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[logo]
COLONIAL
MINNESOTA TAX-EXEMPT FUND
[graphic omitted]
ANNUAL REPORT
JANUARY 31, 1997
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NOT FDIC- MAY LOSE VALUE
INSURED NO BANK GUARANTEE
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COLONIAL MINNESOTA TAX-EXEMPT FUND HIGHLIGHTS
FEBRUARY 1, 1996 - JANUARY 31, 1997
INVESTMENT OBJECTIVE: Colonial Minnesota 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 Minnesota 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: "The past 12 months were volatile for fixed income
investments. Fluctuating interest rates caused the bond market to cycle up and
down over the period. However, low inflation combined with Minnesota's strong
and well-managed economy positions the Fund to enjoy good performance in the
months ahead." -- Brian Hartford
COLONIAL MINNESOTA TAX-EXEMPT FUND PERFORMANCE
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CLASS A CLASS B
Inception dates 9/26/86 8/4/92
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Distributions declared per share* $0.367 $0.314
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SEC yields on 1/31/97** 4.69% 4.16%
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Taxable-equivalent SEC yields*** 8.49% 7.53%
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12-month total returns, assuming reinvestment 2.16% 1.40%
of all distributions and no sales charge or
contingent deferred sales charge (CDSC)
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Net asset value per share on 1/31/97 $7.13 $7.13
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*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 44.7%
federal and Minnesota 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.
QUALITY BREAKDOWN (as of 1/31/97) TOP FIVE SECTORS (as of 1/31/97)
................................. .......................................
AAA .................65.6% Hospitals ........................20.3%
AA ..................17.8% General Obligations ..............19.6%
A ................... 5.1% Joint Power Authority ............12.6%
BBB ................. 4.5% Refunded .........................12.5%
CCC ................. 1.1% School General Obligations .......11.7%
Non rated ........... 5.1%
Cash & Equivs ....... 0.8%
Because the Fund is actively managed, quality and sector weightings will change.
Quality breakdown and sector classifications are based upon 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 classification (SIC)
as published by the U.S. Office of Management and Budget.
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PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
[Photo of Harold W. Cogger]
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.
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.
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PORTFOLIO MANAGEMENT REPORT
BRIAN HARTFORD is portfolio manager of the Colonial Minnesota Tax-Exempt Fund.
Mr. Hartford is vice president of Colonial Management Associates, Inc. and is
the Quantitative Risk Manager for Colonial's tax-exempt investments.
Q. WHAT WAS THE FUND'S STRATEGY DURING THE PAST 12 MONTHS?
A. Our core strategy consisted of increasing the Fund's credit quality and
decreasing the Fund's maturity in response to market conditions. While we
started the year with a positive interest rate outlook, stronger than expected
economic reports led to rising interest rates early in the period. At that time
we reduced the Fund's interest rate sensitivity. Midway through the year, signs
of an economic slowdown coupled with continued low levels of inflation led us to
improve our outlook. We increased the Fund's sensitivity to interest rates,
permitting us to take advantage of declining interest rates during the autumn
months. Despite some reversal of the bond market rally in December and January,
our fundamental outlook has remained relatively unchanged.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE DURING THE PERIOD?
A. Interest rate volatility had a significant impact on the Fund's performance.
Rising interest rates during the first half had a negative effect on fixed
income investments. The portfolio was overweighted in zero-coupon bonds and
these securities are more interest rate sensitive and experience greater price
declines when rates rise. However, a number of investments benefited from the
strong economy and generated positive returns for the Fund. These holdings
include Von Ruden Manufacturing, a producer of lighting systems, Diamond Brands,
a match manufacturer, and TL Systems, a producer of brake parts. The Fund also
profited from its position in housing revenue bonds; repayment is backed by
single- and multi-family housing owners' mortgage payments. These bonds did well
because property owners are less likely to refinance and prepay their mortgages
in a rising interest rate environment.
