<PAGE>
----------------------------------------------------
LIBERTY CALIFORNIA TAX-EXEMPT FUND Semiannual Report
----------------------------------------------------
JULY 31, 2000
[Graphic Omitted]
<PAGE>
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 that your Fund is part
of 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 clear. First,
the Fed was concerned that the rapidly expanding U.S. economy could trigger
higher rates of inflation; and second, the Fed was determined to keep inflation
firmly in hand.
At the beginning of the period, longer-term municipal bond prices rose. Prices
then fell as interest rates rose. 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 the bond market in the foreseeable future. Municipal bond
prices rallied in the final two months of the period.
As always, thank you for choosing Liberty California 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
Not FDIC May Lose Value change frequently, there can be no
Insured No Bank Guarantee assurance that the trends described in this
-------------------------------- report will continue or come to pass.
<PAGE>
--------------------------------------------------------------------------------
HIGHLIGHTS(c)
--------------------------------------------------------------------------------
o POSITIVE RESULTS FOR MUNICIPAL BONDS WERE BOLSTERED BY REDUCED SUPPLY
Due partly 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.
o THE MUNICIPAL BOND YIELD CURVE FLATTENED DURING THE SIX-MONTH PERIOD
Between February and July, yields for short-term municipal bonds declined
slightly (0.10% to 0.20%). Meanwhile, rates for intermediate- and
long-term municipals fell by as much as 0.54% as investors responded to
early signs that the U.S. economy may be slowing and that inflation may
not become a serious problem down the road. As yields fell, bond prices
rose, and the gains were largest for bonds in the 25- to 30-year maturity
range.
MUNICIPAL VS. TREASURY BOND PERFORMANCE
1/31/00 - 7/31/00
Lehman Brothers Salomon 30-Year
Municipal Bond Index Treasury Bond Index
-------------------- -------------------
January 31, 2000 0.00% 0.00%
February 29, 2000 1.16 3.70
March 31, 2000 3.37 8.56
April 30, 2000 2.76 7.23
May 31, 2000 2.22 7.02
June 30, 2000 4.93 9.36
July 31, 2000 6.40 11.48
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.
Past performance is no guarantee of future results.
NET ASSET VALUE PER SHARE
AS OF 7/31/00
Class A $7.31
-------------------------
Class B $7.31
-------------------------
Class C $7.31
-------------------------
DISTRIBUTIONS DECLARED FROM
2/1/00 TO 7/31/00
Class A $.175
-------------------------
Class B $.148
-------------------------
Class C $.159
-------------------------
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.
<PAGE>
--------------------------------------------------------------------------------
PORTFOLIO MANAGER'S REPORT
--------------------------------------------------------------------------------
TOP FIVE SECTORS
7/31/00 vs. 1/31/00
FUND AS OF 7/31/00 FUND AS OF 1/31/00
SPECIAL PROPERTY TAX 18.0% 16.9%
LOCAL APPROPRIATED 17.9% 18.3%
REFUNDED/ESCROW 14.1% 14.1%
LOCAL GO'S 7.3% 8.2%
STATE GO'S 7.6% 7.1%
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.
SEC YIELDS ON 7/31/00
Class A 4.34%
------------------------------
Class B 3.79%
------------------------------
Class C 4.06%
------------------------------
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 4.06% for Class C shares.
TAXABLE-EQUIVALENT SEC YIELDS
ON 7/31/00
Class A 7.92%
------------------------------
Class B 6.92%
------------------------------
Class C 7.41%
------------------------------
Taxable-equivalent SEC yields are based on the maximum effective combined 45.2%
federal and state income tax rate. This tax rate does not reflect the phaseout
of exemptions or the reduction of otherwise allowable deductions which occurs
when Adjusted Gross Income exceeds certain levels.
RISING LONG-TERM BOND PRICES CONTRIBUTED TO 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 California Tax-Exempt Fund
posted a total return of 8.25% without a sales charge for the six months ended
July 31, 2000.
FUND SHIFTED EMPHASIS TO BETTER LONG-TERM POSITIONING
For the period, the Fund was invested primarily in bonds that do well during
periods of declining interest rates -- that is, bonds in the 15- to 25-year
maturity range, bonds with long-term call protection, zero coupon bonds and
deep-discount securities. However, higher-than-anticipated economic growth and
fears of more rapid inflation sent interest rates higher for part of the six
months. To help protect the Fund from these interest rate increases, we adopted
temporary defensive measures while keeping the bulk of the portfolio positioned
for an environment of slower economic growth, low rates of inflation and lower
interest rates.
Later in the period, we were able to reduce these defensive measures and refocus
our efforts on maintaining a portfolio that may prosper in a falling interest
rate environment. More specifically, we sold prerefunded bonds, short-maturity
issues and bonds with shorter call protection. Such bonds generally do not
appreciate as greatly as other bonds when yields are falling. We purchased a
variety of bonds in the 15- to 25-year maturity ranges, bonds with 10 or more
years of call protection (i.e., securities that can be called for redemption by
the issuers not sooner than 10 years from date of issue), noncallable bonds,
and, to a lesser extent, zero coupon bonds, to "lock in" what we believe will be
viewed as attractive rates.
