<PAGE>
- ------------------------------------------------
COLONIAL MINNESOTA TAX-EXEMPT FUND ANNUAL REPORT
- ------------------------------------------------
JANUARY 31, 2000
[Graphic Omitted]
<PAGE>
President's Message
DEAR SHAREHOLDER:
Amid the pressure of rising interest rates, virtually all bonds -- including
municipal securities -- posted significant losses for the 12-month period ended
January 31, 2000. This was due to the U.S. economy growing better than expected
and foreign economies rebounding throughout most of 1999. Both of these
occurrences stirred up inflationary fears, which prompted bond yields to move
higher. As bond yields rose, their prices declined. In response to this
environment, the Federal Reserve Board implemented three interest-rate hikes,
the first of which was in June, to slow the economy and to address growing fears
of inflation.
A combination of stronger demand and reduced supply helped municipals lose less
value than their Treasury counterparts during the year. Investors were lured
back to the municipal market after a long hiatus to capture the attractive
higher yields. Meanwhile, the supply of municipal bonds dwindled considerably as
issuers reduced their refinancing and new issue activity in response to rising
interest rates. Under these circumstances, municipal bond investors experienced
a tax-exempt yield that was attractive compared to their taxable counterparts
without having to compromise quality.
These challenging bond market conditions were reflected in the Fund's negative
one-year total return. Over time, Colonial Minnesota Tax-Exempt Fund has
provided a way for investors to seek competitive levels of tax-free income and
potential for long-term price appreciation.
The Portfolio Manager's Report on the following pages will provide you with more
specific information on your Fund's performance and the market in which your
Fund invests. Thank you for choosing Colonial Minnesota Tax-Exempt Fund and for
giving us the opportunity to serve your investment needs.
Sincerely,
/s/ Stephen E. Gibson
Stephen E. Gibson
President
March 10, 2000
Because economic and market conditions change frequently, there can be no
assurance that the trends described herein will continue or come to
pass.
<PAGE>
- --------------------------------------------------------------------------------
HIGHLIGHTS
- --------------------------------------------------------------------------------
> FEDERAL RESERVE BOARD RAISED RATES TO SLOW THE ECONOMY.
In June of 1999, the Federal Reserve Board made its first of three
interest-rate hikes in an attempt to slow a fast-growing economy and keep
inflation under control. Despite this anti-inflationary effort, the first
interest rate hike did little to slow the economy, which resulted in the
Federal Reserve Board raising rates again in August and November. As interest
rates increased, the yields on bonds increased, causing their prices to
decline -- since bond prices and interest rates move in opposite directions.
> MUNICIPALS HELD UP BETTER THAN TREASURYS AMID RISING RATES.
Compared to their U.S. Treasury counterparts, municipal bonds provided a
historically generous yield during this challenging period in the bond
market. Rising bond yields attracted more investors while supply diminished,
which provided municipals with a measure of insulation from rising interest
rates.
> SHORT-TERM OBLIGATIONS OUTPERFORMED LONG-TERM ISSUES AS INTEREST RATES ROSE.
Securities such as short-term municipals outperformed long-term issues later
in the period. This was expected as bonds with shorter maturities are less
sensitive to interest rates.
MUNICIPAL VS. TREASURY BOND PERFORMANCE
1/31/99 - 1/31/00
Salomon
Lehman Brothers 30-Year
Municipal Bond Index Treasury Index
-------------------- --------------
1/99 0.00% 0.00%
1/00 (3.63)% (15.00)%
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 1/31/00
Class A $6.46
- -------------------
Class B $6.46
- -------------------
Class C $6.46
- -------------------
DISTRIBUTIONS DECLARED FROM 2/1/99 TO 1/31/00
Class A $0.335
- -------------------
Class B $0.283
- -------------------
Class C $0.304
- -------------------
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 1/31/00
Class A 4.95%
- -------------------
Class B 4.43%
- -------------------
Class C 4.73%
- -------------------
The 30-day SEC yield reflects 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 4.42% for Class C shares.
TAXABLE-EQUIVALENT SEC YIELDS ON 1/31/00
Class A 8.96%
- -------------------
Class B 8.02%
- -------------------
Class C 8.56%
- -------------------
Taxable-equivalent SEC yields are based on the combined maximum effective 44.7%
federal and Minnesota state income tax rate. This tax rate does not reflect the
phase out of exemptions or the reduction of otherwise allowable deductions which
occur when Adjusted Gross Income exceeds certain levels.
<PAGE>
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PORTFOLIO MANAGER'S REPORT
- --------------------------------------------------------------------------------
QUALITY BREAKDOWN AS OF 1/31/00
AAA 44.2%
- -------------------
AA 15.1%
- -------------------
A 11.4%
- -------------------
BBB 9.7%
- -------------------
BB 1.0%
- -------------------
CCC 1.4%
- -------------------
Non-rated 17.2%
- -------------------
Quality breakdown categories are calculated as a percentage of total
investments, included short-term obligations. Ratings shown in the quality
breakdown 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 this quality breakdown in the future.
BOUGHT
- --------------------------------------------------------------------------------
We purchased Boise Cascade (1.0% of net assets), a Baa rated company, which is
benefiting from recent restructuring as well as the fundamental upswing in the
paper industry.
INVESTMENT ACTIVITY WAS INITIALLY FOCUSED ON HIGHER-YIELDING BONDS
At the beginning of 1999, our outlook called for continued low inflation and
modest economic growth in response to the global economic and market turmoil of
the fall of 1998. Based on those expectations, our investment strategy at that
time was to extend the Fund's duration and structure the portfolio with bonds
that tend to do well during periods of declining interest rates. As part of this
strategy, we looked for bonds, such as zero coupons, that we thought would help
enhance the Fund's total return potential and help maintain the Fund's income
level.
