<PAGE> 1
[BUILDING GRAPHIC]
LIBERTY NORTH CAROLINA TAX-EXEMPT FUND SEMIANNUAL REPORT
JULY 31, 2000
<PAGE> 2
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
You may have noticed that your Fund has a new name. As of July 14, the names of
our funds were changed to include Liberty. Rest assured, the investment
objectives and strategies employed by the Fund's managers are not affected by
this name change. We believe the new name better reflects your Fund's
affiliation with the Liberty funds, a diverse family of funds representing a
wide selection of investment styles and specialized money management. The goal
of all Liberty funds is to help you reach for financial freedom -- however you
define it.
Although the municipal bond markets exhibited considerable volatility during the
six months ended July 31, 2000, the overall result was positive. As the Federal
Reserve (the Fed) repeatedly raised key short-term interest rates -- by 0.25% in
both February and March and by 0.50% in May -- two things became quite clear.
First, the Fed was concerned that the rapidly expanding U.S. economy could
ignite higher rates of inflation. Second, the Fed was quite determined to snuff
out the sparks before they could become a conflagration.
Initially, the rate increases hurt performance in the municipal bond markets
because as rates rise, bond prices fall. However, the Fed's persistence --
coupled with indications by the second quarter of the calendar year that the
economy may be slowing -- appears to have convinced investors that inflation
will not become a major obstacle to growth in the foreseeable future. Municipal
bond prices rallied in the final two months of the period. Your Fund's
management team had anticipated this scenario for some time, and the Fund was
well positioned to benefit from the rally.
As always, thank you for choosing Liberty North Carolina Tax-Exempt Fund and for
giving us the opportunity to serve your investment needs.
Respectfully,
/s/ Stephen E. Gibson
-----------------------
Stephen E. Gibson
President
September 11, 2000
Not FDIC
insured
May Lose Value
No Bank Guarantee
Because economic and market conditions change frequently, there can be no
assurance that the trends described in this report will continue or come to
pass.
<PAGE> 3
HIGHLIGHTS
- POSITIVE RESULTS FOR MUNICIPAL BONDS WERE BOLSTERED BY RESTRICTED SUPPLY.
Due to high tax revenues and budget surpluses, state and local governments
issued fewer municipal bonds during the first six months of calendar year
2000. New bond issues were 22% below the 1999 level, and refundings of
existing bonds declined nearly 70%. At the same time, higher yields
prompted an increase in demand for municipal bonds. The combination of
reduced supply and increased demand helped to keep prices for municipal
bonds higher than they might otherwise have been.
- THE MUNICIPAL BOND YIELD CURVE FLATTENED DURING THE SIX-MONTH PERIOD.
Between February and July, yields for short-term municipal bonds declined
slightly (0.10% to 0.20%). Meanwhile, rates for intermediate- and long-term
municipals fell by as much as 0.54% as investors responded to early signs
that the U.S. economy may be slowing and that inflation may not become a
serious problem down the road. As yields fell, bond prices rose, and the
gains were largest for bonds in the 25- to 30-year maturity range.
MUNICIPAL VS. TREASURY BOND PERFORMANCE
1/31/00 - 7/31/00
[LINE GRAPH]
<TABLE>
<CAPTION>
LEHMAN BROTHERS SALOMON 30-YEAR
MUNICIPAL BOND INDEX TREASURY BOND INDEX
-------------------- -------------------
<S> <C> <C>
1/31/2000 0 0
2/29/2000 1.16 3.7
3/31/2000 3.37 8.56
4/30/2000 2.76 7.23
5/31/2000 2.22 7.02
6/30/2000 4.93 9.36
7/31/2000 6.4 11.48
</TABLE>
Past performance is no indication of future results.
Performance of municipal bonds is illustrated by the Lehman Brothers Municipal
Bond Index, a broad-based, unmanaged index that tracks the performance of the
municipal bond market. Performance of the 30-year Treasury bond is illustrated
by the Salomon 30-Year Treasury Bond Index, a broad-based, unmanaged index that
tracks the performance of the 30-year-on-the-run Treasury market. Unlike mutual
funds, indexes are not investments and do not incur fees or expenses. It is not
possible to invest directly in an index.
NET ASSET VALUE PER SHARE AS OF 7/31/00
<TABLE>
<S> <C>
Class A $7.08
Class B $7.08
Class C $7.08
</TABLE>
DISTRIBUTIONS DECLARED FROM 2/1/00 TO 7/31/00
<TABLE>
<S> <C>
Class A $0.164
Class B $0.138
Class C $0.148
</TABLE>
A portion of the Fund's income may be subject to the alternative minimum tax.
The Fund may at times purchase tax-exempt securities at a discount. Some or all
of this discount may be included in the Fund's ordinary income, and is taxable
when distributed.
