<PAGE>
[Graphic Omitted]
- -----------------------------------------------
COLONIAL STRATEGIC INCOME FUND ANNUAL REPORT
- -----------------------------------------------
DECEMBER 31, 1999
<PAGE>
President's Message
DEAR SHAREHOLDER:
During the 12-month period ended December 31, 1999, most bonds succumbed to the
pressure of inflation worries and rising interest rates. Stronger-than-expected
U.S. economic growth, combined with the rebound of the Japanese, European and
emerging market economies, prompted the Federal Reserve Board to raise interest
rates in preemptive strikes against potential inflation. Bond prices, which move
in the opposite direction of their yields, posted significant losses as a
result.
Increased interest rates also weighed on high-yield corporate bonds, although
their high levels of income helped cushion them against rising rates. In
addition, the strong economy translated into better corporate profitability for
many high-yield issuers. Overseas, the performance of foreign bonds was mixed.
Meanwhile, emerging-market bonds were boosted by more stable economic conditions
and favorable investor sentiment.
Throughout this period, Colonial Strategic Income Fund remained committed to its
strategy of diversifying among a broad range of U.S. government, high-yield
corporate and foreign bonds. While our adherence to this approach meant that the
Fund lost some ground in its Treasury and foreign government holdings, it
benefited from the rebound of emerging-market and high-yield bonds. Even though
the Fund's short-term results reflected the bond markets' difficulties, the Fund
has provided above-average returns for longer periods, such as three and five
years.1 While past performance cannot predict future results, it is important to
keep a long-term perspective when making investment decisions.
The following report will provide you with more specific information about your
Fund's performance and the strategies used during the period. As always, we
thank you for choosing Colonial Strategic Income Fund and for giving us the
opportunity to serve your investment needs.
Respectfully,
/s/ Stephen E. Gibson
- ------------------------
Stephen E. Gibson
President
February 11, 2000
(1) Lipper, Inc., a widely respected data provider in the industry, calculates
an average total return for mutual funds with similar investment objectives
as the Fund. The total return calculated for the Lipper Multi-Sector Income
Category was 2.57% for the 12 months ended December 31, 1999. The Fund's
Class A shares were ranked in the third quartile for one year (73 out
of 111), in the second quartile for three years (ranked 22 out of 73), in
the first quartile for five years (ranked 10 out of 45) and in the third
quartile for ten years (6 out of 9).
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.
- --------------------------------
Not FDIC May Lose Value
Insured --------------------
No Bank Guarantee
- --------------------------------
<PAGE>
- --------------------------------------------------------------------------------
HIGHLIGHTS
- --------------------------------------------------------------------------------
o 1999 PROVED A DIFFICULT YEAR FOR GOVERNMENT BONDS, BOTH IN THE U.S. AND ABROAD
Stronger-than-expected economic growth, rebounding foreign economies and Y2K
concerns put pressure on virtually all bonds during 1999. As bond yields
increased in response to rising interest rates, bond prices generally
declined. European government bonds struggled as economies on that continent
improved, triggering inflationary concerns and rising interest rates.
Practically the only bright spots were the emerging markets bonds, which
rebounded as those regions stabilized and investor sentiment turned more
favorable.
o HIGH-YIELD CORPORATE BONDS OUTPACED GOVERNMENT BONDS
A barrage of newly issued securities and rising interest rates put pressure on
high-yield bonds in the first half of 1999. However, the comparatively high
levels of income they provided helped cushion high-yield securities against
the effects of rising interest rates. Once supply abated in the final months
of the year, corporate bonds rallied and furthered their lead over government
securities.
o FUND'S THREE-MARKET STRATEGY SEEKS TO REDUCE VOLATILITY OF SINGLE-MARKET
INVESTING
The three sectors of the bond market tend to react differently to economic
conditions. A particular sector may be up while others may be down. The Fund's
three-market strategy pursues opportunities within the entire bond market and
seeks to reduce the risks of investing in individual markets. The chart below
compares the Fund to common benchmarks for the three markets in which the Fund
normally invests.
