<PAGE> 1
COLONIAL CONNECTICUT TAX-EXEMPT FUND ANNUAL REPORT
JANUARY 31, 2000
[PHOTO]
<PAGE> 2
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Amid the pressure of rising interest rates, virtually all bonds -- including
municipal securities -- posted significant losses for the 12-month period ended
January 31, 2000. This was due to the U.S. economy growing better than expected
and foreign economies rebounding throughout most of 1999. Both of these
occurrences stirred up inflationary fears, which prompted bond yields to move
higher. As bond yields rose, their prices declined. In response to this
environment, the Federal Reserve Board implemented three interest rate hikes,
the first of which was in June, to slow down the economy and to address growing
fears of inflation.
A combination of stronger demand and reduced supply helped municipals lose less
value than their Treasury counterparts during the year. Investors were lured
back to the municipal market after a hiatus to capture the attractive higher
yields. Meanwhile, the supply of municipal bonds dwindled as issuers reduced
their refinancing activity in response to rising interest rates. Under these
circumstances, municipal bond investors were provided with an attractive
tax-exempt yield relative to their taxable counterparts.
Despite these challenging bond market conditions, the Fund outperformed its
Lipper peer group average for the 12-month period.(1) Although past performance
cannot predict results, it is important to maintain a long-term perspective when
making investment decisions.
The Portfolio Manager's 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 Connecticut Tax-Exempt Fund and
for giving us the opportunity to serve your investment needs.
Sincerely,
/s/ STEPHEN E. GIBSON
- ---------------------
Stephen E. Gibson
President
March 13, 2000
(1) Lipper, Inc., a widely respected data provider in the industry, calculates
an average total return for mutual funds with similar investment objectives as
the Fund. The total return calculated for the Lipper Connecticut Municipal Debt
Category was negative 5.38% for the 12 months ended January 31, 2000. The Fund's
Class A shares were ranked in the first quartile for the 1 year (3 out of 28
funds), in the first quartile for the 3 years (1 out of 22 funds) and in the
first quartile for the 5 years (3 out of 20 funds). Rankings do not include
sales charges. Performance for different share classes will vary with fees
associated with each class. Past performance cannot predict future results.
Because economic and market conditions change frequently, there can be no
assurance that the trends described in this report will continue or come to
pass.
NOT FDIC MAY LOSE VALUE
-----------------
INSURED NO BANK GUARANTEE
<PAGE> 3
HIGHLIGHTS
- - FEDERAL RESERVE BOARD RAISED RATES TO SLOW THE ECONOMY.
In June of 1999, the Federal Reserve Board made its first of three
interest-rate hikes in an attempt to slow a fast-growing economy and keep
inflation under control. Despite this anti-inflationary effort, the first
interest rate hike did little to slow the economy which resulted in the
Federal Reserve Board raising rates again in August and November. As
interest rates increased, the yields on bonds increased, causing their
prices to decline -- since bond prices and interest rates move in opposite
directions.
- - MUNICIPALS HELD UP BETTER THAN TREASURYS AMID RISING RATES.
Compared to their U.S. Treasury counterparts, municipal bonds provided a
historically generous yield during this challenging period in the bond
market. Rising bond yields attracted more investors while supply
diminished, which provided municipals with a measure of insulation from
rising interest rates.
- - SHORT-TERM OBLIGATIONS OUTPERFORMED LONG-TERM ISSUES AS INTEREST RATES
ROSE.
Securities such as short-term municipal notes outperformed long-term issues
later in the period. This was expected as bonds with shorter maturities are
less sensitive to rising interest rates.
MUNICIPAL VS. TREASURY BOND PERFORMANCE
1/31/99 - 1/31/00
[LINE CHART]
Lehman Brothers Municipal Bond Index (3.63%)
Salomon 30-Year Treasury Index (15.00%)
NET ASSET VALUE PER SHARE
AS OF 1/31/00
<TABLE>
<S> <C>
Class A $7.28
Class B $7.28
Class C $7.28
</TABLE>
DISTRIBUTIONS DECLARED PER
SHARE FROM 2/1/99 TO 1/31/00
<TABLE>
<S> <C>
Class A $0.368
Class B $0.310
Class C $0.333
</TABLE>
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 is taxable
when distributed.
SEC YIELDS ON 1/31/00
<TABLE>
<S> <C>
Class A 4.55%
Class B 4.02%
Class C 4.32%
</TABLE>
The 30-day SEC yields reflect the portfolio's earning power, net of expenses,
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 4.40%, 3.85% and 3.85% for Class A, B
and C shares, respectively.
TAXABLE-EQUIVALENT SEC YIELDS
ON 1/31/00
<TABLE>
<S> <C>
Class A 7.89%
Class B 6.97%
Class C 7.49%
</TABLE>
Taxable-equivalent SEC yields are based on the combined maximum effective 42.3%
federal and state income tax rate. This tax rate does not reflect the phase out
of exemptions or the reduction of otherwise allowable deductions which occur
when Adjusted Gross Income exceeds certain levels.
Performance of municipal bonds is illustrated by the Lehman Brothers Municipal
Bond Index, a broad-based, unmanaged index that tracks the performance of the
municipal bond market. Performance of the 30-year Treasury bond is illustrated
by the Salomon 30-Year Treasury Bond Index, a broad-based, unmanaged index that
tracks the performance of the 30-Year-on-the-run Treasury 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.
1
<PAGE> 4
PORTFOLIO MANAGER'S REPORT
RISING INTEREST RATES, INFLATION FEARS ROIL BOND MARKETS
Bonds lost considerable ground during the period, plagued by rising interest
rates and persistent inflation worries. Against this unfavorable investment
environment, the Fund's Class A shares returned negative 3.87%, without a sales
charge, for the 12 months ended January 31, 2000, outperforming its Lipper peer
group average of negative 5.38%.
FUND ADOPTED DEFENSIVE SHORT-TERM POSTURE
At the beginning of the period, our outlook called for low inflation and modest
economic growth in response to the global economic and market turmoil during the
fall of 1998. Based on those expectations, we sought to structure the portfolio
with a larger-than-average proportion of bonds that tend to do well during
periods of declining interest rates and emphasized bonds that would help
maintain the Fund's income level.
To the surprise of most economists and market observers, the global turmoil
quickly abated, setting the stage for better economic growth across the world.
Rather than restructure the portfolio and sell bonds we believed would
ultimately serve the Fund well, we pursued some short-term strategies aimed at
temporarily cushioning the Fund against raising rates. One of our interim
defenses against rising rates was a temporary position in short-term municipal
notes. Because of their short life span, municipal notes are the least
susceptible to changes in price due to changes in interest rates.