SEC YIELDS ON 7/31/00
<TABLE>
<S> <C>
Class A 4.00%
Class B 3.43%
Class C 3.72%
</TABLE>
The 30-day SEC yields reflect the portfolio's earning power, net of expenses,
expressed as an annualized percentage of the public offering price at the end of
the period. If the Advisor or its affiliates had not waived certain Fund
expenses, the SEC yield would have been 3.43% for Class C shares.
TAXABLE-EQUIVALENT SEC YIELDS ON 7/31/00
<TABLE>
<S> <C>
Class A 7.18%
Class B 6.16%
Class C 6.68%
</TABLE>
Taxable-equivalent SEC yields are based on the maximum combined effective 44.3%
federal and state income tax rate. This tax rate does not reflect the phaseout
of exemptions or the reduction of otherwise allowable deductions that occur when
Adjusted Gross Income exceeds certain levels.
1
<PAGE> 4
PORTFOLIO MANAGER'S REPORT
QUALITY BREAKDOWN AS OF 7/31/00
<TABLE>
<S> <C>
AAA 45.8%
AA 32.7%
A 15.3%
BBB 3.9%
Non-rated 2.3%
</TABLE>
Quality breakdowns are calculated as a percentage of total investments,
including short-term obligations. Ratings shown in the quality breakdowns
represent the highest rating assigned to a particular bond by one of the
following respected rating agencies: Standard & Poor's Corporation, Moody's
Investors Service, Inc. or Fitch Investors Service, Inc.
Because the Fund is actively managed, there can be no guarantee the Fund will
continue to maintain these quality breakdowns in the future.
BOUGHT/SOLD
As part of our efforts to lengthen the Fund's duration and keep its credit
quality high, we divested uninsured (BBB-rated) Puerto Rico general obligation
bonds due in 2014 and replaced them with insured (AAA-rated) Puerto Rico finance
bonds due in 2017 (3.4% of net assets).
RISING LONG-TERM BOND PRICES CONTRIBUTED TO MODEST BUT SOLID GAINS FOR THE FUND
Against a backdrop of falling yields and rising prices for intermediate- and
long-term municipal bonds, Class A Shares of Liberty North Carolina Tax-Exempt
Fund posted a total return of 6.44% without a sales charge for the six months
ended July 31, 2000. We are pleased with this result, which reflects not only
the general trend in the market but the effectiveness of our investment
strategy.
FUND SHIFTED EMPHASIS TO BETTER LONG-TERM POSITIONING
In the second half of the fiscal year ended January 31, 2000, we chose to
shorten the Fund's duration. This move was designed to insulate the Fund from
the impact of rising interest rates, which generally lead to lower bond prices.
By February of this year, we were convinced that the market would ultimately
come to view the Fed's interest rate hikes as an effective, preemptive strike
against higher inflation. In a lower inflation-rate environment, investors would
not demand higher yields, so we expected more moderate interest rates to prevail
in the long run. Falling rates, of course, mean rising prices for bonds.
With this scenario in mind, we began lengthening the Fund's duration in
February, purchasing primarily securities in the 15- to 17-year maturity range.
Following additional "preemptive strikes" against inflation in February, March
and May, investors did indeed allow bond yields to subside. The bond market
rallied, and the Fund performed quite well.
One contributor to performance was a bond backed by USAir, the regional
airline. When UAL, Inc., the parent company of United Airlines, announced its
proposed merger with USAir, the value of this holding increased. Investors
reasoned that, following the merger, UAL's higher credit rating would apply to
USAir-related debt. Investor speculation about this became excessive, however,
and we sold the bond as its price rose, thereby capturing some additional
appreciation for the Fund.
NORTH CAROLINA CONTINUED TO BE A NATIONAL LEADER
North Carolina's increasingly diversified economy and conservative fiscal
policies have made it one of the most financially healthy states in recent
years. Relatively low business costs have attracted a large number of financial
services, technology, education and research businesses. Added to the state's
traditional textiles and manufacturing companies, this has fostered
above-average job growth and below-average
2
<PAGE> 5
PORTFOLIO MANAGER'S REPORT (CONTINUED)
unemployment rates. At the same time the climate and attractive housing prices
have proven very attractive to retirees, who have brought significant amounts of
personal assets to the state and boosted retail sales rates. Per capita personal
income has grown rapidly, fueling healthy gains in state tax revenues.
SIGNS OF A POSITIVE ENVIRONMENT FOR BONDS ARE GROWING
Our outlook for the municipal bond market has improved considerably. As the
six-month period came to a close, we had already seen the first signs of more
temperate U.S. economic growth, including a reduction in new housing starts and
softening of retail sales. Slower growth could set the stage for lower interest
rates in 12 to 15 months. We believe the Fund is well positioned should that
occur.
In addition, North Carolina, with its very diverse economy, high tax revenues
and low level of debt, is well positioned to deal with the effects of a
nationwide economic slowdown. Nonetheless, the Fund could be adversely affected
by the lack of liquidity in the North Carolina municipal market. The supply of
bonds is quite limited, while the demand is extensive. This may keep prices for
North Carolina issues high, but it also could make it difficult to buy new
securities if and when we feel a change in tactics for the Fund is warranted.
