<PAGE> 1
[PICTURE OMITTED]
LIBERTY MICHIGAN 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 Michigan 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
Because economic and market conditions change frequently, there can be no
assurance that the trends described in this report will continue or come to
pass.
Not FDIC Insured
May Lose Value
No Bank Guarantee
<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.
[LINE GRAPH]
MUNICIPAL VS. TREASURY BOND PERFORMANCE
1/31/00 - 7/31/00
<TABLE>
<CAPTION>
Lehman Brothers Salomon 30-Year
Municipal Bond Index Treasury Bond Index
-------------------- -------------------
<S> <C> <C>
1/31/00 0 0
2/29/00 1.16 3.7
3/31/00 3.37 8.56
4/30/00 2.76 7.23
5/31/00 2.22 7.02
6/30/00 4.93 9.36
7/31/00 6.4 11.48
</TABLE>
NET ASSET VALUE PER SHARE AS OF 7/31/00
<TABLE>
<S> <C>
Class A $ 6.82
-------------------------------------------------------------------------------
Class B $ 6.82
-------------------------------------------------------------------------------
Class C $ 6.82
-------------------------------------------------------------------------------
</TABLE>
DISTRIBUTIONS DECLARED FROM 2/1/00 TO 7/31/00
<TABLE>
<S> <C>
Class A $ 0.162
-------------------------------------------------------------------------------
Class B $ 0.137
-------------------------------------------------------------------------------
Class C $ 0.147
-------------------------------------------------------------------------------
</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 4.14%
-------------------------------------------------------------------------------
Class B 3.57%
-------------------------------------------------------------------------------
Class C 3.82%
-------------------------------------------------------------------------------
</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 3.22% for Class C shares.
TAXABLE-EQUIVALENT SEC YIELDS ON 7/31/00
<TABLE>
<S> <C>
Class A 7.17%
-------------------------------------------------------------------------------
Class B 6.18%
-------------------------------------------------------------------------------
Class C 6.62%
-------------------------------------------------------------------------------
</TABLE>
Taxable-equivalent SEC yields are based on the maximum combined effective 42.3%
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.
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.
1
<PAGE> 4
Portfolio Manager's Report
QUALITY BREAKDOWN AS OF 7/31/00
<TABLE>
<S> <C>
AAA 51.9%
-------------------------------------------------------------------------------
AA 14.7%
-------------------------------------------------------------------------------
A 14.0%
-------------------------------------------------------------------------------
BBB 7.9%
-------------------------------------------------------------------------------
BB 0.5%
-------------------------------------------------------------------------------
B 0.5%
-------------------------------------------------------------------------------
Non-rated 8.4%
-------------------------------------------------------------------------------
Cash equivalents 2.1%
-------------------------------------------------------------------------------
</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.
SOLD
We sold a 5.60% Michigan Tawas hospital bond due in 2013 on the blue list. The
blue list is a trading system which allows institutions to offer securities
directly to retail investors, who often will pay more for a bond than an
institutional buyer. In this way, we increased the Fund's profit on the trade.
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 Michigan Tax-Exempt Fund
posted a total return of 6.34% 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.
THE FUND SHIFTED EMPHASIS TO BONDS THAT RESPOND WELL TO FALLING INTEREST RATES
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 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 adjusted the Fund's holdings in several ways.
First, we traded securities with maturities of 10 to 12 years for issues in the
15- to 20-year maturity range. Second, we divested bonds purchased in a lower
interest rate environment (i.e., those with lower coupons) that were trading at
a loss. We then used the proceeds to increase the Fund's exposure to discounted
and zero coupon bonds. Both groups are known to appreciate more than comparable
current-coupon bonds when interest rates fall. Following additional
anti-inflationary "strikes" by the Fed in February, March and May, investors did
indeed take the pressure off bond yields. The bond market rallied, and the Fund
performed quite well.
