<PAGE>
[graphic omitted]
COLONIAL CALIFORNIA TAX-EXEMPT FUND ANNUAL REPORT
January 31, 1998
----------------------------
NOT FDIC MAY LOSE VALUE
INSURED NO BANK GUARANTEE
----------------------------
<PAGE>
COLONIAL CALIFORNIA TAX-EXEMPT FUND HIGHLIGHTS
FEBRUARY 1, 1997 - JANUARY 31, 1998
INVESTMENT OBJECTIVE: Colonial California 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 California state personal income tax and
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.
California's ongoing economic revival contributed to the Fund's positive
performance as well." - Gary Swayze
COLONIAL CALIFORNIA TAX-EXEMPT FUND PERFORMANCE
- -------------------------------------------------------------------------------
CLASS A CLASS B CLASS C1
Inception dates 6/16/86 8/4/92 8/1/97
- -------------------------------------------------------------------------------
Distributions declared per share (2) $0.442 $0.386 $0.236
- -------------------------------------------------------------------------------
SEC yields on 1/31/98 (3) 3.89% 3.32% 3.62%
- -------------------------------------------------------------------------------
Taxable-equivalent SEC yields (4) 7.10% 6.06% 6.61%
- -------------------------------------------------------------------------------
12-month total returns, assuming 11.05% 10.23% 3.93%(5)
reinvestment of all distributions and
no sales charge or contingent deferred
sales charge (CDSC)
- -------------------------------------------------------------------------------
Net asset value per share on 1/31/98 $7.72 $7.72 $7.72
- -------------------------------------------------------------------------------
(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 January 31, 1998, reflect the portfolio's earning
power, net of expenses, expressed as an annualized percentage of the maximum
offering price per share at the end of the period. If the Distributor had
not waived certain Fund expenses, the SEC yield for Class C shares would
have been 3.32%.
(4) Taxable-equivalent SEC yields are based on the combined maximum effective
45.22% federal and California income tax rates. 5Performance results reflect
any voluntary waiver of expenses by the Distributor. Absent this waiver,
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 .................... 74.1% Local Appropriated ..... 18.7%
AA .................... 3.8% Tax Allocation ......... 17.4%
A .................... 4.2% Refunded ............... 14.3%
BBB .................... 9.5% General Obligations .... 12.9%
Non-rated .............. 6.7% Water & Sewer .......... 6.3%
Short-Term Obligations 1.7%
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
[graphic omitted]
I am pleased to present the annual report for Colonial California 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 a response to growing concerns 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: 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.
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 California 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 California'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 California Tax-Exempt Fund and is
vice president of Colonial Management Associates, Inc. Mr. Swayze assumed
management of the Fund in October, 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 low 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 11.05% 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 10.42%. Above average
performance was due primarily to the Fund's strategic shift into a larger than
average concentration in non-callable bonds, that have a relatively high
sensitivity to interest rates. These bonds experienced larger price gains as
interest rates declined.
CALIFORNIA'S COMEBACK CONTINUED
Growth in California's economy continued at a pace not seen since the mid-1980s.
The employment picture is bright as the State has recovered the jobs lost during
the recession earlier in this decade. In addition, the employment base has
broadened significantly, reducing the State's historical dependence on the
defense and aerospace industries. Diversification has been fueled by strong
growth in computer software and manufacturing as well as in the construction and
entertainment industries. However, because of the State's large export economy,
we anticipate that economic setbacks in southeast Asia will restrain the rate of
California's growth over the next few quarters.
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 in 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.