CONNECTICUT ENJOYED REASONABLE ECONOMIC GROWTH
Connecticut's economic growth rate remained positive, but lagged the country as
a whole. One of the major constraints to better growth was a shrinking labor
force and migration out of the state, which caused the state's employment growth
rate to trail the national average. The gaming industry provided a stable new
employment pace, with Foxwoods Casino becoming the largest employer in the
state. In response to a reasonably strong economy and the state's progress in
restoring budgetary reserves and stabilizing its finance, Connecticut's credit
quality was upgraded to Aa by Moody's Investors Service, Inc. in 1999.
QUALITY BREAKDOWN
AS OF 1/31/00
<TABLE>
<S> <C>
AAA 53.5%
AA 33.0%
A 7.3%
BBB 1.4%
BB 1.5%
Non-rated 1.9%
Cash equivalents 1.4%
</TABLE>
Quality breakdowns are calculated as a percentage of total investments,
including short-term obligations. Ratings shown in the quality breakdowns
represent the highest rating assigned to a particular bond by one of the
following respected rating agencies: Standard & Poor's Corporation, Moody's
Investors Service, Inc. or Fitch Investors Service, Inc.
Because the Fund is actively managed, there can be no guarantee the Fund will
continue to maintain these quality breakdowns in the future.
BOUGHT
CONNECTICUT MARY WADE HOME
We purchased Connecticut Mary Wade Home (0.7% of net assets), a nursing home
with strong financials, a long operating history and a solid management team.
The high-yielding bonds were purchased at attractive prices and represent good
total return potential.
2
<PAGE> 5
PORTFOLIO MANAGER'S REPORT (CONTINUED)
OUTLOOK CALLS FOR A MORE FAVORABLE ENVIRONMENT
Our outlook for the municipal bond market is reasonably favorable, calling for
lower interest rates over the long term. That said, we wouldn't rule out the
possibility of the Fed raising short-term interest rates again to keep inflation
in check. Given a scenario characterized by moderate economic growth, low
inflation and stable to declining long-term interest rates, we believe that the
Fund is well positioned. If interest rates appear to us to be heading
significantly higher, we will likely adjust our strategy in response.
Connecticut's economy would be vulnerable to a prolonged stock market correction
should it occur. Barring that development, the state's economy should continue
to grow, although at a slightly weaker pace than the nation as a whole due to
higher-than-average wage inflation and labor shortages.
/s/ Gary Swayze
GARY SWAYZE is portfolio manager of Colonial Connecticut Tax-Exempt fund and is
a senior vice president of Colonial Management Associates, Inc.
Effective August 20, 1999, the Board of Trustees approved an increase in the
internal limit that the Fund's Advisor has set regarding investment in inverse
floating rate obligations. These obligations represent interest in tax-exempt
bonds and carry interest rates that vary inversely to changes in short-term
interest rates. Although floating rate obligations may have greater price
volatility and offer additional yield, the Fund's Advisor uses futures contracts
from time to time to mitigate the additional duration. The Advisor has set a
policy to invest no more than 15% of the Fund's total assets in inverse floating
rate obligations.
Tax-exempt investing offers current tax-free income, but also involves certain
risks. The value of the Fund will be affected by interest rate changes and the
creditworthiness of the issues held in the Fund. The Fund's management,
including risk management specialists and credit analysts, identifies problems
and opportunities and reacts quickly to market changes.
Top Five Sector Breakdowns
1/31/00 vs. 1/31/99
<TABLE>
<CAPTION>
Fund as of Fund as of
1/31/00 1/31/99
<S> <C> <C>
Local General Obligations 22.1% 21.5%
State General Obligations 12.4% 12.1%
Hospital 10.0% 13.2%
Water & Sewer 9.3% 5.5%
Single Family 8.9% 8.1%
</TABLE>
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 sector breakdowns in the
future.
SOLD
CONNECTICUT NEW BRITAIN HOSPITAL
We sold Connecticut New Britain Hospital bonds after they had been prerefunded,
a process where the issuer backs the bonds with U.S. Treasury securities. After
the prerefunding and a price boost, the bonds offered less total return
potential.
3
<PAGE> 6
PERFORMANCE INFORMATION
PERFORMANCE OF A $10,000 INVESTMENT IN ALL SHARE CLASSES FROM 11/1/91 - 1/31/00
<TABLE>
<CAPTION>
Without With
sales sales
charge charge
<S> <C> <C>
Class A $15,998 $15,238
Class B $15,110 $15,110
Class C $15,817 $15,817
</TABLE>
PERFORMANCE OF A $10,000 INVESTMENT IN CLASS A SHARES FROM 11/1/91 - 1/31/00
<TABLE>
<CAPTION>
Without sales charge With sales charge Lehman Brothers
Municipal Bond Index
<S> <C> <C> <C>
11/1/91 10000 10000 10000
12/27/91 10209 9724 10215
1/31/92 10220 9735 10238.5
2/28/92 10230 9745 10241.6
3/31/92 10300 9811 10245.7
4/30/92 10311 9822 10336.9
5/31/92 10468 9971 10458.8
6/30/92 10786 10274 10634.5
7/31/92 10973 10452 10953.6
8/31/92 10882 10365 10847.3
9/30/92 10908 10390 10917.8
10/31/92 10772 10260 10810.8
11/30/92 11023 10499 11004.4
12/24/92 11161 10631 11116.6
1/31/93 11293 10757 11245.5
2/28/93 11761 11202 11652.6
3/31/93 11573 11023 11529.1
4/30/93 11799 11239 11645.6
5/31/93 11856 11293 11710.8
6/30/93 12064 11492 11906.3
7/31/93 12088 11514 11921.8