Q. HOW IS THE STATE'S ECONOMY FARING?
A. Minnesota's economy is doing well. It grew at a stronger pace than the nation
during the year. The State's diverse economy, low unemployment and conservative
budget processes have resulted in a strong financial position and a moderate
debt burden. Minnesota is positioned well to weather a cyclical decline in
economic activity. We continued to focus the Fund's investment activity in the
high growth Minneapolis/St. Paul metropolitan area. We decreased the Fund's
holdings in electric utility bonds because potential deregulation in the
industry may result in increased competition and decreased financial flexibility
for electric power generators.
Q. WHAT IS YOUR OUTLOOK FOR THE MONTHS AHEAD?
A. Our investment outlook remains fairly positive. We should continue to see
moderate levels of economic growth with subdued inflation pressures through the
first half of 1997. We do not believe there will be significant price pressures
in the months ahead and are hopeful the market will reconcile continued slow
economic growth and a low level of inflation. While this could result in lower
interest rates in 1997, we will be maintaining our core strategy until we see
clearer market trends.
COLONIAL MINNESOTA TAX-EXEMPT FUND'S INVESTMENT PERFORMANCE
Change in Value of $10,000 from 1/31/87 to 1/31/97
Based on NAV and MOP for Class A Shares
Date NAV MOP Lehman
---- --- --- ------
Jan 31, 87 10000 9525 10,000
Apr 30, 87 9955.181 9482.31 9,444
Jul 31, 87 9616.53 9159.745 9,771
Oct 31, 87 9151.348 8716.658 9,466
Jan 31, 88 10046.46 9569.252 10,205
Apr 30, 88 10094.86 9615.352 10,270
Jul 31, 88 10244.79 9758.159 10,458
Oct 31, 88 10548.63 10047.57 10,884
Jan 31, 89 10764.62 10253.3 11,080
Apr 30, 89 10905 10387.01 11,187
Jul 31, 89 11270.51 10735.16 11,732
Oct 31, 89 11251.63 10717.18 11,724
Jan 31, 90 11422.26 10879.7 11,970
Apr 30, 90 11498.25 10952.09 11,993
Jul 31, 90 11988.43 11418.98 12,545
Oct 31, 90 12035.16 11463.49 12,594
Jan 31, 91 12416.38 11826.6 13,076
Apr 30, 91 12660.6 12059.22 13,371
Jul 31, 91 12854.58 12243.98 13,640
Oct 31, 91 13180.93 12554.83 14,126
Jan 31, 92 13451.01 12812.09 14,502
Apr 30, 92 13606.71 12960.4 14,642
Jul 31, 92 14273.84 13595.84 15,514
Oct 31, 92 14056.3 13388.62 15,311
Jan 31, 93 14581.75 13889.12 15,928
Apr 30, 93 15032.68 14318.63 16,494
Jul 31, 93 15312.81 14585.45 16,886
Oct 31, 93 15779.67 15030.14 17,468
Jan 31, 94 16130.63 15364.43 17,881
Apr 30, 94 15299.51 14572.79 16,850
Jul 31, 94 15617.94 14876.09 17,202
Oct 31, 94 15180.16 14459.1 16,707
Jan 31, 95 15658.91 14915.12 17,245
Apr 30, 95 16253.77 15481.72 17,971
Jul 31, 95 16413.68 15634.03 18,557
Oct 31, 95 17021.1 16212.6 19,186
Jan 31, 96 17772.55 16928.36 19,840
Apr 30, 96 17176.06 16360.2 19,399
Jul 31, 96 17554.3 16720.47 19,781
Oct 31, 96 17980.86 17126.77 20,279
Jan 31, 97 18157.19 17294.73 20,603
A $10,000 investment in Class B shares made on August 4, 1992 (inception) at NAV
would have been valued at $12,329 on January 31, 1997. The same investment after
deducting the applicable contingent deferred sales charge (CDSC) would have
grown to $12,132 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)
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CLASS A SHARES CLASS B SHARES
INCEPTION 9/26/86 8/4/92
NAV MOP NAV W/CDSC
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1 YEAR 3.16% (1.74)% 2.39% (2.51)%
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5 YEARS 6.26% 5.23% -- --
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10 YEARS 6.44% 5.93% -- --
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SINCE INCEPTION 6.50% 5.99% 4.94% 4.55%
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Past performance cannot predict future results. Returns 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 for Class B shares.
