<PAGE>
[GRAPHIC]
COLONIAL
NORTH CAROLINA
TAX-EXEMPT FUND
SEMIANNUAL REPORT
JULY 31, 1996
NOT FDIC- MAY LOSE VALUE
INSURED NO BANK GUARANTEE
<PAGE>
COLONIAL NORTH CAROLINA TAX-EXEMPT FUND HIGHLIGHTS
FEBRUARY 1, 1996 - JULY 31, 1996
INVESTMENT OBJECTIVE: Colonial North Carolina Tax-Exempt Fund seeks as high a
level of after-tax total return, as is consistent with prudent risk, by pursuing
current income exempt from federal and North Carolina state personal income tax.
The Fund also provides opportunities for long-term appreciation from a portfolio
primarily invested in investment grade municipal bonds.
THE FUND IS DESIGNED TO OFFER:
- High monthly double-tax-free income
- Long-term appreciation
- Emphasis on quality
PORTFOLIO MANAGER COMMENTARY: "The Fund is invested in a mixture of high
quality, lower coupon bonds that could provide the potential for price
appreciation, and lower quality, high coupon bonds that could enhance cash flows
and could help support the net asset value during periods of rising interest
rates." - Robert Waas
COLONIAL NORTH CAROLINA TAX-EXEMPT FUND PERFORMANCE
<TABLE>
<CAPTION>
CLASS A CLASS B
<S> <C> <C>
Inception dates 9/1/93 9/1/93
Distributions declared per share* $0.188 $0.162
SEC yields on 7/31/96** 5.12% 4.62%
Taxable-equivalent SEC yields*** 9.19% 8.29%
Total returns, assuming reinvestment
of all distributions and no sales charge
or contingent deferred sales charge (CDSC)
6-months (0.66)% (1.03)%
Net asset value per share at 7/31/96 $ 7.03 $ 7.03
</TABLE>
*A portion of the Fund's income may be subject to the alternative minimum tax.
**The 30-day SEC yields on July 31, 1996 reflect the portfolio's earning power,
net of expenses, expressed as an annualized percentage of the maximum offering
price per share at the end of the period. If the Adviser had not waived or borne
certain Fund expenses, SEC yields would have been lower; the yield for Class A
shares would have been 4.45% and the yield for Class B shares would have been
3.92%.
***Taxable-equivalent SEC yields are based on the maximum effective 44.3%
federal and North Carolina income tax rates.
<TABLE>
<CAPTION>
QUALITY BREAKDOWN
(as of 7/31/96)
<S> <C>
AAA ............................ 53.4%
AA ............................. 22.0%
A .............................. 20.7%
Non-rated ...................... 1.9%
Cash & Equivalents ............. 2.0%
<CAPTION>
TOP FIVE SECTORS
(as of 7/31/96)
<S> <C>
Water & Sewer .................. 16.2%
Public Improvement ............. 14.5%
General Obligations ............ 14.4%
Housing ........................ 13.2%
Hospitals ...................... 12.5%
</TABLE>
Sector classifications are based upon Colonial's defined criteria as used in the
investment process. Because the Fund is actively managed, quality and sector
weightings will change.
2
<PAGE>
PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
[PHOTO]
I am pleased to present your Fund's semiannual report for the period ended July
31, 1996. Your receipt of this report provides us with the opportunity to
reflect on the investment environment of the past six months.
In the bond market, significantly stronger than expected economic indicators
early in the period stirred inflation fears and propelled long-term interest
rates upward. The Federal Reserve Board lowered short-term interest rates in
January, but failed to continue the easing trend that the market anticipated. As
a result, long-term interest rates rose during the period, eliminating almost
half of the ground gained during 1995's bond market rally. Bond market
volatility continues, based upon receipt of conflicting economic reports and
changing expectations of Federal Reserve Board activity.
While market conditions put pressure on municipal bond prices as well, there was
some good news for the tax-exempt sector. Some of the significant reasons that
municipal bonds outperformed Treasury bonds were technical, such as low supply
and strong retail market support. Others were fundamental, such as the easing of
fears generated by tax-reform proposals, particularly those promoting a flat
tax.
In the stock market, generally favorable conditions prevailed throughout most of
the period, with both large company and small company stocks posting strong
performance until July, when a price correction took place. As a result of that
correction, stock indices generally posted negative total returns for July.
