<PAGE>
[graphic omitted]
COLONIAL CONNECTICUT TAX-EXEMPT FUND ANNUAL REPORT
January 31, 1998
----------------------------
NOT FDIC MAY LOSE VALUE
INSURED NO BANK GUARANTEE
----------------------------
<PAGE>
COLONIAL CONNECTICUT TAX-EXEMPT FUND HIGHLIGHTS
FEBRUARY 1, 1997 - JANUARY 31, 1998
INVESTMENT OBJECTIVE: Colonial Connecticut 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 Connecticut state personal income tax.
The Fund also provides opportunities for long-term appreciation from a portfolio
primarily invested in investment grade municipal bonds.
PORTFOLIO MANAGER COMMENTARY: "Bond market conditions improved during the period
and the Fund was well positioned to take advantage of declining interest rates.
Furthermore, Connecticut's economic revival accelerated and generated some of
the strongest economic growth in the region. This, in turn, benefitted your
Fund's performance."
-- Gary Swayze
COLONIAL CONNECTICUT TAX-EXEMPT FUND PERFORMANCE
CLASS A CLASS B CLASS C(1)
- -------------------------------------------------------------------------------
Inception dates 11/1/91 6/8/92 8/1/97
- -------------------------------------------------------------------------------
Distributions declared per share(2) $0.389 $0.332 $0.177
- -------------------------------------------------------------------------------
SEC yields on 1/31/98(3) 3.89% 3.32% 3.62%
- -------------------------------------------------------------------------------
Taxable-equivalent SEC yields(4) 6.74% 5.75% 6.27%
- -------------------------------------------------------------------------------
12-month total returns, assuming 10.00% 9.19% 3.90%
reinvestment of all distributions and
no sales charge or contingent deferred
sales charge (CDSC)(5)
- -------------------------------------------------------------------------------
Net asset value per share on 1/31/98 $7.83 $7.83 $7.83
(1) Class C share total return is cumulative since inception on August 1, 1997.
(2) A portion of the Fund's income may be subject to the alternative minimum
tax.
(3) The 30-day SEC yields on Janaury 31, 1998 reflect the portfolio's earning
power, net of expenses, expressed as an annualized percentage of the public
offering price per share at the end of the period. If the Adviser or
Distributor had not waived or borne certain Fund expenses, SEC yields would
have been 3.71% for Class A shares, 3.14% for Class B shares and 3.12% for
Class C shares.
(4) Taxable-equivalent SEC yield is based on the maximum effective 42.3% federal
and Connecticut income tax rates.
(5) Performance results reflect any voluntary waivers or reimbursements of
expenses by the Adviser or Distributor. Absent these waivers or
reimbursement arrangements, performance results would have been lower. 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 1/31/98) TOP FIVE SECTORS (as of 1/31/98)
- --------------------------------- ---------------------------------
AAA .......................54.0% General Obligations .......33.8%
AA ........................31.6% Hospitals .................12.8%
A .........................10.2% Housing ...................12.2%
BBB ........................0.6% Sales & Excise Tax .........7.1%
Non-rated ..................2.4% Nursing Homes ..............6.2%
Short-Term Obligations .....1.2%
Quality and sector breakdowns are calculated as a percentage of total
investments, including short-term obligations. Because the Fund is actively
managed, there can be no guarantee the Fund will continue to maintain these
quality and sector breakdowns in the future.
<PAGE>
PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
[Photo of Harold W. Cogger]
I am pleased to present the annual report for Colonial Connecticut Tax-Exempt
Fund. This report reflects on the investment environment for the 12 months ended
January 31, 1998.
The strength of the economy during the first quarter of 1997 led the Federal
Reserve Board to raise short-term interest rates in March for the first time in
two years. This action was in response to growing concern about future wage and
price inflation. By mid April, economic growth appeared to moderate while
inflation remained under control. During the second half of the period, interest
rates declined and bond prices rose. As the year ended, there was good news for
the bond markets, including the smallest annual increase in inflation since 1964
and a Federal budget proposal that predicts a surplus for the first time in
nearly 30 years. Strong consumer confidence, rising employment and controlled
inflation point to a firm foundation for further economic expansion. However,
the rate of economic growth in 1998 may be tempered by the slowdown in the Asian
economies and its impact on the global marketplace.
Investments in municipal bonds outperformed most alternative fixed-income
investments, including Treasury bonds, on an after-tax basis during the first
half of the period. However, during the second half, a seasonal surge in
municipal supply combined with increased refundings caused municipal bonds to
slightly underperform Treasurys. On a more positive note, this surge offered
higher relative yields and positioned the market for positive performance in the
months ahead as the supply is absorbed.
Since the Fund's inception, the Adviser has voluntarily waived certain expenses.
The Adviser is continuing to waive certain fees; however, effective January 1,
1998, it is doing so at a lower rate.
The long-term benefits of investing in any municipal bond fund include tax-free
income as well as the opportunity to diversify your fixed-income portfolio.
Colonial Connecticut Tax-Exempt Fund continues to offer you competitive tax-free
income and the potential for long-term total return as well as an opportunity to
participate in Connecticut's economic expansion.
Respectfully,
/s/ Harold W. Cogger
Harold W. Cogger
President
March 11, 1998
Because market conditions change frequently, there can be no assurance that the
trends described in this report will continue.
<PAGE>
PORTFOLIO MANAGER REPORT
GARY SWAYZE is portfolio manager of Colonial Connecticut Tax-Exempt Fund and is
vice president of Colonial Management Associates, Inc.
Mr. Swayze assumed management of the Fund in December, 1997.