Going forward, as the heavy level of tax-exempt refundings and year-end 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
California Municipal Debt category. The Fund's Class A shares ranking for the
one-year period is in the 2nd quartile (rated 30 out of 103 funds) and in the
3rd quartile for the five-year period (rated 34 out of 54 funds) and in the 3rd
quartile for the ten-year period (rated 20 out of 30 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 CALIFORNIA TAX-EXEMPT FUND'S 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
- -------------------------------------------------------------------------------
NAV POP LEHMAN
- -------------------------------------------------------------------------------
Jan 1988 $10,000 $ 9,525 $10,000
Apr 1988 10,020 9,544 10,064
Jul 1988 10,219 9,734 10,248
Oct 1988 10,602 10,098 10,627
Jan 1989 10,881 10,364 10,857
Apr 1989 11,007 10,485 10,962
Jul 1989 11,438 10,894 11,496
Oct 1989 11,422 10,880 11,488
Jan 1990 11,590 11,040 11,729
Apr 1990 11,645 11,092 11,752
Jul 1990 12,130 11,554 12,293
Oct 1990 12,103 11,528 12,341
Jan 1991 12,510 11,916 12,814
Apr 1991 12,778 12,171 13,102
Jul 1991 13,051 12,431 13,366
Oct 1991 13,495 12,854 13,842
Jan 1992 13,788 13,133 14,211
Apr 1992 13,928 13,267 14,348
Jul 1992 14,682 13,985 15,203
Oct 1992 14,393 13,710 15,004
Jan 1993 14,988 14,276 15,608
Apr 1993 15,447 14,714 16,163
Jul 1993 15,718 14,971 16,547
Oct 1993 16,241 15,470 17,117
Jan 1994 16,553 15,767 17,522
Apr 1994 15,502 14,766 16,512
Jul 1994 15,753 15,004 16,857
Oct 1994 15,224 14,501 16,371
Jan 1995 15,753 15,004 16,898
Apr 1995 16,419 15,639 17,610
Jul 1995 16,692 15,899 18,184
Oct 1995 17,462 16,633 18,800
Jan 1996 18,239 17,373 19,442
Apr 1996 17,717 16,875 19,010
Jul 1996 18,107 17,247 19,384
Oct 1996 18,594 17,710 19,872
Jan 1997 18,783 17,891 20,189
Apr 1997 18,794 17,901 20,271
Jul 1997 20,026 19,075 21,371
Oct 1997 20,136 19,180 21,560
Jan 1998 20,859 19,868 22,230
A $10,000 investment in Class B shares made on 8/4/92 (inception) at net asset
value (NAV) would have grown to $13,668 on 1/31/98. The same investment after
deducting the applicable contingent deferred sales charge (CDSC) would have been
valued at $13,568 on 1/31/98. A $10,000 investment in Class C shares made on
8/1/97 (inception) at NAV would have grown to $10,393 on 1/31/98. The same
investment after deducting the applicable CDSC would have been valued at $10,293
on 1/31/98.
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 6/16/86 8/4/92 8/1/97
NAV POP NAV w/CDSC NAV w/CDSC
- -------------------------------------------------------------------------------
1 YEAR 11.05% 5.78% 10.23% 5.23% -- --
- -------------------------------------------------------------------------------
5 YEARS 6.83 5.80 6.04 5.72 -- --
- -------------------------------------------------------------------------------
10 YEARS (OR LIFE) 7.63 7.11 5.85 5.71 3.93% 2.93%
- -------------------------------------------------------------------------------
(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 - 97.0% PAR VALUE
- --------------------------------------------------------------------------------
EDUCATION - 2.5%
EDUCATION
Loyola Marymount University,
5.000% 10/01/22 $ 600 $ 590
--------
State Educational Facilities
Authority, Pooled College & University Project,
6.300% 04/01/21 1,000 1,076
Statewide Communities Development Corp.,
J. Paul Getty Trust Center,
5.000% 10/01/23 7,500 7,340
--------
9,006
--------
- --------------------------------------------------------------------------------
HEALTHCARE - 2.0%
HOSPITAL
Contra Costa County,
Merrithew Memorial Hospital,
5.375% 11/01/17 2,000 2,050
Duarte, City of Hope National Medical Center,
Series 1993,
6.000% 04/01/08 500 529
Riverside County Asset Leasing Corp.,
Riverside County Hospital Project, Series B,
5.700% 06/01/16 2,500 2,732
State Health Facilities Financing Authority,
Catholic Healthcare West, Series 1994-A,
4.750% 07/01/19 2,000 1,899
