<PAGE>
- -------------------------------------------------------
COLONIAL MINNESOTA TAX-EXEMPT FUND Semiannual report
- -------------------------------------------------------
July 31, 1998
[graphic omitted]
----------------------------
Not FDIC May Lose Value
Insured No Bank Guarantee
----------------------------
<PAGE>
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COLONIAL MINNESOTA TAX-EXEMPT FUND HIGHLIGHTS
FEBRUARY 1, 1998 - JULY 31, 1998
INVESTMENT OBJECTIVE: Colonial Minnesota Tax-Exempt Fund seeks as high a level
of after-tax total return as is consistent with prudent risk by pursuing current
income exempt from federal and Minnesota state personal income tax. The Fund
also provides opportunities for long-term appreciation from a portfolio
primarily invested in investment-grade municipal bonds.
PORTFOLIO MANAGER COMMENTARY: "The Fund was positioned for a declining interest
rate environment. Interest rates varied considerably, but were essentially
unchanged between the beginning and the end of the period. While the lack of a
strong market direction restrained performance of the portfolio's more interest
rate sensitive bonds, Minnesota's strong economy, responsible fiscal management
and significant financial reserves supported the prices of many of the Fund's
holdings during the period." - Brian Hartford
COLONIAL MINNESOTA TAX-EXEMPT FUND PERFORMANCE
CLASS A CLASS B CLASS C
Inception dates 9/26/86 8/4/92 8/1/97
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Distributions declared per share(1) $0.244 $0.214 $0.226
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SEC yields on 7/31/98(2) 4.13% 3.57% 3.87%
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Taxable-equivalent SEC yields(3) 7.47% 6.46% 7.00%
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Six-month total returns, assuming 1.41% 1.01% 1.17%
reinvestment of all distributions and
no sales charge or contingent deferred
sales charge (CDSC)(4)
- -------------------------------------------------------------------------------
Net asset value per share on 7/31/98 $7.35 $7.35 $7.35
(1) A portion of the Fund's income may be subject to the alternative minimum
tax.
(2) The 30-day SEC yields on July 31, 1998, reflect the portfolio's earning
power, net of expenses, and is expressed as an annualized percentage of the
public offering price at the end of the period. If the Advisor or
Distributor had not waived or borne certain Fund expenses, SEC yields would
have been 4.06% for Class A shares, 3.49% for Class B shares and 3.49% for
Class C shares.
(3) Taxable-equivalent SEC yields are based on the combined maximum effective
44.7% federal and Minnesota state income tax rate.
(4) Performance results reflect any voluntary waivers or reimbursements of Fund
expenses by the Advisor or Distributor. Absent these waivers or
reimbursement arrangements, performance results would have been lower.
The Fund may at times purchase tax-exempt securities at a discount. Some or
all of this discount may be included in the Fund's ordinary income and will
be taxable when distributed.
QUALITY BREAKDOWN (as of 7/31/98) TOP FIVE SECTORS (as of 7/31/98)
- ---------------------------------------------------------------------------
AAA ......... 48.8% BBB ......... 5.0% Hospitals ................... 17.1%
AA .......... 25.5% CCC ......... 1.2% Local General Obligations ... 16.6%
A ........... 11.5% Non-rated ... 8.0% Education ................... 13.0%
Joint Power Authority ....... 11.4%
Refunded .................... 8.3%
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>
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PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
[Photo of Stephen E. Gibson]
In June 1998, Harold Cogger retired as president of Colonial Minnesota
Tax-Exempt Fund. I would like to take this opportunity to thank him for his
guidance over the past few years and wish him well. As the new president of the
Fund, I am pleased to present the semiannual report for Colonial Minnesota
Tax-Exempt Fund for the six-month period ended July 31, 1998.
Conditions for fixed-income investments varied during the period. Early on,
interest rates were volatile, based on uncertainty over the effects of the Asian
economic crisis on the U.S. economy. However, reports of stronger-than-expected
economic growth during the spring had investors fearing the Federal Reserve
Board might raise rates. In response, bond prices fell. This environment
prevailed until the final months of the period, when weaker economic numbers
hinting at slower growth encouraged fixed-income investors.
The tax-exempt bond market experienced price volatility similar to that of the
broader U.S. government bond market. Early in the period, declines in long-term
interest rates that occurred in the fourth quarter of 1997 helped stimulate the
supply of municipal bonds. Many issuers rushed to take advantage of low rates to
refinance existing higher-coupon debt, as well as to finance new projects. The
market found it difficult to absorb the unusually large increase in supply and
prices declined early in 1998. During this period, municipal bond yields became
very attractive in comparison to Treasury bonds. The increased investor demand
that followed helped push municipal bond prices higher towards the end of July.
For investors seeking competitive levels of tax-free income and the potential
for long-term price appreciation, Colonial Minnesota Tax-Exempt Fund remains a
suitable option for their investment portfolios.
Respectfully,
/s/ Stephen E. Gibson
Stephen E. Gibson
President
September 11, 1998
Because market conditions change frequently, there can be no assurance that the
trends discussed above or on the following pages will continue.
