<PAGE>
- ----------------------------------------------------
COLONIAL MASSACHUSETTS TAX-EXEMPT FUND ANNUAL REPORT
- ----------------------------------------------------
January 31,1999
[graphic omitted]
------------------------------
Not FDIC May Lose Value
Insured No Bank Guarantee
------------------------------
<PAGE>
COLONIAL MASSACHUSETTS TAX-EXEMPT FUND HIGHLIGHTS
FEBRUARY 1, 1998 - JANUARY 31, 1999
PORTFOLIO MANAGER COMMENTARY: "Interest rate volatility, low nominal interest
rates and a near-record level of supply created challenging conditions for
tax-exempt investors. Despite these hurdles, the Fund was well positioned. We
took advantage of declining interest rates and a strong Massachusetts economy,
generating attractive performance relative to the Fund's Lipper peer group."(1)
- Gary Swayze
COLONIAL MASSACHUSETTS TAX-EXEMPT FUND PERFORMANCE
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
Inception dates 4/10/87 6/8/92 8/1/97
12-month distributions declared per share(2) $0.528 $0.466 $0.491
- --------------------------------------------------------------------------------
SEC yields on 1/31/99(3) 3.50% 2.92% 3.22%
- --------------------------------------------------------------------------------
Taxable-equivalent SEC yields(4) 6.16% 5.14% 5.67%
- --------------------------------------------------------------------------------
12-month total returns, assuming reinvestment 6.25% 5.44% 5.76%(5)
of all distributions and no sales charge or
contingent deferred sales charge (CDSC)
- --------------------------------------------------------------------------------
Net asset value per share on 1/31/99 $8.06 $8.06 $8.06
- --------------------------------------------------------------------------------
QUALITY BREAKDOWN(6) (as of 1/31/99) TOP FIVE SECTORS(6) (as of 1/31/99)
- ------------------------------------ -----------------------------------
AAA ............................50.0% State General Obligations ......16.5%
AA .............................13.4% Water & Sewer ..................13.9%
A ..............................16.9% Refunded/Escrowed ..............13.5%
BBB .............................7.1% Education .......................9.2%
BB ..............................0.4% Local General Obligations .......9.6%
Nonrated .......................10.0%
Short-Term Obligations ..........2.2%
(1) See complete Lipper rankings on page 3.
(2) A portion of the Fund's income may be subject to the alternative minimum
tax. The Fund may at times purchase tax-exempt securities at a discount.
Some or all of this discount may be included in the Fund's ordinary income
and will be taxable when distributed.
(3) The 30-day SEC yields on January 31, 1999, reflect the portfolio's earning
power, net of expenses, and are expressed as an annualized percentage of the
public offering price at the end of the period. If the Advisor or its
affiliates had not waived certain Fund expenses, the SEC yield would have
been 2.92% for Class C shares.
(4) Taxable-equivalent SEC yields are based on the combined maximum effective
43.2% federal and Massachusetts income tax rate. This tax rate does not
reflect the phase out of exemptions or the reduction of otherwise allowable
deductions which occurs when Adjusted Gross Income exceeds certain levels.
(5) Performance results reflect any voluntary waiver of Fund expenses by the
Advisor or its affiliates. Absent this waiver, performance results would
have been lower.
(6) Quality and sector breakdowns are calculated as a percentage of total
investments, including short-term obligations. Because the Fund is actively
managed, there can be no guarantee the Fund will continue to maintain these
quality and sector breakdowns in the future.
<PAGE>
PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
[Photo of Stephen E. Gibson]
I am pleased to present the annual report for Colonial Massachusetts Tax-Exempt
Fund for the 12 months ended January 31, 1999.
The past 12 months were generally positive for bonds, although conditions varied
considerably as domestic and international events affected all sectors of the
bond market. Despite some economic uncertainty early in the year, the economy
continued to grow and inflation remained low, creating a positive climate for
bonds.
International events played a role in the strong U.S. bond market. The economic
turmoil in Asia that began in 1997 gradually spread to other less-developed
markets, most notably Russia and Latin America. During pockets of increased
volatility, investors around the world sought the relative quality and stability
of U.S. Treasury bonds. Although demand for safety made Treasurys the bond
market's biggest winner, municipal bonds also benefited.
Colonial's disciplined bond fund management style and long-term investment
orientation served shareholders well during this volatile period, helping the
Fund outperform the majority of its peers over the past 12 months.(1) For
investors seeking competitive levels of tax-free income and the potential for
long-term price appreciation, Colonial Massachusetts Tax-Exempt Fund may provide
an attractive option.
The Portfolio Manager Report on the following pages will provide you with more
specific information on your Fund's performance and the market in which your
Fund invests. Thank you for choosing Colonial Massachusetts Tax-Exempt Fund and
for giving us the opportunity to serve your
investment needs.
Respectfully,
/s/ Stephen E. Gibson
Stephen E. Gibson
President
March 11, 1999
(1) Source: Lipper, Inc. Lipper rankings are based on the Lipper Massachusetts
Tax-Exempt Municipal Fund universe. The Fund (Class A shares) ranked in the
first quartile for one year (5 out of 57 funds), in the first quartile for
five years (3 out of 30 funds) and in the first quartile for ten years (4
out of 16 funds). Rankings do not include any sales charges. Performance for
different share classes will vary with fees associated with each class. Past
performance does not guarantee future results.
Because economic and market conditions change frequently, there can be no
assurance that the trends described above or on the following pages will
continue.
<PAGE>
PORTFOLIO MANAGER REPORT
GARY SWAYZE is portfolio manager of Colonial Massachusetts Tax-Exempt Fund and
is a senior vice president of Colonial Management Associates, Inc.
TAX-EXEMPT MARKET GENERATED MODEST GAINS
The period began on a positive note, with the U.S. economy strong and no clear
signs of inflation. Throughout the year a series of international crises were
manifested domestically, affecting both stock and bond prices. Instability in
Asia, Russia and Latin America contributed to an increase in the U.S. trade
deficit and concerns about corporate profitability. This fall, the Federal
Reserve Board lowered short-term interest rates three times in an effort to
renew investor confidence. Sentiment about how these events might impact the
U.S. economy in the long run shifted throughout the period, taking fixed-income
investors on a roller coaster ride through much of the year. Overall, bond
prices rose during the period.
