<PAGE> 1
LIBERTY CONNECTICUT TAX-EXEMPT FUND SEMIANNUAL REPORT
JULY 31, 2000
[BACKGROUND GRAPHIC]
<PAGE> 2
President's Message
DEAR SHAREHOLDER:
You may have noticed that your Fund has a new name. As of July 14, the names of
our funds were changed to include Liberty. Rest assured, the investment
objectives and strategies employed by the Fund's managers are not affected by
this name change. We believe the new name better reflects 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 Connecticut Tax-Exempt Fund and for
giving us the opportunity to serve your investment needs.
Respectfully,
/s/ Stephen E. Gibson
Stephen E. Gibson
President
September 11, 2000
Not FDIC Insured.
May Lose Value.
No Bank Guarantee.
Because economic and market conditions change frequently, there can be no
assurance that the trends described in this report will continue or come to
pass.
<PAGE> 3
HIGHLIGHTS
- POSITIVE RESULTS FOR MUNICIPAL BONDS WERE BOLSTERED BY 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.
- 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 Municipal Bond Index
Salomon 30-Year Treasury Bond Index
[LINE GRAPH]
<TABLE>
<S> <C> <C>
1/31/00 0 0
2/29/00 1.16 3.7
3/31/00 3.37 8.56
4/30/00 2.76 7.23
5/31/00 2.22 7.02
6/30/00 4.93 9.36
7/31/00 6.4 11.48
</TABLE>
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
<TABLE>
<S> <C>
CLASS A $7.55
-----------------------------
CLASS B $7.55
-----------------------------
CLASS C $7.55
-----------------------------
</TABLE>
DISTRIBUTIONS DECLARED PER SHARE FROM 2/1/00 TO 7/31/00
<TABLE>
<S> <C>
CLASS A $.185
-----------------------------
CLASS B $.158
-----------------------------
CLASS C $.169
-----------------------------
</TABLE>
A portion of the Fund's income may be subject to the alternative minimum tax.
The Fund may at times purchase tax-exempt securities at a discount.
Some or all of this discount may be included in the Fund's ordinary income, and
is taxable when distributed.
SEC yields on 7/31/00
<TABLE>
<S> <C>
CLASS A 4.41%
-----------------------------
CLASS B 3.88%
-----------------------------
CLASS C 4.18%
-----------------------------
</TABLE>
The 30-day SEC yields reflect the portfolio's earning power, net of expenses,
expressed as an annualized percentage of the public offering price at the end of
the period. If the Advisor or its affiliates had not waived certain Fund
expenses, the SEC yield would have been 4.23% for Class A shares, 3.70% for
Class B shares, and 3.70% for Class C shares.
TAXABLE-EQUIVALENT SEC YIELDS
ON 7/31/00
<TABLE>
<S> <C>
CLASS A 7.65%
-----------------------------
CLASS B 6.73%
-----------------------------
CLASS C 7.25%
-----------------------------
</TABLE>
Taxable-equivalent SEC yields are based on the maximum effective combined 42.3%
federal and state income tax rate. This tax rate does not reflect the phaseout
of exemptions or the reduction of otherwise allowable deductions which occurs
when Adjusted Gross Income exceeds certain levels.
1
<PAGE> 4
PORTFOLIO MANAGER'S REPORT
RISING LONG-TERM BOND PRICES CONTRIBUTED TO MODEST BUT SOLID GAINS FOR THE FUND
Against a backdrop of falling yields and rising prices for intermediate- and
long-term municipal bonds, Class A shares of Liberty Connecticut Tax-Exempt Fund
posted a total return of 6.33% without a sales charge for the six months ended
July 31, 2000.
FUND SHIFTED EMPHASIS TO BETTER LONG-TERM POSITIONING
At the beginning of the period, the Fund was investing primarily in bonds that
do well during periods of declining interest rates -- that is, bonds in the 10-
to 20-year maturity range, bonds with long-term call protection 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 near-term interest rate increases,
we adopted temporary defensive measures while selectively investing 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
redouble our efforts on maintaining a portfolio that could 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 range, 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) and
noncallable bonds, to "lock in" what we believe will be viewed as attractive
rates.
CONNECTICUT'S ECONOMIC GROWTH WAS POSITIVE BUT RESTRAINED BY A SHRINKING LABOR
FORCE
Though positive, economic growth in Connecticut has lagged the national average.
One reason is a migration of workers out of the state. The resulting labor
shortage has constrained the growth of industries in Connecticut. On the plus
side, the gaming industry continued to provide a stable new source of
employment, and a surge in traffic at Hartford's Bradley International Airport
may benefit nearby transportation and hospitality businesses. Fiscally,
Connecticut has been stable and even earned a credit upgrade to Aa by Moody's
Investors Service, Inc. in 1999. However, a high debt load and a desire to cut
taxes will likely limit the possibility of additional upgrades anytime soon.