Our expectations for the remainder of 1996 include a moderating economy. We do
believe that the economy will continue to grow, although at a slower pace than
was indicated earlier this year. The lack of any appreciable wage and price
pressure should put the bond market's fears of inflation to rest. Therefore, we
are optimistic that market psychology will shift and volatility will decline by
year-end.
As always, we thank you for the opportunity to help you meet your investment
goals through the Colonial family of funds.
Respectfully,
/s/ Harold W. Cogger
Harold W. Cogger
President
September 11, 1996
3
<PAGE>
PORTFOLIO MANAGEMENT REPORT
ROBERT WAAS is portfolio manager of the Colonial North Carolina Tax-Exempt Fund
and is vice president of Colonial Management Associates, Inc.
Q: WHAT WAS THE FUND'S STRATEGY DURING THE PAST SIX MONTHS?
A: We implemented a two-part strategy near the beginning of the period. First,
we reduced our investment in 30-year discount bonds that are priced to maturity
and increased our investments in 30-year premium bonds that are priced to call.
Because the call date occurs much earlier than the 30-year final maturity, the
interest rate sensitivity of callable bonds is lower, effectively the same as
that of other bonds that would mature on the call date. Second, to the extent
that we chose to own discount bonds, we exchanged those with 30-year maturities
for bonds with 15 to 20-year maturities. Both moves had the effect of increasing
the Fund's holdings of shorter effective maturities, reducing the expected price
swings in response to interest rate changes.
Q: HOW DID THE FUND'S SIX MONTH PERFORMANCE COMPARE TO THE LEHMAN BROTHERS
MUNICIPAL BOND INDEX?
A: The Fund underperformed the Lehman Brothers Municipal Bond Index, a
broad-based, unmanaged index that tracks the performance of the municipal bond
market. The Index's holdings represent many states, not just North Carolina. The
total return for the Fund's Class A shares, based on net asset value, was down
0.66%, while the return on the Index was down 0.30%. This underperformance is
attributable to the Fund's narrower range of investments, which was only
partially offset by the Fund's shorter average duration and greater coupon
income from holdings of premium, high coupon bonds.
Q: WHAT FACTORS CONTRIBUTED TO PERFORMANCE DURING THIS PERIOD?
A: The biggest factor was a number of stronger than expected economic reports
that resulted in interest rates moving up close to 100 basis points over the
period, which had a negative effect on fixed income investments. Other factors
included a tight supply of North Carolina bonds, which created a challenging
environment for implementing the Fund's strategy and shifting its focus towards
bonds with shorter effective maturities. However, higher levels of coupon income
from premium bonds acquired near the beginning of the period have enhanced total
return.
Q: HOW IS THE STATE'S ECONOMY FARING?
A: Our outlook on the State of North Carolina remains very positive. The State's
economic base continues to expand as corporations are attracted by a relatively
low cost of doing business and a high quality of life. Growth continues to
exceed the national average, while unemployment is well below the national
average. We are monitoring certain economic centers, such as Charlotte, for
infrastructure needs as economic expansion continues. While funding these
projects will increase borrowing needs, we anticipate that positive demographics
and expected population growth will be more than adequate to support the
additional debt load.
Q: WHAT IS YOUR OUTLOOK FOR THE REMAINDER OF 1996?
A: A number of recent reports have indicated stronger economic growth.
Despite these growth indicators, we have not seen any appreciable wage and price
pressure, which should calm the market's fears of inflation. We do expect
continued volatility and fluctuating interest rates through the end of the year,
with only a modest prospect for tax-exempt bonds to appreciate in price.
However, we believe that Fund shareholders should continue to receive
competitive income-oriented return during this portion of the market cycle and
that the Fund should be positioned to generate strong total returns when
interest rates decline.
