-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IGdsiknUUryvOpHMoVtU1x6o69IbFwjWRrfj6xvoH5kf+9574MrMAom3hERJ6SHv Du8UsDR9mNPAROEqdjHejQ== 0000950135-02-001181.txt : 20020415 0000950135-02-001181.hdr.sgml : 20020415 ACCESSION NUMBER: 0000950135-02-001181 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020301 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LIBERTY FUNDS TRUST II CENTRAL INDEX KEY: 0000315665 IRS NUMBER: 046452949 FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-03009 FILM NUMBER: 02564146 BUSINESS ADDRESS: STREET 1: ONE FINANCIAL CTR CITY: BOSTON STATE: MA ZIP: 02111 BUSINESS PHONE: 6174263750 FORMER COMPANY: FORMER CONFORMED NAME: COLONIAL TRUST II DATE OF NAME CHANGE: 19920505 FORMER COMPANY: FORMER CONFORMED NAME: COLONIAL MONEY MARKET FUND DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: COLONIAL TRUST II / DATE OF NAME CHANGE: 19950926 N-30D 1 b41474cdn-30d.txt LIBERTY MONEY MARKET FUND SEMI-ANNUAL REPORT [CAPITAL BUILDING GRAPHIC] LIBERTY MONEY MARKET FUND Semiannual report December 31, 2001 President's Message DEAR SHAREHOLDER, I want to take this opportunity to let you know that the sale of Liberty Financial's asset management companies -- including Stein Roe & Farnham Incorporated, the investment advisor of your fund -- was completed effective November 1, 2001. In light of this change and recent turmoil in the markets, I think it is important to assure you that your fund continues to follow the same solid investment principles which attracted you in the first place. The six-month period ended December 31, 2001 was especially volatile for money markets, as interest rate reductions by the Federal Reserve Board (the "Fed") had a direct, negative impact on money market yields. During the period, the Fed cut interest rates five times totaling 2.0% and bringing the key federal funds rate down to only 1.75%, the lowest level in 40 years. These attempts to stimulate the economy did little to stop the country from sliding deeper into a recession. At the beginning of the period, the economy had already stalled and was headed toward stagnant growth. Although the events of September 11 had a dramatic, negative impact on the economy, we were likely already in a recession. During the period, manufacturing continued its year-and-a-half long slump, corporate profits suffered and unemployment rates rose. Federal tax cuts passed earlier in the year coupled with New York's billions of dollars in disaster aid after September 11 provided an infusion of both fiscal and monetary stimulus, but did not prevent an economic decline. Toward the end of the period, however, some signs pointed toward the beginning of a recovery. The equity markets rallied in the fourth quarter and consumer confidence, which plummeted in September and October, began to improve. Many companies forecast improved earnings in 2002, although some industry sectors, such as telecommunications, expect to struggle with earnings into 2003. The magnitude of the economic recovery will affect whether the Fed raises interest rates or keeps them level, with any rate increases likely to help money market yields recover from present levels. On the following pages, you will find more detailed information about your fund's results and strategies. Thank you for investing in Liberty Money Market Fund and for giving us the opportunity to serve your investment needs. Sincerely, /s/ Keith T. Banks Keith T. Banks President MEET THE NEW PRESIDENT Effective November 1, 2001, Mr. Keith Banks has taken on the position of president of Stein Roe. Mr. Banks is currently chief investment officer and chief executive officer of Fleet Asset Management, a position he has held since 2000. Prior to joining Fleet, he was managing director and head of US equity for J.P. Morgan Investment Management from 1996 to 2000. He began his investment career in 1981 as an equity analyst for Home Insurance. A chartered financial analyst, Mr. Banks earned his BA from Rutgers University and his MBA from Columbia Business School. May Lose Value Not FDIC Insured No Bank Guarantee Past performance cannot predict future investment results. Since economic and market conditions change frequently, there can be no assurance that the trends described in this report will continue to come to pass. PORTFOLIO MANAGER'S REPORT DISTRIBUTIONS DECLARED PER SHARE 7/1/01-12/31/01 Class A $0.011 - -------------------------------------------------------------------------------- Class B $0.006 - -------------------------------------------------------------------------------- Class C $0.009 - -------------------------------------------------------------------------------- 7-DAY YIELDS ON 12/31/01(2) Class A 1.23% - -------------------------------------------------------------------------------- Class B 0.23% - -------------------------------------------------------------------------------- Class C 0.83% - -------------------------------------------------------------------------------- 30-DAY YIELDS ON 