CALIFORNIA'S ECONOMY REMAINS AMONG THE HEALTHIEST IN THE NATION
Driven by job growth across all sectors, including manufacturing, California's
economy continues to be one of the healthiest in the United States. The economy
is well diversified among basic and high-tech industries, and personal incomes
are rising, providing the push for growth in real estate markets throughout the
state.
The fiscal picture is equally attractive. Due to California's graduated income
tax and rapid income growth, the state has experienced a windfall in revenues,
easing budgetary pressures and allowing it to enhance education programs and
increase aid to counties and local governments.
<PAGE>
--------------------------------------------------------------------------------
PORTFOLIO MANAGER'S REPORT (CONTINUED)
--------------------------------------------------------------------------------
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. The Fund is well positioned should that occur. In
addition to a sizable investment in long-term and call-protected issues, the
Fund owns zero coupon and discount bonds that may reap a larger-than-average
benefit should interest rates fall.
Our outlook for California is also positive. Provided that rising interest rates
do not trigger problems in the housing market and labor shortages do not lead to
wage inflation, we expect economic expansion in the state to exceed the national
average in the coming year. In addition, the generally positive economic
picture, which is raising demand for tax-exempt bonds among even middle-class
residents, should help keep the California municipal market on a positive track.
/s/ Gary Swayze
Gary Swayze is portfolio manager of Liberty California Tax-Exempt Fund and is a
senior vice president of Colonial Management Associates, Inc.
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.
QUALITY BREAKDOWNS AS OF
7/31/00
AAA 73.3%
------------------------------
AA 4.2%
------------------------------
A 1.2%
------------------------------
BBB 10.9%
------------------------------
Nonrated 9.4%
------------------------------
Cash Equivalents 1.0%
------------------------------
Quality breakdowns are calculated as a percentage of total investments,
including short-term obligations. Ratings shown in the quality breakdowns
represent the highest rating assigned to a particular bond by one of the
following respected rating agencies: Standard & Poor's Corporation, Moody's
Investors Service, Inc., or Fitch Investors Service, Inc.
Because the Fund is actively managed, there can be no guarantee the Fund will
continue to maintain these quality breakdowns in the future.
BOUGHT
--------------------------------------------------------------------------------
We purchased Yuba, CA Unified School District zero coupon, noncallable, insured
bonds due in 2020 (0.27% of net assets). If interest rates fall, these 20-year
bonds provide the lion's share of the appreciation potential of comparable
30-year bonds, but they should be less volatile.
SOLD
--------------------------------------------------------------------------------
One goal during the period was to lengthen the Fund's duration, so we sold
Mojave, CA water agency bonds due in 2021. Though they had a 6.95% coupon, they
had been prerefunded. In a prerefunding, Treasury bonds are purchased and, when
they mature, the proceeds are used to pay the principal due on the original
municipal bonds to a shorter call date. Prerefunding effectively shortens the
risk period or maturity for the original bonds to just a few years.
<PAGE>
PERFORMANCE INFORMATION
AVERAGE ANNUAL TOTAL RETURNS AS OF 7/31/00
------------------------------------------------------------------------------
Share Class A B C
Inception 6/16/86 8/4/92 8/1/97
------------------------------------------------------------------------------
Without With Without With Without With
Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge
-------------------------------------------------------------------------------
6 month (cumulative) 8.25% 3.11% 7.85% 2.85% 8.01% 7.01%
-------------------------------------------------------------------------------
1 year 4.60 (0.37) 3.82 (1.16) 4.13 3.13
-------------------------------------------------------------------------------
5 years 6.21 5.18 5.42 5.10 5.92 5.92
-------------------------------------------------------------------------------
10 years 6.40 5.88 5.75 5.75 6.25 6.25
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/00
------------------------------------------------------------------------------
Share Class A B C
------------------------------------------------------------------------------
Without With Without With Without With
Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge
-------------------------------------------------------------------------------
6 month (cumulative) 6.01% 0.97% 5.59% 0.59% 5.76% 4.76%
-------------------------------------------------------------------------------
1 year 3.25 (1.65) 2.49 (2.42) 2.79 1.81
-------------------------------------------------------------------------------
5 years 5.96 4.94 5.17 4.84 5.67 5.67
-------------------------------------------------------------------------------
10 years 6.38 5.86 5.74 5.74 6.24 6.24
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
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
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 were 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 the newer classes would have been lower.
