<PAGE>
[Illustration]
- ---------------------------------------------
COLONIAL OHIO TAX-EXEMPT FUND ANNUAL REPORT
- ---------------------------------------------
January 31, 1998
----------------------------
Not FDIC May Lose Value
Insured No Bank Guarantee
----------------------------
<PAGE>
- --------------------------------------------------------------------------------
COLONIAL OHIO TAX-EXEMPT FUND HIGHLIGHTS
February 1, 1997 - January 31, 1998
INVESTMENT OBJECTIVE: Colonial Ohio 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 Ohio state personal income tax. The Fund also
provides opportunities for long-term appreciation from a portfolio primarily
invested in investment grade municipal bonds.
PORTFOLIO MANAGER COMMENTARY: "Bond market conditions improved during the period
and the Fund was well positioned to take advantage of declining interest rates.
Ohio's strong fiscal management has resulted in significant cash reserves in the
State's general revenue and budget stabilization funds."
-- William Loring
COLONIAL OHIO TAX-EXEMPT FUND PERFORMANCE
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C(1)
<S> <C> <C> <C>
Inception dates 9/26/86 8/4/92 8/1/97
Distributions declared per share(2) $0.376 $0.320 $0.176
SEC yields on 1/31/98(3) 3.90% 3.33% 3.64%
Taxable-equivalent SEC yields(4) 6.96% 5.94% 6.49%
12-month total returns, assuming reinvestment 10.58% 9.76% 3.81%
of all distributions and no sales charge or
contingent deferred sales charge (CDSC)(5)
Net asset value per share on 1/31/98 $7.72 $7.72 $7.72
</TABLE>
(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 3.70% for Class A shares, 3.12% for Class B shares and 3.12% for
Class C shares.
(4)Taxable-equivalent SEC yields are based on the maximum effective 43.95%
federal and Ohio 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 will be
taxable when distributed.
<TABLE>
<CAPTION>
QUALITY BREAKDOWN (as of 1/31/98) TOP FIVE SECTORS (as of 1/31/98)
<S> <C> <C>
AAA ......................... 63.1% General Obligations ......... 32.2%
AA .......................... 9.7% Water & Sewer ............... 14.2%
A ........................... 10.1% Education ................... 9.5%
BBB ......................... 8.8% State Appropriated .......... 7.0%
BB .......................... 1.5% Hospital .................... 3.2%
Non-rated ................... 6.2%
Short-term Obligations ...... 0.6%
</TABLE>
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
TO FUND SHAREHOLDERS
I am pleased to present the annual report
for Colonial Ohio Tax-Exempt Fund. This [PHOTO]
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 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 Ohio 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 Ohio'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 Ohio 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 10.58% 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 9.12% 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.
OHIO'S ECONOMY SETTLED DOWN
Economic growth in Ohio continued during the period, but at a slower pace than
other midwestern states. While the State has successfully increased its economic
base to include significant employment in the finance, high technology and
health care industries, unemployment remains below the national average and a
tight labor supply is holding back the State's economic growth. As a significant
export economy, Ohio may be hurt by the financial crisis in southeast Asia. Weak
currencies in many of Ohio's export markets make Ohio's exports relatively less
affordable. The State also experienced decelerating growth in the manufacturing
sector and a significant decrease in housing construction. Despite all these
signs of a potential economic slowdown, Ohio appears well prepared to weather a
downturn. The economy
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
is significantly more diversified and strong fiscal management has resulted in
significant cash reserves in the State's general revenue and budget
stabilization funds.
POSITIVE OUTLOOK AHEAD FOR THE ECONOMY
We do not expect any major changes in either the national or State economy over
the next few months. We believe that growth will continue, although at a slower
pace than 1997. This is due in part to the financial crisis in Asia and its
anticipated impact on the worldwide marketplace. However, we expect that
inflation will remain subdued and that interest rates may continue to decline
somewhat, as they did during the second half of the year. Declining interest
rates are positive for bond prices. With slower economic growth, low inflation
and the possibility of a balanced Federal budget all forecasted for 1998, we
expect this trend in the bond market to continue. Even with a decreased yield,
current income outpaces inflation even before tax-exemption is factored in. In
fact, the Fund's inflation-adjusted yield, in which the inflation rate is
subtracted from the actual yield, is attractive by historical standards. Our
goal remains unchanged: to increase your total return by carefully researching
and selecting a portfolio of primarily investment-grade municipal bonds.