12/31/01(2) Class A 1.19% - -------------------------------------------------------------------------------- Class B 0.20% - -------------------------------------------------------------------------------- Class C 0.79% - -------------------------------------------------------------------------------- (2) If the advisor or its affiliates had not waived certain fund expenses, the 7-day and 30-day yields would have been 0.23% and 0.19% for class C shares. FUND'S YIELD FALLS WITH INTEREST RATES After a period of extremely strong results, yields for the Liberty Money Market Fund declined dramatically during the period. For the six-month period that ended December 31, 2001, the fund's class A shares returned 1.12%, underperforming the fund's peer group, the Lipper Money Market Fund Average, which returned 1.19% during the same period.(1) Average rates for money market funds ended the period at their lowest level since the creation of money market funds. FED RATE CUTS DEPRESSED MONEY MARKET YIELDS By far the overriding factor behind performance during this period was the Federal Reserve's relentless drive to prevent a recession by reducing rates. Since January 2001, the Fed has lowered interest rates an unprecedented 11 times totaling a staggering 4.75%. During the six-month period, rates fell five times totaling 2%. This had a dramatic impact on money market yields, which dropped below 1% after September 11, when most people expected a huge outflow of cash from the stock market. Although a move to safety did not materialize as the stock market steadied itself, the Fed cut rates soon after, which kept yields depressed until December, when they rose slightly. During the second half of 2001, we lengthened maturities modestly, attempting to lock in favorable gains as Fed easing found its way into the market. Although we increased our average maturity from 40.5 to 48 days, the fund's average maturity lagged its peers and did not help relative performance. CORPORATE PAPER BECAME MORE ATTRACTIVE Since interest rates began their decline in January 2001, the fund's percentage of assets in some sectors changed accordingly. Before the period began on July 1, 2001 we had increased federal agency securities in the fund, adding liquidity and rate protection. As securities in this sector matured during the fiscal period, we replaced them with less expensive corporate paper to give the fund additional yield. As a result, the fund's percentage of assets in federal agency debt decreased slightly. Commercial paper, on the other hand, increased as a percentage of fund's net assets from 82.5% to 87.3% at period end. We bought one-year notes issued by Bank One (4.3% of net assets) to lock in higher yields. - --------------- (1) Lipper Inc., a widely respected data provider in the industry, calculates total returns for mutual funds with investment objectives similar to those of the fund. 1 -- PORTFOLIO MANAGER'S REPORT (CONTINUED) OUTLOOK IS MUTED FOR MONEY MARKETS We look for interest rates to stabilize if the economy recovers modestly. A slow recovery should help the yield curve (the difference in yield between one-year and shorter-term securities) to remain constant through most of the year. A more vigorous recovery, however, could lead the Fed to raise rates later in the year and result in higher money market yields. Because there is some difference of opinion about whether the Fed will eventually raise rates in late 2002, we will monitor these economic trends and shorten maturities should future interest rate increases seem likely. PORTFOLIO BREAKDOWN(3) AS OF 12/31/01 - ------------------------------------- Commercial Paper.............. 83.1% Letter of Credit Commercial Paper....................... 4.6% Corporate Notes............... 4.3% Federal Agencies.............. 8.0%
PORTFOLIO MATURITY(3) AS OF 12/31/01 - ------------------------------------- 0-4 days...................... 7.0% 5-14 days..................... 39.0% 15-29 days.................... 22.0% 30-59 days.................... 20.0% 60+ days...................... 12.0%
MUTUAL FUND PERFORMANCE CHANGES OVER TIME. PLEASE VISIT LIBERTYFUNDS.COM FOR DAILY PERFORMANCE UPDATES. PAST PERFORMANCE CANNOT PREDICT FUTURE RESULTS. (3) Portfolio breakdown and maturity weightings are unaudited and are calculated as a percentage of total market value of the investment portfolio. Because it is actively managed, there can be no guarantee the portfolio will continue to hold or invest in these securities in the future. On March 2, 1998, the fund became a feeder fund for the SR&F Cash Reserves Portfolio, a money market fund managed by Stein Roe & Farnham Incorporated. Prior to this transition, approximately two-thirds of the portfolio holdings represented a selection of short-term US government agency securities. The fund no longer invests primarily in U.S. government securities, but rather in the portfolio, which invests in high quality money market securities. The fund pursues its objective by investing all of its assets in SR&F Cash Reserves Portfolio as part of a master fund/feeder fund structure. An investment in the fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. 2 - -- INVESTMENT PORTFOLIO -- SR&F CASH RESERVES PORTFOLIO December 31, 2001 (Unaudited)