<PAGE>
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PORTFOLIO MANAGEMENT REPORT
BRIAN HARTFORD is portfolio manager of Colonial Minnesota Tax-Exempt Fund. Mr.
Hartford is vice president of Colonial Management Associates, Inc. and is the
Quantitative Risk Manager for Colonial's tax-exempt investments.
VARIABLE ECONOMIC AND MARKET CONDITIONS PREVAILED
Conditions for fixed-income investments varied during the period as investors
weighed the fundamental strength of the U.S. economy against the potential for
an economic slowdown caused by the crisis in Southeast Asia. Market sentiment
regarding the likelihood of an interest rate increase by the Federal Reserve
Board changed several times during the period. Uncertainty about the domestic
economy's ability to produce continued growth without inflation caused bond
prices to alternately rise and fall for much of the period. Bond prices rallied
modestly near the end of July as the Federal Reserve Board signaled that no
change in interest rates was imminent.
Like the broader bond market, the tax-exempt market also experienced alternately
declining and rising prices. Supply and demand factors contributed to this
volatility. Declines in long-term interest rates during the fourth quarter of
1997 led to an increased supply of municipal bonds that the market initially
found difficult to absorb. However, as prices declined, investor demand
increased again, pushing prices back up during the second half of the period.
FUND WAS POSITIONED TO BENEFIT FROM DECLINING INTEREST RATES
Based on our long-term outlook for low inflation and modest economic growth, we
structured the portfolio to take advantage of a potential decline in interest
rates. During the last half of 1997, the portfolio benefited from its holdings
in discount and non-callable bonds, which tend to perform well in a
declining-rate environment. However, in the most recent six-month period, bond
prices were volatile, reflecting investors' changing expectations about the
strength and direction of the nation's economy. This vacillating bond market had
a somewhat dampening effect on the performance of the Fund's discount and
non-callable holdings. For the six months ended July 31, 1998, the total return
for Class A shares was 1.41%, based on net asset value.
MINNESOTA'S FINANCIAL HEALTH EXCEEDS FORECAST
Continued strength in the regional and national economies, as well as
additional stock market gains, have contributed to strong revenue growth for the
state. Minnesota's tax receipts for the most recent fiscal year have exceeded
forecast amounts in almost every category. Employment remained strong, with the
number of jobs in Minnesota reaching an all-time high in May. The metropolitan
Minneapolis-St. Paul area continued to keep pace with the rest of the state,
with robust levels of construction and housing activity, retail sales and
corporate earnings. As in many other parts of the nation, tight labor markets
may restrain future economic growth. Therefore, we expect to continue focusing
on revenue-backed, essential service bonds such as water and gas utilities,
health care and public infrastructure. For example, we purchased additional
bonds issued by The Mayo Clinic in Rochester, a nationally recognized health
care research and treatment facility (the new purchase represents 2.0% of total
net assets). Based on its strong management, national reputation and demand for
its services, this issuer holds the highest uninsured bond rating of any health
care issuer in the nation.
OUTLOOK FOR A POSITIVE ECONOMIC AND MARKET ENVIRONMENT
Our long-term outlook remains positive. We expect that low inflation and modest
economic growth will continue. Sustained high levels of productivity and global
competition are likely to keep inflation pressure low. The economic slowdown in
Asia should keep the U.S. economy from growing too fast. The current federal
budget surplus may limit the government's need to borrow money, and thus, the
need to issue Treasury securities. This could help create higher demand for
alternative fixed-income investments, including tax-exempt bonds.
Considering these factors, the Fund will remain positioned for a declining
interest rate environment. However, we do anticipate some variability in
interest rates in the months to come. Therefore, we will continue to actively
manage all aspects of the Fund to decrease the potential negative effects of
rate volatility.
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<PAGE>
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COLONIAL MINNESOTA TAX-EXEMPT FUND'S INVESTMENT PERFORMANCE VS.
