<PAGE>
COLONIAL
MASSACHUSETTS TAX-EXEMPT FUND
ANNUAL REPORT
JANUARY 31, 1997
NOT FDIC- | MAY LOSE VALUE
INSURED | NO BANK GUARANTEE
<PAGE>
COLONIAL MASSACHUSETTS TAX-EXEMPT FUND HIGHLIGHTS
FEBRUARY 1, 1996 - JANUARY 31, 1997
INVESTMENT OBJECTIVE: Colonial Massachusetts 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 Massachusetts 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:
/X/ High monthly double tax-free income
/X/ Long-term appreciation
/X/ Emphasis on quality
PORTFOLIO MANAGER COMMENTARY: "Expectations regarding the strength of the
economy shifted throughout the course of the year, resulting in high levels of
volatility for fixed-income investments. However, Massachusetts strong and well
managed economy combined with the portfolios' focus on high quality bonds should
position the Fund to enjoy good performance in the months ahead."
- Maureen Newman
COLONIAL MASSACHUSETTS TAX-EXEMPT FUND PERFORMANCE
<TABLE>
<CAPTION>
CLASS A CLASS B
Inception dates 4/10/87 6/8/92
<S> <C> <C>
Distributions declared per share* $0.411 $0.353
SEC yields on 1/31/97** 4.54% 4.00%
Taxable-equivalent SEC yields*** 8.54% 7.53%
12-month total returns, assuming reinvestment 2.43% 1.66%
of all distributions and no sales charge or
contingent deferred sales charge (CDSC)
Net asset value per share on 1/31/97 $ 7.81 $ 7.81
</TABLE>
*A portion of the Fund's income may be subject to the alternative minimum tax.
**The 30-day SEC yields on January 31, 1997 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.
***Taxable-equivalent SEC yields are based on the maximum effective 46.8%
federal and Massachusetts income tax rates.
The Fund may at times purchase tax-exempt securities at a discount, and some or
all of this discount may be included in the Fund's ordinary income which will be
taxable when distributed.
<TABLE>
<CAPTION>
QUALITY BREAKDOWN (as of 1/31/97) TOP FIVE SECTORS (as of 1/31/97)
<S> <C> <C> <C>
AAA .......................... 43.4% General Obligations ........... 17.1%
AA ........................... 9.2% Water & Sewer ................. 14.9%
A ............................ 32.6% Education ..................... 11.5%
BBB .......................... 4.4% Transportation ................ 9.4%
Non-rated .................... 8.8% Refunded ...................... 8.1%
Cash & Equivalents ........... 1.6%
</TABLE>
Because the Fund is actively managed, quality and sector weightings will change.
Quality breakdown and sector allocations are based on total net assets. Sector
classifications used on this page are based upon Colonial's defined criteria as
used in the investment process. Industry sectors in the following financial
statements are based upon the standard industrial classifications (SIC) as
published by the U.S. Office of Management and Budget.
2
<PAGE>
PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
I am pleased to present your Fund's annual report for the fiscal year ended
January 31, 1997. This report provides information on the investment environment
of the past 12 months and on the performance of your Fund.
[PHOTO]
Harold W. Cogger
President
Long-term interest rates were volatile during the period. Signs that economic
growth was easing during the third quarter of 1996 led to a bond market rally
and declining interest rates. However, interest rates climbed once again during
December and January 1997 in response to accelerating economic activity.
Examples include a surge in construction and a sharp improvement in the trade
balance. Despite continued low levels of inflation, the Federal Reserve Board
characterized factors holding down prices as "temporary" and made clear its
willingness to strike against future anticipated inflation. This stance suggests
rising interest rates ahead.
Tax-exempt bonds outperformed the Treasurys during most of the period, as a
result of low supply and narrowing yield spreads. Fundamentals remain positive
and state credit quality has generally improved, reflecting in part increased
tax revenue collections generated by a stronger economy.
In the domestic stock market a focus on large capitalization stocks carried
market indexes to several record highs. European markets continued to experience
declining interest rates and inflation levels, conditions that may prevail until
economic activity in these nations increases.
Our economic expectations for 1997 are relatively bright and include growth at a
moderate, more sustainable rate than we saw during 1996. However, we expect
inflation adjusted interest rates to remain relatively high until questions
regarding both the Federal Reserve's monetary policy and Federal budget
negotiations are resolved.
The following report provides you with specific information on your Fund's
performance and insights from your portfolio manager. 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
March 12, 1997
Because market conditions change frequently, there can be no assurance that the
trends described in this report will continue, come to pass or affect Fund
performance.
3
<PAGE>
PORTFOLIO MANAGEMENT REPORT
MAUREEN NEWMAN is portfolio manager of Colonial Massachusetts Tax-Exempt Fund.
Ms. Newman is Vice President of Colonial Management Associates, Inc. and is the
Manager of Tax-Exempt Credit Research.
Q. WHAT WAS THE FUND'S STRATEGY DURING THE PAST 12 MONTHS?
A. Our strategy was generally conservative over the period with two main
objectives. First, we focused on shortening the maturity of the portfolio to
reduce the Fund's sensitivity to interest rates. This approach was used because
bonds with shorter maturities experience smaller price declines when interest
rates rise, as they did during much of the period. We also increased our
investments in higher coupon, premium bonds. These bonds are generally less
interest rate sensitive than bonds that sell at or below face value. Second, we
concentrated on increasing our holdings of bonds with higher ratings,
particularly AAA-rated insured bonds. This strategy was used in response to a
decline in the relative yield advantage of lower quality bonds compared to
higher quality bonds. We believe that there is greater value in owning high
quality bonds at this time.
Q. WHAT FACTORS CONTRIBUTED TO PERFORMANCE DURING THIS PERIOD?
A. The biggest factor was the volatile investment environment during the first
half of the period. Stronger than expected economic reports sent long-term
interest rates up between January and July. The increase in interest rates had a
negative effect on performance. Since the supply of Massachusetts bonds was
light during the first part of the period, it was difficult to fully implement
the strategy of reducing interest rate volatility until later in the year. Some
of the Fund's underperformance during the first six months was made up during
the second half of the period, due to strong income levels and the
implementation of the conservative strategy discussed previously.