COMMERCIAL INTEREST MATURITY PAPER - 87.3% RATE (A) DATE PAR VALUE - ----------------------------------------------------------------------- American Home Products 1.800% 01/02/02 $14,065,000 $ 14,064,297 American Honda Finance 1.930% 01/29/02 20,000,000 19,969,978 Amsteel Funding 2.030% 01/07/02 33,000,000 32,988,835 Asset Securitization Corp. 1.900% 01/16/02 33,000,000 32,973,875 Baxter International (b) 2.050% 01/09/02 20,000,000 19,990,889 Corporate Asset Funding (b) 2.050% 01/10/02 33,000,000 32,983,088 Enterprise Funding 1.890% 01/24/02 33,000,000 32,960,152 Falcon Asset Securitization (b) 1.970% 01/17/02 20,000,000 19,982,489 Fountain Square 1.920% 01/17/02 33,000,000 32,971,840 Goldman 2.050% 01/02/02 33,000,000 32,998,121 Kimberly-Clark 1.770% 02/05/02 33,000,000 32,943,212 Petrbras International LOC 1.800% 01/10/02 33,000,000 32,985,150 Pharmacia Corp. 1.850% 01/10/02 8,000,000 7,996,300 Phillip Morris Company 1.800% 01/31/02 26,000,000 25,961,000 Preferred Receivables Funding (b) 2.060% 01/08/02 28,322,000 28,310,655 Preferred Receivables Funding (b) 1.800% 01/23/02 4,000,000 3,995,600 Quebec (Province Of) 1.810% 02/01/02 25,000,000 24,961,035 Receivables Capital (b) 2.020% 01/08/02 14,037,000 14,031,487 Receivables Capital (b) 2.080% 01/11/02 12,000,000 11,993,067 7-Eleven 1.770% 02/25/02 30,000,000 29,918,875 Special Purpose Accounts Receivable 2.050% 01/08/02 33,000,000 32,986,797 Swedish Export Credit 1.800% 02/11/02 33,000,000 32,932,350 Verizon Network Funding 1.800% 01/28/02 19,582,000 19,555,564 Virginia Electric & Power Company 1.800% 01/11/02 29,497,000 29,482,120
INTEREST MATURITY RATE (A) DATE PAR VALUE - ----------------------------------------------------------------------- Windmill Funding (b) 1.930% 01/09/02 $20,000,000 $ 19,991,422 Windmill Funding (b) 1.950% 01/11/02 12,500,000 12,493,229 ----------- TOTAL COMMERCIAL PAPER (cost of $632,421,427) 632,421,427 ----------- CORPORATE FIXED INCOME BONDS - 4.3% FINANCE, INSURANCE & REAL ESTATE - 4.3% DEPOSITORY INSTITUTIONS - 4.3% Bank One Corp. (cost $31,234,500) 6.900% 10/07/02 30,000,000 31,234,500 ----------- GOVERNMENT OBLIGATIONS - 8.0% Fed Home Loan Mortgage Co. 0.000% 06/26/02 25,000,000 24,538,611 Fed Home Loan Mortgage Co. 2.420% 09/20/02 34,000,000 33,401,184 ----------- TOTAL GOVERNMENT OBLIGATIONS (cost of $57,939,795) 57,939,795 ----------- TOTAL INVESTMENTS - 99.6% (cost of $721,595,722) (c) 721,595,722 ----------- OTHER ASSETS & LIABILITIES, NET - 0.4% 2,583,172 ----------- NET ASSETS - 100.0% $724,178,894 -----------
NOTES TO INVESTMENT PORTFOLIO: (a) The interest rate is the effective rate at the date of purchase except for variable rate notes, for which the interest rate represents the current rate as of the most recent reset date. (b) These securities are exempt from registration under Rule 144A of the Securities Act of 1933 and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2001, the value of these securities amounted to $163,771,926, which represents 22.6% of net assets. (c) Cost for both financial statement and federal income tax purposes is the same.
ACRONYM NAME - ------- ---------------- LOC Letter of Credit
See notes to financial statements. 3 -- SR&F CASH RESERVES PORTFOLIO December 31, 2001 (Unaudited) STATEMENT OF ASSETS AND LIABILITIES - ------------------------------------------------------------- ASSETS: Investments, at cost $721,595,722 ----------- Investments, at value $721,595,722 Cash 2,256,827 Receivable for: Interest 486,631 Deferred Trustees' compensation plan 324 ----------- Total Assets 724,339,504 ----------- LIABILITIES: Payable for: Management fee 149,696 Transfer agent fee 523 Bookkeeping fee 3,999 Deferred Trustees' fee 324 Other liabilities 6,068 ----------- Total Liabilities 160,610 ----------- NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTEREST $724,178,894 ===========
STATEMENT OF OPERATIONS - ------------------------------------------------------------- For the Six Months Ended December 31, 2001 (Unaudited) INVESTMENT INCOME: Interest $11,359,642 EXPENSES: Management fee $885,185 Bookkeeping fee 5,000 Transfer agent fee 3,025 Trustees' fee 3,098 Custody fee 10,677 Other expenses 31,276 ------- Total Expenses 938,261 Custody earnings credit (9,502) ------- Net Expenses 928,759 ---------- Net Investment Income $10,430,883 ==========
STATEMENTS OF CHANGES IN NET ASSETS - -------------------------------------------------------------