8/31/93 12425 11835 12169.8
9/30/93 12542 11946 12308.5
10/31/93 12407 11818 12331.9
11/30/93 12383 11795 12223.4
12/29/93 12596 11998 12481.3
1/31/94 12667 12065 12623.6
2/28/94 12142 11565 12296.6
3/31/94 11583 11033 11796.2
4/30/94 11818 11257 11896.4
5/31/94 12105 11531 11999.9
6/30/94 11883 11320 11926.7
7/31/94 12140 11563 12145
8/31/94 12148 11571 12187.5
9/30/94 11807 11246 12008.4
10/31/94 11397 10856 11794.6
11/30/94 11490 10944 11581.1
12/28/94 11684 11129 11835.9
1/31/95 12219 11639 12174.4
2/28/95 12432 11841 12528.7
3/31/95 12611 12012 12672.8
4/30/95 12516 11921 12688
5/31/95 13008 12390 13092.7
6/30/95 12771 12165 12978.8
7/31/95 12709 12105 13102.1
8/31/95 13012 12394 13268.5
9/30/95 13105 12483 13352.1
10/31/95 13304 12672 13545.7
11/30/95 13611 12964 13770.6
12/27/95 13634 12986 13902.8
1/31/96 13710 13059 14008.4
2/29/96 13697 13046 13913.2
3/31/96 13430 12792 13735.1
4/30/96 13326 12693 13696.6
5/31/96 13440 12802 13691.1
6/30/96 13481 12841 13840.4
7/31/96 13798 13144 13964.9
8/31/96 13637 12990 13962.1
9/30/96 13884 13225 14157.6
10/31/96 14019 13353 14317.6
11/30/96 14194 13520 14579.6
12/27/96 14199 13525 14518.4
1/31/97 14242 13566 14546
2/28/97 14343 13663 14679.8
3/31/97 14216 13541 14484.5
4/30/97 14336 13655 14606.2
5/31/97 14552 13861 14826.8
6/30/97 14749 14048 14985.4
7/31/97 14967 14256 15400.5
8/31/97 14952 14242 15255.7
9/30/97 15132 14413 15437.3
10/31/97 15136 14417 15536.1
11/30/97 15318 14590 15627.7
12/26/97 15503 14767 15855.9
1/31/98 15627 14885 16019.2
2/28/98 15548 14809 16024
3/31/98 15730 14983 16038.5
4/30/98 15591 14850 15966.3
5/31/98 15814 15064 16218.6
6/30/98 15876 15123 16281.8
7/20/98 15899 15144 16322.5
8/20/98 16064 15301 16575.5
9/20/98 16291 15517 16782.7
10/20/98 16354 15577 16782.7
11/20/98 16376 15598 16841.4
12/20/98 16460 15678 16883.5
1/20/99 16585 15797 17084.5
2/20/99 16606 15817 17009.3
3/20/99 16563 15776 17033.1
4/20/99 16605 15816 17075.7
5/20/99 16500 15716 16976.6
6/20/99 16246 15474 16732.2
7/20/99 16418 15638 16792.4
8/20/99 16206 15436 16658.1
9/20/99 16186 15417 16664.7
10/20/99 15972 15213 16484.8
11/20/99 16191 15422 16659.5
12/20/99 16064 15301 16534.6
1/31/00 16508 15238 15998
</TABLE>
The Lehman Brothers Municipal Bond Index is an 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.
AVERAGE ANNUAL TOTAL RETURNS AS OF 1/31/00
<TABLE>
<CAPTION>
Share Class A B C
Inception Date 11/1/91 6/8/92 8/1/97
- ----------------------------------------------------------------------------------------------------------------------------------
Without With sales Without With sales Without With sales
sales charge charge sales charge charge sales charge charge
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year (3.87)% (8.44)% (4.59)% (9.17)% (4.31)% (5.22)%
5 Years 5.81 4.79 5.02 4.69 5.57 5.57
Life of Fund 5.86 5.23 5.13 5.13 5.71 5.71
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/99
<TABLE>
<CAPTION>
Share Class A B C
- ----------------------------------------------------------------------------------------------------------------------------------
Without With sales Without With sales Without With sales
sales charge charge sales charge charge sales charge charge
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year (2.40)% (7.04)% (3.13)% (7.78)% (2.84)% (3.77)%
5 Years 6.60 5.57 5.81 5.49 6.37 6.37
Life of Fund 5.97 5.34 5.24 5.24 5.83 5.83
</TABLE>
Past performance cannot predict future investment results. Returns and value of
an investment will vary, resulting in a gain or loss on sale. All results shown
assume reinvestment of distributions. The "with sales charge" returns include
the maximum 4.75% charge for Class A shares and the maximum contingent deferred
sales charges (CDSC) 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 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 its inception date. 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 the periods prior to the inception of Class B and
Class C shares would have been lower.
4
<PAGE> 7
INVESTMENT PORTFOLIO
January 31, 2000
(In thousands)
<TABLE>
<CAPTION>
MUNICIPAL BONDS - 96.8% PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
EDUCATION - 7.1%
EDUCATION - 6.6%
State Health & Educational Facilities Authority:
5.250% 11/01/17 $2,500 $2,292
Hopkins School, Series 1998-A,
4.750% 07/01/23 1,385 1,114
Quinnipiac College, Series 1998-E,
4.700% 07/01/15 1,250 1,063
St. Joseph College, Series 1999-A:
5.250% 07/01/13 450 414
5.250% 07/01/14 475 430
Trinity College, Series 1998-F,
5.500% 07/01/21 2,000 1,882
Yale University, Series 1992,
IFRN (variable rate),
7.924% 06/10/30 2,500 2,328
------
9,523
------
STUDENT LOAN - 0.5%
State Higher Education
Supplemental Loan Authority,
Series 1991-A,
7.200% 11/15/10 670 694
------
- --------------------------------------------------------------------------------
HEALTHCARE - 14.5%
HOSPITAL - 9.9%
State Health & Educational
Facilities Authority:
Bridgeport Hospital, Series A,
6.500% 07/01/12 1,000 1,047
Catholic Health East, Series 1999-F,
5.750% 11/15/29 1,000 938
Danbury Hospital, Series E,
6.500% 07/01/14 1,400 1,451
Hospital for Specialty Care, Series B,
5.375% 07/01/17 2,500 2,053
Norwalk Hospital, Series D,
6.250% 07/01/12 1,750 1,842
St. Francis Hospital & Medical Center,
Series B,
6.125% 07/01/10 1,000 1,037
St. Raphael Hospital:
Series E,
6.750% 07/01/13 1,400 1,457
Series 1992-F,
6.200% 07/01/14 750 774
Series 1992-G,
6.200% 07/01/14 225 232
Series 1993-H,
5.250% 07/01/09 2,000 1,984
Yale-New Haven Hospital:
Series G,
6.500% 07/01/12 500 523
</TABLE>
<TABLE>
<CAPTION>
PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
Series 1996-H,
5.500% 07/01/13 $1,000 $ 980
-------
14,318
NURSING HOME - 4.6% -------
State Development Authority:
Clintonville Manor Realty, Inc.,
Series 1992,
6.750% 06/20/21 1,490 1,505
Duncaster Inc.:
Series 1992,
6.700% 09/01/07 250 265
Series 1992,
6.750% 09/01/15 1,250 1,328
Mary Wade Home, Series 1999-A,
6.375% 12/01/18 1,000 956
State Health & Educational Facilities
Authority:
Pope John Paul II Center for Health,
6.250% 11/01/13 2,000 2,042
Noble Horizons Project, Series 1993,
5.875% 11/01/12 640 628
-------
6,724
-------
- --------------------------------------------------------------------------------
HOUSING - 11.0%
MULTI-FAMILY - 2.3%
New Britain Housing Authority,
Nathan Hale Apartments:
Series 1992-A,
6.500% 07/01/02 65 66
Series 1992-B,
6.875% 07/01/24 2,590 2,664
Waterbury Nonprofit Housing Corp.,
Fairmont Heights, Series 1993-A,
6.500% 01/01/26 600 609
------
3,339
------
SINGLE-FAMILY - 8.7%
State Housing Finance Authority:
Series 1990-B4,
7.300% 11/15/03 5 5
Series 1991-C1,
6.450% 11/15/11 1,325 1,357
Series 1991-C2,
6.700% 11/15/22 30 31
Series 1991-C,
6.600% 11/15/23 1,415 1,457
Series 1992-B,
6.700% 11/15/12 2,215 2,317
Series 1993-B,
5.650% 05/15/06 550 558
Series 1993-B,
6.200% 05/15/12 5,000 5,062
Series-C1,
6.350% 05/15/17 945 949
</TABLE>
5
<PAGE> 8
INVESTMENT PORTFOLIO (CONTINUED)
January 31, 2000
(In thousands)
<TABLE>
<CAPTION>
PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
Series D-2,
5.60% 11/15/21 $1,000 $ 915
-------
12,651
-------
- --------------------------------------------------------------------------------
OTHER - 1.2%
REFUNDED/ESCROWED (a)
PR Commonwealth of Puerto Rico,
Series 1994,
6.500% 07/01/23 1,500 1,622
State Health & Educational
Facilities Authority,
Lutheran General Health Care System,
Series 1989,
7.250% 07/01/04 120 126
-------
1,748
-------
- --------------------------------------------------------------------------------
OTHER REVENUE - 2.1%
INDUSTRIAL - 1.5%
State Development Authority,
Pfizer Inc. Project, Series 1994,
7.000% 07/01/25 2,000 2,149
-------
PAPER PRODUCTS - 0.6%
Sprague, International Paper Co. Project,
Series A,
5.700% 10/01/21 1,000 865
-------
- --------------------------------------------------------------------------------
RESOURCE RECOVERY - 3.8%
DISPOSAL - 1.9%
State Development Authority,
Sewer Sludge Disposal Facilities,
Series 1996,
8.250% 12/01/06 1,130 1,219
State Disposal Facility,
Netco Waterbury Ltd.,
Series 1995,
9.375% 06/01/16 1,400 1,537
-------
2,756
-------
RESOURCE RECOVERY - 1.9%
Bristol Resource Recovery Facility
Operation Committee,
Ogden Martin Systems, Inc.,
Series 1995,
6.500% 07/01/14 1,500 1,495
State Resource Recovery Authority,
American Re-Fuel Co., Series 1992-A,
6.450% 11/15/22 1,425 1,311
-------
2,806
-------
- --------------------------------------------------------------------------------
TAXED BACKED - 46.6%
LOCAL GENERAL OBLIGATIONS - 21.7%
Bethel,
6.500% 02/15/09 1,220 1,326
</TABLE>
<TABLE>
<CAPTION>
PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
Bridgeport:
Series 1996-A,
6.500% 09/01/08 $3,000 $3,256
Series A,
6.250% 03/01/12 2,465 2,624
Danbury:
Series 1992,
5.625% 08/15/11 690 705
Series 1994,
4.500% 02/01/12 1,280 1,154
4.500% 02/01/13 1,280 1,138
Darien,
Series 1999,
4.500% 08/01/18 500 407
East Haddam,
Series 1991,
6.300% 06/15/09 260 272
Farmington,
Series 1993:
5.700% 01/15/12 590 603
5.700% 01/15/13 570 579
Granby,
Series 1993:
6.500% 04/01/09 200 219
6.550% 04/01/10 175 193
Griswold,
Series 1992,
6.000% 04/15/09 410 428
Hamden,
Series 1992:
6.000% 10/01/11 425 443
6.000% 10/01/12 425 433
Hartford County Metropolitan District:
5.625% 02/01/11 600 608
5.625% 02/01/12 600 606
5.625% 02/01/13 600 604
Series 1991,
6.200% 11/15/10 220 238
Series 1993:
5.200% 12/01/12 600 586
5.200% 12/01/13 500 483
Montville,
Series 1993,
6.300% 03/01/12 335 358
New Britain:
Series 1992,
6.000% 02/01/08 400 419
Series 1993-A,
6.000% 10/01/12 2,000 2,088
Series 1993-B,
6.000% 03/01/12 1,000 1,043
</TABLE>
6
<PAGE> 9
INVESTMENT PORTFOLIO (CONTINUED)
January 31, 2000
(In thousands)
<TABLE>
<CAPTION>
MUNICIPAL BONDS (CONTINUED) PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
TAXED BACKED (CONTINUED)
LOCAL GENERAL OBLIGATIONS (CONTINUED)
North Branford:
6.200% 02/15/11 $ 195 $ 202
6.200% 02/15/12 225 232
Norwich,
Series 1994:
5.750% 09/15/13 875 880
5.750% 09/15/14 870 871
Plainfield,
Series 1992,
6.375% 08/01/11 500 525
PR Commonwealth of Puerto Rico
Municipal Finance Agency,
Series 1999-A,
5.500% 08/01/23 350 325
Somers:
6.250% 01/15/08 270 280
6.000% 01/15/11 125 129
South Windsor,
Series 1992,
6.200% 09/01/10 495 517
Stamford:
Series 1992,
6.125% 11/01/11 1,050 1,106
Series 1995,
5.250% 03/15/14 2,160 2,040
State Regional School District:
No. 14, Series 1991,
6.100% 12/15/06 285 303
No. 5, Series 1992,
6.300% 03/01/10 400 420
Series 1993,
5.600% 02/15/12 150 152
Torrington,
Series 1992,
6.400% 05/15/10 750 787
Vernon,
Series 1988,
7.100% 10/15/03 250 270
West Haven,
Series 1993-B,
5.400% 06/01/10 705 728