<PAGE>
--------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
--------------------------------------------------------------------------------
July 31, 2000 (Unaudited)
(In thousands)
MUNICIPAL BONDS - 97.7% PAR VALUE
---------------------------------------------------------------------
EDUCATION - 1.4%
EDUCATION
State Educational Facilities Authority,
Pooled College & University Project,
6.300% 4/1/21 $ 1,000 $ 1,019
La Verne University,
Series 2000,
6.625% 6/1/20 1,000 1,015
Statewide Communities Development Authority,
Crossroads School for Arts & Sciences,
Series 1998,
6.000% 8/1/28 1,935 1,864
--------
3,898
--------
---------------------------------------------------------------------
HEALTHCARE - 4.7%
CONGREGATE CARE RETIREMENT - 1.2%
Abag Finance Authority for Nonprofit Corps.,
Channing House,
Series 1999,
5.375% 2/15/19 1,700 1,499
Riverside County Air Force Village
West, Inc.,
Series 1999,
5.750% 5/15/19 2,000 1,811
--------
3,310
--------
HOSPITAL - 3.5%
Hi Desert Memorial Health Care District,
Series 1998,
5.500% 10/1/15 1,000 855
Riverside County Asset Leasing Corp., Riverside
County Hospital Project,
Series B,
5.700% 6/1/16 2,500 2,596
State Health Facilities Financing Authority,
Cedars-Sinai Medical Center,
Series 1999 A,
6.125% 12/1/30 2,500 2,520
Statewide Communities Development Authority:
St. Joseph Health System,
Series 1998,
5.250% 7/1/10 860 885
Catholic Healthcare West,
Series 1999,
6.500% 7/1/20 3,000 2,991
--------
9,847
--------
---------------------------------------------------------------------
HOUSING - 6.5%
ASSISTED LIVING/SENIOR - 0.5%
Abag Finance Authority for Nonprofit Corps.,
Eskaton Gold River Lodge,
Series 1998,
6.375% 11/15/28 1,400 1,199
--------
MULTI-FAMILY - 0.0%
Santa Rosa, Chanate Lodge Project,
Series 1992,
6.625% 12/1/02 65 66
--------
SINGLE FAMILY - 6.0%
Southern California Home
Financing Authority:
Series A,
7.625% 10/1/22 620 629
Series 1990 A,
7.625% 10/1/23 235 240
State Housing Finance Agency:
Series A-1, Class I,
5.950% 8/1/16 3,000 3,071
Series 1997 B,
6.000% 8/1/16 1,600 1,643
State Rural Home Mortgage
Finance Authority:
Series A-2,
7.000% 9/1/29 3,795 4,358
Series 1995 B,
7.750% 9/1/26 1,185 1,253
Series 1998 B-4,
6.350% 12/1/29 2,625 2,765
Series 2000 B,
6.100% 6/1/31 1,500 1,622
Series 2000 D,
6.000% 6/1/31 1,000 1,077
Stockton, Series 1990 A,
7.400% 8/1/05 30 30
PR Commonwealth of Puerto Rico
Housing Finance Corp.,
Series B,
7.650% 10/15/22 60 61
--------
16,749
--------
---------------------------------------------------------------------
OTHER - 15.4%
POOL/BOND BANK - 1.3%
State Public Capital Improvements
Financing Authority,
Joint Powers Agency,
Series 1988 A,
8.500% 3/1/18 3,500 3,544
--------
REFUNDED/ESCROWED (a) - 14.1%
Central Unified School District,
(b) 03/01/18 20,065 7,598
Colton Public Financing Authority,
Series 1995,
7.500% 10/1/20 2,945 3,214
Duarte, City of Hope National
Medical Center,
Series 1993,
6.000% 4/1/08 500 532
Fontana Public Financing Authority,
North Fontana Redevelopment,
Series 1991 A,
7.750% 12/1/20 785 836
Los Angeles Convention & Exhibit Center,
Series 1985,
9.000% 12/1/20 500 613
Moreno Valley Unified School District,
7.400% 9/1/16 20 21
Murrieta County Water District,
Series 1991,
8.300% 10/1/21 1,000 1,064
Pomona,
Series 1990 B,
7.500% 8/1/23 1,000 1,216
Riverside County,
Series 1989-A,
7.800% 5/1/21 2,500 3,152
Riverside Public Financing Authority,
Series A,
8.000% 2/1/18 590 612
Riverside Unified School District, Community
Facilities District No. 2,
Series 1993 A,
7.250% 9/1/18 1,000 1,078
Sacramento Cogeneration Authority, Project
Revenue, Procter & Gamble Project,
Series 1995,
6.500% 7/1/21 6,500 7,230
Sacramento Unified School, Community
Facilities District No. 1,
Series B,
7.300% 9/1/13 1,760 1,914
San Joaquin Hills Transportation
Corridor Agency,
Series 1993,
(b) 01/01/20 15,400 5,201
Soledad Redevelopment Agency Project,
Series 1992,
7.400% 11/1/12 890 968
Torrance Redevelopment Agency, Downtown
Redevelopment Project,
Series 1992,
7.125% 9/1/21 1,000 1,050
Watsonville Mammoth Lakes,
Series B,
7.875% 6/1/11 475 499
Whisman School District:
Series 1996 A:
(b) 8/1/15 1,595 722
(b) 8/1/16 1,645 696
VI Virgin Islands Public Financing,
Series 1992 A,
7.250% 10/1/18 1,000 1,082