RISING INTEREST RATES INITIATED A MORE CONSERVATIVE STRATEGY
We adjusted our initial strategy mid-year to a more conservative approach as
interest rates began to rise. Rather than dramatically change the structure of
the portfolio and sell bonds we believed would ultimately serve the Fund well,
we implemented strategies in the interim to cushion the Fund against rising
rates. More specifically, we reduced the Fund's duration and increased holdings
in fundamentally sound issues and moved away from longer-maturity bonds. By
adjusting to a more conservative strategy, the Fund was at less risk as interest
rates rose and was positioned to benefit from a longer-term environment of
steady economic growth with low to moderate inflation.
FUND PERFORMANCE OVERVIEW
For the 12-month period, the Fund generated a total return of negative 7.87% for
Class A shares, without a sales charge. This disappointing performance reflects
the challenging fixed-income conditions that prevailed throughout 1999.
Moreover, we were overweighted in zero coupon bonds and deep discount bonds
which are more sensitive to interest rate movements than current coupon bonds
with comparable maturities. However, we adjusted our investment strategy
mid-year which helped the Fund rebound in the fourth quarter.
MINNESOTA ECONOMY REMAINS STRONG AND STEADY
With a well-diversified economy, Minnesota has enjoyed steady growth and low
unemployment. Most of the opportunities have been occurring in the Twin Cities
area. The manufacturing sector and the service sector, particularly construction
and financial services, have all performed well during this period of economic
expansion. Due to a strong economy, actual tax receipts have recently exceeded
estimates while expenditures have been lower than estimated largely due to
reduced human services expenditures. Debt levels are moderate and within the
policies set under debt management targeted levels. Given ongoing base revenue
growth, recently enacted tax cuts appear manageable within the context of
maintaining the state's AAA rating.
FAVORABLE OUTLOOK
Looking ahead, we believe there are signs of continuing growth for 2000, similar
to what we've seen over the last few years. We expect high productivity to
remain. We expect a moderate pickup in inflation of a little more than 2%. We
suspect that further interest rate increases are in store for the first part of
2000, since the economy is entering the year with such strong momentum. In this
environment, our strategy would be to structure the Fund to be less sensitive to
interest rate movements by shortening its duration and adjusting the portfolio
as market conditions warrant. We will continue to actively manage the Fund's
positioning in an effort to add value for our investors.
/s/ Brian Hartford
BRIAN HARTFORD is portfolio manager of Colonial Minnesota Tax-Exempt Fund and is
a senior vice president of Colonial Management Associates, Inc.
Effective August 20, 1999, the Board of Trustees approved an increase in the
internal limit that the Fund's Advisor has set regarding investment in inverse
floating rate obligations. These obligations represent interest in tax-exempt
bonds and carry interest rates that vary inversely to changes in short-term
interest rates. Although floating rate obligations may have greater price
volatility and offer additional yield, the Fund's Advisor from time to time uses
futures contracts to mitigate the additional duration. The Advisor has set a
policy to invest no more than 15% of the Fund's total assets in inverse floating
rate obligations.
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 BREAKDOWNS 1/31/00 VS. 1/31/99
FUND FUND
AS OF 1/31/00 AS OF 1/31/99
------------- -------------
Hospital 14.8% 15.1%
Local General Obligations 13.8% 16.5%
Education 13.7% 13.4%
Refunded/Escrowed 8.6% 7.9%
State Appropriated 5.0% 4.1%
Sector breakdown categories are calculated as a percentage of total investments,
including short-term obligations. Because the Fund is actively managed, there
can be no guarantee the Fund will continue to maintain this sector breakdown in
the future.
SOLD
- --------------------------------------------------------------------------------
We sold a $1 million position in the Mayo Clinic because of its long maturity
(maturity date of 2027). This sale supports our strategy to shorten the Fund's
duration.
<PAGE>
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PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
PERFORMANCE OF A $10,000 INVESTMENT IN ALL SHARE CLASSES FROM 1/31/90 - 1/31/00
Without With
Sales Sales
Charge Charge
- -------------------------------
Class A $17,304 $16,482
- -------------------------------
Class B $16,359 $16,359
- -------------------------------
Class C $17,107 $17,107
- -------------------------------
PERFORMANCE OF A $10,000 INVESTMENT IN CLASS A SHARES FROM 1/31/90 - 1/31/00
Lehman
Brothers
Municipal Without With
Bond Index Sales Charge Sales Charge
---------- ------------ ------------
1/31/90 $10,000 $10,000 $10,000
1/91 10,924 10,949 10,429
1/92 12,117 11,776 11,217
1/93 13,308 12,802 12,194
1/94 14,939 14,028 13,362
1/95 14,407 13,910 13,249
1/96 16,578 15,581 14,841
1/97 17,214 15,985 15,226
1/98 18,957 17,628 16,791
1/99 20,218 18,732 17,842
1/31/00 19,479 17,304 16,482
The Lehman Brothers Municipal Bond Index is an unmanaged index that tracks
the performance of the municipal bond market. Unlike mutual funds, indexes
are not investments and do not incur fees or expenses. It is not possible to
invest directly in an index.
AVERAGE ANNUAL TOTAL RETURNS AS OF 1/31/00
Share Class A B C
Inception 9/26/86 8/4/92 8/1/97
- --------------------------------------------------------------------------------
Without With Without With Without With
Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge
- --------------------------------------------------------------------------------
1 year (7.87)% (12.24)% (8.56)% (12.95)% (8.29)% (9.16)%
- --------------------------------------------------------------------------------
5 years 4.77 3.75 3.98 3.66 4.53 4.53
- --------------------------------------------------------------------------------
10 years 5.64 5.12 5.04 5.04 5.52 5.52
- --------------------------------------------------------------------------------
Average Annual Total Returns as of 12/31/99
Share Class A B C
- --------------------------------------------------------------------------------
Without With Without With Without With
Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge
- --------------------------------------------------------------------------------
1 year (5.70)% (10.18)% (6.41)% (10.91)% (6.13)% (7.02)%
- ------------------------------------------------------------------------------
5 years 5.70 4.67 4.91 4.58 5.46 5.46
- ------------------------------------------------------------------------------
10 years 5.75 5.24 5.17 5.17 5.64 5.64
Past performance cannot predict future investment 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% charge for Class A shares and the maximum contingent deferred
sales charges (CDSC) of 5% for one year and 2% for five years for Class B shares
and 1% for one year for Class C shares.