4
<PAGE>
COLONIAL NORTH CAROLINA TAX-EXEMPT FUND INVESTMENT PERFORMANCE
Change in Value of $10,000 from 9/93 to 7/96
Based on Maximum Offering Price (MOP) for Class A Shares
and Applicable Contingent Deferred Sales Charges (CDSC) for Class B Shares
Class A Shares
LEHMAN
$11,475
NAV
$11,020
MOP
$10,496
NAV MOP Lehman
9/1/93 10000 9525 10000
10070 9592 10114
10061 9583 10133
9957 9484 10044
10164 9681 10256
10222 9736 10373
9900 9430 10104
9315 8872 9693
9415 8968 9775
9529 9076 9859
9477 9027 9799
9621 9164 9979
9667 9208 10014
9502 9051 9867
9253 8814 9691
9029 8600 9516
9305 8863 9725
9654 9195 10004
9991 9516 10294
10111 9631 10413
10130 9649 10425
10397 9903 10758
10208 9723 10664
10287 9798 10765
10377 9884 10901
10468 9971 10970
10665 10158 11130
10892 10375 11314
11030 10506 11423
11093 10566 11509
10973 10451 11432
10822 10308 11286
10794 10281 11254
10827 10313 11250
7/31/96 10924 10405 11372
<PAGE>
Class B Shares
LEHMAN
$11,475
NAV
$10,782
W/CDSC
$10,501
NAV MOP Lehman
9/93 10000 10000 10000
10064 10064 10114
10049 10049 10133
9938 9938 10044
10138 10138 10256
10190 10190 10373
9863 9863 10105
9274 9274 9693
9368 9368 9775
9475 9475 9860
9418 9418 9800
9554 9554 9979
9594 9594 10014
9425 9425 9867
9171 9171 9692
8943 8943 9516
9211 9211 9726
9551 9551 10004
9878 9878 10295
9991 9991 10413
10004 10004 10426
10261 10261 10758
10069 10069 10664
10140 10140 10765
10223 10223 10902
10306 10306 10971
10494 10494 11130
10711 10711 11315
10840 10840 11424
10895 10894 11510
10770 10770 11432
10615 10615 11286
10581 10581 11254
10606 10606 11250
10695 10695 11372
7/96 10782 10501 11475
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS AS
of June 30, 1996 (most recent quarter end)
5
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
Inception 9/1/93 Inception 9/1/93
NAV MOP NAV w/CDSC
<C> <C> <C> <C> <C>
1 year 7.00% 1.92% 6.21% 1.21%
Since inception 3.17% 1.41% 2.40% 1.44%
</TABLE>
The Lehman Brothers Municipal Bond Index is a broad-based, unmanaged index that
tracks the performance of the municipal bond market. The performance of the
Index does not reflect fees or expenses associated with an actual investment.
Past performance cannot predict future results. Return and value of an
investment will vary, resulting in a gain or loss on sale. All results shown
assume reinvestment of distributions. NAV return does not include sales charges
or CDSC. MOP return includes the maximum sales charge of 4.75%. The CDSC return
reflects the maximum charge of 5% for one year and 3% since inception. If the
Adviser had not waived or borne certain Fund expenses, total returns would have
been lower.
Performance for different share classes will vary based on differences in sales
charges and fees associated with each class.
5
<PAGE>
INVESTMENT PORTFOLIO
JULY 31, 1996 (UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
MUNICIPAL BONDS - 97.0% PAR VALUE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CERTIFICATES OF PARTICIPATION - 8.5%
Charlotte:
Charlotte-Mecklenburg Law Project,
Series 1993-B,
5.375% 06/01/13 $ 700 $ 681
Cityfair Parking Facility,
Series 1994-A,
6.125% 06/01/10 430 443
Durham County,
Hospital & Office Facilities,
Series 1994,
6.000% 05/01/14 1,000 1,016
Randolph County,
Randolph County Project,
Series 1995,
5.300% 06/01/15 640 603
------
2,743
------
.................................................................................................
EDUCATION - 8.8%
East Carolina University,
Series 1994,
6.200% 11/01/15 475 494
State Education Assistance Authority,
Series 1996-C,
6.350% 07/01/16 1,000 1,006
State Educational Facilities Finance
Agency, Duke University, Series C,
6.750% 10/01/21 1,235 1,340
------
2,840
------
.................................................................................................
GENERAL OBLIGATIONS - 14.2%
Lincoln County,
Series 1994,
5.100% 06/01/10 600 575
Onslow County,
Series 1995,
5.700% 03/01/16 500 497
Orange County,
Series 1994,
5.500% 02/01/14 490 474
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/July 31, 1996
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PR Commonwealth of Puerto Rico:
Series 1996,
6.500% 07/01/14 $1,000 $1,090
Series 1994:
6.400% 07/01/11 500 524
6.500% 07/01/23 500 524
State, Series 1994-A,
4.750% 02/01/13 1,000 893
------
4,577
------
....................................................................................................