--------
7,210
--------
- --------------------------------------------------------------------------------
HOUSING - 5.8%
MULTI-FAMILY - 0.1%
Santa Rosa, Chanate Lodge Project,
Series 1992,
6.625% 12/01/02 245 260
--------
SINGLE FAMILY - 5.7%
Delta County Home Mortgage Finance
Authority, Series 1992-A,
6.750% 12/01/25 3,000 3,112
PR Commonwealth of Puerto Rico Housing Finance Corp.,
Series B,
7.650% 10/15/22 440 470
Southern California Home Financing Authority:
Series A,
7.625% 10/01/22 1,015 1,060
Series 1990-A,
7.625% 10/01/23 420 443
State Housing Finance Agency:
Series A-1, Class I,
5.950% 08/01/16 3,000 3,161
Series B,
8.600% 08/01/19 2,365 2,441
Series 1990-D,
7.750% 08/01/10 635 677
Series 1991-C,
7.450% 08/01/11 65 66
Series 1997-B,
6.000% 08/01/16 1,600 1,692
State Rural Home Mortgage Finance Authority:
Series A-3,
6.250% 09/01/29 4,000 4,526
Series 1995-B,
7.750% 09/01/26 2,375 2,745
Stockton, Series 1990-A,
7.400% 08/01/05 40 42
--------
20,435
--------
- --------------------------------------------------------------------------------
OTHER - 15.1%
POOL/BOND BANK - 1.0%
State Public Capital Improvements
Financing Authority,
Joint Powers Agency, Series 1988-A,
8.500% 03/01/18 3,500 3,583
--------
REFUNDED/ESCROWED (B) - 14.1%
Alum Rock Unified Elementary School
District,
(a) 09/01/15 1,825 595
Colton Public Financing Authority,
Series 1995,
7.500% 10/01/20 3,000 3,533
Commerce Joint Powers Financing
Authority, Multiple Project Loans, Series A,
8.000% 03/01/21 30 34
Desert Hospital, Certificate of
Participation, Series 1990,
8.100% 07/01/20 1,750 1,956
Empire Union School District,
Mello-Roos Financing, Series 1990-A,
7.400% 10/01/15 1,000 1,109
Fontana Public Financing Authority,
North Fontana Redevelopment, Series 1991-A,
7.750% 12/01/20 785 902
Glendora Public Financing Authority,
Series B,
7.625% 09/01/10 850 916
La Quinta Redevelopment Agency,
Series 1990,
8.400% 09/01/12 1,000 1,131
Local Government Power Authority,
Anaheim Redevelopment Agency,
Series 1986-A,
8.200% 09/01/15 4,500 4,705
Los Angeles Convention & Exhibit
Center, Series 1985,
9.000% 12/01/20 500 660
Los Angeles County Transportation,
Metro Train Series 1991-A,
6.900% 07/01/21 1,000 1,113
Mojave Water Agency,
Morongo Basin Pipeline, Series 1991,
6.950% 09/01/21 1,000 1,119
Moreno Valley Unified School District,
7.400% 09/01/16 20 23
Murrieta County Water District,
Series 1991,
8.300% 10/01/21 1,000 1,163
Northern California Power Agency,
Hydroelectric Project No. 1, Series 1986-B-2,
8.000% 07/01/24 1,750 1,782
Orange County Community Facility:
District 87-4, Series 1990-A,
8.000% 08/15/15 1,000 1,116
District 87-3, Mello-Roos,
7.800% 08/15/15 2,000 2,223
Pomona, Series 1990-B,
7.500% 08/01/23 1,000 1,300
PR Commonwealth of Puerto Rico
Series 1991,
7.300% 07/01/20 1,200 1,317
PR Commonwealth of Puerto Rico Electric
Power Authority, Series 1989-N,
7.000% 07/01/07 635 672
Rancho Mirage Joint Powers
Financing Authority, Series 1991-A,
7.500% 04/01/17 1,545 1,733
Riverside County, Series 1989-A,
7.800% 05/01/21 2,500 3,407
Riverside Public Financing Authority:
Series A,
8.000% 02/01/18 590 667
Rocklin, Stanford Ranch Community Facilities,
District, Series 1990,
8.100% 11/01/15 1,000 1,126
Sacramento City Financing Authority,
Series 1991,
6.800% 11/01/20 2,500 2,796
Sacramento Unified School, Community
Facilities District No. 1, Series B,
7.300% 09/01/13 1,760 2,037
San Joaquin Hills Transportation
Corridor Agency, Series 1993,
(a) 01/01/20 15,400 5,085
State Health Facilities Financing Authority,
Children's Hospital of Los Angeles, Series 1991-A
7.125% 06/01/21 2,000 2,234
State Pollution Control, Financing Authority,
North California Recycling Center, Series 1991-A,
6.750% 07/01/17 1,000 1,123
Stockton Community Facilities District,
Series 2,
7.750% 08/01/15 1,000 1,109
Watsonville Mammoth Lakes,
Series B,
7.875% 06/01/11 500 569
Westminster Redevelopment Agency,
Project No. 1, Series 1993,
6.200% 08/01/23 1,000 1,105
--------
50,360