<TABLE>
<CAPTION>
QUALITY BREAKDOWN AS OF 7/31/00
<S> <C>
AAA 52.1%
------------------------------
AA 32.6%
------------------------------
A 8.3%
------------------------------
BBB 1.9%
------------------------------
BB 1.6%
------------------------------
NONRATED 2.5%
------------------------------
CASH EQUIVALENTS 1.0%
</TABLE>
Quality breakdowns are calculated as a percentage of total investments,
including short-term obligations. Ratings shown in the quality breakdowns
represent the highest rating assigned to a particular bond by one of the
following respected rating agencies: Standard & Poor's Corporation, Moody's
Investors Service, Inc., or Fitch Investors Service, Inc.
Because the Fund is actively managed, there can be no guarantee the Fund will
continue to maintain these quality breakdowns in the future.
BOUGHT
We purchased State of Connecticut general obligation bonds due in 2017 (0.95% of
net assets). If interest rates fall, these 17-year bonds may provide the lion's
share of the appreciation potential of comparable 25- to 30-year bonds, but they
should be less volatile.
2
<PAGE> 5
PORTFOLIO MANAGER'S REPORT
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 intermediate and long-term and
call-protected issues, the Fund owns some discount bonds that may reap a
larger-than-average benefit should interest rates fall.
Because many Connecticut residents are employed on Wall Street, a lingering
stock market correction could affect the state's tax revenues and housing
market. Barring that development, we look for below-average but steady economic
progress for the state.
/s/Gary Swayze
GARY SWAYZE is portfolio manager of Liberty Connecticut 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.
[Line Graph]
TOP FIVE SECTOR BREAKDOWNS
7/31/00 VS. 1/31/00
<TABLE>
<CAPTION>
2/31/00 1/31/00
------- -------
<S> <C> <C>
Local General Obligations 22.8 21.1
State General Obligations 11.2 12.1
Education 9.3 6.6
Single Family 9.0 8.7
Hospital 8.8 9.9
</TABLE>
Sector breakdowns are calculated as a percentage of net assets, including
short-term obligations.
Because the Fund is actively managed, there can be no guarantee the Fund will
continue to maintain these sector breakdowns in the future.
SOLD
One goal during the period was to lengthen the Fund's duration, so we sold State
of Connecticut Clean Water Fund revenue bonds due in 2012. Though they were
highly rated and had a 6.125% 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 at an early
call date. Prerefunding effectively shortens the time until final payment or
maturity for the original bonds to just a few years.
3
<PAGE> 6
PERFORMANCE INFORMATION
AVERAGE ANNUAL TOTAL RETURNS AS OF 7/31/00
<TABLE>
<CAPTION>
SHARE CLASS A B C
INCEPTION 11/1/91 6/8/92 8/1/97
WITHOUT WITH SALES WITHOUT WITH SALES WITHOUT WITH SALES
SALES CHARGE CHARGE SALES CHARGE CHARGE SALES CHARGE CHARGE
<S> <C> <C> <C> <C> <C> <C>
6-MONTH
(CUMULATIVE) 6.33% 1.28% 5.94% .94% 6.10% 5.10%
1 YEAR 4.18 (0.77) 3.40 (1.56) 3.71 2.72
5 YEARS 5.98 4.95 5.19 4.86 5.68 5.68
LIFE 6.26 5.67 5.52 5.52 6.09 6.09
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/00
<TABLE>
<CAPTION>
SHARE CLASS A B C
WITHOUT WITH SALES WITHOUT WITH SALES WITHOUT WITH SALES
SALES CHARGE CHARGE SALES CHARGE CHARGE SALES CHARGE CHARGE
<S> <C> <C> <C> <C> <C> <C>
6-MONTH
(CUMULATIVE) 4.23% (0.72)% 3.82% (1.18)% 3.98% 2.98%
1 YEAR 2.93 (1.96) 2.16 (2.74) 2.46 1.49
5 YEARS 5.71 4.68 4.92 4.59 5.42 5.42
LIFE 6.12 5.53 5.39 5.39 5.96 5.96
</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.