--------
39,298
--------
---------------------------------------------------------------------
OTHER REVENUE - 1.2%
HOTELS
Sacramento City Financing Authority,
Sacramento Convention Center,
Series 1999 A,
6.250% 1/1/30 3,500 3,329
--------
---------------------------------------------------------------------
TAX-BACKED - 55.6%
LOCAL APPROPRIATED - 17.9%
Alameda County, Capital Projects,
Series 1989,
(b) 6/15/14 2,185 1,048
Anaheim Public Financing Authority,
Series C,
6.000% 09/01/14 3,500 3,869
Bishop, Escalon & Lemoore Cities,
Series 1991 A,
7.700% 5/1/11 700 719
Compton, Civic Center Projects,
5.500% 9/1/15 3,000 2,861
Grossmont Unified High School District,
Capital Projects,
Series 1991,
(b) 11/15/06 4,500 3,389
Los Angeles Convention &
Exhibition Authority,
Series 1993 A,
6.125% 08/15/11 5,000 5,608
Los Angeles County Public Works
Financing Authority,
Series A,
5.500% 10/1/18 2,895 2,965
Modesto, Community Center Project,
Series 1993 A,
5.000% 11/1/23 2,235 2,095
Pasadena Civic Improvement Corp.,
Series 1996,
5.250% 2/1/16 3,020 3,014
Rancho Mirage Joint Powers Financing
Authority, Civic Center,
Series 1991 A,
7.500% 4/1/17 455 470
Ridgecrest Civic Center,
Series 1999,
6.250% 3/1/26 1,500 1,496
Sacramento City Financing Authority,
Series A,
5.375% 11/1/14 1,100 1,146
Sacramento County, Public Facilities Project,
5.375% 2/1/19 3,000 2,967
San Diego Convention Center Expansion
Financing Authority,
Series 1998 A,
4.750% 4/1/28 4,750 4,167
Santa Ana Financing Authority,
Police Holding Facility,
Series 1994 A,
6.250% 7/1/18 6,035 6,700
Santa Clara County Financing Authority,
Series A,
5.000% 11/15/17 3,500 3,359
Victor Elementary School District,
Series 1996,
6.450% 5/1/18 3,345 3,800
--------
49,673
--------
LOCAL GENERAL OBLIGATIONS - 7.3%
Benicia Unified School District,
Series 1994 C,
6.450% 6/1/19 3,870 4,259
Cabrillo Unified School District,
Series 1996 A,
(b) 8/1/15 3,000 1,343
Central School District,
San Bernardino County,
Series A,
(b) 5/1/16 750 776
East Whittier School City School District,
Series A,
5.750% 8/1/17 1,675 1,782
Fairfield-Suisun Unified School District,
Series 1999,
(b) 8/15/24 1,000 962
Fillmore Unified School District,
Series A:
(b) 7/1/11 950 553
(b) 7/1/12 980 535
(b) 7/1/17 650 254
Franklin-McKinley School District,
Series A,
5.250% 7/1/16 1,705 1,705
Golden West School Financing Authority,
Series 1999 A,
(b) 8/1/12 1,925 1,045
Jefferson Unified High School Distict,
Series 2000 A,
6.450% 8/1/25 1,000 1,130
Rocklin Unified School District,
Series 1991 C,
(b) 7/1/20 6,920 2,238
Sanger Unified School District,
Series 1999,
5.350% 8/1/15 1,500 1,553
Simi Valley Unified School District,
Series 1997,
5.250% 8/1/22 925 904
Union Elementary School District,
Series 1999 A,
(b) 9/1/19 1,750 595
Yuba City Unified School District,
Series 2000,
(b) 9/1/20 2,385 764
--------
20,398
--------
SPECIAL NON-PROPERTY TAX - 1.4%
PR Commonwealth of Puerto Rico Highway &
Transportation Authority:
Series W,
5.500% 7/1/09 580 616
Series 1996 Y,
6.250% 7/1/12 3,000 3,362
--------
3,978
--------
SPECIAL PROPERTY TAX - 18.0%
Anaheim Public Financing Authority,
Series A,
5.250% 2/1/18 3,000 2,943
Capistrano Unified School District, Ladera
Community Facilities
District No. 98-2,
Series 1999,
5.750% 9/1/29 3,000 2,711
Carson,
Series 1992,
7.375% 9/2/22 905 942
Cerritos Public Financing Authority,
Los Coyotes Redevelopment Project,
Series 1993 A,
6.500% 11/1/23 2,000 2,260
Concord Redevelopment Agency,
Central Concord Project,
Series 1988,
8.000% 7/1/18 25 25
Contra Costa County Public
Financing Authority,
Series 1992 A,
7.100% 8/1/22 1,000 1,059
Costa Mesa Public Financing,
Series 1991 A,
7.100% 8/1/21 890 913
Elk Grove Unified School District,
Community Facilities,
Series 1995:
(b) 12/1/08 1,000 1,142
6.500% 12/1/18 2,720 974
6.500% 12/1/24 4,055 4,607
Englewood Redevelopment Agency,
Series 1998 A,
5.250% 5/1/23 1,000 969
La Mirada Redevelopment Agency,
Civic Theater Project,
Series 1998,
5.700% 10/1/20 1,000 909
Los Angeles Community Redevelopment Agency,
Hollywood Redevelopment
Project,
Series 1998 C,
5.375% 7/1/18 1,665 1,681
Oakland Redevelopment Agency,
Central District Redevelopment Project,
Series 1992,
5.500% 02/01/14 8,400 8,843
Orange County Community Facilities District,
Ladera Ranch,