SIX MONTHS ENDED (UNAUDITED) YEAR ENDED DECEMBER 31, JUNE 30, INCREASE (DECREASE) IN NET ASSETS: 2001 2001 - ------------------------------------------------- --------------- OPERATIONS: Net investment income $ 10,430,883 $ 45,265,926 ----------- ------------- TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST: Contributions 561,387,653 2,646,184,636 Withdrawals (535,081,270) (2,792,772,318) ----------- ------------- Net Increase (Decrease) from Transactions in Investors' Beneficial Interest 26,306,383 (146,587,682) ----------- ------------- Total Increase (Decrease) in Net Assets 36,737,266 (101,321,756) NET ASSETS: Beginning of period 687,441,628 788,763,384 ----------- ------------- End of period $ 724,178,894 $ 687,441,628 =========== =============
FINANCIAL HIGHLIGHTS - -------------------------------------------------------------
SIX MONTHS ENDED PERIOD (UNAUDITED) ENDED DECEMBER 31, YEAR ENDED JUNE 30, JUNE 30, 2001 2001 2000 1999 1998 (A) - ----------------------------------- ----- ----- ----- -------- RATIOS TO AVERAGE NET ASSETS: Expenses(b) 0.25%(c) 0.26% 0.25% 0.25% 0.26%(c) Net investment income(b) 2.86%(c) 5.75% 5.52% 4.83% 5.45%(c)
(a) From commencement of operations on March 2, 1998. (b) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had no impact. (c) Annualized. See notes to financial statements. 4 - -- SR&F CASH RESERVES PORTFOLIO -- NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 (UNAUDITED) NOTE 1. ORGANIZATION OF THE SR&F CASH RESERVES PORTFOLIO SR&F Cash Reserves Portfolio (the "Portfolio") is a separate series of SR&F Base Trust, a Massachusetts common law trust organized under an Agreement and Declaration of Trust dated August 23, 1993. The Declaration of Trust permits the Trustees to issue non-transferable interests in the Portfolio. The investment objective of the Portfolio is to seek maximum current income consistent with capital preservation and maintenance of liquidity. The Portfolio commenced operations on March 2, 1998. At commencement, Stein Roe Cash Reserves Fund and Liberty Money Market Fund contributed $493,224,000 and $187,537,000, respectively, in securities and other assets in exchange for beneficial ownership of the Portfolio. The Portfolio allocates income, expenses and net realized gains and losses to each investor on a daily basis, based on a method approved by the Internal Revenue Service. At December 31, 2001, Stein Roe Cash Reserves Fund and Liberty Money Market Fund owned 54.1% and 45.9%, respectively, of the Portfolio. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES The following summarizes the significant accounting policies of the Portfolio. These policies are in conformity with generally accepted accounting principles, which require management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. INVESTMENT TRANSACTIONS AND INVESTMENT INCOME: Investment transactions are accounted for on trade date. Interest income, including discount accretion and premium amortization, is recorded daily on the accrual basis. Realized gains or losses from investment transactions are reported on an identified cost basis. The Portfolio is permitted to invest in repurchase agreements involving securities issued or guaranteed by the U.S. Government or by its agencies or instrumentalities. The Portfolio requires issuers of repurchase agreements to transfer the securities underlying those agreements to the Portfolio's custodian at the time of payment. SECURITY VALUATIONS: The Portfolio utilizes the amortized cost method to value its investments. This technique approximates market value and involves valuing a security initially at cost and, thereafter assuming a constant amortization to maturity of any discount or premium. Other assets are valued at fair value as determined in good faith by or under the direction of the Board of Trustees. FEDERAL INCOME TAXES: No provision is made for federal income taxes because the Portfolio is treated as a partnership for federal income tax purposes and all of its income is allocated to its owners based on a method approved by the Internal Revenue Service. NOTE 3. PORTFOLIO COMPOSITION Under normal market conditions, the Portfolio will invest at least 25% of its total assets in securities of issuers in the financial services industry (which includes, but is not limited to, banks, consumer and business credit institutions, and other financial services companies). NOTE 4. TRUSTEES' FEES AND TRANSACTIONS WITH AFFILIATES MANAGEMENT FEE: The Portfolio pays monthly management fees to Stein Roe & Farnham Incorporated (the "Advisor"), an indirect, majority-owned subsidiary of Fleet National Bank ("Fleet"), for its services as investment Advisor and manager. The management fee for the Portfolio is computed at an annual rate of 0.25% of the first $500 million of average daily net assets, and 0.225% thereafter. On November 1, 2001, Liberty Financial Companies Inc., the former parent of the Advisor, completed the sale of its asset management business, including the Advisor, to Fleet. This transaction resulted in a change of control of the Advisor and, therefore, an assignment of the Advisor's investment advisory contract with the Portfolio to Fleet. The Portfolio had obtained approval of a new investment advisory contract by the Portfolio's Board of Trustees and