4
<PAGE> 7
INVESTMENT PORTFOLIO
July 31, 2000 (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
MUNICIPAL BONDS - 98.2% PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
EDUCATION - 9.8%
EDUCATION - 9.3%
State Health & Educational Facilities Authority:
Hopkins School, Series 1998 A,
4.750% 7/1/23 $ 1,385 $ 1,216
Quinnipiac College, Series 1998 E,
4.700% 7/1/15 1,250 1,135
St. Joseph College, Series 1999 A:
5.250% 7/1/13 450 441
5.250% 7/1/14 475 460
State University,
5.250% 11/1/17 2,500 2,442
Trinity College, Series 1998 F,
5.500% 7/1/21 2,000 2,007
Yale-New Haven Hospital,
Series 2000 D-1,
5.750% 7/1/30 1,000 1,013
University of Connecticut,
Series 2000 A,
5.750% 11/15/29 2,000 2,018
Yale University,
Series 1992, IFRN (variable rate), 7.244% 6/10/30 2,500 2,503
-------
13,235
-------
STUDENT LOAN - 0.5%
State Higher Education Supplemental
Loan Authority, Series 1991A,
7.200% 11/15/10 645 670
-------
--------------------------------------------------------------------------------
HEALTHCARE - 14.0%
HOSPITAL - 8.8%
State Health & Educational Facilities Authority:
Bridgeport Hospital, Series A,
6.500% 7/1/12 1,000 1,038
Hospital for Special Care, Series B,
5.375% 7/1/17 1,500 1,250
Norwalk Hospital, Series D,
6.250% 7/1/12 1,750 1,837
St. Francis Hospital & Medical Center,
Series B,
6.125% 7/1/10 1,000 1,040
St. Raphael Hospital:
Series E,
6.750% 7/1/13 1,400 1,452
Series 1992 F,
6.200% 7/1/14 750 781
Series 1992 G,
6.200% 7/1/14 225 234
Series 1993 H,
5.250% 7/1/09 2,000 2,053
</TABLE>
<TABLE>
<CAPTION>
Par Value
--------------------------------------------------------------------------------
<S> <C> <C>
State Health & Educational
Facilities Authority Revenue:
Catholic Health East, Series 1999 F,
5.750% 11/15/29 $ 1,000 $ 982
Danbury Hospital, Series 1991 E,
6.500% 7/1/14 230 238
Yale-New Haven Hospital:
Series G,
6.500% 7/1/12 500 521
Series 1996 H,
5.500% 7/1/13 1,000 1,016
-------
12,442
-------
INTERMEDIATE CARE FACILITIES - 0.4%
State Housing Financing Authority
Special Obligatory Group Home,
5.850% 6/15/30 500 500
-------
NURSING HOME - 4.8%
State Development Authority:
Clintonville Manor Realty, Inc.,
Series 1992,
6.750% 6/20/21 1,490 1,507
Duncaster, Inc. Project,
Series 1992:
6.700% 9/1/07 250 264
6.750% 9/1/15 1,250 1,325
Mary Wade Home, Series 1999 A,
6.375% 12/1/18 1,000 969
State Health & Educational Facilities
Authority:
Noble Horizons Project, Series 1993,
5.875% 11/1/12 640 649
Pope John Paul II Center for Health,
6.250% 11/1/13 2,000 2,102
-------
6,816
-------
--------------------------------------------------------------------------------
HOUSING - 11.8%
MULTI-FAMILY - 2.8%
Greenwich Housing Authority, Greenwich
Close Apartments, Series 1997 A, 750 692
6.350% 9/1/27
New Britain Housing Authority,
Nathan Hale Apartments:
Series 1992 A,
6.500% 7/1/02 50 51
Series 1992 B,
6.875% 7/1/24 2,590 2,670
Waterbury Nonprofit Housing Corp.,
Fairmont Heights, Series 1993 A,
6.500% 1/1/26 600 611
-------
4,024
-------
</TABLE>
See notes to investment portfolio.
5
<PAGE> 8
INVESTMENT PORTFOLIO (CONTINUED)
July 31, 2000 (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
MUNICIPAL BONDS (CONTINUED) PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
HOUSING (CONTINUED)
SINGLE FAMILY - 9.0%
State Housing Financing Authority:
Series 1990 B4,
7.300% 11/15/03 $ 5 $ 5
Series 1991 C,
6.600% 11/15/23 1,415 1,463
Series 1991 C1,
6.450% 11/15/11 1,325 1,363
Series 1991 C2,
6.700% 11/15/22 30 31
Series 1992 B,
6.700% 11/15/12 2,215 2,312
Series 1993 B:
5.650% 5/15/06 550 564
6.200% 5/15/12 5,000 5,156
State Housing Financing
Authority Revenue, Series C1,
6.350% 5/15/17 930 941
Health & Educational Facilities
Authority, Series D-2,
5.600% 11/15/21 1,000 951
-------
12,786
-------
--------------------------------------------------------------------------------
INDUSTRIAL - 2.1%
FOREST PRODUCTS - 0.6%
Sprague, International Paper Co. Project,
Series A,
5.700% 10/1/21 1,000 916
-------
MANUFACTURING - 1.5%
State Development Authority,
Pfizer, Inc. Project, Series 1994,
7.000% 7/1/25 2,000 2,193
-------
--------------------------------------------------------------------------------
OTHER - 0.1%
REFUNDED/ESCROWED (a)
State Health & Educational Facilities
Authority, Lutheran General Health
Care System, Series 1989,
7.250% 7/1/04 100 105
-------
--------------------------------------------------------------------------------
RESOURCE RECOVERY - 4.0%
DISPOSAL - 2.0%
State Development Authority, Sewer
Sludge Disposal Facilities Revenue:
New Haven Residuals, Series 1996,
8.250% 12/1/06 1,130 1,229
Netco-Waterbury Ltd., Series 1995,
9.375% 6/1/16 $1,300 $1,552
-------
2,781
-------
RESOURCE RECOVERY - 2.0%
Bristol Resource Recovery Facility
Operation Committee, Ogden
Martin Systems, Inc., Series 1995,
6.500% 7/1/14 1,500 1,541
State Resource Recovery Authority,
American Re-Fuel Co., Series 1992 A,
6.450% 11/15/22 1,425 1,352
-------
2,893
-------
--------------------------------------------------------------------------------
TAX-BACKED - 46.1%
LOCAL GENERAL OBLIGATIONS - 22.8%
Bethel,
6.500% 2/15/09 1,220 1,368
Bridgeport:
Series A,
6.250% 03/01/12 (b) 2,465 2,729
Series 1996 A,
6.500% 09/01/08 (b) 3,000 3,323
Danbury:
Series 1992,
5.625% 8/15/11 690 732
Series 1994:
4.500% 2/1/12 1,280 1,205
4.500% 2/1/13 1,280 1,192
Darien,
Series 1999,
4.500% 8/1/18 500 436
East Haddam,
Series 1991,
6.300% 6/15/09 260 269
Farmington,
Series 1993:
5.700% 1/15/12 590 626
5.700% 1/15/13 570 602
Granby,
Series 1993:
6.500% 4/1/09 200 224
6.550% 4/1/10 175 198
Griswold,
Series 1992,
6.000% 4/15/09 410 427
Hamden,
Series 1992:
6.000% 10/1/11 425 441
6.000% 10/1/12 425 443
</TABLE>
See notes to investment portfolio.
