<PAGE>
-------------------------------------------------------
LIBERTY MINNESOTA 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 quite clear.
First, the Fed was concerned that the rapidly expanding U.S. economy could
ignite higher rates of inflation. Second, the Fed was quite determined to keep
inflation rates firmly in control.
Initially, the rate increases hurt performance in the municipal bond markets
because as rates rise, bond prices fall. However, the Fed's persistence --
coupled with indications by the second quarter of the calendar year that the
economy may be slowing -- appears to have convinced investors that inflation
will not become a major obstacle to growth in the foreseeable future. Municipal
bond prices rallied in the final two months of the period. Your Fund's
management team had anticipated this scenario for some time, and the Fund was
well positioned to benefit from the rally.
As always, thank you for choosing Liberty Minnesota Tax-Exempt Fund and for
giving us the opportunity to serve your investment needs.
Respectfully,
/S/ Stephen E. Gibson
Stephen E. Gibson
President
September 11, 2000
---------------------------
Not FDIC May Lose Value
Insured No Bank Guarantee
---------------------------
Because economic and market conditions change frequently, there can be no
assurance that the trends described in this report will continue or come to
pass.
<PAGE>
--------------------------------------------------------------------------------
HIGHLIGHTS
--------------------------------------------------------------------------------
o POSITIVE RESULTS FOR MUNICIPAL BONDS WERE BOLSTERED BY RESTRICTED SUPPLY
Due to high tax revenues and budget surpluses, state and local governments
issued fewer municipal bonds during the first six months of calendar year
2000. New bond issues were 22% below the 1999 level, and re-fundings 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
-------------------- -------------------
1/31/00 0.00% 0.00%
2/29/00 1.16 3.70
3/31/00 3.37 8.56
4/30/00 2.76 7.23
5/31/00 2.22 7.02
6/30/00 4.93 9.36
7/31/00 6.40 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 $6.70
-----------------------------------------
Class B $6.70
-----------------------------------------
Class C $6.70
-----------------------------------------
DISTRIBUTIONS DECLARED FROM 2/1/00 TO 7/31/00
Class A $.166
-----------------------------------------
Class B $.141
-----------------------------------------
Class C $.151
-----------------------------------------
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
--------------------------------------------------------------------------------
SEC YIELDS ON 7/31/00
Class A $4.61
-----------------------------------------
Class B $4.07
-----------------------------------------
Class C $4.35
-----------------------------------------
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 4.04 for Class C shares.
TAXABLE-EQUIVALENT SEC YIELDS ON 7/31/00
Class A $8.34
-----------------------------------------
Class B $7.36
-----------------------------------------
Class C $7.87
-----------------------------------------
Taxable-equivalent SEC yields are based on the maximum effective 44.7% federal
and state income tax rate. This tax rate does not reflect the phase out of
exemptions or the reduction of otherwise allowable deductions which occurs when
Adjusted Gross Income exceeds certain levels.
BOUGHT
--------------------------------------------------------------------------------
Moving to lengthen the Fund's duration, we bought Minneapolis Metropolitan
Airport (2.3% of net assets), which matures in 2025.
SOLD
--------------------------------------------------------------------------------
We sold Saint Louis Park Hospital, a shorter term issue, in order to lengthen
the average maturity of the Fund.
RISING BOND PRICES CONTRIBUTED TO MODEST BUT SOLID GAINS FOR THE FUND
Against a backdrop of falling yields and rising prices, especially for
intermediate- and long-term municipal bonds, Class A shares of Liberty Minnesota
Tax-Exempt Fund posted a total return of 6.35% without a sales charge for the
six months ended July 31, 2000.
FUND SHIFTED EMPHASIS TO BONDS THAT RESPOND WELL TO FALLING INTEREST RATES
In the second half of the fiscal year ended January 31, 2000, we chose to
shorten the Fund's duration. This move was designed to insulate the Fund from
the impact of interest rate hikes by the Fed, which generally lead to lower bond
prices. As the present fiscal year began, we were convinced that the market
would ultimately come to view the Fed's rate increases as an effective curb
against higher inflation. In a lower inflation-rate environment, investors would
not demand higher yields, so we anticipated more moderate interest rates in the
long run. Falling rates, of course, generally mean rising prices for bonds.