fund shareholders, which became effective upon completion of the sale. The new contract is identical to the prior contract in all material respects except for its effective and termination dates. BOOKKEEPING FEE: The Advisor is responsible for providing pricing and bookkeeping services to the Portfolio under a Pricing and Bookkeeping Agreement. Under a separate agreement (the "Outsourcing Agreement"), the Advisor has delegated those functions to State Street Bank and Trust Company ("State Street"). The Advisor pays fees to State Street under the Outsourcing Agreement. Under its pricing and bookkeeping agreement with the SR&F Base Trust on behalf of the Portfolio, the Advisor receives from the Portfolio an annual flat fee of $10,000 paid monthly. 5 -- SR&F CASH RESERVES PORTFOLIO -- NOTES TO FINANCIAL STATEMENTS (CONTINUED) TRANSFER AGENT FEE: The Portfolio pays Liberty Funds Services, Inc., a monthly fee equal to $6,000 annually. OTHER: Certain officers and trustees of the Trust are also officers of the Advisor. Compensation is paid to trustees not affiliated with the Advisor. No remuneration was paid to any other trustee or officer of the Trust, who is affiliated with the Advisor. 6 - -- LIBERTY MONEY MARKET FUND STATEMENT OF ASSETS AND LIABILITIES December 31, 2001 (Unaudited) ASSETS: Investments in Portfolio, at value $332,746,921 Receivable for: Fund shares sold 11,317,481 Deferred Trustees' compensation plan 6,427 Other assets 76,852 ----------- Total Assets 344,147,681 ----------- LIABILITIES: Payable for: Fund shares repurchased 1,401,334 Distributions 11,013 Administration fee 68,293 Transfer agent fee 68,293 Bookkeeping fee 10,012 Deferred Trustees' fee 6,427 ----------- Total Liabilities 1,565,372 ----------- NET ASSETS $342,582,309 =========== COMPOSITION OF NET ASSETS: Paid-in capital $342,631,592 Overdistributed net investment income (45,594) Accumulated net realized loss (3,689) ----------- NET ASSETS $342,582,309 =========== Class A: Net assets $231,746,884 Shares outstanding 231,744,587 =========== Net asset value and redemption price per share $ 1.00(a) =========== Class B: Net assets $ 94,432,701 Shares outstanding 94,507,170 =========== Net asset value and redemption price per share $ 1.00(a) =========== Class C: Net assets $ 16,402,724 Shares outstanding 16,408,187 =========== Net asset value and redemption price per share $ 1.00(a) ===========
(a) Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. -- STATEMENT OF OPERATIONS For the Six Months Ended December 31, 2001 (Unaudited) INVESTMENT INCOME: Interest income allocated from Portfolio $4,667,815 EXPENSES: Expenses allocated from Portfolio $382,355 Administration fee 375,272 Distribution fee: Class B 344,371 Class C 49,541 Service fee: Class B 114,790 Class C 16,426 Bookkeeping fee 53,691 Transfer agent fee 539,381 Trustees' fee 1,483 Other expenses 67,274 ------- Total Expenses 1,944,584 Fees waived by Distributor -- Class C (39,685) --------- Net Expenses 1,904,899 --------- Net Investment Income $2,762,916 ---------
See notes to financial statements. 7 -- LIBERTY MONEY MARKET FUND -- STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED (UNAUDITED) YEAR ENDED DECEMBER 31, JUNE 30, INCREASE (DECREASE) ------------- --------------- IN NET ASSETS: 2001 2001 - -------------------------------------------------------------- OPERATIONS: Net investment income $ 2,762,916 $ 14,727,263 ------------ -------------- DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income: Class A (2,133,912) (11,442,545) Class B (545,763) (2,941,345) Class C (114,243) (337,341) ------------ -------------- Total Distributions Declared to Shareholders (2,793,918) (14,721,231) ------------ -------------- SHARE TRANSACTIONS: Class A: Subscriptions 544,570,877 2,464,044,192 Distributions reinvested 1,791,026 8,756,600 Redemptions (504,415,046) (2,461,670,240) ------------ -------------- Net Increase 41,946,857 11,130,552 ------------ -------------- Class B: Subscriptions 75,218,968 152,900,737 Distributions reinvested 473,659 2,522,883 Redemptions (62,130,996) (143,751,857) ------------ -------------- Net Increase 13,561,631 11,671,763 ------------ -------------- Class C: Subscriptions 55,244,364 89,495,212 Distributions reinvested 91,766 238,671 Redemptions (48,942,084) (83,673,462) ------------ -------------- Net Increase 6,394,046 6,060,421 ------------ -------------- Net Increase from Share Transactions 61,902,534 28,862,736 ------------ -------------- Total Increase in Net Assets 61,871,532 28,868,768 NET ASSETS: Beginning of period 280,710,777 251,842,009 ------------ -------------- End of period (including overdistributed net investment income of $(45,594) and $(14,592), respectively) $ 342,582,309 $ 280,710,777 ============ ==============