6
<PAGE> 9
INVESTMENT PORTFOLIO (CONTINUED)
July 31, 2000 (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
MUNICIPAL BONDS (CONTINUED) PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
Hartford:
5.625% 2/1/11 $ 600 $ 632
5.625% 2/1/12 600 630
5.625% 2/1/13 600 627
Hartford County Metropolitan District:
Series 1991,
6.200% 11/15/10 220 245
Series 1993:
5.200% 12/1/12 600 611
5.200% 12/1/13 500 506
Montville,
Series 1993,
6.300% 3/1/12 335 372
New Britain:
Series 1992,
6.000% 2/1/08 400 431
Series 1993 A,
6.000% 10/1/12 2,000 2,177
Series 1993 B,
6.000% 3/1/12 1,000 1,085
North Branford:
6.200% 2/15/11 195 201
6.200% 2/15/12 225 231
Norwich,
Series 1994:
5.750% 9/15/13 875 901
5.750% 9/15/14 870 891
Plainfield,
Series 1992,
6.375% 8/1/11 500 525
PR Commonwealth of Puerto Rico
Municipal Finance Agency,
Series 1999 A,
5.500% 08/01/23 (b) 350 350
Somers:
6.000% 1/15/11 125 128
6.250% 1/15/08 270 277
South Windsor,
Series 1992,
6.200% 9/1/10 495 514
Stamford:
Series 1992,
6.125% 11/01/11 (b) 1,050 1,106
Series 1995,
5.250% 3/15/14 2,160 2,164
State Regional School District:
No. 5:
Series 1992,
6.300% 3/1/10 400 419
Series 1993,
5.600% 2/15/12 150 155
</TABLE>
<TABLE>
<CAPTION>
Par Value
--------------------------------------------------------------------------------
<S> <C> <C>
No. 14, Series 1991,
6.100% 12/15/06 $ 285 $ 307
Torrington,
Series 1992,
6.400% 5/15/10 750 785
Vernon,
Series 1988,
7.100% 10/15/03 250 269
West Haven,
Series 1993 B,
5.400% 6/1/10 705 730
Westbrook,
Series 1992:
6.300% 3/15/12 265 295
6.400% 3/15/09 630 703
-------
32,482
-------
SPECIAL NON-PROPERTY TAX - 5.8%
PR Commonwealth of Puerto Rico,
Highway & Transportation Authority,
Series W,
5.500% 7/1/09 1,110 1,180
PR Public Building Authority,
Series B,
5.000% 7/1/13 1,000 999
State Special Tax Obligatory Revenue,
Series 1992 B
6.125% 9/1/12 5,500 6,030
-------
8,209
-------
STATE APPROPRIATED - 6.3%
PR Commonwealth of Puerto Rico,
Public Building Authority,
Series 1993 M,
5.700% 7/1/16 3,300 3,354
State Certificates of Participation,
Middletown Courthouse Project:
6.250% 12/15/09 1,685 1,758
6.250% 12/15/13 850 887
State Development Authority,
Series 1993-A,
5.250% 11/15/11 750 761
State Health & Educational Facilities
Authority, American Health
Foundation/Windsor Project,
7.125% 11/1/24 2,000 2,220
-------
8,980
-------
STATE GENERAL OBLIGATIONS - 11.2%
PR Commonwealth of Puerto Rico,
Aqueduct & Sewer Authority, Series 1995,
6.000% 07/01/07 (b) 2,750 2,988
</TABLE>
See notes to investment portfolio.