With this scenario in mind, we steadily lengthened the Fund's duration, selling
shorter-term securities and using the proceeds to purchase issues in the 15- to
25-year maturity range. In particular, we focused on bonds for essential
services such as water and power. Even in periods of economic slowdown, such
basic facilities tend to generate consistent revenues, so their bonds generally
perform well when economic growth moderates.
Following additional anti-inflationary "strikes" by the Fed in February, March
and May, investors did indeed allow bond yields to subside. The bond market
rallied, and the Fund performed quite well. These strong results can be
attributed to the Fund's longer duration. They can also be credited to the zero
coupon and noncallable bonds in the portfolio, which tend to gain more value
than comparable callable or current-coupon bonds when yields decline.
One area that detracted from performance was the Fund's high-yield holdings.
These provided attractive yields, but their prices did not rally as strongly as
those of their investment-grade counterparts. This was due in part to weakness
in the health care sector, where increasing competition and federal budget cuts
have proved problematic for hospital systems.
STRONG MINNESOTA ECONOMY FORGED AHEAD
Minnesota's diversified economy continued to generate above-budget tax receipts
in this most recent period, while expenditures remain below budgeted levels.
Debt levels are moderate. The state is fiscally healthy and well positioned to
deal with the kind of mild-to-moderate economic slowdown -- the so-called "soft
landing" -- that the Fed is attempting to engineer.
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. We would expect the Fed to undertake few, if any,
additional interest rate increases during the balance of 2000. Slower growth
could set the stage for lower interest rates in 12 to 15 months.
For Minnesota, a slight abatement of economic growth could actually be a
boon, relieving some of the pressures created by a shortage of labor in the
state. With this exception, we do not believe that any "soft landing" the Fed
can bring about will have a material effect on the state's robust economy and
its municipal bond market.
/s/ Brian M. Hartford
BRIAN M. HARTFORD is portfolio manager of Colonial Minnesota 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 38.6%
-----------------------------------------
AA 17.3%
-----------------------------------------
A 13.0%
-----------------------------------------
BBB 11.5%
-----------------------------------------
BB 1.1%
-----------------------------------------
CCC 0.2%
-----------------------------------------
Nonrated 17.0%
-----------------------------------------
Cash Equivalents 1.3%
-----------------------------------------
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.
TOP FIVE SECTORS 7/31/00 VS. 1/31/00
FUNDS AS OF FUNDS AS OF
7/31/00 1/31/00
----------- -----------
EDUCATION 16.0% 13.5%
HOSPITAL 14.0% 14.5%
LOCAL GENERAL OBLIGATIONS 9.4% 13.1%
REFUNDED/ESCROW 8.4% 8.5%
MUNICIPAL ELECTRIC 5.8% 2.9%
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.
<PAGE>
--------------------------------------------------------------------------------
PERFORMANCE INFORMATION
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 7/31/00
<TABLE>
<CAPTION>
Share Class A B C
Inception 9/26/86 8/04/92 8/01/97
Without With Without With Without With
Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
6 month (cumulative) 6.35% 1.30% 5.96% 0.96% 6.11% 5.11%
-----------------------------------------------------------------------------------------