--------
- --------------------------------------------------------------------------------
TAX-BACKED - 55.4%
LOCAL APPROPRIATED - 18.5%
Alameda County, Capital Projects:
5.000% 06/01/22 500 490
Series 1989,
(a) 06/15/14 2,185 967
Anaheim Public Financing Authority,
Series C,
6.000% 09/01/14 3,500 4,002
Anderson Water, Certificate of Participation,
7.900% 12/01/11 610 655
Bishop, Escalon & Lemoore Cities,
Series 1991-A,
7.700% 05/01/11 700 756
Compton Civic Center Project,
5.500% 09/01/15 3,000 3,038
Fresno Unified School District,
Phase VI, Series 1991-A,
7.200% 05/01/11 1,000 1,116
Grossmont Unified High School District,
1991 Capital Projects,
(a) 11/15/06 4,500 3,061
Los Angeles Convention & Exhibition
Authority, Series 1993-A,
6.125% 08/15/11 5,000 5,790
Los Angeles County Public Works
Financing Authority, Series A,
5.250% 09/01/14 3,740 3,875
Modesto, Community Center Project,
Series 1993-A,
5.000% 11/01/23 2,235 2,235
Pasadena Civic Improvement Corp.,
Series 1996,
5.250% 02/01/16 3,020 3,084
Rancho Mirage Joint Powers, Financing
Authority, Civic Center, Series 1991-A,
7.500% 04/01/17 455 498
Riverside County, Historic Courthouse Project,
5.750% 11/01/17 2,255 2,435
Sacramento City Financing Authority,
Series A,
5.375% 11/01/14 4,000 4,281
Sacramento County, Public Facilities Project,
5.375% 02/01/19 6,000 6,128
San Diego County, Central Jail Project,
5.000% 10/01/17 1,250 1,242
San Mateo County Board of Education,
Series 1991,
7.100% 05/01/21 750 790
Santa Ana Financing Authority,
Police Holding Facility, Series 1994-A,
6.250% 07/01/18 6,035 7,076
Santa Clara County Financing Authority,
Series A,
5.000% 11/15/17 4,500 4,472
Stanislaus County,
Series A,
5.250% 05/01/18 4,000 4,050
Tehachapi Water & Sewer District,
8.200% 11/01/20 2,000 2,197
Victor Elementary School District,
Series 1996,
6.450% 05/01/18 3,345 3,975
--------
66,213
--------
LOCAL GENERAL OBLIGATIONS - 7.9%
Benicia Unified School District:
Series A,
(a) 08/01/16 1,355 537
Series 1994-C,
6.450% 06/01/19 3,870 4,370
Cabrillo Unified School District,
Series 1996-A,
(a) 08/01/15 3,000 1,255
Central School District,
San Bernardino County, Series A,
7.050% 05/01/16 750 824
Central Unified School District,
(a) 03/01/18 20,065 7,240
East Whittier School City School District,
Series A,
5.750% 08/01/17 1,675 1,844
Fillmore Unified School District, Series A:
(a) 07/01/11 950 501
(a) 07/01/12 980 488
(a) 07/01/17 650 244
Franklin-McKinley School District, Series A,
5.250% 07/01/16 1,705 1,748
Los Angeles Unified School District, Series A,
5.000% 07/01/21 5,000 4,918
Rocklin, Unified School District,
Series 1991-C,
(a) 07/01/20 6,920 2,203
Simi Valley, Unified School District,
5.250% 08/01/22 925 959
Whisman School District,
Series 1996-A:
(a) 08/01/15 1,595 667
(a) 08/01/16 1,645 651
--------
28,449
--------
SPECIAL NON-PROPERTY TAX - 2.6%
Los Angeles County Metropolitan
Transportation Authority, Series 1995-A,
5.000% 07/01/25 3,000 2,934
PR Commonwealth of Puerto Rico
Highway & Transportation Authority:
Series W,
5.500% 07/01/09 580 640
Series 1996 Y,
6.250% 07/01/12 3,000 3,524
Riverside County Transportation
Commission, Series 1996-A,
6.000% 06/01/09 2,000 2,289
--------
9,387
--------
SPECIAL PROPERTY TAX - 17.2%
Anaheim Public Finance Authority Revenue,
5.250% 02/01/18 $3,000 $3,050
Carlsbad Unified School District,
Community Facility District No. 5, Series 1990,
7.650% 09/01/14 1,000 1,060
Carson, Series 1992,
7.375% 09/02/22 950 1,031
Cerritos Public Financing Authority,
Los Coyotes Redevelopment Project,
Series 1993-A,
6.500% 11/01/23 2,000 2,443
Commerce Joint Powers Financing
Authority, Series 1991-A,
8.000% 03/01/21 970 1,034
Concord Redevelopment Agency,
Central Concord Project, Series 1988-3,
8.000% 07/01/18 25 26
Contra Costa County Public Financing
Authority, Series 1992-A,
7.100% 08/01/22 1,000 1,101
Corona Community Facility District,
Foothill Ranch, Series 1990-A1,
8.350% 09/01/20 1,000 1,021
Costa Mesa Public Financing,