HEALTH - 16.7%
HOSPITALS
Charlotte-Mecklenburg Hospital
Authority, Series 1992,
6.250% 01/01/20 1,500 1,526
Lincoln County,
Lincoln County Hospital,
9.000% 05/01/07 285 342
New Hanover County,
New Hanover Regional Medical Center,
Series 1993,
4.750% 10/01/13 500 446
State Medical Care Commission:
Mercy Hospital, Series 1992,
6.500% 08/01/15 1,000 1,046
Presbyterian Health Services Corp.,
Series 1993,
5.500% 10/01/20 360 339
St. Joseph's Hospital Project, Series 1994,
5.100% 10/01/14 555 511
University of North Carolina at
Chapel Hill, University Hospital,
Series 1996,
5.250% 02/15/19 750 691
Wake County, Series 1993,
5.125% 10/01/13 500 467
------
5,368
------
....................................................................................................
HOUSING - 13.1%
MULTI-FAMILY - 11.5%
Durham, Durham Hosiery
Mill Project, Series 1987,
7.500% 08/01/29 1,575 1,681
Eastern Carolina Regional Housing
Authority, Jacksonville New River
Apartments, Series 1994,
8.250% 09/01/14 250 251
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/July 31, 1996
- ---------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HOUSING - CONT.
MULTI-FAMILY - CONT.
North Wilkesboro Housing
Development Corp., Series 1995-A,
6.350% 10/01/22 $1,745 $1,771
------
3,703
------
SINGLE-FAMILY - 1.6%
State Housing Finance Agency,
Series W,
6.450% 09/01/14 485 501
------
......................................................................................................
PUBLIC FACILITIES IMPROVEMENT - 14.1%
Charlotte, Convention Facilities
Project, Series 1993-C,
5.250% 12/01/13(a) 1,550 1,473
Cumberland County,
Civic Center Project,
Series 1995-A,
6.400% 12/01/24(a) 2,000 2,088
Harnett County,
Harnett County Projects,
Series 1994,
6.400% 12/01/14 250 261
PR Commonwealth of Puerto Rico
Public Buildings Authority, Series 1993-M,
stepped coupon, (5.700% 07/01/98)
3.750% 07/01/16(b) 200 178
Rowan County,
Justice Center Project,
Series 1992,
6.250% 12/01/07 500 532
------
4,532
------
......................................................................................................
PUBLIC INFRASTRUCTURE - 0.8%
TURNPIKE/TOLL ROAD/BRIDGE
PR Commonwealth of Puerto Rico
Highway & Transportation Authority,
Series W,
5.500% 07/01/09 240 242
------
......................................................................................................
REFUNDED/ESCROW/SPECIAL OBLIGATIONS (c) - 3.1%
State Municipal Power Agency,
Catawba No. 1, Series 1990,
5.500% 01/01/13 1,000 1,004
------
......................................................................................................
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/July 31, 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TRANSPORTATION - 1.6%
Chapel Hill, Parking Facilities,
Series 1994,
6.450% 12/01/23 $ 500 $ 515
-------
...........................................................................................................
UTILITY - 3.6%
MUNICIPAL ELECTRIC
Concord Utilities System,
5.500% 12/01/19(a) 1,200 1,156
-------
...........................................................................................................
WATER & SEWER - 12.5% Charlotte Water & Sewer:
Series 1994,
5.800% 02/01/15 1,000 1,029
Series 1995,
5.400% 04/01/15 500 492
Fayetteville Public Works Commission,
Series 1993,
4.750% 03/01/14(a) 1,500 1,318
Mount Holly Water & Sewer,
Series 1993,
4.900% 03/01/12 120 111
PR Commonwealth of Puerto Rico
Aqueduct & Sewer Authority,
Series 1995,
6.250% 07/01/12 1,000 1,054
-------
4,004
-------
TOTAL MUNICIPAL BONDS (cost of $31,001) (d) 31,185
-------
SHORT-TERM OBLIGATIONS - 2.0%
- --------------------------------------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (e)
Craven County Industrial Facilities &
Pollution Control Financing Authority,
John Hancock Resource Recovery, Inc.,
3.600% 05/01/11 440 440
FL Pinellas County Health Facilities
Authority, Series 1985,
3.750% 12/01/15 200 200
-------
TOTAL SHORT TERM OBLIGATIONS 640
-------
OTHER ASSETS & LIABILITIES, NET - 1.0% 317
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS - 100% $32,142
-------
</TABLE>
9
<PAGE>
NOTES TO INVESTMENT PORTFOLIO:
- ---------------------------------------------------------------------------
(a) These securities, or a portion thereof, with a market value of
$6,035, are being used to collateralize open futures
contracts.
(b) Shown parenthetically is the interest rate to be paid and the
date the Fund will begin accruing this rate.
(c) 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.
