly notify each Bank of its receipt of
such Loan Request for a Swing Loan. BAI shall not make any Swing Loan
immediately after BAI becomes aware that one or more of the conditions precedent
contained in Section 4.2 is not satisfied until such conditions have been
satisfied or waived.
(b) Each Fund requesting by telephone notice and obtaining a Swing Loan
shall deliver promptly by facsimile transmission to BAI and the Agent a Loan
Request signed by an Authorized Officer confirming such telephonic notice for a
Swing Loan. If the information contained in any such Loan Request differs in any
material respect from the action taken by BAI, the records of BAI shall govern,
absent manifest error.
(c) Each outstanding Swing Loan shall be payable on the Business Day next
following the day the Swing Loan was made, with interest at the Base Rate
accrued thereon, and shall be subject to all the terms and conditions applicable
to Loans, except that all interest thereon shall be payable to BAI solely for
its own account. On the due date for such Swing Loan, unless the borrowing Fund
delivers or has previously delivered to BAI and the Agent a notice of its
intention to repay and does repay the Swing Loan prior to 8:00 a.m. (San
Francisco time), such Swing Loan shall automatically convert to a Base Rate Loan
under this Agreement, and each Bank (other than BAI) shall irrevocably and
unconditionally purchase from BAI, without recourse or warranty to BAI, an
undivided interest and participation in such Swing Loan in an amount equal to
such Bank's Pro Rata Share and promptly pay such amount to the Agent for the
benefit of BAI in immediately available funds. Such payment shall be made by the
other Banks whether or not a Default is then continuing or any other condition
precedent set forth in Section 4.2 is then met and whether or not the relevant
Fund has then requested a Loan in such amount. If such amount is not in fact
paid to BAI by any Bank, BAI shall be entitled to recover such amount on demand
from such Bank, together with accrued interest thereon from the due date
therefor (if made prior to 12:00 noon, San Francisco time) on any Business Day
until the date such amount is paid to BAI by such Bank, at the Federal Funds
Rate (as determined by the Agent) for the first three Business Days after such
Bank receives notice of such required purchase and thereafter at the Base Rate.
The failure of any Bank to pay such amount to the Agent for the benefit of BAI
shall not relieve any other Bank of its obligation to BAI hereunder.
Notwithstanding the foregoing, upon repayment by the borrowing Fund of a
Swing Loan made by BAI hereunder, such Fund on that due date may otherwise
deliver a Loan Request to the Agent pursuant to Section 2.3 and borrow Loans
subject to the terms of this Agreement from all the Banks.
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY
3.1. Taxes. (a) Any and all payments by a Fund to each Bank or the Agent
under this Agreement and any other Credit Document shall be made free and clear
of, and without deduction or withholding for, any Taxes. In addition, each Fund
shall pay all Other Taxes.
(b) Each Fund agrees to indemnify and hold harmless each Bank and the Agent
for the full amount of Taxes or Other Taxes in connection with a payment by it
(including any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable by it under this Section) paid by the Bank or the Agent and any
liability (including penalties, interest, additions to tax and expenses) arising
therefrom or with respect thereto, whether or not such Taxes or Other Taxes were
correctly or legally asserted. Payment under this indemnification shall be made
within 30 days after the date the Bank or the Agent makes written demand
therefor.
(c) If a Fund shall be required by law to deduct or withhold any Taxes or
Other Taxes from or in respect of any sum payable hereunder to any Bank or the
Agent, then:
(i) the sum payable shall be increased as necessary so that after making
all required deductions and withholdings (including deductions and withholdings
applicable to additional sums payable under this Section), such Bank or the
Agent, as the case may be, receives an amount equal to the sum it would have
received had no such deductions or withholdings been made;
(ii) the Fund shall make such deductions and withholdings;
(iii) the Fund shall pay the full amount deducted or withheld to the
relevant taxing authority or other authority in accordance with applicable law;
and
(iv) the Fund shall also pay to the Agent for the account of such Bank, at
the time interest is paid, all additional amounts which the respective Bank
specifies as necessary to preserve the after-tax yield the Bank would have
received if such Taxes or Other Taxes had not been imposed.
(d) Within 30 days after the date of any payment by a Fund of Taxes or
Other Taxes, the Fund shall furnish the Agent the original or a certified copy
of a receipt evidencing payment thereof or other evidence of payment
satisfactory to the Agent.
(e) If a Fund is required to pay additional amounts to any Bank or the
Agent pursuant to subsection (c) of this Section, then such Bank shall use
reasonable efforts (consistent with legal and regulatory restrictions) to change
the jurisdiction of its Lending Office so as to eliminate any such additional
payment by the Fund which may thereafter accrue, if such change in the judgment
of such Bank is not otherwise disadvantageous to such Bank.
To the extent appropriate, payments by any Fund under this Section 3.1
shall be subject to the Allocation Notice requirements under Section 2.14(a).
3.2.Illegality. (a) If any Bank reasonably determines that the introduction
of any Requirement of Law, or any change in any Requirement of Law, or in the
interpretation or administration of any Requirement of Law, has made it
unlawful, or that any central bank or other Governmental Authority has asserted
that it is unlawful, for any Bank or its applicable Lending Office to make
Offshore Rate Loans, then, on notice thereof by the Bank to the Funds through
the Agent, any obligation of that Bank to make Offshore Rate Loans shall be
suspended until the Bank gives notice, and the Bank agrees promptly to give such
notice, to the Agent and the Funds when the circumstances giving rise to such
determination no longer exist.
(b) If a Bank reasonably determines that it is unlawful to maintain any
Offshore Rate Loan, a Fund shall, upon its receipt of notice of such fact and
demand from such Bank (with a copy to the Agent), prepay in full such Offshore
Rate Loans of that Bank then outstanding, together with interest accrued thereon
and amounts required under Section 3.4, either on the last day of the Interest
Period thereof, if the Bank may lawfully continue to maintain such Offshore Rate
Loans to such day, or immediately, if the Bank may not lawfully continue to
maintain such Offshore Rate Loan, as provided in a notice from the Bank to the
relevant Fund(s). If a Fund is required to so prepay any Offshore Rate Loan,
then concurrently with such prepayment, the Fund may borrow from the affected
Bank, in the amount of such repayment, a Base Rate Loan or a Federal Funds Rate
Loan, as designated by such borrowing Fund pursuant to Section 2.3.
(c) If the obligation of any Bank to make or maintain Offshore Rate Loans
has been so terminated or suspended, the relevant Fund(s) may elect, by giving
notice to the Bank through the Agent, that all Loans which would otherwise be
made by the Bank as Offshore Rate Loans shall be instead Base Rate Loans or
Federal Funds Rate Loans, as designated by the relevant Fund(s).
(d) Before giving any notice to the Agent under this Section, the affected
Bank shall designate a different Lending Office with respect to its Offshore
Rate Loans if such designation will avoid the need for giving such notice or
making such demand and will not, in the judgment of the Bank, be illegal or
otherwise disadvantageous to the Bank.
3.3. Increased Costs and Reduction of Return. (a) If any Bank reasonably
determines that, due to the introduction of or any change in or in the
interpretation of any law or regulation or the compliance by that Bank with any
guideline or request from any central bank or other Governmental Authority
(whether or not having the force of law), there shall be any increase in the
cost to such Bank of agreeing to make or making, funding or maintaining any
Offshore Rate Loans, then the affected Fund shall be liable for, and shall from
time to time upon demand (with a copy of such demand to be sent to the Agent)
pay to the Agent, for the account of such Bank, additional amounts as are
sufficient to compensate such Bank for such increased costs.
(b) If any Bank shall have determined that (i) the introduction of any
Capital Adequacy Regulation, (ii) any change in any Capital Adequacy Regulation,
(iii) any change in the interpretation or administration of any Capital Adequacy
Regulation by any central bank or other Governmental Authority charged with the
interpretation or administration thereof or (iv) compliance by the Bank (or its
Lending Office) or any corporation controlling the Bank with any Capital
Adequacy Regulation affects or would affect the amount of capital required or
expected to be maintained by the Bank or any corporation controlling the Bank
and (taking into consideration such Bank's or such corporation's policies with
respect to capital adequacy and such Bank's desired return on capital)
determines that the amount of such capital is increased as a consequence of its
Commitment, Loans, credits or other obligations under this Agreement, then, upon
demand of such Bank to the affected Fund through the Agent, the affected Fund
shall pay to the Bank, from time to time as specified by the Bank, additional
amounts sufficient to compensate the Bank for such increase.
3.4. Funding Losses. Each Fund shall reimburse each Bank and hold each Bank
harmless from any loss or expense which the Bank may reasonably sustain or incur
as a consequence of:
(a) the failure of such Fund to make on a timely basis any payment of
principal of any Offshore Rate Loan;
(b) the failure of such Fund to borrow, continue or convert a Loan after
the Fund has given (or is deemed to have given) a Loan Request or a
Conversion/Continuation Notice;
(c) the failure of such Fund to make any prepayment in accordance with any
notice delivered under Section 2.6; or
(d) the prepayment or other payment (including after acceleration thereof)
of an Offshore Rate Loan on a day that is not the last day of the relevant
Interest Period;
including any such loss or expense arising from the liquidation or
reemployment of funds obtained by it to maintain its Offshore Rate Loans or from
fees payable to terminate the deposits from which such funds were obtained. For
purposes of calculating amounts payable by a Fund to the Banks under this
Section and under Section 3.3(b), each Offshore Rate Loan made by a Bank (and
each related reserve, special deposit or similar requirement) shall be
conclusively deemed to have been funded at the IBOR used in determining the
Offshore Rate for such Offshore Rate Loan by a matching deposit or other
borrowing in the interbank eurodollar market for a comparable amount and for a
comparable period, whether or not such Offshore Rate Loan is in fact so funded.
3.5. Inability to Determine Rates. If the Agent determines that for any
reason adequate and reasonable means do not exist for determining the Offshore
Rate for any requested Interest Period with respect to a proposed Offshore Rate
Loan or that the Offshore Rate applicable pursuant to Section 2.8(a) for any
requested Interest Period with respect to a proposed Offshore Rate Loan does not
adequately and fairly reflect the cost to any Bank of funding such Loan, the
Agent will promptly so notify the affected Fund and each Bank. Thereafter, the
obligation of the Banks to make or maintain Offshore Rate Loans hereunder shall
be suspended until the Agent gives notice (and, if appropriate, the Agent shall
give such notice) to the Funds that adequate and reasonable means do exist for
determining such Offshore Rate or such Offshore Rate does adequately and fairly
reflect the costs to the Banks of funding such Loans. Upon receipt of such
notice, the affected Fund may revoke any Loan Request or Conversion/Continuation
Notice then submitted by it. If the affected Fund does not revoke such Notice,
the Banks shall make, convert or continue the Loans, as proposed by such Fund,
in the amount specified in the applicable notice submitted by the Fund, but such
Loans shall be made, converted or continued as Base Rate Loans or Federal Funds
Rate Loans instead of Offshore Rate Loans as the Fund so elects in its
revocation notice.
3.6. Certificates of Banks. Any Bank claiming reimbursement or compensation
under this Article III shall deliver to the affected Fund (with a copy to the
Agent) a certificate setting forth in reasonable detail the amount payable to
the Bank hereunder, and such certificate shall be conclusive and binding on such
Fund in the absence of manifest error.
3.7. Substitution of Banks. Upon the receipt by a Fund from any Bank (an
"Affected Bank") of a claim for compensation under Section 3.3, such Fund may:
(i) request the Affected Bank to use its best efforts to obtain a replacement
bank or financial institution satisfactory to such Fund to acquire and assume
all or a ratable part of all of such Affected Bank's Loans and Commitment (a
"Replacement Bank"); (ii) request one more of the other Banks to acquire and
assume all or part of such Affected Bank's Loans and Commitment (it being
understood that no such other Bank shall be in any way required to effect any
such acquisition and assumption); or (iii) designate a Replacement Bank. Any
such designation of a Replacement Bank under clause (i) or (iii) shall be
subject to the prior written consent of the Agent (which consent shall not be
unreasonably withheld) and payment in full of all amounts due and owing
hereunder to the Replacement Bank.
3.8. Survival. The agreements and obligations of the Funds in this Article
III shall survive the payment of all other Obligations.
ARTICLE IV
CONDITIONS TO BORROWING
4.1. Conditions of Initial Loan. This Agreement shall take effect from the
first day that the Agent shall have received counterparts hereof signed by each
Trust on behalf of each of its respective Fund(s), the Agent and the Banks, and
each of the conditions set forth in this Section 4.1 has been waived by the
Agent and each Bank or met.
(a) The Agent shall have received from each Trust a certificate, dated the
date hereof, of its Secretary or Assistant Secretary as to
(i) resolutions of its board of trustees then in full force and effect
authorizing the execution, delivery and performance of this Agreement, the Notes
and each other Credit Document to be executed by it;
(ii) the incumbency and signatures of those of its officers or agents
authorized to act with respect to this Agreement, the Notes and each other
Credit Document executed by it;
(iii) such Trust's valid existence as evidenced by a certificate issued by
the Secretary of State of The Commonwealth of Massachusetts and appended to the
relevant certificate of its Secretary or Assistant Secretary; and
(iv) the fact that the agreements delivered by the Trusts pursuant to
Section 4.1(e) constitute all such agreements between the Trusts and the
Adviser;
upon which certificates the Agent and each Bank may conclusively rely until they
shall have received a further certificate from the relevant Trust cancelling or
amending such prior certificate.
(b) The Agent shall have received, for the account of each Bank, a Note of
each Fund duly executed and delivered by the relevant Trust on behalf of each
such Fund and made payable to the order of such Bank.
(c) The Agent shall have received (1) an opinion, dated the date hereof and
addressed to the Agent and all Banks, from Ropes & Gray, counsel to the Funds,
substantially in the form of Exhibit 4.1(c)-1, which the Trusts hereby expressly
authorize and instruct such counsel to prepare and deliver and (2) an opinion,
dated the date hereof and addressed to the Agent and all Banks, from Mayer,
Brown & Platt, counsel to the Agent, substantially in the form of Exhibit
4.1(c)-2.
(d) The Agent shall have received evidence of payment of all accrued and
unpaid fees, costs and expenses to the extent then due and payable on the
Closing Date, together with Attorney Costs of the Agent to the extent invoiced
prior to or on the Closing Date, plus such additional amounts of Attorney Costs
as shall constitute the Agent's reasonable estimate of Attorney Costs incurred
or to be incurred by it through the closing proceedings (provided that such
estimate shall not thereafter preclude final settling of accounts between the
Funds and the Agent), including any such costs, fees and expenses arising under
or referenced in Section 2.9(a) and those then due and payable pursuant to
Section 9.4.
(e) The Agent shall have received copies of each investment advisory
agreement between each Trust and the Adviser, together with all sub-advisory
agreements, if any.
(f) The Agent shall have received an initial Borrowing Base Certificate for
each Fund.
(g) The Agent shall have received an initial Allocation Notice.
(h) The Agent shall have received copies of the most recent prospectus and
statement of additional information for each Fund.
4.2. All Borrowings. The obligation of each Bank to fund any Loan on the
occasion of any Borrowing (including the initial Borrowing) by a Fund or to
continue or convert a Loan to a Fund as contemplated in a
Continuation/Conversion Notice submitted to the Agent by such Fund shall be
subject to the satisfaction of each of the conditions precedent set forth in
this Section 4.2.
(a) No Default shall have occurred and be continuing with respect to the
borrowing Fund.
(b) The representations and warranties of the borrowing Fund contained in
Article V (except to the extent such representations and warranties relate
solely to an earlier date, in which case they shall be true and correct as of
such earlier date) shall be true and correct in all material respects on and as
of the date of such Borrowing, both immediately before and after giving effect
to such Borrowing, as if then made.
(c) Except as disclosed by the borrowing Fund to the Agent and the Banks
pursuant to Section 5.7, no labor controversy, litigation, arbitration or
governmental investigation or proceeding shall be pending and no development
shall have occurred with respect to such matters, or, to the knowledge of such
Fund, threatened against it, which, in the reasonable opinion of the Banks,
might materially affect the Fund's consolidated business, operations, assets,
revenues, properties or prospects or which purports to affect the legality,
validity or enforceability of this Agreement, the Notes or any other Credit
Document.
(d) In the case of a Borrowing, the Agent shall have received a Loan
Request for such Borrowing and, in the case of a continuation or conversion of a
Borrowing, a Continuation/Conversion Notice for such Borrowing. Each of the
delivery of a Loan Request or Continuation/Conversion Notice and, in the case of
a Borrowing, the acceptance by the relevant Fund of the proceeds of such
Borrowing shall constitute a representation and warranty by such Fund that on
the date of such Borrowing (both immediately before and after giving effect to
such Borrowing and the application of the proceeds thereof) or continuation or
conversion, as the case may be, the statements made in Sections 4.2(a), (b),
(c), (f) and (g) and in the document referred to in Section 4.2(e) are true and
correct.
(e) The Agent shall have received with respect to the borrowing Fund a duly
executed FRB Form FR U-1 as required pursuant to FRB Regulation U (12 C.F.R.
221.1 et seq.), in form and substance satisfactory to the Agent and its counsel,
together with all information requested by the Agent in connection therewith,
including updates of information, if any, required by such Regulation U.
(f) The Net Asset Value of the borrowing Fund at the time of delivery of a
Loan Request shall be at least $10,000,000.
(g) Both before and after the Loan in question, the borrowing Fund's Asset
Coverage Ratio shall be at least 10 to 1.
(h) With respect to such Fund, there shall not have been outstanding as of
the close of business (San Francisco time) on the day preceding the proposed
Borrowing Date for the requested Loan a Loan that had been outstanding for at
least two weeks.
Any instrument, agreement or other document to be received by the Agent
pursuant to this Article IV, and any other condition precedent required to be
met or satisfied under this Article IV, shall be in form and substance
reasonably satisfactory to the Agent and each Bank and in sufficient copies for
each Bank.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
In order to induce the Banks and the Agent to enter into this Agreement and
to make Loans hereunder, each Fund and, to the extent hereinafter set forth,
each Trust represents and warrants unto the Agent and each Bank with respect to
itself as set forth in this Article V. The representations and warranties
contained in this Article V shall be deemed to be repeated each time that a Fund
requests that a Loan be made as provided in Article IV.
5.1. Existence. Each Trust is an open-end management investment company
within the meaning of the Act and is duly organized, validly existing and in
good standing under the laws of the state of its organization. Such Trust is in
good standing and is duly qualified to do business in The Commonwealth of
Massachusetts. Each Fund is a series of shares of beneficial interest in the
Trust of which it comprises a series (which shares have been and will be duly
authorized, validly issued, fully paid and non-assessable by such Trust) and
legally constitutes a fund or portfolio permitted to be marketed to investors
pursuant to the provisions of the Act.
5.2. Authorization. Each Trust is duly authorized to execute and deliver
this Agreement and the Notes of each of its Funds and, so long as this Agreement
shall remain in effect with respect to it, each of its Funds will continue to be
duly authorized to borrow monies hereunder on its own behalf and to perform its
obligations under this Agreement and its Notes. The execution, delivery and
performance by each Trust and its Funds of this Agreement and the Notes and the
Borrowings of each Fund do not and will not require any consent or approval of
or registration with any governmental agency or authority.
5.3. No Conflicts. The execution, delivery and performance by each Trust
and Fund of this Agreement and the Notes do not and, so long as this Agreement
shall remain in effect with respect to them, will not (i) conflict with any
provision of law, (ii) conflict with the Trust Agreement of the Trust of which
any Fund comprises a series, (iii) conflict with any agreement binding upon
them, (iv) conflict with the Fund's most recent prospectus or its most recent
statement of additional information, (v) conflict with any court or
administrative order or decree applicable to them or (vi) require or result in
the creation or imposition of any Lien on any of the Fund's assets.
5.4. Validity and Binding Effect. This Agreement is, and the Notes when
duly executed and delivered will be, the legal, valid and binding obligation of
each Fund, enforceable against it in accordance with their terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
receivership, fraudulent conveyance, fraudulent transfer, moratorium or other
similar laws of general application affecting the enforcement of creditors'
rights or by general principles of equity limiting the availability of equitable
remedies.