THE LEHMAN BROTHERS MUNICIPAL BOND INDEX
Growth of $10,000 from 7/31/88 - 7/31/98
CLASS A SHARES
Based on NAV and POP
NAV POP LEHMAN
- --------------------------------------------------------------
Jul 31, 88 $10,000 $ 9,525 $10,000
Oct 31, 88 10,297 9,807 10,369
Jan 31, 89 10,507 10,008 10,594
Apr 28, 89 10,644 10,139 10,697
Jul 31, 89 11,001 10,479 11,218
Oct 31, 89 10,983 10,461 11,210
Jan 31, 90 11,149 10,620 11,445
Apr 30, 90 11,224 10,690 11,467
Jul 31, 90 11,702 11,146 11,995
Oct 31, 90 11,748 11,190 12,042
Jan 31, 91 12,120 11,544 12,503
Apr 30, 91 12,358 11,771 12,785
Jul 31, 91 12,547 11,951 13,043
Oct 31, 91 12,866 12,255 13,507
Jan 31, 92 13,130 12,506 13,867
Apr 30, 92 13,282 12,651 14,000
Jul 31, 92 13,933 13,271 14,835
Oct 30, 92 13,720 13,069 14,641
Jan 29, 93 14,233 13,557 15,230
Apr 30, 93 14,673 13,976 15,772
Jul 30, 93 14,947 14,237 16,146
Oct 29, 93 15,403 14,671 16,702
Jan 31, 94 15,745 14,997 17,098
Apr 29, 94 14,934 14,225 16,112
Jul 29, 94 15,245 14,521 16,449
Oct 31, 94 14,817 14,114 15,975
Jan 31, 95 15,285 14,559 16,489
Apr 28, 95 15,865 15,112 17,184
Jul 31, 95 16,021 15,260 17,744
Oct 31, 95 16,614 15,825 18,345
Jan 31, 96 17,348 16,524 18,971
Apr 30, 96 16,766 15,969 18,550
Jul 31, 96 17,135 16,321 18,914
Oct 31, 96 17,551 16,718 19,391
Jan 31, 97 17,723 16,881 19,700
Apr 30, 97 17,750 16,906 19,780
Jul 31, 97 19,041 18,137 20,854
Oct 31, 97 19,070 18,164 21,038
Jan 30, 98 19,680 18,746 21,692
Apr 30, 98 19,492 18,566 21,620
Jul 31, 98 19,957 19,009 22,103
GROWTH OF A $10,000 INVESTMENT MADE ON 7/31/88
As of 7/31/98
- ------------------------------------------------------------------------------
Class A Class B Class C
NAV POP NAV w/CDSC NAV w/CDSC
- ------------------------------------------------------------------------------
$19,957 $19,009 $19,084 $19,084 $19,865 $19,865
- ------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
As of 7/31/98
- -----------------------------------------------------------------------------
CLASS A CLASS B CLASS C
INCEPTION 9/26/86 8/4/92 8/1/97
NAV POP NAV W/CDSC NAV W/CDSC
- -----------------------------------------------------------------------------
1 YEAR 4.81% (0.17%) 4.01% (0.91%) 4.33% 3.34%
- -----------------------------------------------------------------------------
5 YEARS 5.95 4.93 5.16 4.83 5.85 5.85
- -----------------------------------------------------------------------------
10 YEARS (OR LIFE) 7.15 6.63 6.68 6.68 7.10 7.10
- -----------------------------------------------------------------------------
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. The 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 Distributor. Absent these waivers or reimbursement
arrangements, performance results would have been lower.
Performance for different share classes will vary based on differences in sales
charges and fees associated with each class.
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.
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<PAGE>
INVESTMENT PORTFOLIO
JULY 31, 1998 (UNAUDITED, IN THOUSANDS)
MUNICIPAL BONDS - 99.1% PAR VALUE
- -------------------------------------------------------------------------------
EDUCATION - 12.9%
EDUCATION
State Higher Education Facilities
Authority:
Carleton College,
5.000% 11/01/18 $ 1,500 $ 1,466
Macalester College, Series 4-N,
5.550% 03/01/17 500 525
St. Johns University, Series 4-L,
5.350% 10/01/17 1,000 1,017
University of St. Thomas:
Series 4-M,
5.350% 04/01/17 500 508
Series 4-P
5.375% 04/01/18 525 532
University of Minnesota:
Series 1996 A:
5.750% 07/01/14 500 547
5.750% 07/01/17 1,000 1,088
Series 1999 A,
5.500% 07/01/21 1,000 1,063
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6,746
-------
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HEALTHCARE - 18.2%
HOSPITALS - 16.9%
Minneapolis-St. Paul Housing &
Redevelopment Authority, Healthspan,
Series 1993 A,
4.750% 11/15/18 3,160 2,983
Monticello-Big Lake Community Hospital
District,
5.750% 12/01/19 500 521
Princeton,
Fairview Hospital,
Series 1991 C,
6.250% 01/01/21 300 322
Red Wing,
River Region Group,
Series 1993 A:
6.400% 09/01/12 200 214
6.500% 09/01/22 300 322
Rochester:
Mayo Foundation,
Series 1998 A,
5.500% 11/15/27 1,000 1,031
Mayo Medical Center,
Series 1992 I,
5.900% 11/15/09 1,000 1,115
St. Cloud,
St. Cloud Hospital,
Series 1996 B,
5.000% 07/01/20 1,300 1,266
St. Paul Housing & Redevelopment
Authority, Healtheast Project:
Series 1993 A,