Performance results reflect any voluntary waivers or reimbursement of Fund
expenses by the Advisor or its affiliates. Absent these waivers or reimbursement
arrangements, performance results would have been lower.
Performance for different share classes will vary based on differences in sales
charges and fees associated with each class.
Class B and 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 their inception date. 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 periods prior to the inception of Class B and
Class C shares would have been lower.
<PAGE>
<TABLE>
- --------------------
INVESTMENT PORTFOLIO
- --------------------
January 31, 2000
(In thousands)
<CAPTION>
MUNICIPAL BONDS - 98.0% PAR VALUE
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
EDUCATION - 13.5%
EDUCATION
State Higher Education Facilities Authority:
Carleton College, Series 4-N,
5.000% 11/01/18 $1,500 $ 1,312
Northwestern College of Chiropractic,
Series 1998 4-Z
5.200% 10/01/13 275 249
St. Johns University, Series 4-L,
5.350% 10/01/17 1,000 905
St. Thomas University, Series 4-M,
5.350% 04/01/17 500 455
University of Minnesota:
Series 1996 A:
5.750% 07/01/14 500 505
5.750% 07/01/17 1,000 993
Series 1999 A,
5.500% 07/01/21 1,000 938
Victoria, Holy Family Catholic High School,
Series 1999 A,
5.875% 09/01/29 300 260
-------
5,617
-------
- ---------------------------------------------------------------------------------------------
HEALTHCARE - 18.5%
CONGREGATE CARE RETIREMENT - 1.8%
Bloomington Housing & Redevelopment Authority, Senior Summer House,
Series 1998,
5.500% 11/01/01 110 107
Columbia Heights, Crest View Corp.,
Series 1998,
6.000% 03/01/33 300 244
Golden Valley, Covenant Retirement Communities, Inc., Series 1999 A,
5.500% 12/01/29 500 402
-------
753
-------
HOSPITALS - 14.5%
Marshall, Weiner Memorial Medical Center, Series 1999,
6.000% 11/01/28 300 238
Princeton, Fairview Hospital,
Series 1991 C,
6.250% 01/01/21 300 300
Red Wing, River Region Group,
Series 1993 A:
6.400% 09/01/12 200 194
6.500% 09/01/22 300 279
Redwood Falls, Series 1998,
5.750% 12/01/23 500 397
Rochester, Mayo Medical Center,
Series 1992 I,
5.900% 11/15/09 1,000 1,044
St. Paul Housing & Redevelopment Authority,
Healtheast Project:
Series 1997 A,
5.500% 11/01/09 250 216
Series 1993 B,
6.625% 11/01/17 660 582
Series 1998,
5.300% 05/15/28 1,000 749
State Agricultural & Economic Development Board, St Mary's Medical
Center,
Series 1999 A,
4.750% 02/15/16 1,000 846
Thief River Falls, Series 1999,
6.800% 11/01/19 250 230
Waconia, Ridgeview Medical Center,
Series 1999 A,
6.125% 01/01/29 1,000 966
-------
6,041
-------
NURSING HOMES - 2.2%
Duluth Economic Development Authority, BSM Properties, Inc.,
Series 1998 A,
5.875% 12/01/28 250 196
Minneapolis, Walker Methodist Senior Services Group, Series 1998 A,
5.875% 11/15/18 250 204
New Hope, North Ridge Care Center, Inc.,
Series 1999,
5.875% 03/01/29 300 237
Sartell, Foundation for Healthcare,
Series 1999 A,
6.625% 09/01/29 300 258
-------
895
-------
- ---------------------------------------------------------------------------------------------
HOUSING - 8.8%
ASSISTED LIVING/SENIOR - 0.7%
Roseville, Care Institute, Inc.,
Series 1993,
7.750% 11/01/23 300 267
-------
MULTI-FAMILY - 4.6%
Dakota County Housing & Redevelopment Authority, Series 1999,
6.000% 11/01/09 255 234
Grand Housing & Redevelopment Authority, Lakeshore Forest Park
Apartments,
Series 1999 B,
5.700% 10/01/29 500 438
Lakeville, Southfork Apartment Project,
Series 1989 A,
9.875% 02/01/20 200 196
Minneapolis, Riverplace Project,
Series 1987 A,
7.100% 01/01/20 200 200
Robbinsdale Economic Development Authority, Series 1999 A,
6.875% 01/01/26 250 230
Southeastern Multi-County Housing & Redevelopment Authority, Goodhue
Apartment Project, Series 1999 A,
6.750% 01/01/31 250 232
Washington County Housing & Redevelopment Authority, Cottages of Aspen,
Series 1992,
9.250% 06/01/22 175 181
White Bear Lake, Birch Lake Townhomes Project, Series 1989 A,
9.750% 07/15/19 200 195
-------
1,906
-------
SINGLE-FAMILY - 3.5%
Chicago & Stearns Counties,
Series 1994 B,
7.050% 09/01/27 1,175 1,225
Dakota County Housing & Redevelopment Authority, Series 1986,
7.200% 12/01/09 50 50
Minneapolis-St. Paul Housing Board,
Series 1987 C,
8.875% 11/01/18 165 167
Washington County Housing & Redevelopment Authority, City of Cottage
Grove,
Series 1986,
7.600% 12/01/11 25 25
-------
1,467
-------
- ---------------------------------------------------------------------------------------------
INDUSTRIAL - 10.1%
FOOD PRODUCTS - 3.5%
Duluth Seaway Port Authority, Cargill Inc.,
Series 1993 A,
5.750% 12/01/16 1,500 1,454
-------
FOREST PRODUCTS - 2.8%
Hubbard County, Potlach Corp.,
Series 1987 A,
7.375% 08/01/13 285 290
International Falls:
Boise Cascade Corp. Project,
5.650% 12/01/22 500 419
Series 1999,
6.850% 12/01/29 500 483
-------
1,192
-------
MANUFACTURING - 3.8%
Alexandria Industrial Development