5.5. No Default. No Fund is in default under any agreement or instrument to
which it is a party or by which any of its respective properties or assets is
bound or affected, other than minor defaults that could not reasonably be
expected to result in a Material Adverse Change. To the best of its knowledge,
no Default with respect to it has occurred and is continuing.
5.6. Financial Statements. With respect to each Fund, its most recent
audited Statement of Assets and Liabilities and its most recent semi-annual
asset statement, copies of which have been or will be furnished to the Banks,
have been prepared in conformity with GAAP applied on a basis consistent with
that of the preceding Fiscal Year or period and present fairly its financial
condition as at such dates and the results of its operations for the periods
then ended, subject (in the case of the interim financial statement) to year-end
audit adjustments. Since the date of its most recent Statement of Assets and
Liabilities and such semi-annual asset statement, there has been no Material
Adverse Change.
5.7. Litigation. With respect to each Fund, no claims, litigation,
arbitration proceedings or governmental proceedings that could reasonably be
expected to result in a Material Adverse Change are pending or, to the best of
its knowledge, threatened against or are affecting it, except those referred to
in Exhibit 5.7-1. Other than any liability incident to such claims, litigation
or proceedings or provided for or disclosed in the financial statements referred
to in Section 5.6 or listed on Exhibit 5.7-2, to the best of its knowledge, it
has no contingent liabilities which are material to it other than those incurred
in the ordinary course of business.
5.8. Liens. With respect to each Fund, none of its property, revenues or
assets is subject to any Lien, except (i) Liens in favor of the Banks, if any,
(ii) Liens for current Taxes not delinquent or Taxes being contested in good
faith and by appropriate proceedings and as to which such reserves or other
appropriate provisions as may be required by GAAP are being maintained, (iii)
Liens as are necessary in connection with a secured letter of credit opened by
or for it in connection with the trustees' and officers' errors and omissions
liability insurance policy of the Trust of which it comprises a series, (iv)
Liens in connection with the payment of initial and variation margin in
connection with authorized futures and options transactions and collateral
arrangements with respect to options, futures contracts, options on futures
contracts, when- issued or delayed delivery securities or other authorized
investments, (v) Liens arising under any custodian agreement to which it or the
Trust of which it is a series is a party and (vi) Liens in connection with
reverse repurchase transactions.
5.9. Partnerships. With respect to each Fund, it is not a general partner
or joint venturer in any partnership or joint venture; provided, however, it may
be a "feeder" fund in a "master/feeder" fund arrangement.
5.10. Purpose. With respect to each Fund, the proceeds of the Loans will be
used by it for short-term liquidity and other temporary emergency purposes,
which purposes are permitted under the Act and by its prospectus and statement
of additional information. Neither the making of any Loan nor the use of the
proceeds thereof will violate or be inconsistent with the provisions of Federal
Reserve Board Regulations G, T, U or X. It acknowledges that Loans made to it
may be deemed by the Federal Reserve Board to be "purpose loans" under
Regulation U because of the status of the Trust of which it is a series as an
investment company (or the functional equivalent thereof).
5.11. Compliance and Government Approvals. Each Trust or Fund is in
compliance with all statutes and governmental rules and regulations applicable
to it, including, without limitation, the Act other than immaterial incidents of
non-compliance that could not reasonably be expected to result in a Material
Adverse Change. No authorization or approval or other action by, and no notice
to or filing with, any governmental authority or regulatory body or other person
is required for the due execution, delivery or performance by such Trust or Fund
of this Agreement, the Notes or any of the other Credit Documents.
5.12. Pension and Welfare Plans. No Trust or Fund has established or
maintained, nor is it liable under, any Plan.
5.13. Taxes. Each Trust and Fund has filed all tax returns that are
required to have been filed and has paid, or made adequate provisions for the
payment of, all of its Taxes that are due and payable, except such Taxes, if
any, as are being contested in good faith and by appropriate proceedings and as
to which such reserves or other appropriate provisions as may be required by
GAAP have been maintained. Such Trust or Fund is not aware of any proposed
assessment against it for additional Taxes (or any basis for any such
assessment) which might be material in amount to it. Such Trust or Fund has
substantially complied with all requirements of the Code applicable to regulated
investment companies so as to be relieved of federal income tax on net
investment income and net capital gains distributed to its shareholders.
5.14. Subsidiaries; Investments. No Trust or Fund has Subsidiaries or
equity investments or any interest in any other Person other than portfolio
securities (including investment company securities) which may have been
acquired in the ordinary course of business.
5.15. Full Disclosure. No representation or warranty contained in this
Agreement or in any other document or instrument furnished by a Trust or Fund to
the Banks in connection herewith contains any untrue statement of any material
fact as of the date when made or omits to state any material fact necessary to
make the statements herein or therein not misleading as of the date when made in
light of the circumstances in which the same were made.
5.16. Investment Policies. Each Fund's assets are being invested
substantially in accordance with the investment policies and restrictions set
forth in each of its most recent prospectus and its most recent statement of
additional information.
5.17. Tax Status. Each Fund has taken all steps reasonably necessary to
maintain its status as a regulated investment company under the Code with
respect to net investment income and net capital gains.
5.18.Regulations G, U and X. No Trust or Fund is engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock, and no
proceeds of any Loans will be used for a purpose which violates or would be
inconsistent with FRB Regulations G, U, and X.
5.19.Status of Loans. Each Fund's obligation in connection with the
repayment of any Loans made to it hereunder shall at all times constitute its
unconditional Indebtedness and will rank at least pari passu in priority of
payment with all of its other present and future unsecured and unsubordinated
Indebtedness.
ARTICLE VI
COVENANTS
From the date of this Agreement and thereafter until the expiration or
termination of the Commitments and until all Obligations have been paid or
performed in full, each Fund and each Trust shall perform the obligations made
applicable to it in this Article VI.
6.1. Financial Statements and Other Reports. Each Fund shall deliver to the
Agent, with sufficient copies for each Bank:
(a) As soon as available and in any event within 60 days after each of its
Fiscal Years, a copy of its annual audited Statement of Assets and Liabilities,
including a statement of investments, prepared in conformity with GAAP and
certified by an independent certified public accountant who, in the commercially
reasonable judgment of the Majority Banks, shall be satisfactory to the Majority
Banks, together with a certificate from such accountant (i) acknowledging to the
Banks such accountant's understanding that the Banks are relying on such
Statement of Assets and Liabilities, (ii) containing a computation of, and
showing compliance with, the financial ratio contained in Section 6.12 and (iii)
to the effect that, in making the examination necessary for the signing of such
Statement of Assets and Liabilities, such accountant has not become aware of any
Default that has occurred and is continuing, or if such accountant has become
aware of any such event, describing it and the steps, if any, being taken to
cure it;
(b) Within 60 days after the end of the first six months of its Fiscal
Year, a copy of its published semi- annual asset statement, prepared in
conformity with GAAP;
(c) Within 15 days after the end of each calendar quarter, (i) a
certificate substantially in the form of Exhibit 6.1 ("Borrowing Base
Certificate") setting forth its (A) borrowing base (as calculated in the manner
contemplated by the form of Borrowing Base Certificate) ("Borrowing Base") and
(B) Asset Coverage Ratio as of the last day of such calendar quarter and (ii) a
certificate signed by an Authorized Officer certifying that, to the best of such
Person's knowledge, no Default has occurred and is continuing or, if an Event of
Default has occurred and is continuing, the steps being taken to remedy the
same;
(d) (i) Within 15 days following the filing thereof, any preliminary proxy
materials filed with the Securities and Exchange Commission and (ii) within 15
days after the same become available, copies of its current prospectus and
statement of additional information (marked to show changes from the prospectus
and statement of additional information most recently delivered to the Banks),
except that if its investment policies are changed materially (including any
change in its ability to borrow hereunder), copies of a revised prospectus (or a
prospectus supplement) and statement of additional information (marked to show
changes from the prospectus (or prospectus supplement) and statement of
additional information most recently delivered to the Banks) reflecting any such
changes shall be provided to the Agent within 15 days after the same become
available; and
(e) Promptly from time to time such other reports or information as any of
the Banks may reasonably request.
6.2. Notices. Each Fund shall notify the Banks in writing of any of the
following immediately upon learning of the occurrence thereof, describing the
same and, if applicable, stating the steps being taken by the Person(s) affected
with respect thereto:
(a) the occurrence of a Default;
(b) the institution of any litigation, arbitration proceeding or
governmental proceeding which is likely to result in a Material Adverse Change;
(c) the entry of any judgment or decree against it if the aggregate amount
of all judgments and decrees then outstanding against it exceeds the lesser of
5% of its Net Asset Value or $5,000,000 after deducting (i) the amount with
respect to which it is insured and with respect to which the insurer has assumed
responsibility in writing and (ii) the amount for which it is otherwise
indemnified if the terms of such indemnification and the Person providing such
indemnification are satisfactory to the Majority Banks;
(d) the occurrence of a change of its name (whether of its legal name or a
"d/b/a" designation). The Trust of which such Fund is a series, on behalf of
each of the affected Fund(s), shall promptly execute and deliver to each Bank a
new Note for each such Fund executed in its new name, together with such other
documents in connection therewith as the Banks shall reasonably request;
(e) the scheduling of consideration by the board of trustees of the Trust
of which it comprises a series of a change in such Fund's Adviser, distributor,
administrator, custodian (unless such custodian is a Bank) or independent
accountant, or the appointment of any sub-adviser or any Person acting in a
similar capacity to an Adviser; provided that a mailing to shareholders with
respect to any of the foregoing shall not be deemed to be sufficient notice
hereunder; and
(f) the occurrence of such other events as the Agent may from time to time
reasonably specify.
Notwithstanding anything to the contrary in the foregoing, in the case of
the matters described in subparagraph (e), the notice contemplated by this
Section 6.2 shall be given not later than 30 days prior to the time (i) the
board of trustees of the affected Trust is to consider approval of such change
or appointment or otherwise determines to recommend such change or appointment
(if necessary) to the Fund's shareholders for their approval and (ii) of any
change of such Fund's custodian; provided, however, if in the case of the
matters contemplated by subparagraph (e) the affected Fund could not in good
faith have provided the specified advance notice, such notice shall be given by
such Fund immediately following the earliest feasible time the notice could have
been provided.
6.3. Existence. Each Trust, except as specified in Section 6.11(a), shall
maintain and preserve its existence as a registered investment company and the
respective existence of each of its Funds as a "series," within the meaning of
the Act, and maintain and preserve all rights, privileges, licenses, copyrights,
trademarks, trade names, franchises and other authority to the extent material
and necessary for the conduct of its business in the ordinary course, unless
none of the Funds comprising such Trust has Loans outstanding and each such Fund
has irrevocably notified the Agent (which shall thereupon promptly notify the
Banks) that it shall not request any Loans hereunder.
6.4. Nature of Business. Each Trust shall continue in, and limit its
operations to, the business of an open-end management investment company, within
the meaning of the Act, and maintain in full force and effect at all times all
governmental licenses, registrations, permits and approvals necessary for the
continued conduct of its business, including, without limitation, its
registration with the Securities and Exchange Commission under the Act as an
open-end investment company.
6.5. Books, Records and Access. Each Trust and Fund shall maintain complete
and accurate books and records in which full and correct entries in conformity
with GAAP shall be made of all transactions in relation to its business and
activities; upon reasonable notice, the Trust or Fund shall permit access by the
Banks to its books and records during normal business hours and permit the Banks
to make copies of such books and records.
6.6. Insurance. Each Trust and Fund shall maintain in full force and effect
insurance to such extent and against such liabilities as is commonly maintained
by companies similarly situated, including, but not limited to (i) such fidelity
bond coverage as shall be required by Rule 17g-1 promulgated under the Act or
any similar or successor provision and (ii) errors and omissions, director and
officer liability and other insurance against such risks and in such amounts
(and with such co-insurance and deductibles) as is usually carried by other
companies of established reputation engaged in the same or similar businesses
and similarly situated and will, upon request of the Agent, furnish to the Banks
a certificate of an Authorized Officer setting forth the nature and extent of
all insurance maintained by such Trust or Fund in accordance with this Section.
6.7. Investment Policies and Restrictions. (a) No Fund, without prior
written notice to the Agent of at least 30 days, shall rescind, amend or modify
any investment policy described as "fundamental" in any prospectus or any
registration statement(s) that may be on file with the Securities and Exchange
Commission with respect thereto (collectively herein, a "proposed change"). If,
in the reasonable judgment of the Majority Banks, such proposed change will
result in a change in the Banks' analysis of the creditworthiness of the
affected Fund, the Agent shall notify the relevant Fund of such decision;
thereafter, if such proposed change is implemented with respect to such Fund,
the Banks may terminate their Commitments to lend to such Fund, and all Loans
outstanding to such Fund shall become immediately due and payable.
(b) Each Fund's investment in any of its assets shall be made in accordance
with its investment policies and restrictions set forth in its most recent
prospectus and statement of additional information.
6.8. Taxes. Each Trust and Fund shall pay when due all of its Taxes, unless
and only to the extent that such Taxes are being contested in good faith and by
appropriate proceedings and it shall have set aside on its books such reserves
or other appropriate provisions therefor as may be required by GAAP. Such Trust
or Fund shall at all times comply with all requirements of the Code applicable
to regulated investment companies, to such effect as not to be subject to
federal income taxes on net investment income and net capital gains distributed
to its shareholders.
6.9. Compliance. Each Trust and Fund shall comply in all material respects
with all statutes and governmental rules and regulations applicable to it,
including, without limitation, the Act.
6.10. Pension Plans. No Fund will enter into, or incur any liability
relating to, any Plan.
6.11. Merger, Purchase and Sale. No Trust or Fund shall:
(a) be a party to any merger or consolidation; provided, however, that any
Trust or Fund can merge or consolidate with any other Person in accordance with
17 C.F.R. 270.17a-8 if (i) such merger or consolidation complies in all material
respects with the requirements of 17 C.F.R. 270.17a-8 and all rules promulgated
in connection therewith, (ii) the surviving entity assumes all of the
obligations to the Banks of the merging or consolidating Trusts and/or Funds
prior to such merger or consolidation and (iii) in the good faith judgment of
all the Banks the financial condition and investment policies and restrictions
of the surviving entity are not fundamentally different from those of the
merging or consolidating Trusts and/or Funds prior to such merger or
consolidation;
(b) except as permitted by Section 6.11(a) and except for sales or other
dispositions of portfolio securities in the ordinary course of its business or
to meet shareholder redemption requests, sell, transfer, convey, lease or
otherwise dispose of all or any substantial part of its assets; provided,
however, that any Fund or Trust can sell substantially all of its assets to
another Person in accordance with 17 C.F.R. 270.17a-8 if (i) such sale complies
in all material respects with the requirements of 17 C.F.R. 270.17a-8 and all
rules promulgated in connection therewith, (ii) the purchasing entity assumes
all obligations to the Banks of the selling Fund prior to such sale and (iii) in
the good faith judgment of all the Banks, the financial condition and investment
policies and restrictions of the purchasing entity are not fundamentally
different from those of the selling Fund prior the to asset sale; or
(c) except as permitted by Section 6.11(a), purchase or otherwise acquire
all or substantially all the assets of any Person without the review and consent
thereto of all the Banks, which consent shall not be unreasonably withheld.
For purposes of this Section 6.11 only, a sale, transfer, conveyance, lease
or other disposition of assets shall be deemed to be a "substantial part" of the
assets of any Trust or Fund only if the value of such assets, when added to the
value of all other assets sold, transferred, conveyed, leased or otherwise
disposed of by such Trust or Fund (other than in the normal course of business
or in a manner otherwise consistent with such Fund's investment policies) during
the same Fiscal Year, exceeds 15% of such Trust's or Fund's Total Assets
determined as of the end of the immediately preceding Fiscal Year.
6.12. Asset Coverage Ratio. Each Fund shall not at any time permit its
Asset Coverage Ratio to be less than 10 to 1 or such other more restrictive
ratio as may be set forth in any prospectus with respect to such Fund. In
calculating the ratio set forth in this Section 6.12, a Fund may not treat as an
asset Indebtedness owing to such Fund by any investment company advised by the
Adviser unless the Asset Coverage Ratio of such investment company is at least
10 to 1.
6.13. Liens. No Fund shall create or permit to exist any Lien with respect
to any property, revenues or assets now owned or hereafter acquired by it,
except (i) Liens in favor of the Banks, if any, (ii) Liens for current Taxes not
delinquent or Taxes being contested in good faith and by appropriate proceedings
and as to which such reserves or other appropriate provisions as may be required
by GAAP are being maintained, (iii) Liens as are necessary in connection with a
secured letter of credit opened by or on behalf of such Fund in connection with
the Fund's trustees' errors and omissions liability insurance policy, (iv) Liens
incurred in the ordinary course of business in connection with authorized
futures and options transactions and collateral arrangements with respect to
options, futures contracts, options on futures contracts, when-issued or delayed
delivery securities or other authorized investments, (v) Liens arising under any
custodian agreement to which the Trust of which the Fund comprises a series is a
party and (vi) Liens in connection with reverse repurchase agreements; provided,
however, the value of any of its assets subject to a Lien shall be excluded from
calculation of its Borrowing Base.
6.14. Guaranties. No Fund shall become or be a guarantor or surety of, or
otherwise become or be responsible in any manner (whether by agreement to
purchase any obligations, stock, assets, goods or services, or to supply or
advance any funds, assets, goods or services, or otherwise) with respect to, any
undertaking of any other Person, except for the endorsement, in the ordinary
course of collection, of instruments payable to it or its order.
6.15. Other Agreements. No Trust or Fund shall enter into any agreement
containing any provision that would be violated or breached by performance of
its obligations hereunder or under any instrument or document delivered or to be
delivered by it hereunder or in connection herewith.
6.16. Transactions with Related Parties. No Fund shall enter into or be a
party to any transaction or arrangement, including, without limitation, the
purchase, sale, loan, lease or exchange of property or the rendering of any
service, with any Related Party, except in the ordinary course of and pursuant
to the reasonable requirements of its business and upon fair and reasonable
terms no less favorable to it than would be obtainable in a comparable
arm's-length transaction with a Person not a Related Party, provided that any
such transaction must be made in substantial compliance with Section 17 of the
Act or an exemption therefrom.
6.17. Other Indebtedness. No Fund shall incur or permit to exist any
Indebtedness, other than (i) the Loans; (ii) unsecured Indebtedness owing to its
custodian that will not exceed (a) for any reason other than Indebtedness
arising from a failed trade, the lesser of $1,000,000 and 10% of its
then-current Net Asset Value and (b) with respect to Indebtedness arising from
failed trades, the lesser of $5,000,000 and 5% of its then-current Net Asset
Value; (iii) unsecured Indebtedness owing to another Fund which, when aggregated
with any other Indebtedness owing by it or any other Fund to another Fund, does
not exceed $25,000,000, provided that any such Indebtedness is on terms
consistent with and otherwise allowed by the Act or regulatory approval of the
Securities and Exchange Commission; (iv) reverse repurchase transactions in an
amount not exceeding that permitted by the Fund's investment policies and
restrictions; and (v) Indebtedness owing in respect of payments due to trustees
of the Trusts under any deferred compensation plan, provided that such payments
shall not in the aggregate for all Funds exceed $750,000.
6.18. Changes to Organization Documents, etc. No Trust or Fund shall make
or permit to be made any material changes to its Organization Documents without
the prior written consent of the Majority Banks.
6.19. Violation of Investment Restrictions, etc. No Fund shall violate or
take any action which would result in a violation of any of the investment
restrictions or fundamental investment policies of such Fund as from time to
time in effect.
6.20. Proceeds of Loans. Each Fund shall utilize the proceeds of each Loan
made to it to provide temporary liquidity funding allowed under the Act. None of
the proceeds of any Loan shall be used directly for the purpose, whether
immediate, incidental or ultimate, of acquiring any "margin stock" within the
meaning of Regulation U.
6.21. Adviser. Each Fund shall maintain Colonial Management Associates,
Inc. or one of its Affiliates as Adviser to it.