As the heavy level of tax-exempt refunding and year-end supply is absorbed by
the market, we expect 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 Ohio Tax-Exempt Municipal Fund universe. The Fund (Class A shares) ranked
in the first quartile for 1 year (rated 4 out of 50 funds), in the second
quartile for 5 years (rated 13 out of 25 funds) and in the third quartile for 10
years (rated 7 out of 12 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 OHIO 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
[Graph omitted, plot points supplied below]
<TABLE>
<CAPTION>
Label NAV POP Lehman
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1 Jan-88 10000 9525 10000
2 Apr-88 10086 9607 10064
3 Jul-88 10286 9798 10248
4 Oct-88 10722 10213 10627
5 Jan-89 11022 10499 10857
6 Apr-89 11133 10604 10962
7 Jul-89 11515 10968 11496
8 Oct-89 11486 10941 11488
9 Jan-90 11596 11045 11729
10 Apr-90 11607 11056 11752
11 Jul-90 12238 11656 12293
12 Oct-90 12218 11638 12341
13 Jan-91 12664 12062 12814
14 Apr-91 12968 12352 13102
15 Jul-91 13146 12521 13366
16 Oct-91 13574 12929 13842
17 Jan-92 13930 13269 14211
18 Apr-92 14073 13405 14348
19 Jul-92 14902 14194 15203
20 Oct-92 14641 13946 15004
21 Jan-93 15241 14517 15608
22 Apr-93 15743 14995 16163
23 Jul-93 16071 15307 16547
24 Oct-93 16569 15782 17117
25 Jan-94 16944 16139 17522
26 Apr-94 15839 15086 16512
27 Jul-94 16198 15429 16857
28 Oct-94 15673 14928 16371
29 Jan-95 16201 15431 16898
30 Apr-95 16778 15981 17610
31 Jul-95 17028 16219 18184
32 Oct-95 17736 16894 18800
33 Jan-96 18498 17619 19442
34 Apr-96 17861 17013 19010
35 Jul-96 18267 17399 19384
36 Oct-96 18775 17883 19872
37 Jan-97 19006 18103 20189
38 Apr-97 19010 18107 20271
39 Jul-97 20200 19240 21371
40 Oct-97 20311 19346 21560
41 Jan-98 21017 20018 22230
</TABLE>
A hypothetical $10,000 investment in Class B shares made on August 4, 1992
(inception), at net asset value (NAV), would have been valued at $13,569 on
January 31, 1998. The same investment after deducting the applicable contingent
deferred sales charge (CDSC) would have grown to $13,469 on January 31, 1998. A
$10,000 investment in Class C shares made on August 1, 1997 (inception), at NAV,
would have grown to $10,381 on January 31, 1998. The same investment after
deducting the applicable CDSC would have been valued at $10,281 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.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
As of January 31, 1998
- --------------------------------------------------------------------------------
Class A Shares Class B Shares Class C Shares(1)
INCEPTION 9/26/86 8/4/92 8/1/97
NAV POP NAV w/CDSC NAV w/CDSC
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 year 10.58% 5.33% 9.76% 4.76% -- --
- --------------------------------------------------------------------------------
5 years 6.64 5.60 5.85 5.53 -- --
- --------------------------------------------------------------------------------
10 years (or Life) 7.71 7.19 5.71 5.57 3.81% 2.81%
- --------------------------------------------------------------------------------
</TABLE>
(1)The 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 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 THOUSANDS)
<TABLE>
<CAPTION>
MUNICIPAL BONDS - 98.6% PAR VALUE
------------------------------------------------------------------------------
<S> <C> <C>
EDUCATION - 11.1%
EDUCATION - 9.4%
Miami University, Series 1993,
(a) 12/01/09 $ 400 $ 235
State Higher Educational Facilities Commission:
Case Western Reserve, Series 1994:
6.125% 10/01/15 1,505 1,755
6.250% 10/01/17 4,340 5,135
Ohio Dominican College, Series 1994,
6.625% 12/01/14 1,500 1,658
University of Cincinnati, Series AD,
5.000% 06/01/17 1,500 1,494
---------
10,277
---------
STUDENT LOAN - 1.7%
Cincinnati Student Loan Funding Corporation,
Series A,
6.150% 08/01/10 1,775 1,864
---------
- --------------------------------------------------------------------------------
HEALTHCARE - 5.5%
HOSPITALS - 3.2%
Franklin County, Holy Cross Health System,
Series 1991,
6.750% 06/01/19 500 549
Green Springs, St. Francis Health
Care Center, Series 1994 A,
7.000% 05/15/04 700 775
Marion County, Community Hospital,
Series 1996,
6.375% 05/15/11 1,000 1,100
Miami County,
Upper Valley Medical Center, Inc.,
Series 1996 C,
6.000% 05/15/06 1,000 1,067
---------
3,491
---------
NURSING HOMES- 2.3%
Lucas County, Gericare, Inc.,
Series 1988 B,
10.500% 06/01/18 500 514
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/January 31, 1998
- -----------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- -----------------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE - CONT.