/s/ David Pope
--------------
DAVID POPE is portfolio manager of Liberty North Carolina Tax-Exempt Fund and is
a vice president of Colonial Management Associates, Inc. (CMA).
Tax-exempt investing offers current tax-free income, but also involves certain
risks. The value of the Fund will be affected by interest rate changes and the
creditworthiness of the issues held in the Fund. The Fund's management,
including risk management specialists and credit analysts, identifies problems
and opportunities and reacts quickly to market changes.
[LINE GRAPH]
TOP FIVE SECTOR BREAKDOWN
7/31/00 VS. 1/31/00
<TABLE>
<CAPTION>
7/31/00 1/31/00
------- -------
<S> <C> <C>
Refunded/Escrowed 20.4% 19.3%
Local Appropriated 17.2% 19.3%
Hospital 11.3% 11.5%
Joint Power Authority 7.7% 7.2%
Education 7.7% 7.4%
</TABLE>
Sector breakdowns are calculated as a percentage of net assets.
Because the Fund is actively managed, there can be no guarantee the Fund will
continue to maintain this breakdown in the future.
3
<PAGE> 6
PERFORMANCE INFORMATION
AVERAGE ANNUAL TOTAL RETURNS AS OF 7/31/00
<TABLE>
<CAPTION>
Share Class A B C
Inception Date 9/1/93 9/1/93 8/1/97
----------------------------- -------------------------- ---------------------------
Without With Sales Without With Sales Without With Sales
Sales Charge Charge Sales Charge Charge Sales Charge Charge
------------ ---------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
6 month
(cumulative) 6.44% 1.38% 6.04% 1.04% 6.20% 5.20%
1 year 2.44 (2.42) 1.68 (3.21) 1.99 1.01
5 years 5.51 4.49 4.72 4.39 4.89 4.89
Life of Fund 4.38 3.65 3.60 3.60 3.72 3.72
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/00
<TABLE>
<CAPTION>
Share Class A B C
-------------------------- -------------------------- --------------------------
Without With Sales Without With Sales Without With Sales
Sales Charge Charge Sales Charge Charge Sales Charge Charge
------------ ---------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
6 month
(cumulative) 4.02% (0.92)% 3.61% (1.39)% 3.77% 2.77%
1 year 1.27 (3.54) 0.52 (4.32) 0.82 (0.15)
5 years 5.35 4.33 4.57 4.23 4.72 4.72
Life of Fund 4.20 3.46 3.43 3.43 3.54 3.54
</TABLE>
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. The "with sales charge" returns include
the maximum 4.75% sales charge for Class A shares, the appropriate Class B
shares contingent deferred sales charge for the holding period after purchase as
follows: through first year -- 5%, second year -- 4%, third year -- 3%, fourth
year -- 3%, fifth year -- 2%, sixth year -- 1%, thereafter -- 0% and the Class C
shares contingent deferred sales charge of 1% for the first year only.
Performance for different share classes will vary based on differences in sales
charges and fees associated with each class.
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.
Class C share performance information includes returns of the Fund's Class B
shares (the oldest existing Fund class with a similar expense structure) for
periods prior to its inception date. These Class B share returns are not
restated to reflect any expense differential (e.g. Rule 12b-1 fees) between
Class B and Class C shares.
4
<PAGE> 7
INVESTMENT PORTFOLIO
July 31, 2000
(Unaudited, in thousands)
<TABLE>
<CAPTION>
MUNICIPAL BONDS - 99.1% PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
EDUCATION - 11.2%
EDUCATION - 7.7%
East Carolina University,
Series 1994,
6.200% 11/01/15 $ 475 $ 504
PR Commonwealth of Puerto Rico,
Ana G. Mendez University System,
Series 1999,
5.375% 02/01/19 275 255
State Educational Facilities Authority,
Wake Forest University,
Series 1998,
5.000% 11/01/17 250 236
State Educational Facilities Finance Agency,
Duke University,
Series C,
6.750% 10/01/21 1,235 1,288
-------
2,283
-------
STUDENT LOAN - 3.5%
State Education Assistance Authority,
Series 1996 C,
6.350% 07/01/16 1,000 1,030
-------
--------------------------------------------------------------------------------
HEALTHCARE - 11.3%
HOSPITAL
Charlotte-Mecklenburg Hospital,
Carolinas Healthcare Systems,
Series A:
5.000% 01/15/17 750 687
6.250% 01/01/20 485 494
State Medical Care Commission,
Annie Penn Memorial Hospital,