SIX MONTHS ENDED (UNAUDITED) YEAR ENDED DECEMBER 31, JUNE 30, ------------- --------------- 2001 2001 - -------------------------------------------------------------- CHANGES IN SHARES: Class A: Subscriptions 544,568,013 2,464,030,619 Issued for distributions reinvested 1,791,027 8,756,600 Redemptions (504,413,889) (2,461,651,696) ------------ -------------- Net Increase 41,945,151 11,135,523 ------------ -------------- Class B: Subscriptions 75,218,969 152,900,737 Issued for distributions reinvested 473,659 2,522,883 Redemptions (62,130,797) (143,744,457) ------------ -------------- Net Increase 13,561,831 11,679,163 ------------ -------------- Class C: Subscriptions 55,244,364 89,495,212 Issued for distributions reinvested 91,766 238,671 Redemptions (48,942,083) (83,671,962) ------------ -------------- Net Increase 6,394,047 6,061,921 ------------- ---------------
See notes to financial statements. 8 - -- LIBERTY MONEY MARKET FUND -- NOTES TO FINANCIAL STATEMENTS December 31, 2001 (Unaudited) NOTE 1. ACCOUNTING POLICIES ORGANIZATION: Liberty Money Market Fund (the "Fund"), a series of Liberty Funds Trust II, is a 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 invests all of its investable assets in the SR&F Cash Reserves Portfolio (the "Portfolio"), a Massachusetts common trust, having the same investment objective as the Fund. The value of the Fund's investment in the Portfolio reflects the Fund's proportionate interest in the net assets of the Portfolio (45.9% at December 31, 2001). The performance of the Fund is directly affected by the performance of the Portfolio. The financial statements of the Portfolio, including the portfolio of investments, are included elsewhere in this report and should be read in conjunction with the Fund's financial statements. The Fund may issue an unlimited number of shares. The Fund offers three classes of shares: Class A, Class B, and Class C shares, all of which are sold at net asset value. 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 which shares were purchased. Class C shares are subject to a contingent deferred sales charge on redemptions made within one year after purchase and a continuing service and 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 followed by the Fund in the preparation of its financial statements. SECURITY VALUATION AND TRANSACTIONS: Valuation of securities by the Portfolio is discussed in Note 2 of the Portfolio's Notes to Financial Statements which are included elsewhere in this report. The Fund attempts to maintain a per-share net asset value of $1.00, which management believes will be possible under most conditions. In the event that a deviation of 0.50% or more exists between the Fund's $1.00 per-share net asset value, calculated at amortized cost, and the net asset value calculated by reference to market quotations, the Board of Trustees would consider what action, if any, should be taken. DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS: All income, expenses (other than the Class B and Class C service and 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 net investment income per share data and ratios for the Fund for the entire period by the service fee and 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 income, no federal income tax has been accrued. At June 30, 2001, capital loss carryforwards available (to the extent provided in regulations) to offset future realized gains were approximately as follows:
CAPITAL LOSS YEAR OF EXPIRATION CARRYFORWARD - -------------------------------- 2003 $1,327 2007 1,424 2008 583 2009 355 ------ $3,689 ======
Expired capital loss carryforwards, if any, are recorded as a reduction of paid-in capital. DISTRIBUTIONS TO SHAREHOLDERS: The Fund declares and records distributions daily and pays monthly. NOTE 2. FEES AND COMPENSATION PAID TO AFFILIATES ADMINISTRATION FEE: Colonial Management Associates, Inc. (the "Administrator") provides accounting and other services and office facilities for a monthly fee equal to 0.25% annually of the Fund's average daily net assets. On November 1, 2001, Liberty Financial Companies, Inc., the former parent of the Administrator, completed the sale of its asset management business, including the Administrator, to Fleet National Bank ("Fleet"). This transaction resulted in a change of control of the Administrator and, therefore, an assignment of the Administrator's contract with the Portfolio to Fleet. The Fund had obtained approval of a new administration contract by the Portfolio's Board of Trustees and fund shareholders, which became effective upon completion of 9 -- LIBERTY MONEY MARKET FUND -- NOTES TO FINANCIAL STATEMENTS (CONTINUED) December 31, 2001 (Unaudited) the sale. The new contract is identical to the prior contract in all material respects except for its effective and termination dates. BOOKKEEPING FEE: The Administrator is responsible for providing pricing and bookkeeping services to the Fund under a Pricing and Bookkeeping Agreement. Under a separate agreement (the "Outsourcing Agreement"), the Administrator has delegated those functions to State Street Bank and Trust Company ("State Street"). The Administrator pays fees to State Street under the Outsourcing Agreement. Under