Also important to the Fund's most recent results were improvements in the
healthcare sector. Nationwide, healthcare has suffered for the past several
years from mismanagement, federal budget cuts to Medicare and increased
competition. As a result, the Fund's healthcare holdings detracted from
performance during 1999. In the most recent period, the industry began to
recover, and the Fund's healthcare holdings (13.8% of net assets as of July 31,
2000), though still problematic, presented less of a challenge to performance.
2
<PAGE> 5
PORTFOLIO MANAGER'S REPORT (continued)
MICHIGAN CONTINUED ECONOMIC EXPANSION
As the national economy, personal wealth and automobile sales grew in the past
decade, Michigan's economy enjoyed extraordinarily strong growth, and the most
recent period was no exception. However, while the state has attracted
businesses in other industries, it remains largely dependent upon automobile
manufacturing, an area that could be greatly effected by labor shortages, labor
unions and the economic cycle.
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.
While Michigan, with its auto-dominated economy, is more vulnerable to an
economic slowdown than most states, we are not overly concerned. We believe the
Fed will be successful in engineering a gradual rather than sudden or severe
reduction of economic activity.
/s/ David S. Pope
DAVID POPE is portfolio manager of Liberty Michigan 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.
TOP FIVE SECTOR BREAKDOWN
7/31/00 VS. 1/31/00
<TABLE>
<CAPTION>
7/31/00 1/31/00
------- -------
<S> <C> <C>
Local General Obligations 21.2% 17.7%
Refunded/Escrowed 20.0% 22.3%
Hospital 12.1% 11.8%
Investor Owned Utilities 11.3% 10.5%
Airport 4.4% 3.9%
</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 these sector breakdowns in the future.
BOUGHT
We purchased zero coupon bonds issued by the Holland, MI, School District (2.0%
of net assets). AAA-rated and insured, these bonds due in 2017 bolstered the
portfolio's credit quality and enhanced the Fund's capital appreciation
potential in the event long-term rates continue to decline.
3
<PAGE> 6
PERFORMANCE INFORMATION
AVERAGE ANNUAL TOTAL RETURNS AS OF 7/31/00
<TABLE>
<CAPTION>
SHARE CLASS A B C
INCEPTION DATE 9/26/86 8/4/92 8/1/97
---------------------------------------------------------------------------------------------
WITHOUT WITH SALES WITHOUT WITH SALES WITHOUT WITH SALES
SALES CHARGE CHARGE SALES CHARGE CHARGE SALES CHARGE CHARGE
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
6 month
(cumulative) 6.34% 1.29% 5.95% 0.95% 6.10% 5.10%
---------------------------------------------------------------------------------------------
1 year 2.10 (2.75) 1.33 (3.54) 1.63 0.66
---------------------------------------------------------------------------------------------
5 years 5.63 4.61 4.84 4.51 5.33 5.33
---------------------------------------------------------------------------------------------
10 years 6.16 5.65 5.51 5.51 6.01 6.01
---------------------------------------------------------------------------------------------
</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) 3.68% (1.25)% 3.26% (1.74)% 3.43% 2.43%
---------------------------------------------------------------------------------------------
1 year 0.93 (3.86) 0.17 (4.64) 0.47 (0.49)
---------------------------------------------------------------------------------------------
5 years 5.40 4.38 4.61 4.27 5.11 5.11
---------------------------------------------------------------------------------------------
10 years 6.17 5.65 5.52 5.52 6.02 6.02
---------------------------------------------------------------------------------------------
</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 B and C share (newer class shares) performance information includes
returns of the Fund's Class A shares (the oldest existing Fund class) for
periods prior to 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 the period prior to the inception
of the newer class shares would have been lower.