Series 1998,
5.375% 01/01/22 500 388
Gaston Health Care,
Series 1998,
5.000% 02/15/19 750 658
Stanley Memorial Hospital,
Series 1999,
6.375% 10/01/29 500 503
Wilson Memorial Hospital,
Series 1997,
(a) 11/01/14 1,380 632
-------
3,362
-------
--------------------------------------------------------------------------------
HOUSING - 12.4%
ASSISTED LIVING/SENIOR - 0.6%
State Medical Care Commission,
DePaul Community Facilities Project,
Series 1999,
7.625% 11/01/29 200 192
-------
MULTI-FAMILY - 7.0%
Eastern Carolina Regional Housing
Authority, New River Apartments,
Jacksonville, Series 1994,
8.250% 09/01/14 235 240
Raleigh Housing Authority,
Cedar Point Apartments,
Series 1999 A,
5.875% 11/01/24 500 466
State Housing Finance Agency,
Series F,
6.600% 07/01/17 1,340 1,393
-------
2,099
-------
SINGLE FAMILY - 4.8%
State Housing Finance Agency:
Series W,
6.450% 09/01/14 410 420
Series KK,
5.500% 03/01/09 305 308
Series 1998,
5.250% 03/01/17 750 706
-------
1,434
-------
--------------------------------------------------------------------------------
OTHER - 20.4%
REFUNDED/ESCROWED (b)
Cumberland County,
Civic Center Project,
Series 1995 A,
6.400% 12/01/24 1,000 1,087
Eastern Municipal Power Agency:
Series 1987 A,
4.500% 01/01/24 1,750 1,529
Series 1991 A,
6.500% 01/01/18 1,500 1,681
Lincoln County,
Lincoln County Hospital,
9.000% 05/01/07 215 246
State Municipal Power Agency,
Catawba No. 1,
Series 1990,
5.500% 01/01/13 1,000 1,036
Wake County,
Series 1993,
5.125% 10/01/13 500 499
-------
6,078
-------
--------------------------------------------------------------------------------
TAX-BACKED - 28.1%
LOCAL APPROPRIATED - 17.2%
Chapel Hill,
Parking Facilities,
Series 1994,
6.450% 12/01/23 500 516
</TABLE>
See notes to investment portfolio.
5
<PAGE> 8
INVESTMENT PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
MUNICIPAL BONDS (CONTINUED) PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
Cityfair Parking Facility,
Series 1994 A,
6.125% 06/01/10 $ 430 $ 453
Cumberland County,
Civic Center Project,
Series 1998,
5.000% 12/01/18 1,000 932
Durham County,
Hospital & Office Facilities:
Series 1994,
6.000% 05/01/14 1,000 1,062
Series 1997,
5.000% 05/01/14 250 242
Harnett County,
Harnett County Projects,
Series 1994,
6.400% 12/01/14 250 269
Randolph County,
Randolph County Projects
Series 2000,
5.750% 06/01/22 250 252
Rowan County,
Justice Center Project,
Series 1992,
6.250% 12/01/07 500 529
Sampson Area,
Series 1999,
4.750% 06/01/24 1,000 871
-------
5,126
-------
STATE APPROPRIATED - 4.1%
PR Commonwealth of Puerto Rico,
Public Finance Corp.,
Series 1998 A,
5.375% 06/01/17 1,000 1,013
PR Commonwealth of Puerto Rico
Public Building Authority,
Series 1993 M,
5.700% 07/01/16 200 203
-------
1,216
-------
STATE GENERAL OBLIGATIONS - 6.8%
State Public School,
Series 1999,
4.600% 04/01/16 1,000 903
PR Commonwealth of Puerto Rico
Aqueduct & Sewer Authority,
Series 1995,
6.250% 07/01/12 1,000 1,112
-------
2,015
-------
--------------------------------------------------------------------------------
TRANSPORTATION - 3.5%
AIR TRANSPORTATION
Charlotte Airport,
Series 1999, IFRN (variable rate) (c)
7.610% 06/15/22 1,000 1,033
-------
--------------------------------------------------------------------------------
UTILITY - 12.2%
JOINT POWER AUTHORITY - 7.7%
Eastern Municipal Power Agency:
Series 1993 B,
6.000% 01/01/22 500 517
Series 1999 D,
6.700% 01/01/19 500 513
State Municipal Power Agency,
Catawba Electric No. 1,
Series 1998 A,
5.500% 01/01/15 1,250 1,270
-------
2,300
-------
MUNICIPAL ELECTRIC - 4.5%
University of North Carolina
at Chapel Hill:
(a) 08/01/13 2,000 1,009
Series 1997,
(a) 08/01/20 1,000 325
-------
1,334
-------
TOTAL MUNICIPAL BONDS
(cost of $29,353) (d) 29,502
-------
OPTIONS - 0.1%
--------------------------------------------------------------------------------
December 2000 Treasury Bond Call,
Strike price 100, expiration 11/18/00
(cost of $14) 1,100 15
-------
TOTAL INVESTMENTS
(cost of $29,367) 29,517
-------
OTHER ASSETS & Liabilities, Net - 0.8% 248
=======
NET ASSETS - 100% $29,765
=======
</TABLE>
NOTES TO INVESTMENT PORTFOLIO:
(a) Zero coupon bond.