6.22. Service Providers to Trust. No Fund shall change its distributor,
custodian, accountant or administrator unless the Majority Banks provide their
prior written consent to such change, which consent shall not be withheld by the
Majority Banks unless, based upon their reasonable judgment, the Majority Banks
in good faith conclude that such change will result in a change in the
creditworthiness of such Fund.
ARTICLE VII
EVENTS OF DEFAULT
7.1. Events of Default. Each of the following shall constitute an Event of
Default with respect to a Fund under this Agreement (it being understood that an
Event of Default with respect to a Fund shall not constitute an Event of Default
with respect to any other Fund):
(a) Default in payment by a Fund (i) when and as required to be paid herein
of any amount of principal of any Loan or (ii) within five days after the same
becomes due of any interest, fee or any other amount payable hereunder or under
any other Credit Document.
(b) Default by a Fund in the payment when due, whether by acceleration or
otherwise (subject to any applicable grace period), of any Indebtedness of, or
guaranteed by, such Fund in excess of 5% of such Fund's then- current Net Asset
Value. (c) Any event or condition shall occur that results in the acceleration
of the maturity of any Indebtedness of, or guaranteed by, a Fund or enables the
holder or holders of such other Indebtedness or any trustee or agent for such
holders (any required notice of default having been given and any applicable
grace period having expired) to accelerate the maturity of such other
Indebtedness in excess of 5% of such Fund's then-current total Net Asset Value.
(d) Default by a Fund in the payment when due, whether by acceleration or
otherwise, or in the performance or observance (subject to applicable grace
periods, if any, having expired) of (i) any obligation or agreement of such Fund
to or with a Bank (other than any obligation or agreement of such Fund hereunder
or under such Fund's Notes) or (ii) any material obligation or agreement of such
Fund to or with any other Person, except only to the extent that the existence
of any such default is being contested by such Fund in good faith and by
appropriate proceedings and such Fund shall have set aside on its books such
reserves or other appropriate provisions therefor as may be required by GAAP,
provided that the amount of such obligation arising from any default is in
excess of 5% of such Fund's then- current total Net Asset Value.
(e) A Fund (i) ceases or fails to be solvent, or generally fails to pay, or
admits in writing its inability to pay, its debts as they become due, subject to
applicable grace periods, if any, whether at stated maturity or otherwise; (ii)
voluntarily ceases to conduct its business in the ordinary course; (iii)
commences any Insolvency Proceeding with respect to itself; or (iv) takes any
action to effectuate or authorize any of the foregoing.
(f) (i) Any involuntary Insolvency Proceeding is commenced or filed against
a Fund, or any writ, judgment, warrant of attachment, execution or similar
process is issued or levied against a substantial part of its assets, and any
such proceeding or petition shall not be dismissed, or such writ, judgment,
warrant of attachment, execution or similar process shall not be released,
vacated or fully bonded within 60 days after commencement, filing or levy; (ii)
a Fund admits the material allegations of a petition against it in any
Insolvency Proceeding, or an order for relief (or similar order under non-U.S.
law) is ordered in any Insolvency Proceeding; or (iii) it acquiesces in the
appointment of a receiver, trustee, custodian, conservator, liquidator,
mortgagee in possession (or agent therefor) or other similar Person for itself
or a substantial portion of its property or business. (g) A Fund shall default
in the performance of its agreement under Section 6.4, 6.7, 6.11 or 6.12.
(h) A Fund shall default in the performance of its other agreements herein
set forth (and not constituting an Event of Default under any of the other
subsections of this Section 7.1), and such default shall continue for 30 days
(or three Business Days in the case of the agreement contained in the last
sentence of the definition of "Total Assets") after notice thereof to such Fund
from the Agent.
(i) Any representation or warranty made by a Fund herein, or in any
schedule, statement, report, notice, certificate or other writing furnished by
it on or as of the date as of which the facts set forth therein are stated or
certified, is untrue or misleading in any material respect when made or deemed
made or any certification made or deemed made by it to the Banks is untrue or
misleading in any material respect on or as of the date made or deemed made.
(j) There shall be entered against a Fund one or more judgments or decrees
which, when taken together, will exceed the lesser of 5% of such Fund's Net
Asset Value and $5,000,000, excluding those judgments or decrees (i) that shall
have been stayed or discharged less than 30 calendar days from the entry thereof
and (ii) those judgments and decrees for and to the extent which such Fund is
insured and with respect to which the insurer has assumed responsibility in
writing or for and to the extent which such Fund is otherwise indemnified if the
terms of such indemnification and the Person providing such indemnification are
satisfactory to the Majority Banks.
(k) The Majority Banks shall have reasonably determined in good faith that
a Material Adverse Change as to a Fund has occurred.
(l) A Fund shall no longer be in compliance with all material provisions of
the Act after giving effect to all notice, cure and contest periods thereunder.
(m) Colonial Management Associates, Inc. or one of its Affiliates shall
cease to be the Adviser or administrator of a Fund, or such Fund is in breach of
the covenant set forth in Section 6.22.
(n) A Fund shall violate or take any action that would result in a
violation of any of its investment restrictions or fundamental investment
policies as from time to time in effect, except for violations or the taking of
such actions that could not reasonably be expected to result in a Material
Adverse Change.
(o) There occurs a Change in Control of a Fund's Adviser.
7.2. Remedies. If any Event of Default described in Section 7.1 shall have
occurred and be continuing, the Agent, upon the direction of the Majority
Lenders, shall declare the Commitments to be terminated with respect to the
applicable Fund and such Fund's obligations under its Notes to be due and
payable, whereupon such Commitments shall immediately terminate with respect to
such Fund and such Fund's Notes shall become immediately due and payable, all
without advance notice of any kind (except that if an event described in Section
7.1(e) or Section 7.1(f) occurs, the Commitments shall immediately terminate
with respect to such Fund and the obligations under the Notes with respect to
such Fund shall become immediately due and payable without declaration or
advance notice of any kind). The Agent shall promptly advise such Fund of any
such declaration, but failure to do so shall not impair the effect of such
declaration. If an Event of Default shall have occurred, the Agent may exercise
on behalf of itself and the Banks all rights and remedies available to it and
the Banks against such Fund under the Credit Documents or applicable law.
ARTICLE VIII
THE AGENT
8.1. Appointment and Authorization. Each Bank hereby irrevocably (subject
to Section 8.9) appoints, designates and authorizes the Agent to take such
action on its behalf under the provisions of this Agreement and each other
Credit Document and to exercise such powers and perform such duties as are
expressly delegated to it by the terms of this Agreement or any other Credit
Document, together with such powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary contained elsewhere in this
Agreement or in any other Credit Document, the Agent shall not have any duties
or responsibilities, except those expressly set forth herein, nor shall the
Agent have or be deemed to have any fiduciary relationship with any Bank, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Credit Document or
otherwise exist against the Agent.
8.2. Delegation of Duties. The Agent may execute any of its duties under
this Agreement or any other Credit Document by or through agents, employees or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects with
reasonable care.
8.3. Liability of Agent. None of the Agent-Related Persons shall (i) be
liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Credit Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct)
or (ii) be responsible in any manner to any of the Banks for any recital,
statement, representation or warranty made by a Trust or Fund or any officer or
agent thereof contained in this Agreement or in any other Credit Document, or in
any certificate, report, statement or other document referred to or provided for
in, or received by the Agent under or in connection with, this Agreement or any
other Credit Document, or the validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Credit Document, or
for any failure of a Trust or Fund or any other party to any Credit Document to
perform its obligations hereunder or thereunder. No Agent-Related Person shall
be under any obligation to any Bank to ascertain or to inquire as to the
observance or performance of any of the agreements contained in or conditions of
this Agreement or any other Credit Document or to inspect the properties, books
or records of a Trust or Fund.
8.4. Reliance by Agent. (a) The Agent shall be entitled to rely, and shall
be fully protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement, or other document or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons
and upon advice and statements of legal counsel (including counsel to the
Funds), independent accountants and other experts selected by the Agent. The
Agent shall be fully justified in failing or refusing to take any action under
this Agreement or any other Credit Document unless it shall first receive such
advice or concurrence of the Majority Banks as it deems appropriate, and if it
so requests, it shall first be indemnified to its satisfaction by the Banks
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this Agreement or
any other Credit Document in accordance with a request or consent of the
Majority Banks and such request, and any action taken or failure to act pursuant
thereto shall be binding upon all of the Banks.
(b) For purposes of determining compliance with the conditions specified in
Section 4.1, each Bank that has executed this Agreement shall be deemed to have
consented to, approved or accepted, or be satisfied with each document or other
matter either sent by the Agent to such Bank for consent, approval, acceptance
or satisfaction, or required thereunder to be consented to, approved by,
acceptable or satisfactory to the Bank.
8.5. Notice of Default. The Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default, except with respect to defaults in the
payment of principal, interest and fees required to be paid to the Agent for the
account of the Banks, unless the Agent shall have received written notice from a
Bank or a Fund referring to this Agreement, describing such Default and stating
that such notice is a "notice of default". The Agent will notify the Banks of
its receipt of any such notice. The Agent shall take such action with respect to
such Default as may be requested by the Majority Banks in accordance with
Article VII; provided, however, that unless and until the Agent has received any
such request, the Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default as it shall deem
advisable or in the best interest of the Banks.
8.6. Credit Decision. Each Bank acknowledges that none of the Agent-Related
Persons has made any representation or warranty to it and that no act by the
Agent hereinafter taken, including any review of the affairs of the Funds, shall
be deemed to constitute any representation or warranty by any Agent-Related
Person to any Bank. Each Bank represents to the Agent that it has, independently
and without reliance upon any Agent-Related Person and based on such documents
and information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, property, financial and
other condition, and creditworthiness of the Funds, and all applicable bank
regulatory laws relating to the transactions contemplated hereby, and made its
own decision to enter into this Agreement and to extend credit to the Funds
hereunder. Each Bank also represents that it will, independently and without
reliance upon any Agent-Related Person and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Credit Documents and to make such investigations as
it deems necessary to inform itself as to the business, prospects, operations,
property, financial and other condition, and creditworthiness of the Funds.
Except for notices, reports and other documents expressly herein required to be
furnished to the Banks by the Agent, the Agent shall not have any duty or
responsibility to provide any Bank with any credit or other information
concerning the business, prospects, operations, property, financial and other
condition, or creditworthiness of the Funds which may come into the possession
of any of the Agent-Related Persons.
8.7. Indemnification of Agent. Whether or not the transactions contemplated
hereby are consummated, the Banks shall indemnify upon demand the Agent-Related
Persons (to the extent not reimbursed by or on behalf of the Funds and without
limiting the obligation of the Funds to do so), pro rata, from and against any
and all Indemnified Liabilities; provided, however, that no Bank shall be liable
for the payment to the Agent-Related Persons of any portion of such Indemnified
Liabilities resulting solely from such Person's gross negligence or willful
misconduct. Without limitation of the foregoing, each Bank shall reimburse the
Agent upon demand for its ratable share of any costs or out- of-pocket expenses
(including Attorney Costs) incurred by the Agent in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement,
any other Credit Document, or any document contemplated by or referred to
herein, to the extent that the Agent is not reimbursed for such expenses by or
on behalf of the Funds. The undertaking in this Section shall survive the
payment of all Obligations hereunder and the resignation or replacement of the
Agent.
8.8. Agent in Individual Capacity. BofA and its Affiliates may make loans
to, issue letters of credit for the account of, accept deposits from, acquire
equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with the Funds and their
Affiliates as though BofA were not the Agent hereunder and without notice to or
consent of the Banks. The Banks acknowledge that, pursuant to such activities,
BofA or its Affiliates may receive information regarding the Funds or their
Affiliates (including information that may be subject to confidentiality
obligations in favor of the Funds) and acknowledge that the Agent shall be under
no obligation to provide such information to them. With respect to its Loans,
BofA shall have the same rights and powers under this Agreement as any other
Bank and may exercise the same as though it were not the Agent, and the terms
"Bank" and "Banks" include BofA in its individual capacity.
8.9. Successor Agent. The Agent may, and at the request of the Majority
Banks shall, resign as Agent upon 30 days' notice to the Banks. If the Agent
resigns under this Agreement, the Majority Banks shall appoint from among the
Banks a successor agent for the Banks, which successor agent shall be subject to
approval by the Funds. If no successor agent is appointed prior to the effective
date of the resignation of the Agent, the Agent may appoint, after consulting
with the Banks and the Funds, a successor agent from among the Banks. Upon the
acceptance of its appointment as successor agent hereunder, such successor agent
shall succeed to all the rights, powers and duties of the retiring Agent and the
term "Agent" shall mean such successor agent, and the retiring Agent's
appointment, powers and duties as Agent shall be terminated. After any retiring
Agent's resignation hereunder as Agent, the provisions of this Article VIII and
Sections 9.4 and 9.5 shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent under this Agreement. If no
successor agent has accepted appointment as Agent by the date which is 30 days
following a retiring Agent's notice of resignation, the retiring Agent's
resignation shall nevertheless thereupon become effective, and the Banks shall
perform all of the duties of the Agent hereunder until such time, if any, as the
Majority Banks appoint a successor agent as provided for above.
8.10. Withholding Tax. (a) If any Bank is a "foreign corporation,
partnership or trust" within the meaning of the Code and such Bank claims
exemption from, or a reduction of, U.S. withholding tax under Sections 1441 or
1442 of the Code, such Bank agrees with and in favor of the Agent to deliver to
the Agent:
(i) if such Bank claims an exemption from, or a reduction of, withholding
tax under a United States tax treaty, properly completed IRS Forms 1001 and W-8
before the payment of any interest in the first calendar year and before the
payment of any interest in each third succeeding calendar year during which
interest may be paid under this Agreement;
(ii) if such Bank claims that interest paid under this Agreement is exempt
from United States withholding tax because it is effectively connected with a
United States trade or business of such Bank, two properly completed and
executed copies of IRS Form 4224 before the payment of any interest is due in
the first taxable year of such Bank and in each succeeding taxable year of such
Bank during which interest may be paid under this Agreement, and IRS Form W-9;
and
(iii) such other form or forms as may be required under the Code or other
laws of the United States as a condition to exemption from, or reduction of,
United States withholding tax.
Such Bank agrees to promptly notify the Agent of any change in circumstances
that would modify or render invalid any claimed exemption or reduction.
(b) If any Bank claims exemption from or reduction of withholding tax under
a United States tax treaty by providing IRS Form 1001 and such Bank sells,
assigns, grants a participation in, or otherwise transfers all or part of the
Obligations of a Fund to such Bank, such Bank agrees to notify the Agent of the
percentage amount in which it is no longer the beneficial owner of Obligations
of such Fund to such Bank. To the extent of such percentage amount, the Agent
will treat such Bank's IRS Form 1001 as no longer valid.
(c) If any Bank claiming exemption from United States withholding tax by
filing IRS Form 4224 with the Agent sells, assigns, grants a participation in,
or otherwise transfers all or part of the Obligations of a Fund to such Bank,
such Bank agrees to undertake sole responsibility for complying with the
withholding tax requirements imposed by Sections 1441 and 1442 of the Code.
(d) If any Bank is entitled to a reduction in the applicable withholding
tax, the Agent may withhold from any interest payment to such Bank an amount
equivalent to the applicable withholding tax after taking into account such
reduction. If the forms or other documentation required by subsection (a) of
this Section are not delivered to the Agent, then the Agent may withhold from
any interest payment to such Bank not providing such forms or other
documentation an amount equivalent to the applicable withholding tax.
(e) If the IRS or any other Governmental Authority of the United States or
other jurisdiction asserts a claim that the Agent did not properly withhold tax
from amounts paid to or for the account of any Bank (because the appropriate
form was not delivered, was not properly executed, or because such Bank failed
to notify the Agent of a change in circumstances which rendered the exemption
from, or reduction of, withholding tax ineffective, or for any other reason),
such Bank shall indemnify the Agent fully for all amounts paid, directly or
indirectly, by the Agent as tax or otherwise, including penalties and interest,
and including any taxes imposed by any jurisdiction on the amounts payable to
the Agent under this Section, together with all costs and expenses (including
Attorney Costs). The obligation of the Banks under this subsection shall survive
the payment of all Obligations and the resignation or replacement of the Agent.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1. Amendments and Waivers. No amendment or waiver of any provision of
this Agreement or any other Credit Document, and no consent with respect to any
departure by any Trust or Fund therefrom, shall be effective unless the same
shall be in writing and signed by the Majority Banks (or by the Agent at the
written request of the Majority Banks) and the Funds and acknowledged by the
Agent, and then any such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided,
however, that no such waiver, amendment, or consent shall, unless in writing and
signed by all the Banks and the Funds and acknowledged by the Agent, do any of
the following:
(a) increase or extend the Commitments of any Bank (or reinstate any
Commitment(s) terminated pursuant to Section 7.1);
(b) postpone or delay any date fixed by this Agreement or any other Credit
Document for any payment of principal, interest, fees or other amounts due to
the Banks (or any of them) hereunder or under any other Credit Document;
(c) reduce the principal of, or the rate of interest specified herein on,
any Loan, or (subject to clause (ii) below) any fees or other amounts payable
hereunder or under any other Credit Document;
(d) change the percentage of the Commitments or of the aggregate unpaid
principal amount of the Loans which is required for the Banks or any of them to
take any action hereunder; or
(e) amend this Section, Section 2.13, Section 6.12 or any provision herein
providing for consent or other action by all Banks;
and, provided further, that (i) no amendment, waiver or consent shall, unless in
writing and signed by the Agent in addition to the Majority Banks or all the
Banks, as the case may be, affect the rights or duties of the Agent under this
Agreement or any other Credit Document and (ii) the Fee Letter may be amended,
or rights or privileges thereunder waived, in a writing executed by the parties
thereto.
9.2. Notices. (a) All notices, requests and other communications shall be
in writing (including, unless the context expressly otherwise provides, by
facsimile transmission, provided that any matter transmitted by any Fund by
facsimile (i) shall be immediately confirmed by a telephone call to the
recipient at the number specified on Schedule III and (ii) shall be followed
promptly by delivery of a hard copy original thereof) and mailed, faxed or
delivered to the address or facsimile number specified for notices on Schedule
III, or, as directed to the Funds or the Agent, to such other address as shall
be designated by such party in a written notice to the other parties, and as
directed to any other party, at such other address as shall be designated by
such party in a written notice to the Funds and the Agent.
(b) All such notices, requests and communications shall, when transmitted
by overnight delivery or faxed, be effective when delivered for overnight
(next-day) delivery or transmitted in legible form by facsimile machine,
respectively, or if mailed, upon the third Business Day after the date deposited
into the U.S. mail, or if delivered, upon delivery; provided that notices
pursuant to Article II or VIII shall not be effective until actually received by
the Agent.
(c) Any agreement of the Agent and the Banks herein to receive certain
notices by telephone or facsimile is solely for the convenience and at the
request of the Funds. The Agent and the Banks shall be entitled to rely on the
authority of any Person purporting to be a Person authorized by a Fund to give
such notice, and the Agent and the Banks shall not have any liability to such
Fund or other Person on account of any action taken or not taken by the Agent or
the Banks in reliance upon such telephonic or facsimile notice. The obligation
of the Funds to repay the Loans shall not be affected in any way or to any
extent by any failure by the Agent and the Banks to receive written confirmation
of any telephonic or facsimile notice or the receipt by the Agent and the Banks
of a confirmation which is at variance with the terms understood by the Agent
and the Banks to be contained in the telephonic or facsimile notice.
9.3. No Waiver; Cumulative Remedies. No failure to exercise and no delay in
exercising, on the part of the Agent or any Bank, any right, remedy, power or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege.