4
<PAGE> 7
INVESTMENT PORTFOLIO
July 31, 2000 (Unaudited)
(in thousands)
<TABLE>
<CAPTION>
MUNICIPAL BONDS - 98.3% PAR VALUE
--------------------------------------------------------------------------
<S> <C> <C>
EDUCATION - 4.2%
Oakland County Economic Development Corp.,
Cranbrook Educational Community Project,
Series B,
5.000% 11/1/17 $1,535 $1,432
PR Commonwealth of Puerto Rico,
Ana G. Mendez University System,
Series 1999,
5.375% 2/1/19 275 255
------
1,687
------
-------------------------------------------------------------------------
HEALTHCARE - 13.8%
CONGREGATE CARE RETIREMENT - 0.5%
State Strategic Fund, Holland Home,
Series 1998,
5.750% 11/15/18 250 208
------
HOSPITALS - 12.1%
Chippewa County Hospital Finance Authority,
County War Memorial Hospital,
Series B,
5.625% 11/1/14 500 436
Dickinson County,
Series 1999,
5.800% 11/1/24 500 386
Royal Oak Hospital Finance Authority
William Beaumont Hospital:
Series 1992 E,
6.625% 1/1/19 1,000 1,042
Series 1993 G,
5.250% 11/15/19 1,300 1,226
State Hospital Finance Authority:
Central Michigan Community Hospital,
Series 1993 A,
6.000% 10/1/08 500 488
Crittenton Hospital,
Series 1992 A,
6.700% 3/1/07 750 781
Detroit Medical Center,
Series 1988 A,
8.125% 8/15/12 20 20
Memorial Healthcare Center,
Series 1999,
5.750% 11/15/15 500 433
------
4,812
------
NURSING HOME - 1.2%
Cheboygan County Economic Development Corp.,
Metro Health Foundation Project,
Series 1993,
10.000% 11/01/22 (a) 600 455
------
-------------------------------------------------------------------------
HOUSING - 3.9%
MULTI-FAMILY - 1.5%
State Housing Development Authority:
Series 1990 A,
7.700% 4/1/23 $ 500 $ 516
------
Series 1991 B,
7.050% 10/1/12 85 88
------
604
------
SINGLE FAMILY - 2.4%
State Housing Development Authority,
Series 1994 D,
6.850% 6/1/26 935 954
------
-------------------------------------------------------------------------
INDUSTRIAL - 0.5%
FOOD PRODUCTS
State Strategic Fund,
Michigan Sugar Co.,
Carollton Project,
Series 1998 C,
6.550% 11/1/25 250 207
------
-------------------------------------------------------------------------
OTHER - 24.4%
POOL/BOND BANK - 4.4%
State Municipal Bond Authority,
Local Government Loan Program:
Series 1992 D,
6.650% 5/1/12 1,000 1,042
Revolving Fund,
5.125% 10/1/20 750 702
------
1,744
------
REFUNDED/ESCROWED (B) - 20.0%
Battle Creek,
7.650% 5/1/22 750 838
Detroit Downtown Development Authority,
Area No. 1 Projects:
Series 1996 C,
6.200% 7/1/17 1,000 1,089
Series 1996 D,
6.500% 7/1/10 700 773
Dickinson County, Memorial Hospital System,
Series 1994,
8.125% 11/1/24 550 629
Kalamazoo Hospital Finance Authority:
Borgess Medical Center,
Series 1994 A,
6.250% 6/1/14 1,000 1,092
Bronson Methodist Hospital,
Series 1992 A,
6.250% 5/15/12 1,500 1,598
</TABLE>
5
<PAGE> 8
INVESTMENT PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
MUNICIPAL BONDS - (CONTINUED) PAR VALUE
-------------------------------------------------------------------------
<S> <C> <C>
Redford Township Building Authority,
Series 1992,
6.500% 11/1/13 $ 675 $ 711
State Hospital Finance Authority,
Daughters of Charity-Providence,
Series 1991,
7.000% 11/1/21 1,000 1,050
VI Public Finance Authority,
Series 1992 A,
7.000% 10/1/02 125 132
------
7,912
------
-------------------------------------------------------------------------