Series 1991-A,
7.100% 08/01/21 890 950
Elk Grove Unified School District,
Community Facilities, Series 1995,
(a) 12/01/18 2,720 945
6.500% 12/01/08 1,000 1,184
6.500% 12/01/24 4,055 4,972
Fontana Redevelopment Agency, Tax Allocation,
5.500% 10/01/27 1,400 1,412
Oakland Redevelopment Agency, Central
District Redevelopment Project, Series 1992,
5.500% 02/01/14 8,400 9,091
Rancho Cucamonga Redevelopment Agency,
Series 1996,
5.250% 09/01/16 4,000 4,088
Richmond Joint Powers Financing
Authority, Series 1990-A,
7.700% 10/01/10 870 952
Riverside County Public Financing Authority:
Series 1991-A,
8.000% 02/01/18 410 448
Redevelopment Projects, Series A,
5.250% 10/01/16 3,120 3,112
Riverside Unified School District, Community
Facilities District No. 2, Series 1993-A,
7.250% 09/01/18 1,000 1,094
San Jose Redevelopment Agency,
Area Redevelopment Project, Series 1993,
5.000% 08/01/21 10,000 9,797
Santa Fe Springs Redevelopment Agency,
Consolidated Redevelopment Project,
Series 1992-A,
6.400% 09/01/22 7,275 8,037
Santa Margarita/Dana Point Authority,
Series 1994-B,
7.250% 08/01/13 2,000 2,557
Soledad Redevelopment Agency,
Series 1992,
7.400% 11/01/12 935 1,046
Torrance Redevelopment Agency,
Downtown Redevelopment Project, Series 1992,
7.125% 09/01/21 1,000 1,090
--------
61,541
--------
STATE APPROPRIATED - 4.5%
PR Commonwealth of Puerto Rico, Public
Buildings Authority, Series 1993-M,
stepped coupon, (5.700% 7/01/98),
3.750% 07/01/16(c) 2,250 2,319
State Public Works Board:
Department of Corrections Corcoran II Project,
Series 1996-A,
5.250% 01/01/21 4,000 4,023
Secretary of State & State Archives, Series 1992-A,
6.500% 12/01/08 1,000 1,181
State Prisons, Series 1993-A,
5.000% 12/01/19 6,000 6,047
Various State Prisons Projects, Series 1993-A,
5.250% 12/01/13 2,500 2,652
--------
16,222
--------
STATE GENERAL OBLIGATIONS - 4.7%
PR Commonwealth of Puerto Rico:
6.500% 07/01/14 2,000 2,409
Aqueduct & Sewer Authority:
6.000% 07/01/09 1,250 1,435
6.250% 07/01/13 2,750 3,234
Series 1995,
5.650% 07/01/15 1,000 1,106
State of California:
5.500% 04/01/12 $2,770 $3,027
10.000% 02/01/10 2,000 3,000
Series 1995,
10.000% 10/01/06 1,185 1,659
VI Virgin Islands Public Financing,
Series 1992-A,
7.250% 10/01/18 1,000 1,130
--------
17,000
--------
- --------------------------------------------------------------------------------
TRANSPORTATION - 3.4%
AIRPORT - 0.9%
Los Angeles Department of Airports,
Los Angeles International Airport,
Series 1995-D,
5.500% 05/15/15 3,025 3,127
--------
TRANSPORTATION - 2.5%
Los Angeles Harbor Department,
Series 1996-B,
5.375% 11/01/19 8,750 8,853
--------
- --------------------------------------------------------------------------------
UTILITY - 12.8%
INDIVIDUAL POWER PRODUCER - 2.0%
Sacramento Cogeneration Authority,
Procter & Gamble Project, Series 1995,
6.500% 07/01/21 6,500 7,128
--------
INVESTOR OWNED - 1.5%
State Pollution Control Finance Authority,
San Diego Gas & Electric Co., Series 1996-A,
5.900% 06/01/14 4,650 5,219
--------
MUNICIPAL ELECTRIC - 3.1%
PR Commonwealth of Puerto Rico Electric
Power Authority:
Series 1989-N,
7.000% 07/01/07 365 385
Series 1989-O,
(a) 07/01/17 2,490 931
Reading Electric Systems,
RIB (variable rate), Series 1992-A,
8.558% 07/08/22 750 989
Sacramento Municipal Utilities District:
Series 1993-G,
6.500% 09/01/13 1,500 1,800
Series K,
5.700% 07/01/17 1,500 1,645
Series L,
5.125% 07/01/22 3,700 3,682
Turlock Irrigation District,
Series 1996-A:
6.000% 01/01/11 1,000 1,143
6.000% 01/01/12 500 571
--------
11,146
--------
WATER & SEWER - 6.2%
Big Bear Lake, Series 1996,
6.000% 04/01/15 1,350 1,538
Contra Costa Water District,
Series 1994-G,
5.000% 10/01/24 5,000 4,892
Fresno, Series 1995-A,
6.000% 09/01/09 1,525 1,749
6.000% 09/01/10 1,420 1,630
Metropolitan Water District,
RIB (variable rate),
7.680% 08/05/22 2,000 2,273
Mojave Water Agency Morongo Basin,
5.800% 09/01/22 4,000 4,294
San Diego County Water Authority,
5.750% 05/01/11 2,100 2,335
Santa Maria, Series A,