9.4. Costs and Expenses. Subject to the allocation provisions of Section
2.14, the Funds shall:
(a) whether or not the transactions contemplated hereby are consummated,
pay or reimburse BofA (including in its capacity as Agent) within five Business
Days after demand for all reasonable costs and expenses incurred by BofA
(including in its capacity as Agent) in connection with the development,
preparation, delivery, administration and execution of, and any amendment,
supplement, waiver or modification to (in each case, whether or not
consummated), this Agreement, any Credit Document and any other documents
prepared in connection herewith or therewith, and the consummation of the
transactions contemplated hereby and thereby, including reasonable Attorney
Costs incurred by BofA (including in its capacity as Agent) with respect
thereto; provided, however, notwithstanding anything to the contrary in the
foregoing, the responsibility of a Fund to reimburse BofA for Attorney Costs in
connection with the development, preparation, delivery and execution of this
Agreement and such other documents and the consummation of such transactions
shall be limited to the reasonable fees and disbursements of outside counsel to
BofA; and
(b) pay or reimburse the Agent, the Arranger and each Bank within five
Business Days after demand for all costs and expenses (including Attorney Costs)
incurred by them in connection with the enforcement, attempted enforcement, or
preservation of any rights or remedies under this Agreement or any other Credit
Document during the existence of an Event of Default or after acceleration of
the Loans (including in connection with any "workout" or restructuring regarding
the Loans and including in any Insolvency Proceeding or appellate proceeding).
9.5. Funds Indemnification. (a) Whether or not the transactions
contemplated hereby are consummated, the Funds shall indemnify and hold the
Agent-Related Persons, and each Bank and each of its respective officers,
directors, employees, counsel, agents and attorneys-in-fact (each, an
"Indemnified Person"), harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses and disbursements (including Attorney Costs) of any kind or
nature whatsoever which may at any time (including at any time following
repayment of the Loans and the termination, resignation or replacement of the
Agent or replacement of any Bank) be imposed on, incurred by or asserted against
any such Person in any way relating to or arising out of this Agreement or any
document contemplated by or referred to herein, or the transactions contemplated
hereby, or any action taken or omitted by any such Person under or in connection
with any of the foregoing, including with respect to any investigation,
litigation or proceeding (including any Insolvency Proceeding or appellate
proceeding) related to or arising out of this Agreement or the Loans or the use
of the proceeds thereof, whether or not any Indemnified Person is a party
thereto (all the foregoing, collectively, the "Indemnified Liabilities");
provided that no Fund shall have an obligation hereunder to any Indemnified
Person with respect to Indemnified Liabilities resulting solely from the gross
negligence or willful misconduct of such Indemnified Person. The agreements in
this Section shall survive payment of all other Obligations.
(b) Promptly after receipt by an Indemnified Person under subsection (a)
above of notice of the commencement of any action, such Indemnified Person
shall, if a claim in respect thereof is to be made against a Fund under such
subsection, notify such Fund in writing of the commencement thereof, but the
omission so to notify such Fund shall not relieve it from any liability which it
may have to any Indemnified Person otherwise than under such subsection. In case
any such action shall be brought against any Indemnified Person and it shall
notify the relevant Fund of the commencement thereof, the indemnifying Fund
shall be entitled to participate therein and, to the extent that it shall wish,
jointly with any other Fund similarly notified, to assume the defense thereof,
with counsel reasonably satisfactory to such Indemnified Person (who shall not,
except with the consent of the Indemnified Person, be counsel to the
indemnifying Fund(s)), and after notice from the indemnifying Fund(s) to such
Indemnified Person of its election so to assume the defense thereof; provided
that in no event shall any settlement or compromise of any such claims, actions
or demands be made without the consent of the Indemnified Person, the consent of
which shall not be unreasonably withheld.
(c) The agreements in this Section 9.5 shall survive payment of all other
Obligations.
9.6. Payments Set Aside. To the extent that a Fund makes a payment to the
Agent or the Banks, or the Agent or the Banks exercise their right of set-off,
and such payment or the proceeds of such set-off or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required (including pursuant to any settlement entered into by the Agent or
such Bank in its discretion) to be repaid to a trustee, receiver or any other
party, in connection with any Insolvency Proceeding or otherwise, then (a) to
the extent of such recovery, the obligation or part thereof originally intended
to be satisfied shall be revived and continued in full force and effect as if
such payment had not been made or such set-off had not occurred and (b) each
Bank severally agrees to pay to the Agent upon demand its pro rata share of any
amount so recovered from or repaid by the Agent.
9.7. Successors and Assigns. (a) The provisions of this Agreement shall be
binding upon and shall inure to the benefit of each Fund, the Agent and the
Banks and their respective successors and assigns, except that no Fund may
assign or otherwise transfer any of its rights under this Agreement without the
prior written consent of the Banks. One or more additional Funds may become
party hereto upon the written approval of all the Banks.
(b) The Loans are being made by the Banks in the ordinary course of their
business and not with a view toward distribution, it being understood that each
Bank may sell participations and assignments in its Commitments and the Loans as
provided herein. Any Bank may at any time assign, subject to the relevant Fund's
consent, which consent shall not be unreasonably withheld, to one or more banks
(as defined in Section 2(a)(5) of the Act) not an affiliate (as defined in the
Act) of any Trust or Fund or Colonial Management Associates, Inc. (each an
"Assignee") all, or a proportionate part of all, of its rights under this
Agreement and such Fund's Notes. Any Bank may at any time grant to one or more
banks (as defined in Section 2(a)(5) of the Act) not an affiliate (as defined in
the Act) of any Trust or Fund or Colonial Management Associates, Inc. (each a
"Participant") participating interests in its Commitments or any or all of its
Loans. In the event of any such grant by a Bank of a participating interest to a
Participant, whether or not upon notice to the relevant Fund, such Bank shall
remain responsible for the performance of its obligations hereunder, and the
relevant Fund shall continue to deal solely and directly with such Bank in
connection with the Bank's rights and obligations under this Agreement. Any
agreement pursuant to which such Bank may grant such a participating interest
shall provide that the Bank shall retain the sole right and responsibility to
enforce the obligations of the relevant Fund hereunder, including, without
limitation, the right to approve any amendment, modification or waiver of any
provision of this Agreement; provided that such participation agreement may
provide that such Bank will not agree to any modification, amendment or waiver
of this Agreement (i) which increases or decreases the Commitments of the Bank,
(ii) reduces the principal of or rate of interest on any Loan or fees hereunder
or (iii) postpones the date fixed for any payment of principal of or interest on
any Loan or any fees hereunder without the consent of the Participant. The
relevant Fund agrees that each Participant shall, to the extent provided in its
participation agreement, be entitled to the benefits of Article III hereof with
respect to its participating interest.
(c) Any Bank may at any time assign all or any portion of its rights under
this Agreement and the Notes to a Federal Reserve Bank. No such assignment shall
release such Bank from its obligations hereunder.
(d) No Assignee, Participant or other transferee of a Bank's rights shall
be entitled to receive any greater payment under Section 3.1 and Section 3.3
hereof than such Bank would have been entitled to receive with respect to the
rights transferred, unless such transfer is made with the relevant Trust's or
Fund's prior written consent or at a time when the circumstances giving rise to
such greater payment did not exist.
9.8. Confidentiality. Each Bank agrees to take and to cause its Affiliates
to take normal and reasonable precautions and exercise due care to maintain the
confidentiality of all written information identified as "confidential" or
"secret" by a Fund and provided to it by or on behalf of the Fund, or by the
Agent on such Fund's behalf, under this Agreement or any other Credit Document,
and neither it nor any of its Affiliates shall use any such information other
than in connection with or in enforcement of this Agreement and the other Credit
Documents, except to the extent such information (i) was or becomes generally
available to the public other than as a result of disclosure by the Bank or (ii)
was or becomes available on a non- confidential basis from a source other than
the Fund, provided that such source is not bound by a confidentiality agreement
with the Fund known to the Bank; provided, however, that any Bank may disclose
such information (A) at the request or pursuant to any requirement of any
Governmental Authority to which the Bank is subject or in connection with an
examination of such Bank by any such authority; (B) pursuant to subpoena or
other court process; (C) when required to do so in accordance with the
provisions of any applicable Requirement of Law; (D) to the extent reasonably
required in connection with any litigation or proceeding to which the Agent, any
Bank or their respective Affiliates may be party; (E) to the extent reasonably
required in connection with the exercise of any remedy hereunder or under any
other Credit Document; (F) to such Bank's independent auditors and other
professional advisors; (G) to any Participant or Assignee, actual or potential,
provided that such Person agrees in writing to keep such information
confidential to the same extent as required by the Banks hereunder; (H) as to
any Bank or its Affiliate, as expressly permitted under the terms of any other
document or agreement regarding confidentiality to which such Fund is party or
is deemed party with such Bank or such Affiliate; and (I) to its Affiliates.
9.9. Setoff. In addition to any rights and remedies of the Banks provided
by law, if, as to a Fund, an Event of Default exists and is continuing or the
Loans have been accelerated, each Bank is authorized at any time and from time
to time, without prior notice to the relevant Fund (any such notice being waived
by such Fund to the fullest extent permitted by law), to set off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held by, and other indebtedness at any time owing by, such Bank to or
for the credit or the account of the Fund against any and all Obligations owing
to such Bank, now or hereafter existing, irrespective of whether or not the
Agent or such Bank shall have made demand under this Agreement or any Credit
Document and although such Obligations may be contingent or unmatured provided
that any such appropriation and application shall be subject to the provisions
of Section 2.13. Each Bank agrees promptly to notify the affected Fund and the
Agent after any such set-off and application made by such Bank; provided,
however, that the failure to give such notice shall not affect the validity of
such set-off and application.
9.10. Notification of Addresses, Lending Offices, etc. Each Bank shall
notify the Agent in writing of any changes in the address to which notices to
the Bank should be directed, of addresses of any Lending Office, of payment
instructions in respect of all payments to be made to it hereunder and of such
other administrative information as the Agent shall reasonably request.
9.11. Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of said counterparts taken together shall be deemed to
constitute but one and the same instrument.
9.12. Survival. The obligations of the Funds under Sections 2.9, 9.4 and
9.5, and the obligations of the Banks under Section 8.7, shall in each case
survive any termination of this Agreement, the payment in full of all
Obligations and the termination of all Commitments. The representations and
warranties made by the Trusts and Funds in this Agreement and in each other
Credit Document shall survive the execution and delivery of this Agreement and
each such other Credit Document.
9.13. Disclaimer. None of the shareholders, trustees, officers, employees
and other agents of any Trust or Fund shall be personally bound by or liable for
any indebtedness, liability or obligation hereunder or under the Notes, nor
shall resort be had to their private property for the satisfaction of any
obligation or claim hereunder. Nothing in this Section 9.13 shall affect the
Bank's rights against Adviser Persons as provided in Section 1.5.
9.14. Severability. The illegality or unenforceability of any provision of
this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or any instrument or agreement required hereunder.
9.15. No Third Parties Benefited. This Agreement is made and entered into
for the sole protection and legal benefit of the Trusts and Funds, the Banks,
the Agent and the Agent-Related Persons, and their permitted successors and
assigns, and no other Person shall be a direct or indirect legal beneficiary of,
or have any direct or indirect cause of action or claim in connection with, this
Agreement or any of the other Credit Documents.
9.16. Governing Law and Jurisdiction. (a) THIS AGREEMENT AND THE NOTES
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
ILLINOIS; PROVIDED THAT THE AGENT AND THE BANKS SHALL RETAIN ALL RIGHTS ARISING
UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY
OTHER CREDIT DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS OR
OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF ILLINOIS, AND BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH TRUST AND EACH OF THE AGENT AND THE BANKS
CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON- EXCLUSIVE
JURISDICTION OF THOSE COURTS. EACH TRUST AND EACH OF THE AGENT AND THE BANKS
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT
OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. EACH TRUST, THE AGENT AND THE
BANKS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS,
WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY ILLINOIS LAW.
9.17. Waiver of Jury Trial. THE TRUSTS, THE BANKS AND THE AGENT EACH WAIVE
THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS,
OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR
OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER
PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT
TO CONTRACT CLAIMS, TORT CLAIMS OR OTHERWISE. THE TRUSTS, THE BANKS AND THE
AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A
COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER
AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF
THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN
WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT
OR THE OTHER CREDIT DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS
TO THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS.
9.18. Entire Agreement. This Agreement, together with the other Credit
Documents, embodies the entire agreement and understanding among the Trusts, the
Banks and the Agent and supersedes all prior or contemporaneous agreements and
understandings of such Persons, verbal or written, relating to the subject
matter hereof and thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
COLONIAL TRUST I ON
BEHALF OF
COLONIAL INCOME
FUND, COLONIAL HIGH
YIELD SECURITIES FUND AND COLONIAL
STRATEGIC INCOME FUND
By Richard A. Silver
Title Treasurer
Address: One Financial Center
Boston, MA 02111-2621
Facsimile No.: (617) 772-3148
Attention: Fund Accounting
with a copy to:
Address: One Financial Center
Boston, MA 02111-2621
Facsimile No.: (617) 345-0919
Attention: Legal
COLONIAL TRUST II ON
BEHALF OF
COLONIAL ADJUSTABLE
RATE U.S.
GOVERNMENT FUND
By Richard A. Silver
Title Treasurer
Address: One Financial Center
Boston, MA 02111-2621
Facsimile No.: (617) 772-3148
Attention: Fund Accounting
with a copy to:
Address: One Financial Center
Boston, MA 02111-2621
Facsimile No.: (617) 345-0919
Attention: Legal
COLONIAL TRUST III
ON BEHALF OF
COLONIAL GLOBAL
EQUITY FUND, COLONIAL
GLOBAL NATURAL RESOURCES FUND,
COLONIAL GROWTH SHARES FUND, THE
COLONIAL FUND, COLONIAL GLOBAL
UTILITIES FUND, COLONIAL STRATEGIC
BALANCED FUND AND COLONIAL
INTERNATIONAL FUND FOR GROWTH
By Richard A. Silver
Title Treasurer
Address: One Financial Center
Boston, MA 02111-2621
Facsimile No.: (617) 772-3148
Attention: Fund Accounting
with a copy to:
Address: One Financial Center
Boston, MA 02111-2621
Facsimile No.: (617) 345-0919
Attention: Legal
COLONIAL TRUST IV ON
BEHALF OF
COLONIAL
INTERMEDIATE TAX EXEMPT
FUND, COLONIAL HIGH
YIELD MUNICIPAL
FUND, COLONIAL UTILITIES FUND,
COLONIAL SHORT TERM TAX EXEMPT
FUND, COLONIAL TAX EXEMPT INSURED
FUND AND COLONIAL TAX EXEMPT FUND
By Richard A. Silver
Title Treasurer
Address: One Financial Center
Boston, MA 02111-2621
Facsimile No.: (617) 772-3148
Attention: Fund Accounting
with a copy to:
Address: One Financial Center
Boston, MA 02111-2621
Facsimile No.: (617) 345-0919
Attention: Legal
COLONIAL TRUST V ON
BEHALF OF
COLONIAL CALIFORNIA
TAX EXEMPT
FUND, COLONIAL
CONNECTICUT TAX
EXEMPT FUND, COLONIAL FLORIDA TAX
EXEMPT FUND, COLONIAL MASSACHUSETTS
TAX EXEMPT FUND, COLONIAL MICHIGAN
TAX EXEMPT FUND, COLONIAL MINNESOTA
TAX EXEMPT FUND, COLONIAL NEW YORK
TAX EXEMPT FUND, COLONIAL NORTH
CAROLINA TAX EXEMPT FUND AND
COLONIAL OHIO TAX EXEMPT FUND
By Richard A. Silver
Title Treasurer
Address: One Financial Center
Boston, MA 02111-2621
Facsimile No.: (617) 772-3148
Attention: Fund Accounting
with a copy to:
Address: One Financial Center
Boston, MA 02111-2621
Facsimile No.: (617) 345-0919
Attention: Legal
COLONIAL TRUST VI ON
BEHALF OF
COLONIAL SMALL STOCK
FUND AND
COLONIAL U.S. FUND FOR GROWTH
By Richard A. Silver
Title Treasurer
Address: One Financial Center
Boston, MA 02111-2621
Facsimile No.: (617) 772-3148
Attention: Fund Accounting
with a copy to:
Address: One Financial Center
Boston, MA 02111-2621
Facsimile No.: (617) 345-0919
Attention: Legal
COLONIAL TRUST VII
ON BEHALF OF
COLONIAL NEWPORT
TIGER FUND
By Richard A. Silver
Title Treasurer
Address: One Financial Center
Boston, MA 02111-2621
Facsimile No.: (617) 772-3148
Attention: Fund Accounting
with a copy to:
Address: One Financial Center
Boston, MA 02111-2621
Facsimile No.: (617) 345-0919
Attention: Legal
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By [Illegible]
Title Vice President
Address for Payments:
Agency Management Services #5596
1455 Market Street, 12th Floor
San Francisco, California 94103
Account No: 1233-15041
ABA No: 1210-0035-8
Reference: Colonial Management
Associates
Attention: Charles Graber
Vice President
Telephone: (415)
436-3495
Facsimile: (415) 436-2700
BANK OF AMERICA
ILLINOIS, as a Bank
By [Illegible]
Title Vice President
ABN AMRO BANK N.V.,
NEW YORK BRANCH
By Eisso P.W. VanderMeulen
Title Authorized Signature
Assistant Vice President
By David Eastep
Title Authorized Signature
Asst. Vice President
CREDIT LYONNAIS NEW
YORK BRANCH
By Jacques-Yves Mulliez
Title Senior Vice President
FLEET BANK, N.A.
By [Illegible]
Title Vice President
MELLON BANK, N.A.
By [Illegible]
Title Vice President
SCHEDULE I
Definitions
"Act" means the Investment Company Act of 1940.
"Adviser" means Colonial Management Associates, Inc. or one
of its Affiliates, as investment adviser, sub-adviser or
administrator to a Fund, together with any successor thereto
permitted by Section 6.2(e) hereof.
"Adviser Persons" is defined in Section 1.5.
"Affiliate" means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is
under common control with, such Person. A Person shall be deemed
to control another Person if the controlling Person possesses,
directly or indirectly, the power to direct or cause the
direction of the management and policies of the other Person,
whether through the ownership of voting securities, membership
interests, by contract, or otherwise.
"Agent" is defined in the preamble and includes each other
Person as shall have subsequently been appointed as the successor
Agent pursuant to Section 8.9.
"Agent-Related Persons" means BofA and any successor agent
arising under Section 8.9, together with their respective
Affiliates (including, in the case of BofA, the Arranger), and
the officers, directors, employees, agents and attorneys-in-fact
of such Persons and Affiliates.
"Agent's Payment Office" means the address for payments set
forth on the signature page hereto in relation to the Agent or
such other address as the Agent may from time to time specify.
"Agreement" means this Credit Agreement.
"Allocation Notice" means a notice, substantially in the
form of Exhibit 2.14, furnished to the Agent by or on behalf of
each Fund setting forth, as of the date of such notice, the
manner of allocation of liability for amounts that shall become
due and payable by the Funds under the Credit Documents other
than principal and interest in respect of Loans. The allocation
of liability among the Funds as set forth in an Allocation Notice
shall be effective from the date of receipt thereof by the Agent
until a later dated Allocation Notice is delivered to the Agent.
"Applicable Margin" means,
(i) with respect to Base Rate Loans, 0%;
(ii) with respect to Federal Funds Rate Loans, 0.5%;
and
(iii) with respect to Offshore Rate Loans, 0.5%.
"Arranger" means BA Securities, Inc., a Delaware
corporation.
"Asset Coverage Ratio" means, with respect to any Fund, the
ratio which the Net Asset Value of such Fund, less the value of
assets subject to Liens, bears to the aggregate amount of
Indebtedness of such Fund.
"Assignee" is defined in Section 9.7(b).
"Attorney Costs" means and includes any and all fees and
disbursements of any law firm or other external counsel, the
allocated cost of internal legal services and all disbursements
of internal counsel.
"Authorized Officer" means, relative to any Fund, those of
its officers or agents whose signatures and incumbency shall have
been certified to the Agent and the Banks pursuant to Section
4.1(a).
"Banks" is defined in the preamble.
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978.