Performance for different share classes will vary based on differences in sales
charges and fees associated with each class.
<PAGE>
INVESTMENT PORTFOLIO
JANUARY 31, 1997 (IN THOUSANDS)
MUNICIPAL BONDS - 97.9% PAR VALUE
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EDUCATION - 14.5%
EDUCATION - 2.8%
University of Minnesota,
Series 1996 A:
5.750% 07/01/14 $ 500 $ 513
5.750% 07/01/17 1,000 1,015
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1,528
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LOCAL GENERAL OBLIGATIONS - 11.7%
Bagley Independent School District
No. 162, Series 1994,
4.850% 02/01/12 750 694
Montevideo Independent School
District No. 129, Series 1993,
4.900% 02/01/10 400 379
New Prague Independent School
District No. 721, Series 1996 A,
5.000% 02/01/16 2,000 1,860
North St. Paul & Maplewood Unified
School District, Series 1996 A,
5.125% 02/01/25 2,000 1,848
Roseau Independent School
District No. 682, Series 1991,
7.000% 02/01/14 200 213
Rosemount Independent School
District No. 196, Series 1994 B,
(a) 06/01/10 2,765 1,344
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6,338
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HEALTHCARE - 20.3%
HOSPITALS
Minneapolis-St. Paul Housing &
Redevelopment Authority, Healthspan,
Series 1993 A,
4.750% 11/15/18 (b) 4,410 3,837
Princeton, Fairview Hospital,
Series 1991 C,
6.250% 01/01/21 300 311
Red Wing, River Region Group,
Series 1993 A:
6.400% 09/01/12 200 201
6.500% 09/01/22 300 301
Rochester, Mayo Medical
Center, Series 1992 I,
5.900% 11/15/09 2,000 2,115
St. Cloud Hospital,
Series 1996 B,
5.000% 07/01/20 2,800 2,531
St. Louis Park, Healthsystem, Inc.,
Series 1993 A,
5.200% 07/01/23 1,620 1,499
St. Paul Housing & Redevelopment
Authority, Healtheast Project,
Series 1993 A,
6.625% 11/01/17 250 254
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11,049
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HOUSING - 8.8%
ASSISTED LIVING/SENIOR - 0.5%
Roseville, Care Institute, Inc.,
Series 1993,
7.750% 11/01/23 300 284
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MULTI-FAMILY - 2.8%
Eden Prairie, Preserve Place Apartments,
Series 1987,
8.000% 07/01/28 650 668
Lakeville, Southfork Apartment Project,
Series 1989 A,
9.875% 02/01/20 200 202
Minneapolis, Riverplace
Project, Series 1987 A,
7.100% 01/01/20 255 262
Washington County Housing &
Redevelopment Authority,
Cottages of Aspen, Series 1992,
9.250% 06/01/22 185 200
White Bear Lake, Birch Lake Townhomes
Project, Series 1989 A,
9.750% 07/15/19 200 201
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1,533
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SINGLE FAMILY - 5.5%
Chisago & Stearns Counties,
Series 1994 B,
7.050% 09/01/27 1,500 1,594
Dakota County Housing &
Redevelopment Authority,
Series 1986,
7.200% 12/01/09 75 78
Minneapolis-St. Paul Housing Board,
Series 1987 C,
8.875% 11/01/18 380 394
State Housing Finance Agency:
Series 1987 A,
8.500% 02/01/17 25 26
Series 1987 C,
9.000% 08/01/18 600 613
Series 1988 C,
8.500% 07/01/19 25 26
Series 1988 D,
8.050% 08/01/18 160 163
Washington County Housing &
Redevelopment Authority,
City of Cottage Grove, Series 1986,
7.600% 12/01/11 80 80
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2,974
--------
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OTHER - 13.5%
PUBLIC INFRASTRUCTURE - 1.0%