COLONIAL STRATEGIC INCOME FUND(1) COMPARED WITH THREE BOND MARKET SECTORS
1/1/99 - 12/31/99
Total Retuns
------------
Foreign Government Bonds (5.07)%
U.S. Government Bonds (8.40)%
Colonial Strategic Income Fund 1.28%
High-Yield Corporate Bonds 3.28%
(1)Performance of Class A Shares without sales charge.
Past performance cannot predict future results.
Foreign government bonds are represented by the Salomon Brothers Non-U.S.
World Government Bond Index; U.S. government bonds are represented by the
Salomon Brothers 10-Year Treasury Government Bond Index; and high-yield
corporate bonds are represented by the CS First Boston Global High Yield
Index.
Unlike mutual funds, indexes are not investments and do not incur fees or
expenses. It is not possible to invest in an index.
NET ASSET VALUE PER SHARE
AS OF 12/31/99
Class A $6.62
- -----------------------------------------
Class B $6.62
- -----------------------------------------
Class C $6.62
- -----------------------------------------
Class J $6.62
- -----------------------------------------
Class Z $6.62
- -----------------------------------------
DISTRIBUTIONS DECLARED PER
SHARE FROM 1/1/99 TO 12/31/99
Class A $0.576
- -----------------------------------------
Class B $0.524
- -----------------------------------------
Class C $0.535
- -----------------------------------------
Class J $0.552
- -----------------------------------------
Class Z(1) $0.543
- -----------------------------------------
SEC YIELDS ON 12/31/99(2)
Class A 7.83%
- -----------------------------------------
Class B 7.45%
- -----------------------------------------
Class C 7.61%
- -----------------------------------------
Class J 7.63%
- -----------------------------------------
Class Z 8.47%
- -----------------------------------------
(1)Distributions for Class Z shares are for the period 1/29/99 through
12/31/99.
(2)The 30-day SEC yields reflect the portfolio's earning power net of expenses,
expressed as an annualized percentage of the public offering price per share.
If the Advisor or its affiliates had not waived certain Fund expenses, the
SEC yield for Class C shares would have been 7.45%.
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER'S REPORT
- --------------------------------------------------------------------------------
FUND MAINTAINED DIVERSIFIED APPROACH
This was a fairly tough year for most types of bonds, which slumped amid growing
inflationary jitters, climbing global interest rates and persistent worries
about potential Y2K glitches. Against that unfavorable backdrop, the Fund's
Class A shares returned 1.28%, without sales charge, for the 12 months ended
December 31, 1999.
Despite last year's bond market difficulties, we stuck to the strategy that has
led the Fund to post solid long-term results. We remained committed to
maintaining a well-diversified portfolio that was invested across three sectors
of the bond market -- U.S. government, high-yield corporate and foreign bonds.
History shows that these markets do not generally move in tandem, which allows
the Fund to seek income from all three sectors while reducing the volatility of
single-market investing.
HIGH-YIELD CORPORATE BONDS BOOSTED PERFORMANCE
After posting relatively weak performance in the first half of 1999, high-yield
corporate bonds (41.0% of net assets) gathered strength as the year progressed.
The main drivers of their late-year comeback were the strong economy -- which
translated into good financial performance for many high-yield issuers -- and a
slowdown in supply. In the summer and early fall of 1999, companies rushed to
issue new debt in order to avoid any potential market disruptions caused by Y2K
concerns. By late fall, supply dwindled, demand increased and the high-yield
market firmed.
Thanks to the ongoing strength of the economy and improving commodity prices ,
the Fund's cyclical holdings in paper, metal, chemical and auto companies
performed especially well. Paper companies such as Riverwood International (0.6%
of net assets), as well as Kaiser Aluminum (0.4% of net assets) each posted
strong gains. We also enjoyed good, but more moderate, gains from many cable
holdings. Ongoing industry consolidation and the convergence of broadcast and
Internet services helped boost holdings such as Charter Communications (0.7% of
net assets) and U.K.-based NTL (0.7% of net assets).