"Base Rate" means, for any day, the rate of interest in
effect for such day as publicly announced from time to time by
BofA in San Francisco, California, as its "reference rate." The
"reference rate" is a rate set by BofA based upon various
factors, including BofA's costs and desired return, general
economic conditions and other factors and is used as a reference
point for pricing some loans, which may be priced at, above or
below such announced rate. Any change in the reference rate
announced by BofA shall take effect at the opening of business on
the day specified in the public announcement of such change.
"Base Rate Loan" means a Loan that bears interest based on
the Base Rate, including a Swing Loan.
"BAI" means Bank of America Illinois.
"BofA" is defined in the preamble.
"Borrowing" means a borrowing hereunder, other than a Swing
Loan, consisting of Loans of the same Type made to a Fund on the
same day by the Banks under Article II and, other than in the
case of Base Rate Loans or Federal Funds Rate Loans, having the
same Interest Period.
"Borrowing Base" has the meaning set forth in Section
6.1(c).
"Borrowing Base Certificate" means a Borrowing Base
Certificate as defined in Section 6.1(c) and substantially in the
form of Exhibit 6.1 attached hereto.
"Borrowing Date" means any date on which a Borrowing occurs
under Section 2.3.
"Business Day" means any day other than a Saturday, Sunday
or other day on which commercial banks in New York City or San
Francisco are authorized or required by law to close and, if the
applicable Business Day relates to any Offshore Rate Loan, means
such a day on which dealings are carried on in the applicable
offshore dollar interbank market.
"Capital Adequacy Regulation" means any guideline, request
or directive of any central bank or other Governmental Authority,
or any other law, rule or regulation, whether or not having the
force of law, in each case, regarding capital adequacy of any
bank or of any corporation controlling a bank.
"Change in Control" means any transaction or series of
transactions where (i) any "person" (as such term is used in
Section 13(d) and 14(d) of the Securities Exchange Act of 1934
(the "Exchange Act") as in effect on the date hereof) becomes
the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act, as in effect on the date hereof), directly or
indirectly, of securities of another Person (the "Target")
representing 20% or more of the combined voting power of the
Target's then-outstanding securities; (ii) at any time less than
a majority of the members of the Target's board of directors
shall be persons who were either nominated for election or were
elected by such board of directors; (iii) the Target's
stockholders approve a merger or consolidation of the Target
with any other Person, other than a merger or consolidation that
would result in the voting securities of the Target outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the surviving entity) at least 75% of the combined
voting power of the voting securities of the Target or such
surviving entity outstanding immediately after such merger or
consolidation; or (iv) the Target's stockholders approve a plan
of complete liquidation of the Target or an agreement for the
sale or disposition of all or substantially all of the Target's
assets.
"Closing Date" means the date on which all conditions
precedent set forth in Section 4.1 are satisfied or waived by
all the Banks (or, in the case of Section 4.1(d), waived by the
Person entitled to receive such payment).
"Code" means the Internal Revenue Code of 1986.
"Commitment" means, relative to any Bank, such Bank's
obligation to make Loans pursuant to Section 2.1.
"Commitment Amount" means, on any date, $200,000,000, as
such amount may be reduced from time to time pursuant to Section
2.5.
"Commitment Termination Date" means with respect to any Fund
the earliest to occur of:
(a) April 28, 1997;
(b) the date on which the Commitments terminate in
accordance with the provisions of this Agreement; and
(c) the date on which any Event of Default with
respect to that Fund described in Section 7.1(e) or
Section 7.1(f) occurs.
Upon the occurrence of any event described in clause (b) or
(c) above, the Commitments shall terminate automatically and
without further action.
"Contingent Obligation" means, as to any Person, any direct
or indirect liability of that Person, whether or not contingent,
with or without recourse, (a) with respect to any Indebtedness,
lease, dividend, letter of credit or other obligation (the
"primary obligations") of another Person (the "primary
obligor"), including any obligation of that Person (i) to
purchase, repurchase or otherwise acquire such primary
obligations or any security therefor, (ii) to advance or provide
funds for the payment or discharge of any such primary
obligation, or to maintain working capital or equity capital of
the primary obligor, or otherwise to maintain the net worth or
solvency or any balance sheet item, level of income or financial
condition of the primary obligor, (iii) to purchase property,
securities or services primarily for the purpose of assuring the
owner of any such primary obligation of the ability of the
primary obligor to make payment of such primary obligation, or
(iv) otherwise to assure or hold harmless the holder of any such
primary obligation against loss in respect thereof (each, a
"Guaranty Obligation"); (b) with respect to any Surety
Instrument issued for the account of that Person or as to which
that Person is otherwise liable for reimbursement of drawings or
payments; (c) to purchase any materials, supplies or other
property from, or to obtain the services of, another Person if
the relevant contract or other related document or obligation
requires that payment for such materials, supplies or other
property, or for such services, shall be made regardless of
whether delivery of such materials, supplies or other property
is ever made or tendered, or such services are ever performed or
tendered; or (d) in respect of any Swap Contract. The amount of
any Contingent Obligation shall, in the case of Guaranty
Obligations, be deemed equal to the stated or determinable
amount of the primary obligation in respect of which such
Guaranty Obligation is made or, if not stated or if
indeterminable, the maximum reasonably anticipated liability in
respect thereof, and in the case of other Contingent
Obligations, shall be equal to the maximum reasonably
anticipated liability in respect thereof.
"Continuation/Conversion Notice" means a notice of
continuation or conversion and certificate duly executed by an
Authorized Officer of the borrowing Fund, substantially in the
form of Exhibit 2.4.
"Credit Documents" means this Agreement, any Notes, the Fee
Letter and all other documents delivered to the Agent or any
Bank in connection herewith.
"Default" means any Event of Default or any condition,
occurrence or event which, with notice or lapse of time or both,
would, unless cured or waived, constitute an Event of Default.
"Dollar" and the symbol "$" mean the lawful money of the
United States.
"ERISA" means the Employee Retirement Income Security Act of
1974.
"Eurodollar Reserve Percentage" has the meaning specified in
the definition of "Offshore Rate".
"Event of Default" means any of the events described in
Section 7.1.
"Exchange Act" has the meaning specified in the definition
of "Change in Control".
"Federal Funds Rate" means, for any day, the rate as quoted
by the Federal Reserve Bank of New York and confirmed in the
weekly statistical release designated as H.15(519), or any
successor publication, published by the Federal Reserve Bank of
New York (including any such successor, "H.15(519)") on the
preceding Business Day opposite the caption "Federal Funds
(Effective)"; or, if for any relevant day such rate is not so
published on any such preceding Business Day, the rate for such
day will be the arithmetic mean as determined by the Agent of
the rates for the last transaction in overnight Federal funds
arranged prior to 9:00 a.m. (New York City time) on that day by
each of three leading brokers of Federal funds transactions in
New York City selected by the Agent.
"Federal Funds Rate Loan" means a Loan that bears interest
based on the Federal Funds Rate.
"Fee Letter" means the letter agreement referred to in
Section 2.9.
"Fiscal Quarter" means any quarter of a Fiscal Year.
"Fiscal Year" means any period of twelve consecutive
calendar months ending on the last day of such twelve-month
period; references to a Fiscal Year with a number corresponding
to any calendar year (e.g., the "1995 Fiscal Year") refer to the
Fiscal Year ending on or before December 31 during such calendar
year.
"FRB" means the Board of Governors of the Federal Reserve
System and any Governmental Authority succeeding to any of its
principal functions.
"Fund" means each series or class of shares of a Trust which
constitutes a "series" under the Act, which is a signatory to
this Agreement or which becomes a signatory to this Agreement
following the approval of all the Banks.
"GAAP" means United States generally accepted accounting
principles.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof, any central bank
(or similar monetary or regulatory authority) thereof, any
entity exercising executive, legislative, judicial, regulatory
or administrative functions of or pertaining to government, and
any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the
foregoing.
"Guaranty Obligation" has the meaning specified in the
definition of "Contingent Obligation."
"Indebtedness" of any Person means, without duplication, (a)
all indebtedness for borrowed money; (b) all obligations issued,
undertaken or assumed as the deferred purchase price of property
or services (other than trade payables entered into in the
ordinary course of business on ordinary terms); (c) all non-
contingent reimbursement or payment obligations with respect to
Surety Instruments; (d) all obligations evidenced by notes,
bonds, debentures or similar instruments, including, without
limitation, obligations so evidenced incurred in connection with
the acquisition of property, assets or businesses; (e) all
indebtedness created or arising under any conditional sale or
other title retention agreement, or incurred as financing, in
either case with respect to property acquired by the Person
(even though the rights and remedies of the seller or bank under
such agreement in the event of default are limited to
repossession or sale of such property); (f) all obligations as
lessee under leases that have been or should be, in accordance
with GAAP, recorded as capital leases; (g) all net obligations
with respect to Swap Contracts; (h) all indebtedness referred to
in clauses (a) through (g) above secured by (or for which the
holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien upon or in property
(including accounts and contracts rights) owned by such Person,
even though such Person has not assumed or become liable for the
payment of such Indebtedness; (i) all Guaranty Obligations in
respect of indebtedness or obligations of others of the kinds
referred to in clauses (a) through (g) above; (j) all Contingent
Obligations; and (k) all other items which, in accordance with
GAAP, would be included as liabilities on the liability side of
the balance sheet of such Person as of the date at which
Indebtedness is to be determined.
"Indemnified Liabilities" is defined in Section 9.5.
"Indemnified Persons" is defined in Section 9.5.
"Insolvency Proceeding" means, with respect to any Person,
(a) any case, action or proceeding before any court or other
Governmental Authority relating to bankruptcy, reorganization,
insolvency, liquidation, receivership, dissolution, winding-up
or relief of debtors or (b) any general assignment for the
benefit of creditors, composition, marshalling of assets for
creditors, or other similar arrangement in respect of its
creditors generally or any substantial portion of its creditors,
undertaken under U.S. Federal, state or foreign law, including
the Bankruptcy Code.
"Interest Payment Date" means, as to any Loan other than a
Base Rate Loan or Federal Funds Rate Loan, the last day of each
Interest Period applicable to such Loan and, as to any Base Rate
Loan or Federal Funds Rate Loan, the last Business Day of each
calendar quarter.
"Interest Period" means, as to any Offshore Rate Loan, the
period commencing on the Borrowing Date of such Loan or on the
Conversion/Continuation Date on which the Loan is converted into
or continued as an Offshore Rate Loan and ending on the date one
or two weeks thereafter as selected by a Fund in its Loan
Request or Conversion/Continuation Notice,
provided that:
(i) if any Interest Period would otherwise end on a
day that is not a Business Day, that Interest Period shall
be extended to the following Business Day unless, in the
case of an Offshore Rate Loan, the result of such extension
would be to carry such Interest Period into another calendar
month, in which event such Interest Period shall end on the
preceding Business Day; and
(ii) no Interest Period for any Loan shall extend
beyond the Commitment Termination Date.
"IRS" means the Internal Revenue Service and any
Governmental Authority succeeding to any of its principal
functions under the Code.
"Lending Office" means, as to any Bank, the office or
offices of such Bank specified as its "Lending Office" or
"Domestic Lending Office" or "Offshore Lending Office", as the
case may be, on such Bank's signature page hereto or in the case
of an Assignee Bank, in the Bank Assignment Agreement or such
other office or offices as such Bank may from time to time
notify to the Trusts and the Agent.
"Lien" means any security interest, mortgage, deed of trust,
pledge, hypothecation, assignment, charge or deposit
arrangement, segregated asset arrangement established in
connection with reverse repurchase transactions, encumbrance,
lien (statutory or other), or preferential arrangement of any
kind or nature whatsoever in respect of any property (including
those created by, arising under or evidenced by any conditional
sale or other title retention agreement, the interest of a
lessor under a capital lease, any financing lease having
substantially the same economic effect as any of the foregoing,
or the filing of any financing statement naming the owner of the
asset to which such lien relates as debtor, under the Uniform
Commercial Code or any comparable law) and any contingent or
other agreement to provide any of the foregoing, but not
including the interest of a lessor under an operating lease.
"Loan" means an extension of credit by a Bank to a Fund
under Article II and may be a Base Rate Loan (including a Swing
Loan), Federal Funds Rate Loan or an Offshore Rate Loan (each, a
"Type" of Loan).
"Loan Request" means a request for a Loan given by a Fund to
the Agent, substantially in the form of Exhibit 2.3.
"Majority Banks" means, at any time, at least two Banks then
holding at least 66-2/3% of the then aggregate unpaid principal
amount of the Loans or, if no such principal amount is then
outstanding, at least two Banks then having at least 66-2/3% of
the Commitments.
"Material Adverse Change" means any change that is material
and adverse to (x) the condition (financial or otherwise),
business or prospects of a Fund, provided any change occurring
after the most recent Borrowing Date resulting from a decrease
in the Net Asset Value of a Fund shall not be deemed a Material
Adverse Change as long as such Fund's Net Asset Value has not
decreased by more than 25% per share since the Borrowing Date,
or (y) the ability of a Fund to duly and punctually pay and
perform all or any of its Obligations.
"Net Asset Value" means, at any date, Total Assets less
Total Liabilities.
"Non-United States Person" means any corporation,
partnership, association or trust that is organized under the
laws of a jurisdiction other than the United States of America
or one of its states.
"Note" means the promissory note of a Fund, substantially in
the form set forth as Exhibit 2.2.
"Obligations" means all obligations (monetary or otherwise)
of a Fund to the Banks and the Agent under the Credit Documents
and the Fee Letter, including (a) all obligations to make
payments to the Banks of, and in respect of the principal amount
of and interest on, any Loan and (b) all obligations of a Fund
to the Banks and the Agent in respect of fees, costs, expenses
and indemnification under Sections 9.4 and 9.5.
"Offshore Rate" means, for any Interest Period, with respect
to Offshore Rate Loans comprising part of the same Borrowing,
the rate of interest per annum (rounded upward to the next
1/16th of 1%) determined by the Agent as follows:
Offshore Rate = IBOR
1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means, for any day for
any Interest Period, the maximum reserve percentage
(expressed as a decimal, rounded upward to the next 1/100th
of 1%) in effect on such day (whether or not applicable to
any Bank) under regulations issued from time to time by the
FRB for determining the maximum reserve requirement
(including any emergency, supplemental or other marginal
reserve requirement) with respect to Eurocurrency funding
(currently referred to as "Eurocurrency liabilities"); and
"IBOR" means the rate of interest per annum determined
by the Agent as the rate at which Dollar deposits in the
approximate amount of BofA's Offshore Rate Loan for such
Interest Period would be offered by BofA's Grand Cayman
Branch, Grand Cayman B.W.I. (or such other office as may be
designated for such purpose by BofA), to major banks in the
offshore Dollar interbank market at their request at
approximately 9:00 a.m. (San Francisco time) one Business
Day prior to the commencement of such Interest Period.
The Offshore Rate shall be adjusted automatically as to all
Offshore Rate Loans then outstanding as of the effective date of
any change in the Eurodollar Reserve Percentage.
"Offshore Rate Loan" means a Loan that bears interest based
on the Offshore Rate.
"Organization Documents" means, for any Trust, the Trust
Agreement, the bylaws, any certificate of determination or
instrument relating to the rights of preferred shareholders of
such Trust and all applicable resolutions of the board of
trustees (or any committee thereof) of such Trust.
"Other Taxes" means any present or future stamp or
documentary taxes or any other excise or property taxes, charges
or similar levies that arise from any payment made hereunder or
from the execution, delivery or registration of, or otherwise
with respect to, this Agreement or any other Credit Documents.
"Participant" is defined in Section 9.7(b).
"Person" means any natural person, corporation, partnership,
firm, association, trust, government, governmental agency or any
other entity, whether acting in an individual, fiduciary or
other capacity.
"Plan" means any "pension plan" or "welfare benefit plan" as
such terms are defined in ERISA.
"Pro Rata Share" means, as to any Bank at any time, the
percentage equivalent (expressed as a decimal, rounded to the
ninth decimal place) at such time of such Bank's Commitment
divided by the combined Commitments of all Banks, as set forth
on Schedule II, as such amount may be adjusted from time to time
as a result of an assignment made by such Bank pursuant to
Section 9.7 or otherwise.
"Regulation U" means the FRB's Regulation U.
"Related Party" means, with respect to a Fund and for
purposes of Section 6.16 only, any Person (i) which directly or
indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such Fund,
(ii) which beneficially owns or holds 5% or more of the equity
interest of such Fund or (iii) 5% or more of the equity interest
of which is beneficially owned or held by such Fund. The term
"control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
"Replacement Bank" is defined in Section 3.7.
"Requirement of Law" means, as to any Person, any law
(statutory or common), treaty, rule or regulation or
determination of an arbitrator or of a Governmental Authority,
in each case applicable to or binding upon the Person or any of
its property or to which the Person or any of its property is
subject.
"Subsidiary" means, with respect to any Person, any
corporation of which more than 50% of the outstanding capital
stock having ordinary voting power to elect a majority of the
board of directors of such corporation (irrespective of whether
at the time capital stock of any other class or classes of such
corporation shall or might have voting power upon the occurrence
of any contingency) is at the time directly or indirectly owned
by such Person, by such Person and one or more other
Subsidiaries of such Person, or by one or more other
Subsidiaries of such Person.
"Surety Instruments" means all letters of credit (including
standby and commercial), banker's acceptances, bank guaranties,
shipside bonds, surety bonds and similar instruments.
"Swap Contract" means any agreement (including any master
agreement and any agreement, whether or not in writing, relating
to any single transaction) that is an interest rate swap
agreement, basis swap, forward rate agreement, commodity swap,
commodity option, equity or equity index swap or option, bond
option, interest rate option, forward foreign exchange
agreement, rate cap, collar or floor agreement, currency swap
agreement, cross-currency rate swap agreement, swaption,
currency option or any other similar agreement (including any
option to enter into any of the foregoing).
"Swing Loan" means a Loan made by BAI in accordance with the
terms of Section 2.15 of this Agreement.
"Target" has the meaning specified in the definition of
"Change in Control".
"Taxes" means any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the case of each
Bank and the Agent, such taxes (including income taxes or
franchise taxes) as are imposed on or measured by each Bank's
net income by the jurisdiction (or any political subdivision
thereof) under the laws of which such Bank or the Agent, as the
case may be, is organized or maintains a lending office.
"Total Assets" means, with respect to a Fund as of any date,
the aggregate amount of all items that would be set forth as
assets on a balance sheet of such Fund on such date prepared in
accordance with GAAP. The assets of a Fund shall be valued in
accordance with the Act, the rules and regulations under the
Act, and the valuation procedures set forth in its most recent
statement of additional information. Upon the written request
of the Agent, a Fund shall promptly furnish all such information
as the Agent shall reasonably request relating to the value of
any portfolio security or other asset of such Fund or the
assignment of values thereto by such Fund or any other Person.
"Total Liabilities" means, with respect to a Fund as of any
date, the aggregate amount of all items that would be set forth
as liabilities on a balance sheet of such Fund on such date
prepared in accordance with GAAP.
"Trust" has the meaning assigned to such term in the
preamble.
"Trust Agreement" means, with respect to a Trust, such
Trust's Agreement and Declaration of Trust or similar
instrument, as amended from time to time.
"Type" has the meaning specified in the definition of
"Loan."
"United States" or "U.S." means the United States of
America, its 50 States and the District of Columbia.
SCHEDULE II
COMMITMENTS
AND PRO RATA SHARES
Pro Rata
Bank Commitment Share
Bank of America Illinois $50,000,000 25.00%
ABN AMRO Bank N.V.,
New York Branch $37,500,000 18.75%
Credit Lyonnais
New York Branch $37,500,000 18.75%
Fleet Bank, N.A. $37,500,000 18.75%
Mellon Bank, N.A. $37,500,000 18.75%
TOTAL $200,000,000 100%
SCHEDULE III
OFFSHORE AND DOMESTIC LENDING OFFICES,
ADDRESSES FOR NOTICES
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
Bank of America National Trust
and Savings Association
Agency Management Services #5596
1455 Market Street, 12th Floor
San Francisco, California 94103
Attention: Charles Graber
Vice President
Telephone: (415) 436-3495
Facsimile: (415) 436-2700
BANK OF AMERICA ILLINOIS
Domestic and Offshore Lending Office:
1850 Gateway Boulevard, Fourth Floor
Concord, California 94520
Notices (other than Loan Requests and Notices of
Conversion/Continuation):
Bank of America Illinois
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Money Managers Group
Telephone: (312) 828-3014
Facsimile: (312) 987-0889
ABN AMRO BANK N.V. NEW YORK BRANCH
Domestic and Offshore Lending Office:
500 Park Avenue
New York, New York 10022
Attention: Stella Milano
Telephone: (212) 838-4308
Facsimile: (212) 980-1464
Notices (other than Loan Requests and Notices of
Conversion/Continuation):
ABN AMRO Bank N.V.