(d) Cost for federal income tax purposes is the same.
(e) Variable rate demand notes are considered short-term obligations.
Interest rates change periodically on specified dates. 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 July 31, 1996.
Short futures contracts open at July 31, 1996:
<TABLE>
<CAPTION>
Par value Unrealized
covered by Expiration depreciation
Type contracts month at 07/31/96
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Treasury bond $3,200 September $ 36
</TABLE>
See notes to financial statements.
10
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
JULY 31, 1996 (UNAUDITED)
(in thousands except for per share amounts and footnotes)
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS
Investments at value (cost $31,001) $ 31,185
Short-term obligations 640
--------
31,825
Receivable for:
Interest $ 497
Fund shares sold 2
Expense reimbursement due from Adviser 5
Deferred organization expenses 13
Other 95 612
------- --------
Total Assets 32,437
LIABILITIES
Payable for:
Fund shares repurchased 138
Distributions 134
Variation margin on futures 22
Accrued Deferred Trustees fees 1
-------
Total Liabilities 295
--------
NET ASSETS $ 32,142
--------
Net asset value & redemption price per share -
Class A ($14,624/2,079) $ 7.03
--------
Maximum offering price per share - Class A
($7.03/0.9525) $ 7.38(a)
--------
Net asset value & offering price per share -
Class B ($17,518/2,491) $ 7.03(b)
--------
COMPOSITION OF NET ASSETS
Capital paid in $ 33,335
Undistributed net investment income 25
Accumulated net realized loss (1,366)
Net unrealized appreciation (depreciation) on:
Investments 184
Open futures contracts (36)
--------
$ 32,142
--------
</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 SIX MONTHS ENDED JULY 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
(in thousands)
<S> <C> <C>
INVESTMENT INCOME
Interest $ 953
EXPENSES
Management fee $ 89
Service fee 23
Distribution fee - Class B 67
Transfer agent 27
Bookkeeping fee 14
Trustees fee 6
Custodian fee 1
Audit fee 10
Legal fee 4
Registration fee 5
Reports to shareholders 2
Amortization of deferred
organization expenses 3
Other 2
-------
253
Fees and expenses waived or borne
by the Adviser (113) 140
------- -------
Net Investment Income 813
-------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain (loss) on:
Investments (69)
Closed futures contracts 307
-------
Net Realized Gain 238
Net unrealized depreciation during
the period on:
Investments (1,347)
Open futures contracts (24)
-------
Net Unrealized Depreciation (1,371)
-------
Net Loss (1,133)
-------
Net Decrease in Net Assets from Operations $ (320)
=======
</TABLE>
See notes to financial statements.
12
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
(Unaudited)
Six months Year ended
(in thousands) ended July 31 January 31
------------- ----------
INCREASE (DECREASE) IN NET ASSETS 1996 1996
<S> <C> <C>
Operations:
Net investment income $ 813 $ 1,746
Net realized gain (loss) 238 (1,167)
Net unrealized appreciation (depreciation) (1,371) 4,031
------- -------
Net Increase (Decrease) from Operations (320) 4,610
Distributions:
From net investment income - Class A (403) (852)
From net investment income - Class B (412) (894)
------- -------
(1,135) 2,864
------- -------
Fund Share Transactions:
Receipts for shares sold - Class A 690 3,464
Value of distributions reinvested - Class A 235 493
Cost of shares repurchased - Class A (1,587) (3,623)
------- -------
(662) 334
------- -------
Receipts for shares sold - Class B 1,452 3,082
Value of distributions reinvested - Class B 213 468
Cost of shares repurchased - Class B (2,132) (3,700)
------- -------
(467) (150)
------- -------
Net Increase (Decrease) from Fund
Share Transactions (1,129) 184
------- -------
Total Increase (Decrease) (2,264) 3,048
NET ASSETS
Beginning of period 34,406 31,358
------- -------
End of period (including undistributed
net investment income of $25 and $22,
respectively) $32,142 $34,406
======= =======
NUMBER OF FUND SHARES
Sold - Class A 98 495
Issued for distributions reinvested - Class A 34 70
Repurchased - Class A (227) (516)
------- -------
(95) 49
------- -------
Sold - Class B 208 440
Issued for distributions reinvested - Class B 30 67
Repurchased - Class B (304) (521)
------- -------
(66) (14)
------- -------
</TABLE>
See notes to financial statements.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1996 (UNAUDITED)
NOTE 1. INTERIM FINANCIAL STATEMENTS
................................................................................