Westbrook,
Series 1992:
6.300% 03/15/12 265 284
6.400% 03/15/09 630 681
-------
31,545
-------
</TABLE>
<TABLE>
<CAPTION>
PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
SPECIAL NON-PROPERTY TAX - 6.1%
PR Commonwealth of Puerto Rico:
Highway & Transportation Authority,
Series W,
5.50% 07/01/09 $ 1,110 $ 1,135
Building Authority,
Series B,
5.000% 07/01/13 1,000 939
State,
Series 1992-B,
6.125% 09/01/12 5,500 5,778
State, Transportation Infrastructure,
Series 1994-B,
6.000% 10/01/09 1,000 1,052
-------
8,904
-------
STATE APPROPRIATED - 6.7%
PR Commonwealth of Puerto Rico
Public Building Authority,
Series 1993-M,
5.700% 07/01/16 3,300 3,210
State Certificates of Participation,
Middletown Courthouse Project:
6.250% 12/15/09 1,685 1,767
6.250% 12/15/10 750 787
6.250% 12/15/12 100 105
6.250% 12/15/13 850 891
State Development Authority,
Series 1993-A,
5.250% 11/15/11 750 731
State Health & Educational Facilities
Authority, American Health
Foundation/Windsor Project,
7.125% 11/01/24 2,000 2,208
-------
9,699
-------
STATE GENERAL OBLIGATIONS - 12.1%
PR Commonwealth of Puerto Rico:
Aqueduct & Sewer Authority,
Series 1995,
6.000% 07/01/07 2,750 2,910
Highway & Transportation Authority,
Series X,
5.500% 07/01/13 (b) 3,000 3,000
State Government:
Series 1990-B,
(c) 11/15/10 1,450 793
Series 1993-A,
5.600% 11/15/10 1,000 1,012
Series 1993-B,
5.400% 09/15/09 3,000 3,031
Series 1995-B,
5.375% 10/01/15 5,000 4,778
</TABLE>
7
<PAGE> 10
INVESTMENT PORTFOLIO (CONTINUED)
January 31, 2000
(In thousands)
<TABLE>
<CAPTION>
PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
Series 1998-C,
4.500% 10/15/16 $1,000 $ 829
Series 1999 B-2,
5.875% 11/01/15 1,250 1,263
-------
17,616
-------
- --------------------------------------------------------------------------------
UTILITY - 10.5%
INVESTOR OWNED - 0.6%
State Development Authority,
Connecticut Light & Power Co.,
Series 1993-B,
5.950% 09/01/28 1,000 871
-------
MUNICIPAL ELECTRIC - 0.8%
PR Puerto Rico Electric Power Authority,
Series 1998-EE,
4.500% 07/01/18 1,500 1,228
-------
WATER & SEWER - 9.1%
South Central Regional Water Authority:
Series 11,
5.750% 08/01/12 2,000 2,013
Series 1999 15-A,
5.125% 08/01/29 4,000 3,379
State Clean Water Fund:
Series 1991,
7.000% 01/01/11 1,850 1,933
Series 1992:
6.125% 02/01/12 (b) 3,580 3,764
6.125% 02/01/12 150 154
Series 1993,
5.875% 04/01/09 1,000 1,044
Series 1999,
5.125% 09/01/15 1,000 922
-------
13,209
-------
TOTAL MUNICIPAL BONDS
(cost of $139,613)(d) 140,645
-------
</TABLE>
<TABLE>
<CAPTION>
PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM OBLIGATIONS - 1.4%
- --------------------------------------------------------------------------------
VARIABLE SERIES DEMAND NOTES (e)
DC District of Columbia,
Series 1991 B-1,
3.650% 06/01/03 $ 400 $ 400
IL Naperville,
Series 1999,
3.300% 12/01/29 400 400
NY Long Island Power Authority,
Sub-Series 1998-5,
3.500% 05/01/33 100 100
TX Gulf Coast Waste Disposal Authority
Monsanto Co.,
Series 1994,
3.450% 04/01/13 1,100 1,100
--------
TOTAL SHORT-TERM OBLIGATIONS 2,000
--------
OTHER ASSETS & LIABILITIES, NET - 1.8% 2,717
--------
NET ASSETS - 100.0% $145,362
--------
</TABLE>
NOTES TO INVESTMENT PORTFOLIO:
(a) The Fund has been informed that each issuer has placed direct obligations
of the U.S. Government in an irrevocable trust, solely for the payment of
the interest and principal.
(b) These securities, or a portion thereof, with a total market value of
$5,419 are being used to collateralize open futures contracts.
(c) Zero coupon bond.
(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,
2000.
<TABLE>
<CAPTION>
ACRONYM NAME
------- ----
<S> <C>
IFRN Inverse Floating Rate Note
</TABLE>
Long futures contracts open at January 31, 2000:
<TABLE>
<CAPTION>
Par value Unrealized
covered by Expiration depreciation
Type contracts month at 01/31/00
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Municipal Bond $4,400 March $(183)
</TABLE>
See notes to financial statements.
8
<PAGE> 11
STATEMENT OF ASSETS AND LIABILITIES
January 31, 2000
(In thousands except for per share amounts and footnotes)
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS
Investments at value (cost $139,613) $140,645
Short-term obligations 2,000
--------
142,645
Receivable for:
Interest $2,048
Investments sold 1,222
Fund shares sold 299
Expense reimbursement due
from Advisor 21
Other 30 3,620
------ --------
Total Assets 146,265
LIABILITIES
Payable for:
Fund shares repurchased 580
Distributions 200
Variation margin on futures 26
Accrued:
Management fee 62
Transfer agent fee 16
Bookkeeping fee 5
Deferred Trustees fee 5
Other 9
------
Total Liabilities 903
--------
NET ASSETS $145,362
========
Net asset value & redemption price per share --
Class A ($66,348/9,117) $ 7.28(a)
========
Maximum offering price per share --
Class A ($7.28/0.9525) $ 7.64(b)
========
Net asset value & offering price per share --
Class B ($76,246/10,477) $ 7.28(a)
========
Net asset value & offering price per share --
Class C ($2,768/381) $ 7.28(a)
========
COMPOSITION OF NET ASSETS
Capital paid in $149,752
Overdistributed net investment income (189)
Accumulated net realized loss (5,050)
Net unrealized appreciation (depreciation) on:
Investments 1,032
Open future contracts (183)
--------
$145,362
========
</TABLE>
(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.