(b) The Fund has been informed that each issuer has placed direct obligations of
the U.S. Government in an irrevocable trust, solely for the payment of the
interest and principal.
(c) This is a restricted security which was acquired at a cost of $99. This
security represents 3.5% of the Fund's net assets at July 31, 2000.
(d) Cost for federal income tax purposes is the same.
<TABLE>
<CAPTION>
Acronym Name
------- ----
<S> <C>
IFRN Inverse Floating Rate Note
</TABLE>
See notes to financial statements.
6
<PAGE> 9
STATEMENT OF ASSETS AND LIABILITIES
July 31, 2000 (Unaudited)
(In thousands except for per share amounts and footnotes)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value (cost $29,367) $ 29,517
Receivable for:
Interest $ 295
Other 89 384
-------- --------
Total Assets 29,901
LIABILITIES
Payable for:
Distributions 37
Fund shares repurchased 35
Accrued :
Management fee 12
Transfer agent fee 3
Bookkeeping fee 2
Deferred Trustees fees 3
Other 44
--------
Total Liabilities 136
--------
NET ASSETS $ 29,765
========
Net asset value & redemption price per share --
Class A ($15,687/2,216) $ 7.08(a)
========
Maximum offering price per share --
Class A ($7.08/0.9525) $ 7.43(b)
========
Net asset value & offering price per share --
Class B ($13,526/1,910) $ 7.08(a)
========
Net asset value & offering price per share --
Class C ($552/78) $ 7.08(a)
========
COMPOSITION OF NET ASSETS
Capital paid in $ 30,860
Overdistributed net investment income (47)
Accumulated net realized loss (1,198)
Net unrealized appreciation 150
--------
$ 29,765
========
</TABLE>
(a) Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
(b) On sales of $50,000 or more the offering price is reduced.
STATEMENT OF OPERATIONS
For the Six Months ended July 31, 2000 (Unaudited)
(In thousands)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest $ 875
EXPENSES
Management fee $ 75
Service fee 28
Distribution fee -- Class B 51
Distribution fee -- Class C 2
Transfer agent fee 24
Bookkeeping fee 14
Trustees fee 4
Audit fee 20
Legal fee 3
Registration fee 9
Reports to shareholders 8
Other 3
--------
Total expenses 241
Fees waived by the Distributor -- Class C (1)
Custodian credits earned (1) 239
-------- --------
Net Investment Income 636
--------
NET REALIZED & UNREALIZED GAIN (LOSS) ON
PORTFOLIO POSITIONS
Net realized loss on:
Investments (171)
Closed futures contracts (23)
--------
Net Realized Loss (194)
Net change in unrealized
appreciation/depreciation
during the period on:
Investments 1,411
Open futures contracts (20)
--------
Net change in unrealized
appreciation/depreciation 1,391
--------
Net Gain 1,197
--------
Increase in Net Assets from Operations $ 1,833
========
</TABLE>
See notes to financial statements.
7
<PAGE> 10
STATEMENT OF CHANGES IN NET ASSETS
(In thousands)
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS
ENDED YEAR ENDED
JULY 31, JANUARY 31,
-------- -----------
INCREASE (DECREASE) IN NET ASSETS 2000 2000
--------------------------------- ---- ----
<S> <C> <C>
OPERATIONS:
Net investment income $ 636 $ 1,342
Net realized loss (194) (258)
Net unrealized appreciation/depreciation 1,391 (3,421)
-------- --------
Net Increase (Decrease) from Operations 1,833 (2,337)
DISTRIBUTIONS:
From net investment income -- Class A (369) (736)
From net investment income -- Class B (272) (575)
From net investment income -- Class C (13) (30)
-------- --------
1,179 (3,678)
-------- --------
FUND SHARE TRANSACTIONS:
Receipts for shares sold -- Class A 440 3,670
Value of distributions reinvested -- Class A 225 442
Cost of shares repurchased -- Class A (1,342) (2,931)
-------- --------
(677) 1,181
-------- --------
Receipts for shares sold -- Class B 310 1,441
Value of distributions reinvested -- Class B 131 290
Cost of shares repurchased -- Class B (1,384) (3,454)
-------- --------
(943) (1,723)
-------- --------
Receipts for shares sold -- Class C 70 411
Value of distributions reinvested -- Class C 6 23
Cost of shares repurchased -- Class C (242) (160)
-------- --------
(166) 274
-------- --------
Net Decrease from Fund Share Transactions (1,786) (268)
-------- --------
Total Decrease (607) (3,946)
NET ASSETS
Beginning of period 30,372 34,318
-------- --------
End of period (net of overdistributed net
investment income of $47 and $29,
respectively) $ 29,765 $ 30,372
======== ========
</TABLE>
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS
ENDED YEAR ENDED
JULY 31, JANUARY 31,
-------- -----------
NUMBER OF FUND SHARES 2000 2000
--------------------- ---- ----
<S> <C> <C>
Sold -- Class A 64 501
Issued for distributions reinvested -- Class A 32 61
Repurchased -- Class A (193) (409)
---- ----
(97) 153
---- ----
Sold -- Class B 45 201
Issued for distributions reinvested -- Class B 19 40
Repurchased -- Class B (200) (481)
---- ----
(136) (240)
---- ----
Sold -- Class C 10 55
Issued for distributions reinvested -- Class C 1 3
Repurchased -- Class C (35) (22)
---- ----
(24) 36
---- ----
</TABLE>
See notes to financial statements.