7
<PAGE> 10
INVESTMENT PORTFOLIO (CONTINUED)
July 31, 2000 (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
MUNICIPAL BONDS (CONTINUED) PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
PR Highway & Transportation Authority,
Series X,
5.500% 7/1/13 $ 3,000 $ 3,141
State:
Series 1990 B,
(c) 11/15/10 1,450 858
Series 1993 B,
5.400% 9/15/09 3,000 3,136
State:
Series 1995 B,
5.375% 10/1/15 1,000 1,004
Series 1998 C,
4.500% 10/15/16 1,000 882
Series 1999 A-5,
5.000% 6/15/18 1,250 1,182
Series 1999 B-2,
5.875% 11/01/15 (b) 1,250 1,313
Series 2000 B,
5.875% 6/15/17 1,300 1,349
-------
15,853
-------
--------------------------------------------------------------------------------
TRANSPORTATION - 1.4%
AIRPORT
Bradley International Airport,
Series 2000 A:
6.500% 7/1/18 1,000 1,019
6.600% 7/1/24 1,000 1,016
-------
2,035
-------
--------------------------------------------------------------------------------
UTILITY - 8.9%
INDEPENDENT POWER PRODUCER - 0.4%
PR Commonwealth of Puerto Rico
Industrial, Educational, Medical &
Environmental Cogeneration Facilities,
AES Project, Series 2000,
6.625% 6/1/26 500 516
-------
INVESTOR OWNED - 0.6%
State Development Authority,
Connecticut Light & Power Co.,
Series 1993 B,
5.950% 9/1/28 1,000 888
-------
MUNICIPAL ELECTRIC - 0.9%
PR Puerto Rico Electric Power Authority,
Series 1998 EE,
4.500% 7/1/18 1,500 1,318
-------
WATER & SEWER - 7.0%
South Central Regional Water Authority:
Series 11,
5.750% 8/1/12 2,000 2,055
</TABLE>
<TABLE>
<CAPTION>
Par Value
--------------------------------------------------------------------------------
<S> <C> <C>
Series 1999 15-A,
5.125% 8/1/29 (b) $ 4,000 $ 3,697
State Clean Water Fund:
Series 1991,
7.000% 1/1/11 1,850 1,907
Series 1992,
6.125% 2/1/12 150 157
Series 1993,
5.875% 4/1/09 1,000 1,077
Series 1999,
5.125% 9/1/15 1,000 982
--------
9,875
--------
TOTAL MUNICIPAL BONDS
(cost of $134,500)(d) 139,517
--------
SHORT TERM OBLIGATIONS - 1.0%
--------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (e)
IA State Higher Education Loan Authority,
St. Ambrose University, Series 1999,
4.300% 10/1/09 100 100
IL Galesburg, Knox College, Series 1999,
4.250% 7/1/24 500 500
IN Marion County,
Indiana Wesleyan University, Series 2000,
4.550% 6/1/30 700 700
MO State Environmental Improvement &
Energy Resource Authority,
Monsanto Co., Series 1993,
4.250% 6/1/23 100 100
TOTAL SHORT-TERM OBLIGATIONS 1,400
--------
OTHER ASSETS & LIABILITIES, NET - 0.8% 1,127
--------
NET ASSETS - 100.0% $142,044
--------
</TABLE>
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) These securities, or a portion thereof, with a total market value of $137,
are being used to collateralize the open futures contracts listed below.
(c) Zero coupon bond.
(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 at July 31, 2000:
<TABLE>
<CAPTION>
Par value Unrealized
covered Expiration appreciation
Type by contracts month at 7/31/00
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Municipal Bond $13,500 September $902
Treasury Note 2,200 September 74
$976
</TABLE>
<TABLE>
<CAPTION>
Acronym Name
------- ----
<S> <C>
IFRN Inverse Floating Rate Note
</TABLE>
See notes to financial statements.
8
<PAGE> 11
STATEMENT OF ASSETS AND LIABILITIES
July 31, 2000 (Unaudited)
(In thousands except for per share amounts and footnotes)
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS
Investments at value (cost $134,500) $139,517
Short-term obligations 1,400
---------
140,917
---------
Receivable for:
Interest $ 1,902
Fund shares sold 40
Expense reimbursement due from
Advisor 20
Variation margin on futures contracts 5
Other 29 1,996
-------- ---------
Total Assets 142,913
---------
LIABILITIES
Payable for:
Investments purchased 503
Distributions 190
Fund shares repurchased 51
Accrued:
Management fee 59
Bookkeeping fee 5
Transfer agent fee 26
Deferred Trustees' fees 5
Other 30
-------
Total Liabilities 869
---------
NET ASSETS $ 142,044
=========
Net asset value & redemption price per share --
Class A ($67,942/8,998) $ 7.55(a)
=========
Maximum offering price per share --
Class A ($7.55/0.9525) $ 7.93(b)
=========
Net asset value & offering price per share --
Class B ($70,824/9,386) $ 7.55(a)
=========
Net asset value & offering price per share --
Class C ($3,278/434) $ 7.55(a)
=========
COMPOSITION OF NET ASSETS
Capital paid in $ 141,178
Overdistributed net investment income (175)
Accumulated net realized loss (4,952)
Net unrealized appreciation on:
Investments 5,017
Open futures contracts 976
---------
$ 142,044
=========
</TABLE>
(a) Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
(b) On sales of $50,000 or more the offering price is reduced.