Minneapolis Community Development Agency:
Series 1987 III,
8.625% 12/01/27 260 269
Series 1991 1,
8.000% 12/01/16 250 264
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533
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REFUNDED/ESCROW/SPECIAL OBLIGATIONS (c) - 12.5%
Brainerd Independent School District No. 181,
Series 1991 A,
7.000% 06/01/11 200 218
Burnsville, Fairview Community Hospital,
Series 1982 A,
(a) 05/01/12 (b) 2,145 885
Dakota & Washington Counties
Housing & Redevelopment Authority,
Series 1988,
8.150% 09/01/16 235 295
Delano Independent School
District No. 879,
Series 1990:
7.250% 02/01/09 100 110
7.250% 02/01/10 100 110
Faribault County,
Series 1988:
7.400% 04/01/06 65 65
7.400% 04/01/09 25 25
Moorhead Residential,
7.100% 08/01/11 20 23
New York Mills Independent School
District No. 553, Series 1992 A,
6.850% 02/01/18 210 231
Owatonna Independent School
District No. 761, Series 1990:
7.100% 02/01/09 115 122
7.100% 02/01/10 120 127
7.100% 02/01/11 130 138
Rockford Independent School
District No. 883, Series A,
7.100% 12/15/10 400 424
Southern Minnesota Municipal
Power Agency, Series 1992 A,
5.750% 01/01/18 500 514
St. Cloud Hospital, Series 1990 B,
7.000% 07/01/20 150 168
St. Louis Park, Methodist Hospital,
Series 1990 C,
7.250% 07/01/18 165 183
St. Paul, Series 1988 A,
8.000% 12/01/08 250 267
State Higher Education Facilities
Authority:
Hamline University, Series 3 K,
6.600% 06/01/08 250 273
University of St. Thomas:
Series 2 O,
7.600% 10/01/07 200 212
Series 3 C,
7.100% 09/01/10 100 110
State Public Facilities
Authority:
Series 1989 A,
7.000% 03/01/09 100 108
Series 1990 A,
7.100% 03/01/12 300 329
Series 1991 A,
6.950% 03/01/13 200 222
Virginia, Series 1989 B:
7.500% 02/01/07 100 104
7.500% 02/01/08 100 104
Western Minnesota Municipal
Power Agency, Series 1983 A,
9.750% 01/01/16 1,000 1,419
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6,786
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OTHER REVENUE - 6.3%
AMUSEMENTS & RECREATION - 0.5%
Metropolitan Council,
Hubert H. Humphrey Metrodome,
Series 1992,
6.000% 10/01/09 300 310
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MANUFACTURING - 3.0%
Brooklyn Park, TL Systems
Corp., Series 1991,
10.000% 09/01/16 260 320
Buffalo, Von Ruden Manufacturing, Inc.,
Series 1989,
10.500% 09/01/14 540 599
Cloquet,
Diamond Brands, Inc.,
9.000% 06/01/02 700 705
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1,624
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OTHER REVENUE - 2.8%
Duluth Seaway Port Authority,
Cargill Inc., Series 1993 A,
5.750% 12/01/16 1,500 1,513
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RESOURCE RECOVERY - 0.5%
MISCELLANEOUS DISPOSABLE
Hubbard County, Potlach
Corp., Series 1987 A,
7.375% 08/01/13 285 302
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TAX-BACKED - 19.6%
GENERAL OBLIGATIONS
Minneapolis, Sports Arena,
Series 1996,
5.125% 10/01/20 2,000 1,880
Minneapolis-St. Paul
Metropolitan
Airports Commission, Series 7,
7.800% 01/01/11 300 319
St. Cloud, Series 1996 D,
5.250% 12/01/18 2,000 1,925
State:
Duluth Airport, Series 1995 B,
6.250% 08/01/14 2,000 2,077
Series 1995,
5.250% 08/01/14 4,500 4,438
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10,639
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TRANSPORTATION - 1.0%
TRANSPORTATION
St. Paul Port Authority,