Q. HOW IS THE STATE'S ECONOMY FARING?
A. The Massachusetts economy is doing extremely well. According to the Federal
Reserve Board, the increase in existing home sales in the second and third
quarters of 1996 was the highest rate of increase in the nation. Unemployment
levels fell to around 4% by the end of 1996, well beneath the national average.
The high technology and service sectors continued to grow strongly. The Fund's
significant investments in both state and local general obligation issues
benefited from these trends and their positive effect on Massachusetts' fiscal
position. Another area that we targeted was transportation projects, and this
should continue to be an important sector for new issuance as the Commonwealth
funds its obligations for the Central Artery project. We are also closely
monitoring developments in utility deregulation in Massachusetts. An increase in
utility competition may result in lower electric bills for employers, helping to
reduce the cost of doing business in the Commonwealth.
4
<PAGE>
Q. WHAT IS YOUR OUTLOOK FOR THE MONTHS AHEAD?
A. We believe that inflation has remained in check in spite of the economy's
strength, partially due to gains in productivity and a strong dollar. While we
do not believe we will see significant price pressure in the months ahead, we
are monitoring both the dollar and wage levels closely. A weakening dollar
and/or rising wages could indicate a potential acceleration in the inflation
rate -- a negative for bond prices. As a result, we continue to hold a cautious
outlook on the economy and interest rates. We will maintain the portfolio's
conservative structure until a clearer trend emerges.
COLONIAL MASSACHUSETTS TAX-EXEMPT FUND INVESTMENT PERFORMANCE
Change in Value of $10,000 from 4/30/87 to 1/31/97
NAV and MOP for Class A Shares
<TABLE>
<CAPTION>
Label A B C
Label CMATEF NAV MOP Lehman
<S> <C> <C> <C> <C>
1 Apr 30, 87 10000 9525 10000
2 May 31, 87 9890.293 9420.504 9950
3 Jun 30, 87 10151.96 9669.742 10243
4 Jul 31, 87 10300.54 9811.267 10347
5 Aug 31, 87 10321.75 9831.468 10370
6 Sep 30, 87 9714.391 9252.957 9988
7 Oct 31, 87 9790.227 9325.19 10023
8 Nov 30, 87 10104.66 9624.689 10285
9 Dec 31, 87 10242.3 9755.793 10434
10 Jan 31, 88 10620.32 10115.86 10806
11 Feb 29, 88 10760.41 10249.29 10920
12 Mar 31, 88 10613.6 10109.46 10793
13 Apr 30, 88 10709.82 10201.1 10875
14 May 31, 88 10637.52 10132.24 10844
15 Jun 30, 88 10904.33 10386.37 11002
16 Jul 31, 88 10970.83 10449.72 11074
17 Aug 31, 88 11022.14 10498.59 11084
18 Sep 30, 88 11152.18 10622.45 11284
19 Oct 31, 88 11362.36 10822.85 11483
20 Nov 30, 88 11287.77 10751.6 11378
21 Dec 31, 88 11420.47 10878 11495
22 Jan 31, 89 11634.5 11081.86 11732
23 Feb 28, 89 111510 10963.28 11598
24 Mar 31, 89 11498.21 10952.04 11571
25 Apr 30, 89 11748.71 11190.65 11846
26 May 31, 89 11918.24 11352.12 12091
27 Jun 30, 89 12039.15 11467.29 12256
28 Jul 31, 89 12127.72 11551.65 12423
29 Aug 31, 89 12031.91 11460.39 12301
30 Sep 30, 89 12053.64 11481.09 12264
31 Oct 31, 89 12109.56 11534.36 12414
32 Nov 30, 89 12285.58 11702.02 12631
33 Dec 31, 89 12378.37 11790.4 12735
34 Jan 31, 90 12316.13 11731.12 12675
35 Feb 28, 90 12445.19 11854.04 12788
36 Mar 31, 90 12417.18 11827.36 12791
37 Apr 30, 90 12265.04 11682.45 12699
38 May 31, 90 12608.67 12009.76 12976
39 Jun 30, 90 12704.97 12101.49 13090
40 Jul 31, 90 12928.49 12314.39 13283
41 Aug 31, 90 12664.75 12063.18 13090
42 Sep 30, 90 12617.28 12017.96 13098
43 Oct 31, 90 12788.71 12181.24 13336
44 Nov 30, 90 13090.26 12468.47 13604
45 Dec 31, 90 13168.02 12542.54 13663
46 Jan 31, 91 13338.61 12705.03 13846
47 Feb 28, 91 13473.38 12833.4 13967
48 Mar 31, 91 13533.35 12890.52 13972
49 Apr 30, 91 13726.58 13074.56 14158
50 May 31, 91 13864.74 13206.16 14284
51 Jun 30, 91 13849.29 13191.44 14270
52 Jul 31, 91 14065.21 13397.11 14444
53 Aug 31, 91 14224.29 13548.64 14634
54 Sep 30, 91 14364.55 13682.24 14825
55 Oct 31, 91 14525.47 13835.51 14958
56 Nov 30, 91 14549.15 13858.07 15000
57 Dec 31, 91 14887.01 14179.88 15322
58 Jan 31, 92 14887.12 14179.98 15357