FUND TOOK ADVANTAGE OF IMPROVING INVESTMENT ENVIRONMENT DESPITE DECLINING YIELD
SPREADS
During the year, yield spreads between high and low quality municipal bonds
decreased. Investors later in the period, received little benefit from taking on
the additional risk of lower quality bonds, particularly in the non-rated
sector. Despite this, investors "reached" for the yield of lower quality
municipals as interest rates declined during the latter months of the period.
While these conditions made identifying attractive new investments difficult,
price increases in the lower quality bonds already in the portfolio resulted in
rising net asset values for the Fund.
These conditions also led us to focus more closely on selected bonds that we
believed would outperform in a declining interest rate environment. For example,
we increased our holdings of non-callable bonds. Non-callable bonds are
attractive when interest rates are falling because their issuers cannot "call",
or redeem, the bonds before they mature. Callable bonds, on the other hand, are
quite likely to be redeemed when interest rates decline because issuers want to
reduce their borrowing costs. As a result, non-callable bonds have a longer
lifespan and are more sensitive to changes in interest rates. They generally
experience greater price gains when interest rates decline.
FUND'S INCREASED SENSITIVITY TO INTEREST RATES TRANSLATED INTO ABOVE AVERAGE
PERFORMANCE
The Fund generated a 12-month total return of 10.00% for Class A shares, based
on net asset value. This compares favorably with the Fund's Lipper peer group
average which posted a 12-month total return of 9.43%*. Above average
performance was due primarily to the Fund's strategic shift into a larger than
average concentration of non-callable bonds, that have a relatively high
sensitivity to interest rates. These bonds experienced larger price gains as
interest rates declined.
CONNECTICUT'S ECONOMIC REVIVAL ACCELERATED IN 1997
Despite lagging most of the northeast since the recession of the early 1990s,
Connecticut posted some of the best economic growth in the region during 1997.
Job growth was the best in ten years and unemployment dropped to 4.7%.
Per-capita income, already among the highest in the nation, grew strongly. The
expansion was fueled by growth in casino, business services and retail
employment. In addition, the prosperity on Wall Street had a positive effect on
counties in the southwestern part of the State near New York City. While job
growth and overall activity could slow down during 1998, the outlook remains
positive. An improved mix of industries has lessened the State's historical
dependence on defense and insurance. The technology, general manufacturing and
securities industries should support continued economic progress.
POSITIVE OUTLOOK AHEAD FOR THE ECONOMY
We do not expect any major changes in either the national or State economy over
the next few months. We believe that growth will continue, although at a slower
pace than 1997. This is due in part to the financial crisis in Asia and its
anticipated impact on the worldwide marketplace. However, we expect that
inflation will remain subdued and that interest rates may continue to decline
somewhat, as they did during the second half of the year. Declining interest
rates are positive for bond prices. With slower economic growth, low inflation
and the possibility of a balanced Federal budget all forecast for 1998, we
expect this trend in the bond market to continue. Even with a decreased yield,
current income outpaces inflation even before tax-exemption is factored in. In
fact, the Fund's inflation-adjusted yield, in which the inflation rate is
subtracted from the actual yield, is attractive by historical standards. Our
goal remains unchanged: to increase your total return by carefully researching
and selecting a portfolio of primarily investment-grade municipal bonds.
As the heavy level of refunding and year-end tax-exempt supply is absorbed by
the market, we expect new issuance to be steady and more manageable. We are
looking for fewer refundings and more infrastructure and public education
issues. Currently, municipal bonds represent excellent value when compared to
other fixed-income investments, including Treasury bonds, and we believe that
tax-exempt bonds will continue to offer compelling after-tax returns.
*Source: Lipper Analytical Services, Inc. Lipper rankings are based on the
Lipper Connecticut Municipal Debt category. The Fund's Class A shares ranking
for the one-year period is in the 1st quartile (rated 3 out of 22 funds) and in
the 2nd quartile for the five-year period (rated 6 out of 11 funds). Rankings do
not include any sales charges. Performance for different share classes will vary
with fees associated with each class. Past performance cannot guarantee future
results.