Like the broader bond market, municipal bond prices were affected by global
events and interest rate volatility. In addition, the tax-exempt market
experienced a near-record level of issuance in 1998, as issuers took advantage
of lower interest rates to refinance existing debt and to finance new projects.
At times, the market found it difficult to absorb this supply.
FUND'S PERFORMANCE REFLECTS INVESTMENT STRATEGY
For the 12-month period, the Fund generated a total return of 6.25% for Class A
shares, based on net asset value. This compares favorably with the performance
of the Fund's Lipper competitive peer group, which averaged 5.52% for the same
time period. We attribute this performance to the Fund's investment strategy.
Our forecast for modest economic growth and low inflation led us to believe that
interest rates would decline. Since bond prices tend to rise when interest rates
fall, we emphasized bonds with a higher sensitivity to interest rate changes for
most of the year. These included noncallable bonds, which cannot be refinanced
at a lower rate of interest prior to maturity. The longer life span of these
bonds increases their sensitivity to changes in interest rates, often producing
attractive price gains when interest rates decline.
In the final months of the year, we targeted purchases in intermediate maturity
bonds with premium coupons, which were available at attractive prices. We
believe they offered relative value to investors and positioned the Fund well
for the market environment. We will continue to actively manage the portfolio in
search of other relative value opportunities.
MASSACHUSETTS ECONOMY LEADS THE NEW ENGLAND REGION
Massachusetts is the fastest-growing state in New England, as measured by
personal income, employment and gross state product. Robust growth in the high
technology, financial services and software development sectors has all but
erased memories of the recession that gripped the Commonwealth in 1990-1991.
Since that time, job creation has accelerated to a record level, unemployment
has declined from 9.1% to 3.1%, and personal income growth has increased to the
second highest in the nation. These positive developments have translated into
solid gains in income and sales tax revenues, enhancing the Commonwealth's
budget surplus. During the past year, the Commonwealth's economy earned its
first appearance on the "Development Report Card for the States" honor roll,
which recognized only seven states in 1998. Massachusetts was the only state in
the Northeast and the only large industrial state to earn top ratings in the
categories of economic performance, business vitality and development capacity.
POSITIVE OUTLOOK FOR MUNICIPAL MARKET CONDITIONS
Looking ahead, inflation should remain low, as we expect productivity gains and
a worldwide surplus in manufacturing capacity to limit the potential for
substantial price increases. In the municipal market, we expect positive supply
and demand dynamics. We doubt total issuance will match 1998's near-record
supply of $280 billion, partially because refinancing volume should slow down as
many issuers have already refinanced. Overall, lower supply, combined with
generally positive expectations for the economic environment should have a
positive impact on municipal bond prices. However, as we end the eighth
consecutive year of economic expansion in the U.S., we will watch for events and
trends that could change our expectations and possibly lead us to alter our
investment strategy.
COLONIAL MASSACHUSETTS TAX-EXEMPT FUND'S INVESTMENT PERFORMANCE VS.
THE LEHMAN BROTHERS MUNICIPAL BOND INDEX
Growth of $10,000 from 1/31/89 - 1/31/99
Class A Shares
Based on NAV and POP
AS_OF_DATE NAV POP Lehman
Mar 31, 89 $ 9,883 $ 9,413 $ 9,862
Jun 30, 89 10,348 9,856 10,446
Sep 30, 89 10,360 9,868 10,453
Dec 31, 89 10,639 10,134 10,854
Mar 31, 90 10,673 10,166 10,903
Jun 30, 90 10,920 10,401 11,157
Sep 30, 90 10,845 10,330 11,164
Dec 31, 90 11,318 10,780 11,645
Mar 31, 91 11,632 11,080 11,908
Jun 30, 91 11,904 11,338 12,163
Sep 30, 91 12,347 11,760 12,636
Dec 31, 91 12,796 12,188 13,059
Mar 31, 92 12,847 12,237 13,098
Jun 30, 92 13,338 12,704 13,595
Sep 30, 92 13,710 13,058 13,956
Dec 31, 92 14,022 13,356 14,210
Mar 31, 93 14,570 13,878 14,738
Jun 30, 93 15,014 14,301 15,221
Sep 30, 93 15,497 14,761 15,735
Dec 31, 93 15,679 14,934 15,956
Mar 31, 94 14,901 14,193 15,080
Jun 30, 94 15,043 14,328 15,246
Sep 30, 94 15,105 14,387 15,351
Dec 31, 94 14,785 14,083 15,131
Mar 31, 95 15,882 15,127 16,201
Jun 30, 95 16,105 15,340 16,591
Sep 30, 95 16,564 15,777 17,068
Dec 31, 95 17,500 16,669 17,772
Mar 31, 96 17,066 16,255 17,558
Jun 30, 96 17,185 16,369 17,693
Sep 30, 96 17,571 16,736 18,098
Dec 31, 96 18,012 17,157 18,559
Mar 31, 97 17,953 17,100 18,515
Jun 30, 97 18,586 17,703 19,153
Sep 30, 97 19,137 18,228 19,730
Dec 31, 97 19,637 18,704 20,265
Mar 31, 98 19,801 18,860 20,499
Jun 30, 98 20,136 19,179 20,811
Sep 30, 98 20,597 19,618 21,450
Dec 31, 98 21,126 20,123 21,578
Jan 31, 99 21,053 20,053 21,835
GROWTH OF A $10,000 INVESTMENT MADE ON 1/31/89
As of 1/31/99
- --------------------------------------------------------------------------------
Class A Class B Class C
NAV POP NAV w/CDSC NAV w/CDSC
- --------------------------------------------------------------------------------
$21,053 $20,053 $20,040 $20,040 $20,909 $20,909
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
As of 1/31/99
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
INCEPTION 4/10/87 6/8/92 8/1/97
NAV POP NAV w/CDSC NAV w/CDSC
- --------------------------------------------------------------------------------
1 YEAR 6.25% 1.20% 5.44% 0.46% 5.76% 4.76%
- --------------------------------------------------------------------------------
5 YEARS 5.82 4.79 5.02 4.70 5.67 5.67
- --------------------------------------------------------------------------------
10 YEARS 7.73 7.21 7.20 7.20 7.65 7.65
- --------------------------------------------------------------------------------
Past performance cannot predict future results. Returns and value of an
investment will vary, resulting in a gain or loss on sale. All results shown
assume reinvestment of distributions. Net asset value (NAV) returns do not
include sales charges or contingent deferred sales charges (CDSC). Public
offering price (POP) returns include the maximum sales charge of 4.75% for Class
A shares. CDSC returns reflect the maximum charges of 5% for one year and 2% for
five years for Class B shares, and 1% for one year for Class C shares.