59 Feb 29, 92 14927.35 14218.3 15362
60 Mar 31, 92 14947.2 14237.2 15368
61 Apr 30, 92 15068.66 14352.9 15504
62 May 31, 92 15272.57 14547.12 15687
63 Jun 30, 92 15517.92 14780.82 15950
64 Jul 31, 92 16012.73 15252.13 16428
65 Aug 31, 92 15867.19 15113.5 16268
66 Sep 30, 92 15950.48 15192.83 16374
67 Oct 31, 92 15740.27 14992.61 16213
68 Nov 30, 92 16119.04 15353.39 16504
69 Dec 31, 92 16313.83 15538.92 16672
70 Jan 31, 93 16504.36 15720.41 16866
71 Feb 28, 93 17081.91 16270.41 17476
72 Mar 31, 93 16951.81 16146.6 17291
73 Apr 30, 93 17101.95 16289.6 17466
74 May 31, 93 17187.78 16371.36 17564
75 Jun 30, 93 17468.02 16638.29 17857
76 Jul 31, 93 17485.93 16655.35 17880
77 Aug 31, 93 17812.3 16966.21 18253
78 Sep 30, 93 18030.02 17173.6 18461
79 Oct 31, 93 18071.87 17213.45 18497
80 Nov 30, 93 17910.23 17059.49 18333
81 Dec 31, 93 18241.88 17375.39 18720
82 Jan 31, 94 18462.57 17585.6 18934
83 Feb 28, 94 18049.32 17191.98 18444
84 Mar 31, 94 17336.13 16512.67 17693
85 Apr 30, 94 17445.63 16616.96 17843
86 May 31, 94 17599.84 16763.85 17997
87 Jun 30, 94 17501.3 16669.99 17887
88 Jul 31, 94 17821.53 16975.01 18215
89 Aug 31, 94 17861.52 17013.1 18278
90 Sep 30, 94 17573.39 16738.65 18010
91 Oct 31, 94 17167.51 16352.05 17691
92 Nov 30, 94 16731.86 15937.1 17370
93 Dec 31, 94 17202.07 16384.97 17753
94 Jan 31, 95 17817.47 16971.14 18260
95 Feb 28, 95 18317.27 17447.2 18791
96 Mar 31, 95 18477.7 17600.01 19007
97 Apr 30, 95 18516.54 17637 19030
98 May 31, 95 19043.87 18139.29 19637
99 Jun 30, 95 18737.9 17847.85 19465
100 Jul 31, 95 18849.8 17954.44 19649
101 Aug 31, 95 19109.78 18202.06 19899
102 Sep 30, 95 19271.27 18355.89 20024
103 Oct 31, 95 19659.09 18725.28 20316
104 Nov 30, 95 20073.02 19119.55 20653
105 Dec 31, 95 20360.82 19393.68 20851
106 Jan 31, 96 20471.92 19499.5 21009
107 Feb 29, 96 20227.33 19266.53 20867
108 Mar 31, 96 19855.56 18912.42 20600
109 Apr 30, 96 19763.87 18825.08 20542
110 May 31, 96 19774.74 18835.44 20534
111 Jun 30, 96 19993.69 19043.99 20758
112 Jul 31, 96 20158.92 19201.37 20946
113 Aug 31, 96 20142.97 19186.18 20941
114 Sep 30, 96 20442.71 19471.68 21234
115 Oct 31, 96 20691.49 19708.64 21474
116 Nov 30, 96 21076.44 20075.31 21867
117 Dec 31, 96 20955.3 19960.88 21775
118 Jan 31, 97 20969.4 19973.35 21816
</TABLE>
A hypothetical $10,000 investment in Class B shares made on June 8, 1992
(inception) at NAV would have been valued at $13,250 on January 31, 1997. The
same investment after deducting the applicable contingent deferred sales charge
(CDSC) would have grown to $13,050 on January 31, 1997.
The Lehman Brothers Municipal Bond Index is a broad-based, unmanaged index that
tracks the performance of the municipal bond market. Unlike mutual funds,
indexes are not investments, do not incur fees or expenses, and it is not
possible to invest in an index.
AVERAGE ANNUAL TOTAL RETURNS
As of December 31, 1996 (Most Recent Quarter End)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES
INCEPTION 4/10/87 6/8/92
NAV MOP NAV W/CDSC
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 YEAR 2.92% (1.96)% 2.16% (2.73)%
- --------------------------------------------------------------------------------
5 YEARS 7.08% 6.04% -- --
- --------------------------------------------------------------------------------
SINCE INCEPTION 7.75% 7.21% 6.35% 6.00%
- --------------------------------------------------------------------------------
</TABLE>
Past performance cannot predict future results. Return and value of an
investment will vary, resulting in a gain or loss on sale. All results shown
assume reinvestment of distributions. Net asset value (NAV) returns do not
include sales charges or CDSC. Maximum offering price (MOP) returns include the
maximum sales charge of 4.75%. The CDSC returns reflect the maximum charge of 5%
for one year and 2% since inception. If the adviser has not waived or borne
certain Fund expenses, total returns would have been lower.
Performance for different share classes will vary based on differences in sales
charges and fees associated with each class.