OTHER REVENUE - 1.9%
HOTELS
Detroit Economic Development Corp.,
E.H. Association Limited Partnership,
Series 1992,
7.000% 6/1/12 750 764
------
-------------------------------------------------------------------------
RESOURCE RECOVERY - 1.1%
DISPOSAL
State Strategic Fund, United Waste Systems, Inc.,
Series 1995,
5.200% 4/1/10 500 438
------
-------------------------------------------------------------------------
TAX-BACKED - 29.9%
LOCAL APPROPRIATED - 2.5%
Wayne County Building Authority,
Series 1996 A,
5.250% 6/1/16 1,000 977
------
LOCAL GENERAL OBLIGATIONS - 21.2%
Central Montcalm Public Schools,
Series 1999,
5.750% 5/1/24 1,000 1,004
Holland School District,
Series 1992,
(c) 5/1/17 2,000 778
Kalamazoo School District,
Series 1999,
4.500% 5/1/16 500 434
Okemos Public School District,
Series 1993,
(c) 5/1/12 500 268
Paw Paw Public School District,
Series 1998,
5.000% 5/1/25 1,020 941
Redford Unified School District,
Series 1997,
5.000% 5/1/22 750 696
Southgate Community School District,
Series 1999,
5.000% 5/1/25 $1,000 $ 902
St. Johns Public School,
Series 1998,
5.100% 5/1/25 1,790 1,668
Williamston Community School District,
Series 1996,
5.500% 5/1/25 1,725 1,702
------
8,393
------
SPECIAL PROPERTY TAX - 1.3%
Romulus Tax Increment
Finance Authority,
Series 1994,
6.750% 11/1/19 500 525
------
STATE APPROPRIATED - 4.9%
Redevco, Inc.,
Series 2000,
(c) 6/1/21 2,000 594
PR Commonwealth of Puerto Rico
Public Building Authority,
Series 1995 A,
6.250% 7/1/14 1,200 1,340
------
1,934
------
-------------------------------------------------------------------------
TRANSPORTATION - 4.4%
AIRPORT
Wayne Charter County,
Detroit Metropolitan Airport:
Series 1998 A,
5.000% 12/1/28 1,000 868
Series 1998 B,
4.875% 12/1/23 1,000 879
------
1,747
------
-------------------------------------------------------------------------
UTILITY - 14.2%
INDEPENDENT POWER PRODUCER - 0.5%
Midland County Economic Development Corp.,
Series 2000,
6.875% 7/23/09 200 202
------
INVESTOR OWNED - 11.3%
St. Clair County Economic Development Corp.,
Detroit Edison Co.,
Series 1933 AA,
6.400% 8/1/24 2,000 2,139
State Strategic Fund, Detroit Edison Co.,
Series BB,
7.000% 5/1/21 (d) 2,000 2,354
------
4,493
------
</TABLE>
See notes to investment portfolio.
6
<PAGE> 9
INVESTMENT PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
MUNICIPAL BONDS - (CONTINUED) PAR VALUE
--------------------------------------------------------------------------
<S> <C> <C>
WATER & SEWER - 2.4%
Detroit, Water Supply System,
Series 1999 A,
(c) 7/1/20 $3,000 $ 951
-------
TOTAL MUNICIPAL BONDS
(cost of $37,959) (e) 39,006
-------
SHORT-TERM OBLIGATIONS - 2.0%
--------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (f)
MN Minneapolis,
Series 1996,
4.150% 12/1/06 820 820
-------
OTHER ASSETS & LIABILITIES, NET - (0.4)% (167)
--------------------------------------------------------------------------
NET ASSETS - 100.0% $39,659
-------
</TABLE>
NOTES TO INVESTMENT PORTFOLIO:
(a) This issuer is in default of certain debt covenants. Income is not being
accrued.
(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) Zero coupon bond.
(d) This security, or a portion thereof, with a total market value of $2,178 is
being used to collateralize open futures contracts.
(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 July 31, 2000.