STATEMENT OF OPERATIONS
For the Year Ended January 31, 2000
(In thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME
Interest $ 9,142
EXPENSES
Management fee $ 815
Service fee 300
Distribution fee -- Class B 627
Distribution fee -- Class C 19
Transfer agent fee 245
Bookkeeping fee 67
Trustees fee 14
Audit fee 18
Legal fee 10
Custodian fee 3
Registration fee 16
Reports to shareholders 18
Other 12
----------
Total expenses 2,164
Fees waived by the Advisor (238)
Fees waived by the Distributor -- Class C (8)
Custodian credits earned (3) 1,915
---------- ---------
Net Investment Income 7,227
---------
NET REALIZED & UNREALIZED GAIN (LOSS) ON
PORTFOLIO POSITIONS
Net realized gain (loss) on:
Investments (79)
Closed futures contracts 133
----------
Net Realized Gain 54
Net change in unrealized appreciation/
depreciation during the period on:
Investments (14,207)
Open future contracts (183)
----------
Net Change in Unrealized
Appreciation/Depreciation (14,390)
---------
Net Loss (14,336)
---------
Decrease in Net Assets from Operations $ (7,109)
=========
</TABLE>
See notes to financial statements.
9
<PAGE> 12
STATEMENT OF CHANGES IN NET ASSETS
(In thousands)
<TABLE>
<CAPTION>
YEARS ENDED
JANUARY 31
---------------------------
INCREASE (DECREASE) IN NET ASSETS 2000 1999
- --------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income $ 7,227 $ 7,141
Net realized gain 54 699
Net change in unrealized
appreciation/depreciation (14,390) 1,933
--------- ---------
Net Increase (Decrease)
from Operations (7,109) 9,773
Distributions:
From net investment income -- Class A (3,696) (3,771)
In excess of net investment income -- Class A -- (110)
From net investment income -- Class B (3,410) (3,337)
In excess of net investment income -- Class B -- (97)
From net investment income -- Class C (112) (33)
In excess of net investment income -- Class C -- (1)
--------- ---------
(14,327) 2,424
--------- ---------
Fund Share Transactions:
Receipts for shares sold -- Class A 4,861 9,765
Value of distributions reinvested -- Class A 2,122 2,342
Cost of shares repurchased -- Class A (17,038) (10,158)
--------- ---------
(10,055) 1,949
--------- ---------
Receipts for shares sold -- Class B 11,545 12,745
Value of distributions reinvested -- Class B 2,091 2,189
Cost of shares repurchased -- Class B (17,985) (12,593)
--------- ---------
(4,349) 2,341
--------- ---------
Receipts for shares sold -- Class C 2,664 841
Value of distributions reinvested -- Class C 80 21
Cost of shares repurchased -- Class C (1,087) (25)
--------- ---------
1,657 837
--------- ---------
Net Increase (Decrease) from Fund Share
Transactions (12,747) 5,127
--------- ---------
Total Increase (Decrease) (27,074) 7,551
NET ASSETS
Beginning of period 172,436 164,885
--------- ---------
End of period (net of overdistributed
net investment income of
$189 and $211, respectively) $ 145,362 $ 172,436
--------- ---------
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED
JANUARY 31
---------------------------
NUMBER OF FUND SHARES 2000 1999
- --------------------------------------------------------------------------------
<S> <C> <C>
Sold -- Class A 638 1,246
Issued for distributions reinvested -- Class A 280 299
Repurchased -- Class A (2,267) (1,299)
--------- ---------
(1,349) 246
--------- ---------
Sold -- Class B 1,511 1,625
Issued for distributions reinvested -- Class B 276 280
Repurchased -- Class B (2,378) (1,610)
--------- ---------
(591) 295
--------- ---------
Sold -- Class C 346 107
Issued for distributions reinvested -- Class C 11 3
Repurchased -- Class C (144) (3)
--------- ---------
213 107
--------- ---------
</TABLE>
See notes to financial statements.
10
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
January 31, 2000
NOTE 1. ACCOUNTING POLICIES
ORGANIZATION:
Colonial Connecticut Tax Exempt Fund (the Fund), a series of Liberty Funds Trust
V, formerly Colonial Trust V, is a non-diversified portfolio of a Massachusetts
business trust, registered under the Investment Company Act of 1940, as amended,
as an open-end management investment company. The Fund's investment objective is
to seek as high a level of after-tax total return, as is consistent with prudent
risk, by pursuing current income exempt from federal and Connecticut state
personal income tax. The Fund also provides 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. A 1.00% contingent deferred sales charge is assessed 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 are subject to an annual
distribution fee and a contingent deferred sales charge. Class B shares will
convert to Class A shares as follows:
<TABLE>
<CAPTION>
ORIGINAL PURCHASE CONVERTS TO CLASS A SHARES
- ----------------- --------------------------
<S> <C>
Less than $250,000 8 years
$250,000 to less than $500,000 4 years
$500,000 to less than $1,000,000 3 years
</TABLE>
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.
Options are valued at the last reported sale price, or in the absence of a sale,
the mean between the last quoted bid and asking price.
Futures contracts are valued based on the difference between the last sale price
and the opening price of the contract.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
Portfolio positions for which market quotations are not readily available are
valued at fair value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains and losses are based upon the specific
identification method for both financial statement and federal income tax
purposes.
The Fund may trade securities on other than normal settlement terms. This may
increase the risk if the other party to the transaction fails to deliver and
causes the Fund to subsequently invest at less advantageous prices.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS:
All income, expenses (other than the Class B and Class C distribution fees), and
realized and unrealized gains (losses), are allocated to each class
proportionately on a daily basis for purposes of determining the net asset value
of each class.
Class B and Class C per share data and ratios are calculated by adjusting the
expense and net investment income per share data and ratios for the Fund for the
entire period by the distribution fee applicable to Class B and Class C shares
only.
FEDERAL INCOME TAXES:
Consistent with the Fund's policy to qualify as a regulated investment company
and to distribute all of its taxable 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 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>
11
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
January 31, 2000
BOOKKEEPING FEE:
The Advisor provides bookkeeping and pricing services for $27,000 annually plus
0.035% of the Fund's average net assets over $50 million.
TRANSFER AGENT FEE:
Liberty Funds Services, 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.
Effective January 1, 2000, the Transfer Agent fee was reduced from 0.13%
annually of average net assets to a fee comprised of 0.07% annually of average
net assets plus charges based on the number of shareholder accounts and
transactions.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES:
Liberty Funds Distributor, Inc. (the Distributor), a subsidiary of the Advisor,
is the Fund's principal underwriter. During the year ended January 31, 2000, the
Fund has been advised that the Distributor retained net underwriting discounts
of $17,823 on sales of the Fund's Class A shares and received contingent
deferred sales charges (CDSC) of none, $198,609 and $4,792 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, 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:
<TABLE>
<CAPTION>
VALUATION OF SHARES OUTSTANDING ON THE
20TH OF EACH MONTH WHICH WERE ISSUED ANNUAL FEE RATE
- ------------------------------------ ---------------
<S> <C>
Prior to November 30, 1994 0.10%
On or after December 1, 1994 0.25%
</TABLE>
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 0.60% annually of the Fund's average net assets.