<PAGE>
COLONIAL CONNECTICUT TAX-EXEMPT FUND INVESTMENT PERFORMANCE
THE LEHMAN BROTHERS MUNICIPAL BOND INDEX
Change in Value of $10,000 from 11/1/91 to 1/31/98
Based on NAV and POP for Class A Shares
- -------------------------------------------------------------------------------
NAV POP LEHMAN
--- --- ------
Nov. 1, 1991 $10,000 $ 9,525 $10,000
Nov. 10, 1991 9,983 9,509 10,028
Dec. 31, 1991 10,234 9,748 10,243
Jan. 31, 1992 10,231 9,745 10,266
Feb. 29, 1992 10,243 9,756 10,270
Mar. 31, 1992 10,211 9,726 10,274
Apr. 30, 1992 10,295 9,806 10,365
May 31, 1992 10,465 9,968 10,487
Jun. 30, 1992 10,680 10,173 10,663
Jul. 31, 1992 10,999 10,476 10,983
Aug. 31, 1992 10,819 10,305 10,876
Sep. 30, 1992 10,875 10,359 10,947
Oct. 31, 1992 10,679 10,172 10,839
Nov. 30, 1992 11,019 10,496 11,033
Dec. 31, 1992 11,143 10,613 11,146
Jan. 31, 1993 11,290 10,753 11,276
Feb. 28, 1993 11,711 11,155 11,683
Mar. 31, 1993 11,600 11,049 11,560
Apr. 30, 1993 11,718 11,161 11,677
May 31, 1993 11,790 11,230 11,742
Jun. 30, 1993 12,030 11,458 11,938
Jul. 31, 1993 12,052 11,480 11,954
Aug. 31, 1993 12,325 11,740 12,203
Sep. 30, 1993 12,490 11,896 12,342
Oct. 31, 1993 12,481 11,889 12,366
Nov. 30, 1993 12,346 11,760 12,257
Dec. 31, 1993 12,575 11,978 12,515
Jan. 31, 1994 12,678 12,076 12,658
Feb. 28, 1994 12,348 11,761 12,330
Mar. 31, 1994 11,774 11,215 11,828
Apr. 30, 1994 11,831 11,269 11,929
May 31, 1994 11,954 11,387 12,032
Jun. 30, 1994 11,864 11,301 11,958
Jul. 31, 1994 12,119 11,544 12,178
Aug. 31, 1994 12,144 11,567 12,220
Sep. 30, 1994 11,921 11,354 12,041
Oct. 31, 1994 11,613 11,061 11,827
Nov. 30, 1994 11,285 10,749 11,613
Dec. 31, 1994 11,644 11,110 11,868
Jan. 31, 1995 12,062 11,489 12,208
Feb. 28, 1995 12,411 11,822 12,563
Mar. 31, 1995 12,539 11,943 12,707
Apr. 30, 1995 12,547 11,951 12,722
May 31, 1995 12,847 12,237 13,128
Jun. 30, 1995 12,680 12,078 13,013
Jul. 31, 1995 12,723 12,118 13,136
Aug. 31, 1995 12,920 12,306 13,303
Sep. 30, 1995 13,030 12,411 13,387
Oct. 31, 1995 13,229 12,600 13,582
Nov. 30, 1995 13,481 12,841 13,807
Dec. 31, 1995 13,647 12,998 13,940
Jan. 31, 1996 13,723 13,071 14,045
Feb. 29, 1996 13,602 12,955 13,950
Mar. 31, 1996 13,408 12,771 13,772
Apr. 30, 1996 13,395 12,758 13,733
May 31, 1996 13,399 12,763 13,728
Jun. 30, 1996 13,532 12,890 13,878
Jul. 31, 1996 13,665 13,016 14,003
Aug. 31, 1996 13,652 13,003 14,000
Sep. 30, 1996 13,824 13,167 14,196
Oct. 31, 1996 13,959 13,296 14,356
Nov. 30, 1996 14,208 13,533 14,619
Dec. 31, 1996 14,157 13,484 14,557
Jan. 31, 1997 14,200 13,526 14,585
Feb. 28, 1997 14,358 13,676 14,719
Mar. 31, 1997 14,192 13,518 14,522
Apr. 30, 1997 14,292 13,613 14,644
May 31, 1997 14,489 13,800 14,865
Jun. 30, 1997 14,647 13,951 15,023
Jul. 31, 1997 15,001 14,288 15,439
Aug. 31, 1997 14,888 14,181 15,294
Sep. 30, 1997 15,068 14,352 15,476
Oct. 31, 1997 15,170 14,449 15,575
Nov. 30, 1997 15,253 14,528 15,667
Dec. 31, 1997 15,458 14,723 15,896
Jan. 31, 1998 15,621 14,879 16,059
- -------------------------------------------------------------------------------
A $10,000 investment in Class B shares made on June 8, 1992 (inception) at net
asset value (NAV) would have grown to $14,297 on January 31, 1998. The same
investment after deducting the applicable contingent deferred sales charge
(CDSC) would been valued at $14,197 on Janaury 31, 1998. A $10,000 investment in
Class C shares made on August 1, 1997 (inception) at NAV would have grown to
$10,390 on January 31, 1998. The same investment after deducting the applicable
CDSC would have been valued at $10,290 on January 31, 1998.
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 January 31, 1998
- -------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES CLASS C SHARES(1)
INCEPTION 11/1/91 6/8/92 8/1/97
NAV POP NAV w/CDSC NAV w/CDSC
- -------------------------------------------------------------------------------
1 YEAR 10.00% 4.78% 9.19% 4.19% -- --
- -------------------------------------------------------------------------------
5 YEARS 6.71 5.68 5.92 5.60 -- --
- -------------------------------------------------------------------------------
10 YEARS (OR LIFE) 7.39 6.56 6.53 6.39 3.90% 2.90%
- -------------------------------------------------------------------------------
(1) Class C share total returns are cumulative since inception on August 1,
1997.
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. NAV returns do not include sales charges
or CDSC. Public offering price (POP) returns include the maximum sales charge of
4.75%. The applicable CDSC for Class B shares is 5% for 1 year, 2% for 5 years
and 1% since inception. The CDSC for Class C shares is 1% since inception.
Performance results reflect any voluntary waivers or reimbursements of expenses
by the Adviser or Distributor. Absent these waivers or reimbursement
arrangements, performance results would have been lower.
Performance for different share classes will vary based on differences in sales
charges and fees associated with each class.