500 Park Avenue
New York, New York 10022
Attention: Stella Milano
Telephone: (212) 838-4308
Facsimile: (212) 980-1464
CREDIT LYONNAIS NEW YORK BRANCH
Domestic and Offshore Lending Office:
Exchange Place
53 State Street
Boston, Massachusetts 02109
Attention: Lisa Turilli
Telephone: (617) 723-2615
Facsimile: (617) 723-4803
Notices (other than Loan Requests and Notices of
Conversion/Continuation):
Credit Lyonnais
Exchange Place
53 State Street
Boston, Massachusetts 02109
Attention: Lisa Turilli
Telephone: (617) 723-2615
Facsimile: (617) 723-4803
FLEET BANK, N.A.
Domestic and Offshore Lending Office:
One Federal Street
Mail Code MAOF0210
Boston, Massachusetts 02211
Attention: Bob McClelland
Telephone: (617) 346-5814
Facsimile: (617) 246-5825
Notices (other than Loan Requests and Notices of
Conversion/Continuation):
Fleet Bank, N.A.
One Federal Street
Mail Code MAOF0210
Boston, Massachusetts 02211
Attention: Bob McClelland
Telephone: (617) 346-5814
Facsimile: (617) 246-5825
MELLON BANK, N.A.
Domestic and Offshore Lending Office:
One Mellon Bank Center
Room 305
Pittsburgh, Pennsylvania 15258
Attention: Timothy Somers
Telephone: (412) 234-7036
Facsimile: (412) 234-8087
Notices (other than Loan Requests and Notices of
Conversion/Continuation):
Mellon Bank, N.A.
One Mellon Bank Center
Room 305
Pittsburgh, Pennsylvania 15258
Attention: Timothy Somers
Telephone: (412) 234-7036
Facsimile: (412) 234-8087
EXHIBIT 2.2
Non-Negotiable
PROMISSORY NOTE
$__,000,000.00_________, ________: as of ________ __, 199_
FOR VALUE RECEIVED, the undersigned Fund ("Fund"), promises
to pay to _____________________ (the "Bank"), as set forth in
the Credit Agreement hereinafter referred to and on the
Commitment Termination Date (as defined in the Credit Agreement)
the principal sum of ____________________ AND 00/100 DOLLARS
($__,000,000.00) or, if less, the then aggregate unpaid
principal amount of Base Rate Loans, Federal Funds Rate Loans
and Offshore Rate Loans (as such terms are defined in the Credit
Agreement) as has been borrowed by the Fund under the Credit
Agreement. The Fund may borrow, repay and reborrow hereunder in
accordance with the provisions of the Credit Agreement. All
Base Rate Loans, Federal Funds Rate Loans and Offshore Rate
Loans and all payments of principal shall be recorded by the
holder in its records.
Anything in this Note to the contrary notwithstanding, the
Fund shall be liable hereunder only for Base Rate Loans, Federal
Funds Rate Loans and Offshore Rate Loans borrowed by the Fund
under the Credit Agreement and other obligations with respect
thereto. The sole source of repayment of the principal of and
interest on each Loan hereunder and other obligations with
respect thereto made with respect to the Fund shall be the
revenues and assets of such Fund and not from any other asset of
the Trust or any other Fund as a series of the Trust.
The Fund further promises to pay to the order of the Bank
interest on the aggregate unpaid principal amount hereof from
time to time outstanding from the date hereof until paid in full
at the rates per annum which shall be determined in accordance
with the provisions of the Credit Agreement. Accrued interest
shall be payable on the dates specified in the Credit Agreement.
All payments of principal and interest under this Note
shall be made in lawful money of the United States of America in
immediately available funds at Bank of America National Trust
and Savings Association, ABA No. 1210-0035-8, Account No. 1233-
15041 Reference: Colonial Management Associates, or at such
other place as may be designated by the Agent to the Fund in
writing.
This Note is the Note referred to in, and evidences
indebtedness incurred under, a Credit Agreement dated as of
April 29, 1996 (herein, as it may be amended, modified or
supplemented from time to time, called the "Credit Agreement")
among the Fund, the other parties thereto and the Bank, to which
Credit Agreement reference is made for a statement of the terms
and provisions thereof, including those under which the Fund is
permitted and required to make prepayments and repayments of
principal of such indebtedness and under which such indebtedness
may be declared to be immediately due and payable.
A copy of the Agreement and Declaration of Trust of the
below-named trust (the "Trust") is on file with the Secretary of
State of The Commonwealth of Massachusetts and the Clerk of the
City of Boston, and notice is hereby given that none of the
shareholders, trustees, officers, employees and other agents of
the Trust or the Fund shall be personally bound by or liable for
any indebtedness, liability or obligation arising hereunder, nor
shall resort be had to their private property for the
satisfaction of any obligations or claim arising hereunder.
All parties hereto, whether as makers, endorsers or
otherwise, severally waive presentment, demand, protest and
notice of dishonor in connection with this Note.
This Note is made under and governed by the internal laws
of the State of Illinois.
[NAME OF TRUST] ON BEHALF OF
[NAME OF FUND]
By: _____________________________
Title: __________________________
LOANS AND PRINCIPAL PAYMENTS
Amount of Unpaid
Amount of Principal Principal
Notation
Date Loan Made Repaid Balance
Total Made By
EXHIBIT 2.3
FORM OF LOAN REQUEST
Reference is made to that certain Credit Agreement, dated as
of April 29, 1996 (the "Credit Agreement"), among the borrowers
party thereto, various financial institutions party thereto and
Bank of America National Trust and Savings Association (the
"Bank"). Capitalized terms used herein and not otherwise defined
shall have the meanings given to such terms in the Credit
Agreement. Pursuant to the terms of the Credit Agreement, the
undersigned, on behalf of and with respect to the [Name of Fund],
hereby represents and certifies to the Agent and the Banks as
follows:
1. On _______________, the undersigned, on behalf of the
[Name of Fund], requested that the Bank make a [Type of Loan]1 in
the principal amount of $___________to be made on _____________
and having a tenor of ____________________.
2. The purpose for which such Loan will be used is
________________________________________________________________.
3. As of ____________________2, (i) the Asset Coverage
Ratio of such Fund was as set forth in subparagraph (e) below and
(ii) the Borrowing Base of such Fund was as set forth in
subparagraph (f) below, calculated as follows:
(a) Net Asset Value plus proposed
Loan ______________
(b) minus (without duplication)
value of Assets subject
to Liens (including, without
limitation, margin and asset
allocation arrangements) ______________
(c) Adjusted Net Asset Value
((a) minus (b)) ______________
(d) Indebtedness (including proposed
Loan) ______________
(e) Asset Coverage Ratio ((c) divided
by (d)) ______________
(f) Borrowing Base ((c) times 10%) ______________
5. The undersigned further certifies, on behalf of the
Fund, that (a) the proceeds of such Loan will be utilized solely
by the Fund designated above, (b) to the best of its knowledge,
no Default has occurred and is continuing as of the date of this
Borrowing Certificate and (c) the Asset Coverage Ratio of the
Fund as set forth in its prospectus is not more restrictive than
10 to 1.
6. The undersigned further certifies, on behalf of the
Fund, that, with respect to the Fund, there has not been
outstanding as of the close of business (San Francisco time) on
the day preceding the proposed Borrowing Date for the requested
Loan a Loan that had been outstanding for at least two weeks.
A copy of the Agreement and Declaration of Trust of the
below-named trust (the "Trust") is on file with the Secretary of
State of The Commonwealth of Massachusetts and the Clerk of the
City of Boston, and notice is hereby given that none of the
shareholders, trustees, officers, employees and other agents of
the Trust or the Fund shall be personally bound by or liable for
any indebtedness, liability or obligation arising hereunder, nor
shall resort be had to their private property for the
satisfaction of any obligations or claim arising hereunder.
Date: ____________________ __________, on behalf of
[Name of Fund]
By: _____________________
Title: [Must be an Authorized
Officer of the Trust]
EXHIBIT 2.4
NOTICE OF CONVERSION/CONTINUATION
Date: , 199
To: Bank of America National Trust and Savings Association, as
Agent for the Banks party to the Credit Agreement dated as
of April 29, 1996 (the "Credit Agreement") among the
investment companies party thereto, certain financial
institutions party thereto and Bank of America National
Trust and Savings Association, as Agent
Ladies and Gentlemen:
The undersigned, ___________________________ (the "Fund"),
refers to the Credit Agreement, the terms defined therein being
used herein as therein defined, and hereby gives you notice
irrevocably, pursuant to Section 2.4 of the Credit Agreement, of
the [conversion] [continuation] of the Loans specified herein,
that:
1. The Conversion/Continuation Date is ,
19 .
2. The aggregate amount of the Loans to be [converted]
[continued] is $ .
3. The Loans are to be [converted into] [continued as]
[Federal Funds Rate] [Offshore Rate] [Base Rate] Loans.
4. [If applicable:] The duration of the Interest
Period for the Loans included in the [conversion]
[continuation] shall be days.
The undersigned hereby certifies that the following
statements are true on the date hereof, and will be true on the
proposed Conversion/Continuation Date, before and after giving
effect thereto and to the application of the proceeds therefrom:
(a) the representations and warranties of the Fund
contained in Article V of the Credit Agreement are true and
correct as though made on and as of such date (except to the
extent such representations and warranties relate to an
earlier date, in which case they are true and correct as of
such date);
(b) no Default has occurred and is continuing or would
result from such proposed [conversion] [continuation];
(c) the proposed [conversion][continuation] will not
cause the aggregate principal amount of all outstanding
Loans to exceed the combined Commitments of the Banks; and
(d) there has not been outstanding as of the close of
business (San Francisco time) on the day preceding the
proposed continuation date for the requested Loan a Loan
that had been outstanding for at least two weeks.
A copy of the Agreement and Declaration of Trust of the
below-named trust (the "Trust") is on file with the Secretary of
State of The Commonwealth of Massachusetts and the Clerk of the
City of Boston, and notice is hereby given that none of the
shareholders, trustees, officers, employees and other agents of
the Trust or the Fund shall be personally bound by or liable for
any indebtedness, liability or obligation arising hereunder, nor
shall resort be had to their private property for the
satisfaction of any obligations or claim arising hereunder.
__________, on behalf of
[Name of Fund]
By:
Title: [Must be an Authorized
Officer]
EXHIBIT 2.14
FORM OF ALLOCATION NOTICE
Date: , 199
To: Bank of America National Trust and Savings Association, as
Agent for the Banks party to the Credit Agreement dated as
of April 29, 1996 (the "Credit Agreement") among the
investment companies party thereto, certain financial
institutions party thereto and Bank of America National
Trust and Savings Association, as Agent
Ladies and Gentlemen:
Reference is made to the Credit Agreement (the terms defined
therein being used herein as therein defined). This instrument
is an Allocation Notice as contemplated by the Credit Agreement.
The allocation of liability of the Funds as set forth herein
shall be effective from the date hereof until a later dated
Allocation Notice is delivered to the Agent.
Name of Fund % Allocation
Colonial Income Fund
Colonial High Yield Securities Fund
Colonial Strategic Income Fund
Colonial Adjustable Rate U.S.
Government Fund
Colonial Global Equity Fund
Colonial Global Natural Resources
Fund
Colonial Growth Shares Fund
The Colonial Fund
Colonial Global Utilities Fund
Colonial Strategic Balanced Fund
Colonial International Fund For
Growth
Colonial Intermediate Tax Exempt
Fund
Colonial High Yield Municipal Fund
Colonial Utilities Fund
Colonial Short Term Tax Exempt Fund
Colonial Tax Exempt Insured Fund
Colonial Tax Exempt Fund
Colonial California Tax Exempt Fund
Colonial Connecticut Tax Exempt
Fund
Colonial Florida Tax Exempt Fund
Colonial Massachusetts Tax Exempt
Fund
Colonial Michigan Tax Exempt Fund
Colonial Minnesota Tax Exempt Fund
Colonial New York Tax Exempt Fund
Colonial North Carolina Tax Exempt
Fund
Colonial Ohio Tax Exempt Fund
Colonial Small Stock Fund
Colonial U.S. Fund For Growth
Colonial Newport Tiger Fund
100%
COLONIAL TRUST I ON BEHALF OF
COLONIAL INCOME FUND, COLONIAL HIGH
YIELD SECURITIES FUND AND COLONIAL
STRATEGIC INCOME FUND
By _____________________________
Title __________________________
COLONIAL TRUST II ON BEHALF OF
COLONIAL ADJUSTABLE RATE U.S.
GOVERNMENT FUND
By _____________________________
Title __________________________
COLONIAL TRUST III ON BEHALF OF
COLONIAL GLOBAL EQUITY FUND, COLONIAL
GLOBAL NATURAL RESOURCES FUND, COLONIAL
GROWTH SHARES FUND, THE COLONIAL FUND,
COLONIAL GLOBAL UTILITIES FUND,
COLONIAL STRATEGIC BALANCED FUND AND
COLONIAL INTERNATIONAL FUND FOR GROWTH
By _____________________________
Title __________________________
COLONIAL TRUST IV ON BEHALF OF
COLONIAL INTERMEDIATE TAX EXEMPT
FUND, COLONIAL HIGH YIELD MUNICIPAL
FUND, COLONIAL UTILITIES FUND,
COLONIAL SHORT TERM TAX EXEMPT FUND,
COLONIAL TAX EXEMPT INSURED FUND
AND COLONIAL TAX EXEMPT FUND
By _____________________________
Title __________________________
COLONIAL TRUST V ON BEHALF OF
COLONIAL CALIFORNIA TAX EXEMPT
FUND, COLONIAL CONNECTICUT TAX
EXEMPT FUND, COLONIAL FLORIDA TAX
EXEMPT FUND, COLONIAL MASSACHUSETTS
TAX EXEMPT FUND, COLONIAL MICHIGAN
TAX EXEMPT FUND, COLONIAL MINNESOTA
TAX EXEMPT FUND, COLONIAL NEW YORK
TAX EXEMPT FUND, COLONIAL NORTH
CAROLINA TAX EXEMPT FUND AND
COLONIAL OHIO TAX EXEMPT FUND
By _____________________________
Title __________________________
COLONIAL TRUST VI ON BEHALF OF
COLONIAL SMALL STOCK FUND AND
COLONIAL U.S. FUND FOR GROWTH
By _____________________________
Title __________________________
COLONIAL TRUST VII ON BEHALF OF
COLONIAL NEWPORT TIGER FUND
By _____________________________
Title __________________________
EXHIBIT 4.1(c)-1
FORM OF OPINION OF COUNSEL TO THE FUNDS
April , 1996
To Bank of America National Trust
and Savings Association, as Agent, and
the Banks listed on Schedule I to the Credit Agreement
c/o Bank of America National Trust
and Savings Association
231 South LaSalle Street
Chicago, IL 60697
Ladies and Gentlemen:
This opinion is being furnished to you pursuant to Section 4.1(c)
of the Credit Agreement dated as of April 29, 1996 (the "Credit
Agreement") among Colonial Trust I ("Trust I"), Colonial Trust II
("Trust II"), Colonial Trust III ("Trust III"), Colonial Trust IV
("Trust IV"), Colonial Trust V ("Trust V"), Colonial Trust VI
("Trust VI") and Colonial Trust VII ("Trust VII," and together
with Trust I, Trust II, Trust III, Trust IV, Trust V and Trust
VI, the "Trusts"), on behalf of certain of their Funds described
below, various banks party thereto and Bank of America National
Trust and Savings Association, as Agent (the "Agent"), in
connection with the closing held this day under the Credit
Agreement. Terms defined in the Credit Agreement and not
otherwise defined herein are used herein with the meanings so
defined.
Trust I is executing the Credit Agreement on behalf of Colonial
Income Fund, Colonial High Yield Securities Fund and Colonial
Strategic Income Fund. Trust II is executing the Credit
Agreement on behalf of Colonial Adjustable Rate U.S. Government
Fund. Trust III is executing the Credit Agreement on behalf of
Colonial Global Equity Fund, Colonial Global Natural Resources
Fund, Colonial Growth Shares Fund, The Colonial Fund, Colonial
Global Utilities Fund, Colonial Strategic Balanced Fund and
Colonial International Fund For Growth. Trust IV is executing
the Credit Agreement on behalf of Colonial Intermediate Tax
Exempt Fund, Colonial High Yield Municipal Fund, Colonial
Utilities Fund, Colonial Short Term Tax Exempt Fund, Colonial Tax
Exempt Insured Fund and Colonial Tax Exempt Fund. Trust V is
executing the Credit Agreement on behalf of Colonial California
Tax Exempt Fund, Colonial Connecticut Tax Exempt Fund, Colonial
Florida Tax Exempt Fund, Colonial Massachusetts Tax Exempt Fund,
Colonial Michigan Tax Exempt Fund, Colonial Minnesota Tax Exempt
Fund, Colonial New York Tax Exempt Fund, Colonial North Carolina
Tax Exempt Fund and Colonial Ohio Tax Exempt Fund. Trust VI is
executing the Credit Agreement on behalf of Colonial Small Stock
Fund and Colonial U.S. Fund For Growth. Trust VII is executing
the Credit Agreement on behalf of the Colonial Newport Tiger
Fund.
We have acted as counsel to the Trusts and the Funds in
connection with the Credit Agreement and as such are familiar
with the proceedings taken by them in connection therewith.
We have participated in the preparation of the Credit Agreement
and the Notes being delivered today and have examined copies of
the foregoing, executed by each of the Trusts on behalf of their
respective Funds. We have also examined such certificates,
documents and records, and have made such examination of laws, as
we have deemed necessary to enable us to render the opinions
expressed below. In addition, we have examined and relied as to
matters of fact upon representations and warranties contained in
the Credit Agreement and in certificates, copies of which have
been furnished to you, and upon the covenants contained in the
Credit Agreement as to the application of the proceeds of the
Loans made pursuant thereto.
We call your attention to the fact that each of the Credit
Agreement and the Notes provides that it is to be governed by and
construed in accordance with the laws of the State of Illinois
and we understand that you are relying on the advice of your own
counsel with respect to all matters involving Illinois law. For
purposes of rendering the opinions expressed in paragraphs 3, 4
and 5 below, we have assumed that each of the Credit Agreement
and the Notes provides that it is to be governed by and construed
in accordance with the internal laws of The Commonwealth of
Massachusetts.
The opinions expressed below are limited to matters governed by
the internal laws of The Commonwealth of Massachusetts and the
federal laws of the United States. Notwithstanding the
foregoing, we express no opinion as to the securities or "blue
sky" laws of any state, territory or possession of the United
States of America, including those of The Commonwealth of
Massachusetts.
The opinions in paragraphs 5 and 6 below assume that one or more
Forms FR U-1 have been duly signed by a Trust on behalf of each
Fund and accepted by a duly authorized officer of the Agent in
accordance with the requirements of Regulation U of the Board of
Governors of the Federal Reserve System and, in the event of any
assignment of the Credit Documents or Loans to any other party
(which must be a bank within the meaning of Regulation U) in
accordance with the terms of the Credit Agreement, additional
such forms are executed and accepted by such assignee.
In our opinions below, we do not express any opinion regarding
any arrangements among the Trusts and the Funds.
Based on the foregoing, we are of the opinion that:
1. Each Trust is a legally organized and validly existing
unincorporated voluntary association under and by virtue of the
laws of The Commonwealth of Massachusetts.
2. Each Fund has powers adequate for the execution,
delivery and performance of the Credit Agreement and the Notes
and for the carrying on of the business now conducted by it.