Performance results reflect any voluntary waivers or reimbursement of Fund
expenses by the Advisor or its affiliates. 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.
Class B and Class C share (newer class shares) performance information includes
returns of the Fund's Class A shares (the oldest existing fund class) for
periods prior to the inception of the newer class shares. These Class A share
returns are not restated to reflect any expense differential (e.g., Rule 12b-1
fees) between Class A shares and the newer class shares. Had the expense
differential been reflected, the returns for periods prior to the inception of
the newer class shares would have been lower.
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 and do not incur fees or expenses. It is not
possible to invest directly in an index.
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
JANUARY 31, 1999 (IN THOUSANDS)
<CAPTION>
MUNICIPAL BONDS - 97.0% PAR VALUE
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EDUCATION - 12.3%
EDUCATION - 9.2%
State College Building Authority,
Southeastern University,
Series 1995 A,
5.750% 5/1/16 $1,250 $ 1,349
State HEFA Brandeis University,
4.750% 10/1/18 2,000 1,970
State Health & Educational
Facilities Authority:
Amherst College, Series E,
6.800% 11/1/21 500 553
Bentley College, Series 1998 J,
5.000% 7/1/23 1,550 1,543
Community Colleges Program, Series A,
6.600% 10/1/22 1,250 1,406
Harvard University, Series N,
6.250% 4/1/20(a) 2,250 2,694
Northeastern University, Series 1998 G,
5.000% 10/1/22 3,840 3,824
Stonehill College, Series 1998 G,
5.250% 7/1/28 1,000 1,023
State Industrial Finance Agency:
Babson College,
Series 1992 A,
6.375% 10/1/09 1,000 1,117
Cambridge Friends School,
Series 1998,
5.750% 9/1/18 1,000 1,034
Concord Academy
Series 1997,
5.500% 9/1/27 1,250 1,274
Emerson College,
Series 1991 A,
8.900% 1/1/18 500 542
St John's High School,
Series 1998,
5.700% 6/1/18 1,000 1,050
Tabor Academy,
Series 1998,
5.400% 12/1/18 1,000 1,019
Wentworth Institute of Technology,
Series 1998,
5.750% 10/1/28 1,650 1,715
--------
22,113
--------
STUDENT LOANS - 3.1%
New England Educational Loan Marketing
Corp., Student Loan, Series 1993-A,
5.700% 7/1/05 5,000 5,356
State Educational Financing Authority,
Issue E,
5.650% 7/1/10 2,000 2,183
--------
7,539
--------
.............................................................................................
HEALTHCARE - 14.3%
HOSPITALS - 9.0%
MA Health Cape Cod Healthcare Group,
5.450% 11/15/23 1,000 997
MA HEFA Central N.E. Health,
5.500% 8/1/14 1,255 1,335
State Health & Educational
Facilities Authority:
Berkshire Health System, Series C,
6.000% 10/1/20 1,000 1,038
Catholic Health East, Series 1998 B,
5.000% 11/15/28 1,000 991
Children's Hospital, Series E,
6.200% 10/1/16 2,000 2,170
Dana-Farber Cancer Institute:
Series 1995 G1,
5.500% 12/1/27 5,000 5,126
Series C,
6.650% 12/1/15 250 271
Milford-Whitinsville Regional Hospital, Series C,
5.375% 7/15/28 500 486
Newton-Wellesley Hospital, Series 1997 G,
6.000% 7/1/12 1,000 1,129
Spaulding Rehabilitation Hospital, Series A,
7.625% 7/1/21 400 409
University Hospital, Series C,
7.250% 7/1/19 1,000 1,076
Youville House Project,
5.950% 2/15/17 500 540
State Industrial Finance Agency,
Massachusetts Biomedical:
Series A-2,
(b) 8/1/08 2,000 1,330
Series 1989 A2,
(b) 8/1/10 8,000 4,773
--------
21,671
--------
INTERMEDIATE CARE FACILITIES - 0.6
Development New England Center for Children,
5.875% 11/1/18 1,000 1,030
State Health & Educational
Facilities Authority,
Corp. for Independent Living,
8.100% 7/1/18 290 327
--------
1,357
--------
LIFECARE - 0.4%
State Industrial Finance Agency,
Reeds Landing Project,
7.750% 10/1/00 1,000 1,016
--------
NURSING HOMES - 4.3%
Boston,
St. Joseph Nursing Care Center, Inc.,
Series 1990,
10.000% 1/1/20(c) 480 513
State Health & Educational
Facilities Authority,
Deutsches Altenheim, Inc., Series A,
7.700% 11/1/31 955 1,013
State Industrial Finance Agency:
American Health Foundation, Inc.,
Series 1989,
10.125% 3/1/19(d) 1,740 1,305
Belmont Home Care,
Series 1995 A,
9.270% 1/1/25 2,000 2,325
Chelsea Jewish Nursing Home, Series A,
6.500% 8/1/37 1,000 1,127
GF/Massachusetts, Inc.,
Series 1994,
8.300% 7/1/23 2,415 2,711
Seacoast Nursing Home,
Series 1991,
9.625% 12/1/21 1,285 1,457
--------
10,451
--------
.............................................................................................