6.625% 11/01/17 250 268
Series 1997 A,
5.500% 11/01/09 250 257
Series 1993 B,
6.625% 11/01/17 500 537
-------
8,836
-------
LIFECARE - 0.8%
Bloomington Housing & Redevelopment Authority,
Senior Summer House,
Series 1998,
5.500% 11/01/01 110 110
Columbia Heights, Crest View Corp.,
Series 1998,
6.000% 03/01/33 300 301
-------
411
-------
NURSING HOME - 0.5%
Duluth Economic Development Authority,
BSM Properties, Inc.,
Series 1998 A,
5.875% 12/01/28 250 250
-------
- -----------------------------------------------------------------------------
HOUSING - 5.6%
ASSISTED LIVING/SENIOR - 0.6%
Roseville,
Care Institute, Inc.,
Series 1993,
7.750% 11/01/23 300 303
-----------
MULTI-FAMILY - 1.6%
Lakeville,
Southfork Apartment Project,
Series 1989 A,
9.875% 02/01/20 200 202
Minneapolis,
Riverplace Project,
Series 1987 A,
7.100% 01/01/20 230 233
Washington County Housing &
Redevelopment Authority,
Cottages of Aspen,
Series 1992,
9.250% 06/01/22 180 199
White Bear Lake,
Birch Lake Townhomes Project,
Series 1989 A,
9.750% 07/15/19 200 204
-------
838
-------
SINGLE FAMILY - 3.4%
Chicago & Stearns Counties,
Series 1994 B,
7.050% 09/01/27 1,175 1,269
Dakota County Housing &
Redevelopment Authority,
Series 1986,
7.200% 12/01/09 60 61
Minneapolis-St. Paul Housing
Board, Series 1987 C,
8.875% 11/01/18 305 315
State Housing Finance Agency,
Series 1988 D,
8.050% 08/01/18 90 93
Washington County Housing &
Redevelopment Authority,
City of Cottage Grove, Series 1986,
7.600% 12/01/11 65 65
-------
1,803
-------
- -----------------------------------------------------------------------------
OTHER - 10.7%
POOL/BOND BANK - 2.5%
Minneapolis Community Development
Agency, Series 1991-1,
8.000% 12/01/16 250 278
State Public Facilities Authority,
Water Pollution Control Revenue,
Series 1996 B,
5.400% 03/01/16 1,000 1,025
-------
1,303
-------
REFUNDED/ESCROWED (a) - 8.2%
Burnsville, Fairview Community Hospital,
Series 1982 A,
(b) 05/01/12 2,145 987
Dakota & Washington Counties
Housing & Redevelopment Authority,
Series 1988,
8.150% 09/01/16 235 318
Moorhead Residential,
7.100% 08/01/11 20 23
Owatonna Independent School
District No. 761, Series 1990:
7.100% 02/01/09 115 117
7.100% 02/01/10 120 122
7.100% 02/01/11 130 132
Rockford Independent School
District No. 883,
Series A,
7.100% 12/15/10 400 405
St. Louis Park,
Methodist Hospital,
Series 1990 C,
7.250% 07/01/18 165 178
State Higher Education Facilities Authority:
Hamline University,
Series 3 K,
6.600% 06/01/08 250 271
University of St. Thomas,
Series 3 C,
7.100% 09/01/10 100 107
State Public Facilities Authority,
Water Pollution Control Revenue,
Series 1989 A,
7.000% 03/01/09 100 104
Western Minnesota Municipal
Power Agency,
Series 1983 A,
9.750% 01/01/16 $ 1,000 $ 1,525
-------
4,289
-------
- -----------------------------------------------------------------------------
OTHER REVENUE - 8.9%
HOTELS - 0.5%
Minneapolis,
Holiday Inn Metrodome Project,
6.000% 12/01/01 250 252
-------
INDUSTRIAL - 6.3%
Alexandria Industrial Development
Revenue Bonds,
Seluemed Ltd.,
5.850% 03/01/18 830 840
Brooklyn Park,
TL Systems Corp.,
Series 1991,
10.000% 09/01/16 255 312
Buffalo,
Von Ruden Manufacturing, Inc.,
Series 1989,
10.500% 09/01/14 525 563
Duluth Seaway Port Authority,
Cargill, Inc.,
Series 1993 A,
5.750% 12/01/16 1,500 1,571
-------
3,286
-------
PAPER PRODUCTS - 1.5%
Hubbard County,
Potlach Corp.,
Series 1987 A,
7.375% 08/01/13 285 298
International Falls,
Boise Cascade Corp. Project,
5.650% 12/01/22 500 507
-------
805
-------
RECREATION - 0.6%
Metropolitan Council,
Hubert H. Humphrey Metrodome,
Series 1992,
6.000% 10/01/09 300 326
-------
- -----------------------------------------------------------------------------
TAX-BACKED - 27.0%
LOCAL APPROPRIATED - 3.4%
Elk River Independent School District No. 728,
Series 1997 A,
5.375% 02/01/17 1,000 1,019
Hibbing Economic Development Authority,
6.400% 02/01/12 300 312
Minneapolis Special School District No.1,
Series 1998 A,
4.750% 02/01/18 500 476
-------
1,807
-------
LOCAL GENERAL OBLIGATIONS - 16.4%
Austin,
Series 1998 A,
5.450% 10/01/17 500 507
Bagley Independent School District
No. 162,
Series 1994,
4.850% 02/01/12 750 747
Minneapolis-St. Paul Metropolitan
Aiports Commission,
Series 7,
7.800% 01/01/11 300 311
New York Mills Independent School
District No. 553,
Series 1992 A,
6.850% 02/01/18 210 227
North St.Paul & Maplewood Unified
School District,
Series 1996 A,
5.125% 02/01/25 2,000 1,981
