<PAGE>
COLONIAL MICHIGAN TAX-EXEMPT FUND ANNUAL REPORT
January 31, 1998
Not FDIC
Insured
May Lose Value
No Bank Guarantee
<PAGE>
COLONIAL MICHIGAN TAX-EXEMPT FUND HIGHLIGHTS
February 1, 1997 - January 31, 1998
INVESTMENT OBJECTIVE: Colonial Michigan 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 Michigan state personal income tax and
opportunities for long-term appreciation from a portfolio primarily invested in
investment grade municipal bonds. Fund shares are also intended to be exempt
from the Michigan intangibles tax.
PORTFOLIO MANAGER COMMENTARY: "Bond market conditions improved during the period
and the Fund was well positioned to take advantage of declining interest rates.
As we look ahead, Michigan's progress towards a more diversified economy, good
fiscal management and adequate cash reserves provide a strong foundation for
weathering a potential economic slowdown." -- William Loring
COLONIAL MICHIGAN TAX-EXEMPT FUND PERFORMANCE
CLASS A CLASS B CLASS C(1)
Inception dates 9/26/86 8/4/92 8/1/97
Distributions declared per share (2) $0.348 $0.295 $0.158
SEC yields on 1/31/98 (3) 3.96% 3.39% 3.70%
Taxable-equivalent SEC yields (4) 6.86% 5.87% 6.41%
12-month total returns, assuming 10.93% 10.11% 3.92%
reinvestment of all distributions and no
sales charge or contingent deferred
sales charge (CDSC) (5)
Net asset value per share on 1/31/98 $ 7.32 $ 7.32 $ 7.32
1 The 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 January 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 3.74%
for Class A shares, 3.17% for Class B shares and 3.17% for Class C shares.
4 Taxable-equivalent SEC yields are based on the maximum effective 42.3% federal
and Michigan income tax rates.
5 Performance results reflect any voluntary waivers or reimbursements of Fund
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 would
be taxable when distributed.
QUALITY BREAKDOWN (as of 1/31/98) TOP FIVE SECTORS (as of 1/31/98)
AAA . . . . . . . . . . . . .55.7% General Obligations . . . . . .16.9%
AA . . . . . . . . . . . . . 15.2% Hospitals . . . . . . . . . . . 16.4%
A. . . . . . . . . . . . . . 14.9% Investor Owned . . . . . . . . . 9.3%
BBB . . . . . . . . . . . . . 7.2% Education . . . . . . . . . . . .6.7%
Non-rated . . . . . . . . . . 3.5% Housing . . . . . . . . . . . . .8.4%
Short-term Obligations . . . .3.5%
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.
2
<PAGE>
PRESIDENT'S MESSAGE [PHOTO]
To Fund Shareholders
I am pleased to present the annual report for Colonial Michigan 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 interest rates in March for the first time in two years.
This action was a response to growing concern about future wage and price
inflation. By mid-April, economic growth appeared to slow 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
the first predicted Federal budget surplus 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.
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 Michigan 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 Michigan'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.
3
<PAGE>
PORTFOLIO MANAGEMENT REPORT
WILLIAM LORING is portfolio manager of Colonial Michigan Tax-Exempt Fund and is
vice president of Colonial Management Associates, Inc. Mr. Loring assumed
management of the Fund in October, 1997 and has managed other Colonial municipal
bond funds since 1986.
THE FUND WAS POISED TO TAKE ADVANTAGE OF THE IMPROVING INVESTMENT ENVIRONMENT
During the beginning of the period, interest rates rose in response to
unanticipated strength in the auto, housing and manufacturing sectors. However,
by mid-April we saw signs of improving conditions for bond prices -- economic
growth was slowing and inflation continued to be low. In addition, Congress
agreed to a balanced budget plan that further calmed fixed-income markets.
Because many signs suggested that the rising interest rate environment was
behind us, we shifted the Fund's focus to investments that were more sensitive
to changes in interest rates, such as bonds with longer maturities. We expected
that as rates fell, these bonds would outperform, which they did. However, near
the end of the period, some of these bonds became overpriced. As this became
apparent, we sold some of our holdings to take advantage of the mismatch between
price and value.