(a) 08/01/14 2,000 880
State Department of Water Resources,
Central Valley Project, Series 1996-O,
4.750% 12/01/25 2,750 2,580
--------
22,171
--------
TOTAL INVESTMENTS (cost of $316,258(d) 347,310
--------
SHORT-TERM OBLIGATIONS - 1.6%
- --------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES(e)
CA Newport Beach Hoag Hospital,
3.600% 10/01/22 4,400 4,400
LA State Offshore Terminal Authority,
Loop, Inc.,
3.650% 09/01/06 800 800
NY Niagara Mohawk Series 1985-A,
3.900% 07/01/15 700 700
--------
TOTAL SHORT-TERM OBLIGATIONS 5,900
--------
OTHER ASSETS & LIABILITIES, NET - 1.4% 4,845
- --------------------------------------------------------------------------------
NET ASSETS - 100.0% $358,055
========
NOTES TO INVESTMENT PORTFOLIO:
- --------------------------------------------------------------------------------
(a) Zero coupon bond.
(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) Shown parenthetically is the interest rate to be paid and the date the Fund
will begin accruing this rate.
(d) Cost for federal income tax purposes is the same.
(e) Variable rate demand notes are considered short-term obligations.
Interest rates change periodically on specified dates. These securities are
payable on demand and are secured by either letters of credit or other
credit support agreements from banks. The rates listed are as of January 31,
1998.
Acronym Name
--------------------- -----------------------
RIB Residual Interest Bonds
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
JANUARY 31, 1998
(in thousands except for per share amounts and footnotes)
ASSETS
Investments at value (cost $316,258) $ 347,310
Short-term obligations 5,900
---------
353,210
Receivable for:
Interest $ 5,621
Investments sold 488
Fund shares sold 132
Other 70 6,311
------- ---------
Total Assets 359,521
LIABILITIES
Payable for:
Distributions 1,350
Fund shares repurchased 85
Accrued:
Deferred Trustees fees 6
Other 25
-------
Total Liabilities 1,466
---------
NET ASSETS $ 358,055
---------
Net asset value & redemption price per share -
Class A ($255,838/33,145) $7.72
=========
Maximum offering price per share - Class A
($7.72/0.9525) $8.10(a)
=========
Net asset value & offering price per share -
Class B ($101,657/13,170) $7.72(b)
=========
Net asset value & offering price per share -
Class C ($560/72) $7.72(b)
=========
COMPOSITION OF NET ASSETS
Capital paid in $ 329,090
Overdistributed net investment income (7)
Accumulated net realized loss (2,080)
Net unrealized appreciation 31,052
---------
$ 358,055
=========
(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 $ 20,694
--------
EXPENSES
Management fee $ 1,789
Service fee 509
Distribution fee - Class B 753
Distribution fee - Class C 1
Transfer agent 538
Bookkeeping fee 135
Audit fee 33
Trustees fee 26
Legal fee 5
Custodian fee 12
Registration fee 23
Reports to shareholders 15
Other 32
--------
3,871
Fees waived by the Distributor - Class C (a) 3,871
-------- --------
Net Investment Income 16,823
--------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO
POSITIONS Net realized gain (loss) on:
Investments 4,458
Closed futures contracts (1,449)
--------
Net Realized Gain 3,009
Net unrealized appreciation (depreciation)
during the period on:
Investments 17,329
Open futures contracts (324)
--------
Net Unrealized Appreciation 17,005
--------
Net Gain 20,014
--------
Increase in Net Assets from Operations $ 36,837
========
(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 $ 16,823 $ 19,010
Net realized gain 3,009 6,801
Net unrealized appreciation (depreciation) 17,005 (16,275)
-------- --------
Net Increase from Operations 36,837 9,536
Distributions:
From net investment income - Class A (12,766) (14,448)
In excess of net investment income - Class A (22) --
From net realized gains - Class A (2,150) --
In excess of net realized gains - Class A (134) --
From net investment income - Class B (4,231) (4,590)
In excess of net investment income - Class B (7) --