In the opinion of management of Colonial North Carolina Tax-Exempt Fund (the
Fund), a series of Colonial Trust V, the accompanying financial statements
contain all normal and recurring adjustments necessary for the fair presentation
of the financial position of the Fund at July 31, 1996, and the results of its
operations, the changes in its net assets and the financial highlights for the
six months then ended.
NOTE 2. ACCOUNTING POLICIES
................................................................................
ORGANIZATION: The Fund is a non-diversified portfolio of a Massachusetts
business trust, registered under the Investment Company Act of 1940, as amended,
as an open-end management investment company. The Fund's investment objective is
to seek as high a level of after-tax total return, as is consistent with prudent
risk. 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 revenue and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies 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.
14
<PAGE>
Notes to Financial Statements/July 31, 1996
- --------------------------------------------------------------------------------
The Fund may trade securities on other than normal settlement terms. This may
increase the risk if the other party to the transaction fails to deliver and
causes the Fund to subsequently invest at less advantageous prices.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS: All income,
expenses (other than the Class B distribution fee), realized and unrealized
gains (losses), are allocated to each class proportionately on a daily basis for
purposes of determining the net asset value of each class.
Class B per share data and ratios are calculated by adjusting the expense and
net investment income per share data and ratios for the Fund for the entire
period by the annualized 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 $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.
15
<PAGE>
Notes to Financial Statements/July 31, 1996
- --------------------------------------------------------------------------------
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES
................................................................................
MANAGEMENT FEE: Colonial Management Associates, Inc. (the Adviser) is the
investment Adviser of the Fund and furnishes accounting and other services and
office facilities for a monthly fee based on 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.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES: Colonial Investment
Services, Inc. (the Distributor) an affiliate of the Adviser, is the Fund's
principal underwriter. For the six months ended July 31, 1996, the Fund has been
advised that the Distributor retained net underwriting discounts of $2,265 on
sales of the Fund's Class A shares and received contingent deferred sales
charges (CDSC) of $56,534 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>
16
<PAGE>
Notes to Financial Statements/July 31, 1996
- --------------------------------------------------------------------------------
The CDSC and the fees received from the 12b-1 plan are used principally as
repayment to the Distributor for amounts paid by the Distributor to dealers who
sold such shares.
EXPENSE LIMITS: The Adviser has agreed, until further notice, to waive fees and
bear certain Fund expenses to the extent that total expenses (exclusive of
service and distribution fees, brokerage commissions, interest, taxes, and
extraordinary expenses, if any) exceed 0.30% annually of the Fund's average net
assets.
OTHER: The Fund pays no compensation to its officers, all of whom are employees
of the Adviser.
The Fund's Trustees may participate in a deferred compensation plan which may be
terminated at any time. Obligations of the plan will be paid solely out of the
Fund's assets.
NOTE 4. PORTFOLIO INFORMATION
................................................................................
INVESTMENT ACTIVITY: During the six months ended July 31, 1996, purchases and
sales of investments, other than short-term obligations, were $5,100,153 and
$6,191,880, respectively.
Unrealized appreciation (depreciation) at July 31, 1996, based on cost of
investments for both financial statement and federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation $ 632,382
Gross unrealized depreciation (448,281)
----------
Net unrealized appreciation $ 184,101
----------
</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.
17
<PAGE>
Notes to Financial Statements/July 31, 1996
- --------------------------------------------------------------------------------
NOTE 4. PORTFOLIO INFORMATION - CONT.
................................................................................
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
The Fund may purchase or sell municipal and Treasury bond futures contracts and
purchase and write options on futures. The Fund will invest in these instruments
to hedge against the effects of changes in 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
Statement of Assets and Liabilities at any given time.
NOTE 5. LINE OF CREDIT
................................................................................
The Fund may borrow up to 10% of its net assets under a line of credit for
temporary or emergency purposes. Any borrowings bear interest at one of the
following options determined at the inception of the loan: (1) federal funds
rate plus 1/2 of 1%, (2) the lending bank's base rate or (3) IBOR offshore loan
rate plus 1/2 of 1%. There were no borrowings under the line of credit during
the six months ended July 31, 1996.