FUND'S INCREASED SENSITIVITY TO INTEREST RATES TRANSLATED INTO ABOVE-AVERAGE
PERFORMANCE
The Fund generated a 12-month total return of 10.93% for Class A shares, based
on net asset value. This outperformed both the Fund's Lipper peer group and the
Fund's benchmark, the Lehman Brothers Municipal Bond Index, which posted a
12-month total return of 9.49% and 10.11%, respectively.* The Fund's
above-average performance was due primarily to a larger than average
concentration in bonds with a relatively high sensitivity to interest rates.
These bonds experienced larger price gains as interest rates declined.
MICHIGAN'S ECONOMY CONTINUED TO POST SOLID GAINS
Despite expectations for a slowdown in economic activity, Michigan continued to
experience growth in many sectors. Estimates for the State's economic output
have been revised upward for 1998. The unemployment rate remained below that of
the nation, and construction and housing activity were strong. Business services
continued to drive new job growth with larger increases in service-oriented
employment than other midwestern states. However, while we believe Michigan's
economy will continue to expand, we think that it will do so at a slower pace.
The tight labor supply and a high level of unionized workers may result in
higher wages, restricting corporate profitability. While the State has made
significant progress in diversifying its employment base, heavy industry
accounts for a higher than average proportion of its workforce. Michigan may
also experience a negative effect from the financial crisis in southeast Asia; a
strong U.S. dollar
4
<PAGE>
could reduce demand for domestically produced automobiles in favor of the
relatively less expensive Asian imports.
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. Bond prices generally
increase with declining interest rates. With slower economic growth, low
inflation and the possibility of a balanced Federal budget all forecasted for
1998, we expect this trend in the bond market to continue. Even with decreased
yield, current income outpaces inflation even before the 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 think we
may see another round of refunding issues if interest rates continue to fall.
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 Michigan Tax-Exempt Municipal Fund universe. The Fund (Class A shares)
ranked in the first quartile for 1 year (rated 5 out of 50 funds), in the third
quartile for 5 years (rated 11 out of 19 funds) and in the fourth quartile for
10 years (rated 9 out of 9 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.
5
<PAGE>
COLONIAL MICHIGAN TAX-EXEMPT FUND INVESTMENT PERFORMANCE
VS. THE LEHMAN BROTHERS MUNICIPAL BOND INDEX
Change in Value of $10,000 from 1/31/88 to 1/31/98
Based on NAV and POP for Class A Shares
$25,000 LEHMAN
$20,000 $22,230
$15,000 [Graph] NAV
$10,000 $20,215
POP
$19,255
1/88 1/98
<TABLE>
<CAPTION>
Label POP NAV POP Lehman
<S> <C> <C> <C> <C>
1 Jan 31, 88 10000 9525 10000
2 Apr 30, 88 10006 9531 10064
3 Jul 31, 88 10298 9809 10248
4 Oct 31, 88 10640 10135 10627
5 Jan 31, 89 10980 10390 10857
6 Apr 30, 89 11016 10492 10962
7 Jul 31, 89 11174 10644 11496
8 Oct 31, 89 11217 10684 11488
9 Jan 31, 90 11333 10795 11729
10 Apr 30, 90 11280 10744 11752
11 Jul 31, 90 11814 11253 12293
12 Oct 31, 90 11689 11134 12341
13 Jan 31, 91 12127 11551 12814
14 Apr 30, 91 12479 11886 13102
15 Jul 31, 91 12685 12083 13366
16 Oct 31, 91 13068 12447 13842
17 Jan 31, 92 13355 12720 14211
18 Apr 30, 92 13464 12825 14348
19 Jul 31, 92 14266 13588 15203
20 Oct 31, 92 13966 13302 15004
21 Jan 31, 93 14696 13998 15608
22 Apr 30, 93 15154 14435 16163
23 Jul 31, 93 15428 14695 16547
24 Oct 31, 93 15922 15166 17117
25 Jan 31, 94 16337 15561 17522
26 Apr 30, 94 15285 14559 16512
27 Jul 31, 94 15687 14942 16857
28 Oct 31, 94 15153 14434 16371
29 Jan 31, 95 15738 14990 16898
30 Apr 30, 95 16276 15503 17610
31 Jul 31, 95 16339 15563 18184
32 Oct 31, 95 17107 16295 18800
33 Jan 31, 96 17805 16959 19442
34 Apr 30, 96 17283 16462 19010
35 Jul 31, 96 17664 16825 19384
36 Oct 31, 96 18046 17189 19872
37 Jan 31, 97 18223 17357 20189
38 Apr 30, 97 18241 17374 20271
39 Jul 31, 97 19410 18488 21371
40 Oct 31, 97 19539 18610 21560
41 Jan 31, 98 20215 19255 22230
</TABLE>
A $10,000 investment in Class B shares made on August 4, 1992 (inception), at
net asset value (NAV), would have been valued at $13,635 on January 31, 1998.