3. The Credit Agreement has been duly authorized, executed
and delivered by a Trust on behalf of each Fund and (subject to
the qualifications stated in the third to last paragraph hereof)
is a legal, valid and binding obligation of each Fund,
enforceable in accordance with its terms.
4. Each of the Notes being delivered to you today has been
duly authorized, executed and delivered by a Trust on behalf of a
Fund and (subject to the qualifications stated in the third to
last paragraph hereof) is a legal, valid and binding obligation
of such Fund, enforceable in accordance with its terms.
5. The execution and delivery of the Credit Agreement and
the Notes being delivered to you today do not, and the
performance by each of the Funds of the terms thereof applicable
to it will not, result in any violation of, be in conflict with,
constitute default under, or, result in the creation of a lien
under, any term or provision of: (i) the Declaration of Trust or
By-laws of each Trust, (ii) any material provision in any
material indenture, mortgage, agreement, or contract to which any
Trust on behalf of a Fund is a party or by which any of a Fund's
properties may be bound which is included as an exhibit to any
Trust's registration statement (as amended through the date
hereof (the "Registration Statement") filed with the Securities
and Exchange Commission under the Securities Act of 1933, as
amended (the "1933 Act"), and the Investment Company Act of 1940,
as amended (the "1940 Act"), (iii) any federal or Massachusetts
law, statute or governmental regulation, including without
limitation, the 1940 Act, or (iv) to our knowledge, any writ,
order, or decision binding on a Trust or a Trust on behalf of a
Fund, as the case may be.
6. No consent or approval of any federal or Massachusetts
governmental authority is required to be obtained by any Trust or
any Trust on behalf of a Fund, as the case may be, in connection
with the execution, delivery or performance of the Credit
Agreement or the Notes, nor for borrowings thereunder in
accordance with the limits set forth in such Fund's or Trust's
Registration Statement.
7. To our knowledge, each Trust is a registered, open-end
management investment company under the 1940 Act. Each Fund's
shares of beneficial interest are registered for sale under the
1933 Act.
Our opinions that each of the Credit Agreement and the Notes
being delivered to you today is a legal, valid and binding
obligation, enforceable in accordance with its terms, is subject
to (i) bankruptcy, insolvency, reorganization, moratorium and
other similar laws affecting the rights and remedies of creditors
and (ii) general principles of equity, regardless of whether
applied in proceedings in equity or at law.
Our opinions expressed above are subject to the following
qualifications:
a. The enforceability of the provisions of the Credit
Agreement providing for indemnification may be affected by public
policy considerations or court decisions which may limit the
right of the indemnified party to obtain indemnification.
b. We express no opinion as to the enforceability of any
provision of the Credit Agreement which purports to grant the
right of setoff to a Bank.
The foregoing opinion is solely for your benefit and may not be
relied on by any person other than you.
Very truly yours,
Ropes & Gray
EXHIBIT 4.1(c)-2
FORM OF OPINION OF COUNSEL TO THE AGENT
April , 1996
Bank of America National Trust
and Savings Association, as Agent
and each Lender now or hereafter
party to the Credit Agreement
hereinafter referred to
Global Agency #5596
1455 Market Street
12th Floor
San Francisco, California 94137
Re: Colonial Management Associates, Inc. -
Credit Agreement dated as of April 29, 1996
Between Certain Investment Companies and Financial
Institutions Party Thereto
Ladies/Gentlemen:
We have acted as special counsel to Bank of America National
Trust and Savings Association, as agent, in connection with (i)
the preparation, execution and delivery of (a) a Credit
Agreement, dated as of April 29, 1996 (the "Credit Agreement";
terms defined therein having the same respective meanings
herein), among the investment companies and/or series of
investment companies as are or may become parties thereto (the
"Borrower(s)"), certain financial institutions as are or may
become parties thereto (collectively, the "Lenders") and Bank of
America National Trust and Savings Association, as agent (the
"Agent"); and (b) the Promissory Notes of the Borrowers, each
dated April 29, 1996; and (ii) the closing of the credit
transaction relating to the Credit Agreement.
This opinion is delivered pursuant to Section 4.1(c) of the
Credit Agreement.
In so acting, we have examined executed counterparts of the
Credit Agreement and the executed Notes, together with the
certificates, opinions and other documents furnished pursuant to
Section 4.1 of the Credit Agreement in connection with the credit
transaction relating to the Credit Agreement on or before the
date hereof (collectively, the "Closing Documents").
In such examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as
originals, the conformity to the originals of all such documents
submitted to us as copies, and the due authority of the persons
executing or delivering the same. As to factual matters, we have
relied solely on the documents that we have examined.
To the extent that our opinion expressed below involves
conclusions as to the matters set forth in the opinion of Ropes &
Grey, as Borrowers' counsel, furnished to the Agent pursuant to
Section 4.1(c) of the Credit Agreement (the "Borrower Closing
Opinion"), we have assumed without independent investigation the
correctness of the matters referred to therein, and our opinion
is subject to the assumptions, qualifications, and limitations
set forth in such opinion with respect thereto. In rendering our
opinions set forth below, we have relied upon the accuracy of the
opinions contained in the Borrower Closing Opinion other than
with respect to Illinois laws, statutes, rules and regulations.
In addition, as to questions of fact material to the opinions set
forth below, we have relied, without independent verification,
upon the representations made by each Trust and the Fund(s), as a
series of each Trust in the Credit Agreement.
Based upon the foregoing examination of documents and
assumptions and having due regard for legal considerations we
deem relevant, we are of the following opinion:
(1) The Credit Agreement and each Note constitutes the
legal, valid and binding obligation of each Borrower
enforceable against each Borrower in accordance with its
terms; and
(2) The Borrower Closing Opinion and each of the other
Closing Documents are substantially responsive to the
requirements of the Credit Agreement.
Our opinions in paragraphs 1 and 2 above are subject to the
following qualifications:
(a) The enforceability of the Credit Agreement and the
Notes may be subject to or limited by bankruptcy,
insolvency, reorganization, arrangement, fraudulent
conveyance or transfer, moratorium, or other laws and court
decisions, now or hereafter in effect, relating to or
affecting the rights of creditors generally.
(b) The enforceability of the Credit Agreement and the
Notes is subject to the application of and may be limited by
general principles of equity, including without limitation,
concepts of materiality, reasonableness, good faith, and
fair dealing (regardless of whether considered in a
proceeding in equity or at law). Such principles of equity
are of general application, and in applying such principles
a court, among other things, might not allow a creditor to
accelerate maturity of a debt upon the occurrence of a
default deemed immaterial or might decline to order the
borrower to perform covenants. Such principles applied by a
court might include a requirement that a creditor act with
reasonableness and good faith. Thus, we express no opinion
as to the validity or enforceability of (i) provisions
restricting access to legal or equitable remedies, such as
the specific performance of executory covenants, (ii)
provisions that purport to establish evidentiary standards,
(iii) provisions that require that all amendments,
modifications or waivers be in writing in order to be
effective, (iv) provisions relating to waivers,
severability, indemnity, submissions to jurisdiction, set
off, or delay or omission of enforcement of rights or
remedies and (v) provisions purporting to convey rights to
persons other than parties to the Credit Agreement. In
addition, we express no opinion as to the enforceability of
any provision purporting to provide indemnification or
contribution relating to matters under Federal or state
securities laws.
(c) The remedies of specific performance and
injunctive and other forms of equitable relief are subject
to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
(d) We have not been requested to render, and with
your permission we do not express, any opinion as to the
applicability to the Credit Agreement and the Notes of
Section 548 of the Bankruptcy Code, or any other fraudulent
conveyance or transfer laws or any court decisions with
respect to any of the foregoing.
(e) Our opinions expressed herein are limited only to
the law of the State of Illinois. Notwithstanding the
foregoing, we express no opinion as to the securities or
"blue sky" law of the State of Illinois. We do not express
any opinion herein concerning any other law. Without
limiting the generality of the foregoing, we express no
opinion as to the effect of the law of any jurisdiction
other than the State of Illinois wherein the Agent or any
Lender may be located or wherein enforcement of the Credit
Agreement or any of the other Closing Documents may be
sought which limits the rates of interest legally chargeable
or collectible.
This opinion is furnished by us, as counsel to the Agent, to
you, and is solely for your benefit and your respective
assignees, participants and transferees. Accordingly, this
opinion may not be used, circulated, quoted, or relied upon by
any other Person, in each instance, without our prior written
consent, except that you are authorized to circulate this opinion
(i) to your accountants and other professional advisors, (ii) to
any governmental authority exercising regulatory or supervisory
jurisdiction over you and (iii) pursuant to lawful process.
Very truly yours,
MAYER, BROWN & PLATT
By_______________________
EXHIBIT 5.7-1
SCHEDULE OF LITIGATION
None.
EXHIBIT 5.7-2
SCHEDULE OF CONTINGENT LIABILITIES
None.
EXHIBIT 6.1
FORM OF BORROWING BASE CERTIFICATE
Reference is made to that certain Credit Agreement, dated as
of April 29, 1996 (the "Credit Agreement"), among certain
investment companies party thereto, various financial
institutions party thereto and Bank of America National Trust and
Savings Association, as Agent. Capitalized terms used herein and
not otherwise defined shall have the meanings given to such terms
in the Credit Agreement.
Pursuant to the terms of the Credit Agreement, the
undersigned, on behalf of and with respect to the [Name of Fund]
(the "Fund"), hereby represents and certifies to the Agent and
the Banks that as of __________ __, 199_, (i) the Borrowing Base
of the Fund was the amount shown in subparagraph (e) below and
(ii) the Asset Coverage Ratio was the ratio set forth in
subparagraph (f) below, each calculated as follows:
(a) Net Asset Value ______________
(b) minus (without duplication)
value of Assets subject
to Liens (including, without
limitation, margin and asset
allocation arrangements) _______________
(c) Adjusted Net Asset Value
((a) minus (b)) ______________
(d) Indebtedness ______________
(e) Borrowing Base ((c) times 10%) ______________
(f) Asset Coverage Ratio ((c) divided
by (d)) ______________
The Asset Coverage Ratio of the Fund as set forth in its
prospectus is not more restrictive than 10 to 1.
A copy of the Agreement and Declaration of Trust of the
below-named trust (the "Trust") is on file with the Secretary of
State of The Commonwealth of Massachusetts and the Clerk of the
City of Boston, and notice is hereby given that none of the
shareholders, trustees, officers, employees and other agents of
the Trust or the Fund shall be personally bound by or liable for
any indebtedness, liability or obligation arising hereunder, nor
shall resort be had to their private property for the
satisfaction of any obligations or claim arising hereunder.
Date: ____________________ __________, on behalf of
[Name of Fund]
By:
Title: [Must be an Authorized
Officer]
_______________________________
If request relates to a Swing Loan; insert Swing Loan.
Use immediately preceding Business Day.
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Prospectus and Statement of Additional Information constituting
parts of this Post-Effective Amendment No. 19 to the registration
statement on Form N-1A (the "Registration Statement") of our reports
dated March 13, 1996, relating to the financial statements and financial
highlights appearing in the January 31, 1996 Annual Reports to Shareholders
of Colonial California Tax-Exempt Fund, Colonial Connecticut Tax-Exempt Fund,
Colonial Florida Tax-Exempt Fund, Colonial Massachusetts Tax-Exempt Fund,
Colonial Michigan Tax-Exempt Fund, Colonial Minnesota Tax-Exempt Fund,
Colonial New York Tax-Exempt Fund, Colonial North Carolina Tax-Exempt Fund
and Colonial Ohio Tax-Exempt Fund, each a series of Colonial Trust V,
which are also incorporated by reference into the Registration Statement.
We also consent to the references to us under the headings "Independent
Accountants" in the Statement of Additional Information and the "Funds'
Financial History" in the Prospectus.
PRICE WATERHOUSE LLP
--------------------------
PRICE WATERHOUSE LLP
Boston, MA
May 17, 1996
<TABLE>
<CAPTION>
PERFORMANCE CALCULATION
COLONIAL CALIFORNIA TAX EXEMPT FUND - CLASS A
Fiscal Year End: 1/31/96
Inception Date: 6/16/86
SINCE INCEPTION
ONE YEAR ENDING 1/31/96 FIVE YEARS ENDING 1/31/96 6/16/86 TO 1/31/96
Standard Non-Standard Standard Non-Standard Standard Non-Standard
-------------- ------------------- -------------- ------------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Initial Inv. $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00
Max. Load 4.75% 4.75% 4.75%
Amt. Invested $952.50 $1,000.00 $952.50 $1,000.00 $952.50 $1,000.00
Initial NAV $6.87 $6.87 $6.98 $6.98 $7.14 $7.14
Initial Shares 138.646 145.560 136.461 143.266 133.403 140.056
Shares From Dist. 7.621 8.000 47.719 50.090 117.156 123.001
End of Period NAV $7.54 $7.54 $7.54 $7.54 $7.54 $7.54
Total Return 10.29% 15.78% 38.87% 45.79% 88.92% 98.34%
Average Annual
Total Return 10.29% 15.78% 6.79% 7.83% 6.83% 7.37%
</TABLE>
<TABLE>
<CAPTION>
PERFORMANCE CALCULATION
COLONIAL CALIFORNIA TAX-EXEMPT FUND - CLASS B
Fiscal Year End: 1/31/96
Inception Date: 8/4/92
SINCE INCEPTION
ONE YEAR ENDING 1/31/96 8/4/92 TO 1/31/96
Standard Non-Standard Standard Non-Standard
-------------- ------------------- -------------- ------------
<S> <C> <C> <C> <C>
Initial Inv. $1,000.00 $1,000.00 $1,000.00 $1,000.00
Amt. Invested $1,000.00 $1,000.00 $1,000.00 $1,000.00
Initial NAV $6.87 $6.87 $7.41 $7.41
Initial Shares 145.560 145.560 134.953 134.953
Shares From Dist. 6.877 6.877 25.937 25.937
End of Period NAV $7.54 $7.54 $7.54 $7.54
CDSC 5.00% 3.00%
Total Return 9.94% 14.94% 18.31% 21.31%
Average Annual
Total Return 9.94% 14.94% 4.93% 5.68%
</TABLE>
COLONIAL CALIFORNIA TAX-EXEMPT FUND
FUND YIELD CALCULATION
(CALENDAR MONTH-END METHOD)
30-DAY BASE PERIOD ENDED 1/31/96
a-b 6
FUND YIELD = 2 ----- +1 -1
c-d
ADJUSTED
YIELD YIELD*
a = dividends and interest earned during ------------ --------
the month ................................ $1,879,726 $1,879,726
b = expenses (exclusive of distribution fee)
accrued during the month.................. 313,791 291,679
c = average dividend shares outstanding
during the month ......................... 54,743,589 54,743,589
d = class A maximum offering price per share
on the last day of the month ............. $7.92 $7.92
CLASS A YIELD ........................... 4.37% 5.45%
======= =====
CLASS B Y IELD ........................... 3.83% 4.97%
======= =====
TAX-EQUIVALENT YIELD: CLASS A............ 8.13%
=======
CLASS B........... 7.12%
=======
*Without voluntary expense limit.
<TABLE>
<CAPTION>
PERFORMANCE CALCULATION
COLONIAL CONNECTICUT TAX-EXEMPT FUND - CLASS A
Fiscal Year End: 1/31/96
Inception Date: 11/1/91
SINCE INCEPTION
1 YEAR ENDING 1/31/96 11/1/91 TO 1/31/96
Standard Non-Standard Standard Non-Standard
-------------- ------------------- -------------- -------------------
<S> <C> <C> <C> <C>
Initial Inv. $1,000.00 $1,000.00 $1,000.00 $1,000.00
Max. Load 4.75% 4.75%
Amt. Invested $952.50 $1,000.00 $952.50 $1,000.00
Initial NAV $7.08 $7.08 $7.14 $7.14
Initial Shares 134.534 141.243 133.403 140.056
Shares From Dist. 7.491 7.866 37.910 39.800
End of Period NAV $7.63 $7.63 $7.63 $7.63
Total Return 8.36% 13.77% 30.71% 37.23% 662
Average Annual
Total Return 8.36% 13.77% 6.50% 7.72%
</TABLE>
<TABLE>
<CAPTION>
PERFORMANCE CALCULATION
COLONIAL CONNECTICUT TAX-EXEMPT FUND - CLASS B
Fiscal Year End: 1/31/96
Inception Date: 6/8/92
SINCE INCEPTION
ONE YEAR ENDING 1/31/96 6/8/92 TO 1/31/96
Standard Non-Standard Standard Non-Standard
-------------- ------------------- -------------- -------------------
<S> <C> <C> <C> <C>
Initial Inv. $1,000.00 $1,000.00 $1,000.00 $1,000.00
Amt. Invested $1,000.00 $1,000.00 $1,000.00 $1,000.00
Initial NAV $7.08 $7.08 $7.20 $7.20
Initial Shares 141.243 141.243 138.889 138.889
Shares From Dist. 6.767 6.767 28.196 28.196
End of Period NAV $7.63 $7.63 $7.63 $7.63
CDSC 5.00% 3.00%
Total Return 7.93% 12.93% 24.49% 27.49%
Average Annual
Total Return 7.93% 12.93% 6.18% 6.88%
</TABLE>
COLONIAL CONNECTICUT TAX-EXEMPT FUND
FUND YIELD CALCULATION
(CALENDAR MONTH-END METHOD)
30-DAY BASE PERIOD ENDED 1/31/96
a 6
FUND YIELD = 2 ----- +1 -1
c-d
ADJUSTED
YIELD YIELD*
a = dividends and interest earned during ======== =========
the month ................................ $732,493 $732,493
b = expenses (exclusive of distribution fee)
accrued during the month.................. 79,127 119,793
c = average dividend shares outstanding
during the month ......................... 21,409,330 21,409,330
d = class A maximum offering price per share
on the last day of the month ............. $8.01 $8.01
CLASS A YIELD ........................... 4.62% 4.32%
======= ======
CLASS B YIELD ........................... 4.09% 3.78%
======= ======
TAX-EQUIVALENT YIELD: CLASS A............ 8.01%
=======
CLASS B............ 7.09%
=======
* Without voluntary expense limit.
<TABLE>
<CAPTION>
PERFORMANCE CALCULATION
COLONIAL FLORIDA TAX-EXEMPT FUND - CLASS A
Year End: 1/31/96
Inception Date: 02/1/93
SINCE INCEPTION
1 YEAR ENDED 1/31/96 2/1/93 TO 1/31/96
Standard Non-Standard Standard Non-Standard
----------- ------------------- ------------ ------------
<S> <C> <C> <C> <C>
Initial Inv. $1,000.00 $1,000.00 $1,000.00 $1,000.00
Max. Load 4.75% 4.75%
Amt. Invested $952.50 $1,000.00 $952.50 $1,000.00
Initial NAV $7.10 $7.10 $7.50 $7.50
Initial Shares 134.155 140.845 127.000 133.333
Shares From Dist. 7.787 8.176 23.380 24.548
End of Period NAV $7.62 $7.62 $7.62 $7.62
Total Return 8.16% 13.55% 14.59% 20.31%
Average Annual
Total Return 8.16% 13.55% 4.64% 6.36%
</TABLE>
<TABLE>
<CAPTION>
PERFORMANCE CALCULATION
COLONIAL FLORIDA TAX-EXEMPT FUND - CLASS B
Year End: 1/31/96
Inception Date: 2/1/93
SINCE INCEPTION
1 YEAR ENDED 1/31/96 2/1/93 TO 1/31/96
Standard Non-Standard Standard Non-Standard
------------ ------------------- ----------- -------------
<S> <C> <C> <C> <C>
Initial Inv. $1,000.00 $1,000.00 $1,000.00 $1,000.00
Amt. Invested $1,000.00 $1,000.00 $1,000.00 $1,000.00
Initial NAV $7.10 $7.10 $7.50 $7.50
Initial Shares 140.845 140.845 133.333 133.333
Shares From Dist. 7.080 7.080 21.080 21.080
End of Period NAV $7.62 $7.62 $7.62 $7.62
CDSC 5.00% 3.00%
Total Return 7.72% 12.72% 14.66% 17.66%
Average Annual
Total Return 7.72% 12.72% 4.67% 5.57%
</TABLE>
COLONIAL FLORIDA TAX-EXEMPT FUND
FUND YIELD CALCULATION
(CALENDAR MONTH-END METHOD)
30-DAY BASE PERIOD ENDED 1/31/96
a 6
FUND YIELD = 2 ----- +1 -1
c-d
ADJUSTED
YIELD YIELD*
a = dividends and interest earned during ======== ==========
the month ................................ $303,212 $303,212
b = expenses (exclusive of distribution fee)
accrued during the month.................. 31,788 56,696
c = average dividend shares outstanding
during the month ......................... 8,963,189 8,963,189
d = class A maximum offering price per share
on the last day of the month ............. $8.00 $8.00
CLASS A YIELD ........................... 4.59% 4.16%
======= =======
CLASS B YIELD ........................... 4.06% 3.61%
=======
TAX-EQUIVALENT YIELD: CLASS A............ 7.60%
=======
CLASS B............ 6.72%
=====
* Without voluntary expense limit.