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 custodian fees
were reduced by balance credits of $2,927 applied during the year ended January
31, 2000. 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 an agreement.
NOTE 3. PORTFOLIO INFORMATION
INVESTMENT ACTIVITY:
During the year ended January 31, 2000, purchases and sales of investments,
other than short-term obligations, were $14,067,049 and $25,201,911,
respectively.
Unrealized appreciation (depreciation) at January 31, 2000, based on cost of
investments for both financial statement and federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation $4,366,092
Gross unrealized depreciation (3,334,000)
----------
Net unrealized appreciation $1,032,092
==========
</TABLE>
CAPITAL LOSS CARRYFORWARDS:
At January 31, 2000, capital loss carryforwards available (to the extent
provided in regulations) to offset future realized gains were approximately as
follows:
<TABLE>
<CAPTION>
YEAR OF EXPIRATION CAPITAL LOSS CARRYFORWARD
- ------------------ -------------------------
<S> <C>
2003 $ 554,000
2004 2,209,000
2008 788,000
----------
$3,551,000
==========
</TABLE>
Expired capital loss carryforwards, if any, are recorded as a reduction of
capital paid in.
To the extent loss carryforwards are used to offset any future realized gains,
it is unlikely that such gains would be distributed since they may be taxable to
shareholders as ordinary income.
OTHER:
There are certain risks arising from geographic concentration in any state.
Certain revenue or tax related events in a state may impair the ability of
certain issuers of municipal securities to pay principal and interest on their
obligations.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
The Fund may purchase or sell municipal and Treasury bond futures contracts and
purchase and write options on futures. The Fund will invest in these instruments
to hedge against the effects of changes in the value of portfolio securities due
to anticipated changes in interest rates and/or market conditions, for duration
management, or when the transactions are economically appropriate to the
reduction of risk inherent in the management of the Fund and not for trading
purposes. The use of futures contracts and options involves certain risks which
include (1) imperfect correlation between the price movement of the instruments
and the underlying securities, (2) inability to close out a position due to
different trading hours, or the temporary absence of a liquid market for either
the instrument or the underlying securities or (3) an inaccurate prediction by
the
12
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
January 31, 2000
Advisor 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 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, 2000.
CHANGE IN INDEPENDENT AUDITOR:
Based on the recommendation of the Audit Committee of the Fund on June 18, 1999,
the Board of Trustees determined not to retain PricewaterhouseCoopers LLP (PwC)
as the Fund's independent auditor and voted to appoint Ernst & Young LLP for the
fiscal year ended January 31, 2000. During the two most recent fiscal years,
PwC's audit reports contained no adverse opinion or disclaimer of opinion; nor
were its reports qualified or modified as to uncertainty, audit scope, or
accounting principle. Further, in connection with its audits for the two most
recent years and through March 11, 1999, there were no disagreements between the
Fund and PwC on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedures, which if not resolved to
the satisfaction of PwC would have caused it to make reference to the
disagreement in its report on the financial statements for such years.
13
<PAGE> 16
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
YEARS ENDED JANUARY 31
----------------------------------------------------------------------------------
2000 1999
----------------------------------- ----------------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.950 $ 7.950 $ 7.950 $ 7.830 $ 7.830 $ 7.830
-------- -------- --------- ----------- -------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) (b) 0.368 0.310 0.333(c) 0.369 0.308 0.333(d)
Net realized and unrealized gain (loss) (0.670) (0.670) (0.670) 0.129 0.129 0.129
-------- -------- --------- ----------- -------- -----------
Total from Investment Operations (0.302) (0.360) (0.337) 0.498 0.437 0.462
-------- -------- --------- ----------- -------- -----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.368) (0.310) (0.333) (0.368) (0.309) (0.333)
In excess of net investment income -- -- -- (0.010) (0.008) (0.009)
-------- -------- --------- ----------- -------- -----------
Total Distributions
Declared to Shareholders (0.368) (0.310) (0.333) (0.378) (0.317) (0.342)
-------- -------- --------- ----------- -------- -----------
NET ASSET VALUE, END OF PERIOD $ 7.280 $ 7.280 $ 7.280 $ 7.950 $ 7.950 $ 7.950
======== ======== ========= =========== ======== ===========
Total return (e)(f) (3.87)% (4.59)% (4.31)% 6.54% 5.73% 6.05%
======== ======== ========= =========== ======== ===========
RATIOS TO AVERAGE NET ASSETS
Expenses (g) 0.78% 1.53% 1.23%(c) 0.77% 1.52% 1.22%(d)
Net investment income (g) 4.84% 4.09% 4.39%(c) 4.69% 3.94% 4.24%(d)
Fees and expenses waived or borne by the
Advisor (g) 0.15% 0.15% 0.15% 0.14% 0.14% 0.14%
Portfolio turnover 9% 9% 9% 6% 6% 6%
Net assets at end of period (000) $ 66,348 $ 76,246 $ 2,768 $ 83,156 $ 87,947 $ 1,333
(a) Net of fees and expenses
waived or borne
by the Advisor which amounted to: $ 0.011 $ 0.011 $ 0.011 $ 0.011 $ 0.011 $ 0.011
</TABLE>
(b) The per share net investment income amounts do not reflect the period's
reclassification of differences between book and tax basis net
investment income.
(c) Net of fees waived by the Distributor which amounted to $0.023 per
share and 0.30%.
(d) Net of fees waived by the Distributor which amounted to $0.024 per
share and 0.30%.
(e) Total return at net asset value assuming all distributions reinvested
and no initial sales charge or contingent deferred sales charge.
(f) Had the Advisor and Distributor not waived or reimbursed a portion of
expenses, total return would have been reduced.
(g) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
2000 Federal Income Tax Information (unaudited).
Approximately 100% of the income distributions will be treated as exempt income
for Federal income tax purposes.