<PAGE>
INVESTMENT PORTFOLIO
JANUARY 31, 1998 (IN THOUSANDS)
MUNICIPAL BONDS - 97.9% PAR VALUE
- -------------------------------------------------------------------------------
EDUCATION - 5.7%
EDUCATION - 4.9%
CT State Health & Educational
Facilities Authority:
Choate Rosemary Hall,
5.000% 07/01/17 $ 500 $ 498
Connecticut College, Series C1:
5.250% 11/01/17 2,500 2,553
5.500% 07/01/27 1,000 1,044
Trinity College, Series C,
6.000% 07/01/12 1,000 1,083
Yale University,
Series 1992, RIB (variable rate),
7.944% 06/10/30 2,500 2,869
---------
8,047
---------
STUDENT LOAN - 0.8%
CT State Higher Education
Supplemental Loan Authority:
Series 1991-A,
7.200% 11/15/10 770 837
Series 1992-A,
6.375% 11/15/99 425 439
---------
1,276
---------
- --------------------------------------------------------------------------------
HEALTHCARE - 18.8%
HOSPITAL - 12.7%
CT State Health & Educational
Facilities Authority:
Bridgeport Hospital, Series A,
6.500% 07/01/12 1,000 1,094
Danbury Hospital, Series E,
6.500% 07/01/14 1,400 1,513
Norwalk Hospital, Series D,
6.250% 07/01/12 1,750 1,902
Special Care Hospital,
5.375% 07/01/17 1,000 998
St. Francis Hospital & Medical Center, Series B,
6.125% 07/01/10 1,000 1,088
St. Mary's Hospital, Series E,
5.500% 07/01/13 1,440 1,456
St. Raphael Hospital:
Series E,
6.750% 07/01/13 1,400 1,524
Series 1992-F,
6.200% 07/01/14 750 815
Series 1992-G,
6.200% 07/01/14 225 245
Series 1993-H,
5.250% 07/01/09 3,410 3,655
Waterbury Hospital,
7.000% 07/01/20 4,450 4,795
William W. Backus Hospital, Series C,
6.000% 07/01/12 250 266
Yale-New Haven Hospital:
Series G,
6.500% 07/01/12 500 547
Series 1996-H,
5.500% 07/01/13 1,000 1,057
---------
20,955
---------
NURSING HOME - 6.1%
CT State Development Authority:
Clintonville Manor Realty, Inc.,
Series 1992,
6.750% 06/20/21 1,490 1,597
Duncaster Inc.,
Series 1992:
6.700% 09/01/07 500 546
6.750% 09/01/15 2,500 2,716
CT State Health & Educational
Facilities Authority:
American Health Foundation/Windsor Project,
7.125% 11/01/24 2,000 2,316
Noble Horizons Project, Series 1993,
5.875% 11/01/12 640 681
Pope John Paul II Center for Health,
6.250% 11/01/13 2,000 2,209
---------
10,065
---------
- --------------------------------------------------------------------------------
HOUSING - 12.1%
MULTI-FAMILY - 2.1%
New Britain Housing Authority,
Nathan Hale Apartments:
Series 1992-A,
6.500% 07/01/02 105 111
Series 1992-B,
6.875% 07/01/24 2,590 2,748
Waterbury Nonprofit Housing Corp.,
Fairmont Heights, Series 1993-A,
6.500% 01/01/26 600 630
---------
3,489
---------
SINGLE-FAMILY - 10.0%
CT State Housing Finance Authority:
Series B2,
6.750% 05/15/22 1,765 1,893
Series D-2,
5.600% 11/15/21 1,000 1,016
Series 1990-B4,
7.300% 11/15/03 135 140
Series 1991-C,
6.600% 11/15/23 1,580 1,688
Series 1991-C1,
6.450% 11/15/11 1,325 1,413
Series 1991-C2,
6.700% 11/15/22 90 96
Series 1992-B,
6.700% 11/15/12 2,275 2,443
Series 1993-B:
5.650% 05/15/06 550 584
6.200% 05/15/12 5,000 5,324
Sub-Series C1,
6.350% 05/15/17 1,245 1,330
Series 1994 D, Sub-Series D1,
6.625% 05/15/24 500 536
---------
16,463
---------
- --------------------------------------------------------------------------------
OTHER - 2.5%
REFUNDED/ESCROWED (a)
CT State Health & Educational
Facilities Authority:
Lawrence & Memorial Hospitals, Series C,
6.250% 07/01/22 400 442
Lutheran General Health Care System, Series 1989,
7.250% 07/1/04 (b) 155 170
New Britain Hospital, Series 1991-A,
7.750% 07/01/22 200 233
State of Connecticut, Series 1991-B,
6.250% 10/01/09 2,500 2,736
Stratford, Series 1992,
7.300% 03/01/12 500 555
---------
4,136
---------
OTHER REVENUE - 2.0%
INDUSTRIAL - 1.4%
CT State Development Authority,
Pfizer Inc. Project, Series 1994,
7.000% 07/01/25 2,000 2,337
---------
Paper Products - 0.6%
Sprague, International Paper Co. Project,
Series A,
5.700% 10/01/21 1,000 1,034
---------
- --------------------------------------------------------------------------------
RESOURCE RECOVERY - 3.8%
DISPOSAL - 1.9%
CT State Development Authority,
Sewer Sludge Disposal Facilities,
Series 1996,
8.250% 12/01/06 1,360 1,440
CT State Disposal Facility,
Netco Waterbury Ltd., Series 1995,
9.375% 06/01/16 1,500 1,742
---------
3,182
---------
RESOURCE RECOVERY - 1.9%
Bristol Resource Recovery Facility
Operation Commitee,
Ogden Martin Systems, Inc., Series 1995,
6.500% 07/01/14 1,500 1,652
CT State Resource Recovery Authority,
American Re-Fuel Co., Series 1992-A,
6.450% 11/15/22 1,425 1,529
---------
3,181
---------
- --------------------------------------------------------------------------------
TAX-BACKED - 46.6%
Local General Obligations - 21.6%
Bethel,
6.500% 02/15/09 1,220 1,443
Bridgeport:
Series A,
6.250% 03/01/12 2,465 2,866
Series 1996-A,
6.500% 09/1/08 (b) 3,000 3,526
City of Hartford:
5.625% 02/01/11 600 660
5.625% 02/01/12 600 659
5.625% 02/01/13 600 658
Danbury:
Series 1992,
5.625% 08/15/11 690 762