5
<PAGE>
INVESTMENT PORTFOLIO
JANUARY 31, 1997 (IN THOUSANDS)
<TABLE>
<CAPTION>
MUNICIPAL BONDS - 100.1% PAR VALUE
- -----------------------------------------------------------------------------------
<S> <C> <C>
EDUCATION - 14.0%
Education - 11.5%
State College Building Authority,
Series 1994 A:
7.500% 05/01/08 $ 2,000 $ 2,390
7.500% 05/01/14 1,825 2,238
Southeastern University,
Series 1995 A,
5.750% 05/01/16 1,250 1,259
State Health & Educational
Facilities Authority:
Amherst College, Series E,
6.800% 11/01/21 500 538
Berklee College of Music, Series C,
6.875% 10/01/21 1,000 1,086
Community Colleges Program, Series A,
6.600% 10/01/22 1,250 1,284
Harvard University, Series N,
6.250% 04/01/20 9,250 10,106
Tufts University, Series 1988 D,
7.700% 08/01/08 400 428
Worcester Polytechnic Institute, Series E:
6.625% 09/01/17 500 519
6.750% 09/01/11 500 536
State Industrial Finance Agency:
Babson College,
Series 1992 A,
6.375% 10/01/09 1,000 1,074
Series 1997 A,
5.250% 10/01/27 2,000 1,822
College of the Holy Cross,
5.500% 03/01/05 1,375 1,435
Concord Academy,
Series 1991,
6.900% 09/01/21 400 434
Emerson College,
Series 1991 A,
8.900% 01/01/18 500 549
Phillips Academy,
Series 1993,
5.375% 09/01/23 2,050 1,945
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/January 31, 1997
- -----------------------------------------------------------------------------------
<S> <C> <C>
University of Massachusetts
Building Authority,
Series 1991 A,
7.200% 05/01/04 $ 400 $ 456
-------
28,099
-------
School District General Obligation - 0.4%
Nauset Regional School District:
Series A:
6.400% 06/15/09 220 233
6.400% 06/15/10 220 232
Series B:
6.400% 09/15/09 260 276
6.400% 09/15/10 260 275
-------
1,016
-------
Student Loan - 2.1%
New England Educational Loan Marketing
Corp., Student Loan, Series 1993-A,
5.700% 07/01/05 5,000 5,069
-------
- -----------------------------------------------------------------------------------
HEALTH - 12.4%
Health Services - 1.5%
State Industrial Finance Agency:
Harvard Community Health Plan, Inc.,
Series 1988 B,
8.125% 10/01/17 640 686
Massachusetts Biomedical Research Corp.,
Series 1989 A2:
(a) 08/01/08 2,000 1,045
(a) 08/01/10 4,000 1,820
-------
3,551
-------
Hospitals - 6.7%
State Health & Educational
Facilities Authority:
Berkshire Health System, Series C,
6.000% 10/01/20 1,000 904
Beth Israel Hospital, Series D,
7.800% 07/01/14 250 268
Beverly Hospital, Series D,
7.300% 07/01/13 1,000 1,079
Capital Asset Program, Series 1989 F,
7.300% 10/01/18 750 816
Charlton Memorial Hospital, Series B:
7.250% 07/01/07 500 541
7.250% 07/01/13 500 541
Children's Hospital, Series E,
6.200% 10/01/16 2,000 2,037
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/January 31, 1997
- -----------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- -----------------------------------------------------------------------------------
<S> <C> <C>
HEALTH - CONT
Hospitals - cont
Dana Farber Cancer Institute:
Series C,
6.650% 12/01/15 $ 250 $ 260
Series 1995 G1,
5.500% 12/01/27 6,000 5,640
Lowell General Hospital, Series 1991 A,
8.400% 06/01/11 500 582
Medical Center of Central Mass., Series A,
7.000% 07/01/12 1,000 1,052
Newton-Wellesley Hospital, Series 1997 G,
6.000% 07/01/12(b) 1,000 1,044
Spaulding Rehabilitation Hospital, Series A,
7.625% 07/01/21 400 420
University Hospital, Series C,
7.250% 07/01/19 1,000 1,090
-------
16,274
-------
Intermediate Care Facilities - 0.1%
State Health & Educational
Facilities Authority,
Corp. for Independent Living,
8.100% 07/01/18 295 296
-------
Nursing Homes - 4.1%
Boston,
St. Joseph Nursing Care Center, Inc.
Series 1990,
10.000% 01/01/20(c) 490 536
State Health & Educational
Facilities Authority:
Deutsches Altenheim, Inc., Series A,
7.700% 11/01/31 975 1,044
Fairview Extended Care Service, Inc.,
Series 1990-A,
10.250% 01/01/21 500 565
State Industrial Finance Agency:
American Health Foundation Inc.,
Series 1989,
10.125% 03/01/19 1,785 1,879
Belmont Home Care,
Series 1995 A,
9.270% 01/01/25 2,000 2,138
GF/Massachusetts Inc.,
Series 1994,
8.300% 07/01/23 2,475 2,478
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/January 31, 1997
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
HEALTH - CONT.
Nursing Homes - cont.
Seacoast Nursing Home,
Series 1991,
9.625% 12/01/21 $1,260 $ 1,389
-------
10,029
-------
- -----------------------------------------------------------------------------------
HOUSING - 8.8%
Assisted Living/Senior - 0.5%
State Industrial Finance Agency,
Heights Crossing Ltd.,
Series 1995,
6.000% 02/01/15 1,125 1,128
-------
Multi-Family - 5.1%
Boston-Mount Pleasant
Development Corp.,
Section 8 Assisted, Series A,
6.750% 08/01/23 1,680 1,743
Framingham Housing Authority,
Beaver Terrace Apartments,
Series 1991 A,
6.600% 08/20/16 655 670
State Housing Finance Agency:
Series 1988 A,
8.400% 08/01/21 1,210 1,267
Series 1989 A,
7.600% 12/01/16 675 710
Series 1990 A,
8.150% 02/01/29 135 143
Series 1992 C,
6.875% 11/15/11 3,000 3,214
Series 1994 A,
6.750% 07/01/28 4,500 4,719
-------
12,466
-------
Single-Family - 3.2%
State Housing Finance Agency:
Series 3,
7.875% 06/01/14 400 411
Series 4,
7.375% 06/01/14 705 720
Series 5,
8.375% 06/01/15 500 513
Series 6,
8.100% 12/01/14 495 517
Series 7,
8.100% 06/01/20 420 439
Series 8,
7.700% 06/01/17 575 601