The same investment after deducting the applicable contingent deferred sales
charge (CDSC) would have grown to $13,535 on January 31, 1998. A $10,000
investment in Class C shares made on August 1, 1997 (inception), at NAV, would
have grown to $10,392 on January 31, 1998. The same investment after deducting
the applicable CDSC would have been valued at $10,292 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 SHARES1
INCEPTION 9/26/86 8/4/92 8/1/97
NAV POP NAV W/CDSC NAV W/CDSC
- -------------------------------------------------------------------------------
1 YEAR 10.93% 5.66% 10.11% 5.11% -- --
- -------------------------------------------------------------------------------
5 YEARS 6.59 5.55 5.79 5.47 -- --
- -------------------------------------------------------------------------------
10 YEARS (OR LIFE) 7.29 6.77 5.80 5.66 3.92% 2.92%
- -------------------------------------------------------------------------------
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 waiver s or reimbursements of Fund
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.
6
<PAGE>
INVESTMENT PORTFOLIO
JANUARY 31, 1998 (IN THOUSAND)
<TABLE>
<CAPTION>
MUNICIPAL BONDS - 95.6% PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EDUCATION - 8.7%
EDUCATION - 6.6%
Lake Superior State University,
5.125% 11/15/19 $ 500 $ 498
Oakland County Economic Development Corp.,
Cranbrook Educational Community Project,
Series B,
5.000% 11/01/17 $1,000 994
Western Michigan University,
Series 1993-A,
5.000% 07/15/21 2,000 1,951
-----
3,443
-----
STUDENT LOAN - 2.1%
Higher Education Student Loan Authority,
5.450% 06/01/07 1,000 1,065
-----
</TABLE>
- -------------------------------------------------------------------------------
HEALTHCARE - 18.5%
HOSPITALS - 16.3%
<TABLE>
<S> <C> <C> <C> <C>
Chippewa County Hospital Finance Authority,
County War Memorial Hospital, Series B,
5.625% 11/01/14 500 507
Dickinson County,
Memorial Hospital System,
Series 1994,
8.125% 11/01/24 550 642
Kalamazoo Hospital Finance Authority:
Borgess Medical Center,
Series 1994-A,
6.250% 06/01/14 1,785 2,080
Bronson Methodist Hospital,
Series 1992-A,
6.250% 05/15/12 1,500 1,636
Royal Oak Hospital Finance Authority,
William Beaumont Hospital,
Series 1993-G,
5.250% 11/15/19 2,000 2,005
Saginaw Hospital Finance Authority,
Saginaw General Hospital,
Series 1989,
7.625% 10/01/19 175 186
State Hospital Finance Authority:
Central Michigan Community Hospital,
Series 1993-A,
6.000% 10/01/08 500 530
</TABLE>
7
<PAGE>
Investment Portfolio/January 31, 1998
- --------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- --------------------------------------------------------------------------------
HEALTHCARE - CONT.
HOSPITALS - CONT.