1 year 0.49 (4.28) (0.26) (5.04) 0.04 (0.92)
-----------------------------------------------------------------------------------------
5 years 5.07 4.06 4.29 3.96 4.78 4.78
-----------------------------------------------------------------------------------------
10 years 5.77 5.26 5.13 5.13 5.63 5.63
-----------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/00
<CAPTION>
Share Class A B C
Without With Without With Without With
Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
6 month (cumulative) 3.33% (1.58)% 2.93% (2.07)% 3.09% 2.09%
-----------------------------------------------------------------------------------------
1 year (0.91) (5.62) (1.66) (6.36) (1.36) (2.30)
-----------------------------------------------------------------------------------------
5 years 4.93 3.91 4.14 3.82 4.64 4.64
-----------------------------------------------------------------------------------------
10 years 5.75 5.24 5.12 5.12 5.61 5.61
-----------------------------------------------------------------------------------------
</TABLE>
Past performance cannot predict future results. Returns and value of an
investment will vary resulting in a gain or loss on sale. All results shown
assume reinvestment of distributions. The "with sales charge" returns include
the maximum 4.75% sales charge for Class A shares, the appropriate Class B
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)
<TABLE>
<CAPTION>
MUNICIPAL BONDS - 97.2% PAR VALUE
--------------------------------------------------------------------------------------------------
<S> <C> <C>
EDUCATION - 16.0%
EDUCATION
State Higher Education Facilities Authority:
Carleton College, Series 4-N,
5.000% 11/1/18 $ 1,500 $ 1,408
College of Art & Design,
Series 5-D,
6.750% 5/1/26 500 505
Northwestern College of Chiropractic,
Series 1998 4-Z
5.200% 10/1/13 275 259
St. Johns University,
Series 4-L,
5.350% 10/1/17 1,000 961
St. Thomas University,
Series 4-M,
5.350% 4/1/17 500 485
University of Minnesota,
Series 1996 A:
5.750% 7/1/14 500 525
5.750% 7/1/17 1,000 1,042
Series 1999 A,
5.500% 7/1/21 1,000 1,001
Victoria, Holy Family Catholic High School, Series 1999 A,
5.875% 9/1/29 300 269
---------
6,455
---------
--------------------------------------------------------------------------------------------------
HEALTHCARE - 18.8%
CONGREGATE CARE RETIREMENT - 2.0%
Bloomington Housing & Redevelopment Authority, Senior Summer House,
Series 1998,
5.500% 11/1/01 110 108
Columbia Heights, Crest View Corp.,
Series 1998,
6.000% 3/1/33 300 247
Golden Valley, Covenant Retirement Communities, Inc., Series 1999 A,
5.500% 12/1/29 500 434
---------
789
---------
HOSPITAL - 14.0%
Marshall, Weiner Memorial Medical Center, Series 1999,
6.000% 11/1/28 300 240
Princeton, Fairview Hospital, Series 1991 C,
6.250% 1/1/21 300 305
Red Wing, River Region Group,
Series 1993 A:
6.500% 9/1/22 300 320
6.400% 9/1/12 200 213
Redwood Falls, Series 1998,
5.750% 12/1/23 500 402
Rochester, Mayo Medical Center,
Series 1992 I,
5.900% 11/15/09 500 536
St. Paul Housing & Redevelopment Authority, Healtheast Project:
Series 1997 A,
5.500% 11/1/09 250 218
Series 1993 B,
6.625% 11/1/17 660 574
Series 1998,
5.300% 5/15/28 1,000 770
State Agricultural & Economic Development Board, St. Mary's Medical
Center,
Series 1999 A,
4.750% 2/15/16 1,000 900
Thief River Falls, Series 1999,
6.800% 11/1/19 150 140
Waconia, Ridgeview Medical Center,
Series 1999 A,
6.125% 1/1/29 1,000 1,019
---------
5,637
---------
NURSING HOME - 2.8%
Carlton, Inter-Faith Social Services, Inc.,
Series 2000,
7.750% 4/1/29 200 194
Duluth Economic Development Authority, BSM Properties, Inc.,