STATEMENT OF OPERATIONS
For the Six Months Ended July 31, 2000
(In thousands)
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C> <C>
Interest $ 4,158
EXPENSES
Management fee $ 357
Service fee 137
Distribution fee -- Class B 277
Distribution fee -- Class C 11
Transfer agent fee 108
Bookkeeping fee 30
Trustees' fees 7
Audit fee 20
Legal fee 4
Custodian fee 2
Registration fee 9
Reports to shareholders 11
Other 6
----
Total expenses 979
Fees waived by the Advisor (124)
Fees waived by the Distributor -- Class C (5)
Custodian credits earned (2) 848
---- ------
Net Investment Income 3,310
======
NET REALIZED & UNREALIZED GAIN (LOSS)
ON PORTFOLIO POSITIONS
Net realized gain
(loss) on:
Investments 372
Closed futures contracts (274)
-----
Net Realized Gain 98
Net change in unrealized
appreciation/depreciation
during the period on:
Investments 3,985
Open futures contracts 1,159
-----
Net Change in Unrealized
Appreciation/Depreciation 5,144
------
Net Gain 5,242
------
Increase in Net Assets from Operations $8,552
======
</TABLE>
(a) Rounds to less than one
See notes to financial statements.
9
<PAGE> 12
STATEMENT OF CHANGES IN NET ASSETS
(In thousands)
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS YEAR ENDED
ENDED JULY 31, JANUARY 31,
-------------- -----------
INCREASE (DECREASE) IN NET ASSETS 2000 2000
--------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income $ 3,310 $ 7,227
Net realized gain 98 54
Net change in unrealized
appreciation/depreciation 5,144 (14,390)
--------- ---------
Net Increase (Decrease)
from Operations 8,552 (7,109)
Distributions:
From net investment income -- Class A (1,653) (3,696)
From net investment income -- Class B (1,574) (3,410)
From net investment income -- Class C (69) (112)
--------- ---------
5,256 (14,327)
--------- ---------
Fund Share Transactions:
Receipts for shares sold -- Class A 4,891 4,861
Value of distributions reinvested -- Class A 890 2,122
Cost of shares repurchased -- Class A (6,648) (17,038)
--------- ---------
(867) (10,055)
--------- ---------
Receipts for shares sold -- Class B 1,611 11,545
Value of distributions reinvested -- Class B 943 2,091
Cost of shares repurchased -- Class B (10,658) (17,985)
--------- ---------
(8,104) (4,349)
--------- ---------
Receipts for shares sold -- Class C 543 2,664
Value of distributions reinvested -- Class C 52 80
Cost of shares repurchased -- Class C (198) (1,087)
--------- ---------
397 1,657
--------- ---------
Net Decrease from Fund
Share Transactions (8,574) (12,747)
--------- ---------
Total Decrease (3,318) (27,074)
Net Assets
Beginning of period 145,362 172,436
--------- ---------
End of period (net of overdistributed
net investment income of
$175 and $189, respectively) $ 142,044 $ 145,362
========= =========
</TABLE>
<TABLE>
<CAPTION>
(UNAUDITED) YEAR
SIX MONTHS ENDED
ENDED JULY 31, JANUARY 31,
-------------- -----------
NUMBER OF FUND SHARES 2000 2000
--------------------------------------------------------------------------------
<S> <C> <C>
Sold -- Class A 658 638
Issued for distributions reinvested -- Class A 120 280
Repurchased -- Class A (897) (2,267)
------ ------
(119) (1,349)
------ ------
Sold -- Class B 218 1,511
Issued for distributions reinvested -- Class B 128 276
Repurchased -- Class B (1,437) (2,378)
------ ------
(1,091) (591)
------ ------
Sold -- Class C 73 346
Issued for distributions reinvested -- Class C 7 11
Repurchased -- Class C (27) (144)
------ ------
53 213
------ ------
</TABLE>
See notes to financial statements.
10
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
July 31, 2000 (Unaudited)
NOTE 1. INTERIM FINANCIAL STATEMENTS
In the opinion of management of Liberty Connecticut Tax-Exempt Fund (formerly
Colonial Connecticut 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 Connecticut 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 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 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 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
11
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
July 31, 2000 (Unaudited)
pro-rata portion of the combined average net assets of the funds constituting
Trust V as follows:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS ANNUAL FEE RATE
--------------------------------------------------------------------------------
<S> <C>
First $2 billion 0.50%
Over $2 billion 0.45%
</TABLE>
BOOKKEEPING FEE:
The Advisor provides bookkeeping and pricing services for a monthly fee equal to
$27,000 annually plus 0.035% 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 $7,652 on sales of the Fund's Class A shares and received contingent deferred
sales charges (CDSC) of none, $90,898 and $65 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 0.19% (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 0.60% annually of the Fund's average net assets.
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 $1,900 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 $9,046,860, and $14,535,207,
respectively.
Unrealized appreciation (depreciation) at July 31, 2000, based on cost of
investments for both financial statement and federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation $6,401,181
Gross unrealized depreciation (1,384,471)
----------
Net unrealized appreciation $5,016,710
==========
</TABLE>
CAPITAL LOSS CARRYFORWARDS:
At January 31, 2000, capital loss carryforwards available (to the extent
provided in regulations) to offset future realized gains were approximately as
follows:
<TABLE>
<CAPTION>
Year of expiration Capital loss carryforward
---------------------------------------------------------
<S> <C>
2003 $ 554,000
2004 2,209,000
2008 788,000
----------
$3,551,000
==========
</TABLE>
Expired capital loss carryforwards, if any, are recorded as a reduction of
capital paid in.