HOUSING - 4.0%
ASSISTED LIVING/SENIOR - 0.5%
Boston Industrial Development
Finance Authority,
Springhouse, Inc., Series 1988,
5.875% 7/1/18 1,200 1,205
--------
MULTI-FAMILY - 2.1%
Boston-Mount Pleasant
Development Corp.,
Series A,
6.750% 8/1/23 1,630 1,737
State Housing Finance Agency:
Series 1990 A,
8.150% 2/1/29 135 142
Series 1992 C,
6.875% 11/15/11 3,000 3,272
--------
5,151
--------
SINGLE FAMILY - 1.4%
State Housing Finance Agency:
Series 13,
7.950% 6/1/23 295 309
Series 18,
7.350% 12/1/16 1,000 1,055
Series 1997 57,
5.600% 6/1/30 1,975 2,033
--------
3,397
--------
..........................................................................................
OTHER - 13.4%
REFUNDED/ESCROWED (e)
Boston,
Series 1992 A,
6.500% 7/1/12(a) 4,340 4,838
Holyoke,
School Project Loan,
7.650% 8/1/09 500 560
Lynn,
7.850% 1/15/11 1,000 1,158
Mansfield,
6.700% 1/15/11 1,000 1,109
State Health & Educational
Facilities Authority:
Berklee College of Music, Series C,
6.875% 10/1/21 1,000 1,108
Charlton Memorial Hospital, Series B:
7.250% 7/1/07 500 553
7.250% 7/1/13 500 554
Cooley Dickinson Hospital, Series A,
7.125% 11/15/18 1,810 2,067
Deaconess Hospital,
7.200% 4/1/22 2,500 2,746
Fairview Extended Care Service, Inc., Series A,
10.250% 1/1/21 500 577
Lowell General Hospital, Series 1991 A,
8.400% 6/1/11 500 564
The Medical Center of Central MA, Series A,
7.000% 7/1/12 1,000 1,102
Winchester Hospital, Series C,
7.550% 7/1/11 500 556
Worcester Polytechnic Institute, Series E:
6.625% 9/1/17 500 560
6.750% 9/1/11 500 564
State Industrial Finance Agency,
Mary Ann Morse Nursing Home, Inc.:
Series 1990,
9.000% 10/1/20 470 522
Series 1991 I,
10.000% 1/1/21 925 1,063
PR Commonwealth of Puerto Rico,
Series 1994,
6.500% 7/1/23 5,000 5,773
State Commonwealth GO,
Series 1991 C,
6.500% 8/1/11 800 875
State Turnpike Authority,
Series 1993 A,
5.000% 1/1/20 5,000 5,138
University of Massachusetts
Building Authority,
Series 1976 A,
7.500% 5/1/11 95 115
VI Virgin Islands Public Finance
Authority,
Series 1992 A,
7.000% 10/1/02 250 280
--------
32,382
--------
.............................................................................................
OTHER REVENUE - 1.1%
INDUSTRIAL - 0.7%
State Industrial Finance Agency,
House of Bianchi, Inc.,
8.750% 6/1/18 1,700 1,760
--------
Recreation - 0.4%
YMCA,
5.450% 11/1/28 1,000 1,000
--------
..........................................................................................
RESOURCE RECOVERY - 3.2%
DISPOSAL - 1.8%
Boston Industrial Development
Finance Authority,
Jet-A-Way, Inc.,
10.500% 1/1/11 200 222
Massachusetts Environmental Services,
Series 1994 A,
8.750% 11/1/21 (d) 2,935 2,348
State Industrial Finance Agency,
Peabody Monofill Associates, Inc.,
Series 1995,
9.000% 9/1/05 1,705 1,888
--------
4,458
--------
RESOURCE RECOVERY - 1.4%
Agawam,
Springfield Resource Recovery Project,
Series 1986,
8.500% 12/1/08 445 451
MA IFA Ogden Haverhill Project:
5.500% 12/1/19 1,000 1,001
5.600% 12/1/19 2,000 2,019
--------
3,471
--------
..........................................................................................
TAX-BACKED - 29.9%
LOCAL APPROPRIATED - 0.5%
Plymouth County,
Plymouth County Correctional Facility,
Series A,
7.000% 4/1/22 1,000 1,115
--------
LOCAL GENERAL OBLIGATIONS - 9.1%
Amherst-Pelham Regional School District,
Series 1998,
5.500% 5/15/13 1,300 1,402
Boston,
Series 1998 C,
4.250% 11/1/18 4,000 3,708
Frontier Regional School District,
Series 1998,
5.500% 6/15/14 1,500 1,624
Holyoke,
Series 1996 A,
6.000% 6/15/07(a) 1,345 1,521
Lowell,
8.400% 1/15/09 1,000 1,114
Malden,
4.500% 10/1/18 5,410 5,178
Nantucket,
Series 1991,
6.800% 12/1/11 2,675 2,969
Norton,
5.125% 10/1/16 1,285 1,329
Southern Berkshire Regional
School District,
7.000% 4/15/11 500 566
Swansea,
School Project Loan:
6.800% 1/15/09 250 278
6.800% 1/15/10 125 139
6.800% 1/15/11 210 233
Weymouth,
Series 1992:
6.700% 6/15/09 200 219
6.700% 6/15/10 200 218
6.700% 6/15/11 155 169
6.700% 6/15/12 140 153
Worcester,
Series C,
5.750% 10/1/13 1,000 1,096
--------
21,916
--------
SPECIAL NON-PROPERTY TAX - 2.0%
Martha's Vineyard Land Bank,
Series 1998,
5.125% 5/1/18 1,265 1,292
PR Commonwealth of Puerto Rico
Highway & Transportation Authority:
Series W,
5.500% 7/1/09 660 744
Series 1996 Z,
6.250% 7/1/05 1,500 1,714
State,
Series A,
5.500% 6/1/13 1,000 1,114
--------
4,864
--------
STATE APPROPRIATED - 1.9%
Massachusetts Bay Transportation
Authority,
Series 1988,
7.750% 1/15/06 250 291
PR Commonwealth of Puerto Rico
Public Buildings Authority,
Series 1993 M:
5.600% 7/1/08 1,500 1,699
5.700% 7/1/16 2,000 2,116
University of Massachusetts
Building Authority,
Series 1991 A,
7.200% 5/1/04 400 456
--------
4,562
--------
STATE GENERAL OBLIGATIONS - 16.4%
Massachusetts Bay Transportation
Authority:
Series D,
5.750% 3/1/13 2,000 2,259
Series 1991 A,
7.000% 3/1/21 1,500 1,895
Series 1992 B,
6.200% 3/1/16 3,700 4,371
Series 1994 A:
7.000% 3/1/14 1,250 1,586
7.000% 3/1/10 5,000 6,211
7.000% 3/1/11 4,270 5,357
State College Building Authority,
Series 1994 A,
7.500% 5/1/14 1,825 2,397
State:
Series B,
7.000% 7/1/09 4,385 5,467
Series 1992 B,
6.500% 8/1/08 1,000 1,191
Series 1991 B,
6.500% 8/1/11 860 931
Series 1997 B,
5.125% 6/1/12 (a) 2,000 2,123
Series A,
5.750% 8/1/08 3,000 3,422
Series 1991 C,
6.500% 8/1/11 450 487
PR Commonwealth,
5.250% 7/1/18 1,750 1,853
--------
39,550
--------
..........................................................................................