Series 1999 A,
6.700% 8/15/29 2,000 2,008
Rancho Cucamonga Redevelopment Agency,
Series 1996,
5.250% 9/1/16 4,000 3,991
Richmond Joint Powers Financing Authority,
Series 1990 A,
7.700% 10/1/10 870 892
Riverside County Public Financing Authority,
Redevelopment Projects,
Series A,
5.250% 10/1/16 3,120 2,850
San Clemente Assessment Escrow,
6.050% 9/2/28 1,000 950
San Marcos Public Facilities Authority,
Series 1998,
5.800% 9/1/18 1,500 1,406
Santa Fe Springs Redevelopment Agency,
Consolidated Redevelopment
Project,
Series 1992 A,
6.400% 9/1/22 2,690 2,801
Santa Margarita Water District,
Series 1999,
6.250% 9/1/29 2,500 2,425
Santa Margarita/Dana Point Authority,
Series 1994 B,
7.250% 8/1/13 2,000 2,449
Riverside Public Financing Authority,
Series 1991 A,
8.000% 2/1/18 410 422
--------
50,172
--------
STATE APPROPRIATED - 3.4%
State Public Works Board:
Secretary of State & State Archives,
Series 1992 A,
6.500% 12/1/08 1,000 1,141
Various State Prisons Projects,
Series 1993 A:
5.000% 12/1/19 (c) 6,000 5,700
5.250% 12/1/13 2,500 2,587
--------
9,428
--------
STATE GENERAL OBLIGATIONS - 7.6%
State,
5.500% 04/01/12 2,770 2,952
State,
10.000% 02/01/10 2,000 2,792
State:
Series 1995,
10.000% 10/01/06 1,185 1,540
Series 1998,
4.500% 12/1/24 3,250 2,747
State,
Series 1999,
4.750% 4/1/29 3,600 3,147
PR Commonwealth of Puerto Rico:
6.500% 7/1/14 2,000 2,281
Series 1995,
5.650% 7/1/15 1,000 1,053
PR Commonwealth of Puerto Rico
Aqueduct & Sewer Authority:
6.000% 7/1/09 1,250 1,374
6.250% 07/01/13 2,750 3,080
--------
20,966
--------
---------------------------------------------------------------------
TRANSPORTATION - 3.7%
AIRPORT - 0.7%
San Francisco City &
County Airport Commission,
Series 1998,
4.500% 5/1/18 2,310 2,029
--------
TRANSPORTATION - 3.0%
Los Angeles Harbor Department,
Series 1996 B,
5.375% 11/01/19 8,750 8,390
--------
---------------------------------------------------------------------
UTILITY - 9.2%
INDEPENDENT POWER PRODUCER - 0.3%
PR Commonwealth of Puerto Rico Industrial,
Educational, Medical & Environmental
Cogeneration Facilities, AES Project,
Series 2000,
6.625% 6/1/26 800 826
--------
INVESTOR OWNED - 2.1%
State Pollution Control Financing Authority:
San Diego Gas & Electric Co.,
Series 1996 A,
5.900% 6/1/14 2,650 2,871
Southern California Edison Co.:
Series 1999 B,
5.450% 9/1/29 2,000 1,964
Series 1999 C,
5.550% 9/1/31 1,000 978
--------
5,813
--------
MUNICIPAL ELECTRIC - 2.7%
Reading Electric Systems,
Series 1992 A, IFRN (variable rate),
9.396% 7/8/22 750 873
Sacramento Municipal Utilities District:
Series K,
5.700% 7/1/17 1,500 1,587
Series 1993 G,
6.500% 09/01/2013 1,500 1,736
Turlock Irrigation District,
Series 1996 A,
6.000% 1/1/12 500 555
PR Commonwealth of Puerto Rico Electric
Power Authority:
Series 1989 O,
(b) 7/1/17 2,490 965
Series 1998 EE,
4.500% 7/1/18 2,000 1,757
--------
7,473
--------
WATER & SEWER - 4.1%
Big Bear Lake,
Series 1996,
6.000% 4/1/15 1,350 1,488
Compton, Sewer Revenue,
Series 1998,
5.375% 9/1/23 1,320 1,172
Fresno,
Series 1995 A,
6.000% 09/01/10 1,420 1,576
Los Angeles Waste Water,
Series 1998 C,
4.000% 6/1/15 2,000 1,709
Metropolitan Water District of Southern
California, IFRN (variable rate),
7.680% 8/5/22 2,000 2,233
San Diego County Water Authority,
Series 1997 A,
5.750% 5/1/11 2,100 2,280
Santa Maria,
Series A,
(b) 8/1/14 2,000 952
--------
11,410
--------
TOTAL MUNICIPAL BONDS
(cost of $261,607)(d) 271,796
--------
SHORT-TERM OBLIGATIONS - 1.0%
---------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (d)
IA Woodbury County, Siouxland Medical
Educational Foundation:
Series 1996,
4.350% 11/1/16 100 100
Series 1998,
4.300% 12/1/14 1,200 1,200
IL State Educational Facilities Authority,
4.200% 12/1/25 1,200 1,200
IN State Health Facilities Financing Authority,
Series 2000,
4.250% 1/12/20 300 300
--------
TOTAL SHORT-TERM OBLIGATIONS 2,800
--------
OTHER ASSETS & LIABILITIES, NET - 1.3% 3,593
--------
NET ASSETS - 100.0% $278,189
--------
NOTES TO INVESTMENT PORTFOLIO:
---------------------------------------------------------------------
(a) The Fund has been informed that each issuer has placed direct obligations of
the U.S. Government in an irrevocable trust, solely for the payment of the
interest and principal.
(b) Zero coupon bond.