its pricing and bookkeeping agreement with the Fund, the Administrator receives from the Fund an annual flat fee of $5,000, paid monthly, and in any month that the Fund's average daily net assets are more than $50 million, a monthly fee equal to the average daily net assets of the Fund for that month multiplied by a fee rate that is calculated by taking into account the fees payable to State Street under the Outsourcing Agreement. TRANSFER AGENT FEE: Liberty Funds Services, Inc., (the "Transfer Agent"), an affiliate of the Administrator, provides shareholder services for a monthly fee comprised of 0.06% annually of the Fund's average daily 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 Administrator, is the Fund's principal underwriter. For the six months ended December 31, 2001, the Fund has been advised that the Distributor received contingent deferred sales charges (CDSC) of $195,701, $282,728 and $30,071 on Class A, Class B, and Class C shares redemptions, respectively. The Fund has adopted a 12b-1 plan which requires the payment of a service fee to the Distributor equal to 0.25% annually of Class B and Class C net assets as of the 20th of each month. The plan also requires the payment of a distribution fee to the Distributor equal to 0.75% annually of the average net assets attributable to Class B and Class C shares. The Distributor has voluntarily agreed to waive a portion of the Class C share distribution fee so that it does not exceed 0.15% 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 Administrator has agreed, until further notice, to waive fees and bear certain Fund expenses to the extent that total expenses (inclusive of the Fund's proportionate share of the Portfolio's expenses and exclusive of service and distribution fees, brokerage commissions, interest, taxes and extraordinary expenses, if any) exceed 1.00% annually of the Fund's average net assets. OTHER: The Fund pays no compensation to its officers, all of whom are employees of the Administrator. 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. NOTE 3. OTHER RELATED PARTY TRANSACTIONS At December 31, 2001, Colonial Investment Services, Inc. owned 9.9% of the Fund's shares outstanding. 10 - -- LIBERTY MONEY MARKET FUND -- FINANCIAL HIGHLIGHTS Selected data for a share outstanding throughout each period is as follows:
SIX MONTHS ENDED YEAR (UNAUDITED) YEAR ENDED JUNE 30, ENDED DECEMBER 31, --------------------------------------------------- AUGUST 31, CLASS A SHARES 2001 2001 2000 1999 1998 (A)(B) 1997 - -------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE -- BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 ---------- -------- -------- -------- ---------- --------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.011(c) 0.052(c) 0.052(c) 0.046(c) 0.041(c) 0.048 LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.011) (0.052) (0.052) (0.046) (0.041) (0.048) ---------- -------- -------- -------- ---------- --------- NET ASSET VALUE -- END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 ========== ======== ======== ======== ========== ========= Total return (d) 1.12%(e) 5.34%(f) 5.26%(f) 4.70%(f) 4.17%(e)(f) 4.90% ========== ======== ======== ======== ========== ========= RATIOS TO AVERAGE NET ASSETS: Expenses (g) 0.95%(c)(h) 0.70%(c) 0.65%(c) 0.68%(c) 0.69%(c)(h) 0.72% Net investment income (g) 2.17%(c)(h) 5.31%(c) 5.13%(c) 4.61%(c) 4.93%(c)(h) 4.73% Waiver/Reimbursement -- 0.19% 0.19% 0.19% 0.19%(h) -- Net assets, end of period (000's) $231,747 $189,822 $178,678 $157,790 $128,658 $144,076
(a) The Fund changed its fiscal year end from August 31 to June 30. Information presented is for the period September 1, 1997 through June 30, 1998. (b) Effective March 2, 1998, Stein Roe & Farnham Incorporated became the investment Advisor of the Fund. (c) The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the SR&F Cash Reserves Portfolio. (d) Total return at net asset value assuming all distributions reinvested and no contingent deferred sales charge. (e) Not annualized. (f) Had the Administrator and Distributor not waived a portion of expenses, total return would have been reduced. (g) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had no impact. (h) Annualized. 11 -- LIBERTY MONEY MARKET FUND -- FINANCIAL HIGHLIGHTS Selected data for a share outstanding throughout each period is as follows:
SIX MONTHS ENDED YEAR (UNAUDITED) YEAR ENDED JUNE 30, ENDED DECEMBER 31, ------------------------------------------------ AUGUST 31, CLASS B SHARES 2001 2001 2000 1999 1998 (A)(B) 1997 - -------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE -- BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 ---------- ------- ------- ------- --------- --------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.006(c) 0.042(c) 0.041(c) 0.036(c) 0.032(c) 0.038 LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.006) (0.042) (0.041) (0.036) (0.032) (0.038) ---------- ------- ------- ------- --------- --------- NET ASSET VALUE -- END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 ========== ======= ======= ======= ========= ========= Total return (d) 0.62%(e) 4.31%(f) 3.99%(f) 3.68%(f) 3.28%(e)(f) 3.82% ========== ======= ======= ======= ========= ========= RATIOS TO AVERAGE NET ASSETS: Expenses (g) 1.95%(c)(h) 1.70%(c) 1.65%(c) 1.68%(c) 1.69%(c)(h) 1.72% Net investment income (g) 1.17%(c)(h) 4.31%(c) 4.13%(c) 3.61%(c) 3.93%(c)(h) 3.73% Waiver/Reimbursement -- 0.19% 0.19% 0.19% 0.19%(h) -- Net assets, end of period (000's) $94,433 $80,879 $69,214 $93,821 $61,811 $70,242