Series 1994:
4.500% 02/01/12 1,280 1,263
4.500% 02/01/13 1,280 1,254
East Haddam, Series 1991,
6.300% 06/15/09 260 282
Farmington, Series 1993:
5.700% 01/15/12 590 653
5.700% 01/15/13 570 631
Granby, Series 1993:
6.500% 04/01/09 200 237
6.550% 04/01/10 175 208
Griswold, Series 1992,
6.000% 04/15/09 410 445
Hamden, Series 1992:
6.000% 10/01/11 425 462
6.000% 10/01/12 425 462
Hartford County Metropolitan
District:
Series 1991,
6.200% 11/15/10 220 256
Series 1993:
5.200% 12/01/12 600 636
5.200% 12/01/13 500 528
Montville, Series 1993,
6.300% 03/01/12 335 391
New Britain:
Series 1992,
6.000% 02/01/08 400 451
Series 1993-A,
6.000% 10/01/12 2,000 2,282
Series 1993-B,
6.000% 03/01/12 1,000 1,137
North Branford:
6.200% 02/15/11 195 210
6.200% 02/15/12 225 242
Norwich, Series 1994:
5.750% 09/15/13 875 942
5.750% 09/15/14 870 936
Plainfield, Series 1992,
6.375% 08/01/11 500 551
Regional School District No. 5:
Series 1992,
6.300% 03/01/10 400 437
Series 1993,
5.600% 02/15/12 150 160
Regional School District No. 14,
Series 1991,
6.100% 12/15/06 285 324
Somers:
6.000% 01/15/11 125 133
6.250% 01/15/08 270 289
South Windsor,
Series 1992,
6.200% 09/01/10 495 536
Stamford:
Series 1992,
6.125% 11/01/11 1,050 1,157
Series 1995,
5.250% 03/15/14 2,750 2,829
Torrington, Series 1992,
6.400% 05/15/10 750 824
Vernon, Series 1988,
7.100% 10/15/03 250 288
Waterbury, Series 1993,
5.375% 04/15/08 750 786
West Haven, Series 1993-B
5.400% 06/01/10 705 736
Westbrook, Series 1992:
6.300% 03/15/12 265 310
6.400% 03/15/09 630 739
Windham, Series 1996,
5.000% 06/15/16 1,000 1,002
---------
35,583
---------
SPECIAL NON-PROPERTY TAX - 7.0%
CT State Special Tax,
Series 1992-B
6.125% 09/01/12 5,100 5,843
Series 1996-B,
6.000% 10/01/06 1,000 1,120
Series 1996-C,
6.000% 10/01/06 2,000 2,241
Transportation Infrastructure, Series 1994-B,
6.000% 10/01/09 1,000 1,098
PR Commonwealth of Puerto Rico
Highway & Transportation Authority,
Series W,
5.500% 07/01/09 1,110 1,225
---------
11,527
---------
SPECIAL PROPERTY TAX - 0.7%
CT State Special Assessment,
Second Injury Fund, Series 1996-A,
6.000% 01/01/06 1,100 1,226
---------
STATE APPROPRIATED - 5.4%
CT State Certificates of Participation,
Middletown Courthouse Project:
6.250% 12/15/09 1,685 1,825
6.250% 12/15/10 750 812
6.250% 12/15/12 100 108
6.250% 12/15/13 850 920
CT State Development Authority,
Series 1993 A,
5.250% 11/15/11 750 787
PR Commonwealth of Puerto Rico
Public Buildings Authority, Series B:
5.000% 07/01/13 1,000 1,024
stepped coupon, (5.700% 7/01/98),
3.750% 7/01/16 (c) 3,300 3,401
---------
8,877
---------
STATE GENERAL OBLIGATIONS - 11.9%
State of Connecticut:
Series A,
6.250% 05/15/06 1,000 1,140
Series 1990-B,
(d) 11/15/10 1,450 808
Series 1993-A,
5.600% 11/15/10 1,000 1,067
Series 1993-B,
5.400% 09/15/09 3,000 3,271
Series 1995-B,
5.375% 10/01/15 5,000 5,211
PR Commonwealth of Puerto Rico
Aqueduct & Sewer Authority,
Series 1995,
6.000% 07/01/07 2,750 3,107
PR Commonwealth of Puerto Rico
Highway & Transportation Authority, Series X,
5.500% 07/01/13 3,000 3,282
PR Commonwealth of Puerto Rico,
Series 1994,
6.500% 07/01/23 1,500 1,716
---------
19,602
---------
- --------------------------------------------------------------------------------
UTILITY - 6.4%
JOINT POWER AUTHORITY - 0.7%
CT State Municipal Electric Energy
Cooperative, Series 1996-A
5.000% 01/01/09 1,040 1,081
---------
WATER & SEWER - 5.7%
CT State Clean Water Fund:
Series 1991,
7.000% 01/01/11 1,850 2,022
Series 1992,
6.125% 02/01/12 3,730 4,053
Series 1993,
5.875% 04/01/09 1,000 1,127
South Central Regional Water Authority,
Series 11,
5.750% 08/01/12 2,000 2,149
---------
9,351
---------
TOTAL INVESTMENTS (cost of $148,116)(e) 161,412
---------
SHORT-TERM OBLIGATIONS - 1.1%
- --------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (f)
CA Newport Beach Hoag Hospital,
3.600% 10/01/22 400 400
IN Portage Economic Development Revision,
Pedcor Investments, Series A,
3.650% 08/01/30 100 100
IN Portage, Pedcor Investments,
Series B,
3.650% 08/01/30 200 200
LA East Baton Rouge Parish,
Rhone-Poulenc Project,
3.700% 06/01/98 400 400
MA State Health & Educational
Facilities Authority, Series 1985-D,
3.550% 01/01/35 200 200
MS Perry County,
Leaf River Forest Project,
3.650% 03/01/02 400 400
NC Craven County Industrial Facilities &
Pollution Control Financing Authority,
John Hancock Resource Recovery, Inc., Series C,
3.800% 05/01/11 200 200
---------
TOTAL SHORT-TERM OBLIGATIONS 1,900
---------
- --------------------------------------------------------------------------------
OTHER ASSETS & LIABILITIES, NET - 1.0% $ 1,573
- --------------------------------------------------------------------------------
NET ASSETS - 100.0% $ 164,885
=========
NOTES TO INVESTMENT PORTFOLIO:
- -------------------------------------------------------------------------------
(a) 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.