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/January 31, 1997
- -----------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- -----------------------------------------------------------------------------------
<S> <C> <C>
HOUSING - CONT
Single-Family - cont
Series 9,
8.100% 12/01/21 $ 500 $ 527
Series 12,
7.600% 12/01/13 250 261
Series 13,
7.950% 06/01/23 1,420 1,516
Series 18,
7.350% 12/01/16 1,000 1,055
Series 1987 A,
9.000% 12/01/18 215 222
Series 1987 B,
8.500% 08/01/20 10 10
Series 1988 B,
8.100% 08/01/23 455 476
Series 1989 A:
8.200% 08/01/15 245 257
8.200% 08/01/27 330 346
------
7,871
------
- -----------------------------------------------------------------------------------
OTHER - 8.9%
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 1,863
------
Public Infrastructure - 0.0%
State Industrial Finance Agency,
Series 1987 G,
7.875% 05/01/07 100 100
------
Refunded/Escrow/Special Obligations (e) - 8.1%
Bay Transportation Authority,
General Transportation System,
Series 1990-B,
7.875% 03/01/21 4,000 4,570
Boston Water & Sewer Commission,
Series 1991 A,
7.000% 11/01/18 2,700 3,034
Leominster,
7.500% 04/01/09 1,075 1,192
Lynn,
7.850% 01/15/11 1,000 1,176
Palmer,
Series 1990 B,
7.700% 10/01/10 1,000 1,129
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/January 31, 1997
- -----------------------------------------------------------------------------------
<S> <C> <C>
Southern Berkshire Regional
School District,
7.000% 04/15/11 $ 500 $ 565
State Health & Educational
Facilities Authority:
Carney Hospital, Series C,
7.750% 07/01/14 500 562
Cooley Dickinson Hospital, Series A,
7.125% 11/15/18 1,885 2,158
Framingham Union Hospital, Series B,
8.500% 07/01/20 1,000 1,144
Mt. Auburn Hospital, Series 1988 A,
7.875% 07/01/18 250 268
St. John's Hospital, Series 1990 B,
8.375% 12/01/20 500 578
Winchester Hospital, Series C,
7.550% 07/01/11 500 569
State Housing Finance Agency:
Series A,
8.700% 05/15/14 230 250
Series 1990,
9.000% 10/01/20 480 560
State Industrial Finance Agency,
Mary Ann Morse Nursing Home, Inc.,
Series 1991 I,
10.000% 01/01/21 925 1,125
University of Lowell Building
Authority,
Series 1987 A,
7.600% 11/01/11 200 210
University of Massachusetts
Building Authority,
Series 1976 A,
7.500% 05/01/11 100 115
Worcester,
6.900% 05/15/07 415 468
-------
19,673
-------
- -----------------------------------------------------------------------------------
OTHER REVENUE - 1.2%
Justice & Public Order - 0.5%
Plymouth County Correctional Facility,
Series A,
7.000% 04/01/22 1,000 1,092
-------
Manufacturing - 0.7%
State Industrial Finance Agency,
House of Bianchi Inc.,
8.750% 06/01/18 1,725 1,805
-------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/January 31, 1997
- -----------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- -----------------------------------------------------------------------------------
<S> <C> <C>
RESOURCE RECOVERY - 1.3%
Landfill - 1.0%
State Industrial Finance Agency,
Peabody Monofill Associates, Inc.,
Series 1995,
9.000% 09/01/05 $2,205 $2,329
------
Miscellaneous Disposal - 0.1%
Boston Industrial Development
Finance Authority,
Jet-A-Way, Inc.,
10.500% 01/01/11 300 333
------
Resource Recovery - 0.2%
Agawam,
Springfield Resource Recovery Project,
Series 1986,
8.500% 12/01/08 500 520
------
- -----------------------------------------------------------------------------------
TAX-BACKED - 17.1%
General Obligation - 17.1%
Amherst,
Series 1992,
6.500% 01/15/12 695 739
Andover Old Town Hall,
Series 1989,
7.700% 12/15/04 1,255 1,368
Boston,
Series 1992 A,
6.500% 07/01/12 4,340 4,666
Fall River,
7.200% 06/01/10 1,250 1,405
Groveland,
Series 1991,
6.900% 06/15/08(f) 250 272
Haverhill,
8.200% 08/15/09 935 1,016
Holyoke:
School Project Loan,
7.650% 08/01/09 500 544
Series 1996 A,
6.000% 06/15/07 1,345 1,432
Lowell,
8.400% 01/15/09 1,000 1,136
Mansfield,
6.700% 01/15/11 1,000 1,080
Milford,
Series 1996,
5.000% 08/15/15 1,390 1,294
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/January 31, 1997
- -----------------------------------------------------------------------------------
<S> <C> <C>
Nantucket,
Series 1991,
6.800% 12/01/11 $2,675 $2,932
Peabody:
6.900% 08/01/07 485 528
6.950% 08/01/08 500 544
State:
Series B,
7.000% 07/01/09(f) 4,385 5,136
Series 1991 B:
6.500% 08/01/11 1,140 1,250
6.500% 08/01/11 860 917
Series 1991 C,
6.500% 08/01/11 1,250 1,333
Series 1992 B,
6.500% 08/01/08 1,000 1,115
Series 1996 A,
6.000% 11/01/06 1,000 1,078
Swansea:
School Project Loan:
6.800% 01/15/09 250 264
6.800% 01/15/10 125 132
6.800% 01/15/11 210 222
Uxbridge,
Series 1996,
5.400% 11/15/16 1,000 974
Weymouth,
Series 1992:
6.700% 06/15/09 200 211
6.700% 06/15/10 200 211
6.700% 06/15/11 155 163
6.700% 06/15/12 140 147
Woburn,
7.200% 04/01/04 130 141
Worcester,
Series C,
5.750% 10/01/13 1,000 1,018
PR Commonwealth of Puerto Rico
Public Buildings Authority,
Series 1993 M,
5.600% 07/01/08 2,500 2,628
PR Commonwealth of Puerto Rico,
Series 1994,
6.500% 07/01/23 5,000 5,325
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/January 31, 1997
- -----------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- -----------------------------------------------------------------------------------
<S> <C> <C>
TAX-BACKED - CONT
GENERAL OBLIGATION - CONT
Virgin Islands Public Finance
Authority,
Series 1992 A,
7.000% 10/01/02 $ 250 $ 271