(c) These securities, or a portion thereof, with a total market value of $475,
are being used to collateralize the open futures contracts listed below.
(d) Cost for federal income tax purposes is the same.
(e) 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.
Long futures contracts open on July 31, 2000:
PAR VALUE UNREALIZED
COVERED BY EXPIRATION APPRECIATION
TYPE CONTRACTS MONTH AT 7/31/00
--------------------------------------------------------------------------------
Treasury Bond $14,200 September $478
ACRONYM NAME
----- ----
IFRN Inverse Floating Rate Note
See notes to financial statements.
<PAGE>
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
July 31, 2000
(Unaudited)
(In thousands except for per share amounts and footnotes)
ASSETS
Investments at value (cost $261,607) $271,796
Short-term obligations 2,800
--------
274,596
Receivable for:
Interest $4,374
Investments sold 376
Fund shares sold 4
Variation margin on futures contracts 4
Other 62 4,820
------ --------
Total Assets 279,416
LIABILITIES
Payable for:
Fund shares repurchased 627
Distributions 382
Accrued:
Management fee 116
Bookkeeping fee 9
Transfer agent fee 27
Deferred Trustees' fees 8
Other 58
------
Total Liabilities 1,227
--------
NET ASSETS $278,189
--------
Net asset value & redemption price per share --
Class A ($195,185/26,698) $ 7.31(a)
--------
Maximum offering price per share
-- Class A ($7.31/0.9525) $ 7.67(b)
--------
Net asset value & offering price per share --
Class B ($77,058/10,540) $ 7.31(a)
--------
Net asset value & offering price per share --
Class C ($5,946/813) $ 7.31(a)
--------
COMPOSITION OF NET ASSETS
Capital paid in $268,766
Overdistributed net investment income (322)
Accumulated net realized loss (922)
Net unrealized appreciation on:
Investments 10,189
Open futures contracts 478
--------
$278,189
--------
(a) Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
(b) On sales of $50,000 or more the offering price is reduced.
See notes to financial statements.
<PAGE>
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
For the Six Months Ended July 31, 2000
(Unaudited)
(In thousands)
INVESTMENT INCOME
Interest $ 8,132
EXPENSES
Management fee $ 698
Service fee 241
Distribution fee -- Class B 295
Distribution fee -- Class C 22
Transfer agent fee 193
Bookkeeping fee 54
Audit fee 24
Trustees' fee 10
Legal fee 4
Custodian fee 2
Registration fee 8
Reports to shareholders 13
Other 8
------
Total expenses 1,572
Fees waived by the Distributor - Class C (9)
Custodian credits earned (2) 1,561
------ ---------
Net Investment Income 6,571
---------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain (loss) on:
Investments 802
Closed futures contracts (40)
------
Net Realized Gain 762
Net change in unrealized appreciation/depreciation
during the period on:
Investments 14,000
Open futures contracts 736
------
Net Change in Unrealized Appreciation/Depreciation 14,736
---------
Net Gain 15,498
---------
Increase in Net Assets from Operations $ 22,069
---------
(a) Rounds to less than one.
See notes to financial statements.
<PAGE>
--------------------------------------------------------------------------------
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 $ 6,571 $ 14,423
Net realized gain 762 1,539
Net change in unrealized appreciation/depreciation 14,736 (36,409)
-------- --------
Net Increase (Decrease) from Operations 22,069 (20,447)
DISTRIBUTIONS
From net investment income -- Class A (4,792) (10,468)
From net realized gains -- Class A -- (521)
From net investment income -- Class B (1,639) (3,575)
From net realized gains -- Class B -- (211)
From net investment income -- Class C (133) (299)
From net realized gains -- Class C -- (17)
-------- --------
15,505 (35,538)
-------- --------
FUND SHARE TRANSACTIONS
Receipts for shares sold -- Class A 5,087 13,983
Value of distributions reinvested -- Class A 2,233 5,278
Cost of shares repurchased -- Class A (17,571) (46,533)
-------- --------
(10,251) (27,272)
-------- --------
Receipts for shares sold -- Class B 2,201 9,215
Value of distributions reinvested -- Class B 854 1,973
Cost of shares repurchased -- Class B (10,754) (20,202)
-------- --------
(7,699) (9,014)
-------- --------
Receipts for shares sold -- Class C 204 4,349
Value of distributions reinvested -- Class C 101 233
Cost of shares repurchased -- Class C (752) (3,701)
-------- --------
(447) 881
-------- --------
Net Decrease from Fund Share Transactions (18,397) (35,405)
-------- --------
Total Decrease (2,892) (70,943)
NET ASSETS
Beginning of period 281,081 352,024
-------- --------
End of period (net of overdistributed net investment income of
$322 and $329, respectively) $278,189 $281,081
-------- --------
NUMBER OF FUND SHARES
Sold -- Class A 716 1,918
Issued for distributions reinvested -- Class A 313 717
Repurchased -- Class A (2,468) (6,398)
-------- --------
(1,439) (3,763)
-------- --------
Sold -- Class B 308 1,251
Issued for distributions reinvested -- Class B 120 270
Repurchased -- Class B (1,514) (2,766)
-------- --------
(1,086) (1,245)
-------- --------
Sold -- Class C 29 587
Issued for distributions reinvested -- Class C 14 32
Repurchased -- Class C (106) (514)
-------- --------
(63) 105
-------- --------
</TABLE>
See notes to financial statements.
