<PAGE>
- ------------------------------------------------
COLONIAL MINNESOTA TAX-EXEMPT FUND ANNUAL REPORT
- ------------------------------------------------
JANUARY 31,1999
[graphic omitted]
------------------------------
Not FDIC May Lose Value
Insured No Bank Guarantee
------------------------------
<PAGE>
COLONIAL MINNESOTA TAX-EXEMPT FUND HIGHLIGHTS
FEBRUARY 1, 1998 - JANUARY 31, 1999
PORTFOLIO MANAGER COMMENTARY: "Interest rate volatility, low nominal interest
rates and a near-record level of supply created challenging conditions for
tax-exempt investors. Despite these hurdles, the Fund was well positioned. We
took advantage of declining interest rates and a strong Minnesota economy,
generating attractive performance relative to the Fund's Lipper peer group."(1)
-- 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
- -------------------------------------------------------------------------------
12-month distributions declared per share(2) $0.591 $0.533 $0.556
- -------------------------------------------------------------------------------
SEC yields on 1/31/99(3) 3.78% 3.22% 3.52%
- -------------------------------------------------------------------------------
Taxable-equivalent SEC yields(4) 6.84% 5.83% 6.37%
- -------------------------------------------------------------------------------
12-month total returns, assuming 6.40% 5.59% 5.91%
reinvestment of all distributions and
no sales charge or contingent deferred
sales charge (CDSC)(5)
- -------------------------------------------------------------------------------
Net asset value per share on 1/31/99 $7.36 $7.36 $7.36
- --------------------------------------------------------------------------------
QUALITY BREAKDOWN(6) (as of 1/31/99) TOP FIVE SECTORS(6) (as of 1/31/99)
- --------------------------------------- -----------------------------------
AAA 43.9% BB 0.9% Local General Obligations 16.5%
AA 25.7% CCC 1.2% Hospitals 15.1%
A 10.0% Nonrated 9.6% Education 13.4%
BBB 6.1% Short-Term Joint Power Authority 11.1%
Obligations 2.6% Refunded/Escrowed 7.9%
(1) See complete Lipper rankings on page 3.
(2) A portion of the Fund's income may be subject to the alternative minimum
tax. The Fund may at times purchase tax-exempt securities at a discount.
Some or all of this discount may be included in the Fund's ordinary income
and will be taxable when distributed.
(3) The 30-day SEC yields on January 31, 1999, reflect the portfolio's earning
power, net of expenses, and are expressed as an annualized percentage of the
public offering price at the end of the period. If the Advisor or its
affiliates had not waived certain Fund expenses, the SEC yield would have
been 3.22% for Class C shares.
(4) Taxable-equivalent SEC yields are based on the combined maximum effective
44.7% federal and Minnesota state income tax rate. This tax rate does not
reflect the phase out of exemptions or the reduction of otherwise allowable
deductions which occurs when Adjusted Gross Income exceeds certain levels.
(5) Performance results reflect any voluntary waivers or reimbursements of Fund
expenses by the Advisor or its affiliates. Absent these waivers or
reimbursement arrangements, performance results would have been lower.
(6) Quality and sector breakdowns are calculated as a percentage of total
investments, including short-term obligations. Because the Fund is actively
managed, there can be no guarantee the Fund will continue to maintain these
quality and sector breakdowns in the future.
<PAGE>
PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
[Photo of Stephen E. Gibson]
I am pleased to present the annual report for Colonial Minnesota Tax-Exempt Fund
for the 12 months ended January 31, 1999.
The past 12 months were generally positive for bonds, although conditions varied
considerably as domestic and international events affected all sectors of the
bond market. Despite some economic uncertainty early in the year, the economy
continued to grow and inflation remained low, creating a positive climate for
bonds.
International events played a role in the strong U.S. bond market. The economic
turmoil in Asia that began in 1997 gradually spread to other less-developed
markets, most notably Russia and Latin America. During pockets of increased
volatility, investors around the world sought the relative quality and stability
of U.S. Treasury bonds. Although demand for safety made Treasurys the bond
market's biggest winner, municipal bonds also benefited.
Colonial's disciplined bond fund management style and long-term investment
orientation served shareholders well during this volatile period, helping the
Fund outperform the majority of its peers over the past 12 months.1 For
investors seeking competitive levels of tax-free income and the potential for
long-term price appreciation, Colonial Minnesota Tax-Exempt Fund may provide an
attractive option.
The Portfolio Manager Report on the following pages will provide you with more
specific information on your Fund's performance and the market in which your
Fund invests. Thank you for choosing Colonial Minnesota Tax-Exempt Fund and for
giving us the opportunity to serve your investment needs.
Respectfully,
/s/ Stephen E. Gibson
Stephen E. Gibson
President
March 11, 1999
(1) Source: Lipper, Inc. Lipper rankings are based on the Lipper Minnesota
Tax-Exempt Municipal Fund universe. The Fund (Class A shares) ranked in the
first quartile for one year (3 out of 47 funds), in the first quartile for
five years (3 out of 27 funds) and in the third quartile for ten years (7
out of 12 funds). Rankings do not include any sales charges. Performance for
different share classes will vary with fees associated with each class. Past
performance does not guarantee future results.
Because economic and market conditions change frequently, there can be no
assurance that the trends discussed above or on the following pages will
continue.
<PAGE>
PORTFOLIO MANAGER REPORT
BRIAN HARTFORD is portfolio manager of Colonial Minnesota Tax-Exempt Fund. Mr.
