Cationic copolymerization of L,L-lactide (LA) and C-caprolactone (CL) initiated by low molecular weight diols in the presence of acid catalyst gives corresponding copolyesters terminated at both ends with hydroxyl groups in practically quantitative yield. Copolymerization proceeds by Activated Monomer mechanism. LA is consumed preferentially and at the later stages of copolymerization the reaction mixture is enriched with CL. In spite of that, random distribution of both units is observed and end-groups are mainly -LA-OH groups and not -CL-OH groups. This is explained by the fact that to reach high conversion of both comonomers the relatively long reaction times are required and at those conditions transesterification reaction becomes significant. Thus the microstructure of copolymers and the nature of the end-groups is governed by transesterification rather then by the kinetics of comonomers incorporation. (c) 2007 Wiley Periodicals, Inc.