18
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
(Unaudited)
Six months ended
July 31 Year ended January 31
-------------------------- -----------------------
1996 1996
Class A Class B Class A Class B
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 7.270 $ 7.270 $ 6.680 $ 6.680
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income (a) 0.188 0.162 0.386 0.334
Net realized and
unrealized gain (loss) (0.240) (0.240) 0.588 0.588
------- ------- ------- -------
Total from Investment
Operations (0.052) (0.078) 0.974 0.922
------- ------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment
income (0.188) (0.162) (0.384) (0.332)
------- ------- ------- -------
Net asset value -
End of period $ 7.030 $ 7.030 $ 7.270 $ 7.270
======= ======= ======= =======
Total return (b)(c) (0.66%)(d) (1.03%)(d) 14.91% 14.07%
======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS
Expenses 0.44% (e)(f) 1.19% (e)(f) 0.33%(e) 1.08%(e)
Net investment income 5.34% (e)(f) 4.59% (e)(f) 5.47%(e) 4.72%(e)
Fees and expenses waived
or borne by the Adviser 0.69% (f) 0.69% (f) 0.76% 0.76%
Portfolio turnover 15% (d) 15% (d) 34% 34%
Net assets at end
of period (000) $14,624 $17,518 $15,813 $18,593
(a) Net of fees and expenses waived or borne by the Adviser which amounted to:
$ 0.024 $ 0.024 $ 0.053 $ 0.053
</TABLE>
(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) Not annualized.
(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
(f) Annualized.
19
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
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
--------------------- ----------------------
1995 1994 (b)
Class A Class B Class A Class B
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 7.500 $ 7.500 $ 7.500 $ 7.500
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income (a) 0.396 0.345 0.164 0.141
Net realized and
unrealized gain (loss) (0.822) (0.822) -- --
------- ------- ------- -------
Total from Investment
Operations (0.426) (0.477) 0.164 0.141
------- ------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment
income (0.394) (0.343) (0.164) (0.141)
------- ------- ------- -------
Net asset value -
End of period $ 6.680 $ 6.680 $ 7.500 $ 7.500
======= ======= ======= =======
Total return (c)(d) (5.55%) (6.27%) 2.22%(e) 1.90%(e)
======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS
Expenses 0.12% 0.87% 0.10%(f) 0.85%(f)
Net investment income 5.83% 5.08% 4.91%(f) 4.16%(f)
Fees and expenses waived
or borne by the Adviser 0.93% 0.93% 1.20%(f) 1.20%(f)
Portfolio turnover 37% 37% 1%(f) 1%(f)
Net assets at end
of period (000) $14,189 $17,169 $13,710 $ 9,934
(a) Net of fees and expenses waived or borne by the Adviser which amounted to:
$ 0.063 $ 0.063 $ 0.040 $ 0.040
</TABLE>
(b) The Fund commenced investment operations on September 1, 1993.
(c) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(d) Had the Adviser not waived or reimbursed a portion of expenses, total return
would have been reduced.
(e) Not annualized.
(f) Annualized.
20
<PAGE>
THE COLONIAL FAMILY OF MUTUAL FUNDS
MUTUAL FUNDS FOR PLANNED PORTFOLIOS
Colonial offers a broad range of mutual funds, with objectives ranging from high
current income to long-term growth. All Colonial funds are managed by seasoned
professionals who bring their years of experience to the job of managing your
money.
EQUITY FUNDS
Colonial Newport Tiger Cub Fund
Colonial Newport Tiger Fund
Colonial Newport Japan Fund
Colonial International Fund for Growth
Colonial Global Equity Fund
Colonial Global Natural Resources Fund
Colonial Utilities Fund
Colonial Strategic Balanced Fund
Colonial Small Stock Fund
Colonial Growth Shares Fund
Colonial U.S. Fund for Growth
The Colonial Fund
Colonial Global Utilities Fund
CORPORATE BOND FUNDS
Colonial High Yield Securities Fund
Colonial Strategic Income Fund
Colonial Income Fund
U.S. GOVERNMENT FUNDS
Colonial Federal Securities Fund
Colonial U.S. Government Fund
Colonial Adjustable Rate U.S. Government Fund
Colonial Government Money Market Fund
MUNICIPAL BOND FUNDS
Colonial High Yield Municipal Fund
Colonial State Tax-Exempt Funds (California, Connecticut, Florida,
Massachusetts, Michigan, Minnesota, New York, North Carolina, Ohio)
Colonial Tax-Exempt Fund
Colonial Tax-Exempt Insured Fund
Colonial Intermediate Tax-Exempt Fund
Colonial Short-Term Tax-Exempt Fund
Colonial Municipal Money Market Fund
Please consult your full-service financial adviser to determine how investing in
specific Colonial funds may meet your unique needs.