Short futures contracts open on July 31, 2000:
<TABLE>
<CAPTION>
Par value Unrealized
covered by Expiration appreciation
Type contracts month at 07/31/00
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Treasury Bond $1,200 September $24
</TABLE>
See notes to financial statements.
7
<PAGE> 10
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 $37,959) $ 39,006
Short-term obligations 820
--------
39,826
Receivable for:
Interest $ 557
Fund shares sold 10
Other 44 611
-------- --------
Total Assets 40,437
LIABILITIES
Payable for:
Investments purchased 593
Distributions 53
Fund shares repurchased 79
Variation margin on futures contracts 1
Accrued:
Management fee 16
Bookkeeping fee 3
Transfer agent fee 5
Deferred Trustees' fees 3
Other 25
--------
Total Liabilities 778
--------
NET ASSETS $ 39,659
========
Net asset value & redemption price per share--
Class A ($30,388/4,453) 6.82(a)
--------
Maximum offering price per share--
Class A ($6.82/0.9525) 7.16(b)
--------
Net asset value & offering price per share--
Class B ($8,750/1,282) 6.82(a)
--------
Net asset value & offering price per share--
Class C ($521/76) 6.82(a)
--------
COMPOSITION OF NET ASSETS
Capital paid in $ 39,682
Overdistributed net investment income (117)
Accumulated net realized loss (977)
Net unrealized appreciation on:
Investments 1,047
Open futures contracts 24
--------
$ 39,659
--------
</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 $ 1,184
-------
EXPENSES
Management fee $ 100
Service fee 35
Distribution fee -- Class B 34
Distribution fee -- Class C 2
Transfer agent fee 35
Bookkeeping fee 14
Trustees' fees 4
Custodian fee 2
Audit fee 17
Legal fee 3
Registration fee 8
Reports to shareholders 6
Other 2
-------
260
Fees waived by the Distributor -- Class C (1)
Custodian credits earned (2) 259
------- -------
Net Investment Income 925
-------
NET REALIZED & UNREALIZED GAIN (LOSS) ON
PORTFOLIO POSITIONS
Net realized loss on:
Investments (47)
Closed futures contracts (251)
-------
Net Realized Loss (298)
Net change in unrealized appreciation/
depreciation during the period on:
Investments 1,811
Open futures contracts (13)
-------
Net change in unrealized
appreciation/depreciation 1,798
-------
Net Gain 1,500
-------
Increase in Net Assets from Operations $ 2,425
=======
</TABLE>
See notes to financial statements.
8
<PAGE> 11
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 $ 925 $ 2,096
Net realized loss (298) (122)
Net change in unrealized
appreciation/depreciation 1,798 (5,009)
------- -------
Net Increase (Decrease) from Operations 2,425 (3,035)
Distributions:
From net investment income -- Class A (740) (1,623)
In excess of net investment income --
Class A -- (40)
In excess of net realized gains -- Class A -- (10)
From net investment income -- Class B (184) (424)
In excess of net investment income --
Class B -- (10)
In excess of net realized gains -- Class B -- (3)
From net investment income -- Class C (12) (49)
In excess of net investment income --
Class C -- (1)
In excess of net realized gains -- Class C -- (1)
------- -------
1,489 (5,196)
------- -------
FUND SHARE TRANSACTIONS:
Receipts for shares sold -- Class A 199 3,485
Value of distributions reinvested -- Class A 465 1,002
Cost of shares repurchased -- Class A (2,408) (8,228)
------- -------
(1,744) (3,741)
------- -------
Receipts for shares sold -- Class B 202 1,305
Value of distributions reinvested -- Class B 90 216
Cost of shares repurchased -- Class B (1,131) (3,649)
------- -------
(839) (2,128)
------- -------
Receipts for shares sold -- Class C -- 308
Value of distributions reinvested -- Class C 12 47
Cost of shares repurchased -- Class C (142) (952)
------- -------
(130) (597)
------- -------
Net Decrease from Fund Share
Transactions (2,713) (6,466)
------- -------
Total Decrease (1,224) (11,662)
NET ASSETS
Beginning of period 40,883 52,545
------- -------
End of period (net of overdistributed
net investment income of $117 and
$106, respectively) $ 39,659 $ 40,883
------- -------
</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 30 496
Issued for distributions reinvested -- Class A 70 143
Repurchased -- Class A (362) (1,191)
------- -------
(262) (552)
------- -------
Sold -- Class B 30 186
Issued for distributions reinvested -- Class B 13 30
Repurchased -- Class B (169) (525)
------- -------
(126) (309)
------- -------
Sold -- Class C -- 43
Issued for distributions reinvested -- Class C 2 7
Repurchased -- Class C (22) (139)
------- -------
(20) (89)
------- -------
</TABLE>
See notes to financial statements.