-------
41,492
-------
- -----------------------------------------------------------------------------------
TRANSPORTATION - 14.6%
TRANSPORTATION - 9.4%
Massachusetts Bay Transportation
Authority:
Series 1988,
7.750% 01/15/06 250 287
Series 1991 A,
7.000% 03/01/21 1,500 1,764
Series 1992 B,
6.200% 03/01/16 3,700 3,982
Series 1994 A:
7.000% 03/01/10 5,000 5,819
7.000% 03/01/11(f) 4,270 5,001
7.000% 03/01/14 1,250 1,463
State Port Authority,
Series 1993 B,
5.000% 07/01/18 5,000 4,475
-------
22,791
-------
TURNPIKE/TOLL ROAD/BRIDGE - 5.2%
PR Commonwealth of Puerto Rico
Highway & Transportation Authority:
Series W,
5.500% 07/01/09 660 678
Series 1996 Z,
6.250% 07/01/05(f) 5,500 6,071
State Highway Improvement Loan Act,
Series 1992 A,
6.000% 06/01/13 1,500 1,532
State Turnpike Authority,
Series 1993 A,
5.000% 01/01/20 5,000 4,512
-------
12,793
-------
- -----------------------------------------------------------------------------------
UTILITY - 21.8%
INVESTOR OWNED - 0.6%
State Industrial Finance Agency,
Nantucket Electric Co.,
Series 1996 A,
6.750% 07/01/05 1,400 1,565
-------
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/January 31, 1997
- -----------------------------------------------------------------------------------
<S> <C> <C>
JOINT POWER AUTHORITY - 4.8%
State Municipal Wholesale
Electric Co.:
Series 1994 A,
5.000% 07/01/17 $5,000 $ 4,531
Series 1994 A, RIB, (variable rate)
6.383% 07/01/16 4,000 3,330
Series 1994 B:
4.750% 07/01/10 2,000 1,853
4.750% 07/01/11 2,000 1,840
-------
11,554
-------
MUNICIPAL ELECTRIC - 1.5%
PR Commonwealth of Puerto Rico
Electric Power Authority:
Series 1989 O,
5.000% 07/01/12 2,000 1,850
Series 1995 Y,
7.000% 07/01/07 1,500 1,759
-------
3,609
-------
WATER & SEWER - 14.9%
Boston Water & Sewer
Commission:
Series 1992 A,
5.750% 11/01/13 1,000 1,021
Series 1993 A,
5.250% 11/01/19 4,750 4,447
Essex Sewer District,
Series 1996 A,
5.250% 06/15/18 2,000 1,910
State Industrial Finance Agency,
Massachusetts Environmental Services,
Series 1994 A,
8.750% 11/01/21 2,970 2,911
State Water Pollution Abatement Trust,
Massachusetts Water Resources Authority,
Series 1992 A:
6.500% 07/15/09 2,000 2,240
6.500% 07/15/19 5,000 5,475
Series 1993 B,
5.500% 03/01/17 1,000 971
Series 1993 C:
5.250% 12/01/15 2,750 2,626
5.250% 12/01/15 1,000 983
5.250% 12/01/20 5,025 4,648
Series 1995 A,
5.000% 08/01/14 1,500 1,401
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/January 31, 1997
- -----------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- -----------------------------------------------------------------------------------
<S> <C> <C>
UTILITY - CONT
Water & Sewer - Cont
Series 1995 B,
6.250% 12/01/13 $5,000 $ 5,525
Series 1996 A,
6.000% 02/01/06 1,000 1,071
PR Commonwealth of Puerto Rico
Aqueduct & Sewer Authority,
Series 1995,
6.250% 07/01/13 1,000 1,084
--------
36,313
--------
TOTAL INVESTMENTS (cost of $228,246)(g) 243,631
--------
- -----------------------------------------------------------------------------------
SHORT - TERM OBLIGATIONS - 1.6%
- -----------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (h)
Farmington Hills Hospital
Finance Authority,
Botsford General Hospital, Series 1991 B,
3.700% 02/15/16 800 800
Irvine Ranch Water District,
3.600% 01/01/21 1,400 1,400
Newport Beach Hoag Hospital,
3.650% 10/01/22 400 400
Niagara Mohawk Series 1985-A,
3.750% 07/01/15 1,200 1,200
Perry County,
Leaf River Forest Project,
3.650% 03/01/02 200 200
--------
TOTAL SHORT - TERM OBLIGATIONS 4,000
--------
OTHER ASSETS & LIABILITIES, NET - (1.7)% (4,267)
- -----------------------------------------------------------------------------------
NET ASSETS - 100% $243,364
--------
</TABLE>
NOTES TO INVESTMENT PORTFOLIO:
- --------------------------------------------------------------------------------
(a) Zero coupon bond.
(b) This security has been purchased on a delayed delivery basis for
settlement at a later date beyond the customary settlement time.
(c) This is a restricted security which was acquired on April 2, 1990 at a
cost of $490. This security represents 0.2% of the Fund's net assets as
of January 31, 1997.
(d) Shown parenthetically is the interest rate to be paid and the date the
Fund will begin accruing this rate.
16
<PAGE>
Investment Portfolio/January 31, 1997
- --------------------------------------------------------------------------------
(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) These securities, or a portion thereof, with a total market value of
$12,406, are being used to collateralize open futures contracts.
(g) Cost for federal income tax purposes is the same.
(h) Variable rate demand notes are considered short-term obligations.
Interest rates change periodically on specified dates. These securities
are payable on demand and are secured by either letters of credit or
other credit support agreements from banks. The rates listed are as of
January 31, 1997.
Short futures contracts open at January 31, 1997:
<TABLE>
<CAPTION>
Par value Unrealized
covered by Expiration appreciation
Type contracts month at 1/31/97
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Treasury Bond $10,000 March 136
</TABLE>
<TABLE>
<S> <C>
Acronym Name
---------------- ----------------------------
RIB Residual Interest Bond
</TABLE>
See notes to financial statements.