<TABLE>
<S> <C> <C> <C> <C>
State Hospital Finance Authority:
Crittenton Hospital,
Series 1992-A,
6.700% 03/01/07 $ 750 $ 820
Detroit Medical Center,
Series 1988-A,
8.125% 08/15/12 50 52
------
8,458
------
NURSING HOMES - 2.2%
Cheboygan County Economic
Development Corp.,
Metro Health Foundation Project,
Series 1993,
10.000% 11/01/22 (a) 600 600
Warren Economic Development Corp,
Autumn Woods Project,
Series 1992,
6.900% 12/20/22 500 533
------
1,133
------
...............................................................................
HOUSING - 8.4%
MULTI-FAMILY - 4.6%
Grand Rapids Housing Finance Authority,
Series A,
7.625% 09/01/23 1,500 1,652
State Housing Development Authority:
Series 1990-A,
7.700% 04/01/23 500 536
Series 1991-B,
7.050% 10/01/12 165 176
------
2,364
------
SINGLE-FAMILY - 3.8%
State Housing Development Authority,
Series 1994-D,
6.850% 06/01/26 1,830 1,962
------
...............................................................................
OTHER - 9.3%
POOL/BOND BANK - 3.5%
State Municipal Bond Authority,
Local Government Loan Program:
Series 1992-D,
6.650% 05/01/12 1,000 1,089
Revolving Fund,
5.125% 10/01/20 750 744
------
1,833
------
</TABLE>
8
<PAGE>
Investment Portfolio/January 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
REFUNDED/ESCROWED (b) - 5.8%
Battle Creek,
7.650% 05/01/22 $ 750 898
Redford Township Building Authority,
Series 1992,
6.500% 11/01/13 675 753
Rockford Public Schools,
Series 1990,
7.375% 05/01/19 250 271
State Hospital Finance Authority,
Daughters of Charity-Providence,
Series 1991,
7.000% 11/01/21 1,000 1,118
------
3,040
------
...............................................................................
OTHER REVENUE - 1.6%
HOTELS
Detroit Economic Development Corp.,
E.H. Assoc. Limited Partnership,
Series 1992,
7.000% 06/01/12 750 811
------
...............................................................................
TAX-BACK - 32.3%
LOCAL APPROPRIATED - 3.9%
Wayne County Building Authority,
Series 1996-A,
5.250% 06/01/16 (c) 2,000 2,041
------
LOCAL GENERAL OBLIGATIONS - 14.2%
Lincoln Park School District,
5.000% 05/01/20 1,000 983
Okemos Public School District,
Series 1993,
(d) 05/01/12 500 254
Redford Unified School District:
5.000% 05/01/22 1,000 997
6.350% 05/01/09 1,065 1,245
Rochester Community School District,
5.000% 05/01/19 1,000 1,008
Western Townships Utilities Authority,
Series 1989,
8.200% 01/01/18 1,000 1,058
Williamston Community School District,
Series 1996,
5.500% 05/01/25 (c) 1,725 1,850
------
7,395
------
</TABLE>
9
<PAGE>
Investment Portfolio/January 31, 1998
- --------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- --------------------------------------------------------------------------------
TAX-BACKED - CONT.
SPECIAL ASSESSMENT - 5.2%
<TABLE>
<S> <C> <C> <C> <C>
Detroit Downtown Development Authority,
Area No. 1 Projects:
Series 1996-C,
6.200% 07/01/17 $1,000 1,087
Series 1996-D,
6.500% 07/01/10 700 760
Oakland County,
Preeble Creek Drainage District,
5.000% 05/01/11 300 303
Romulus Tax Increment
Finance Authority,
Series 1994,
6.750% 11/01/19 500 554
------
2,704
------
SPECIAL NON-PROPERTY TAX - 2.3%
PR Commonwealth of Puerto Rico
Highway & Transportation Authority,
Series Y,
6.250% 07/01/14 1,000 1,176
------
STATE APPROPRIATED - 4.2%
PR Commonwealth of Puerto Rico
Public Buildings Authority:
Series 1993-M,
stepped coupon, (5.700% 07/01/98)
3.750% 07/01/16 (e) 750 773
Series 1995-A,
6.250% 07/01/14 1,200 1,411
------
2,184
------
STATE GENERAL OBLIGATIONS - 2.5%
PR Commonwealth of Puerto Rico,
Aqueduct & Sewer Authority,
6.250% 07/01/12 1,000 1,175
Virgin Islands Public Finance Authority,
Series 1992-A,
7.000% 10/01/02 125 137
------
1,312
------
...............................................................................