9
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS
July 31, 2000 (Unaudited)
NOTE 1. INTERIM FINANCIAL STATEMENT
In the opinion of management of Liberty Michigan Tax Exempt Fund (the Fund), a
series of Liberty 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 Michigan 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 and losses are based upon the specific
identification method for both financial statement and federal income tax
purposes.
The Fund may trade securities on other than normal settlement terms. This may
increase the risk if the other party to the transaction fails to deliver and
causes the Fund to subsequently invest at less advantageous prices.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS:
All income, expenses (other than the Class B and Class C distribution fees), and
realized and unrealized gains (losses), are allocated to each class
proportionately on a daily basis for purposes of determining the net asset value
of each class.
Class B and Class C per share data and ratios are calculated by adjusting the
expense and net investment income per share data and ratios for the Fund for the
entire period by the distribution fee applicable to Class B and Class C shares
only.
FEDERAL INCOME TAXES:
Consistent with the Fund's policy to qualify as a regulated investment company
and to distribute all of its taxable and tax-exempt income, no federal income
tax has been accrued.
INTEREST INCOME, DEBT DISCOUNT AND PREMIUM:
Interest income is recorded on the accrual basis. Original issue discount is
accreted to interest income over the life of a security with a corresponding
increase in the cost basis; market discount is not accreted. Premium is
amortized against interest income with a corresponding decrease in the cost
basis.
DISTRIBUTIONS TO SHAREHOLDERS:
The Fund declares and records distributions daily and pays monthly.
The amount and character of income and gains to be distributed
are determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. Reclassifications are made to the
Fund's capital accounts to reflect income and gains available for distribution
(or available capital loss carryforwards) under income tax regulations.
NOTE 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>
10
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
BOOKKEEPING FEE:
The Advisor provides bookkeeping and pricing services for a monthly fee equal to
$27,000 annually plus 0.035% annually 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
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. For the six months ended July 31, 2000, the
Fund has been advised that the Distributor retained net underwriting discounts
of $12,377 on sales of the Fund's Class A shares and received contingent
deferred sales charges (CDSC) of none, $5,614 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 0.18%.
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 assets.
The Fund has an agreement with its custodian bank under which $1,651 of
custodian fees were reduced by balance credits applied during the six months
ended July 31, 2000. The Fund could have invested a portion of the assets
utilized in connection with the expense offset arrangements in an income
producing asset if it had not entered into such agreements.