Series 1998 A,
5.875% 12/1/28 250 198
Minneapolis, Walker Methodist Senior Services Group,
Series 1998 A,
5.875% 11/15/18 250 213
New Hope, North Ridge Care Center, Inc., Series 1999,
5.875% 3/1/29 300 240
Sartell, Foundation for Healthcare,
Series 1999 A,
6.625% 9/1/29 300 262
---------
1,107
---------
--------------------------------------------------------------------------------------------------
HOUSING - 9.1%
ASSISTED LIVING/SENIOR - 0.7%
Roseville, Care Institute, Inc.,
Series 1993,
7.750% 11/1/23 300 271
---------
MULTI-FAMILY - 4.8%
Dakota County Housing & Redevelopment Authority,
Series 1999,
6.000% 11/1/09 255 242
Grand Housing & Redevelopment Authority, Lakeshore Forest Park
Apartments,
Series 1999 B,
5.700% 10/1/29 500 443
Lakeville, Southfork Apartment Project,
Series 1989 A,
9.875% 2/1/20 200 200
Minneapolis, Riverplace Project,
Series 1987 A,
7.100% 1/1/20 190 191
Robbinsdale Economic Development Authority, Series 1999 A,
6.875% 1/1/26 250 233
Southeastern Multi-County Housing & Redevelopment Authority, Goodhue
Apartment Project,
Series 1999 A,
6.750% 1/1/31 250 237
Washington County Housing & Redevelopment Authority, Cottages of Aspen,
Series 1992,
9.250% 6/1/22 175 182
White Bear Lake, Birch Lake Townhomes Project,
Series 1989 A,
9.750% 7/15/19 200 205
---------
1,933
---------
SINGLE FAMILY - 3.6%
Chicago & Stearns Counties,
Series 1994 B,
7.050% 9/1/27 1,175 1,229
Dakota County Housing & Redevelopment Authority,
Series 1986,
7.200% 12/1/09 45 45
Minneapolis-St. Paul Housing Board,
Series 1987 C,
8.875% 11/1/18 145 146
Washington County Housing & Redevelopment Authority, City of Cottage
Grove,
Series 1986,
7.600% 12/1/11 25 25
---------
1,445
---------
--------------------------------------------------------------------------------------------------
INDUSTRIAL - 9.5%
FOOD PRODUCTS - 3.8%
Duluth Seaway Port Authority, Cargill Inc., Series 1993 A,
5.750% 12/1/16 1,500 1,513
---------
FOREST PRODUCTS - 3.0%
Hubbard County, Potlach Corp.,
Series 1987 A,
7.375% 8/1/13 285 289
International Falls, Boise Cascade Corp. Project,
5.650% 12/1/22 500 429
Series 1999,
6.850% 12/1/29 500 497
---------
1,215
---------
MANUFACTURING - 2.7%
Alexandria Industrial Development Revenue Bonds, Seluemed Ltd.,
5.850% 3/1/18 830 804
Brooklyn Park, TL Systems Corp.,
Series 1991,
10.000% 9/1/16 245 276
---------
1,080
---------
--------------------------------------------------------------------------------------------------
OTHER - 9.1%
POOL/BOND BANK - 0.7%
Minneapolis Community Development Agency, Series 1991 1,
8.000% 12/1/16 250 263
---------
REFUNDED/ESCROWED (a) - 8.4%
Burnsville, Fairview Community Hospital, Series 1982 A,
(b) 5/1/12 2,145 1,032
Dakota & Washington Counties Housing & Redevelopment Authority,
Series 1988,
8.150% 9/1/16 235 301
Metropolitan Council, Hubert H. Humphrey Metrodome,
Series 1992,
6.000% 10/1/09 300 312
Moorhead,
7.100% 8/1/11 20 22
State Higher Education Facilities Authority
Hamline University,
Series 3 K,
6.600% 6/1/08 250 259
Western Minnesota Municipal Power Agency, Series 1983 A,
9.750% 1/1/16 1,000 1,455
---------
3,381
---------
--------------------------------------------------------------------------------------------------
OTHER REVENUE - 0.6%
HOTELS
Minneapolis, Holiday Inn Metrodome Project,
6.000% 12/1/01 250 249
---------
--------------------------------------------------------------------------------------------------
TAX-BACKED - 18.8%
LOCAL APPROPRIATED - 3.0%
Hibbing Economic Development Authority,
6.400% 2/1/12 500 492
Minneapolis Special School District No.1,
Series 1998 A,
4.750% 2/1/18 500 446