TRANSPORTATION - 2.1%
AIRPORT
Wayne Charter County,
Detroit Metropolitan Airport,
Series 1994-B,
6.125% 12/01/24 1,000 1,090
------
</TABLE>
10
<PAGE>
Investment Portfolio/January 31, 1998
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
INVESTOR OWNED - 9.3%
St. Clair County Economic
Development Corp.,
Detroit Edison Co.,
Series 1993-AA,
6.400% 08/01/24 (c) $ 2,000 $ 2,272
State Strategic Fund,
Detroit Edison Co.,
Series BB,
7.000% 05/01/21 2,000 2,540
-------
4,812
-------
WATER & SEWER - 5.4%
Detroit Water Supply System:
Series A,
5.750% 07/01/12 1,310 1,456
Series 1995-B,
5.550% 07/01/12 1,250 1,363
-------
2,819
-------
TOTAL MUNICIPAL BONDS (cost of $45,491) 49,642
-------
OPTIONS - 0.0% CONTRACTS
- -------------------------------------------------------------------------------
March 1998 Treasury Bond Puts,
Strike price 116, expiration 2/21/98 3,700 1
March 1998 Treasury Bond Puts,
Strike price 118, expiration 2/21/98 4,000 2
March 1998 Treasury Bond Calls,
Strike price 124, expiration 2/21/98 6,000 22
-------
TOTAL OPTIONS (cost of $105) 25
-------
TOTAL INVESTMENTS (cost of $45,596)(f) 49,667
-------
SHORT-TERM OBLIGATIONS - 3.5% PAR
- -------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (g)
CA Newport Beach Hoag Hospital,
3.600% 10/01/22 $ 1,200 $ 1,200
CA State Health Facilities Financing
Authority, Sutter Health, Series A,
3.550% 03/01/20 400 400
IN Portage,
Pedcor Investments, Series B,
3.650% 08/01/30 100 100
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/January 31, 1998
- -----------------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS - CONT. PAR VALUE
- -----------------------------------------------------------------------------------------
VARIABLE RATE DEMAN NOTES (g)-CONT
<S> <C> <C> <C> <C>
LA State Offshore Terminal Authority,
Loop, Inc.,
3.650% 09/01/06 $ 100 $ 100
-------
TOTAL SHORT-TERM OBLIGATIONS 1,800
-------
OTHER ASSETS & LIABILITIES, NET - 0.9% 446
-------
Net Assets 100.0% $51,913
- -----------------------------------------------------------------------------------------
</TABLE>
NOTES TO INVESTMENT PORTFOLIO:
- --------------------------------------------------------------------------------
(a) This security is exempt from registration under Rule 144A of the
Securities Act of 1933. This security may be resold in transactions
exempt from registration, normally to qualified institutional buyers.
At January 31, 1998, the value of this security amounted to $600 or
1.2% of net assets.
(b) 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.
(c) This security, or a portion thereof, with a total market value of
$2,599 is being used to collateralize open calls on futures.
(d) Zero coupon bond.
(e) Shown parenthetically is the interest rate to be paid and the date the
Fund will begin accruing this rate.
(f) Cost for federal income tax purposes is the same.
(g) Variable rate demand notes are considered short-term obligations.
Interest rates change periodically on specified dates. These securities
are payable on demand and are secured by either letters of credit or
other credit support agreements from banks. The rates listed are as of
January 31, 1998.
See notes to financial statements.