8
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS
July 31, 2000 (Unaudited)
NOTE 1. INTERIM FINANCIAL STATEMENTS
In the opinion of management of Liberty North Carolina Tax-Exempt Fund,
(formerly Colonial North Carolina Tax-Exempt Fund), (the Fund), a series of
Liberty Funds 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, 2000, 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, as is consistent with prudent risk, by
pursuing current income exempt from federal and North Carolina state personal
income tax and opportunities for long-term appreciation from a portfolio
primarily invested in investment grade municipal bonds. The Fund may issue an
unlimited number of shares. The Fund offers three classes of shares: Class A,
Class B and Class C. Class A shares are sold with a front-end sales charge. A
1.00% contingent deferred sales charge is assessed to Class A shares purchased
without an initial sales charge on redemptions made within eighteen months on an
original purchase of $1 million to $25 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 in three, four or eight years after purchase
depending on the program under which shares were purchased. 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.
9
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES
MANAGEMENT FEE:
Colonial Management Associates, Inc. (the Advisor) is the investment Advisor of
the Fund and furnishes accounting and other services and office facilities for a
monthly fee based on the Fund's pro-rata portion of the combined average net
assets of the funds constituting Trust V as follows:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS ANNUAL FEE RATE
------------------ ---------------
<S> <C>
First $2 billion 0.50%
Over $2 billion 0.45%
</TABLE>
BOOKKEEPING FEE:
The Advisor provides bookkeeping and pricing services for a monthly fee equal to
$27,000 annually plus 0.035% of the Fund's average net assets over $50 million.
TRANSFER AGENT FEE:
Liberty Funds Services, Inc. (the Transfer Agent), an affiliate of the Advisor,
provides shareholder services for a monthly fee comprised of 0.07% annually of
the Fund's average net assets plus charges based on the number of shareholder
accounts and transactions and receives reimbursement for certain out of pocket
expenses.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES:
Liberty Funds Distributor, Inc. (the Distributor), a subsidiary of the Advisor,
is the Fund's principal underwriter. During the six months ended July 31, 2000,
the Fund has been advised that the Distributor retained net underwriting
discounts of $5,852 on sales of the Fund's Class A shares and received
contingent deferred sales charges (CDSC) of none, $18,378 and none 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 monthly
service fee to the Distributor. The fee is calculated by adding (1) 0.10% of the
net assets attributable to shares issued prior to November 30, 1994 and (2)
0.25% on net assets attributable to shares issued thereafter. This arrangement
results in a rate of service fee payable by the Fund that is a blend between the
0.10% and 0.25% rates. For the six months ended July 31, 2000, the Fund's
service fee was 0.19%.
The plan also requires the payment of a monthly distribution fee to the
Distributor equal to 0.75% annually of the Fund's average net assets
attributable to Class B and Class C shares. The Distributor has voluntarily
agreed to waive a portion of the Class C distribution fee so that it will not
exceed 0.45% annually.
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.
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 net assets.
The Fund has an agreement with its custodian bank under which custodian fees
were reduced by balance credits of $1,381 applied during the six months ended
July 31, 2000. The Fund could have reinvested 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 4. PORTFOLIO INFORMATION
INVESTMENT ACTIVITY:
For the six months ended July 31, 2000, purchases and sales of investments,
other than short-term obligations were $2,616,025 and $4,233,233, respectively.
Unrealized appreciation (depreciation) at July 31, 2000, based on cost of
investments for both financial statement and federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation $ 695,434
Gross unrealized depreciation (545,001)
---------
Net unrealized appreciation $ 150,433
=========
</TABLE>
CAPITAL LOSS CARRYFORWARDS:
At January 31, 2000, capital loss carryforwards available (to the extent
provided in regulations) to offset future realized gains were approximately as
follows:
<TABLE>
<CAPTION>
YEAR OF EXPIRATION CAPITAL LOSS CARRYFORWARD
------------------ -------------------------
<S> <C>
2004 $356,000
2005 124,000
2007 293,000
--------
$773,000
========
</TABLE>
Expired capital loss carryforwards, if any, are recorded as a reduction of
capital paid in.
To the extent loss carryforwards are used to offset any future realized gains,
it is unlikely that such gains would be distributed since they may be taxable to
shareholders as ordinary income.
OTHER:
There are certain risks arising from geographic concentration in any state.