14
<PAGE> 17
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
YEARS ENDED JANUARY 31
1998 1997
--------------------------------------- ------------------------------
CLASS A CLASS B CLASS C (b) CLASS A CLASS B
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.490 $ 7.490 $ 7.710 $ 7.630 $ 7.630
------- -------- -------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.385 0.328 0.173(c) 0.393 0.338
Net realized and unrealized gain (loss) 0.344 0.344 0.124 (0.141) (0.141)
------- -------- -------- ----------- -----------
Total from Investment
Operations 0.729 0.672 0.297 0.252 0.197
------- -------- -------- ----------- -----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.386) (0.330) (0.177) (0.392) (0.337)
In excess of net investment income (0.003) (0.002) -- -- --
------- -------- -------- ----------- -----------
Total Distributions Declared
to Shareholders (0.389) (0.332) (0.177) (0.392) (0.337)
------- -------- -------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 7.830 $ 7.830 $ 7.830 $ 7.490 $ 7.490
------- -------- -------- ----------- -----------
Total return (d)(e) 10.00% 9.19% 3.90%(f) 3.48% 2.71%
======= ======== ======== =========== ===========
RATIOS TO AVERAGE NET ASSETS
Expenses 0.62%(g) 1.37%(g) 1.09%(c)(g)(h) 0.59%(g) 1.34%(g)
Net investment income 5.04%(g) 4.29%(g) 4.48%(c)(g)(h) 5.28%(g) 4.53%(g)
Fees and expenses waived or borne
by the Advisor 0.29%(g) 0.29%(g) 0.28%(g)(h) 0.31%(g) 0.31%(g)
Portfolio turnover 12% 12% 12% 21% 21%
Net assets at end of period (000) $80,035 $ 84,370 $ 480 $ 74,059 $ 81,437
(a) Net of fees and expenses waived or borne
by the Advisor which amounted to: $ 0.022 $ 0.022 $ 0.021 $ 0.023 $ 0.023
</TABLE>
(b) Class C shares were initially offered on August 1, 1997. Per share data
reflects activity from that date.
(c) Net of fees waived by the Distributor which amounted to $0.012 per
share and 0.30% (annualized).
(d) Total return at net asset value assuming all distributions reinvested
and no initial sales charge or contingent deferred sales charge.
(e) Had the Advisor and Distributor not waived or reimbursed a portion of
expenses, total return would have been reduced.
(f) Not annualized.
(g) The benefits determined from custody credits and directed brokerage
arrangements had no impact.
(h) Annualized.
15
<PAGE> 18
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31
---------------------------
1996
---------------------------
CLASS A CLASS B
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.080 $ 7.080
----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.400 0.345
Net realized and unrealized gain 0.552 0.552
----------- -----------
Total from Investment Operations 0.952 0.897
----------- -----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.402) (0.347)
----------- -----------
NET ASSET VALUE, END OF PERIOD $ 7.630 $ 7.630
=========== ===========
Total return (b)(c) 13.77% 12.93%
=========== ===========
RATIOS TO AVERAGE NET ASSETS
Expenses (d) 0.51% 1.25%
Net investment income (d) 5.42% 4.68%
Fees and expenses waived or borne by the Advisor (d) 0.42% 0.42%
Portfolio turnover 13% 13%
Net assets at end of period (000) $ 80,039 $ 82,785
(a) Net of fees and expenses waived or borne by the Advisor which amounted to: $ 0.031 $ 0.031
</TABLE>
(b) Total return at net asset value assuming all distributions reinvested
and no initial sales charge or contingent deferred sales charge.
(c) Had the Advisor and Distributor not waived or reimbursed a portion of
expenses, total return would have been reduced.
(d) The benefits determined from custody credits and directed brokerage
arrangements had no impact.
16
<PAGE> 19
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
TO THE TRUSTEES OF LIBERTY FUNDS TRUST V AND THE SHAREHOLDERS OF COLONIAL
CONNECTICUT TAX-EXEMPT FUND
We have audited the accompanying statement of assets and liabilities, including
the investment portfolio, of the Colonial Connecticut Tax-Exempt Fund (the
Fund), one of the series of Liberty Funds Trust V, as of January 31, 2000, and
the related statement of operations, the statement of changes in net assets and
financial highlights for the year then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit. The statement of changes in net assets
for the period ended January 31, 1999, and the financial highlights for each of
the four years in the period then ended were audited by other auditors whose
report dated March 11, 1999 expressed an unqualified opinion on those financial
statements and financial highlights.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of January 31, 2000 by correspondence with
the custodian and brokers, or by other appropriate auditing procedures where
replies from brokers were not received. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Colonial Connecticut Tax-Exempt Fund of Liberty Funds Trust V at January 31,
2000, and the results of its operations, the changes in its net assets and the
financial highlights for the year then ended in conformity with accounting
principles generally accepted in the United States.
/s/ Ernst & Young LLP
Boston, Massachusetts
March 13, 2000
17
<PAGE> 20
TRUSTEES & TRANSFER AGENT
TOM BLEASDALE
Retired (formerly Chairman of the Board and Chief Executive Officer, Shore Bank
& Trust Company)
JOHN V. 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
Academic Vice President and Dean of Faculties, Boston College (formerly 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)
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial Connecticut Tax-Exempt Fund is:
Liberty Funds Services, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
The Fund mails one shareholder report to each shareholder address. If you would
like more than one report, please call 1-800-426-3750 and additional reports
will be sent to you.
This report has been prepared for shareholders of Colonial Connecticut
Tax-Exempt Fund. This report may also be used as sales literature when preceded
or accompanied by the current prospectus which provides details of sales
charges, investment objectives and operating policies of the Fund and with the
most recent copy of the Liberty Funds Distributor, Inc. Performance Update.
ANNUAL REPORT:
COLONIAL CONNECTICUT TAX-EXEMPT FUND
<PAGE> 21
Liberty offers the independent thinking and collective strength of six financial
specialists. Our distinguished product line helps financial advisors and their
clients build diversified investment portfolios for long-term financial
goals.
ALL-STAR Institutional money management approach for individual investors.
COLONIAL Fixed income and value style equity investing.
CRABBE
HUSON A contrarian approach to fixed income and equity investing.
NEWPORT A leader in international investing.(SM)
STEIN ROE Solutions for growth and income investing.
ADVISOR
KEYPORT A leading provider of innovative annuity products.
Liberty's mutual funds are offered by prospectus through Liberty Funds
Distributor, Inc.
BEFORE YOU INVEST, CONSULT YOUR FINANCIAL ADVISOR.
Your financial advisor can help you develop a long-term plan for reaching your
financial goals.
COLONIAL CONNECTICUT TAX-EXEMPT FUND ANNUAL REPORT
[LIBERTY FUNDS letterhead] BULK RATE
U.S. POSTAGE
PAID
HOLLISTON, MA
PERMIT NO. 20
778-02/361A-0200 (3/00) 00/329