Series F:
9.125% 12/01/00 25 25
9.125% 12/01/01 25 25
9.125% 12/01/02 25 25
9.125% 12/01/14 575 496
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571
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UTILITY - 13.4%
JOINT POWER AUTHORITY - 12.6%
Northern Municipal Power Agency,
Minnesota Power & Light Co.,
Series 1989 A,
7.250% 01/01/16 700 738
Southern Minnesota Municipal
Power Agency:
Series 1993 A:
4.750% 01/01/16 2,000 1,775
5.000% 01/01/12 750 697
Series 1994 A,
(a) 01/01/27 15,500 2,713
Series A,
5.000% 01/01/16 1,000 910
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6,833
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WATER & SEWER - 0.8%
Anoka County, United Power Assoc.,
Series 1987 A,
6.950% 12/01/08 400 429
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TOTAL MUNICIPAL BONDS (cost of $51,731) 53,246
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OPTIONS - 0.1% CONTRACTS
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March 1997 Treasury Bond Put,
Strike price 110, Expiration 02/22/97
(cost of $47) 4,500 24
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TOTAL INVESTMENTS - 98.0% (cost of $51,778) (d) 53,270
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SHORT-TERM OBLIGATIONS - 0.7% PAR
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VARIABLE RATE DEMAND NOTES (e)
IL State Educational Facilities
Authority,
3.450% 12/01/25 $ 400 400
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OTHER ASSETS & LIABILITIES, NET - 1.3% 705
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NET ASSETS - 100% $ 54,375
========
NOTES TO INVESTMENT PORTFOLIO:
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(a) Zero coupon bond.
(b) These securities, or a portion thereof, with a total market value of
$1,662, are being used to collateralize open futures contracts.
(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
January 31, 1997.
Short futures contracts open at January 31, 1997:
Par value Unrealized
covered by Expiration depreciation
Type contracts month at 01/31/97
- ---------------------------------------------------------------------
Treasury Bond $1,000 March $ 10
See notes to financial statements.
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
JANUARY 31, 1997
(in thousands except for per share amounts and footnotes)
ASSETS
Investments at value (cost $51,778) $53,270
Short-term obligations 400
-------
53,670
Receivable for:
Interest $ 820
Fund shares sold 41
Expense reimbursement
due from Adviser 2
Other 90 953
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Total Assets 54,623
LIABILITIES
Payable for:
Distributions 219
Variation margin on futures 9
Fund shares repurchased 4
Accrued:
Deferred Trustees fees 2
Other 14
------
Total Liabilities 248
-------
NET ASSETS $54,375
=======
Net asset value & redemption price per share -
Class A ($34,986/4,906) $ 7.13
=======
Maximum offering price per share - Class A
($7.13/0.9525) $ 7.49(a)
=======
Net asset value & offering price per share -
Class B ($19,389/2,719) $ 7.13(b)
=======
COMPOSITION OF NET ASSETS
Capital paid in $53,371
Undistributed net investment income 4
Accumulated net realized loss (482)
Net unrealized appreciation (depreciation) on:
Investments 1,492
Open futures contracts (10)
-------
$54,375
=======
(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.