(b) These securities, or a portion thereof, with a total market value of
$1,889, are being used to collateralize open futures contracts.
(c) Shown parenthetically is the interest rate to be paid and the date the
Fund will begin accruing this rate.
(d) Zero coupon bond.
(e) Cost for federal income tax purposes is the same.
(f) Variable rate demand notes are considered short-term obligations.
Interest rates change periodically on specified dates. These securities
are payable on demand and are secured by either letters of credit or
other credit support agreements from banks. The rates listed are as of
January 31, 1998.
Short futures contracts open at January 31, 1998:
Par value Unrealized
covered Expiration appreciation
Type by contracts month at 01/31/98
-----------------------------------------------------------------------
Treasury Bond $1,400 March $10
Acronym Name
-------------- ----------------------
RIB Residual Interest Bond
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
JANUARY 31, 1998
(in thousands except for per share amounts and footnotes)
ASSETS
Investments at value (cost $148,116) $161,412
Short-term obligations 1,900
--------
163,312
Receivable for:
Interest $ 2,109
Fund shares sold 283
Variation margin on futures 6
Other 84 2,482
------- --------
Total Assets 165,794
LIABILITIES
Payable for:
Distributions 620
Fund shares repurchased 271
Payable to Adviser 1
Accrued:
Deferred Trustees fees 3
Other 14
-------
Total Liabilities 909
--------
NET ASSETS $164,885
--------
Net asset value & redemption price per share -
Class A ($80,035/10,220) $7.83
========
Maximum offering price per share - Class A
($7.83/0.9525) $8.22(a)
========
Net asset value & offering price per share -
Class B ($84,370/10,773) $7.83(b)
========
Net asset value & offering price per share -
Class C ($480/61) $7.83(b)
========
COMPOSITION OF NET ASSETS
Capital paid in $157,381
Overdistributed net investment income (12)
Accumulated net realized loss (5,790)
Net unrealized appreciation on:
Investments 13,296
Open futures contracts 10
--------
$164,885
========
(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, 1998
(in thousands)
INVESTMENT INCOME
Interest $ 9,002
EXPENSES
Management fee $ 794
Service fee 251
Distribution fee - Class B 614
Distribution fee - Class C 1
Transfer agent 243
Bookkeeping fee 65
Trustees fee 15
Audit fee 21
Legal fee 5
Custodian fee 7
Registration fee 16
Reports to shareholders 9
Other 21
-------
2,062
Fees waived by the Adviser (461)
Fees waived by the Distributor - Class C (a) 1,601
------- -------
Net Investment Income 7,401
-------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain on:
Investments 400
Closed futures contracts 35
-------
Net Realized Gain 435
Net unrealized appreciation (depreciation)
during the period on:
Investments 6,946
Open futures contracts (254)
------
Net Unrealized Appreciation 6,692
-------
Net Gain 7,127
-------
Increase in Net Assets from Operations $14,528
=======
(a) Rounds to less than one.
See notes to financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(in thousands) Year ended January 31
---------------------------
INCREASE (DECREASE) IN NET ASSETS 1998(a) 1997
Operations:
Net investment income $ 7,401 $ 7,618
Net realized gain 435 569
Net unrealized appreciation (depreciation) 6,692 (3,468)
-------- --------
Net Increase from Operations 14,528 4,719
Distributions:
From net investment income - Class A (3,900) (3,952)
In excess of net investment income - Class A (29) -
From net investment income - Class B (3,548) (3,680)
In excess of net investment income - Class B (26) -
From net investment income - Class C (7) -
In excess of net investment income - Class C (b) -
-------- --------
7,018 (2,913)
-------- --------
Fund Share Transactions:
Receipts for shares sold - Class A 9,611 8,326
Value of distributions reinvested - Class A 2,170 2,258
Cost of shares repurchased - Class A (9,203) (15,080)
-------- --------
2,578 (4,496)
-------- --------
Receipts for shares sold - Class B 9,466 9,762
Value of distributions reinvested - Class B 2,088 2,159
Cost of shares repurchased - Class B (12,234) (11,840)
-------- --------
(680) 81
-------- --------
Receipts for shares sold - Class C 494 --
Value of distributions reinvested - Class C 4 --
Cost of shares repurchased - Class C (25) --
-------- --------
473 --
-------- --------
Net Increase (Decrease) from Fund Share
Transactions 2,371 (4,415)
-------- --------
Total Increase (Decrease) 9,389 (7,328)
NET ASSETS
Beginning of period 155,496 162,824
-------- --------
End of period (net of overdistributed and
including undistributed net investment
income of $12 and $54, respectively) $164,885 $155,496
======== ========
(a) Class C shares were initially offered on August 1, 1997.
(b) Rounds to less than one.
See notes to financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS - CONT.