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
July 31, 2000 (Unaudited)
NOTE 1. INTERIM FINANCIAL STATEMENTS
In the opinion of management of Liberty California Tax-Exempt Fund (formerly
Colonial California Tax-Exempt Fund) (the Fund), a series of Liberty Funds
Trust V, the accompanying financial statements contain all normal and
recurring adjustments necessary for the fair presentation of the financial
position of the Fund at July 31, 2000, and the results of its operations, the
changes in its net assets and the financial highlights for the six months then
ended.
NOTE 2. ACCOUNTING POLICIES
ORGANIZATION
The Fund is a non-diversified portfolio of a Massachusetts business trust,
registered under the Investment Company Act of 1940, as amended, as an open-
end management investment company. The Fund's investment objective is to seek
as high a level of after-tax total return, as is consistent with prudent risk,
by pursuing current income exempt from federal and California 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.
Futures contracts are valued based on the difference between the last sale
price and the opening price of the contract.
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.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
Portfolio positions for which market quotations are not readily available are
valued at fair value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains (losses) are based upon the specific
identification method for both financial statement and federal income tax
purposes.
The Fund may trade securities on other than normal settlement terms. This may
increase the risk if the other party to the transaction fails to deliver and
causes the Fund to subsequently invest at less advantageous prices.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS
All income, expenses (other than 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:
AVERAGE NET ASSETS ANNUAL FEE RATE
------------------ ---------------
First $2 billion 0.50%
Over $2 billion 0.45%
BOOKKEEPING FEE
The Advisor provides bookkeeping and pricing services for 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 the Fund's average net assets plus charges based on the number of
shareholder accounts and transactions and receives reimbursement for certain
out-of-pocket expenses.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES
Liberty Funds Distributor, Inc. (the Distributor), a subsidiary of the
Advisor, is the Fund's principal underwriter. For the six months ended July
31, 2000, the Fund has been advised that the Distributor retained net
underwriting discounts of $6,609 on sales of the Fund's Class A shares and
received contingent deferred sales charges (CDSC) of none, $78,979, and $1,033
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 issues 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 0.17% (annualized).
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.
EXPENSE LIMITS
The Advisor has agreed, until further notice, to waive fees and bear certain
Fund expenses to the extent that total expenses (exclusive of service and
distribution fees, brokerage commissions, interest, taxes, and extraordinary
expenses, if any) exceed 0.80% annually of the Fund's average net assets.
For the six months ended July 31, 2000, the Fund's operating expenses did not
exceed the 0.80% expense limit.
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 the custodian bank under which custodian fees
were reduced by balance credits of $2,404 applied during the six months ended
July 31, 2000. The Fund could have reinvested a portion of the assets utilized
in connection with the expense offset arrangements in an income producing
asset if it had not entered into such an agreement.
NOTE 4. PORTFOLIO INFORMATION
INVESTMENT ACTIVITY
For the six months ended July 31, 2000, purchases and sales of investments,
other than short-term obligations, were $7,890,526 and $26,518,834,
respectively.
Unrealized appreciation (depreciation) at July 31, 2000, based on cost of
investments for both financial statement and federal income tax purposes was:
Gross unrealized appreciation $10,666,495
Gross unrealized depreciation (477,794)
-----------
Net unrealized appreciation $10,188,701
-----------
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 $1,292,000
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 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
during the six months ended July 31, 2000.
<PAGE>
--------------------------------------------------------------------------------
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 $ 6.920 $ 6.920 $ 6.920
-------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) 0.175 0.148 0.159(b)
Net realized and unrealized gain 0.390 0.390 0.390
-------- -------- --------
Total from Investment Operations 0.565 0.538 0.549
-------- -------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.175) (0.148) (0.159)
-------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 7.310 $ 7.310 $ 7.310
-------- -------- --------
Total return (c)(d) 8.25% 7.85% 8.01%(e)
-------- -------- --------
RATIOS TO AVERAGE NET ASSETS
Expenses (f)(g) 0.90% 1.65% 1.35%(b)
Net investment income (f)(g) 4.93% 4.18% 4.48%(b)
Portfolio turnover (d) 3% 3% 3%
Net assets at end of period (000) $195,185 $ 77,058 $ 5,946
(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 $0.011 per share and 0.30% (annualized).
(c) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred sales
charge.
(d) 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.
<CAPTION>
YEAR ENDED JANUARY 31, 2000
------------------------------------------------------------
CLASS A CLASS B CLASS C
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.730 $ 7.730 $ 7.730
-------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.346 0.290 0.312(b)
Net realized and unrealized loss (0.794) (0.794) (0.794)
-------- -------- --------
Total from Investment Operations (0.448) (0.504) (0.482)
-------- -------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.345) (0.289) (0.311)
In excess of net realized gains (0.017) (0.017) (0.017)
-------- -------- --------
Total Distributions Declared to Shareholders (0.362) (0.306) (0.328)
-------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 6.920 $ 6.920 $ 6.920
-------- -------- --------
Total return (c) (5.92)% (6.63)% (6.35)%(d)
-------- -------- --------
RATIOS TO AVERAGE NET ASSETS
Expenses (e) 0.91% 1.66% 1.36%(b)
Net investment income (e) 4.72% 3.97% 4.27%(b)
Portfolio turnover 19% 19% 19%
Net assets at end of period (000) $194,606 $ 80,416 $ 6,059
(a) The per share net investment income amounts do not reflect the period's reclassification of differences between book and tax
basis net investment income.