12
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
JANUARY 31, 1998
(in thousands except for per share amounts and footnotes)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value (cost $45,596) $ 49,667
Short-term obligations 1,800
-----------
51,467
Receivable for:
Interest $ 630
Expense reimbursement due from Adviser 5
Other 63 698
---------- -----------
Total Assets 52,165
LIABILITIES
Payable for:
Distributions 198
Fund shares repurchased 29
Accrued:
Deferred Trustees fees 2
Other 23
---------
Total Liabilities 252
-----------
NET ASSETS $ 51,913
-----------
Net asset value & redemption price per share -
Class A ($39,048/5,335) $ 7.32
-----------
Maximum offering price per share - Class A
($7.32/0.9525) $ 7.69(a)
-----------
Net asset value & offering price per share -
Class B ($12,762/1,744) $ 7.32(b)
-----------
Net asset value & offering price per share -
Class C ($103/14) $ 7.32(b)
-----------
COMPOSITION OF NET ASSETS
Capital paid in $ 48,319
Undistributed net investment income 32
Accumulated net realized loss (509)
Net unrealized appreciation 4,071
-----------
$ 51,913
-----------
</TABLE>
(a) On sales of $50,000 or more the offering price is reduced.
(b) Redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
See notes to financial statements.
13
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JANUARY 31, 1998
<TABLE>
<S> <C> <C>
(in thousands)
INVESTMENT INCOME
Interest $ 3,036
EXPENSES
Management fee $ 260
Service fee 76
Distribution fee - Class B 98
Distribution fee - Class C (a)
Transfer agent fee 82
Bookkeeping fee 28
Trustees fee 12
Audit fee 22
Legal fee 7
Custodian fee 5
Registration fee 19
Reports to shareholders 11
Other 9
---------
629
Fees waived by the Adviser (66)
Fees waived by the Distributor - Class C (a) 563
--------- ---------
Net Investment Income 2,473
---------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain (loss) on:
Investments 819
Closed futures contracts (154)
---------
Net Realized Gain 665
Net unrealized appreciation (depreciation)
during the period on:
Investments 2,117
Open futures contracts (7)
---------
Net Unrealized Gain 2,110
---------
Net Gain 2,775
---------
Increase in Net Assets from Operations $ 5,248
---------
</TABLE>
(a) Rounds to less than one.
See notes to financial statements.
14
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
(in thousands) Year ended January 31
---------------------
1998(a) 1997
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 2,473 $ 2,694
Net realized gain 665 141
Net unrealized appreciation (depreciation) 2,110 (1,769)
-------- --------
Net Increase from Operations 5,248 1,066
Distributions:
From net investment income - Class A (1,914) (2,091)
In excess of net investment income - Class A - (10)
From net investment income - Class B (544) (612)
In excess of net investment income - Class B - (3)
From net investment income - Class C (2) -
In excess of net investment income - Class C - -
-------- --------
2,788 (1,650)
-------- --------
Fund Share Transactions:
Receipts for shares sold - Class A 1,091 2,221
Value of distributions reinvested - Class A 1,079 1,192
Cost of shares repurchased - Class A (4,816) (5,898)
-------- --------
(2,646) (2,485)
-------- --------
Receipts for shares sold - Class B 649 709
Value of distributions reinvested - Class B 263 304
Cost of shares repurchased - Class B (2,213) (2,452)
-------- --------
(1,301) (1,439)
-------- --------
Receipts for shares sold - Class C 100 -
Value of distributions reinvested - Class C 2 -
-------- --------
102 -
-------- --------
Net Decrease from Fund Share
Transactions (3,845) (3,924)
-------- --------
Total Decrease (1,057) (5,574)
NET ASSETS
Beginning of period 52,970 58,544
-------- --------
End of period (including undistributed
net investment income of $32 and none,
respectively) $ 51,913 $ 52,970
-------- --------
</TABLE>
(a) Class C shares were initially offered on August 1, 1997.
Continued on next page.
See notes to financial statements.
15
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS - CONT.
<TABLE>
<CAPTION>
Year ended January 31
---------------------
1998(a) 1997
<S> <C> <C>
NUMBER OF FUND SHARES
Sold - Class A 154 323
Issued for distributions reinvested - Class A 153 173
Repurchased - Class A (684) (856)
---- ----
(377) (360)
---- ----
Sold - Class B 93 103
Issued for distributions reinvested - Class B 37 44
Repurchased - Class B (313) (356)
---- ----
(183) (209)
---- ----
Sold - Class C 14 -
Issued for distributions reinvested - Class C (b) -
---- ----
14 -
---- ----
</TABLE>
(a) Class C shares were initially offered on August 1, 1997.