Hartford is a senior vice president of Colonial Management Associates, Inc. and
is the quantitative risk manager for Colonial's tax-exempt investments.
TAX-EXEMPT MARKET GENERATED MODEST GAINS
The period began on a positive note, with the U.S. economy strong and no clear
signs of inflation. Throughout the year, a series of international crises were
manifested domestically, affecting both stock and bond prices. Instability in
Asia, Russia and Latin America contributed to an increase in the U.S. trade
deficit and concerns about corporate profitability. This fall, the Federal
Reserve Board lowered short-term interest rates three times in an effort to
renew investor confidence. Sentiment about how these events might impact the
U.S. economy in the long run shifted throughout the period, taking fixed-income
investors on a roller coaster ride through much of the year. Overall, bond
prices rose during the period.
Like the broader bond market, municipal bond prices were affected by global
events and interest rate volatility. In addition, the tax-exempt market
experienced a near-record level of issuance in 1998, as issuers took advantage
of lower interest rates to refinance existing debt and to finance new projects.
At times, the market found it difficult to absorb this supply. Despite this
challenging environment, municipal bond prices rose 1.57% during the year as
measured by the Bond Buyer 40 Index, a widely used measure of municipal market
performance.
FUND'S PERFORMANCE REFLECTS INVESTMENT STRATEGY
For the 12-month period, the Fund generated a total return of 6.40% for Class A
shares, based on net asset value. This compares favorably with the performance
of the Fund's Lipper competitive peer group, which averaged 5.56% for the same
time period. We attribute this performance to the Fund's investment strategy.
Our forecast for modest economic growth and low inflation led us to believe that
interest rates would decline. Since bond prices tend to rise when interest rates
fall, we emphasized bonds with a higher sensitivity to interest rate changes for
most of the year. These included noncallable bonds, which cannot be refinanced
at a lower rate of interest prior to maturity. The longer life span of these
bonds increases their sensitivity to changes in interest rates, often producing
attractive price gains when interest rates decline.
In the final months of the year our analysis suggested that the market was
overvalued. In response, we reduced the Fund's sensitivity to interest rate
changes by shortening its duration. We will continue to actively manage the
Fund's positioning in an effort to add value for our investors.
MINNESOTA ECONOMY ROLLED ON
Minnesota was a prime beneficiary of strong national and regional economies
during 1998, generating healthy economic gains during the year as employment,
income and gross state product all increased. However, future growth may be
restrained by tight labor markets and weak global economies. Therefore, many of
the portfolio's holdings represent revenue-backed, essential-service bonds, such
as utilities, health care and education. For example, we purchased bonds of
several Minnesota colleges. We believe their positive enrollment and endowment
trends, combined with relatively high yields, produce attractive appreciation
potential.
Heading into the new year, we believe the state is in very good financial
condition. Positive economic trends have been reflected in the state's annual
budget surplus, which has been buoyed by revenue collections that exceeded
expectations by more than $4 billion. As a result, Minnesota has reduced the
amount of its expected general obligation bond borrowing for the next few years,
indicating a decline in new-issue supply that could have a positive price effect
on Minnesota's outstanding bonds.
POSITIVE OUTLOOK FOR MUNICIPAL MARKET CONDITIONS
Looking ahead, inflation should remain low, as we expect productivity gains and
a worldwide surplus in manufacturing capacity to limit the potential for
substantial price increases. In the municipal market, we expect positive supply
and demand dynamics. We doubt total issuance will match 1998's near-record
supply of $280 billion, partially because refinancing volume should slow down as
many issuers have already refinanced. Overall, lower supply combined with
generally positive expectations for the economic environment should have a
positive impact on municipal bond prices. However, as we end the eighth
consecutive year of economic expansion in the U.S., we will watch for events and
trends that could change our expectations and possibly lead us to alter our
investment strategy.
<PAGE>
COLONIAL MINNESOTA TAX-EXEMPT FUND'S INVESTMENT PERFORMANCE VS.