From net realized gains - Class B (855) --
In excess of net realized gains - Class B (53) --
From net investment income - Class C (8) --
From net realized gains - Class C (5) --
-------- --------
16,606 (9,502)
-------- --------
Fund Share Transactions:
Receipts for shares sold - Class A 17,872 12,231
Value of distributions reinvested - Class A 6,896 6,314
Cost of shares repurchased - Class A (44,923) (52,020)
-------- --------
(20,155) (33,475)
-------- --------
Receipts for shares sold - Class B 6,656 11,308
Value of distributions reinvested - Class B 2,880 2,375
Cost of shares repurchased - Class B (13,410) (17,286)
-------- --------
(3,874) (3,603)
-------- --------
Receipts for shares sold - Class C 631 --
Value of distributions reinvested - Class C 10 --
Cost of shares repurchased - Class C (89) --
-------- --------
552 --
-------- --------
Net Decrease from Fund Share Transactions (23,477) (37,078)
-------- --------
Total Decrease (6,871) (46,580)
NET ASSETS
Beginning of period 364,926 411,506
-------- --------
End of period (net of overdistributed and
including undistributed net investment
income of $7 and $182, respectively) $358,055 $364,926
======== ========
(a) Class C shares were initially offered on August 1, 1997.
See notes to financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS - CONT.
(in thousands) Year ended January 31
------------------------
NUMBER OF FUND SHARES 1998 (a) 1997
Sold - Class A 2,386 1,669
Issued for distributions reinvested - Class A 918 860
Repurchased - Class A (5,994) (7,085)
-------- --------
(2,690) (4,556)
-------- --------
Sold - Class B 889 1,544
Issued for distributions reinvested - Class B 383 323
Repurchased - Class B (1,792) (2,357)
-------- --------
(520) (490)
-------- --------
Sold - Class C 83 --
Issued for distributions reinvested - Class C 1 --
Repurchased - Class C (12) --
-------- --------
72 --
-------- --------
(a) Class C shares were initially offered on August 1, 1997.
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1998
NOTE 1. ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
ORGANIZATION: Colonial California Tax-Exempt Fund (the Fund), a series of
Colonial Trust V, is a 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 California 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.
Futures contracts are valued based on the difference between the last sale price
and the opening price of the contract.
Options are valued at the last reported sale price, or in the absence of a sale,
the mean between the last quoted bid and asking price.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
Portfolio positions 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 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.
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 $23,535 on sales of the Fund's Class A
shares and received contingent deferred sales charges (CDSC) of $223,333 and
$942 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 does 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 0.80% annually of the Fund's average net
assets.
For the year ended January 31, 1998, the Fund's operating expenses did not
exceed the 0.80% expense limit.
OTHER: The Fund pays no compensation to its officers, all of whom are
employees of the Adviser.
The Fund's Trustees may participate in a deferred compensation plan which may be
terminated at any time. Obligations of the plan will be paid solely out of the
Fund's assets.
NOTE 3. PORTFOLIO INFORMATION
................................................................................
INVESTMENT ACTIVITY: During the year ended January 31, 1998, purchases and sales
of investments, other than short-term obligations, were $109,249,630 and
$139,678,018, 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 .......... $31,081,412
Gross unrealized depreciation .......... (29,064)
------------
Net unrealized appreciation .... $31,052,348
===========
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.