(a) The Fund changed its fiscal year end from August 31 to June 30. Information presented is for the period September 1, 1997 through June 30, 1998. (b) Effective March 2, 1998, Stein Roe & Farnham Incorporated became the investment Advisor of the Fund. (c) The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the SR&F Cash Reserves Portfolio. (d) Total return at net asset value assuming all distributions reinvested and no contingent deferred sales charge. (e) Not annualized. (f) Had the Administrator and Distributor not waived a portion of expenses, total return would have been reduced. (g) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had no impact. (h) Annualized. 12 - -- LIBERTY MONEY MARKET FUND -- FINANCIAL HIGHLIGHTS Selected data for a share outstanding throughout each period is as follows:
SIX MONTHS ENDED YEAR (UNAUDITED) YEAR ENDED JUNE 30, ENDED DECEMBER 31, ------------------------------------------------ AUGUST 31, CLASS C SHARES 2001 2001 2000 1999 1998 (A)(B) 1997 (C) - ------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE -- BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 ---------- ------- ------- ------- --------- --------- INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.009(d) 0.048(d) 0.048(d) 0.042(d) 0.037(d) 0.039 LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.009) (0.048) (0.048) (0.042) (0.037) (0.039) ---------- ------- ------- ------- --------- --------- NET ASSET VALUE -- END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 ========== ======= ======= ======= ========= ========= Total return (e) 0.92%(f)(g) 4.93%(g) 4.71%(g) 4.30%(g) 3.81%(f)(g) 3.97% ========== ======= ======= ======= ========= ========= RATIOS TO AVERAGE NET ASSETS: Expenses (h) 1.35%(d)(i) 1.10%(d) 1.05%(d) 1.08%(d) 1.09%(d)(i) 1.64% Net investment income (h) 1.77%(d)(i) 4.91%(d) 4.73%(d) 4.21%(d) 4.53%(d)(i) 3.81% Waiver/Reimbursement 0.60%(i) 0.79% 0.79% 0.79% 0.79%(i) -- Net assets, end of period (000's) $16,403 $10,010 $ 3,950 $ 2,194 $ 3,304 $ 2,904
(a) The Fund changed its fiscal year end from August 31 to June 30. Information presented is for the period September 1, 1997 through June 30, 1998. (b) Effective March 2, 1998, Stein Roe & Farnham Incorporated became the investment Advisor of the Fund. (c) Effective July 1, 1997, Class D shares were redesignated to Class C shares. (d) The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the SR&F Cash Reserves Portfolio. (e) Total return at net asset value assuming all distributions reinvested and no contingent deferred sales charge. (f) Not annualized. (g) Had the Administrator and Distributor not waived a portion of expenses, total return would have been reduced. (h) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had no impact. (i) Annualized. 13 -- SHAREHOLDER MEETING RESULTS On September 26, 2001, a Special Meeting of Shareholders of the Liberty Money Market Fund was held to conduct a vote for or against the approval of the following item listed on the Fund's Proxy Statement for said Meeting. On July 16, 2001, the record date for the Meeting, the Fund had shares outstanding of 283,642,805.601. The votes cast were as follows:
PROPOSAL TO % OF SHARES APPROVE TO TOTAL % OF SHARES A NEW PORTFOLIO OUTSTANDING TO TOTAL MANAGEMENT SHARES SHARES SHARES VOTED AGREEMENT: ------ ----------- ------------ For 160,867,627.966 56.71% 97.51% Against 1,453,665.482 0.51% 0.88% Abstain 2,660,675.747 0.94% 1.61%
14 - -- This page intentionally left blank This page intentionally left blank This page intentionally left blank TRANSFER AGENT IMPORTANT INFORMATION ABOUT THIS REPORT The Transfer Agent for Liberty Money Market 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 Money Market 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 MONEY MARKET FUND BEFORE YOU INVEST, CONSULT YOUR FINANCIAL ADVISOR. Your financial advisor can help you develop a long-term plan for reaching your financial goals. Liberty's mutual funds are offered by prospectus through Liberty Funds Distributor, Inc. LIBERTY MONEY MARKET FUND Semiannual Report [LIBERTY FUNDS LOGO] ________________ | PRSRT STD | ALL-STAR - COLONIAL - CRABBE HUSON - | U.S. POSTAGE | NEWPORT - STEIN ROE ADVISOR | PAID | | HOLLISTON, MA | | PERMIT NO. 20 | |_______________| LIBERTY FUNDS DISTRIBUTOR, INC. (c) 2001 ONE FINANCIAL CENTER, BOSTON, MA 02111-2621, 800-426-3750 www.libertyfunds.com 757-03/472I-(0102)02/192 -----END PRIVACY-ENHANCED MESSAGE-----