21
<PAGE>
SHAREHOLDER SERVICES
TO MAKE INVESTING EASIER
Colonial has one of the most extensive selections of shareholder services
available. Your financial adviser can help you arrange for any of these
services, or you can call Colonial directly at 1-800-345-6611.
AFFORDABLE ADDITIONAL INVESTMENTS: Add to your account with as little as $50;
$25 for an IRA account.
FREE EXCHANGES*: Exchange all or part of your account into the same share class
of another Colonial fund, by phone or mail, as your needs change over time.
EASY ACCESS TO YOUR MONEY*: Make withdrawals from your account by phone, by mail
or, for certain funds, by check.
ONE-YEAR REINSTATEMENT PRIVILEGE: If you need access to your money, but then
choose to return it to Colonial within one year, you can reinvest in any
Colonial fund of the same share class without any penalty or sales charge.
FUNDAMATIC: Make periodic investments as low as $50 from your checking account
to your Colonial account.
SYSTEMATIC WITHDRAWAL PLAN (SWP): Receive monthly, quarterly, or semiannual
payments via check or bank transmission. There is a $5,000 account value
required, but no minimum for the payment amount. The maximum annual withdrawal
is 12% of account balance at time SWP is established. SWPs by check are
processed on the 10th of each month.
AUTOMATED DOLLAR COST AVERAGING: Transfer money on a monthly basis from any
Colonial fund with a balance of $5,000 into the same share class of up to four
other Colonial funds. Minimum for each transfer is $100.
LOW COST IRAs: Choose from a broad range of retirement plans,
including IRAs.
* Redemptions and exchanges are made at the next determined net asset value
after the request is received by Colonial. Proceeds may be more or less than
your original cost. The exchange privilege may be terminated at any time.
Investors who purchase Class B or Class D shares (for applicable funds), or $1
million or more of Class A shares, may be subject to a contingent deferred sales
charge.
22
<PAGE>
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial North Carolina Tax-Exempt Fund is:
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Colonial North Carolina Tax-Exempt Fund mails one shareholder report to each
shareholder address. If you would like more than one report, please call our
Literature Department at 1-800-248-2828 and additional reports will be sent to
you.
This report has been prepared for shareholders of Colonial North Carolina
Tax-Exempt Fund. This report may also be used as sales literature when preceded
or accompanied by the current prospectus which provides details of sales
charges, investment objectives, and operating policies of the Fund.
23
<PAGE>
[COLONIAL MUTUAL FUNDS LOGO]
Mutual Funds for
Planned Portfolios
TRUSTEES
ROBERT J. BIRNBAUM
Trustee (formerly Special Counsel, Dechert, Price & Rhoads; President and Chief
Operating Officer, New York Stock Exchange, Inc.)
TOM BLEASDALE
Trustee (formerly Chairman of the Board and Chief Executive Officer, Shore Bank
& Trust Company)
LORA S. COLLINS
Attorney, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
JAMES E. GRINNELL
Private Investor (formerly Senior Vice President-Operations, The Rockport
Company)
WILLIAM D. IRELAND, JR.
Trustee (formerly Chairman of the Board, Bank of New England-Worcester)
RICHARD W. LOWRY
Private Investor (formerly Chairman and Chief Executive Officer, U.S. Plywood
Corporation)
WILLIAM E. MAYER
Dean, College of Business and Management, University of Maryland (formerly Dean,
Simon Graduate School of Business, University of Rochester; Chairman and Chief
Executive Officer, CS First Boston Merchant Bank; and President and Chief
Executive Officer, The First Boston Corporation)
JAMES L. MOODY, JR.
Chairman of the Board, Hannaford Bros. Co. (formerly Chief Executive Officer,
Hannaford Bros. Co.)
JOHN J. NEUHAUSER
Dean, Boston College School of Management
GEORGE L. SHINN
Financial Consultant (formerly Chairman, Chief Executive Officer and Consultant,
The First Boston Corporation)
ROBERT L. SULLIVAN
Management Consultant (formerly Management Consultant, Saatchi and Saatchi
Consulting Ltd. and Principal and International Practice Director, Management
Consulting, Peat Marwick Main & Co.)
SINCLAIR WEEKS, JR.
Chairman of the Board, Reed & Barton Corporation
COLONIAL INVESTMENT SERVICES, INC., Distributor (C) 1996
One Financial Center, Boston, Massachusetts 02111-2621, 617-426-3750
NC-03/514C-0796 M (9/96)