NURSING HOMES - CONT.
Marion County,
United Church Homes, Inc.,
Series 1993,
6.375% 11/15/10 $ 1,000 $1,063
Montgomery County,
Grafton Oaks Limited Partners,
Series 1986,
9.750% 12/01/16 735 698
Westerville,
Health Care & Retirement Corp. of America,
Series 1989,
10.000% 01/01/08 195 198
------
2,473
------
- -----------------------------------------------------------------------------
HOUSING - 5.2%
MULTI-FAMILY - 3.4%
Columbus-Beckley Housing Corp.,
Section 8 Assisted Project:
7.375% 10/15/21 1,288 1,316
Columbus-Norton Housing Corp.,
Section 8 Assisted Project:
7.375% 07/15/21 1,325 1,361
State Capital Corp. for Housing,
Series 1990 A,
7.500% 01/01/24 1,000 1,056
------
3,733
------
SINGLE-FAMILY - 1.8%
State Housing Finance Agency:
Series A2, RIB (variable rate)
9.263% 03/24/31 350 396
Series 1994 B2,
6.700% 03/01/25 485 521
Series 1997 A-1,
6.050% 09/01/17 1,000 1,059
------
1,976
------
- --------------------------------------------------------------------------------
OTHER - 7.1%
REFUNDED/ESCROWED (b)
Cuyahoga County:
Judson Retirement Community,
Series 1989,
8.875% 11/15/19 500 557
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/January 31, 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Cuyahoga County,
Meridian Health Systems:
Series 1991,
7.000% 08/15/23 $ 500 $ 557
Series 1995,
6.250% 08/15/24 1,000 1,141
Deaconess Hospital of Cleveland,
Series 1985 C,
7.450% 10/01/18 500 557
Delaware County,
Series 1990,
7.250% 11/01/10 250 276
Franklin County,
Holy Cross Health System Corp.,
Series 1990 B,
7.650% 06/01/10 500 550
Greene County,
Fairview Extended Care Service, Inc.,
Series 1990 A,
10.125% 01/01/11 210 244
Hamilton County,
Sisters of Charity Health Care System, Inc.,
Series 1992 A,
6.250% 05/15/14 500 555
Montgomery County,
St. Elizabeth Medical Center,
Series B 1,
8.100% 07/01/18 500 601
Stark County,
Doctor's Hospital, Inc.,
Series 1993,
6.000% 04/01/24 1,500 1,663
State Water Development Authority,
Series 1990 I,
6.000% 12/01/16 1,000 1,111
--------
7,812
--------
- --------------------------------------------------------------------------------
OTHER REVENUE - 5.5%
INDUSTRIAL - 3.5%
Cuyahoga County,
Joy Technologies, Inc.,
Series 1992,
8.750% 09/15/07 500 574
State Burrows Paper Corp.,
Series 1991 6,
7.450% 06/01/03 775 837
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/January 31, 1998
- --------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- -------------------------------------------------------------------------------
<S> <C> <C>
OTHER REVENUE - CONT.
INDUSTRIAL - CONT.