Roseau Independent School
District No. 682,
Series 1991,
7.000% 02/01/14 200 209
Rosemount Independent School
District No. 196,
Series 1994 B,
(b) 06/01/10 2,765 1,576
St. Cloud Hydroelectric,
Series 1996 D,
5.250% 12/01/18 2,000 2,015
Waseca Independent School District
No. 829,
5.500% 04/01/17 1,000 1,027
-------
8,600
-------
SPECIAL NON-PROPERTY TAX - 0.6%
Red Lake Band of Chippewa Indians,
Series 1998,
6.250% 08/01/13 300 299
-------
SPECIAL PROPERTY TAX - 0.4%
Duluth Economic Development Authority,
Series 1998 A,
0.000% 02/01/08 295 190
-------
STATE APPROPRIATED - 4.2%
State, Duluth Airport,
Series 1995 B,
6.250% 08/01/14 2,000 2,178
-------
STATE GENERAL OBLIGATIONS - 2.0%
State,
Series 1995,
5.250% 08/01/14 1,000 1,022
-------
- -----------------------------------------------------------------------------
TRANSPORTATION - 3.2%
AIRPORT - 2.0%
Minneapolis-St. Paul Metropolitan
Aiports Commission,
Series 1998 B,
5.250% 01/01/12 1,000 1,020
-------
TRANSPORTATION - 1.2%
St. Paul Port Authority,
Series F:
9.125% 12/01/00 25 25
9.125% 12/01/01 25 25
9.125% 12/01/02 25 25
9.125% 12/01/14 575 546
-------
621
-------
- -----------------------------------------------------------------------------
UTILITY - 12.6%
INVESTOR OWNED - 0.8%
Anoka County,
United Power Association,
Series 1987 A,
6.950% 12/01/08 400 426
-------
JOINT POWER AUTHORITY - 11.3%
Northern Municipal Power Agency,
Minnesota Power & Light Co.,
Series 1989 A,
7.250% 01/01/16 700 724
Southern Minnesota Municipal
Power Agency,
Series 1993 A:
4.750% 01/01/16 2,000 1,918
5.000% 01/01/12 750 744
Series 1994 A,
(b) 01/01/27 9,000 2,093
Series A,
5.000% 01/01/16 450 443
-------
5,922
-------
WATER & SEWER - 0.5%
St.Paul,
Series 1988 A,
8.000% 12/01/08 250 256
-------
TOTAL MUNICIPAL BONDS (cost of $48,608) 51,789
-------
OPTIONS - 0.0% CONTRACTS
- -----------------------------------------------------------------------------
September 1998 Treasury Bond Put,
Strike price 120, Expiration 08/22/98
(cost of $34) 3,000 3
September 1998 Treasury Bond Call,
Strike price 124, Expiration 08/22/98
(cost of $28) 3,500 10
-------
TOTAL OPTIONS (cost of $62) 13
-------
TOTAL INVESTMENTS - 99.1% (cost of $ 48,670) (c) 51,802
-------
OTHER ASSETS & LIABILITIES, NET - 0.9% 466
- -----------------------------------------------------------------------------
NET ASSETS - 100.0% $ 52,268
========
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, soley for the payment of
the interest and principle.
(b) Zero coupon bond.
(c) Cost for federal income tax purpose is the same.
See notes to financial statements.
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
JULY 31, 1998 (UNAUDITED)
(in thousands except for per share amounts and footnotes)
ASSETS
Investments at value (cost $48,670) $51,802
Receivable for:
Interest $742
Investments sold 537
Fund shares sold 6
Other 4 1,289
----- --------
Total Assets 53,091
LIABILITIES
Payable for:
Investments purchased 531
Fund shares repurchased 120
Distributions 69
Accrued:
Deferred trustees fees 3
Other 100
-----
Total Liabilities 823
-------
NET ASSETS $52,268
-------
Net asset value & redemption price per share -
Class A ($31,567/4,293) $7.35(a)
=======
Maximum offering price per share - Class A
($7.35/0.9525) $7.72(b)
=======
Net asset value & offering price per share -
Class B ($20,492/2,787) $7.35(a)
=======
Net asset value & offering price per share -
Class C ($209/28) $7.35(a)
=======
COMPOSITION OF NET ASSETS
Capital paid in $49,628
Overdistributed net investment income (68)
Accumulated net realized loss (424)
Net unrealized appreciation 3,132
-------
$52,268
=======
(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.
<PAGE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JULY 31, 1998
(UNAUDITED)
(in thousands)
INVESTMENT INCOME
Interest $1,480
EXPENSES
Management fee $131
Service fee 44
Distribution fee - Class B 76
Distribution fee - Class C (a)
Transfer agent 41
Bookkeeping fee 14
Registration fee 8
Custodian fee 2
Audit fee 10
Trustees fee 5
Reports to shareholders 4
Legal fee 4
Other 14
----
353
Fees and expenses waived or borne
by the Adviser (24)
Fees waived by the Distributor -
Class C (a) 329
---- ------
Net Investment Income 1,151
------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain 313
Net unrealized depreciation (824)
------
Net Loss (511)
------
Increase in Net Assets from Operations $ 640
======
(a) Rounds to less than one.