Revenue Bonds, Seluemed Ltd.,
5.850% 03/01/18 830 775
Brooklyn Park, TL Systems Corp.,
Series 1991,
10.000% 09/01/16 245 278
Buffalo, Von Ruden Manufacturing, Inc.,
Series 1989,
10.500% 09/01/14 500 516
-------
1,569
-------
OTHER - 9.1%
POOL/BOND BANK - 0.6%
Minneapolis Community Development Agency,
Series 1991 1,
8.000% 12/01/16 250 264
-------
REFUNDED/ESCROWED (a) - 8.5%
Burnsville, Fairview Community Hospital,
Series 1982 A,
(b) 05/01/12 (c) 2,145 971
Dakota & Washington Counties Housing & Redevelopment Authority,
Series 1988,
8.150% 09/01/16 235 292
Metropolitan Council, Hubert H. Humphrey Metrodome, Series 1992,
6.000% 10/01/09 300 314
Moorhead,
7.100% 08/01/11 20 22
St. Louis Park, Methodist Hospital,
Series 1990 C,
7.250% 07/01/18 165 170
State Higher Education Facilities Authority:
Hamline University,
Series 3 K,
6.600% 06/01/08 250 260
University of St. Thomas,
Series 3-C,
7.100% 09/01/10 100 103
Western Minnesota Municipal Power Agency, Series 1983 A,
9.750% 01/01/16 1,000 1,393
-------
3,525
-------
- ---------------------------------------------------------------------------------------------
OTHER REVENUE - 0.6%
HOTELS
Minneapolis, Holiday Inn
Metrodome Project,
6.000% 12/01/01 250 248
-------
- ---------------------------------------------------------------------------------------------------------
TAX-BACKED - 24.2%
LOCAL APPROPRIATED - 2.8%
Hibbing Economic Development Authority,
6.400% 02/01/12 500 482
Minneapolis Special School District
No.1, Series 1998 A,
4.750% 02/01/18 500 416
Mountain Lake Economic Development Authority, Series 1999,
5.800% 12/01/18 290 260
-------
1,158
-------
LOCAL GENERAL OBLIGATIONS - 13.1%
Hennepin County,
Series 1999 A, 5.000% 12/01/15 1,000 908
New York Mills Independent School District No. 553, Series 1992 A,
6.850% 02/01/18 210 218
Princeton Independent School District No.477,
Series 1997,
5.125% 02/01/24 2,000 1,727
Rosemount Independent School District
No. 196, Series 1994 B,
(b) 6/01/10 (c) 2,765 1,558
Waseca Independent School District No. 829,
5.500% 04/01/17 1,000 1,022
-------
5,433
-------
SPECIAL NON-PROPERTY TAX - 0.7%
Red Lake Band of Chippewa Indians,
Series 1998,
6.250% 08/01/13 300 271
-------
SPECIAL PROPERTY TAX - 0.4%
Duluth Economic Development Authority, Series 1998 A,
(b) 02/01/08 (c) 295 189
-------
STATE APPROPRIATED - 4.9%
State, Duluth Airport,
Series 1995 B,
6.250% 08/01/14 2,000 2,052
-------
STATE GENERAL OBLIGATIONS - 2.3%
State, Series 1995,
5.250% 08/01/14 1,000 952
-------
- ---------------------------------------------------------------------------------------------
TRANSPORTATION - 5.0%
AIRPORT - 2.9%
Minneapolis & St. Paul Metropolitan
Airports Commission:
Series 1999, IFRN (variable rate)
6.345% 01/01/22 (d) 1,000 737
Series 1998 B,
5.250% 01/01/12 500 473
-------
1,210
-------
TRANSPORTATION - 2.1%
Blaine, Consolidated Freightways, Inc.,
Series 1998,
5.150% 01/01/04 300 290
St. Paul Port Authority, Series F:
9.125% 12/01/00 25 25
9.125% 02/01/01 25 25
9.125% 12/01/02 25 25
9.125% 12/01/14 575 500
-------
865
-------
UTILITY - 8.2%
INVESTOR OWNED - 1.0%
Anoka County, United Power Assoc.,
Series 1987 A,
6.950% 12/01/08 400 411
-------
JOINT POWER AUTHORITY - 4.3%
Southern Minnesota Municipal Power Agency:
Series 1993 A:
5.000% 01/01/12 750 690
4.750% 01/01/16 (c) 250 210
Series 1994 A,
(b) 01/01/27 (c) 3,900 714
Series A,
5.000% 01/01/16 200 176
-------
1,790
-------
MUNICIPAL ELECTRIC - 2.9%
Northern Municipal Power Agency,
Series 1998 B,
4.750% 01/01/20 1,500 1,225
-------
TOTAL MUNICIPAL BONDS (cost of $42,898) 40,754
-------
OPTIONS - 0.2% CONTRACTS
- ---------------------------------------------------------------------------------------------
June 2000 Treasury Bond Put, Strike
Price 86, expiration 06/16/00 227 96
March 2000 Treasury Bond Call,
Strike Price 98, expiration 03/17/00 72 1
-------
TOTAL OPTIONS (cost of $267) 97
-------
TOTAL INVESTMENTS (cost of $43,165) (e) 40,851
-------
OTHER ASSETS & LIABILITIES - 1.8% 723
- ---------------------------------------------------------------------------------------------
NET ASSETS - 100.0% $41,574
=======
NOTES TO INVESTMENT PORFOLIO:
- ---------------------------------------------------------------------------------------------
(a) The Fund has been informed that each issuer has placed direct obligation of the U.S.
Government in an irrevocable trust, solely for the payment of the interest and principal.
(b) Zero coupon bond.
(c) This security is being used to collateralize an open call on futures and open futures
contracts.
(d) This security is exempt from registration under Rule 144A of the Securities Act of 1933.
This security may be resold in transactions exempt from registration normally to
qualified institutional buyers. At January 31, 2000, the value of this security amounted
to $737 or 1.8% of net assets.
(e) Cost for federal income tax purposes is the same.