TRANSPORTATION - 2.6%
AIRPORT - 0.9%
State Port Authority,
Series 1998 A,
5.500% 7/1/16 2,000 2,138
--------
TOLL FACILITIES - 1.0%
State Turnpike Authority,
Series C,
(b) 1/1/18 5,825 2,301
--------
TRANSPORTATION - 0.7%
St. Grant Anticipatory Note,
(b) 6/15/12 3,145 1,718
--------
- -------------------------------------------------------------------------------------------
UTILITY - 16.2%
INVESTOR OWNED - 0.7%
State Industrial Finance Agency,
Nantucket Electric Co.,
Series 1996 A,
6.750% 7/1/05(a) 1,400 1,612
--------
JOINT POWER AUTHORITY - 0.9%
State Municipal Wholesale
Electric Co.,
Series 1994 A, IFRN (variable rate),
6.302% 7/1/16 2,000 2,065
--------
MUNICIPAL ELECTRIC - 0.8%
PR Commonwealth of Puerto Rico
Electric Power Authority,
Series 1995 Y,
7.000% 7/1/07(a) 1,500 1,826
--------
WATER & SEWER - 13.8%
Boston Water & Sewer Commission:
Series 1992 A,
5.750% 11/1/13 1,000 1,127
Series 1993 A,
5.250% 11/1/19 4,750 5,026
State Water Pollution Abatement Trust,
New Bedford Loan Program,
Series 1996 A,
6.000% 2/1/06 1,000 1,127
State Water Pollution Authority:
4.750% 2/1/21 1,500 1,452
5.250% 2/1/12 1,000 1,082
State Water Resources Authority:
Series 1992 A:
6.500% 7/15/09 2,000 2,384
6.500% 7/15/19 5,000 5,991
Series 1993 C:
5.250% 12/1/15 2,750 2,941
5.250% 12/1/15 1,000 1,079
5.250% 12/1/20 5,025 5,089
Series 1995 B,
6.250% 12/1/13(a) 5,000 5,994
--------
33,292
--------
TOTAL MUNICIPAL BONDS (cost of $212,790) (f) 233,930
--------
SHORT-TERM OBLIGATIONS - 2.2%
- ---------------------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (g)
CA Irvine Improvement Bond Act of 1915:
Series 1997,
3.000% 9/2/22 100 100
Series 1998,
3.000% 9/2/23 1,200 1,200
CA Irvine Ranch Water District,
3.000% 1/1/21 800 800
FL Pinellas County Health Facilities
Authority,
Series 1985,
3.250% 12/1/15 200 200
IN Indiana Health Facilities Financing Authority,
2.700% 12/1/17 200 200
IN Indiana State Hospital Equipment Finance
Authority, Series A,
2.750% 12/1/15 900 900
MA State Health & Educational
Facilities Authority,
Series 1985 D,
3.200% 1/1/35 1,200 1,200
NM Farmington,
Arizona Public Service Co.,
Four Corners Project, Series 1994 B,
3.150% 9/1/24 200 200
NY Long Island Power Authority,
Sub-Series 1998 5,
3.150% 5/1/33 200 200
NY New York City Municipal Water
Finance Authority,
Series 1995 A,
3.250% 6/15/25 100 100
NY New York City, General Obligation,
Series B,
3.300% 10/1/22 100 100
--------
TOTAL SHORT-TERM OBLIGATIONS 5,200
--------
OTHER ASSETS & LIABILITIES, NET - 0.8% 1,985
- -------------------------------------------------------------------------------------------
NET ASSETS - 100% $241,115
--------
NOTES TO INVESTMENT PORTFOLIO:
- -------------------------------------------------------------------------------------------
(a) These securities, or a portion thereof, with a total market value of $9,213, are being
used to collateralize open futures contracts.
(b) Zero coupon bond.
(c) This is a restricted security which was acquired on April 2, 1990 at a cost of $480.
This security represents 0.2% of the Fund's net assets as of January 31, 1999.
(d) This issuer is in default of certain debt covenants. Income is not being accrued.
(e) 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.
(f) Cost for federal income tax purposes is $212,833.
(g) Variable rate demand notes are considered short-term obligations. Interest rates change
periodically on specified dates. These securities are payable on demand and are secured
by either letters of credit or other credit support agreements from banks. The rates
listed are as of January 31, 1999.
Futures contracts open at January 31, 1999:
Par value Unrealized
covered by Expiration appreciation
Type contracts Month at 01/31/99
----------------------------------------------------------------------------------------
Treasury Bond $ 6,500 March $ 41
Acronym Name
------- ----
IFRN Inverse Floating Rate Note
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF ASSETS & LIABILITIES
JANUARY 31, 1999
(in thousands except for per share amounts and footnotes)
<S> <C> <C>
ASSETS
Investments at value (cost $212,790) $233,930
Short-term obligations 5,200
--------
239,130
Receivable for:
Interest $2,612
Investments sold 2,304
Fund shares sold 102
Variation margin on futures 12
Other 94 5,124
------ --------
Total Assets 244,254
LIABILITIES
Payable for:
Investments purchased 2,375
Fund shares repurchased 421
Distributions 304
Accrued:
Deferred Trustees fees 6
Other 33
------
Total Liabilities 3,139
--------
NET ASSETS $241,115
--------
Net asset value & redemption price per share -
Class A ($180,628/22,405) $ 8.06(a)
--------
Maximum offering price per share - Class A
($8.06/0.9525) $ 8.46(b)
--------
Net asset value & offering price per share -
Class B ($59,789/7,416) $ 8.06(a)
--------
Net asset value & offering price per share -
Class C ($698/87) $ 8.06(a)
--------
COMPOSITION OF NET ASSETS
Capital paid in $220,103
Overdistributed net investment income (274)
Accumulated net realized gain 105
Net unrealized appreciation on:
Investments 21,140
Open futures contracts 41
--------
$241,115
--------
(a) Redemption price per share is equal to net asset value less any applicable contingent
deferred sales charge.