Mountain Lake Economic Development Authority,
Series 1999,
5.800% 12/1/18 290 268
---------
1,206
---------
LOCAL GENERAL OBLIGATIONS - 9.4%
Hennepin County,
Series 1999 A,
5.000% 12/1/15 1,000 966
New York Mills Independent School District No. 553,
Series 1992 A,
6.850% 2/1/18 210 217
North St. Paul & Maplewood Unified School District,
Series 1996 A,
5.125% 2/1/25 1,000 930
Rosemount Independent School District No. 196, Series 1994 B,
(b) 6/1/10 2,765 1,685
---------
3,798
---------
SPECIAL NON-PROPERTY TAX - 0.7%
Red Lake Band of Chippewa Indians,
Series 1998,
6.250% 8/1/13 300 278
---------
SPECIAL PROPERTY TAX - 0.5%
Duluth Economic Development Authority,
Series 1998 A,
(b) 2/1/08 (c) 295 202
---------
STATE APPROPRIATED - 5.2%
State, Duluth Airport,
Series 1995 B,
6.250% 8/1/14 2,000 2,099
---------
--------------------------------------------------------------------------------------------------
TRANSPORTATION - 5.4%
AIRPORT - 4.5%
Minneapolis & St. Paul Metropolitan Airports Commission:
Series 1999 A,
5.125% 1/1/25 1,000 927
Series 1999,
5.695% 1/1/22 1,000 866
---------
1,793
---------
TRANSPORTATION - 0.9%
Blaine, Consolidated Freightways, Inc.,
Series 1998,
5.150% 1/1/04 300 293
St. Paul Port Authority,
Series F:
9.125% 12/1/00 25 25
9.125% 12/1/01 25 25
9.125% 12/1/02 25 25
---------
368
---------
--------------------------------------------------------------------------------------------------
UTILITY - 9.9%
INVESTOR OWNED - 1.0%
Anoka County, United Power Associates,
Series 1987 A,
6.950% 12/1/08 400 411
---------
JOINT POWER AUTHORITY - 3.1%
Southern Minnesota Municipal Power Agency, Series 1993 A,
4.750% 1/1/16 250 228
Series 1994 A,
(b) 1/1/27 3,900 842
Series A,
5.000% 1/1/16 200 190
---------
1,260
---------
MUNICIPAL ELECTRIC - 5.8%
Chaska,
Series 2000 A,
6.000% 10/1/25 1,000 999
Northern Municipal Power Agency,
Series 1998 B,
4.750% 1/1/20 1,500 1,329
---------
2,328
---------
TOTAL MUNICIPAL BONDS (cost of $39,390) 39,081
---------
OPTIONS - 0.2% CONTRACTS
--------------------------------------------------------------------------------------------------
September 2000 Treasury Bond Put,
Strike Price 92, expiration 09/20/00 56 1
December 2000 Treasury Bond Call,
Strike Price 100, expiration 12/19/00 60 82
---------
TOTAL OPTIONS (cost of $139) 83
---------
TOTAL INVESTMENTS (cost of $39,529)(d) 39,164
---------
SHORT-TERM OBLIGATIONS - 1.2%
--------------------------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES(d)
IL Galesburg, Knox College,
Series 1999,
4.250% 7/1/24 200 200
MI Farmington Hills Hospital Finance Authority, Botsford General
Hospital,
Series 1991 B,
4.350% 2/15/16 100 100
TX Gulf Coast Waste Disposal Authority, Monsanto Co.,
Series 1996,
4.400% 7/1/01 200 200
---------
TOTAL SHORT-TERM OBLIGATIONS 500
---------
OTHER ASSETS & LIABILITIES, NET - 1.4% 565
--------------------------------------------------------------------------------------------------
NET ASSETS - 100% $ 40,229
=========
NOTES TO INVESTMENT PORTFOLIO:
--------------------------------------------------------------------------------------------------
</TABLE>
(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) This security, or a portion thereof, with a total market value of
$202 is being used to collateralize open future contracts.
(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.
Short futures contracts open on July 31, 2000:
PAR VALUE UNREALIZED
COVERED BY EXPIRATION DEPRECIATION
TYPE CONTRACTS MONTH AT 07/31/00
--------------------------------------------------------------------------------
Treasury Bond $900 September $35
See notes to financial statements.