Short futures contracts open on January 31, 2000:
PAR VALUE UNREALIZED
COVERED BY EXPIRATION APPRECIATION
TYPE CONTRACTS MONTH AT 1/31/00
- ---------------------------------------------------------------------------------------------
Treasury Bond $900 March $18
</TABLE>
<PAGE>
<TABLE>
- -----------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- -----------------------------------
January 31, 2000
(In thousands except for per share amounts and footnotes)
<S> <C> <C>
ASSETS
Investments at value (cost $43,165) $40,851
Receivable for:
Interest $663
Investments sold 200
Fund shares sold 56
Variation margin on futures 6
Other 62 987
---- -------
Total Assets 41,838
LIABILITIES
Payable for:
Fund shares repurchased 174
Distributions 60
Accrued:
Management fee 18
Bookkeeping fee 2
Transfer agent fee 5
Deferred Trustees fees 3
Other 2
----
Total Liabilities 264
-------
Net Assets $41,574
=======
Net asset value and redemption price
per share -- Class A ($24,248/3,756) $ 6.46(a)
=======
Maximum offering price per share --
Class A ($6.46/0.9525) $ 6.78(b)
=======
Net asset value and offering price
per share -- Class B ($16,945/2,624) $ 6.46(a)
=======
Net asset value and offering price
per share -- Class C ($381/59) $ 6.46(a)
=======
COMPOSITION OF NET ASSETS
Capital paid in $45,331
Overdistributed net investment income (66)
Accumulated net realized loss (1,395)
Net unrealized appreciation (depreciation) on:
Investments (2,314)
Open futures contracts 18
=======
$41,574
=======
(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.
</TABLE>
<PAGE>
<TABLE>
- -----------------------
STATEMENT OF OPERATIONS
- -----------------------
For the year ended January 31, 2000
(In thousands)
<S> <C> <C>
INVESTMENT INCOME
Interest $ 2,891
EXPENSES
Management fee $ 251
Service fee 91
Distribution fee -- Class B 150
Distribution fee -- Class C 2
Transfer agent fee 81
Bookkeeping fee 27
Trustees fee 8
Audit fee 19
Legal fee 8
Custodian fee 2
Registration fee 25
Reports to shareholders 17
Other 4
-------
Total expenses 685
Fees waived by the Distributor --
Class C (1)
Custodian credits earned (2) 682
------- -------
Net Investment Income 2,209
=======
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain (loss) on:
Investments (984)
Closed futures contracts 182
-------
Net Realized Loss (802)
Net change in unrealized appreciation/depreciation during
the period on:
Investments (5,664)
Open futures contracts 31
-------
Net Change in Unrealized
Appreciation/Depreciation (5,633)
-------
Net Loss (6,435)
-------
DECREASE IN NET ASSETS FROM OPERATIONS $(4,226)
=======
</TABLE>
<PAGE>
<TABLE>
- ----------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- ----------------------------------
<CAPTION>
YEARS ENDED JANUARY 31
---------------------------
INCREASE (DECREASE) IN NET ASSETS 2000 1999
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment income $ 2,209 $ 2,289
Net realized gain (loss) (802) 1,451
Net change in unrealized appreciation/depreciation (5,633) (619)
-------- --------
Net Increase (Decrease) from Operations (4,226) 3,121
DISTRIBUTIONS
From net investment income -- Class A (1,407) (1,485)
In excess of net investment income -- Class A -- (65)
From net realized gains -- Class A -- (774)
In excess of net realized gains -- Class A (29) (209)
From net investment income -- Class B (790) (802)
In excess of net investment income -- Class B -- (35)
From net realized gains -- Class B -- (513)
In excess of net realized gains -- Class B (19) (139)
From net investment income -- Class C (14) (9)
In excess of net investment income -- Class C -- (a)
From net realized gains -- Class C -- (6)
In excess of net realized gains -- Class C (a) (2)
-------- --------
(6,485) (918)
-------- --------
FUND SHARE TRANSACTIONS
Receipts for shares sold -- Class A 2,003 1,527
Value of distributions reinvested -- Class A 927 1,749
Cost of shares repurchased -- Class A (6,891) (3,475)
-------- --------
(3,961) (199)
-------- --------
Receipts for shares sold -- Class B 1,701 2,986
Value of distributions reinvested -- Class B 558 1,105
Cost of shares repurchased -- Class B (4,138) (2,606)
-------- --------
(1,879) 1,485
-------- --------
Receipts for shares sold -- Class C 190 120
Value of distributions reinvested -- Class C 12 17
Cost of shares repurchased -- Class C (46) (a)
-------- --------
156 137
-------- --------
Net Increase (Decrease) from Fund Share Transactions (5,684) 1,423
-------- --------
Total Increase (Decrease) (12,169) 505
NET ASSETS
Beginning of period 53,743 53,238
-------- --------
End of period (net of overdistributed net investment
income of $66 and $61, respectively) $ 41,574 $ 53,743
======== ========
NUMBER OF FUND SHARES
Sold -- Class A 278 206
Issued for distributions reinvested -- Class A 134 237
Repurchased -- Class A (1,012) (467)
-------- --------
(600) (24)
-------- --------
Sold -- Class B 238 402
Issued for distributions reinvested -- Class B 81 150
Repurchased -- Class B (601) (352)
-------- --------
(282) 200
-------- --------
Sold -- Class C 27 16
Issued for distributions reinvested -- Class C 2 3
Repurchased -- Class C (7) (a)
-------- --------
22 19
-------- --------
(a) Rounds to less than one.
See notes to financial statement
</TABLE>
<PAGE>
- -----------------------------
NOTES TO FINANCIAL STATEMENTS
- -----------------------------
January 31, 2000
NOTE 1. ACCOUNTING POLICIES
ORGANIZATION
Colonial Minnesota Tax-Exempt Fund (the Fund), a series of Liberty Funds Trust
V, formerly Colonial Trust V, is a non-diversified portfolio of a
Massachusetts business trust, registered under the Investment Company Act of
1940, as amended, as an open-end, management investment company. The Fund's
investment objective is to seek as high a level of after-tax total return, as
is consistent with prudent risk, by pursuing current income exempt from
federal and Minnesota state personal income tax. The Fund also provides
opportunities for long-term appreciation from a portfolio primarily invested
in investment grade municipal bonds. The Fund may issue an unlimited number of
shares. The Fund offers three classes of shares: Class A, Class B and Class C.