See notes to financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(Unaudited)
Six months
ended Year ended
(in thousands) July 31 January 31
----------- ----------
INCREASE (DECREASE) IN NET ASSETS 1998 1998 (a)
Operations:
Net investment income $ 1,151 $ 2,484
Net realized gain 313 479
Net unrealized appreciation (depreciation) (824) 2,474
------- -------
Net Increase from Operations 640 5,437
Distributions:
From net investment income - Class A (754) (1,658)
In excess of net investment income - Class A (57) --
From net realized gains - Class A (240) (201)
From net investment income - Class B (401) (825)
In excess of net investment income - Class B (31) --
From net realized gains - Class B (157) (122)
From net investment income - Class C (4) (2)
In excess of net investment income - Class C (b) --
From net realized gains - Class C (2) (1)
------- -------
(1,006) 2,628
------- -------
Fund Share Transactions :
Receipts for shares sold - Class A 731 2,735
Value of distributions reinvested - Class A 730 1,237
Cost of shares repurchased - Class A (2,110) (7,779)
------- -------
(649) (3,807)
------- -------
Receipts for shares sold - Class B 1,800 1,912
Value of distributions reinvested - Class B 428 639
Cost of shares repurchased - Class B (1,619) (2,644)
------- -------
609 (93)
------- -------
Receipts for shares sold - Class C 70 132
Value of distributions reinvested - Class C 6 3
Cost of shares repurchased - Class C (b) --
------- -------
76 135
------- -------
Net Increase (Decrease) from Fund Share
Transactions 36 (3,765)
------- -------
Total Decrease (970) (1,137)
NET ASSETS
Beginning of period 53,238 54,375
------- -------
End of period (net of overdistributed and
including undistributed net investment
income of $68 and $7, respectively)
$52,268 $53,238
======= =======
(a) Class C shares were initially offered on August 1, 1997.
(b) Rounds to less than one.
Statement of Changes in Net Assets continued on following page.
See notes to financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS - CONT.
(Unaudited)
Six months
ended Year ended
(in thousands) July 31 January 31
----------- ----------
NUMBER OF FUND SHARES 1998 1998 (a)
Sold - Class A 99 378
Issued for distributions reinvested - Class A 98 170
Repurchased - Class A (284) (1,074)
------- -------
(87) (526)
------- -------
Sold - Class B 242 262
Issued for distributions reinvested - Class B 58 88
Repurchased - Class B (219) (363)
------- -------
81 (13)
------- -------
Sold - Class C 9 18
Issued for distributions reinvested - Class C 1 (b)
Repurchased - Class C (b) --
------- -------
10 18
------- -------
(a) Class C shares were initially offered on August 1, 1997.
(b) Rounds to less than one.
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1998 (UNAUDITED)
NOTE 1. INTERIM FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
In the opinion of Colonial Minnesota Tax-Exempt Fund (the Fund), a series of
Colonial Trust V, the accompanying financial statements contain all normal and
recurring adjustments necessary for the fair presentation of the financial
position of the Fund at July, 31 1998, and the results of its operations, the
changes in its net assets and the financial highlights for the six months then
ended.
NOTE 2. ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
ORGANIZATION: The Fund 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 by pursuing current income
exempt from ordinary federal 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.
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 (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 3. FEES AND COMPENSATION PAID TO AFFILIATES
- --------------------------------------------------------------------------------
MANAGEMENT FEE: Colonial Management Associates, Inc. (the Adviser) is the
investment Adviser of the Fund and furnishes accounting and other services and
office facilities for a monthly fee based on the Fund's pro-rata portion of the
combined average net assets of the funds constituting Trust V as follows:
Average Net Assets Annual Fee Rate
------------------ ---------------
First $2 billion 0.50%
Over $2 billion 0.45%
BOOKKEEPING FEE: The Adviser provides bookkeeping and pricing services for
$27,000 per year plus 0.035% of the Fund's average net assets over $50 million.
TRANSFER AGENT: Colonial Investors Service Center, Inc. (the Transfer Agent),
an affiliate of the Adviser, provides shareholder services for a monthly fee
equal to 0.13% annually of the Fund's average net assets and receives
reimbursement for certain out-of-pocket expenses.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES: Liberty Funds
Distributor, Inc., formerly Liberty Financial Investments, Inc. (the
Distributor), a subsidiary of the Adviser, is the Fund's principal underwriter.
For the six months ended July 31, 1998, the Fund has been advised that the
Distributor retained net underwriting discounts of $2,560 on sales of the Fund's
Class A shares and received contingent deferred sales charges (CDSC) of none,
$11,304 and $30 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 does not exceed 0.45% annually. The plan also
requires the payment of a service fee to the Distributor as follows:
Valuation of shares Annual
outstanding on the 20th of Fee
each month which were issued Rate
---------------------------- ----
Prior to November 30, 1994 0.10%
On or after December 1, 1994 0.25%
The CDSC and the fees received from the 12b-1 plan are used principally as
repayment to the Distributor for amounts paid by the Distributor to dealers who
sold such shares.