Year ended January 31
---------------------------
1998(a) 1997
NUMBER OF FUND SHARES
Sold - Class A 1,262 1,122
Issued for distributions reinvested - Class A 285 303
Repurchased - Class A (1,210) (2,038)
-------- --------
337 (613)
-------- --------
Sold - Class B 1,239 1,316
Issued for distributions reinvested - Class B 275 290
Repurchased - Class B (1,608) (1,596)
-------- --------
(94) 10
vSold - Class C 64 --
Issued for distributions reinvested - Class C (b) --
Repurchased - Class C (3) --
-------- --------
61 --
-------- --------
(a) Class C shares were initially offered on August 1, 1997.
(b) Rounds to less than one.
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1998
NOTE 1. ACCOUNTING POLICIES
- -------------------------------------------------------------------------------
ORGANIZATION: Colonial Connecticut Tax-Exempt Fund (the Fund), a series of
Colonial Trust V, is a non-diversified portfolio of a Massachusetts business
trust, registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company. The Fund's investment objective is to
seek as high a level of after-tax total return, as is consistent with prudent
risk, by pursuing current income exempt from federal and Connecticut state
personal income tax and 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 three classes of shares:
Class A, Class B and Class C. Class A shares are sold with a front-end sales
charge and Class B shares 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. Effective August 1,
1997, the Fund began offering Class C shares which are subject to a contingent
deferred sales charge on redemptions made within one year after purchase and an
annual distribution fee.
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.
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.
Futures contracts are valued based on the difference between the last sale price
and the opening price of the contract.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
Portfolio positions for which market quotations are not readily available 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 and 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 and Class C distribution fees), 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 and Class C 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 distribution fee applicable to Class B and Class C 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 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 the Fund's pro-rata portion of the
combined average net assets of the funds constituting Trust V as follows:
Average Net Assets Annual Fee Rate
------------------ ---------------
First $2 billion 0.50%
Over $2 billion 0.45%
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 0.13% 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 was reduced 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: Liberty Financial
Investments, Inc., formerly Colonial Investment Services, Inc. (the
Distributor), an affiliate of the Adviser, is the Fund's principal underwriter.
During the year ended January 31, 1998, the Fund has been advised that the
Distributor retained net underwriting discounts of $27,813 on sales of the
Fund's Class A shares and received contingent deferred sales charges (CDSC) of
$202,881 and $250 on Class B and Class C share redemptions, respectively.
The Fund has adopted a 12b-1 plan which requires the payment of a distribution
fee to the Distributor equal to 0.75% of the Fund's average net assets
attributable to Class B and Class C shares. The Distributor has voluntarily
agreed, until further notice, to waive a portion of the Class C share
distribution fee so that it will not exceed 0.45% annually. 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 0.60% annually of the Fund's average net
assets.
Through December 31, 1997, the expense limit was 0.45% 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: For the year ended January 31, 1998, purchases and sales of
investments, other than short-term obligations were $20,972,921 and $18,276,902,
respectively.
Unrealized appreciation (depreciation) at January 31, 1998, based on cost of
investments for both financial statement and federal income tax purposes was:
Gross unrealized appreciation $13,330,831
Gross unrealized depreciation (34,817)
-----------
Net unrealized appreciation $13,296,014
===========
CAPITAL LOSS CARRYFORWARDS: At January 31, 1998, 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
---------- ------------
2003 $1,133,000
2004 2,209,000
----------
$3,342,000
==========
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 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 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, 1998.
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are
as follows:
<CAPTION>
Year ended January 31
------------------------------------------------------------------------------
1998 1997
Class A Class B Class C (b) Class A Class B
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 7.490 $ 7.490 $ 7.710 $ 7.630 $ 7.630
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a) 0.385 0.328 0.173(c) 0.393 0.338
Net realized and
unrealized gain (loss) 0.344 0.344 0.124 (0.141) (0.141)
----------- ----------- ----------- ----------- -----------
Total from Investment Operations 0.729 0.672 0.297 0.252 0.197
----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.386) (0.330) (0.177) (0.392) (0.337)
In excess of net
investment income (0.003) (0.002) -- -- --
----------- ----------- ----------- ----------- -----------
Total Distributions
Declared to Shareholders (0.389) (0.332) (0.177) (0.392) (0.337)
----------- ----------- ----------- ----------- -----------
Net asset value -
End of period $ 7.830 $ 7.830 $ 7.830 $ 7.490 $ 7.490
=========== =========== =========== =========== ===========
Total return(d)(e) 10.00% 9.19% 3.90%(f) 3.48% 2.71%
=========== =========== =========== =========== ===========
RATIOS TO AVERAGE NET ASSETS
Expenses(g) 0.62% 1.37% 1.09%(c)(h) 0.59% 1.34%
Net investment income(g) 5.04% 4.29% 4.48%(c)(h) 5.28% 4.53%
Fees and expenses waived
or borne by the Adviser(g) 0.29% 0.29% 0.28%(h) 0.31% 0.31%
Portfolio turnover 12% 12% 12% 21% 21%
Net assets at end of period (000) $ 80,035 $ 84,370 $ 480 $ 74,059 $ 81,437
(a) Net of fees and expenses waived or borne by the Adviser which amounted to:
$ 0.022 $ 0.022 $ 0.021 $ 0.023 $ 0.023
(b) Class C shares were initially offered on August 1, 1997. Per share amounts reflect activity from that date.
(c) Net of fees waived by the Distributor which amounted to $0.012 per share and 0.30%.
(d) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred
sales charge.
(e) Had the Adviser and Distributor not waived or reimbursed a portion of expenses, total return would have been reduced.
(f) Not annualized
(g) The benefits derived from custody credits and directed brokerage arrangements had no impact.
(h) Annualized
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS - CONT.