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are
as follows:
Year ended January 31
------------------------------------------
1998
Class A Class B Class C (a)
-------- -------- ------
Net asset value -
Beginning of period $ 7.370 $ 7.370 $7.660
-------- -------- ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.366 0.310 0.164(b)
Net realized and unrealized gain 0.426 0.426 0.132
-------- -------- ------
Total from Investment Operations 0.792 0.736 0.296
-------- -------- ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.369) (0.313) (0.167)
In excess of net investment income (0.004) (0.004) --
From net realized gains (0.068) (0.068) (0.069)
In excess of net realized gains (0.001) (0.001) --
-------- -------- ------
Total Distributions Declared to
Shareholders (0.442) (0.386) (0.236)
-------- -------- ------
Net asset value -
End of period $ 7.720 $ 7.720 $7.720
======== ======== ======
Total return(c) 11.05% 10.23% 3.93%(d)
======== ======== ======
RATIOS TO AVERAGE NET ASSETS
Expenses (e) 0.87% 1.62% 1.32%(b)(f)
Net investment income (e) 4.92% 4.17% 4.32%(b)(f)
Portfolio turnover 31% 31% 31%
Net assets at end of period (000) $255,838 $101,657 $ 560
(a) Class C shares were initially offered on August 1, 1997. Per share amounts
reflect activity from that date.
(b) Net of fees waived by the Distributor which amounted to $0.011 per share and
0.30%.
(c) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(d) Not annualized. Had the Distributor not waived a portion of the Distribution
fee, total return would have been reduced.
(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(f) Annualized.
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS - CONT.
<CAPTION>
Year ended January 31
-----------------------------------------------------------
1997 1996
Class A Class B Class A Class B
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 7.540 $ 7.540 $ 6.870 $ 6.870
-------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.386 0.331 0.388 0.334
Net realized and unrealized gain (loss) (0.173) (0.173) 0.671 0.671
-------- -------- -------- --------
Total from Investment Operations 0.213 0.158 1.059 1.005
-------- -------- -------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.383) (0.328) (0.389) (0.335)
-------- -------- -------- --------
Net asset value -
End of period $ 7.370 $ 7.370 $ 7.540 $ 7.540
======== ======== ======== ========
Total return (b) 2.98% 2.21% 15.78%(c) 14.94%(c)
======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS
Expenses 0.88%(d) 1.63%(d) 0.89%(d) 1.64%(d)
Net investment income 5.23%(d) 4.48%(d) 5.33%(d) 4.58%(d)
Fees and expenses waived or borne
by the Adviser $ - (d) $ - (d) 0.01%(d) 0.01%(d)
Portfolio turnover 25% 25% 47% 47%
Net assets at end of period (000) $264,053 $100,873 $304,581 $106,925
(a) Net of fees and expenses waived or borne by the Adviser which amounted to:
$ - $ - $ 0.001 $ 0.001
(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>
<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
----------------------------------------------------------------------------
1995 1994
Class A Class B Class A Class B
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 7.660 $ 7.660 $ 7.350 $ 7.350
-------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.413 0.360 0.434 0.378
Net realized and unrealized gain (loss) (0.791) (0.791) 0.315 0.315
-------- -------- -------- --------
Total from Investment Operations (0.378) (0.431) 0.749 0.693
-------- -------- -------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.412) (0.359) (0.439) (0.383)
-------- -------- -------- --------
Net asset value -
End of period $ 6.870 $ 6.870 $ 7.660 $ 7.660
======== ======== ======== ========
Total return (b) (4.83%)(c) (5.55%)(c) 10.44%(c) 9.63%(c)
======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS
Expenses 0.77% 1.52% 0.75% 1.50%
Net investment income 5.91% 5.16% 5.73% 4.98%
Fees and expenses waived or borne
by the Adviser 0.06% 0.06% 0.08% 0.08%
Portfolio turnover 47% 47% 17% 17%
Net assets at end of period (000) $301,912 $ 98,975 $379,987 $104,578
(a) Net of fees and expenses waived or borne by the Adviser which amounted to:
$ 0.004 $ 0.004 $ 0.006 $ 0.006
(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) Approximately 99.3% of the income
distributions will be treated as exempt income for federal income tax purposes.
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE TRUSTEES OF COLONIAL TRUST V AND THE SHAREHOLDERS OF
COLONIAL CALIFORNIA 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 California 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>
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial California Tax-Exempt Fund is:
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Colonial California 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 California 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>
- --------------------------------------------------------------------------------
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 CA-02/785E-0198 (3/98) 98/229
- --------------------------------------------------------------------------------