<PAGE>
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
July 31, 2000
(Unaudited)
(In thousands except per share amounts and footnotes)
ASSETS
Investments at value (cost $39,529) $39,164
Short-term obligations 500
-------
39,664
Receivable for:
Interest $ 548
Investments sold 100
Fund shares sold 8
Variation margin on futures contracts 1
Other 95 752
------ -------
Total Assets 40,416
LIABILITIES
Payable for:
Fund shares repurchased 63
Distributions 55
Accrued:
Management fee 17
Bookkeeping fee 2
Transfer agent fee 5
Deferred Trustees fees 4
Other 41
------
Total Liabilities 187
-------
NET ASSETS $40,229
=======
Net asset value & redemption price per share --
Class A ($23,358/3,488) $ 6.70(a)
=======
Maximum offering price per share
-- Class A ($6.70/0.9525) $ 7.03(b)
=======
Net asset value & offering price per share --
Class B ($16,424/2,451) $ 6.70(a)
=======
Net asset value & offering price per share --
Class C ($447/66) $ 6.70(a)
=======
COMPOSITION OF NET ASSETS
Capital paid in $42,498
Overdistributed net investment income (83)
Accumulated net realized loss (1,786)
Net unrealized depreciation on:
Investments (365)
Open futures contracts (35)
-------
$40,229
=======
(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 $ 1,240
EXPENSES
Management fee $ 101
Service fee 37
Distribution fee -- Class B 61
Distribution fee -- Class C 2
Transfer agent fee 40
Bookkeeping fee 14
Trustees' fee 4
Audit fee 18
Legal fee 2
Custodian fee 2
Registration fee 8
Reports to shareholders 11
Other 5
------
305
Fees waived by the Distributor - Class C (1)
Custodian credits earned (2) 302
------ --------
Net Investment Income 938
--------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized loss on:
Investments (383)
Closed futures contracts (8)
------
Net Realized Loss (391)
Net change in unrealized appreciation/depreciation
during the period on:
Investments 1,949
Open futures contracts (53)
------
Net Change in Unrealized Appreciation/Depreciation 1,896
--------
Net Gain 1,505
--------
Increase in Net Assets from Operations $ 2,443
========
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 $ 938 $ 2,209
Net realized loss (391) (802)
Net change in unrealized appreciation/depreciation 1,896 (5,633)
------- -------
Net Increase (Decrease) from Operations 2,443 (4,226)
DISTRIBUTIONS
From net investment income -- Class A (597) (1,407)
In excess of net realized gains -- Class A -- (29)
From net investment income -- Class B (351) (790)
In excess of net realized gains -- Class B -- (19)
From net investment income -- Class C (7) (14)
In excess of net realized gains -- Class C -- (a)
------- -------
(1,488) (6,485)
------- -------
FUND SHARE TRANSACTIONS
Receipts for shares sold -- Class A 161 2,003
Value of distributions reinvested -- Class A 407 927
Cost of shares repurchased -- Class A (2,337) (6,891)
------- -------
(1,769) (3,961)
------- -------
Receipts for shares sold -- Class B 445 1,701
Value of distributions reinvested -- Class B 239 558
Cost of shares repurchased -- Class B (1,804) (4,138)
------- -------
(1,120) (1,879)
------- -------
Receipts for shares sold -- Class C 171 190
Value of distributions reinvested -- Class C 5 12
Cost of shares repurchased -- Class C (120) (46)
------- -------
56 156
------- -------
Net Decrease from Fund Share Transactions (2,833) (5,684)
------- -------
Total Decrease (1,345) (12,169)
Beginning of period 41,574 53,743
------- -------
End of period (net of overdistributed net investment income of $83
and $66, respectively) $40,229 $41,574
======= =======
NUMBER OF FUND SHARES
Sold -- Class A 25 278
Issued for distributions reinvested -- Class A 62 134
Repurchased -- Class A (355) (1,012)
------- -------
(268) (600)
------- -------
Sold -- Class B 67 238
Issued for distributions reinvested -- Class B 36 81
Repurchased -- Class B (276) (601)
------- -------
(173) (282)
------- -------
Sold -- Class C 25 27
Issued for distributions reinvested -- Class C 1 2
Repurchased -- Class C (19) (7)
------- -------
7 22
------- -------
(a) Rounds to less than one.
</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 Minnesota Tax-Exempt Fund (formerly
Colonial Minnesota 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 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 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 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 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 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%
Next $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
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), an affiliate 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 $10,046 on sales of the Fund's Class A shares and received contingent
deferred sales charges (CDSC) of none, $26,697, and none on Class A, Class B and
Class C share redemption's, respectively.