Class A shares are sold with a front-end sales charge. A 1.00% contingent
deferred sales charge is assessed on redemptions made within eighteen months
on an original purchase of $1 million to $5 million.
Class B shares are subject to an annual distribution fee and a contingent
deferred sales charge. Class B shares will convert to Class A shares as
follows:
CONVERTS TO
ORIGINAL PURCHASE CLASS A SHARES
----------------- --------------
Less than $250,000 8 years
$250,000 to less than $500,000 4 years
$500,000 to less than $1,000,000 3 years
Class C shares are subject to a contingent deferred sales charge on
redemptions made within one year after purchase and an annual distribution
fee.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary
of significant accounting policies that are consistently followed by the Fund
in the preparation of its financial statements.
SECURITY VALUATION AND TRANSACTIONS
Debt securities generally are valued by a pricing service based upon market
transactions for normal, institutional-size trading units of similar
securities. When management deems it appropriate, an over-the-counter or
exchange bid quotation is used.
Options are valued at the last reported sale price, or in the absence of a
sale, the mean between the last quoted bid and asking price.
Futures contracts are valued based on the difference between the last sale
price and the opening price of the contract.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
Portfolio positions for which market quotations are not readily available are
valued at fair value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains and losses are based upon the specific
identification method for both financial statement and federal income tax
purposes.
The Fund may trade securities on other than normal settlement terms. This may
increase the risk if the other party to the transaction fails to deliver and
causes the Fund to subsequently invest at less advantageous prices.
DETERMINATION OF CLASS NET ASSET VALUES AND
FINANCIAL HIGHLIGHTS
All income, expenses (other than the Class B and Class C distribution fees),
and realized and unrealized gains (losses), are allocated to each class
proportionately on a daily basis for purposes of determining the net asset
value of each class.
Class B and Class C per share data and ratios are calculated by adjusting the
expense and net investment income per share data and ratios for the Fund for
the entire period by the distribution fee applicable to Class B and Class C
shares.
FEDERAL INCOME TAXES
Consistent with the Fund's policy to qualify as a regulated investment company
and to distribute all of its taxable and tax-exempt income, no federal income
tax has been accrued.
INTEREST INCOME, DEBT DISCOUNT AND PREMIUM
Interest income is recorded on the accrual basis. Original issue discount is
accreted to interest income over the life of a security with a corresponding
increase in the cost basis; market discount is not accreted. Premium is
amortized against interest income with a corresponding decrease in the cost
basis.
DISTRIBUTIONS TO SHAREHOLDERS
The Fund declares and records distributions daily and pays monthly.
The amount and character of income and gains to be distributed are determined
in accordance with income tax regulations which may differ from generally
accepted accounting principles. Reclassifications are made to the Fund's
capital accounts to reflect income and gains available for distribution (or
available capital loss carryforwards) under income tax regulations.
NOTE 2. FEES AND COMPENSATION PAID TO AFFILIATES
MANAGEMENT FEE
Colonial Management Associates, Inc. (the Advisor) is the investment Advisor
of the Fund and furnishes accounting and other services and office facilities
for a monthly fee based on the Fund's pro rata portion of the combined average
net assets of the funds constituting Trust V as follows:
AVERAGE NET ASSETS ANNUAL FEE RATE
------------------ ---------------
First $2 billion 0.50%
Next $2 billion 0.45%
BOOKKEEPING FEE
The Advisor provides bookkeeping and pricing services for $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 equal to 0.13%
annually of the Fund's average net assets and receives reimbursement for
certain out-of-pocket expenses.
Effective January 1, 2000, the Transfer Agent fee was changed to a fee
comprised of 0.07% annually of average net assets plus charges based on the
number of shareholder accounts and transactions.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES
Liberty Funds Distributor, Inc. (the Distributor), an affiliate of the
Advisor, is the Fund's principal underwriter. For the year ended January 31,
2000, the Fund has been advised that the Distributor retained net underwriting
discounts of $3,671 on sales of the Fund's Class A shares and received
contingent deferred sales charges (CDSC) of $9,076, $38,758, and $185 on Class
A, Class B and Class C share redemptions, respectively.
The Fund has adopted a 12b-1 plan which requires the payment of a distribution
fee to the Distributor equal to 0.75% annually of the Fund's average net
assets attributable to Class B and Class C shares. The Distributor has
voluntarily agreed, until further notice, to waive a portion of the Class C
share distribution fee so that it will not exceed 0.45% annually. The plan
also requires the payment of a service fee to the Distributor as follows:
VALUATION OF SHARES ANNUAL
OUTSTANDING ON THE 20TH OF FEE
EACH MONTH WHICH WERE ISSUED RATE
---------------------------- ----
Prior to November 30, 1994 0.10%
On or after December 1, 1994 0.25%
The CDSC and the fees received from the 12b-1 plan are used principally as
repayment to the Distributor for amounts paid by the Distributor to dealers
who sold such shares.
OTHER
The Fund pays no compensation to its officers, all of whom are employees of
the Advisor.
The Fund's Trustees may participate in a deferred compensation plan which may
be terminated at any time. Obligations of the plan will be paid solely out of
the Fund's assets.
The Fund has an agreement with its custodian bank under which custodian fees
were reduced by balance credits of $2,315 applied during the year ended
January 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 an agreement.
NOTE 3. PORTFOLIO INFORMATION
INVESTMENT ACTIVITY
For the year ended January 31, 2000, purchases and sales of investments, other
than short-term obligations, were $13,785,463 and $19,295,875, respectively.