(b) On sales of $50,000 or more the offering price is reduced.
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JANUARY 31, 1999
<S> <C> <C>
(in thousands)
INVESTMENT INCOME
Interest $13,399
EXPENSES
Management fee $1,197
Service fee 396
Distribution fee - Class B 445
Distribution fee - Class C 3
Transfer agent 341
Bookkeeping fee 93
Trustees fee 13
Custodian fee 1
Audit fee 22
Legal fee 52
Registration fee 12
Reports to shareholders 9
Other 20
------
2,604
Fees waived by the Distributor - Class C (1) 2,603
------ -------
Net Investment Income 10,796
-------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain on:
Investments 3,918
Closed futures contracts 476
------
Net Realized Gain 4,394
Net change in unrealized depreciation
during the period on:
Investments (1,102)
Open futures contracts (17)
------
Net Change in Unrealized Depreciation (1,119)
-------
Net Gain 3,275
-------
Increase in Net Assets from Operations $14,071
-------
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
(in thousands) Year ended January 31
--------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS 1999 1998(a)
Operations:
Net investment income $ 10,796 $ 11,710
Net realized gain 4,394 3,978
Net unrealized appreciation (depreciation) (1,119) 6,779
-------- --------
Net Increase from Operations 14,071 22,467
Distributions:
From net investment income - Class A (8,432) (9,280)
In excess of net investment income - Class A (306) (69)
From net realized gains - Class A (2,967) (1,262)
In excess of net realized gains - Class A (64) --
From net investment income - Class B (2,343) (2,595)
In excess of net investment income - Class B (85) (19)
From net realized gains - Class B (982) (413)
In excess of net realized gains - Class B (21) --
From net investment income - Class C (20) (4)
In excess of net investment income - Class C (1) (b)
From net realized gains - Class C (11) (2)
In excess of net realized gains - Class C (b) --
-------- --------
(1,161) 8,823
-------- --------
Fund Share Transactions:
Receipts for shares sold - Class A 14,603 11,290
Value of distributions reinvested - Class A 7,028 5,823
Cost of shares repurchased - Class A (22,846) (25,244)
-------- --------
(1,215) (8,131)
-------- --------
Receipts for shares sold - Class B 6,777 5,337
Value of distributions reinvested - Class B 2,230 1,809
Cost of shares repurchased - Class B (8,094) (9,319)
-------- --------
913 (2,173)
-------- --------
Receipts for shares sold - Class C 478 200
Value of distributions reinvested - Class C 21 4
Cost of shares repurchased - Class C (8) (b)
-------- --------
491 204
-------- --------
Net Increase (Decrease) from Fund Share Transactions 189 (10,100)
-------- --------
Total Decrease (972) (1,277)
NET ASSETS
Beginning of period 242,087 243,364
-------- --------
End of period (net of overdistributed net investment
income of $274 and $28, respectively) $241,115 $242,087
-------- --------
(a) Class C shares were initially offered on August 1, 1997.
(b) Rounds to less than one. Statement of Changes continued on following page.
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS - CONT.
<CAPTION>
Year ended January 31
--------------------------
1999 1998(a)
<S> <C> <C>
(in thousands)
NUMBER OF FUND SHARES
Sold - Class A 1,815 1,430
Issued for distributions reinvested - Class A 875 733
Repurchased - Class A (2,837) (3,198)
-------- --------
(147) (1,035)
-------- --------
Sold - Class B 840 674
Issued for distributions reinvested - Class B 278 228
Repurchased - Class B (1,004) (1,174)
-------- --------
114 (272)
-------- --------
Sold - Class C 59 25
Issued for distributions reinvested - Class C 3 1
Repurchased - Class C (1) (b)
-------- --------
61 26
-------- --------
(a) Class C shares were initially offered on August 1, 1997.
(b) Rounds to less than one. Statement of Changes continued on following page.
See notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1999
NOTE 1. ACCOUNTING POLICIES
................................................................................
ORGANIZATION: Colonial Massachusetts 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 Massachusetts 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 a 1.00% contingent deferred sales charge on redemptions made within
eighteen months on an original purchase of $1 million to $5 million. 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. Class C shares 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 (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 Advisor) is the
investment Advisor of the Fund and furnishes accounting and other services and
office facilities for a monthly fee based on each Fund's pro-rata portion of the
combined average net assets of 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 Advisor 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: Liberty Funds Services, Inc., formerly Colonial Investors
Service Center, Inc. (the Transfer Agent), an affiliate of the Advisor, 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.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES: Liberty Funds
Distributor, Inc., formerly Liberty Financial Investments, Inc. (the
Distributor), a subsidiary of the Advisor, is the Fund's principal underwriter.
During the year ended January 31, 1999, the Fund has been advised that the
Distributor retained net underwriting discounts of $33,637 on sales of the
Fund's Class A shares and received contingent deferred sales charges (CDSC) of
none, $113,679, and $80 on Class A, 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% annually of the Fund's average net assets
attributable to Class B and Class C shares. The Distributor has voluntarily
agreed to waive, until further notice, 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 Advisor 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.
For the year ended January 31, 1999, the Fund's total expenses as defined above
did not exceed the 0.75% expense limit.
OTHER: The Fund pays no compensation to its officers, all of whom are
employees of the Advisor.
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.
The Fund has an agreement with its custodian bank under which $7,455 of
custodian fees were reduced by balance credits applied during the year ended
January 31, 1999. The Fund could have invested a portion of the assets utilized
in connection with the expense offset arrangements in an income producing asset
if it had not entered into such agreements.