THE LEHMAN BROTHERS MUNICIPAL BOND INDEX
Growth of $10,000 from 1/31/89 - 1/31/99
AS_OF_DATE NAV POP Lehman
Mar 31, 89 $ 9,915 $ 9,444 $ 9,862
Jun 30, 89 10,371 9,878 10,446
Sep 30, 89 10,352 9,860 10,453
Dec 31, 89 10,644 10,138 10,854
Mar 31, 90 10,794 10,281 10,903
Jun 30, 90 10,994 10,472 11,157
Sep 30, 90 11,036 10,512 11,164
Dec 31, 90 11,421 10,879 11,645
Mar 31, 91 11,612 11,061 11,908
Jun 30, 91 11,807 11,247 12,163
Sep 30, 91 12,178 11,599 12,636
Dec 31, 91 12,483 11,890 13,059
Mar 31, 92 12,538 11,942 13,098
Jun 30, 92 12,937 12,322 13,595
Sep 30, 92 13,212 12,585 13,956
Dec 31, 92 13,401 12,765 14,210
Mar 31, 93 13,818 13,161 14,738
Jun 30, 93 14,198 13,524 15,221
Sep 30, 93 14,631 13,936 15,735
Dec 31, 93 14,835 14,130 15,956
Mar 31, 94 14,162 13,489 15,080
Jun 30, 94 14,272 13,594 15,246
Sep 30, 94 14,405 13,721 15,351
Dec 31, 94 14,118 13,447 15,131
Mar 31, 95 15,114 14,396 16,201
Jun 30, 95 15,131 14,413 16,591
Sep 30, 95 15,520 14,783 17,068
Dec 31, 95 16,396 15,617 17,772
Mar 31, 96 15,998 15,238 17,558
Jun 30, 96 16,168 15,400 17,693
Sep 30, 96 16,541 15,755 18,098
Dec 31, 96 16,914 16,111 18,559
Mar 31, 97 16,749 15,953 18,515
Jun 30, 97 17,444 16,615 19,153
Sep 30, 97 18,026 17,170 19,730
Dec 31, 97 18,556 17,675 20,265
Mar 31, 98 18,704 17,815 20,499
Jun 30, 98 19,003 18,100 20,811
Sep 30, 98 19,477 18,522 21,450
Dec 31, 98 20,232 19,271 21,578
Jan 31, 99 19,929 18,983 21,835
GROWTH OF A $10,000 INVESTMENT MADE ON 1/31/89
As of 1/31/99
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
NAV POP NAV w/CDSC NAV w/CDSC
- --------------------------------------------------------------------------------
$19,929 $18,983 $18,987 $18,987 $19,793 $19,793
AVERAGE ANNUAL TOTAL RETURNS
As of 1/31/99
- --------------------------------------------------------------------------------
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 6.40% 1.35% 5.59% 0.67% 5.91% 4.93%
5 YEARS 5.87 4.84 5.08 4.75 5.72 5.72
- --------------------------------------------------------------------------------
10 YEARS 7.14 6.62 6.62 6.62 7.07 7.07
- --------------------------------------------------------------------------------
Past performance cannot predict future results. Returns and value of an
investment will vary, resulting in a gain or loss on sale. All results shown
assume reinvestment of distributions. Net asset value (NAV) returns do not
include sales charges or contingent deferred sales charges (CDSC). Public
offering price (POP) returns include the maximum sales charge of 4.75% for Class
A shares. CDSC returns reflect the maximum charges of 5% for one year and 2% for
five years for Class B shares, and 1% for one year for Class C shares.
Performance results reflect any voluntary waivers or reimbursement of Fund
expenses by the Advisor or its affiliates. Absent these waivers or reimbursement
arrangements, performance results would have been lower.
Performance for different share classes will vary based on differences in sales
charges and fees associated with each class.
Class B and Class C share (newer class shares) performance information includes
returns of the Fund's Class A shares (the oldest existing fund class) for
periods prior to the inception of the newer class shares. These Class A share
returns are not restated to reflect any expense differential (e.g., Rule 12b-1
fees) between Class A shares and the newer class shares. Had the expense
differential been reflected, the returns for periods prior to the inception of
the newer class shares would have been lower.
The Lehman Brothers Municipal Bond Index is a broad-based, unmanaged index that
tracks the performance of the municipal bond market. Unlike mutual funds,
indexes are not investments and do not incur fees or expenses. It is not
possible to invest directly in an index.
<PAGE>
INVESTMENT PORTFOLIO
JANUARY 31, 1999 (IN THOUSANDS)
MUNICIPAL BONDS - 97.5% PAR VALUE
- --------------------------------------------------------------------------------
EDUCATION - 13.4%
EDUCATION
N.W. College Chiropractic,
5.200% 10/01/2013 (a) $ 275 $ 275
State Higher Education Facilities
Authority:
Carleton College, Series 4-N,
5.000% 11/01/2018 1,500 1,513
Macalester College, Series 4-N,
5.550% 03/01/2017 500 535
St. Johns University, Series 4-L,
5.350% 10/01/2017 1,000 1,041
St. Thomas University:
Series 4-M,
5.350% 04/01/2017 500 520
Series 4-P,
5.375% 04/01/2018 525 544
University of Minnesota:
Series 1996-A:
5.750% 07/01/2017 1,000 1,126
5.750% 07/01/2014 500 567
Series 1999-A,
5.500% 07/01/2021 1,000 1,100
-------
7,221
-------
................................................................................
HEALTHCARE - 16.6%
HOSPITALS - 15.1%
Health East St. Paul,
6.625% 11/01/2017 485 503
Minneapolis Children's Hospital,
4.450% 08/15/2011 (b) 1,000 1,007
Monticello-Big Lake Community Hospital
District,
5.750% 12/01/2019 500 532
Princeton,
Fairview Hospital,
Series 1991-C,
6.250% 01/01/2021 300 324
Red Wing,
River Region Group,
Series 1993-A:
6.400% 09/01/2012 200 214
6.500% 09/01/2022 300 322
Redwoodfalls Hospital,
5.750% 12/01/2023 500 502
Rochester:
Mayo Foundation:
Series 1993-A,
5.500% 11/15/2027 1,000 1,053
Series 1998-A,
5.500% 11/15/2027 1,000 1,053
Mayo Medical Center,
Series 1992-I,
5.900% 11/15/2009 1,000 1,156
St. Paul Housing & Redevelopment Authority:
Healtheast Project,
Series 1997-A,
5.500% 11/01/2009 250 245
Series 1993-A,
6.625% 11/01/2017 245 254
St. Paul Regions Hospital,
5.300% 05/15/2028 1,000 971
-------
8,136
-------
LIFECARE - 0.6%
Columbia Heights,
Crest View Corp.,
Series 1998,
6.000% 03/01/2033 300 302
-------
NURSING HOME - 0.9%
Duluth Economic Development Authority,
BSM Properties, Inc.,
Series 1998-A,
5.875% 12/01/2028 250 250
Minneapolis,
Walker Methodist Senior Services Group,
Series 1998-A,
5.875% 11/15/2018 250 253
-------
503
-------
................................................................................