Certain revenue or tax related events in a state may impair the ability of
certain issuers of municipal securities to pay principal and interest on their
obligations.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
The Fund may purchase or sell municipal and Treasury bond futures contracts and
purchase and write options on futures. The Fund will invest in these instruments
to hedge against the effects of changes in the value of portfolio securities due
to anticipated changes in interest rates and/or market conditions, for duration
management, or when the transactions are economically appropriate to the
reduction of risk inherent in the management of the Fund and not for trading
purposes. The use of futures contracts and options involves certain risks which
include (1) imperfect correlation between the price movement of the instruments
and the underlying securities, (2) inability to close out a position due to
different trading hours, or the temporary absence of a liquid market for either
the instrument or the underlying securities or (3) an inaccurate prediction by
the Advisor of the future direction of interest rates. Any of these risks may
involve amounts exceeding the amount
10
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
recognized 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, 2000.
11
<PAGE> 14
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED JULY 31, 2000
------------------------------
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $6.810 $6.810 $6.810
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.160 0.134 0.144(b)
Net realized and unrealized gain 0.274 0.274 0.274
------ ------ ------
Total from Investment Operations 0.434 0.408 0.418
------ ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.164) (0.138) (0.148)
------ ------ ------
NET ASSET VALUE, END OF PERIOD $7.080 $7.080 $7.080
------ ------ ------
Total return (c) 6.44% 6.04% 6.20%(e)
------ ------ ------
RATIOS TO AVERAGE NET ASSETS
Expenses (f)(g) 1.25% 2.00% 1.70%(b)
Net investment income (f)(g) 4.60% 3.85% 4.15%(b)
Portfolio turnover (d) 9% 9% 9%
Net assets at end of period (000) $15,687 $13,526 $552
</TABLE>
(a) The per share net investment income amounts do not reflect the period's
reclassification of differences between book and tax basis net
investment income.
(b) Net of fees waived by the Distributor which amounted to $0.010 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) Not annualized.
(e) Had the Distributor not waived a portion of expenses, total return
would have been reduced.
(f) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(g) Annualized.
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31, 2000
---------------------------
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.600 $ 7.600 $ 7.600
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.318 0.264 0.285(b)
Net realized and unrealized loss (0.790) (0.790) (0.790)
------ ------ ------
Total from Investment Operations (0.472) (0.526) (0.505)
------ ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.318) (0.264) (0.285)
------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 6.810 $ 6.810 $ 6.810
------ ------ ------
Total return (c) (6.33)% (7.03)% (6.75)%(d)
------ ------ ------
RATIOS TO AVERAGE NET ASSETS
Expenses (e) 1.11% 1.86% 1.56%(b)
Net investment income (e) 4.41% 3.66% 3.96%(b)
Portfolio turnover 30% 30% 30%
Net assets at end of period (000) $15,746 $13,932 $ 694
</TABLE>
(a) The per share net investment income amounts do not reflect the period's
reclassification of differences between book and tax basis net
investment income.
(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 Distributor not waived a portion of expenses, total return
would have been reduced.
(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
12
<PAGE> 15
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
Year ended January 31, 1999
----------------------------------------------
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.450 $ 7.450 $ 7.450
----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.342 0.285 0.307(b)
Net realized and unrealized gain 0.164 0.164 0.164
----------- ----------- -----------
Total from Investment Operations 0.506 0.449 0.471
----------- ----------- -----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.348) (0.292) (0.314)
In excess of net investment income (0.008) (0.007) (0.007)
----------- ----------- -----------
Total Distributions Declared to Shareholders (0.356) (0.299) (0.321)
----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 7.600 $ 7.600 $ 7.600
----------- ----------- -----------
Total return (c)(d) 6.98% 6.17% 6.49%
----------- ----------- -----------
RATIOS TO AVERAGE NET ASSETS
Expenses (e) 0.81% 1.56% 1.26%(b)
Net investment income (e) 4.55% 3.80% 4.10%(b)
Fees and expenses waived or borne by the Advisor (e) 0.29% 0.29% 0.29%
Portfolio turnover 26% 26% 26%
Net assets at end of period (000) $ 16,426 $ 17,387 $ 505
(a) Net of fees and expenses waived or borne by the Advisor $ 0.022 $ 0.022 $ 0.022
which amounted to:
</TABLE>
(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.