<TABLE>
<CAPTION>
PERFORMANCE CALCULATION
COLONIAL MASSACHUSETTS TAX-EXEMPT FUND - CLASS A
Fiscal Year End: 1/31/96
Inception Date: 4/10/87
SINCE INCEPTION
1 YEAR ENDED 1/31/96 5 YEARS ENDED 1/31/96 4/10/87 TO 1/31/96
Standard Non-Standard Standard Non-Standard Standard Non-Standard
--------------- ------------ ----------- -------------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Initial Inv. $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00
Max. Load 4.75% 4.75% 4.75%
Amt. Invested $952.50 $1,000.00 $952.50 $1,000.00 $952.50 $1,000.00
Initial NAV $7.39 $7.39 $7.12 $7.12 $7.14 $7.14
Initial Shares 128.890 135.318 133.778 140.449 133.403 140.056
Shares From Dist. 7.228 7.591 48.050 50.450 105.925 111.207
End of Period NAV $8.04 $8.04 $8.04 $8.04 $8.04 $8.04
Total Return 9.44% 14.90% 46.19% 53.48% 92.42% 102.02%
Average Annual
Total Return 9.44% 14.90% 7.89% 8.95% 7.70% 8.30%
</TABLE>
<TABLE>
<CAPTION>
PERFORMANCE CALCULATION
COLONIAL MASSACHUSETTS TAX-EXEMPT FUND - CLASS B
Fiscal Year End: 1/31/96
Inception Date: 6/8/92
SINCE INCEPTION
1 YEAR ENDED 1/31/96 6/8/92 TO 1/31/96
Standard Non-Standard Standard Non-Standard
--------------- --------------------- --------------- ------------
<S> <C> <C> <C> <C>
Initial Inv. $1,000.00 $1,000.00 $1,000.00 $1,000.00
Amt. Invested $1,000.00 $1,000.00 $1,000.00 $1,000.00
Initial NAV $7.39 $7.39 $7.45 $7.45
Initial Shares 135.318 135.318 134.228 134.228
Shares From Dist. 6.538 6.538 27.878 27.878
End of Period NAV $8.04 $8.04 $8.04 $8.04
CDSC 5.00% 3.00%
Total Return 9.05% 14.05% 27.33% 30.33%
Average Annual
Total Return 9.05% 14.05% 6.84% 7.52%
</TABLE>
COLONIAL MASSACHUSETTS TAX-EXEMPT FUND
FUND YIELD CALCULATION
(CALENDAR MONTH-END METHOD)
30-DAY BASE PERIOD ENDED 1/31/96
a 6
FUND YIELD = 2 ----- +1 -1
c-d
ADJUSTED
YIELD YIELD*
a = dividends and interest earned during ======== ==========
the month ................................ $1,242,577 $1,242,577
b = expenses (exclusive of distribution fee)
accrued during the month.................. 190,482 198,418
c = average dividend shares outstanding
during the month ......................... 33,537,378 33,537,378
d = class A maximum offering price per share
on the last day of the month ............. $8.44 $8.44
CLASS A YIELD ........................... 4.50% 4.46%
======= =======
CLASS B YIELD ........................... 3.97% 3.93%
======= =======
TAX-EQUIVALENT YIELD: CLASS A............ 8.47%
=======
CLASS B............ 7.47%
=======
* Without voluntary expense limit.
<TABLE>
<CAPTION>
PERFORMANCE CALCULATION
COLONIAL MICHIGAN TAX EXEMPT FUND - CLASS A
Fiscal Year End: 1/31/96
Inception Date: 9/26/86
SINCE INCEPTION
1 YEAR ENDED 1/31/96 5 YEARS ENDED 1/31/96 9/26/86 TO 1/31/96
Standard Non-Standard Standard Non-Standard Standard Non-Standard
--------------- -------------------- --------------- ------------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Initial Inv. $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00
Max. Load 4.75% 4.75% 4.75%
Amt. Invested $952.50 $1,000.00 $952.50 $1,000.00 $952.50 $1,000.00
Initial NAV $6.66 $6.66 $6.52 $6.52 $7.14 $7.14
Initial Shares 143.018 150.150 146.089 153.374 133.403 140.056
Shares From Dist 8.119 8.523 50.041 52.538 107.754 113.126
End of Period NA $7.13 $7.13 $7.13 $7.13 $7.13 $7.13
Total Return 7.76% 13.13% 39.84% 46.82% 71.95% 80.52%
Average Annual
Total Return 7.76% 13.13% 6.94% 7.98% 5.96% 6.52%
</TABLE>
<TABLE>
<CAPTION>
PERFORMANCE CALCULATION
COLONIAL MICHIGAN TAX-EXEMPT FUND - CLASS B
Fiscal Year End: 1/31/96
Inception Date: 8/4/92
SINCE INCEPTION
1 YEAR ENDED 1/31/96 8/4/92 TO 1/31/96
Standard Non-Standard Standard Non-Standard
--------------- -------------------- --------------- ------------
<S> <C> <C> <C> <C>
Initial Inv. $1,000.00 $1,000.00 $1,000.00 $1,000.00
Amt. Invested $1,000.00 $1,000.00 $1,000.00 $1,000.00
Initial NAV $6.66 $6.66 $6.95 $6.95
Initial Shares 150.150 150.150 143.885 143.885
Shares From Dist. 7.355 7.355 27.090 27.090
End of Period NAV $7.13 $7.13 $7.13 $7.13
CDSC 5.00% 3.00%
Total Return 7.30% 12.30% 18.91% 21.91%
Average Annual
Total Return 7.30% 12.30% 5.08% 5.83%
</TABLE>
COLONIAL MICHIGAN TAX-EXEMPT FUND
FUND YIELD CALCULATION
(CALENDAR MONTH-END METHOD)
30-DAY BASE PERIOD ENDED 1/31/96
a 6
FUND YIELD = 2 ----- +1 -1
c-d
ADJUSTED
YIELD YIELD*
a = dividends and interest earned during ======== ==========
the month ................................ $271,053 $271,053
b = expenses (exclusive of distribution fee)
accrued during the month.................. 41,261 53,188
c = average dividend shares outstanding
during the month ......................... 8,265,823 8,265,823
d = class A maximum offering price per share
on the last day of the month ............. $7.49 $7.49
CLASS A YIELD ........................... 4.50% 4.25%
======= =======
CLASS B YIELD ........................... 3.96% 3.71%
======= =======
TAX-EQUIVALENT YIELD: CLASS A............ 7.81%
=======
CLASS B............ 6.87%
=======
* Without voluntary expense limit.
<TABLE>
<CAPTION>
PERFORMANCE CALCULATION
COLONIAL MINNESOTA TAX EXEMPT FUND - CLASS A
Fiscal Year End: 1/31/96
Inception Date: 9/26/86
SINCE INCEPTION
1 YEAR ENDED 1/31/96 5 YEARS ENDED 1/31/96 9/26/86 TO 1/31/96
Standard Non-Standard Standard Non-Standard Standard Non-Standard
--------------- ------------------- --------------- ------------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Initial Inv. $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00
Max. Load 4.75% 4.75% 4.75%
Amt. Invested $952.50 $1,000.00 $952.50 $1,000.00 $952.50 $1,000.00
Initial NAV $6.84 $6.84 $6.93 $6.93 $7.14 $7.14
Initial Shares 139.254 146.199 137.446 144.300 133.403 140.056
Shares From Dist. 7.829 8.221 48.051 50.452 108.141 113.534
End of Period NAV $7.35 $7.35 $7.35 $7.35 $7.35 $7.35
Total Return 8.11% 13.50% 36.34% 43.14% 77.54% 86.39%
Average Annual
Total Return 8.11% 13.50% 6.40% 7.44% 6.33% 6.88%
</TABLE>
<TABLE>
<CAPTION>
PERFORMANCE CALCULATION
COLONIAL MINNESOTA TAX-EXEMPT FUND - CLASS B
Fiscal Year End: 1/31/96
Inception Date: 8/4/92
SINCE INCEPTION
1 YEAR ENDED 1/31/96 8/4/92 TO 1/31/96
Standard Non-Standard Standard Non-Standard
--------------- ------------------- --------------- ------------
<S> <C> <C> <C> <C>
Initial Inv. $1,000.00 $1,000.00 $1,000.00 $1,000.00
Amt. Invested $1,000.00 $1,000.00 $1,000.00 $1,000.00
Initial NAV $6.84 $6.84 $7.21 $7.21
Initial Shares 146.199 146.199 138.696 138.696
Shares From Dist. 7.084 7.084 26.737 26.737
End of Period NAV $7.35 $7.35 $7.35 $7.35
CDSC 5.00% 3.00%
Total Return 7.66% 12.66% 18.59% 21.59%
Average Annual
Total Return 7.66% 12.66% 5.00% 5.75%
</TABLE>
COLONIAL MINNESOTA TAX-EXEMPT FUND
FUND YIELD CALCULATION
(CALENDAR MONTH-END METHOD)
30-DAY BASE PERIOD ENDED 1/31/96
a 6
FUND YIELD = 2 ----- +1 -1
c-d
ADJUSTED
YIELD YIELD*
a = dividends and interest earned during ======== =========
the month ................................ $258,804 $258,804
b = expenses (exclusive of distribution fee)
accrued during the month.................. 41,091 51,093
c = average dividend shares outstanding
during the month ......................... 7,598,485 7,598,485
d = class A maximum offering price per share
on the last day of the month ............. $7.72 $7.72
CLASS A YIELD ........................... 4.49% 4.28%
======= =======
CLASS B YIELD ........................... 3.96% 3.74%
======= =======
TAX-EQUIVALENT YIELD: CLASS A............ 8.12%
=======
CLASS B............ 7.17%
=======
* Without voluntary expense limit.
<TABLE>
<CAPTION>
PERFORMANCE CALCULATION
COLONIAL NEW YORK TAX EXEMPT FUND - CLASS A
Fiscal Year End: 1/31/96
Inception Date: 9/26/86
SINCE INCEPTION
1 YEAR ENDED 1/31/96 5 YEARS ENDED 1/31/96 9/26/86 TO 1/31/96
Standard Non-Standard Standard Non-Standard Standard Non-Standard
-------------- ----------------- -------------- ----------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Initial Inv. $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00
Max. Load 4.75% 4.75% 4.75%
Amt. Invested $952.50 $1,000.00 $952.50 $1,000.00 $952.50 $1,000.00
Initial NAV $6.68 $6.68 $6.60 $6.60 $7.14 $7.14
Initial Shares 142.590 149.701 144.318 151.515 133.403 140.056
Shares From Dist. 8.484 8.906 51.833 54.419 110.685 116.200
End of Period NAV $7.25 $7.25 $7.25 $7.25 $7.25 $7.25
Total Return 9.53% 14.99% 42.21% 49.30% 76.96% 85.79%
Average Annual
Total Return 9.53% 14.99% 7.30% 8.35% 6.29% 6.84%
</TABLE>
<TABLE>
<CAPTION>
PERFORMANCE CALCULATION
COLONIAL NEW YORK TAX-EXEMPT FUND - CLASS B
Fiscal Year End: 1/31/96
Inception Date: 8/4/92
SINCE INCEPTION
1 YEAR ENDED 1/31/96 8/4/92 TO 1/31/96
Standard Non-Standard Standard Non-Standard
------------- ------------------- -------------- ------------
<S> <C> <C> <C> <C>
Initial Inv. $1,000.00 $1,000.00 $1,000.00 $1,000.00
Amt. Invested $1,000.00 $1,000.00 $1,000.00 $1,000.00
Initial NAV $6.68 $6.68 $7.13 $7.13
Initial Shares 149.701 149.701 140.252 140.252
Shares From Dist. 7.743 7.743 27.771 27.771
End of Period NAV $7.25 $7.25 $7.25 $7.25
CDSC 5.00% 3.00%
Total Return 9.15% 14.15% 18.82% 21.82%
Average Annual
Total Return 9.15% 14.15% 5.06% 5.81%
</TABLE>
COLONIAL NEW YORK TAX-EXEMPT FUND
FUND YIELD CALCULATION
(CALENDAR MONTH-END METHOD)
30-DAY BASE PERIOD ENDED 1/31/96
a 6
FUND YIELD = 2 ----- +1 -1
c-d
ADJUSTED
YIELD YIELD*
a = dividends and interest earned during ======== ==========
the month ................................ $512,981 $512,981
b = expenses (exclusive of distribution fee)
accrued during the month.................. 58,840 86,550
c = average dividend shares outstanding
during the month ......................... 15,250,337 15,250,337
d = class A maximum offering price per share
on the last day of the month ............. $7.61 $7.61
CLASS A YIELD ...................... 4.74% 4.44%
======= =======
CLASS B YIELD ...................... 4.22% 3.91%
======= =======
TAX-EQUIVALENT YIELD: CLASS A....... 8.92%
=======
CLASS B...... 7.94%
=======
* Without voluntary expense limit.
<TABLE>
<CAPTION>
PERFORMANCE CALCULATION
COLONIAL NORTH CAROLINA TAX-EXEMPT FUND - CLASS A
Year End: 1/31/96
Inception Date: 9/1/93
SINCE INCEPTION
1 YEAR ENDED 1/31/96 9/1/93 TO 1/31/96
Standard Non-Standard Standard Non-Standard
------------ -------------------- ------------ ------------
<S> <C> <C> <C> <C>
Initial Inv. $1,000.00 $1,000.00 $1,000.00 $1,000.00
Max. Load 4.75% 4.75%
Amt. Invested $952.50 $1,000.00 $952.50 $1,000.00
Initial NAV $6.68 $6.68 $7.50 $7.50
Initial Shares 142.590 149.701 127.000 133.333
Shares From Dist. 7.961 8.357 18.336 19.251
End of Period NAV $7.27 $7.27 $7.27 $7.27
Total Return 9.45% 14.91% 5.66% 10.93%
Average Annual
Total Return 9.45% 14.91% 2.30% 4.38%
</TABLE>
<TABLE>
<CAPTION>
PERFORMANCE CALCULATION
COLONIAL NORTH CAROLINA TAX-EXEMPT FUND - CLASS B
Year End: 1/31/96
Inception Date: 9/1/93
SINCE INCEPTION
1 YEAR ENDED 1/31/96 9/1/93 TO 1/31/96
Standard Non-Standard Standard Non-Standard
------------ -------------------- ------------ -----------
<S> <C> <C> <C> <C>
Initial Inv. $1,000.00 $1,000.00 $1,000.00 $1,000.00
Amt. Invested $1,000.00 $1,000.00 $1,000.00 $1,000.00
Initial NAV $6.68 $6.68 $7.50 $7.50
Initial Shares 149.701 149.701 133.333 133.333
Shares From Dist. 7.202 7.202 16.523 16.523
End of Period NAV $7.27 $7.27 $7.27 $7.27
CDSC 5.00% 2.91%
Total Return 9.07% 14.07% 6.04% 8.95%
Average Annual
Total Return 9.07% 14.07% 2.45% 3.61%
</TABLE>
COLONIAL NORTH CAROLINA TAX-EXEMPT FUND
FUND YIELD CALCULATION
(CALENDAR MONTH-END METHOD)
30-DAY BASE PERIOD ENDED 1/31/96
a 6
FUND YIELD = 2 ----- +1 -1
c-d
ADJUSTED
YIELD YIELD*
a = dividends and interest earned during ======== =========
the month ................................ $157,445 $157,445
b = expenses (exclusive of distribution fee)
accrued during the month.................. 12,298 29,180
c = average dividend shares outstanding
during the month ......................... 4,777,995 4,777,995
d = class A maximum offering price per share
on the last day of the month ............. $7.63 $7.63
CLASS A YIELD ........................... 4.83% 4.25%
======= =======
CLASS B YIELD ........................... 4.31% 3.71%
======= =======
TAX-EQUIVALENT YIELD: CLASS A.... 8.67%
=======
CLASS B... 7.74%
=======
* Without voluntary expense limit.
<TABLE>
<CAPTION>
PERFORMANCE CALCULATION
COLONIAL OHIO TAX EXEMPT FUND - CLASS A
Fiscal Year End: 1/31/96
Inception Date: 9/26/86
SINCE INCEPTION
1 YEAR ENDED 1/31/96 5 YEARS ENDED 1/31/96 9/26/86 TO 1/31/96
Standard Non-Standard Standard Non-Standard Standard Non-Standard
-------------- -------------------- -------------- ------------------ -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Initial Inv. $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00
Max. Load 4.75% 4.75% 4.75%
Amt. Invested $952.50 $1,000.00 $952.50 $1,000.00 $952.50 $1,000.00
Initial NAV $6.93 $6.93 $6.88 $6.88 $7.14 $7.14
Initial Shares 137.446 144.300 138.445 145.349 133.403 140.056
Shares From Dist. 7.365 7.732 46.817 49.148 107.950 113.337
End of Period NAV $7.51 $7.51 $7.51 $7.51 $7.51 $7.51
Total Return 8.75% 14.18% 39.13% 46.07% 81.26% 90.30%
Average Annual
Total Return 8.75% 14.18% 6.83% 7.87% 6.56% 7.12%
</TABLE>
<TABLE>
<CAPTION>
PERFORMANCE CALCULATION
COLONIAL OHIO TAX-EXEMPT FUND - CLASS B
Fiscal Year End: 1/31/96
Inception Date: 8/4/92
SINCE INCEPTION
1 YEAR ENDED 1/31/96 8/4/92 TO 1/31/96
Standard Non-Standard Standard Non-Standard
-------------- -------------------- -------------- -----------
<S> <C> <C> <C> <C>
Initial Inv. $1,000.00 $1,000.00 $1,000.00 $1,000.00
Amt. Invested $1,000.00 $1,000.00 $1,000.00 $1,000.00
Initial NAV $6.93 $6.93 $7.33 $7.33
Initial Shares 144.300 144.300 136.426 136.426
Shares From Dist. 6.614 6.614 24.990 24.990
End of Period NAV $7.51 $7.51 $7.51 $7.51
CDSC 5.00% 3.00%
Total Return 8.34% 13.34% 18.22% 21.22%
Average Annual
Total Return 8.34% 13.34% 4.91% 5.66%
</TABLE>
COLONIAL OHIO TAX-EXEMPT FUND
FUND YIELD CALCULATION
(CALENDAR MONTH-END METHOD)
30-DAY BASE PERIOD ENDED 1/31/96
a 6
FUND YIELD = 2 ----- +1 -1
c-d
ADJUSTED
YIELD YIELD*
a = dividends and interest earned during ======== ==========
the month ................................ $595,511 $595,511
b = expenses (exclusive of distribution fee)
accrued during the month.................. 103,330 115,005
c = average dividend shares outstanding
during the month ......................... 17,420,550 17,420,550
d = class A maximum offering price per share
on the last day of the month ............. $7.88 $7.88
CLASS A YIELD ........................... 4.34% 4.23%
======= =======
CLASS B YIELD ........................... 3.80% 3.69%
======= =======
TAX-EQUIVALENT YIELD: CLASS A............ 7.77%
=======
CLASS B........... 6.80%
=======
* Without voluntary expense limit.