HOUSING - 5.5%
ASSISTED LIVING/SENIOR - 0.8%
Bloomington Housing &
Redevelopment Authority,
Senior Summer House,
Series 1998,
5.500% 11/01/2001 110 110
Roseville,
Elder Care Institute, Inc.,
Series 1993,
7.750% 11/01/2023 300 304
-------
414
-------
MULTI-FAMILY - 1.5%
Lakeville,
Southfork Apartment Project,
Series 1989-A,
9.875% 02/01/2020 200 201
Minneapolis Redevelopment Mortgage,
Riverplace Project,
Series 1987-A,
7.100% 01/01/2020 225 228
Washington County Housing &
Redevelopment Authority,
Cottages of Aspen,
Series 1992,
9.250% 06/01/2022 175 193
White Bear Lake,
Birch Lake Townhomes Project,
Series 1989-A,
9.750% 07/15/2019 200 204
-------
826
-------
SINGLE-FAMILY - 3.2%
Chicago & Stearns Counties,
Series 1994-B,
7.050% 09/01/2027 1,175 1,276
Dakota County Housing &
Redevelopment Authority,
Series 1986,
7.200% 12/01/2009 60 61
Minneapolis-St. Paul Housing
Board,
Series 1987-C,
8.875% 11/01/2018 245 250
State Housing Finance Agency,
Series 1988-D,
8.050% 08/01/2018 90 92
Washington County Housing &
Redevelopment Authority,
City Of Cottage Grove,
Series 1986,
7.600% 12/01/2011 60 60
-------
1,739
-------
................................................................................
OTHER - 10.4%
POOL/BOND BANK - 2.5%
Minneapolis Community Development Agency,
Series 1991-1,
8.000% 12/01/2016 250 277
State Public Facilities Authority,
Water Pollution Control Revenue,
Series 1996-B,
5.400% 03/01/2016 1,000 1,047
-------
1,324
-------
REFUNDED/ESCROWED (C) - 7.9%
Burnsville,
Fairview Community Hospital,
Series 1982-A,
(d) 05/01/2012 (b) 2,145 1,056
Dakota & Washington Counties
Housing & Redevelopment Authority,
Series 1988,
8.150% 09/01/2016 235 325
Metropolitan Council,
Hubert H. Humphrey Metrodome,
Series 1992,
6.000% 10/01/2009 300 329
Moorhead Residential,
7.100% 08/01/2011 20 24
Owatonna Independent School,
District No. 761,
Series 1990:
7.100% 02/01/2009 115 115
7.100% 02/01/2010 120 120
7.100% 02/01/2011 130 130
St. Louis Park,
Methodist Hospital,
Series 1990-C,
7.250% 07/01/2018 165 177
University of St. Thomas,
Series 3 C,
7.100% 09/01/2010 100 107
State Higher Education Facilities Authority,
Hamline University,
Series 3-k,
6.600% 06/01/2008 250 273
Western Minnesota Municipal
Power Agency,
Series 1983-A,
9.750% 01/01/2016 1,000 1,575
-------
4,231
-------
................................................................................
OTHER REVENUE - 8.1%
HOTELS - 0.5%
Minneapolis,
Holiday Inn Metrodome Project,
6.000% 12/01/2001 250 253
-------
INDUSTRIAL - 6.1%
Alexandria Industrial Development
Revenue Bonds,
Seluemed Ltd.,
5.850% 03/01/2018 830 848
Brooklyn Park,
TL Systems Corp.,
Series 1991,
10.000% 09/01/2016 250 304
Buffalo,
Von Ruden Manufacturing, Inc.,
Series 1989,
10.500% 09/01/2014 515 543
Duluth Seaway Port Authority,
Cargill Inc.,
Series 1993-A,
5.750% 12/01/2016 1,500 1,583
-------
3,278
-------
PAPER PRODUCTS - 1.5%
Hubbard County Solid Waste Disposal Revenue,
Potlatch Corp.,
Series 1987-A,
7.375% 08/01/2013 285 295
International Falls,
Boise Cascade Corp. Project,
5.650% 12/01/2022 500 495
-------
790
-------
................................................................................
TAX-BACKED - 27.0%
LOCAL APPROPRIATED - 3.4%
Elk River Independent School District No. 728,
Series 1997-A,
5.375% 02/01/2017 1,000 1,041
Hibbing Economic Development Authority,
6.400% 02/01/2012 300 315
Minneapolis Special School District
Series 1998-A,
4.750% 02/01/2018 500 495
-------
1,851
-------
LOCAL GENERAL OBLIGATIONS - 16.5%
Austin,
Series 1998-A,
5.450% 10/01/2017 500 527
Minneapolis St. Paul Metropolitan
Airport Commission,
5.000% 12/01/2013 1,000 1,047
New York Mills Independent School
District No. 553,
Series 1992-A,
6.850% 02/01/2018 210 228
North St. Paul & Maplewood Unified
School District,
Series 1996-A,
5.125% 02/01/2025 2,000 2,030
Roseau Independent School
District No. 682,
Series 1991,
7.000% 02/01/2014 200 208
Rosemount Independent School
District No. 196,
Series 1994-B,
(d) 06/01/2010 (b) 2,765 1,694
St. Cloud Hydroelectric,
Series 1996-D,
5.250% 12/01/2018 2,000 2,060
Wasica Independent School District
No. 829,
5.500% 04/01/2017 1,000 1,094
-------
8,888
-------
Special Non-Property Tax - 0.6%
Red Lake Bank of Chippewa Indians,
Series 1998,
6.250% 08/01/2013 300 300
-------
SPECIAL PROPERTY TAX - 0.4%
Duluth Economic Development Authority,
Series 1998-A,
(d) 02/01/2008 295 203
-------
STATE APPROPRIATED - 4.1%
State,
Duluth Airport,
Series 1995-B,
6.250% 08/01/2014 2,000 2,222
-------
STATE GENERAL OBLIGATIONS - 2.0%
State,
Series 1995,
5.250% 08/01/2014 1,000 1,051
-------
................................................................................