State Water Development Authority,
North Star BHP Steel Co. Ltd.,
Series 1995,
6.450% 09/01/20 $ 1,500 $ 1,641
State Sponge, Inc., Series 1989 5A,
8.375% 06/01/14 685 732
----------
3,784
----------
OIL & GAS - 1.5%
Hamilton,
Series 1993 A,
4.750% 10/15/23 1,750 1,665
----------
RETAIL- 0.5%
Lake County, North Madison Properties,
Series 1993:
8.069% 09/01/01 285 295
8.819% 09/01/11 200 218
----------
513
----------
- --------------------------------------------------------------------------------
TAX-BACKED - 44.1%
LOCAL APPROPRIATED - 1.9%
Cleveland Stadium Project,
5.250% 11/15/12 2,000 2,080
----------
LOCAL GENERAL OBLIGATIONS - 28.8%
Adams County:
Human Services Building,
7.250% 12/01/11 500 552
Local School District, Series 1995,
7.000% 12/01/15 3,000 3,768
Beavercreek Local School District,
Series 1996,
6.600% 12/01/15 2,500 3,028
Bellefontaine, Storm Water Utility,
Series I,
7.050% 06/01/11 250 271
Brecksville-Broadview Heights
School District,
Series 1996,
6.500% 12/01/16 1,750 2,018
Cleveland,
5.750% 08/01/15 1,000 1,108
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/January 31, 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Columbus School District,
Series 1993,
(a) 12/01/05 $ 2,400 $ 1,714
Crooksville,
Exempted Village School District,
7.375% 12/01/07 25 30
Cuyahoga County, Jail Facilities:
Series 1993 A,
(a) 10/01/12 1,000 497
Series 1993,
5.250% 10/01/13 3,000 3,178
Eastern School District,
Brown & Highland Counties,
Series 1995,
6.250% 12/01/17 1,160 1,357
Fairborn,
Library Improvement,
Series 1991,
7.200% 10/01/11 1,170 1,324
Forest Hills School District,
6.000% 12/01/11 1,600 1,774
Gahanna-Jefferson City School District,
Series 1993:
(a) 12/01/10 840 464
(a) 12/01/11 795 414
Hilliard School District,
Series 1995 A,
(a) 12/01/12 2,505 1,236
Kings County Local School District,
Series 1995,
7.500% 12/01/16 2,110 2,778
Massillon City School District,
Series 1994:
(a) 12/01/08 1,000 618
(a) 12/01/09 1,000 588
(a) 12/01/11 1,000 521
Richland County,
Series 1995,
6.950% 12/01/11 275 323
Rocky River School District,
Series 1996,
(a) 12/01/11 1,115 581
Shaker Heights School District,
Series 1990 A,
7.100% 12/15/10 750 912
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/January 31, 1998
- --------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- -------------------------------------------------------------------------------
<S> <C> <C>
TAX-BACKED - CONT.
LOCAL GENERAL OBLIGATIONS - CONT.
Strongsville School District,
Series 1996,
6.500% 12/01/13 $ 1,500 $ 1,704
Tri-County North Local School
District,
8.125% 12/01/06 75 92
Warren County,
Series 1996,
6.250% 12/01/11 500 585
---------
31,435
---------
SPECIAL NON-PROPERTY TAX - 3.2%
Commonwealth of Puerto Rico
Highway & Transportation Authority,
Series Y,
6.250% 07/01/14 3,000 3,528
---------
STATE APPROPRIATED - 7.0%
Butler County Transportation Improvement
District, Series A,
5.125% 04/01/17 1,000 1,007
PR Commonwealth of Puerto Rico
Public Buildings Authority,
Series 1993 M, stepped coupon, (5.700% 07/01/98),
3.750% 07/01/16 (c) 2,500 2,577
State Building Authority, William Green
Building, Series 1993 A,
4.750% 04/01/14 4,100 4,032
---------
7,616
---------
STATE GENERAL OBLIGATIONS - 3.2%
PR Commonwealth of Puerto Rico
Aqueduct & Sewer Authority,
Series 1995:
6.250% 07/01/12 1,000 1,175
6.250% 07/01/13 1,500 1,764
State,
Series 1992,
6.100% 08/01/12 380 438
VI Virgin Islands Public Finance
Authority,
Series 1992 A,
7.000% 10/01/02 125 137
---------
3,514
---------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/January 31, 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
TRANSPORTATION - 1.7%
AIR TRANSPORTATION - 1.0%
Dayton,
Emery Air Freight Facilities,
Series 1993 F,
6.050% 10/01/09 $ 1,000 $ 1,087
--------
AIRPORT - 0.5%