NOTE 3. PORTFOLIO INFORMATION
................................................................................
INVESTMENT ACTIVITY: During the year ended January 31, 1999, purchases and sales
of investments, other than short-term obligations were $48,658,813 and
$51,285,711, respectively.
Unrealized appreciation (depreciation) at January 31, 1999, based on cost of
investments for federal income tax purposes was:
Gross unrealized appreciation $22,138,285
Gross unrealized depreciation (1,041,239)
-----------
Net unrealized appreciation $21,097,046
-----------
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 Advisor of the future direction of interest rates. Any of these risks
involve amounts exceeding the variation margin recorded in the Fund's Statement
of Assets and Liabilities at any given time.
NOTE 4. LINE OF CREDIT
................................................................................
The Fund may borrow up to 33 1/3% 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, 1999.
NOTE 5. RESULTS OF SPECIAL MEETING OF SHAREHOLDERS (UNAUDITED)
................................................................................
On October 30, 1998, a Special Meeting of Shareholders of the Fund was held to
approve the following items, all as described in the Proxy Statement for the
Meeting. On August 21, 1998, the record date for the Meeting, the Fund had
outstanding 29,757,229 shares of beneficial interest. The votes cast at the
Meeting were as follows:
AUTHORITY
FOR WITHHELD
--- --------
To Elect a Board of Trustees:
Robert J. Birnbaum 16,900,921 514,197
Tom Bleasdale 16,884,206 530,912
John Carberry 16,901,938 513,180
Lora S. Collins 16,909,573 505,545
James E. Grinnell 16,904,365 510,753
Richard W. Lowry 16,884,545 530,573
Salvatore Macera 16,910,266 504,852
William E. Mayer 16,901,938 513,180
James L. Moody, Jr. 16,884,545 530,573
John J. Neuhauser 16,904,028 511,090
Thomas E. Stitzel 16,910,266 504,852
Robert L. Sullivan 16,880,885 534,234
Anne-Lee Verville 16,906,826 508,292
To amend fundamental investment policies regarding borrowing and lending:
FOR AGAINST ABSTAIN
--- ------- -------
14,170,344 359,566 955,576
To approve policies for a master fund/feeder fund structure:
FOR AGAINST ABSTAIN
--- ------- -------
14,041,848 361,903 1,081,735
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are as follows:
<CAPTION>
Year ended January 31
-------------------------------------------
1999
Class A Class B Class C
-------- -------- -------
<S> <C> <C> <C>
Net asset value -
Beginning of period $ 8.100 $ 8.100 $8.100
-------- -------- ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.384 0.322 0.347(a)
Net realized and unrealized gain 0.104 0.104 0.104
-------- -------- ------
Total from Investment Operations 0.488 0.426 0.451
-------- -------- ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.378) (0.318) (0.343)
In excess of net investment income (0.014) (0.012) (0.012)
From net realized gains (0.133) (0.103) (0.133)
In excess of net realized gains (0.003) (0.033) (0.003)
-------- -------- ------
Total Distributions
Declared to Shareholders (0.528) (0.466) (0.491)
-------- -------- ------
Net asset value - End of period $ 8.0600 $ 8.060 $8.060
-------- -------- ------
Total return (b) 6.25% 5.44% 5.76%(c)
-------- -------- ------
RATIOS TO AVERAGE NET ASSETS
Expenses (d) 0.91% 1.66% 1.36%(a)
Net investment income (d) 4.69% 3.94% 4.24%(a)
Portfolio turnover 21% 21% 21%
Net assets at end of period (000) $180,628 $ 59,789 $ 698
(a) Net of fees waived by the Distributor which amounted to $0.024 per share and 0.30%
annualized.
(b) Total return at net asset value assuming all distributions reinvested and no initial sales
charge or contingent deferred sales charge.
(c) Had the Distributor 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.
- ----------------------------------------------------------------------------------------------
Federal Income Tax Information (unaudited)
Approximately 99.2% of the income distributions will be treated as exempt income for federal
income tax purposes.
For the fiscal year ended January 31, 1999 the Fund earned $3,484,842 of long term capital
gains of which none and $3,484,842 are 28% and 20% rate gains, respectively.
- ----------------------------------------------------------------------------------------------
</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
-------------------------------------------
1998
Class A Class B Class C(b)
-------- -------- ------
<S> <C> <C> <C>
Net asset value - Beginning of period $ 7.810 $ 7.810 $8.070
-------- -------- ------
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income (a) 0.403 0.344 0.180(c)
Net realized and unrealized gain (loss) 0.352 0.352 0.090
-------- -------- ------
Total from Investment Operations 0.755 0.696 0.270
-------- -------- ------
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net investment income (0.406) (0.347) (0.180)
In excess of net investment income (0.003) (0.003) (0.004)
From net realized gains (0.056) (0.056) (0.056)
-------- -------- ------
Total Distributions
Declared to Shareholders (0.465) (0.406) (0.240)
-------- -------- ------
Net asset value - End of period $ 8.100 $ 8.100 $8.100
-------- -------- ------
Total return (d)(e) 9.94% 9.13% 3.40%(f)
-------- -------- ------
RATIOS TO AVERAGE NET ASSETS
Expenses (g) 0.90% 1.65% 1.37%(c)(h)
Net investment income (g) 5.05% 4.30% 4.47%(c)(h)
Fees and expenses waived or borne by the
Advisor (g) -- -- --
Portfolio turnover 14% 14% 14%
Net assets at end of period (000) $182,721 $ 59,160 $ 206
(a) Net of fees and expenses waived or
borne by the Advisor which amounted to: $ -- $ -- $ --
(b) Class C shares were initially offered on August 1, 1997. Per share amounts reflect activity
from that date.
(c) Net of fees waived by the Distributor which amounted to $0.012 per share and 0.30%.
(d) Had the Advisor not waived or reimbursed a portion of expenses, total return would have been
reduced.
(e) Total return at net asset value assuming all distributions reinvested and no initial sales
charge or contingent deferred sales charge.
(f) Not annualized. Had the Distributor not waived a portion of the distribution fee, total return
would have been reduced.