TRANSPORTATION - 3.7%
AIRPORT - 2.0%
Minneapolis-St. Paul Metropolitan
Airports Commission,
Series 1998-B,
5.250% 01/01/2012 1,000 1,060
-------
TRANSPORTATION - 1.7%
Blaine,
Consolidated Freightways, Inc.,
Series 1998,
5.150% 01/01/2004 300 302
St. Paul Port Authority:
Series F:
9.125% 12/01/2000 25 25
9.125% 12/01/2001 25 25
9.125% 12/01/2002 25 25
9.125% 12/01/2014 575 549
-------
926
-------
................................................................................
UTILITY - 12.8%
INVESTOR OWNED - 1.7%
Anoka County:
Northern States Power Co.,
Series 1998,
4.600% 12/01/2008 (a) 500 500
United Power Assoc.,
Series 1987-A,
6.950% 12/01/2008 400 425
-------
925
-------
JOINT POWER AUTHORITY - 11.1%
Northern Municipal Power Agency,
Minnesota Power & Light Co.,
Series 1989-A,
4.750% 01/01/2020 1,500 1,475
Southern Minnesota Municipal
Power Agency:
Series A,
5.000% 01/01/2016 (b) 450 450
Series 1993-A:
4.750% 01/01/2016 (b) 1,250 1,252
5.000% 01/01/2012 750 767
Series 1994-A,
(d) 01/01/2027 (b) 3,900 969
Series 1998-A,
5.000% 01/01/2013 1,000 1,045
-------
5,958
-------
TOTAL INVESTMENTS (Cost of $49,051)(e) 52,401
-------
SHORT-TERM OBLIGATIONS - 2.6%
- -------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (f)
CA Irvine Improvement Bond Act of 1915:
Series 1997,
3.000% 09/02/2022 200 200
Series 1998,
3.000% 09/02/2023 1,100 1,100
NY New York City,
3.300% 10/01/2020 100 100
-------
TOTAL SHORT-TERM OBLIGATIONS 1,400
-------
OTHER ASSETS & LIABILITIES, NET - (0.1)% (58)
- --------------------------------------------------------------------------------
NET ASSETS - 100.0% $53,743
-------
(a) This security has been purchased on a delayed delivery basis for settlement
at a future date beyond the customary settlement time.
(b) These securities, or a portion thereof, with a total market value of $4,647
are being used to collateralize the delayed delivery purchase indicated in
note (a) above and open futures contracts.
(c) The Fund has been informed that each issuer has placed direct obligation of
the U.S. Government in an irrevocable trust, solely for the payment of the
interest and principal.
(d) Zero coupon bond.
(e) Cost for federal income tax purposes is the same.
(f) Variable rate demand notes are considered short-term obligations. Interest
rates change periodically on specified dates. These securities are payable
on demand and are secured by either letters of credit or other credit
support agreements from banks. The rates listed are as of January 31, 1999.
Short futures contract open on January 31, 1999,
Par Value Unrealized
covered by Expiration depreciation
Type contracts month at 1/31/99
- -------------------------------------------------------------------------------
Treasury Bond 2,000 March $ 13
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
JANUARY 31, 1999
(in thousands except for per share amounts and footnotes)
ASSETS
Investments at value (cost $49,051) $ 52,401
Short-term obligations 1,400
--------
53,801
Receivable for:
Interest $ 737
Investments sold 102
Fund shares sold 1
Other 68 908
----- --------
Total Assets 54,709
LIABILITIES
Payable for:
Investments purchased 774
Fund shares repurchased 112
Distributions 65
Variation margin on futures 4
Payable to Advisor 3
Accrued:
Deferred Trustees fees 3
Other 5
-----
Total Liabilities 966
--------
NET ASSETS $ 53,743
--------
Net asset value & redemption price per share -
Class A ($32,075/4,356) $7.36 (a)
--------
Maximum offering price per share - Class A
($7.36/0.9525) $7.73 (b)
--------
Net asset value & offering price per share -
Class B ($21,398/2,906) $7.36 (a)
--------
Net asset value & offering price per share -
Class C ($270/37) $7.36 (a)
--------
COMPOSITION OF NET ASSETS
Capital paid in $ 51,015
Overdistributed net investment income (61)
Accumulated net realized loss (548)
Net unrealized appreciation (depreciation) on:
Investments 3,350
Open futures contracts (13)
--------
$ 53,743
--------
(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 YEAR ENDED JANUARY 31, 1999
(in thousands)
INVESTMENT INCOME
Interest $ 2,941
EXPENSES
Management fee $ 264
Service fee 90
Distribution fee - Class B 154
Distribution fee - Class C 2
Transfer agent 81
Bookkeeping fee 28
Registration fee 15
Custodian fee 6
Audit fee 17
Trustees fee 8
Reports to shareholders 4
Legal fee 5
Other 17
-----
Total expenses 691
Fees and expenses waived or borne
by the Advisor (33)
Fees waived by the Distributor - Class C (1)
Custodian credits earned (5) 652
----- -------
Net Investment Income 2,289
-------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain on:
Investments 1,346
Closed futures contracts 105
-----
Net Realized Gain 1,451
Change in net unrealized depreciation
during the period on:
Investments (606)
Open futures contracts (13)
-----
Net Unrealized Depreciation (619)
-------
Net Gain 832
-------
Increase in Net Assets from Operations $ 3,121
-------
See notes to financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(in thousands) Year ended January 31
--------------------------
INCREASE (DECREASE) IN NET ASSETS 1999 1998 (a)
Operations:
Net investment income $ 2,289 $ 2,484
Net realized gain 1,451 479