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 $5,689,865 and $8,391,954.03,
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 $1,735,531
Gross unrealized depreciation (688,290)
----------
Net unrealized appreciation $1,047,241
==========
</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>
2008 $98,000
</TABLE>
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 variation margin 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 for 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 $ 6.570 $ 6.570 $ 6.570
-------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.159 0.134 0.144(b)
Net realized and unrealized gain 0.253 0.253 0.253
-------- -------- --------
Total from Investment Operations 0.412 0.387 0.397
-------- -------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.162) (0.137) (0.147)
-------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 6.820 $ 6.820 $ 6.820
======== ======== ========
Total return (c)(d) 6.34% 5.95% 6.10%(e)
======== ======== ========
RATIOS TO AVERAGE NET ASSETS
Expenses (f)(g) 1.12% 1.87% 1.57%(b)
Net investment income (f)(g) 4.80% 4.05% 4.35%(b)
Portfolio turnover (d) 15% 15% 15%
Net assets at end of period (000) $ 30,388 $ 8,750 $ 521
</TABLE>
(a) The per share net investment income amounts do not reflect the period's
reclassifications 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 $ 7.330 $ 7.330 $ 7.330
-------- -------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.315 0.262 0.283(b)
Net realized and unrealized loss (0.748) (0.748) (0.748)
-------- -------- -----------
Total from Investment Operations (0.433) (0.486) (0.465)
-------- -------- -----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.317) (0.265) (0.286)
In excess of net investment income (0.008) (0.007) (0.007)
In excess of net realized gains (0.002) (0.002) (0.002)
-------- -------- -----------
Total Distributions Declared to Shareholders (0.327) (0.274) (0.295)
-------- -------- -----------
NET ASSET VALUE, END OF PERIOD $ 6.570 $ 6.570 $ 6.570
======== ======== ===========
Total return (c) (6.05)% (6.76)% (6.47)%(d)
======== ======== ===========
RATIOS TO AVERAGE NET ASSETS
Expenses (e) 1.03% 1.78% 1.48%(b)
Net investment income (e) 4.55% 3.80% 4.10%(b)
Portfolio turnover 23% 23% 23%
Net assets at end of period (000) $ 30,997 $ 9,255 $ 631
</TABLE>
(a) The per share net investment income amounts do not reflect the period's
reclassifications of differences between book and tax basis net investment
income.
(b) Net of fees waived by the Distributor which amounted to $0.021 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 $ 7.320 $ 7.320 $ 7.320
----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.341 0.285 0.307(b)
Net realized and unrealized gain 0.111 0.111 0.111
----------- ----------- -----------
Total from Investment Operations 0.452 0.396 0.418
----------- ----------- -----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.343) (0.288) (0.310)
In excess of net investment income (0.008) (0.007) (0.007)
From net realized gains (0.075) (0.075) (0.075)
In excess of net realized gains (0.016) (0.016) (0.016)
----------- ----------- -----------
Total Distributions Declared to Shareholders (0.442) (0.386) (0.408)
----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 7.330 $ 7.330 $ 7.330
=========== =========== ===========
Total return (c)(d) 6.38% 5.57% 5.89%
=========== =========== ===========
RATIOS TO AVERAGE NET ASSETS
Expenses (e) 0.93% 1.68% 1.38%(b)
Net investment income (e) 4.64% 3.89% 4.19%(b)
Fees and expenses waived or borne by the Advisor (e) 0.06% 0.06% 0.06%
Portfolio turnover 15% 15% 15%
Net assets at end of period (000) $ 38,606 $ 12,581 $ 1,358
(a) Net of fees and expenses waived or borne by the Advisor which amounted to: $ 0.004 $ 0.004 $ 0.004
(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 $0.000 per share.