17
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
JANUARY 31, 1997
(in thousands except for per share amounts and footnotes)
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS
Investments at value (cost $228,246) $ 243,631
Short-term obligations 4,000
---------
247,631
Receivable for:
Interest $3,233
Fund shares sold 84
Other 32 3,349
------ ---------
Total Assets 250,980
LIABILITIES
Payable for:
Fund shares repurchased 4,340
Investments purchased 2,081
Distributions 1,072
Variation margin on futures 88
Payable to Adviser 20
Accrued:
Deferred Trustees fees 3
Other 12
------
Total Liabilities 7,616
---------
NET ASSETS $ 243,364
---------
Net asset value & redemption price per share -
Class A ($184,221/23,587) $ 7.81
---------
Maximum offering price per share - Class A
($7.81/0.9525) $ 8.20(a)
---------
Net asset value & offering price per share -
Class B ($59,143/7,574) $ 7.81(b)
---------
COMPOSITION OF NET ASSETS
Capital paid in $230,061
Undistributed net investment income 169
Accumulated net realized loss (2,387)
Net unrealized appreciation on:
Investments 15,385
Open futures contracts 136
---------
$ 243,364
---------
</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.
18
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JANUARY 31, 1997
(in thousands)
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C> <C>
Interest $ 15,573
EXPENSES
Management fee $ 1,285
Service fee 366
Distribution fee - Class B 438
Transfer agent 396
Bookkeeping fee 97
Trustees fee 25
Custodian fee 8
Audit fee 28
Legal fee 4
Registration fee 9
Reports to shareholders 14
Other 20
-------
2,690
Fees waived by the Adviser (6) 2,684
------- --------
Net Investment Income 12,889
--------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain (loss) on:
Investments 3,693
Closed futures contracts (50)
-------
Net Realized Gain
Net unrealized appreciation (depreciation) 3,643
during the period on:
Investments (11,627)
Open futures contracts 129
-------
Net Unrealized Loss (11,498)
--------
Net Loss (7,855)
--------
Net Increase in Net Assets from Operations $ 5,034
--------
</TABLE>
See notes to financial statements.
19
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
(in thousands) Year ended January 31
-------------------------
INCREASE (DECREASE) IN NET ASSETS 1997 1996
<S> <C> <C>
Operations:
Net investment income $ 12,889 $ 13,964
Net realized gain (loss) 3,643 (1,354)
Net unrealized appreciation (depreciation) (11,498) 23,521
--------- ---------
Net Increase from Operations 5,034 36,131
Distributions:
From net investment income - Class A (10,187) (11,196)
From net investment income - Class B (2,652) (2,783)
--------- ---------
(7,805) 22,152
--------- ---------
Fund Share Transactions:
Receipts for shares sold - Class A 13,570 20,583
Value of distributions reinvested - Class A 5,460 6,014
Cost of shares repurchased - Class A (36,490) (29,356)
--------- ---------
(17,460) (2,759)
--------- ---------
Receipts for shares sold - Class B 7,193 8,695
Value of distributions reinvested - Class B 1,553 1,601
Cost of shares repurchased - Class B (8,527) (8,555)
--------- ---------
219 1,741
--------- ---------
Net Decrease from Fund Share
Transactions (17,241) (1,018)
--------- ---------
Total Increase (Decrease) (25,046) 21,134
NET ASSETS
Beginning of period 268,410 247,276
--------- ---------
End of period (including undistributed
net investment income of $169 and $34,
respectively) $ 243,364 $ 268,410
--------- ---------
NUMBER OF FUND SHARES
Sold - Class A 1,752 2,677
Issued for distributions reinvested - Class A 700 780
Repurchased - Class A (4,701) (3,796)
--------- ---------
(2,249) (339)
--------- ---------
Sold - Class B 929 1,132
Issued for distributions reinvested - Class B 201 208
Repurchased - Class B (1,098) (1,106)
--------- ---------
32 234
--------- ---------
</TABLE>
See notes to financial statements.
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1997
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 Fund's investment objective is to
seek as high a level of after-tax total return, as is consistent with prudent
risk, by pursuing current income exempt from federal and Massachusetts 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 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.
21
<PAGE>
Notes to Financial Statements/January 31, 1997
- --------------------------------------------------------------------------------
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.
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>
22
<PAGE>
Notes to Financial Statements/January 31, 1997
- --------------------------------------------------------------------------------
NOTE 2. FEES AND COMPENSATION PAID TO AFFILIATES - CONT.
................................................................................
Effective January 1, 1996, the above management fee applicable to the Trust was
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 FEE: 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
reimbursement for certain out of pocket expenses.
Effective January 1, 1997 and continuing through calendar year 1997, the
Transfer Agent fee will be reduced by 0.01% in cumulative monthly increments,
resulting in a decrease in the fee from 0.14% to 0.13% annually.
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, 1997, the Fund has been
advised that the Distributor retained net underwriting discounts of $33,214 on
sales of the Fund's Class A shares and received contingent deferred sales
charges (CDSC) of $220,969 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.
23
<PAGE>
Notes to Financial Statements/January 31, 1997
- --------------------------------------------------------------------------------
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 0.75% annually of the Fund's average net
assets.
OTHER: The Fund pays no compensation to its officers, all of whom are employees
of the Adviser.
The Fund's Trustees may participate in a deferred compensation plan which may be
terminated at any time. Obligations of the plan will be paid solely out of the
Fund's assets.
NOTE 3. PORTFOLIO INFORMATION
................................................................................
INVESTMENT ACTIVITY: During the year ended January 31, 1997, purchases and sales
of investments, other than short-term obligations were $70,385,136 and
$84,525,904, respectively.
Unrealized appreciation (depreciation) at January 31, 1997, based on cost of
investments for both financial statement and federal income tax purposes was:
<TABLE>
<CAPTION>
<S> <C>
Gross unrealized appreciation $ 15,762,815
Gross unrealized depreciation (377,873)
---------------
Net unrealized appreciation $ 15,384,942
---------------
</TABLE>
Capital loss carryforwards: At January 31, 1997, 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>
2004 $ 897,000
</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.
24
<PAGE>
Notes to Financial Statements/January 31, 1997
- --------------------------------------------------------------------------------
NOTE 3. PORTFOLIO INFORMATION - CONT.
................................................................................
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 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 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 risks may
involve amounts exceeding the variation margin recognized in the Fund's
Statement of Assets and Liabilities at any given time.
NOTE 4. 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 year ended January 31, 1997.