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JANUARY 31, 1997
(in thousands)
INVESTMENT INCOME
Interest $ 3,361
EXPENSES
Management fee $ 282
Service fee 85
Distribution fee - Class B 145
Transfer agent 90
Bookkeeping fee 29
Registration fee 14
Custodian fee 4
Audit fee 22
Trustees fee 15
Reports to shareholders 11
Legal fee 11
Other 8
------
716
Fees waived by the Adviser (73) 643
------ -------
Net Investment Income 2,718
-------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain on:
Investments 3
Closed futures contracts 153
------
Net Realized Gain 156
Net unrealized depreciation
during the period on:
Investments (1,816)
Open futures contracts (5)
------
Net Unrealized Depreciation (1,821)
-------
Net Loss (1,665)
-------
Net Increase in Net Assets from Operations $ 1,053
=======
See notes to financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(in thousands) Year ended January 31
-----------------------------
INCREASE (DECREASE) IN NET ASSETS 1997 1996
Operations:
Net investment income $ 2,718 $ 2,760
Net realized gain (loss) 156 (533)
Net unrealized appreciation (depreciation) (1,821) 4,399
------- -------
Net Increase from Operations 1,053 6,626
Distributions:
From net investment income - Class A (1,850) (2,013)
From net investment income - Class B (856) (799)
------- -------
(1,653) 3,814
------- -------
Fund Share Transactions:
Receipts for shares sold - Class A 4,533 4,070
Value of distributions reinvested - Class A 1,255 1,372
Cost of shares repurchased - Class A (6,290) (7,317)
------- -------
(502) (1,875)
------- -------
Receipts for shares sold - Class B 2,571 4,070
Value of distributions reinvested - Class B 564 536
Cost of shares repurchased - Class B (2,274) (1,453)
------- -------
861 3,153
------- -------
Net Increase from Fund
Share Transactions 359 1,278
------- -------
Total Increase (Decrease) (1,294) 5,092
NET ASSETS
Beginning of period 55,669 50,577
------- -------
End of period (including undistributed and
net of overdistributed net investment
income of $4 and $7, respectively) $54,375 $55,669
======= =======
NUMBER OF FUND SHARES
Sold - Class A 635 574
Issued for distributions reinvested - Class A 177 194
Repurchased - Class A (886) (1,030)
------- -------
(74) (262)
------- -------
Sold - Class B 362 573
Issued for distributions reinvested - Class B 80 75
Repurchased - Class B (320) (205)
------- -------
122 443
------- -------
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1997
NOTE 1. ACCOUNTING POLICIES
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ORGANIZATION: Colonial Minnesota Tax-Exempt Fund (the Fund), a series of
Colonial Trust V, is a non-diversified portfolio of a Massachusetts business
trust, registered under the Investment Company Act of 1940, as amended, as an
open-end, management investment company. The Fund's investment objective is to
seek as high a level of after-tax total return, as is consistent with prudent
risk, by pursuing current income exempt from federal and Minnesota 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 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.
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) and 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:
Average Net Assets Annual Fee Rate
------------------ ---------------
First $1 billion 0.55%
Next $1 billion 0.50%
Over $2 billion 0.45%
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:
Cumulative Annualized
Effective Date Reduction
-------------- ---------------------
January 1, 1996 0.0125%
April 1, 1996 0.0250%
July 1, 1996 0.0375%
October 1, 1996 0.0500%
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 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 $8,752 on
sales of the Fund's Class A shares and received contingent deferred sales
charges (CDSC) of $50,462 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:
Valuation of shares Annual
outstanding on the 20th of Fee
each month which were issued Rate
---------------------------- ------
Prior to November 30, 1994 0.10%
On or after December 1, 1994 0.25%
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 0.75% 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 $15,380,169 and
$14,536,234, respectively.
Unrealized appreciation (depreciation) at January 31, 1997, based on cost of
investments for both financial statement and federal income tax purposes was:
Gross unrealized appreciation $ 2,160,622
Gross unrealized depreciation (669,028)
------------
Net unrealized appreciation $ 1,491,594
============
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:
Year of Capital loss
expiration carryforward
---------- ------------
1999 $ 4,000
2001 8,000
2002 39,000
-----------
$ 51,000
===========
Expired capital loss carryforwards, if any, are recorded as a reduction of
capital paid in.
To the extent loss carryforwards are used to offset any future realized gains,
it is unlikely that such gains would be distributed since they may be taxable to
shareholders as ordinary income.
OTHER: There are certain risks arising from geographic concentration in any
state. Certain revenue or tax related events in a state may impair the ability
of certain issuers of municipal securities to pay principal and interest on
their obligations.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
The Fund may 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 marketconditions, 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 recorded 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.