(b) Net of fees waived by the Distributor which amounted to $0.022 per share and 0.30%.
(c) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred sales
charge.
(d) Had the Distributor not waived a portion of expenses, total return would have been reduced.
(e) The benefits derived from custody credits and directed brokerage arrangements had no impact.
</TABLE>
<PAGE>
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
Selected data for a share of each class outstanding
throughout each period are as follows:
<TABLE>
<CAPTION>
YEARS ENDED JANUARY 31,
---------------------------------------------------------------------------------------------
1999 1998
----------------------------------------- ------------------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C(B)
-----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
<S> <C> <C> <C> <C> <C> <C>
OF PERIOD $ 7.720 $ 7.720 $ 7.720 $ 7.370 $ 7.370 $ 7.660
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.354 0.294 0.318(a) 0.366 0.310 0.164(c)
Net realized and unrealized gain 0.111 0.111 0.111 0.426 0.426 0.132
-------- -------- -------- -------- -------- --------
Total from Investment
Operations 0.465 0.405 0.429 0.792 0.736 0.296
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.352) (0.294) (0.317) (0.369) (0.313) (0.167)
In excess of net investment
income (0.012) (0.010) (0.011) (0.004) (0.004) --
From net realized gains (0.075) (0.075) (0.075) (0.068) (0.068) (0.069)
In excess of net realized
gains (0.016) (0.016) (0.016) (0.001) (0.001) --
-------- -------- -------- -------- -------- --------
Total Distributions
Declared to Shareholders (0.455) (0.395) (0.419) 0.442 (0.386) (0.236)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF
PERIOD $ 7.730 $ 7.730 $ 7.730 $ 7.720 $ 7.720 $ 7.720
-------- -------- -------- -------- -------- --------
Total return (d) 6.23% 5.42% 5.74%(e) 11.05% 10.23% 3.93%(e)(f)
-------- -------- -------- -------- -------- --------
RATIOS TO AVERAGE NET ASSETS
Expenses (g) 0.86% 1.61% 1.31%(a) 0.87% 1.62% 1.32%(c)(h)
Net investment income (g) 4.60% 3.85% 4.15%(a) 4.92% 4.17% 4.32%(c)(h)
Portfolio turnover 13% 13% 13% 31% 31% 31%
Net assets at end of period
(000) $246,576 $ 99,485 $ 5,963 $255,838 $101,657 $101,657
(a) Net of fees waived by the Distributor which amounted to $0.023 per share and 0.30%.
(b) Class C shares were initially offered on August 1, 1997. Per share data reflects 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 Distributor not waived 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 $ 7.540 $ 7.540 $ 6.870 $ 6.870
-------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.386 0.331 0.388 0.334
Net realized and unrealized gain (loss) (0.173) (0.173) 0.671 0.671
-------- -------- -------- --------
Total from Investment Operations 0.213 0.158 1.059 1.005
-------- -------- -------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.383) (0.328) (0.389) (0.335)
-------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 7.370 $ 7.370 $ 7.540 $ 7.540
-------- -------- -------- --------
Total return (b) 2.98% 2.21% 15.78%(c) 14.94%(c)
-------- -------- -------- --------
RATIOS TO AVERAGE NET ASSETS
Expenses (d) 0.88% 1.63% 0.89% 1.64%
Net investment income (d) 5.23% 4.48% 5.33% 4.58%
Fees and expenses waived or borne by the
Advisor (d) -- -- 0.01% 0.01%
Portfolio turnover 25% 25% 47% 47%
Net assets at end of period (000) $264,053 $100,873 $304,581 $106,925
(a) Net of fees and expenses waived or borne
by the Advisor which amounted to: $ -- $ -- $ 0.001 $ 0.001
(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>
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)
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IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Liberty California 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 California 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 CALIFORNIA TAX-EXEMPT FUND
<PAGE>
--------------------------------------------------------------------------------
CHOOSE LIBERTY
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BECAUSE NO SINGLE INVESTMENT MANAGER CAN BE ALL THINGS TO ALL INVESTORS.(SM)
--------------------------------------------------------------------------------
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.
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CRABBE
HUSON A contrarian approach to fixed income and equity investing.
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NEWPORT A leader in international investing.(SM)
--------------------------------------------------------------------------------
STEIN ROE
ADVISOR Innovative solutions for growth and income investing.
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KEYPORT
[graphic A leading provider of innovative annuity products.
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.
--------------------------------------------------------------------------------
LIBERTY CALIFORNIA TAX-EXEMPT FUND SEMIANNUAL REPORT
--------------------------------------------------------------------------------
[Graphic
Omitted] L I B E R T Y
-----------------
F U N D S
ALL-STAR o COLONIAL o CRABBE HUSON o NEWPORT o STEIN ROE ADVISOR
Liberty Funds Distributor, Inc. (C)1999
One Financial Center, Boston, MA 02111-2621, 1-800-426-3750
www.libertyfunds.com
767-03/383C-0700 (9/00) 00/1533