To the extent loss carryforwards are used to offset any future realized gains,
it is unlikely that such gains would be distributed since they may be taxable to
shareholders as ordinary income.
OTHER:
There are certain risks arising from geographic concentration in any state.
Certain revenue or tax related events in a state may impair the ability of
certain issuers of municipal securities to pay principal and interest on their
obligations.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
The Fund may purchase or sell municipal and Treasury bond futures contracts and
purchase and write options on futures. The Fund will invest in these instruments
to hedge against the effects of changes in the value of portfolio securities due
to anticipated changes in interest rates and/or market conditions, for duration
management, or when the transactions are economically appropriate to the
reduction of risk inherent in the management of the Fund and not for trading
purposes. The use of futures contracts and options involves certain risks which
include (1) imperfect correlation between the price movement of the instruments
and the underlying securities, (2) inability to close out a position due to
different trading hours, or the temporary absence of a liquid market for either
the instrument or
12
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
July 31, 2000 (Unaudited)
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.
13
<PAGE> 16
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 $ 7.280 $ 7.280 $ 7.280
-------- --------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a)(b) 0.185 0.158 0.169(c)
Net realized and unrealized gain 0.270 0.270 0.270
-------- --------- --------
Total from Investment Operations 0.455 0.428 0.439
-------- --------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.185) (0.158) (0.169)
-------- --------- --------
NET ASSET VALUE, END OF PERIOD $ 7.550 $ 7.550 $ 7.550
======== ========= ========
Total return (d)(e)(f) 6.33% 5.94% 6.10%(g)
======== ========= ========
RATIOS TO AVERAGE NET ASSETS
Expenses (g)(h) 0.78% 1.53% 1.23%(c)
Net investment income (g)(h) 5.05% 4.30% 4.60%(c)
Fees and expenses waived or borne by the Advisor (g)(h) 0.17% 0.17% 0.17%
Portfolio turnover (f) 6% 6% 6%
Net assets at end of period (000) $ 67,942 $ 70,824 $ 3,278
</TABLE>
<TABLE>
<S> <C> <C> <C>
(a) Net of fees and expenses waived or borne by the Advisor which amounted to: $ 0.006 $ 0.006 $ 0.006
</TABLE>
(b) The per share net investment income amounts do not reflect the period's
reclassification of differences between book and tax basis net investment
income.
(c) Net of fees waived by the Distributor which amounted to $0.011 per share
and 0.30% (annualized).
(d) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(e) Had the Advisor and Distributor not waived or reimbursed a portion of
expenses, total return would have been reduced.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(h) Annualized.
14
<PAGE> 17
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
YEARS ENDED JANUARY 31,
----------------------------------------------------------------------
2000 1999
--------------------------------- ---------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.950 $ 7.950 $ 7.950 $ 7.830 $7.830 $ 7.830
--------- --------- --------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a)(b) 0.368 0.310 0.333(c) 0.369 0.308 0.333(d)
Net realized and unrealized gain (loss) (0.670) (0.670) (0.670) 0.129 0.129 0.129
--------- --------- --------- ------- ------- -------
Total from Investment Operations (0.302) (0.360) (0.337) 0.498 0.437 0.462
--------- --------- --------- ------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.368) (0.310) (0.333) (0.368) (0.309) (0.333)
In excess of net investment income -- -- -- (0.010) (0.008) (0.009)
--------- --------- --------- ------- ------- -------
Total Distributions
Declared to Shareholders (0.368) (0.310) (0.333) (0.378) (0.317) (0.342)
NET ASSET VALUE, END OF PERIOD $ 7.280 $ 7.280 $ 7.280 $ 7.950 $ 7.950 $ 7.950
========= ========= ========= ======== ======== =======
Total return (e)(f) (3.87)% (4.59)% (4.31)% 6.54% 5.73% 6.05%
========= ========= ========= ======== ======== =======
RATIOS TO AVERAGE NET ASSETS
Expenses (g) 0.78% 1.53% 1.23%(c) 0.77% 1.52% 1.22%(d)
Net investment income (g) 4.84% 4.09% 4.39%(c) 4.69% 3.94% 4.24%(d)
Fees and expenses waived or borne by the Advisor (g) 0.15% 0.15% 0.15% 0.14% 0.14% 0.14%
Portfolio turnover 9% 9% 9% 6% 6% 6%
Net assets at end of period (000) $ 66,348 $ 76,246 $ 2,768 $83,156 $87,947 $ 1,333
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
(a) Net of fees and expenses waived or borne by the
Advisor which amounted to: $ 0.011 $ 0.011 $ 0.011 $ 0.011 $ 0.011 $ 0.011
</TABLE>
(b) The per share net investment income amounts do not reflect the period's
reclassification of differences between book and tax basis net investment
income.
(c) Net of fees waived by the Distributor which amounted to $ 0.023 per share
and 0.30%.
(d) Net of fees waived by the Distributor which amounted to $0.024 per share
and 0.30%.