<TABLE>
<CAPTION>
Years ended January 31,
------------------------------------------------
1998
-----------------------------------------------
Class A Class B Class C (b)
------- ------- -----------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $7.120 $7.120 $7.350
----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.373 0.319 0.168(c)
Net realized and unrealized gain 0.327 0.327 0.100
----------- ----------- -----------
Total from Investment Operations 0.700 0.646 0.268
----------- ----------- -----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.370) (0.316) (0.168)
----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $7.450 $7.450 $7.450
----------- ----------- -----------
Total return (d)(e) 10.10% 9.28% 3.69%(f)
----------- ----------- -----------
RATIOS TO AVERAGE NET ASSETS
Expenses (g) 0.49% 1.24% 0.96%(c)(h)
Net investment income (g) 5.11% 4.36% 4.55%(c)(h)
Fees and expenses waived or borne by
the Advisor (g) 0.64% 0.64% 0.63%(h)
Portfolio turnover 23% 23% 23%
Net assets at end of period (000) $16,425 $17,348 $174
(a) Net of fees and expenses waived or borne
by the Advisor which amounted to: $0.047 $0.047 $0.047
</TABLE>
<TABLE>
<CAPTION>
Years ended January 31,
--------------------------------------------------------------
1997 1996
-------------------------- --------------------------
Class A Class B Class A Class B
-------------------------- --------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $7.270 $7.270 $6.680 $6.680
----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.376 0.322 0.386 0.334
Net realized and unrealized gain (0.150) (0.150) 0.588 0.588
----------- ----------- ----------- -----------
Total from Investment Operations 0.226 0.172 0.974 0.922
----------- ----------- ----------- -----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.376) (0.322) (0.384) (0.332)
----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $7.120 $7.120 $7.270 $7.270
----------- ----------- ----------- -----------
Total return (d)(e) 3.29% 2.51% 14.91% 14.07%
----------- ----------- ----------- -----------
RATIOS TO AVERAGE NET ASSETS
Expenses (g) 0.45% 1.20% 0.33% 1.08%
Net investment income (g) 5.29% 4.54% 5.47% 4.72%
Fees and expenses waived or borne by
the Advisor (g) 0.66% 0.66% 0.76% 0.76%
Portfolio turnover 38% 38% 34% 34%
Net assets at end of period (000) $16,522 $17,427 $15,813 $18,593
(a) Net of fees and expenses waived or borne
by the Advisor which amounted to: $0.047 $0.047 $0.053 $0.053
</TABLE>
(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 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 not waived or reimbursed a portion of expenses, total
return would have been reduced.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(h) Annualized.
13
<PAGE> 16
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<PAGE> 17
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<PAGE> 18
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<PAGE> 19
TRUSTEES & TRANSFER AGENT
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)
SALVATORE MACERA
Private Investor (formerly Executive Vice President of Itek Corp. and President
of Itek Optical & Electronic Industries, Inc.)
WILLIAM E. MAYER
Partner, Park Avenue Equity Partners (formerly Dean, College of Business and
Management, University of Maryland; Dean, Simon Graduate School of Business,
University of Rochester; Chairman and Chief Executive Officer, CS First Boston
Merchant Bank; and President and Chief Executive Officer, The First Boston
Corporation)
JAMES L. MOODY, JR.
Retired (formerly Chairman of the Board, Chief Executive Officer and Director,
Hannaford Bros. Co.)
JOHN J. NEUHAUSER
Academic Vice President and Dean of Faculties, Boston College (formerly Dean,
Boston College School of Management)
JOSEPH R. PALOMBO
Chief Operations Officer, Mutual Funds, Liberty Financial Companies, Inc.,
Executive Vice President and Director of Colonial Management Associates, Inc.
and Executive Vice President and Chief Administrative Officer of Liberty Funds
Group LLC (formerly Vice President of Liberty Funds Group - Boston and Chief
Operating Officer, Putnam Mutual Funds)
THOMAS E. STITZEL
Business Consultant and Chartered Financial Analyst (formerly Professor of
Finance, College of Business, Boise State University)
ANNE-LEE VERVILLE
Consultant (formerly General Manager, Global Education Industry, and President,
Applications Solutions Division, IBM Corporation)
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Liberty North Carolina Tax-Exempt Fund is:
Liberty Funds Services, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
The Fund mails one shareholder report to each shareholder address. If you would
like more than one report, please call 1-800-426-3750 and additional reports
will be sent to you.
This report has been prepared for shareholders of Liberty North Carolina
Tax-Exempt Fund. This report may also be used as sales literature when preceded
or accompanied by the current prospectus which provides details of sales
charges, investment objectives and operating policies of the Fund and with the
most recent copy of the Liberty Funds Performance Update.
SEMIANNUAL REPORT:
Liberty North Carolina Tax-Exempt Fund
<PAGE> 20
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BECAUSE NO SINGLE INVESTMENT MANAGER CAN BE ALL THINGS TO ALL INVESTORS.(SM)
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ADVISOR Innovative solutions for growth and income investing.
[KEYPORT LOGO] A LEADING PROVIDER OF INNOVATIVE ANNUITY PRODUCTS.
Liberty's mutual funds are offered by prospectus through Liberty Funds
Distributor, Inc.
BEFORE YOU INVEST, CONSULT YOUR FINANCIAL ADVISOR.
Your financial advisor can help you develop a long-term plan for reaching your
financial goals.
LIBERTY NORTH CAROLINA TAX-EXEMPT FUND Semiannual Report
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One Financial Center, Boston, MA 02111-2621, 1-800-426-3750
www.libertyfunds.com
790-03/386C-0700 (9/00) 00/1565