Unrealized appreciation (depreciation) at January 31, 2000, based on cost of
investments for both financial statement and federal income tax purposes was:
Gross unrealized appreciation $ 594,768
Gross unrealized depreciation (2,909,120)
-----------
Net unrealized depreciation $(2,314,352)
===========
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:
YEAR OF CAPITAL LOSS
EXPIRATION CARRYFORWARD
---------- ------------
2008 $739,000
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 value of portfolio
securities due to anticipated changes in interest rates and/or market
conditions, for duration management, or when the transactions are economically
appropriate to the reduction of risk inherent in the management of the Fund
and not for trading purposes. The use of futures contracts and options
involves certain risks, which include (1) imperfect correlation between the
price movement of the instruments and the underlying securities, (2) inability
to close out positions due to different trading hours, or the temporary
absence of a liquid market for either the instrument or the underlying
securities or (3) an inaccurate prediction by the Advisor of the future
direction of interest rates. Any of these risks may involve amounts exceeding
the amount recorded in the Fund's Statement of Assets and Liabilities at any
given time.
NOTE 4. LINE OF CREDIT
The Fund may borrow up to 33 1/3% of its net assets under a line of credit for
temporary or emergency purposes. Any borrowings bear interest at one of the
following options determined at the inception of the loan: (1) federal funds
rate plus 1/2 of 1%, (2) the lending bank's base rate or (3) IBOR offshore
loan rate plus 1/2 of 1%. There were no borrowings under the line of credit
during the year ended January 31, 2000.
<PAGE>
<TABLE>
- --------------------
FINANCIAL HIGHLIGHTS
- --------------------
Selected data for a share of each class outstanding
throughout each period are as follows:
<CAPTION>
YEAR ENDED JANUARY 31, 2000
---------------------------------------------
CLASS A CLASS B CLASS C
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.360 $ 7.360 $ 7.360
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) 0.326 0.274 0.295(b)
Net realized and unrealized loss (0.891) (0.891) (0.891)
------- ------- -------
Total from Investment Operations (0.565) (0.617) (0.596)
------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income (0.328) (0.276) (0.297)
In excess of net realized gains (0.007) (0.007) (0.007)
------- ------- -------
Total Distributions Declared to Shareholders (0.335) (0.283) (0.304)
------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 6.460 $ 6.460 $ 6.460
======= ======= =======
Total return (c) (7.87)% (8.56)% (8.29)%(d)
======= ======= =======
RATIOS TO AVERAGE NET ASSETS
Expenses (e) 1.06% 1.81% 1.51%(b)
Net investment income (e) 4.71% 3.96% 4.26%(b)
Portfolio turnover 28% 28% 28%
Net assets at end of period (000) $24,248 $16,945 $ 381
(a) The per share net investment income accounts 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 $0.021 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.
- ------------------------------------------------------------------------------------------------------------
2000 FEDERAL TAX INFORMATION (UNAUDITED)
All of the income distributions will be treated as exempt income for federal income tax purposes.
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31, 1999
--------------------------------------------------------
CLASS A CLASS B CLASS C
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.490 $ 7.490 $ 7.490
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) 0.351 0.293 0.316(b)
Net realized and unrealized loss 0.110 0.110 0.110
------- ------- -------
Total from Investment Operations 0.461 0.403 0.426
------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income (0.345) (0.289) (0.311)
In excess of net investment income (0.015) (0.013) (0.014)
From net realized gains (0.182) (0.182) (0.182)
In excess of realized gains (0.049) (0.049) (0.049)
------- ------- -------
Total Distributions Declared to Shareholders (0.591) (0.533) (0.556)
------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 7.360 $ 7.360 $ 7.360
======= ======= =======
Total return (c)(d) 6.40% 5.59% 5.91%
======= ======= =======
RATIOS TO AVERAGE NET ASSETS
Expenses (e) 0.94% 1.69% 1.39%(b)
Net investment income (e) 4.62% 3.87% 4.17%(b)
Fees and expenses waived by advisor 0.06% 0.06% 0.06%
Portfolio turnover 34% 34% 34%
Net assets at end of period (000) $32,075 $21,398 $ 270
(a) Net of fees and expenses waived or borne by the Advisor
which amounted to: $ 0.005 $ 0.005 $ 0.005
(b) Net of fees waived by the Distributor which amounted to $0.022 per share and 0.30%.
(c) Total return at net asset value assuming all distributions reinvested and no initial sales charge or
contingent deferred sales charge.
(d) Had the Advisor and Distributor not waived or reimbursed a portion of expenses, total return would have
been reduced.
(e) The benefits derived from custody credits and directed brokerage arrangements had an impact of 0.01% and
$0.001 per share.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31, 1998
-----------------------------------------------------
CLASS A CLASS B CLASS C(b)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.130 $ 7.130 $ 7.470
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) 0.362 0.308 0.163(c)
Net realized and unrealized gain (loss) 0.405 0.405 0.066
------- ------- -------
Total from Investment Operations 0.767 0.713 0.229
------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income (0.362) (0.308) (0.164)
From net realized gains (0.045) (0.045) (0.045)
------- ------- -------
Total Distributions Declared to Shareholders (0.407) (0.353) (0.209)
------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 7.490 $ 7.490 $ 7.490
======= ======= =======
Total return (d)(e) 11.04% 10.22% 3.13%(f)
======= ======= =======
RATIOS TO AVERAGE NET ASSETS
Expenses (g) 0.91% 1.66% 1.36%(c)(h)
Net investment income (g) 4.97% 4.22% 4.40%(c)(h)
Fees and expenses waived or borne by the Advisor (g) 0.11% 0.11% 0.12%(h)
Portfolio turnover 19% 19% 19%
Net assets at end of period (000) $32,824 $20,278 $ 136
(a) Net of fees and expenses waived or borne by the Advisor which amounted to:
$ 0.008 $ 0.008 $ 0.008
(b) Class C shares were initially offered on August 1, 1997. Per share amounts reflect activity from that date.
(c) Net of fees waived by the Distributor which amounted to $0.011 per share and 0.30%.
(d) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent
deferred sales charge.
(e) Had the Advisor and Distributor not waived or reimbursed a portion of expenses, total return would have been
reduced.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage arrangements had no impact.