(e) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(f) Had the Advisor and Distributor not waived or reimbursed a portion of
expenses, total return would have been reduced.
(g) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
15
<PAGE> 18
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
YEARS ENDED JANUARY 31,
------------------------------------------------------------------------------
1998 1997
------------------------------------------------------------------------------
CLASS A CLASS B CLASS C (b) CLASS A CLASS B
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.490 $ 7.490 $ 7.710 $ 7.630 $ 7.630
-------- -------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.385 0.328 0.173(c) 0.393 0.338
Net realized and unrealized gain (loss) 0.344 0.344 0.124 (0.141) (0.141)
-------- -------- ------- ------- -------
Total from Investment Operations 0.729 0.672 0.297 0.252 0.197
-------- -------- ------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.386) (0.330) (0.177) (0.392) (0.337)
-------- -------- ------- ------- -------
In excess of net investment income (0.003) (0.002) -- -- --
-------- -------- ------- ------- -------
Total Distributions
Declared to Shareholders (0.389) (0.332) (0.177) (0.392) (0.337)
NET ASSET VALUE, END OF PERIOD $ 7.830 $ 7.830 $ 7.830 $ 7.490 $ 7.490
======== ======== ======= ======== ========
Total return (d)(e) 10.00% 9.19% 3.90%(f) 3.48% 2.71%
======== ======== ======= ======== ========
RATIOS TO AVERAGE NET ASSETS
Expenses 0.62%(g) 1.37%(g) 1.09%(c)(g)(h) 0.59%(g) 1.34%(g)
Net investment income 5.04%(g) 4.29%(g) 4.48%(c)(g)(h) 5.28%(g) 4.53%(g)
Fees and expenses waived or borne by the Advisor 0.29%(g) 0.29%(g) 0.28%(g)(h) 0.31%(g) 0.31%(g)
Portfolio turnover 12% 12% 12% 21% 21%
Net assets at end of period (000) $80,035 $84,370 $ 480 $74,059 $81,437
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
(a) Net of fees and expenses waived or borne
by the Advisor which amounted to: $ 0.022 $ 0.022 $0.021 $ 0.023 $ 0.023
</TABLE>
(b) Class C shares were initially offered on August 1, 1997. Per share amounts
reflect activity from that date.
(c) Net of fees waived by the Distributor which amounted to $0.012 per share
and 0.30% (annualized).
(d) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(e) Had the Advisor and Distributor not waived or reimbursed a portion of
expenses, total return would have been reduced.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(h) Annualized.
16
<PAGE> 19
Financial Highlights (continued)
<TABLE>
<CAPTION>
Year ended January 31,
----------------------
1996
----------------------
Class A Class B
----------------------
<S> <C> <C>
Net Asset Value, Beginning of Period $ 7.080 $ 7.080
--------- ---------
Income From Investment Operations:
Net investment income (a) 0.400 0.345
Net realized and unrealized gain 0.552 0.552
--------- ---------
Total from Investment Operations 0.952 0.897
========= =========
Less Distributions Declared to Shareholders:
From net investment income (0.402) (0.347)
--------- ---------
Net Asset Value, End of Period $ 7.630 $ 7.630
Total return (b)(c) 13.77% 12.93%
========= =========
Ratios to Average Net Assets
Expenses (d) 0.51% 1.25%
Net investment income (d) 5.42% 4.68%
Fees and expenses waived or borne by the Advisor (d) 0.42% 0.42%
Portfolio turnover 13% 13%
Net assets at end of period (000) $ 80,039 $ 82,785
</TABLE>
<TABLE>
<S> <C> <C>
(a) Net of fees and expenses waived or borne by the Advisor which amounted to: $ 0.031 $ 0.031
</TABLE>
(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.
17
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<PAGE> 22
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<PAGE> 23
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 Connecticut 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 Connecticut 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 CONNECTICUT TAX-EXEMPT FUND
<PAGE> 24
CHOOSE LIBERTY
BECAUSE NO SINGLE INVESTMENT MANAGER CAN BE ALL THINGS TO ALL INVESTORS(SM).
LIBERTY FUNDS
ALL-STAR Institutional money management approach for individual investors.
COLONIAL Fixed income and value style equity investing.
CRABBE
HUSON A contrarian approach to fixed income and equity investing.
NEWPORT A leader in international investing(SM).
STEIN ROE
ADVISOR Innovative solutions for growth and income investing.
[KEYPORT LOGO] A leading provider of innovative annuity products.
Liberty's mutual funds are offered by prospectus through Liberty Funds
Distributor, Inc.
BEFORE YOU INVEST, CONSULT YOUR FINANCIAL ADVISOR.
Your financial advisor can help you develop a long-term plan for reaching your
financial goals.
LIBERTY CONNECTICUT TAX-EXEMPT FUND Semiannual Report
BULK RATE
U.S. POSTAGE
[LIBERTY FUNDS GRAPHIC] PAID
Holliston, MA
PERMIT NO. 20
Liberty Funds Distributor, Inc.@2000
One Financial Center, Boston, MA 02111-2621, 1-800-426-3750
www.libertyfunds.com
778-03/385C-0700 (9/00) 00/1535