EXPENSE LIMITS: The Adviser has agreed, until further notice, to waive fees and
bear certain Fund expenses to the extent that total expenses (exclusive of
service and distribution fees, brokerage commissions, interest, taxes, and
extraordinary expenses, if any) exceed 0.75% annually of the Fund's average net
assets.
OTHER: The Fund pays no compensation to its officers, all of whom are
employees of the Adviser.
The Fund's Trustees may participate in a deferred compensation plan which may be
terminated at any time. Obligations of the plan will be paid solely out of the
Fund's assets.
NOTE 4. PORTFOLIO INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT ACTIVITY: For the six months ended July 31, 1998, purchases and sales
of investments, other than short-term obligations, were $9,095,506 and
$8,605,482 respectively.
Unrealized appreciation (depreciation) at July 31, 1998, based on cost of
investments for both financial statement and federal income tax purposes was:
Gross unrealized appreciation $3,240,620
Gross unrealized depreciation (109,174)
----------
Net unrealized appreciation $3,131,446
==========
OTHER: There are certain risks arising from geographic concentration in any
state. Certain revenue or tax related events in a state may impair the ability
of certain issuers of municipal securities to pay principal and interest on
their obligations.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
The Fund may purchase or sell municipal and Treasury bond futures contracts and
purchase and write options on futures. The Fund will invest in these instruments
to hedge against the effects of changes in the value of portfolio securities due
to anticipated changes in interest rates and/or market conditions, for duration
management, or when the transactions are economically appropriate to the
reduction of risk inherent in the management of the Fund and not for trading
purposes. The use of futures contracts and options involves certain risks, which
include (1) imperfect correlation between the price movement of the instruments
and the underlying securities, (2) inability to close out a position due to
different trading hours, or the temporary absence of a liquid market for either
the instrument or the underlying securities or (3) an inaccurate prediction by
the Adviser of the future direction of interest rates. Any of these risks may
involve amounts exceeding the amount recorded in the Fund's Statement of Assets
and Liabilities at any given time.
NOTE 5. 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 six months ended July 31, 1998.
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period
are as follows:
(Unaudited)
Six months ended July 31
-----------------------------------------
1998
Class A Class B Class C
--------- --------- --------
Net asset value -
Beginning of period $ 7.490 $ 7.490 $ 7.490
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income (a) 0.177 0.147 0.159(b)
Net realized and
unrealized gain (loss) (0.073) (0.073) (0.073)
------- ------- -------
Total from Investment
Operations 0.104 0.074 0.086
------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.175) (0.147) (0.158)
In excess of net investment income (0.013) (0.011) (0.012)
------- ------- -------
From net realized gains (0.056) (0.056) (0.056)
------- ------- -------
Total Distributions
Declared to Shareholders (0.244) (0.214) (0.226)
------- ------- -------
Net asset value -
End of period $ 7.350 $ 7.350 $ 7.350
======= ======= =======
Total return (c)(d)(e) 1.41% 1.01% 1.17%
======= ======= =======
RATIOS TO AVERAGE NET ASSETS
Expenses (f)(g) 0.96% 1.71% 1.41%
Net investment
income (f)(g) 4.66% 3.91% 4.21%
Fees and expenses
waived or borne
by the Adviser (f)(g) 0.09% 0.09% 0.09%
Portfolio turnover (e) 17% 17% 17%
Net assets at end
of period (000) $31,567 $20,492 $ 209
(a) Net of fees and expenses waived or borne by the Adviser which amounted to:
$ 0.003 $ 0.003 $ 0.003
(b) Net of fees waived by the Distributor which amounted to $ 0.011 per share
and 0.30% (annualized).
(c) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(d) Had the Adviser and distributer not waived or reimbursed a portion of
expenses, total return would have been reduced.
(e) Not annualized.
(f) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(g) Annualized.
<PAGE>
FINANCIAL HIGHLIGHTS - CONT
Selected data for a share of each class outstanding throughout each period are
as follows:
Year ended January 31
-------------------------------------
1998
Class A Class B Class C (b)
--------- --------- ---------
Net asset value -
Beginning of period $ 7.130 $ 7.130 $ 7.470
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.362 0.308 0.163(c)
Net realized and
unrealized gain (loss) 0.405 0.405 0.066
------- ------- -------
Total from Investment
Operations 0.767 0.713 0.229
------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.362) (0.308) (0.164)
From net realized gains (0.045) (0.045) (0.045)
------- ------- -------
Total Distributions
Declared to Shareholders (0.407) (0.353) (0.209)
------- ------- -------
Net asset value - End of period $ 7.490 $ 7.490 $ 7.490
======= ======= =======
Total return (d)(e) 11.04% 10.22% 3.13%(f)(g)
======= ======= =======
RATIOS TO AVERAGE NET ASSETS
Expenses (h) 0.91% 1.66% 1.36%(c)(i)
Net investment income (h) 4.97% 4.22% 4.40%(c)(i)
Fees and expenses waived or
borne by the Adviser (h) 0.11% 0 .11 0.12%(i)
Portfolio turnover 19% 19% 19%
Net assets at end
of period (000) $32,824 $20,278 $ 136
(a) Net of fees and expenses waived or borne by the Adviser which amounted to:
$ 0.008 $ 0.008 $ 0.008
(b) Class C shares were initially offered on August 1, 1997. Per share amounts
reflect activity from that date.