(b) Rounds to less than one.
See notes to financial statements.
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1998
NOTE 1. ACCOUNTING POLICIES
...............................................................................
ORGANIZATION: Colonial Michigan Tax-Exempt Fund (the Fund), a series of Colonial
Trust V, is a non-diversified portfolio of a Massachusetts business trust,
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company. The Fund's investment objective is to seek as
high a level of after-tax total return, as is consistent with prudent risk, by
pursuing current income exempt from federal and Michigan 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.
17
<PAGE>
Notes to Financial Statements/January 31, 1998
- --------------------------------------------------------------------------------
NOTE 1. ACCOUNTING POLICIES - CONT.
...............................................................................
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 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 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.
18
<PAGE>
Notes to Financial Statements/January 31, 1998
- --------------------------------------------------------------------------------
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 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: 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 $3,634 on sales of the Fund's
Class A shares and received contingent deferred sales charges (CDSC) of $28,916
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% 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 0.75% 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.
19
<PAGE>
Notes to Financial Statements/January 31, 1998
- -------------------------------------------------------------------------------
NOTE 3. PORTFOLIO INFORMATION
...............................................................................
INVESTMENT ACTIVITY: For the year ended January 31, 1998, purchases and sales of
investments, other than short-term obligations were $16,117,143 and $21,166,647,
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 $4,152,335
Gross unrealized depreciation (80,935)
----------
Net unrealized appreciation $4,071,400
----------
OTHER: There are certain risks arising from geographic concentration in any
state. Certain revenue or tax related events in a state may impair the ability
of certain issuers of municipal securities to pay principal and interest on
their obligations.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
The Fund may purchase or sell municipal and Treasury bond futures contracts and
purchase and write options on futures. The Fund will invest in these instruments
to hedge against the effects of changes in the value of portfolio securities due
to anticipated changes in interest rates and/or market conditions, for duration
management, or when the transactions are economically appropriate to the
reduction of risk inherent in the management of the Fund and not for trading
purposes. The use of futures contracts and options involves certain risks which
include (1) imperfect correlation between the price movement of the instruments
and the underlying securities, (2) inability to close out a position due to
different trading hours, or the temporary absence of a liquid market for either
the instrument or the underlying securities or (3) an inaccurate prediction by
the Adviser of the future direction of interest rates. Any of these risks may
involve amounts exceeding the variation margin recognized in the Fund's
Statement of Assets and Liabilities at any given time.
NOTE 4. LINE OF CREDIT
...............................................................................
The Fund may borrow up to 10% of its net assets under a line of credit for
temporary or emergency purposes. Any borrowings bear interest at one of the
following options determined at the inception of the loan: (1) federal funds
rate plus 1/2 of 1%, (2) the lending bank's base rate or (3) IBOR offshore loan
rate plus 1/2 of 1%. There were no borrowings under the line of credit during
the year ended January 31, 1998.