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are
as follows:
Year ended January 31
--------------------------------------------------
1997 1996
Class A Class B Class A Class B
---------- ---------- ----------- ----------
Net asset value -
Beginning of period $ 7.350 $ 7.350 $ 6.840 $ 6.840
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.369 0.316 0.384 0.332
Net realized and
unrealized gain (loss) (0.222) (0.222) 0.516 0.516
------- ------- ------- -------
Total from Investment
Operations 0.147 0.094 0.900 0.848
------- ------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.367) (0.314) (0.390) (0.338)
------- ------- ------- -------
Net asset value -
End of period $ 7.130 $ 7.130 $ 7.350 $ 7.350
======= ======= ======= =======
Total return (b)(c) 2.16% 1.40% 13.50% 12.66%
======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS
Expenses (d) 0.90% 1.65% 0.85% 1.60%
Net investment income (d) 5.19% 4.44% 5.41% 4.66%
Fees and expenses
waived or borne
by the Adviser (d) 0.13% 0.13% 0.24% 0.24%
Portfolio turnover 27% 27% 42% 42%
Net assets at end
of period (000) $34,986 $19,389 $36,836 $19,083
(a) Net of fees and expenses waived or borne by the Adviser which amounted to:
$ 0.009 $ 0.009 $ 0.016 $ 0.016
(b) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(c) Had the Adviser not waived or reimbursed a portion of expenses, total
return would have been reduced.
(d) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
<PAGE>
FINANCIAL HIGHLIGHTS - continued
Selected data for a share of each class outstanding throughout each period are
as follows:
Year ended January 31
--------------------------------------------------
1995 1994
Class A Class B Class A Class B
---------- ---------- ----------- ----------
Net asset value -
Beginning of period $ 7.480 $ 7.480 $ 7.160 $ 7.160
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.415 0.363 0.419 0.364
Net realized and
unrealized gain (loss) (0.642) (0.642) 0.323 0.323
------- ------- ------- -------
Total from Investment
Operations (0.227) (0.279) 0.742 0.687
------- ------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.413) (0.361) (0.422) (0.367)
------- ------- ------- -------
Net asset value -
End of period $ 6.840 $ 6.840 $ 7.480 $ 7.480
======= ======= ======= =======
Total return (c)(d) (2.92)% (3.65)% 10.62% 9.81%
======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS
Expenses 0.72% 1.47% 0.82% 1.57%
Net investment income 5.98% 5.23% 5.69% 4.94%
Fees and expenses
waived or borne
by the Adviser 0.26% 0.26% 0.20% 0.20%
Portfolio turnover 26% 26% 9% 9%
Net assets at end
of period (000) $35,846 $14,731 $41,326 $10,317
(a) Net of fees and expenses waived or borne by the Adviser which amounted to:
$ 0.018 $ 0.018 $ 0.015 $ 0.015
(b) Class B shares were initially offered on August 4, 1992. Per share amounts
reflect activity from that date.
(c) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(d) Had the Adviser not waived or reimbursed a portion of expenses, total
return would have been reduced.
(e) Not annualized.
(f) Annualized.
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Year ended January 31
-----------------------
1993
Class A Class B (b)
--------- -----------
$ 7.030 $ 7.210
------- -------
0.449 0.191
0.125 (0.049)
------- -------
0.574 0.142
------- -------
(0.444) (0.192)
------- -------
$ 7.160 $ 7.160
======= =======
8.41% 2.01%(e)
======= =======
0.85% 1.60%(f)
6.33% 5.58%(f)
0.35% 0.35%(f)
5% 5%
$35,017 $ 2,173
$ 0.025 $ 0.009
- ------------------------------------------------------------------------------
Federal income tax information (unaudited)
All of the distributions will be treated as exempt income for federal income tax
purposes.