(g) The benefits derived from custody credits and directed brokerage arrangements had no impact.
(h) Annualized.
</TABLE>
<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>
$ 8.040 $ 8.040 $ 7.390 $ 7.390
-------- ------- -------- -------
0.415 0.357 0.424 0.367
(0.234) (0.234) 0.650 0.650
-------- ------- -------- -------
0.181 0.123 1.074 1.017
-------- ------- -------- -------
(0.411) (0.353) (0.424) (0.367)
- - - -
- - - -
-------- ------- -------- -------
(0.411) (0.353) (0.424) (0.367)
-------- ------- -------- -------
$ 7.810 $ 7.810 $ 8.040 $ 8.040
-------- ------- -------- -------
2.43% 1.66% 14.90% 14.05%
-------- ------- -------- -------
0.90% 1.65% 0.85% 1.60%
5.32% 4.57% 5.49% 4.74%
0.00% 0.00% 0.06% 0.06%
29% 29% 21% 21%
$184,221 $59,143 $207,759 $60,651
$ 0.000 $ 0.000 $ 0.005 $ 0.005
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Selected data for a share of each class outstanding throughout each period are
as follows:
Year ended January 31
-----------------------
1995
Class A Class B
-------- -------
Net asset value - Beginning of period $ 8.130 $ 8.130
-------- -------
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income (a) 0.444 0.388
Net realized and unrealized loss (0.738) (0.738)
-------- -------
Total from Investment Operations (0.294) (0.350)
-------- -------
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net investment income (0.446) (0.390)
-------- -------
Net asset value - End of period $ 7.390 $ 7.390
-------- -------
Total return (b)(c) (3.49)% (4.21)%
-------- -------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.72% 1.47%
Net investment income 5.93% 5.18%
Fees and expenses waived or borne by
the Advisor 0.12% 0.12%
Portfolio turnover 58% 58%
Net assets at end of period (000) $193,303 $53,973
(a) Net of fees and expenses waived or borne
by the Advisor which amounted to: $ 0.009 $ 0.009
(b) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(c) Had the Advisor not waived or reimbursed a portion of expenses, total return
would have been reduced.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE TRUSTEES OF COLONIAL TRUST V AND THE SHAREHOLDERS OF
COLONIAL MASSACHUSETTS 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 Massachusetts Tax-Exempt
Fund (the "Fund") (a series of Colonial Trust V) at January 31, 1999, 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, 1999 by correspondence with
the custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
March 11, 1999
<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 Liberty Funds Services, Inc. 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 Funds Distributor, 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 Funds Distributor 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 Funds Distributor. Minimum for each transfer is $100.
RETIREMENT PLANS: Choose from a broad range of retirement plans, including IRAs.
(1) Redemptions and exchanges are made at the next determined net asset value
after the request is received by the Transfer Agent. Proceeds may be more or
less than your original cost. The exchange privilege may be terminated at
any time. Exchanges are not available on all funds. Investors who purchase
Class B or C shares, or $1 million or more of Class A shares, may be subject
to a contingent deferred sales charge.
<PAGE>
HOW TO REACH US
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.
LIBERTY 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 Funds Distributor,
Inc., call Monday to Friday, 8:30 a.m. to 6:30 p.m. ET.
BY MAIL
LIBERTY FUNDS SERVICES, INC.
P.O. BOX 1722
BOSTON, MA 02105-1722
<PAGE>
SHAREHOLDER COMMUNICATIONS
TO KEEP YOU INFORMED
To make recordkeeping easy and keep you up-to-date on the performance of your
investments, you can expect to receive the following information about your
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 FUNDS DISTRIBUTOR 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.)
<PAGE>
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial Massachusetts Tax-Exempt Fund is:
Liberty Funds Services, Inc.*
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Colonial Massachusetts 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 Massachusetts
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, and the most
recent copy of Liberty Funds Distributor's Performance Update.
* Effective October 1, 1998, Colonial Investors Service Center, Inc. - the
Transfer Agent for Colonial, Crabbe Huson, Newport and Stein Roe Advisor Funds
- changed its name to Liberty Funds Services, Inc.
<PAGE>
TRUSTEES
ROBERT J. BIRNBAUM
Consultant (formerly Special Counsel, Dechert, Price & Rhoads; President and
Chief Operating Officer, New York Stock Exchange, Inc.; President, American
Stock Exchange Inc.)
TOM BLEASDALE
Retired (formerly Chairman of the Board and Chief Executive Officer, Shore Bank
& Trust Company)
JOHN CARBERRY
Senior Vice President of Liberty Financial Companies, Inc. (formerly Managing
Director, Salomon Brothers)
LORA S. COLLINS
Attorney (formerly Attorney, Kramer, Levin, Naftalis & Frankel)
JAMES E. GRINNELL
Private Investor (formerly Senior Vice President-Operations, The Rockport
Company)
RICHARD W. LOWRY
Private Investor (formerly Chairman and Chief Executive Officer, U.S. Plywood
Corporation)
SALVATORE MACERA
Private Investor (formerly Executive Vice President of Itek Corp. and President
of Itek Optical & Electronic Industries, Inc.)
WILLIAM E. MAYER
Partner, Development Capital, LLC (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, Chief Executive Officer and Director,
Hannaford Bros. Co.)
JOHN J. NEUHAUSER
Dean, Boston College School of Management
THOMAS E. STITZEL
Professor of Finance, College of Business, Boise State University; Business
Consultant and Author
ROBERT L. SULLIVAN
Retired Partner, KPMG LLP (formerly Management Consultant, Saatchi and Saatchi
Consulting Ltd. and Principal and International Practice Director, Management
Consulting, Peat Marwick Main & Co.)
ANNE-LEE VERVILLE
Consultant (formerly General Manager, Global Education Industry, and President,
Applications Solutions Division, IBM Corporation)
[logo] L I B E R T Y
COLONIAL o CRABBE HUSON o NEWPORT o STEIN ROE ADVISOR
Liberty Funds Distributor, Inc. (C)1999
One Financial Center, Boston, MA 02111-2621, 1-800-426-3750
Visit us at www.libertyfunds.com
MA-02/680G-0199 (3/99) 99/279