20
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<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 $ 6.930 $ 6.930 $ 7.200 $ 7.130 $ 7.130
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income(a) 0.352 0.299 0.156 (c) 0.354 0.302
Net realized and
unrealized gain (loss) 0.386 0.386 0.122 (0.198) (0.198)
----------- ----------- ----------- ----------- -----------
Total from Investment
Operations 0.738 0.685 0.278 0.156 0.104
----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net
investment income (0.348) (0.295) (0.158) (0.354) (0.303)
In excess of net
investment income - - (0.002) (0.001)
----------- ----------- ----------- ----------- -----------
Total Distributions
Declared to
Shareholders (0.348) (0.295) 01.58) (0.356) (0.304)
----------- ----------- ----------- ----------- -----------
Net asset value -
End of period $ 7.320 $ 7.320 $ 7.320 $ 6.930 $ 6.930
----------- ----------- ----------- ----------- -----------
Total return(d)(e) 10.93% 10.11% 3.92%(f) 2.35% 1.58%
----------- ----------- ----------- ----------- -----------
RATIOS TO AVERAGE NET ASSETS
Expenses (g) 0.90% 1.65% 1.35% (c)(h) 0.89% 1.64%
Net investment
income (g) 4.95% 4.20% 4.35% (c)(h) 5.12% 4.37%
Fees and expenses waived
or borne by the
Adviser (g) 0.13% 0.13% 0.15%(h) 0.12% 0.12%
Portfolio turnover 32% 32% 32% 25% 25%
Net assets at end
of period (000) $ 39,048 $ 12,762 $ 103 $ 39,606 $ 13,364
</TABLE>
(a) Net of fees and expenses waived or borne by the Adviser which amounted to:
<TABLE>
<S> <C> <C> <C> <C> <C>
$ 0.009 $ 0.009 $ 0.010 $ 0.008 $ 0.008
</TABLE>
(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 $0.011 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. Prior years' ratios are net of benefits
received, if any.
(h) Annualized.
21
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
Year ended January 31
--------------------------------------------------------------------
1996 1995
Class A Class B Class A Class B
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $6.660 $ 6.660 $ 7.340 $ 7.340
----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income(a) 0.368 0.317 0.410 0.359
Net realized and
unrealized gain (loss) 0.484 0.484 (0.689) (0.689)
----------- ----------- -----------
Total from Investment
Operations 0.852 0.801 (0.279) (0.330)
----------- ----------- ----------- -----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net
investment income (0.382) (0.331) (0.401) (0.350)
----------- ----------- -----------
Net asset value -
End of period $ 7.130 $ 7.130 $ 6.660 $ 6.660
----------- ----------- ----------- -----------
Total return(b)(c) 13.13% 12.30% (3.66)% (4.39)%
----------- ----------- ----------- -----------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.80%(d) 1.55%(d) 0.62% 1.37%
Net investment
income 5.34%(d) 4.59%(d) 6.08% 5.33%
Fees and expenses waived
or borne by the
Adviser 0.25%(d) 0.25%(d) 0.32% 0.32%
Portfolio turnover 48% 48% 40% 40%
Net assets at end
of period (000) $ 43,308 $ 15,236 $ 41,844 $ 14,144
</TABLE>
(a) Net of fees and expenses waived or borne by the Adviser which amounted to:
<TABLE>
<S> <C> <C> <C> <C>
$ 0.017 $ 0.017 $ 0.022 $ 0.022
</TABLE>
(b) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(c) Had the Adviser not waived or reimbursed a portion of expenses, total return
would have been reduced.
(d) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior years' ratios are net of benefits
received, if any.
- --------------------------------------------------------------------------------
Federal Income Tax Information (unaudited)
All of the distributions will be treated as exempt income for federal income tax
purposes.
- --------------------------------------------------------------------------------
22
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
<TABLE>
<CAPTION>
Year ended January 31
-------------------------------
1994
Class A Class B
---------- ----------
<S> <C> <C>
$ 6.970 $ 6.970
---------- ----------
0.404 0.351
0.356 0.356
---------- ----------
0.760 0.707
---------- ----------
(0.390) (0.337)
---------- ----------
$ 7.340 $ 7.340
---------- ----------
11.16% 10.36%
---------- ----------
0.66% 1.41%
5.61% 4.86%
0.33% 0.33%
7% 7%
$ 45,570 $ 15,030
$ 0.024 $ 0.024
</TABLE>
23
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE TRUSTEES OF COLONIAL TRUST V AND THE SHAREHOLDERS OF
COLONIAL MICHIGAN TAX-EXEMPT FUND
In our opinion, the accompanying statement of assets and liabilities,
including the investment portfolio, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Colonial Michigan Tax-Exempt Fund (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
24
<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.
25
<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
26
<PAGE>
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial Michigan Tax-Exempt Fund is:
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Colonial Michigan 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 Michigan 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.
27
<PAGE>
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
[Logo] 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 MI-02/773E-0198 (3/98) 98/209