</TABLE>
13
<PAGE> 16
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
YEARS ENDED JANUARY 31,
-----------------------------------------------------------------
1998 1997
----------------------------------------- ----------------------
CLASS A CLASS B CLASS C(b) CLASS A CLASS B
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 6.930 $ 6.930 $ 7.200 $ 7.130 $ 7.130
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.352 0.299 0.156(c) 0.354 0.302
Net realized and unrealized gain (loss) 0.386 0.386 0.122 (0.198) (0.198)
-------- -------- -------- -------- --------
Total from Investment Operations 0.738 0.685 0.278 0.156 0.104
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.348) (0.295) (0.158) (0.354) (0.303)
In excess of net investment income -- -- -- (0.002) (0.001)
-------- -------- -------- -------- --------
Total Distributions Declared to Shareholders (0.348) (0.295) (0.158) (0.356) (0.304)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 7.320 $ 7.320 $ 7.320 $ 6.930 $ 6.930
======== ======== ======== ======== ========
Total return (d)(e) 10.93% 10.11% 3.92%(f) 2.35% 1.58%
======== ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS
Expenses (g) 0.90% 1.65% 1.35%(c)(h) 0.89% 1.64%
Net investment income (g) 4.95% 4.20% 4.35%(c)(h) 5.12% 4.37%
Fees and expenses waived or borne by the Advisor (g) 0.13% 0.13% 0.15%(h) 0.12% 0.12%
Portfolio turnover 32% 32% 32% 25% 25%
Net assets at end of period (000) $ 39,048 $ 12,762 $ 103 $ 39,606 $ 13,364
(a) Net of fees and expenses waived or borne by the Advisor
which amounted to: $ 0.009 $ 0.009 $ 0.010 $ 0.008 $ 0.008
(b) Class C shares were initially offered on August 1, 1997.
Per share amounts reflect activity from that date.
(c) Net of fees waived by the Distributor which amounted to
$0.011 per share and 0.30% (annualized).
(d) Total return at net asset value assuming all distributions
reinvested and no initial sales charge or contingent
deferred sales charge.
(e) Had the Advisor and Distributor 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.
</TABLE>
14
<PAGE> 17
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31, 1996
----------------------------
CLASS A CLASS B
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 6.660 $ 6.660
----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.368 0.317
Net realized and unrealized gain (loss) 0.484 0.484
----------- -----------
Total from Investment Operations 0.852 0.801
----------- -----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.382) (0.331)
----------- -----------
NET ASSET VALUE, END OF PERIOD $ 7.130 $ 7.130
=========== ===========
Total return (b)(c) 13.13% 12.30%
=========== ===========
RATIOS TO AVERAGE NET ASSETS
Expenses (d) 0.80% 1.55%
Net investment income (d) 5.34% 4.59%
Fees and expenses waived or borne by the Advisor (d) 0.25% 0.25%
Portfolio turnover 48% 48%
Net assets at end of period (000) $ 43,308 $ 15,236
(a) Net of fees and expenses waived or borne by the Advisor which amounted to: $ 0.017 $ 0.017
(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.
(d) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
</TABLE>
15
<PAGE> 18
This page left intentionally blank.
<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 Michigan 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 Michigan 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 MICHIGAN TAX-EXEMPT FUND
<PAGE> 20
CHOOSE LIBERTY
BECAUSE NO SINGLE INVESTMENT MANAGER CAN BE ALL THINGS TO ALL INVESTORS.(SM)
LIBERTY FUNDS
ALL-STAR INSTITUTIONAL MONEY MANAGEMENT APPROACH FOR INDIVIDUAL INVESTORS.
COLONIAL FIXED INCOME AND VALUE STYLE EQUITY INVESTING.
CRABBE HUSON A CONTRARIAN APPROACH TO FIXED INCOME AND EQUITY INVESTING.
NEWPORT A LEADER IN INTERNATIONAL INVESTING.(SM)
STEIN ROE INNOVATIVE SOLUTIONS FOR GROWTH AND INCOME INVESTING.
ADVISOR
[KEYPORT A LEADING PROVIDER OF INNOVATIVE ANNUITY PRODUCTS.
LOGO]
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 MICHIGAN TAX-EXEMPT FUND SEMIANNUAL REPORT
--------------------------------------------------------------------------------
[LOGO] LIBERTY FUNDS
ALL-STAR - COLONIAL - CRABBE HUSON - NEWPORT - STEIN ROE ADVISOR
-----------------
| BULK RATE |
| U.S. POSTAGE |
| PAID |
| HOLLISTON, MA |
| PERMIT NO. 20 |
-----------------
Liberty Funds Distributor, Inc. (C)2000
One Financial Center, Boston, MA 02111-2621, 1-800-426-3750
www.libertyfunds.com
772-03/384C-0700 (9/00) 00/1563