Cleveland Hopkins International Airport,
Series 1990 B,
7.250% 01/01/20 500 540
--------
TRANSPORTATION - 0.2%
Cleveland, Cuyahoga County Port Authority,
C & P Docks Project,
6.000% 03/01/07 250 256
--------
- --------------------------------------------------------------------------------
UTILITY - 18.4%
INDEPENDENT POWER PRODUCER - 1.0%
State Air Quality Development Authority,
JMG Funding Ltd., Series 1994,
6.375% 01/01/29 1,000 1,103
--------
INVESTOR OWNED - 1.4%
State Air Quality Development Authority:
JMG Funding Project,
5.625% 01/01/23 1,000 1,047
Toledo Edison Co., Series 1990 B,
8.000% 05/15/19 500 540
--------
1,587
--------
MUNICIPAL ELECTRIC - 1.9%
Cleveland Public Power Co.,
Series 1994 A:
(a) 11/15/12 2,250 1,112
(a) 11/15/13 2,000 933
--------
2,045
--------
WATER & SEWER - 14.1%
Cleveland Waterworks,
Series 1993 G,
5.500% 01/01/21 7,000 7,524
Lakewood,
Water & Sewer Systems Revenue,
5.850% 07/01/20 2,405 2,696
State Water Development Authority,
Water Control Loan Fund,
5.500% 06/01/12 2,000 2,133
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/January 31, 1998
- --------------------------------------------------------------------------------
MUNICIPAL BONDS - CONT. PAR VALUE
- -------------------------------------------------------------------------------
<S> <C> <C>
UTILITY - CONT.
WATER & SEWER - CONT.
Toledo Waterworks:
Series 1996:
6.250% 11/15/09 $ 1,050 $ 1,195
6.250% 11/15/10 1,130 1,277
Warren Waterworks,
5.500% 11/01/15 500 538
--------
15,363
--------
TOTAL MUNICIPAL BONDS (cost of $97,913) 107,742
--------
OPTIONS - 0.0% CONTRACTS
- --------------------------------------------------------------------------------
March 1998 Treasury Bond Puts,
Strike price 116, expiration 2/21/98 8,000 1
March 1998 Treasury Bond Puts,
Strike price 118, expiration 2/21/98 15,600 10
--------
TOTAL OPTIONS (cost of $185) 11
--------
TOTAL INVESTMENTS (cost of $98,098) (d) 107,753
--------
SHORT-TERM OBLIGATIONS - 0.6% PAR
- --------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (e)
CA Newport Beach Hoag Hospital,
3.600% 10/01/22 $ 100 100
CA State Health Facilities Financing
Authority, Sutter Health, Series A,
3.550% 03/01/20 100 100
IN Portage Economic Development Revision,
Pedcor Investments, Series A,
3.650% 08/01/30 500 500
--------
TOTAL SHORT-TERM OBLIGATIONS 700
--------
OTHER ASSETS & LIABILITIES, NET - 0.8% 854
- --------------------------------------------------------------------------------
NET ASSETS - 100.0% $109,307
--------
</TABLE>
14
<PAGE>
Investment Portfolio/January 31, 1998
- --------------------------------------------------------------------------------
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 Bond
See notes to financial statements.
15
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS & LIABILITIES
JANUARY 31, 1998
(in thousands except for per share amounts and footnotes)
<S> <C> <C>
ASSETS
Investments at value (cost $98,098) $ 107,753
Short-term obligations 700
---------
108,453
Receivable for:
Interest $ 1,185
Fund shares sold 14
Expense reimbursement due from Adviser 7
Other 124 1,330
---------- ---------
Total Assets 109,783
LIABILITIES
Payable for:
Distributions 390
Fund shares repurchased 74
Accrued:
Deferred Trustees fees 3
Other 9
----------
Total Liabilities 476
---------
NET ASSETS $ 109,307
=========
Net asset value & redemption price per share -
Class A ($62,844/8,136) $ 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 ($46,330/5,998) $ 7.72(b)
=========
Net asset value & offering price per share -
Class C ($133/17) $ 7.72(b)
=========
COMPOSITION OF NET ASSETS
Capital paid in $ 101,357
Undistributed net investment income 45
Accumulated net realized loss (1,750)
Net unrealized appreciation 9,655
---------
$ 109,307
=========
</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.