25
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period
are as follows:
<TABLE>
<CAPTION>
Year ended Year ended
January 31 January 31
------------------------- -----------------------
1997 1996
Class A Class B Class A Class B
---------- -------- -------- --------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 8.040 $ 8.040 $ 7.390 $ 7.390
---------- -------- -------- --------
INCOME FROM
INVESTMENT OPERATIONS:
Net investment
income(a) 0.416 0.357 0.424 0.367
Net realized and
unrealized gain (loss) (0.235) (0.235) 0.650 0.650
---------- -------- -------- --------
Total from Investment
Operations 0.181 0.122 1.074 1.017
---------- -------- -------- --------
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net
investment income (0.411) (0.352) (0.424) (0.367)
---------- -------- -------- --------
Net asset value -
End of period $ 7.810 $ 7.810 $ 8.040 $ 8.040
========== ======== ======== ========
Total return(b)(c) 2.43% 1.66% 14.90% 14.05%
========== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS
Expenses 0.89%(e) 1.64%(e) 0.85%(e) 1.60%(e)
Net investment income 5.32%(e) 4.57%(e) 5.49%(e) 4.74%(e)
Fees and expenses waived
or borne by the
Adviser 0.00% 0.00% 0.06% 0.06%
Portfolio turnover 29% 29% 21% 21%
Net assets at end
of period (000) $ 184,232 $ 59,146 $207,759 $ 60,651
(a) Net of fees and expenses waived or
borne by the Adviser which
amounted to $ -- $ -- $ 0.005 $ 0.005
(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.
</TABLE>
26
<PAGE>
FINANCIAL HIGHLIGHTS - continued
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
Year ended January 31
---------------------------------------------------------------
1995 1994
Class A Class B Class A Class B
--------- ------- -------- -------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 8.130 $ 8.130 $ 7.700 $ 7.700
--------- ------- -------- -------
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income(a) 0.444 0.388 0.453 0.395
Net realized and
unrealized gain (loss) (0.738) (0.738) 0.439 0.439
--------- ------- -------- -------
Total from Investment
Operations (0.294) (0.350) 0.892 0.834
--------- ------- -------- -------
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net
investment income (0.446) (0.390) (0.462) (0.404)
In excess of net
investment income -- -- -- --
From net realized gains -- -- -- --
In excess of net
realized gains -- -- -- --
--------- ------- -------- -------
Total from Distributions
Declared to Shareholders (0.446) (0.390) (0.462) (0.404)
--------- ------- -------- -------
Net asset value -
End of period $ 7.390 $ 7.390 $ 8.130 $ 8.130
========= ======= ======== =======
Total return(c)(d) (3.49%) (4.21%) 11.86% 11.05%
========= ======= ======== =======
RATIOS TO AVERAGE NET ASSETS
Expenses 0.72% 1.47% 0.64% 1.39%
Net investment income 5.93% 5.18% 5.68% 4.93%
Fees and expenses waived
or borne by the Adviser 0.12% 0.12% 0.21% 0.21%
Portfolio turnover 58% 58% 7% 7%
Net assets at end
of period (000) $ 193,303 $53,973 $225,636 $51,819
(a) Net of fees and expenses waived or
borne by the Adviser which
amounted to $ 0.009 $ 0.009 $ 0.016 $ 0.016
(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) Annualized.
</TABLE>
27
<PAGE>
FINANCIAL HIGHLIGHTS - continued
<TABLE>
<CAPTION>
Period ended
Year ended January 31 January 31
======================= ==========
1993 1992
Class A Class B(b) Class A
- -------- ------- --------
<S> <C> <C>
$ 7.420 $ 7.450 $ 7.120
- -------- ------- --------
0.481 0.272 0.505
0.301 0.275 0.295
- -------- ------- --------
0.782 0.547 0.800
- -------- ------- --------
(0.479) (0.274) (0.500)
(0.002) (0.002) --
(0.021) (0.021) --
- -------- ------- --------
(0.502) (0.297) (0.500)
- -------- ------- --------
$ 7.700 $ 7.700 $ 7.420
======== ======= ========
10.87% 1.11(e) 11.61%
======== ======= ========
0.54% 1.29(f) 0.46%
6.38% 5.63(f) 6.89%
0.33% 0.33% 0.43%
7% 7% 14%
$186,526 $17,282 $145,957
$ 0.025 $ 0.016 $ 0.032
</TABLE>
28
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO 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 (the "Fund") (a series of Colonial Trust V) at January 31, 1997, 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, 1997 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 12, 1997
29
<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 on
most funds; $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.
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. Dividends and capital gains must be
reinvested.
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 D shares (for applicable funds), or $1 million
or more of Class A shares, may be subject to a contingent deferred sales charge.
30
<PAGE>
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial Massachusetts Tax-Exempt Fund is:
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Colonial Massachusetts Tax-Exempt Fund mails one shareholder report to each
shareholder address. If you would like more than one report, please call
Colonial at 1-800-426-3750 and additional reports will be sent to you.
This report has been prepared for shareholders of Colonial Massachusetts
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.
31
<PAGE>
[COLONIAL MUTAL FUNDS LOGO]
Mutual Funds for
Planned Portfolios
ROBERT J. BIRNBAUM
Retired (formerly Special Counsel, Dechert, Price & Rhoads; President and Chief
Operating Officer, New York Stock Exchange, Inc.)
TOM BLEASDALE
Retired (formerly Chairman of the Board and Chief Executive Officer, Shore Bank
& Trust Company)
LORA S. COLLINS
Attorney (formerly Attorney, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel)
JAMES E. GRINNELL
Private Investor (formerly Senior Vice President - Operations, The Rockport
Company)
WILLIAM D. IRELAND, JR.
Retired (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
Partner, Development Capital, L.L.C. (formerly Dean, College of Business and
Management, University of Maryland; 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) 1997
A Liberty Financial Company (NYSE: L)
One Financial Center, Boston, Massachusetts 02111-2621, 617-426-3750
MA-02/392D-0197 M (3/97)