- -------------------------------------------------------------------------------
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE TRUSTEES OF COLONIAL TRUST V AND THE SHAREHOLDERS OF
COLONIAL MINNESOTA TAX-EXEMPT FUND
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Colonial Minnesota Tax-Exempt Fund
(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, provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
March 12, 1997
<PAGE>
HOW TO REACH COLONIAL
BY PHONE OR BY MAIL
BY TELEPHONE
COLONIAL CUSTOMER CONNECTION - 1-800-345-6611
For 24-hour account information, call from your touch-tone phone. (Rotary
callers will be automatically connected to a representative during business
hours.) A recorded message will guide you through the menu:
For fund prices, dividends, and capital gains information ...... press [1]
For account information ........................................ press [2]
To speak to a Colonial representative .......................... press [3]
For yield and total return information ......................... press [4]
For duplicate statements or new supply of checks ............... press [5]
To order duplicate tax forms and year-end statements ........... press [6]
(February through May)
To review your options at any time during your call ............ press [*]
To speak with a shareholder services representative about your account, call
Monday to Friday, 8:00 a.m. to 8:00 p.m. ET, and Saturdays from February through
mid-April, 10:00 a.m. to 2:00 p.m. ET.
COLONIAL TELEPHONE TRANSACTION DEPARTMENT - 1-800-422-3737
To purchase, exchange, or sell shares by telephone, call Monday to Friday, 9:00
a.m. to 7:00 p.m. ET. Transactions received after the close of the New York
Stock Exchange will receive the next business day's closing price.
LITERATURE - 1-800-426-3750
To request literature on any Colonial fund, call Monday to Friday, 8:30 a.m.
to 6:30 p.m. ET.
BY MAIL
COLONIAL INVESTORS SERVICE CENTER, INC.
P.O. BOX 1722
BOSTON, MA 02105-1722
<PAGE>
SHAREHOLDER COMMUNICATIONS
TO KEEP YOU INFORMED
To make recordkeeping easy and keep you up-to-date on the performance of your
investments, you can expect to receive the following information about your
Colonial account:
TRANSACTION CONFIRMATIONS: Each time you make a purchase, sale, or exchange, you
receive a confirmation statement within just a few days.
QUARTERLY STATEMENTS: Every three months, if any transactions are made that
affect your share balance, this statement reports on your account activity
during the quarter (including any reinvestment of dividends). This statement
also provides year-to-date information.
COLONIAL SHAREHOLDER NEWS: Mailed with your quarterly account statements, this
newsletter highlights timely investment strategies, portfolio manager
commentary, and shareholder service updates.
TAX FORMS AND YEAR-END TAX GUIDE: Easy-to-use forms and timely information are
designed to make tax reporting simpler. (Usually mailed in January.)
AVERAGE COST BASIS STATEMENTS: If you sold or exchanged shares during the year,
this statement may help you calculate your gain/loss for tax purposes. (Usually
mailed in February.)
<PAGE>
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial Minnesota Tax-Exempt Fund is:
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Colonial Minnesota 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 Minnesota 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.
<PAGE>
[logo] COLONIAL
MUTUAL FUNDS
Mutual Funds for
Planned Portfolios
TRUSTEES
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, C.S. First Boston
Merchant Bank; and President and Chief Executive Officer, The First Boston
Corporation)
JAMES L. MOODY, JR.
Chairman of the Board, Hannaford Bros. Co. (formerly Chief Executive Officer,
Hannaford Bros. Co.)
JOHN J. NEUHAUSER
Dean, Boston College School of Management
GEORGE L. SHINN
Financial Consultant (formerly Chairman, Chief Executive Officer and Consultant,
The First Boston Corporation)
ROBERT L. SULLIVAN
Management Consultant (formerly Management Consultant, Saatchi and Saatchi
Consulting Ltd. and Principal and International Practice Director, Management
Consulting, Peat Marwick Main & Co.)
SINCLAIR WEEKS, JR.
Chairman of the Board, Reed & Barton Corporation
COLONIAL INVESTMENT SERVICES, INC., Distributor(C) 1997
A Liberty Financial Company (NYSE: L)
One Financial Center, Boston, Massachusetts 02111-2621, 617-426-3750
MN-02/394D-0197 M (3/97)