16
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JANUARY 31, 1998
(in thousands)
<S> <C> <C>
INVESTMENT INCOME
Interest $ 6,346
EXPENSES
Management fee $ 553
Service fee 158
Distribution fee - Class B 354
Distribution fee - Class C (a)
Transfer agent 179
Bookkeeping fee 48
Trustees fee 15
Custodian fee 9
Audit fee 22
Legal fee 6
Registration fee 26
Reports to shareholders 8
Other 20
-------
1,398
Fees waived by the Adviser (52)
Waiver of Distribution fee - Class C (a) 1,346
------- ----------
Net Investment Income 5,000
----------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain (loss) on:
Investments 1,149
Closed futures contracts (502)
-------
Net Realized Gain 647
Net unrealized appreciation (depreciation) during
the period on:
Investments 5,156
Open futures contracts (13)
-------
Net Unrealized Appreciation 5,143
----------
Net Gain 5,790
----------
Increase in Net Assets from Operations $ 10,790
===========
</TABLE>
(a) Rounds to less than one.
See notes to financial statements.
17
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
Year ended January 31
(in thousands) -------------------------
INCREASE (DECREASE) IN NET ASSETS 1998 (a) 1997
<S> <C> <C>
Operations:
Net investment income $ 5,000 $ 5,714
Net realized gain 647 1,248
Net unrealized appreciation (depreciation) 5,143 (4,343)
--------- ---------
Net Increase from Operations 10,790 2,619
Distributions:
From net investment income - Class A (3,101) (3,413)
From net realized gains - Class A (89) -
From net investment income - Class B (1,958) (2,200)
From net realized gains - Class B (66) -
From net investment income - Class C (2) -
From net realized gains - Class C (b) -
--------- ---------
5,574 (2,994)
--------- ---------
Fund Share Transactions:
Receipts for shares sold - Class A 1,192 1,915
Value of distributions reinvested - Class A 1,861 1,986
Cost of shares repurchased - Class A (8,603) (11,388)
--------- ---------
(5,550) (7,487)
--------- ---------
Receipts for shares sold - Class B 1,981 3,094
Value of distributions reinvested - Class B 1,235 1,333
Cost of shares repurchased - Class B (8,728) (9,825)
--------- ---------
(5,512) (5,398)
--------- ---------
Receipts for shares sold - Class C 129 -
Value of distributions reinvested - Class C 2 -
Cost of shares repurchased - Class C (b) -
--------- ---------
131 -
--------- ---------
Net Decrease from Fund Share
Transactions (10,931) (12,885)
--------- ---------
Total Decrease (5,357) (15,879)
NET ASSETS
Beginning of period 114,664 130,543
--------- ---------
End of period (including undistributed
net investment income of $45 and $86,
respectively) $ 109,307 $ 114,664
========= =========
</TABLE>
(a) Class C shares were initially offered on August 1, 1997.
(b) Rounds to less than one.
See notes to financial statements.
18
<PAGE>
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS - CONT.
<CAPTION>
Year ended January 31
-------------------------
1998(a) 1997
<S> <C> <C>
NUMBER OF FUND SHARES
Sold - Class A 160 264
Issued for distributions reinvested - Class A 249 274
Repurchased - Class A (1,153) (1,565)
--------- ---------
(744) (1,027)
--------- ---------
Sold - Class B 266 428
Issued for distributions reinvested - Class B 165 184
Repurchased - Class B (1,172) (1,352)
--------- ---------
(741) (740)
--------- ---------
Sold - Class C 17 -
Issued for distributions reinvested - Class C (b) -
Repurchased - Class C (b) -
--------- ---------
17 -
--------- ---------
</TABLE>
(a) Class C shares were initially offered on August 1, 1997.
(b) Rounds to less than one.
See notes to financial statements.
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1998
NOTE 1. ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
ORGANIZATION: Colonial Ohio 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 Ohio 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.
20
<PAGE>
Notes to Financial Statements/January 31, 1998
- --------------------------------------------------------------------------------
NOTE 1. ACCOUNTING POLICIES - CONT.