Net unrealized appreciation (depreciation) (619) 2,474
------- -------
Net Increase from Operations 3,121 5,437
Distributions:
From net investment income - Class A (1,485) (1,658)
In excess of net investment income - Class A (65) --
From net realized gains - Class A (774) (201)
In excess of net realized gains - Class A (209) --
From net investment income - Class B (802) (825)
In excess of net investment income - Class B (35) --
From net realized gains - Class B (513) (122)
In excess of net realized gains - Class B (139) --
From net investment income - Class C (9) (2)
In excess of net investment income - Class C (b) --
From net realized gains - Class C (6) (1)
In excess of net realized gains - Class C (2) --
------- -------
(918) 2,628
------- -------
Fund Share Transactions:
Receipts for shares sold - Class A 1,527 2,735
Value of distributions reinvested - Class A 1,749 1,237
Cost of shares repurchased - Class A (3,475) (7,779)
------- -------
(199) (3,807)
------- -------
Receipts for shares sold - Class B 2,986 1,912
Value of distributions reinvested - Class B 1,105 639
Cost of shares repurchased - Class B (2,606) (2,644)
------- -------
1,485 (93)
------- -------
Receipts for shares sold - Class C 120 132
Value of distributions reinvested - Class C 17 3
Cost of shares repurchased - Class C (b) --
------- -------
137 135
------- -------
Net Increase (Decrease) from Fund Share
Transactions 1,423 (3,765)
------- -------
Total Increase (Decrease) 505 (1,137)
(a) Class C shares were initially offered on August 1, 1997.
(b) Rounds to less than one.
See notes to financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS - CONT.
(in thousands) Year ended January 31
---------------------------
1999 1998 (a)
NET ASSETS
Beginning of period $53,238 $54,375
------- -------
End of period (net of overdistributed and
including undistributed net investment
income of $61 and $7, respectively $53,743 $53,238
------- -------
NUMBER OF FUND SHARES
Sold - Class A 206 378
Issued for distributions reinvested - Class A 237 170
Repurchased - Class A (467) (1,074)
------- -------
(24) (526)
------- -------
Sold - Class B 402 262
Issued for distributions reinvested - Class B 150 88
Repurchased - Class B (352) (363)
------- -------
200 (13)
------- -------
Sold - Class C 16 18
Issued for distributions reinvested - Class C 3 (b)
Repurchased - Class C (b) --
------- -------
19 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
JANUARY 31, 1999
NOTE 1. ACCOUNTING POLICIES
...............................................................................
ORGANIZATION: Colonial Minnesota Tax-Exempt Fund (the Fund), a series of
Colonial Trust V, is a non-diversified portfolio of a Massachusetts business
trust, registered under the Investment Company Act of 1940, as amended, as an
open-end, management investment company. The Fund's investment objective is to
seek as high a level of after-tax total return, as is consistent with prudent
risk, by pursuing current income exempt from federal and Minnesota 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 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 revenue 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.
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:
Average Net Assets Annual Fee Rate
------------------ ---------------
First $2 billion 0.50%
Over $2 billion 0.45%
BOOKKEEPING FEE: The Advisor provides bookkeeping and pricing services for
$27,000 per year plus 0.035% of the Fund's average net assets over $50 million.
TRANSFER AGENT: Liberty Funds Services, Inc., formerly Colonial Investors
Service Center, Inc. (the Transfer Agent), an affiliate of the Advisor, provides
shareholder services for a monthly fee equal to 0.13% annually of the Fund's
average net assets and receives reimbursement for certain out-of-pocket
expenses.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES: Liberty Financial
Investments, Inc., formerly Liberty Financial Investment, Inc. (the
Distributor), an affiliate of the Advisor, is the Fund's principal underwriter.
For the year ended January 31 1999, the Fund has been advised that the
Distributor retained net underwriting discounts of $5,422 on sales of the Fund's
Class A shares and received contingent deferred sales charges (CDSC) of none,
$23,210, 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 will not exceed 0.45% annually. The plan also
requires the payment of a service fee to the Distributor as follows:
Valuation of shares Annual
outstanding on the 20th of Fee
each month which were issued Rate
---------------------------- ----
Prior to November 30, 1994 0.10%
On or after December 1, 1994 0.25%
The CDSC and the fees received from the 12b-1 plan are used principally as
repayment to the Distributor for amounts paid by the Distributor to dealers who
sold such shares.
Expense limits: Through October 31, 1998, the Advisor waived fees and bore
certain Fund expenses to the extent that total expenses (exclusive of service
and distribution fees, brokerage commissions, interest, taxes, and extraordinary
expenses, if any) exceeded 0.75% annually of the Fund's average net assets.