(h) Annualized.
<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 $ 7.350 $ 7.350 $ 6.840 $ 6.840
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) 0.369 0.316 0.384 0.332
Net realized and unrealized gain (loss) (0.222) (0.222) 0.516 0.516
------- ------- ------- -------
Total from Investment Operations 0.147 0.094 0.900 0.848
------- ------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income (0.367) (0.314) (0.390) (0.338)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 7.130 $ 7.130 $ 7.350 $ 7.350
======= ======= ======= =======
Total return (b)(c) 2.16% 1.40% 13.50% 12.66%
======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS
Expenses (d) 0.90% 1.65% 0.85% 1.60%
Net investment income (d) 5.19% 4.44% 5.41% 4.66%
Fees and expenses waived or borne by the
Advisor (d) 0.13% 0.13% 0.24% 0.24%
Portfolio turnover 27% 27% 42% 42%
Net assets at end of period (000) $34,986 $192,389 $36,586 $19,083
(a) Net of fees and expenses waived or borne by the Advisor which amounted to:
$ 0.009 $ 0.009 $ 0.016 $0.016
(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>
<PAGE>
- ---------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- ---------------------------------
TO THE TRUSTEES OF LIBERTY FUNDS TRUST V
AND THE SHAREHOLDERS OF COLONIAL MINNESOTA TAX-EXEMPT FUND
In our opinion, the accompanying statement of assets and liabilities,
including the investment portfolio, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in
all material respects, the financial position of Colonial Minnesota Tax-Exempt
Fund (the "Fund") (a series of Liberty Funds Trust V, formerly Colonial Trust
V), at January 31, 2000, the results of its operations, the changes in its net
assets and the financial highlights for the periods indicated, in conformity
with accounting principles generally accepted in the United States. These
financial statements and the financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in
accordance with auditing standards generally accepted in the United States
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of portfolio positions at January 31,
2000 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
March 10, 2000
<PAGE>
TRUSTEES & TRANSFER AGENT
- --------------------------------------------------------------------------------
TOM BLEASDALE WILLIAM E. MAYER
Retired (formerly Chairman of the Partner, Development Capital, LLC
Board and Chief Executive Officer, (formerly Dean, College of Business
Shore Bank & Trust Company) and Management, University of
Maryland; Dean, Simon Graduate School
JOHN V. CARBERRY of Business, University of Rochester;
Senior Vice President of Liberty Chairman and Chief Executive Officer,
Financial Companies, Inc. (formerly CS First Boston Merchant Bank; and
Managing Director, Salomon Brothers) President and Chief Executive
Officer, The First Boston
LORA S. COLLINS Corporation)
Attorney (formerly Attorney, Kramer,
Levin, Naftalis & Frankel) JAMES L. MOODY, JR.
Retired (formerly Chairman of the
JAMES E. GRINNELL Board, Chief Executive Officer and
Private Investor (formerly Senior Director, Hannaford Bros. Co.)
Vice President-Operations, The
Rockport Company) JOHN J. NEUHAUSER
Academic Vice President and Dean of
RICHARD W. LOWRY Faculties, Boston College (formerly
Private Investor (formerly Chairman Dean, Boston College School of
and Chief Executive Officer, U.S. Management)
Plywood Corporation)
THOMAS E. STITZEL
SALVATORE MACERA Professor of Finance, College of
Private Investor (formerly Executive Business, Boise State University;
Vice President of Itek Corp. and Business Consultant and Author
President of Itek Optical &
Electronic Industries, Inc.) ROBERT L. SULLIVAN
Retired Partner, KPMG LLP (formerly
Management Consultant, Saatchi and
Saatchi Consulting Ltd. and Principal
and International Practice Director,
Management Consulting, Peat Marwick
Main & Co.)
ANNE-LEE VERVILLE
Consultant (formerly General Manager,
Global Education Industry, and
President, Applications Solutions
Division, IBM Corporation)
- --------------------------------------------------------------------------------
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial Minnesota Tax-Exempt Fund is:
Liberty Funds Services, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
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 Colonial Minnesota Tax-Exempt
Fund. This report may also be used as sales literature when preceded or
accompanied by the current prospectus which provides details of sales charges,
investment objectives and operating policies of the Fund and with the most
recent copy of the Liberty Funds Distributor, Inc. Performance Update.
ANNUAL REPORT:
COLONIAL MINNESOTA TAX-EXEMPT FUND
<PAGE>
Liberty offers the independent thinking and collective strength of six financial
specialists. Our distinguished product line helps financial advisors and their
clients build diversified investment portfolios for long-term financial goals.
L I B E R T Y
- -------------------------
F U N D S
- --------------------------------------------------------------------------------
ALL-STAR INSTITUTIONAL MONEY MANAGEMENT APPROACH FOR INDIVIDUAL INVESTORS.
COLONIAL FIXED INCOME AND VALUE STYLE EQUITY INVESTING.
CRABBE A CONTRARIAN APPROACH TO FIXED INCOME AND EQUITY INVESTING.
HUSON
NEWPORT A LEADER IN INTERNATIONAL INVESTING.(SM)
STEIN ROE SOLUTIONS FOR GROWTH AND INCOME INVESTING.
ADVISOR
KEYPORT A LEADING PROVIDER OF INNOVATIVE ANNUITY PRODUCTS.
[graphic omitted]
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
COLONIAL MINNESOTA TAX-EXEMPT FUND ANNUAL REPORT
- --------------------------------------------------------------------------------
---------------
BULK RATE
[Graphic U.S. POSTAGE
Omitted] L I B E R T Y PAID
----------------- HOLLISTON, MA
F U N D S PERMIT NO. 20
---------------
ALL-STAR o COLONIAL o CRABBE HUSON o NEWPORT o STEIN ROE ADVISOR
Liberty Funds Distributor, Inc. (C)2000
One Financial Center, Boston, MA 02111-2621, 1-800-426-3750
www.libertyfunds.com
771-02/399A-0200 (3/00) 00/337