- --------------------------------------------------------------------------------
Cost is determined and gains (losses) are based upon the specific identification
method for both financial statement and federal income tax purposes.
The Fund may trade securities on other than normal settlement terms. This may
increase the risk if the other party to the transaction fails to deliver and
causes the Fund to subsequently invest at less advantageous prices.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS: All income,
expenses (other than the Class B 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 annualized 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:
<TABLE>
<CAPTION>
Average Net Assets Annual Fee Rate
------------------ ---------------
<S> <C>
First $2 billion 0.50%
Over $2 billion 0.45%
</TABLE>
21
<PAGE>
Notes to Financial Statements/January 31, 1998
- --------------------------------------------------------------------------------
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 $4,029 on sales of the Fund's
Class A shares and received contingent deferred sales charges (CDSC) of $153,120
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.
22
<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 $29,100,538 and $41,372,375,
respectively.
Unrealized appreciation (depreciation) at January 31, 1998, based on cost of
investments for both financial statement and federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation $9,872,110
Gross unrealized depreciation (217,078)
----------
Net unrealized appreciation $9,655,032
==========
</TABLE>
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.
23
<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 $ 7.340 $ 7.340 $ 7.610 $ 7.510 $ 7.510
------- ------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income(a) 0.362 0.306 0.162(c) 0.372 0.318
Net realized and
unrealized gain (loss) 0.394 0.394 0.124 (0.179) (0.179)
------- ------- -------- ------- -------
Total from Investment
Operations 0.756 0.700 0.286 0.193 0.139
------- ------- -------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net
investment income (0.365) (0.309) (0.165) (0.363) (0.309)
From net realized gains (0.011) (0.011) (0.011) - -
------- ------- -------- ------- -------
Total Distributions
Declared to
Shareholders (0.376) (0.320) (0.176) - -
------- ------- -------- ------- -------
Net asset value -
End of period $ 7.720 $ 7.720 $ 7.720 $ 7.340 $ 7.340
======= ======= ======== ======= =======
Total return(d)(e) 10.58% 9.76% 0.0381(f) 2.75% 1.98%
======= ======= ======== ======= =======
RATIOS TO AVERAGE NET ASSETS
Expenses 0.89%(g) 1.64%(g) 1.34%(c)(g)(h) 0.88%(g) 1.63%(g)
Net investment
income 4.85%(g) 4.10%(g) 4.21%(c)(g)(h) 5.09%(g) 4.34%(g)
Fees and expenses waived
or borne by the
Adviser 0.05%(g) 0.05%(g) 0.07%(g)(h) 0.04%(g) 0.04%(g)
Portfolio turnover 27% 27% 27% 31% 31%
Net assets at end
of period (000) $62,844 $46,330 $ 133 $65,190 $49,474
(a) Net of fees and expenses waived or borne by the Adviser which amounted to:
$ 0.004 $ 0.004 $ 0.004 $ 0.003 $ 0.003
(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.
</TABLE>
24
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
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>
$ 6.930 $ 6.930 $ 7.670 $ 7.670
--------- --------- --------- ---------
0.375 0.321 0.401 0.348
0.585 0.585 (0.745) (0.745)
--------- --------- --------- ---------
0.960 0.906 (0.344) (0.397)
--------- --------- --------- ---------
(0.380) (0.326) (0.396) (0.343)
- - - -
--------- --------- --------- ---------
(0.380) (0.326) (0.396) (0.343)
--------- --------- --------- ---------
$ 7.510 $ 7.510 $ 6.930 $ 6.930
========= ========= ========= =========
14.18% 13.34% (4.38)% (5.10)%
========= ========= ========= =========
0.85%(g) 1.60%(g) 0.72% 1.47%
5.19%(g) 4.44%(g) 5.71% 4.96%
0.11%(g) 0.11%(g) 0.16% 0.16%
31% 31% 33% 33%
$ 74,383 $ 56,160 $ 72,123 $ 53,547
$ 0.008 $ 0.008 $ 0.011 $ 0.011
</TABLE>
25
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
Year ended January 31
-------------------------
1994
Class A Class B
-------- --------
<S> <C> <C>
Net asset value -
Beginning of period $ 7.290 $ 7.290
-------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income (a) 0.406 0.351
Net realized and
unrealized gain (loss) 0.389 0.389
-------- --------
Total from Investment
Operations 0.795 0.740
-------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net
investment income (0.411) (0.356)
From capital paid in (0.004) (0.004)
-------- --------
Total Distributions
Declared to Shareholders (0.415) (0.360)
-------- --------
Net asset value -
End of period $ 7.670 $ 7.670
======== ========
Total return(b)(c) 11.17% 10.36%
======== ========
RATIOS TO AVERAGE NET ASSETS
Expenses 0.82% 1.57%
Net investment income 5.34% 4.59%
Fees and expenses waived
or borne by
the Adviser 0.09% 0.09%
Portfolio turnover 3% 3%
Net assets at end
of period (000) $ 79,394 $ 51,212
</TABLE>
(a) Net of fees and expenses waived or borne by the Adviser which amounted to:
$ 0.007 $ 0.007
(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.