Effective November 1, 1998 the expense limit was eliminated.
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 $5,436 applied during the year ended January
31, 1999. The Fund could have invested a portion of the assets utilized in
connection with the expense offset arrangements in an income producing asset if
it had not entered into such an agreement.
NOTE 3. PORTFOLIO INFORMATION
...............................................................................
INVESTMENT ACTIVITY: For the year ended January 31, 1999, purchases and sales of
investments, other than short-term obligations, were $17,433,200 and
$17,563,510, respectively.
Unrealized appreciation (depreciation) at January 31, 1999, based on cost of
investments for both financial statement and federal income tax purposes was:
Gross unrealized appreciation $ 3,413,823
Gross unrealized depreciation (63,647)
-----------
Net unrealized appreciation $ 3,350,176
-----------
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 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 positions due to
different trading hours, or the temporary absence of a liquid market for either
the instrument or the underlying securities or (3) an inaccurate prediction by
the Advisor of the future direction of interest rates. Any of these risks may
involve amounts exceeding the amount recorded in the Fund's Statement of Assets
and Liabilities at any given time.
NOTE 4. LINE OF CREDIT
...............................................................................
The Fund may borrow up to 33 1/3% of its net assets under a line of credit for
temporary or emergency purposes. Any borrowings bear interest at one of the
following options determined at the inception of the loan: (1) federal funds
rate plus 1/2 of 1%, (2) the lending bank's base rate or (3) IBOR offshore loan
rate plus 1/2 of 1%. There were no borrowings under the line of credit during
the year ended January 31, 1999.
NOTE 5. RESULTS OF SPECIAL SHAREHOLDER MEETING (UNAUDITED)
...............................................................................
On October 30, 1998, a Special Meeting of Shareholders of the Fund was held to
approve the following items, all as described in the Proxy Statement for the
Meeting. On August 21, 1998, the record date for the Meeting, the Fund had
outstanding 7,085,532 shares of beneficial interest. The votes cast at the
Meeting were as follows:
AUTHORITY
FOR WITHHELD
--- --------
To Elect a Board of Trustees:
Robert J. Birnbaum 3,969,258 110,094
Tom Bleasdale 3,973,225 106,127
John Carberry 3,971,436 107,916
Lora S. Collins 3,971,377 107,975
James E. Grinnell 3,973,225 106,127
Richard W. Lowry 3,973,225 106,127
Salvatore Macera 3,971,377 107,975
William E. Mayer 3,973,225 106,127
James L. Moody, Jr. 3,973,225 106,127
John J. Neuhauser 3,973,225 106,127
Thomas E. Stitzel 3,973,225 106,127
Robert L. Sullivan 3,973,225 106,127
Anne-Lee Verville 3,971,377 107,975
To amend fundamental investment policies regarding borrowing and lending.
FOR AGAINST ABSTAIN
--- ------- -------
2,907,404 74,862 196,581
To approve policies for a master fund/feeder fund structure.
FOR AGAINST ABSTAIN
--- ------- -------
2,877,388 91,451 210,005
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period
are as follows:
Year ended January 31
-------------------------------------
1999
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) 0.351 0.293 0.316 (b)
Net realized and
unrealized gain 0.110 0.110 0.110
------ ------- -------
Total from Investment
Operations 0.461 0.403 0.426
------ ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.345) (0.289) (0.311)
In excess of net investment income (0.015) (0.013) (0.014)
From net realized gains (0.182) (0.182) (0.182)
In excess of realized gains (0.049) (0.049) (0.049)
------ ------- -------
Total Distributions
Declared to Shareholders (0.591) (0.533) (0.556)
------ ------- -------
Net asset value -
End of period $7.360 $ 7.360 $ 7.360
------ ------- -------
Total return (c)(d) 6.40% 5.59% 5.91%
------ ------- -------
RATIOS TO AVERAGE NET ASSETS
Expenses (e) 0.94% 1.69% 1.39% (b)
Net investment
income (e) 4.62% 3.87% 4.17% (b)
Fees and expenses
waived or borne
by the Advisor (e) 0.06% 0.06% 0.06%
Portfolio turnover 34% 34% 34%
Net assets at end
of period (000) $32,075 $21,398 $ 270
(a) Net of fees and expenses waived or borne by the Advisor which amounted to:
$0.005 $ 0.005 $ 0.005
(b) Net of fees waived by the Distributor which amounted to $ 0.022 per share
and 0.30%.
(c) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(d) Had the Advisor and Distributor not waived or reimbursed a portion of
expenses, total return would have been reduced.
(e) The benefits derived from custody credits and directed brokerage
arrangements had an impact of 0.01% and $0.001 per share.
<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)
------- ------ -------
RATIOS TO AVERAGE NET ASSETS
Expenses (g) 0.91% 1.66% 1.36% (c)(h)
Net investment income (g) 4.97% 4.22% 4.40% (c)(h)
Fees and expenses waived or
borne by the Advisor (g) 0.11% 0.11% 0.12% (h)
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 Advisor 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%.
(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 been reduced.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements had no impact. Prior year's ratios are net of benefits
received, if any.
(h) 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
- --------------------------------------------------------------------------------
Federal Income Tax Information (unaudited)
Approximately 99.08% of the income distributions will be treated as exempt for
federal income tax purposes.
For the fiscal year ended January 31, 1999 the Fund earned $1,213,356 of long
term capital gains of which none and $1,213,356 are 28% and 20% rate gains,
respectively.