Selected data for a share of each class outstanding throughout each period are as follows:
<CAPTION>
Year ended January 31
--------------------------------------------------------------------
1996 1995
Class A Class B Class A Class B
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 7.080 $ 7.080 $ 7.890 $ 7.890
----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.400 0.345 0.418 0.363
Net realized and unrealized gain (loss) 0.552 0.552 (0.809) (0.809)
----------- ----------- ----------- -----------
Total from Investment Operations 0.952 0.897 (0.391) (0.446)
----------- ----------- ----------- -----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.402) (0.347) (0.418) (0.363)
From net realized gains -- -- (0.001) (0.001)
----------- ----------- ----------- -----------
Total Distributions
Declared to Shareholders (0.402) (0.347) (0.419) (0.364)
----------- ----------- ----------- -----------
Net asset value -
End of period $ 7.630 $ 7.630 $ 7.080 $ 7.080
=========== =========== =========== ===========
Total return(b)(c) 13.77% 12.93% (4.85)% (5.57)%
=========== =========== =========== ===========
RATIOS TO AVERAGE NET ASSETS
Expenses 0.51%(d) 1.25%(d) 0.32%(d) 1.07%(d)
Net investment income 5.42%(d) 4.68%(d) 5.81%(d) 5.06%(d)
Fees and expenses waived or borne
by the Adviser 0.42%(d) 0.42%(d) 0.55%(d) 0.55%(d)
Portfolio turnover 13% 13% 22% 22%
Net assets at end of period (000) $ 80,039 $ 82,785 $ 74,616 $ 73,580
(a) Net of fees and expenses waived or borne by the Adviser which amounted to:
$ 0.031 $ 0.031 $ 0.039 $ 0.039
(b) 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.
</TABLE>
- ----------------------------------------------------------------------------
Federal Income Tax Information (unaudited)
Approximately 99.5% of the income distributions will be treated as exempt income
for federal income tax purposes.
- ----------------------------------------------------------------------------
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Selected data for a share of each class outstanding throughout each period are
as follows:
Year ended January 31
---------------------
1994
Class A Class B
------- -------
Net asset value -
Beginning of period $ 7.420 $ 7.420
------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.429 0.372
Net realized and unrealized gain (loss) 0.465 0.465
------- -------
Total from Investment Operations 0.894 0.837
------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.424) (0.367)
From net realized gains -- --
------- -------
Total Distributions
Declared to Shareholders (0.424) (0.367)
------- -------
Net asset value -
End of period $ 7.890 $ 7.890
======= =======
Total return(b)(c) 12.30% 11.49%
======= =======
RATIOS TO AVERAGE NET ASSETS
Expenses 0.22% 0.97%
Net investment income 5.48% 4.73%
Fees and expenses waived or borne
by the Adviser 0.65% 0.65%
Portfolio turnover 5% 5%
Net assets at end of period (000) $ 91,436 $ 71,791
(a) Net of fees and expenses waived or borne by the Adviser which amounted to:
$ 0.051 $ 0.051
(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>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE TRUSTEES OF COLONIAL TRUST V AND THE SHAREHOLDERS OF
COLONIAL CONNECTICUT TAX-EXEMPT FUND
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Colonial Connecticut Tax-Exempt
Fund (the "Fund")(a series of Colonial Trust V) at January 31, 1998, 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, 1998 by correspondence with
the custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
March 11, 1998
<PAGE>
SHAREHOLDER SERVICES
TO MAKE INVESTING EASIER
Your Fund has one of the most extensive selections of shareholder services
available. Your financial advisor can help you arrange for any of these
services, or you can call Colonial Investors Service Center 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(1): Exchange all or part of your account into the same share
class of another fund distributed by Liberty Financial Investments, Inc. by
phone or mail.
EASY ACCESS TO YOUR MONEY(1): 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 within one year, you can reinvest in any fund distributed by
Liberty Financial Investments 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 Fund 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 calendar day of each month unless the 10th falls on a
non-business day or the first business day of the week. If this occurs, the
processing date will be the previous business day. Dividends and capital gains
must be reinvested.
AUTOMATED DOLLAR COST AVERAGING: Transfer money on a monthly basis from any fund
with a balance of $5,000 into the same share class of up to four other funds
distributed by Liberty Financial Investments. Minimum for each transfer is $100.
RETIREMENT PLANS: Choose from a broad range of retirement plans,
including IRAs.
(1) Redemptions and exchanges are made at the next determined net asset value
after the request is received by the Transfer Agent. Proceeds may be more or
less than your original cost. The exchange privilege may be terminated at any
time. Exchanges are not available on all funds. Investors who purchase Class B
or C shares, or $1 million or more of Class A shares, may be subject to a
contingent deferred sales charge.
<PAGE>
HOW TO REACH COLONIAL
BY PHONE OR BY MAIL
BY TELEPHONE
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 service 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 fund distributed by Liberty Financial Investments,
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>
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial Connecticut Tax-Exempt Fund is:
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Colonial Connecticut Tax-Exempt Fund mails one shareholder report to each
shareholder address. If you would like more than one report, please call
1-800-426-3750 and additional reports will be sent to you.
This report has been prepared for shareholders of Colonial Connecticut
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>
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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, CS First Boston
Merchant Bank; and President and Chief Executive Officer, The First Boston
Corporation)
JAMES L. MOODY, JR.
Retired (formerly Chairman of the Board and 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
Retired Partner, Peat Marwick Main & Co. (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
[graphic omitted] LIBERTY FINANCIAL INVESTMENTS, INC. (C)1998
Distributor for Colonial Funds, Stein Roe Advisor Funds and
Newport Funds
One Financial Center, Boston, MA 02111-2621
Visit us at www.libertyfunds.com
CT-02/784E-0198 (3/98) 98/228
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