The Fund has adopted a 12b-1 plan, which requires the payment of a monthly
service fee to the Distributor. The fee is calculated by adding (1) 0.10% of the
net assets attributable to shares issued prior to November 30, 1994 and (2)
0.25% on net assets attributable to shares issued thereafter. This arrangement
results in a rate of service fee payable by the Fund that is a blend between the
0.10% and 0.25% rates. For the six months ended July 31, 2000, the Fund's
service fee was 0.18% (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.
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 $1,651 applied during the six months ended
July 31, 2000. The Fund could have invested a portion of the assets utilized in
connection with the expense offset arrangements in an income producing asset if
it had not entered into such 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 $3,394,663 and $6,906,239, 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 $ 1,180,951
Gross unrealized depreciation (1,545,803)
-----------
Net unrealized depreciation $ (364,852)
===========
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 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 $ 6.460 $ 6.460 $ 6.460
-------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) 0.163 0.138 0.148(b)
Net realized and unrealized gain 0.243 0.243 0.243
-------- -------- --------
Total from Investment Operations 0.406 0.381 0.391
-------- -------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income (0.166) (0.141) (0.151)
-------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 6.700 $ 6.700 $ 6.700
======== ======== ========
Total return (c)(d) 6.35% 5.96% 6.11%(e)
======== ======== ========
RATIOS TO AVERAGE NET ASSETS
Expenses (f)(g) 1.19% 1.94% 1.64%(b)
Net investment income (f)(g) 4.97% 4.22% 4.52%(b)
Portfolio turnover (f)(g) 9% 9% 9%
Net assets at end of period (000) $23,358 $ 16,424 $ 447
(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 $0.010 per share and 0.30% (annualized).
(c) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred sales
charge.
(d) Not annualized.
(e) Had the Distributor not waived a portion of expenses, total return would have been reduced.
(f) The benefits derived from custody credits and directed brokerage arrangements had no impact.
(g) Annualized.
</TABLE>
<TABLE>
<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)
From 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(d)
======== ======== ========
Total return (c) (7.87)% (8.56)% (8.29)%
======== ======== ========
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.
</TABLE>
<PAGE>
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
Selected data for a share of each class outstanding
throughout each period are as follows:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31, 1999
---------------------------------------------------------
CLASS A CLASS B CLASS C
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.490 $ 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 (e) 0.06% 0.06% 0.06%
Portfolio turnover 34% 34% 34%
Net assets at end of period (000) $ 32,075 $ 21,398 $ 270
(a) Net of fees and expenses waived or borne by the
Advisor which amounted to: $ 0.005 $ 0.005 $ 0.005
(b) Net of fees waived by the Distributor which amounted to $0.022 per share and 0.30%.
(c) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred sales
charge.
(d) Had the Advisor and Distributor not waived or reimbursed a portion of expenses, total return would have been reduced.
(e) The benefits derived from custody credits and direct brokerage arrangements had an impact of 0.01% and $0.001 per share.
</TABLE>
<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 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.
</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
----------------------------------------------------------------------
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 (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)
-------- -------- -------- --------
Total Distributions Declared to Shareholders (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 $19,389 $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 and Distributor 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)
--------------------------------------------------------------------------------
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Liberty 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 Liberty 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 Performance Update.
SEMIANNUAL REPORT:
LIBERTY MINNESOTA TAX-EXEMPT FUND
<PAGE>
--------------------------------------------------------------------------------
CHOOSE LIBERTY
--------------------------------------------------------------------------------
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.
--------------------------------------------------------------------------------
CRABBE
HUSON A contrarian approach to fixed income and equity investing.
--------------------------------------------------------------------------------
NEWPORT A leader in international investing.(SM)
--------------------------------------------------------------------------------
STEIN ROE
ADVISOR Innovative solutions for growth and income investing.
--------------------------------------------------------------------------------
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 MINNESOTA 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)2000
One Financial Center, Boston, MA 02111-2621, 1-800-426-3750
www.libertyfunds.com
771-03/382C-0700 (09/00) 00/1564