(c) Net of fees waived by the Distributor which amounted to $ 0.011 per share
and 0.30% (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 Adviser not waived or reimbursed a portion of expenses, total return
would have been reduced.
(f) Had the Distributor not waived a portion of the Distribution fee total
return would have been reduced.
(g) Not annualized.
(h) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(i) Annualized.
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Year ended January 31
------------------------------------------------
1997 1996
Class A Class B Class A Class B
------- ------- ------- -------
$ 7.350 $ 7.350 $ 6.840 $ 6.840
------- ------- ------- -------
0.369 0.316 0.384 0.332
(0.222 (0.222) 0.516 0.516
------- ------- ------- -------
0.147 0.094 0.900 0.848
------- ------- ------- -------
(0.367) (0.314) (0.390) (0.338)
-- -- -- --
------- ------- ------- -------
(0.367) (0.314) (0.390) (0.338)
------- ------- ------- -------
$ 7.130 $ 7.130 $ 7.350 $ 7.350
======= ======= ======= =======
2.16% 1.40% 13.50% 12.66%
======= ======= ======= =======
0.90% 1.65% 0.85% 1.60%
5.19% 4.44% 5.41% 4.66%
0.13% 0.13% 0.24% 0.24%
27% 27% 42% 42%
$34,986 $19,389 $36,586 $19,083
$ 0.009 $ 0.009 $ 0.016 $ 0.016
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Selected data for a share of each class outstanding throughout each period
are as follows:
Year ended January 31
-------------------------------------------
1995 1994
Class A Class B Class A Class B
------- ------- ------- -------
Net asset value -
Beginning of period $ 7.480 $ 7.480 $ 7.160 $ 7.160
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.415 0.363 0.419 0.364
Net realized and
unrealized gain (loss) (0.642) (0.642) 0.323 0.323
------- ------- ------- -------
Total from Investment
Operations (0.227) (0.279) 0.742 0.687
------- ------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment
income (0.413) (0.361) (0.422) (0.367)
------- ------- ------- -------
Net asset value -
End of period $ 6.840 $ 6.840 $ 7.480 $ 7.480
======= ======= ======= =======
Total return (b)(c) (2.92)% (3.65)% 10.62% 9.81%
======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS
Expenses 0.72% 1.47% 0.82% 1.57%
Net investment income 5.98% 5.23% 5.69% 4.94%
Fees and expenses
waived or borne
by the Adviser 0.26% 0.26% 0.20% 0.20%
Portfolio turnover 26% 26% 9% 9%
Net assets at end
of period (000) $35,846 $14,731 $41,326 $10,317
(a) Net of fees and expenses waived or borne by the Adviser which amounted to:
$ 0.018 $ 0.018 $ 0.015 $ 0.015
(b) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(c) Had the Adviser not waived or reimbursed a portion of expenses, total return
would have been reduced.
<PAGE>
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial Minnesota Tax-Exempt Fund is:
Liberty Funds Services, Inc.*
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Colonial Minnesota 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 Minnesota 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.
*Effective October 1, 1998, Colonial Investors Service Center, Inc. - the
Transfer Agent for Colonial, Stein Roe Advisor and Newport Funds - will change
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)
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)
WILLIAM E. MAYER
Partner, Development Capital, L.L.C. (formerly Dean, College of Business and
Management, University of Maryland; Dean, Simon Graduate School of Business,
University of Rochester; Chairman and Chief Executive Officer, CS First Boston
Merchant Bank; and President and Chief Executive Officer, The First Boston
Corporation)
JAMES L. MOODY, JR.
Retired (formerly Chairman of the Board, Chief Executive Officer and Director,
Hannaford Bros. Co.)
JOHN J. NEUHAUSER
Dean, Boston College School of Management
ROBERT L. SULLIVAN
Retired Partner, KPMG Peat Marwick LLP (formerly Management Consultant, Saatchi
and Saatchi Consulting Ltd. and Principal and International Practice Director,
Management Consulting, Peat Marwick Main & Co.)
[Logo] LIBERTY
COLONIAL FUNDS o STEIN ROE ADVISOR FUNDS o NEWPORT FUNDS
Liberty Funds Distributor, Inc. (C)1998
One Financial Center, Boston, MA 02111-2621, 1-800-426-3750
Visit us at www.libertyfunds.com
MN-03/742F-0798 (9/98) 98/935
- --------------------------------------------------------------------------------