26
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE TRUSTEES OF COLONIAL TRUST V AND THE SHAREHOLDERS OF
COLONIAL OHIO 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 Ohio 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
27
<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.
28
<PAGE>
SHAREHOLDER COMMUNICATIONS
TO KEEP YOU INFORMED
To make recordkeeping easy and keep you up-to-date on the performance of your
investments, you can expect to receive the following information about your
account:
TRANSACTION CONFIRMATIONS: Each time you make a purchase, sale or exchange, you
receive a confirmation statement within just a few days.
QUARTERLY STATEMENTS: Every three months, if any transactions are made that
affect your share balance, this statement reports on your account activity
during the quarter (including any reinvestment of dividends). This statement
also provides year-to-date information.
LIBERTY FINANCIAL INVESTMENTS INVESTOR OPPORTUNITIES: Mailed with your quarterly
account statements, this newsletter highlights timely investment strategies,
portfolio manager commentary and shareholder service updates.
TAX FORMS AND YEAR-END TAX GUIDE: Easy-to-use forms and timely information are
designed to make tax reporting simpler. (Usually mailed in January.)
AVERAGE COST BASIS STATEMENTS: If you sold or exchanged shares during the year,
this statement may help you calculate your gain/loss for tax purposes. (Usually
mailed in February.)
29
<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
30
<PAGE>
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial Ohio Tax-Exempt Fund is:
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Colonial Ohio 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 Ohio 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
objective and operating policies of the Fund.
31
<PAGE>
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TRUSTEES
ROBERT J. BIRNBAUM
Retired (formerly Special Counsel, Dechert, Price & Rhoads; President and Chief
Operating Officer, New York Stock Exchange, Inc.)
TOM BLEASDALE
Retired (formerly Chairman of the Board and Chief Executive Officer, Shore Bank
& Trust Company)
LORA S. COLLINS
Attorney (formerly Attorney, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel)
JAMES E. GRINNELL
Private Investor (formerly Senior Vice President-Operations, The Rockport
Company)
WILLIAM D. IRELAND, JR.
Retired (formerly Chairman of the Board, Bank of New England-Worcester)
RICHARD W. LOWRY
Private Investor (formerly Chairman and Chief Executive Officer, U.S. Plywood
Corporation)
WILLIAM E. MAYER
Partner, Development Capital, L.L.C. (formerly Dean, College of Business and
Management, University of Maryland; Dean, Simon Graduate School of Business,
University of Rochester; Chairman and Chief Executive Officer, CS First Boston
Merchant Bank; and President and Chief Executive Officer, The First Boston
Corporation)
JAMES L. MOODY, JR.
Retired (formerly Chairman of the Board and Chief Executive Officer, Hannaford
Bros. Co.)
JOHN J. NEUHAUSER
Dean, Boston College School of Management
GEORGE L. SHINN
Financial Consultant (formerly Chairman, Chief Executive Officer and Consultant,
The First Boston Corporation)
ROBERT L. SULLIVAN
Retired Partner, Peat Marwick Main & Co. (formerly Management Consultant,
Saatchi and Saatchi Consulting Ltd. and Principal and International Practice
Director, Management Consulting, Peat Marwick Main & Co.)
SINCLAIR WEEKS, JR.
Chairman of the Board, Reed & Barton Corporation
[LOGO] LIBERTY FINANCIAL INVESTMENTS, INC. [COPYRIGHT]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
OH-02/774E-0198 (3/98) 98/201
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