- --------------------------------------------------------------------------------
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Selected data for a share of each class outstanding throughout each period are
as follows:
Year ended January 31
-----------------------
1995
Class A Class B
---------- -----------
Net asset value -
Beginning of period $ 7.480 $ 7.480
------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.415 0.363
Net realized and unrealized loss (0.642) (0.642)
------- -------
Total from Investment Operations (0.227) (0.279)
------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.413) (0.361)
------- -------
Net asset value - End of period $ 6.840 $ 6.840
------- -------
Total return (b)(c) (2.92)% (3.65)%
------- -------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.72% 1.47%
Net investment income 5.98% 5.23%
Fees and expenses waived or borne
by the Advisor 0.26% 0.26%
Portfolio turnover 26% 26%
Net assets at end of period (000) $35,846 $14,731
(a) Net of fees and expenses waived or borne by the Advisor which amounted to:
$0.018 $ 0.018
(b) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(c) Had the Advisor not waived or reimbursed a portion of expenses, total return
would have been reduced.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE TRUSTEES OF COLONIAL TRUST V AND THE SHAREHOLDERS OF
COLONIAL MINNESOTA TAX-EXEMPT FUND
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Colonial Minnesota Tax-Exempt Fund
(the "Fund") (a series of Colonial Trust V) at January 31, 1999, the results of
its operations, the changes in its net assets and the financial highlights for
the periods indicated, in conformity with generally accepted accounting
principles. These financial statements and the financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of portfolio positions at January 31, 1999 by correspondence with
the custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
March 11, 1999
<PAGE>
SHAREHOLDER COMMUNICATIONS
TO KEEP YOU INFORMED
To make recordkeeping easy and keep you up-to-date on the performance of your
investments, you can expect to receive the following information about your
account:
TRANSACTION CONFIRMATIONS: Each time you make a purchase, sale or exchange, you
receive a confirmation statement within just a few days.
QUARTERLY STATEMENTS: Every three months, if any transactions are made that
affect your share balance, this statement reports on your account activity
during the quarter (including any reinvestment of dividends). This statement
also provides year-to-date information.
LIBERTY FUNDS DISTRIBUTOR INVESTOR OPPORTUNITIES: Mailed with your quarterly
account statements, this newsletter highlights timely investment strategies,
portfolio manager commentary and shareholder service updates.
TAX FORMS AND YEAR-END TAX GUIDE: Easy-to-use forms and timely information are
designed to make tax reporting simpler. (Usually mailed in January.)
AVERAGE COST BASIS STATEMENTS: If you sold or exchanged shares during the year,
this statement may help you calculate your gain/loss for tax purposes. (Usually
mailed in February.)
<PAGE>
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial 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, and the most
recent copy of the Liberty Funds Distributor, Inc. Performance Update.
* Effective October 1, 1998, Colonial Investors Service Center, Inc. -- the
Transfer Agent for Colonial, Crabbe Huson, Newport and Stein Roe Advisor Funds
-- changed its name to Liberty Funds Services, Inc.
<PAGE>
TRUSTEES
ROBERT J. BIRNBAUM
Consultant (formerly Special Counsel, Dechert, Price & Rhoads; President and
Chief Operating Officer, New York Stock Exchange, Inc.; President, American
Stock Exchange Inc.)
TOM BLEASDALE
Retired (formerly Chairman of the Board and Chief Executive Officer, Shore Bank
& Trust Company)
JOHN CARBERRY
Senior Vice President of Liberty Financial Companies, Inc. (formerly Managing
Director, Salomon Brothers)
LORA S. COLLINS
Attorney (formerly Attorney, Kramer, Levin, Naftalis & Frankel)
JAMES E. GRINNELL
Private Investor (formerly Senior Vice President-Operations, The Rockport
Company)
RICHARD W. LOWRY
Private Investor (formerly Chairman and Chief Executive Officer, U.S. Plywood
Corporation)
SALVATORE MACERA
Private Investor (formerly Executive Vice President of Itek Corp. and President
of Itek Optical & Electronic Industries, Inc.)
WILLIAM E. MAYER
Partner, Development Capital, LLC (formerly Dean, College of Business and
Management, University of Maryland; Dean, Simon Graduate School of Business,
University of Rochester; Chairman and Chief Executive Officer, CS First Boston
Merchant Bank; and President and Chief Executive Officer, The First Boston
Corporation)
JAMES L. MOODY, JR.
Retired (formerly Chairman of the Board, Chief Executive Officer and Director,
Hannaford Bros. Co.)
JOHN J. NEUHAUSER
Dean, Boston College School of Management
THOMAS E. STITZEL
Professor of Finance, College of Business, Boise State University; Business
Consultant and Author
ROBERT L. SULLIVAN
Retired Partner, KPMG LLP (formerly Management Consultant, Saatchi and Saatchi
Consulting Ltd. and Principal and International Practice Director, Management
Consulting, Peat Marwick Main & Co.)
ANNE-LEE VERVILLE
Consultant (formerly General Manager, Global Education Industry, and President,
Applications Solutions Division, IBM Corporation)
[logo] L I B E R T Y
COLONIAL o CRABBE HUSON o NEWPORT o STEIN ROE ADVISOR
Liberty Funds Distributor, Inc. (C)1999
One Financial Center, Boston, MA 02111-2621, 1-800-426-3750
Visit us at www.libertyfunds.com
MN-02/682G-0199 (3/99) 99/294