The year was extremely tough on some of our smaller holdings, with Regal Cinemas
(0.3% of net assets) and Pathmark (0.4% of net assets) detracting modestly from
performance. Regal stumbled in response to overbuilding concerns, while Pathmark
fell when Ahold's proposed acquisition of the company fell through in December.
Because we believe the problems surrounding each company are likely to be more
short-term in nature, we held onto both of them.
EMERGING MARKET BONDS WERE WINNERS, EUROPEAN BONDS LAGGARDS
Emerging market government bonds as a group posted gains in excess of 20% for
1999, and the Fund's increased holdings in them (13.9% of net assets) benefited
performance. Rising commodity prices, stabilizing economic conditions and more
enthusiastic investor sentiment were the main reasons that our emerging markets
holdings in Venezuela, Brazil, Russia and Mexico were among our top winners in
1999.
To make way for more emerging market bonds, we sold some U.K. government
bonds. Although they posted decent performance for the first half of the period,
we sold them when it appeared that the U.K. economy was on the mend and interest
rates might move higher in response. In contrast, we added Turkish bonds, in
large part because of the government's commitment to fight inflation and bring
down interest rates.
U.S. GOVERNMENT BONDS WERE IMPORTANT TO DIVERSIFICATION
To adhere to our diversified approach, we maintained holdings in U.S. Treasury
bonds despite their disappointing 1999 performance. Eventually, we believe, the
Treasury market should start to turn more favorable, and we don't want to be
caught having to buy them when their prices are moving higher.
OUTLOOK CALLS FOR MORE FAVORABLE CONDITIONS AS 2000 PROGRESSES
We believe that current strong economic conditions could continue to put upward
pressure on interest rates in the United States. Given that, we would not be
surprised if the Fed has another interest rate hike or so up its sleeve. Beyond
that, however, we think that higher interest rates will eventually slow the
economy. Slower economic growth could, in turn, set the stage for a more
favorable interest-rate environment and better U.S. Treasury bond performance.
We also believe that high-yield corporate bonds can perform well. Having never
fully recovered from the financial market's near meltdown of 1998, high-yield
bonds are attractively priced and offer a yield advantage over Treasurys that is
not usually enjoyed in periods when the economy is so strong. As for foreign
government bonds, we think selected emerging markets offer good higher-yielding
opportunities, although most developed, higher-quality markets remain
unattractive. But no matter what the investing environment, we will focus on
keeping the Fund well diversified.
/s/ Carl C. Ericson
CARL C. ERICSON is a senior vice president of Colonial Management Associates,
Inc. (Advisor) and director of the Taxable Fixed Income Department. Mr. Ericson
has managed the Fund since 1991 and has been employed by the Advisor as a
portfolio manager since 1985.
Strategic investing offers attractive income and total return opportunities, but
also involves certain risks. The value and return of your investment may
fluctuate as a result of changes in interest rates, the financial strength of
issuers of lower-rated bonds, foreign and domestic, political and economic
developments, and changes in currency exchange rates.
TOP SOVEREIGN CREDIT EXPOSURE
AS OF 12/31/99
United States 22.5%
Mexico 3.3%
Greece 3.2%
United Kingdom 3.0%
Brazil 2.8%
PORTFOLIO STRUCTURE AS OF
12/31/99 VS. 12/31/98
FUND AS OF FUND AS OF
12/31/99 12/31/98
CORPORATE BONDS 41.0% 38.0%
FOREIGN GOVT' BONDS 27.7% 24.4%
U.S. GOV'T BONDS/NOTES 22.5% 27.8%
U.S. AGENCIES 3.3% 3.0%
STOCKS 2.8% 2.2%
OTHER 1.7% 1.9%
CASH EQUIVALENTS 1.0% 2.7%
Portfolio credit exposure and structure are calculated as a percentage of net
assets. Because the Fund is actively managed, there can be no guarantee the Fund
will continue to maintain these breakdowns and structure in the future.
BOUGHT
- --------------------------------------------------------------------------------
TURKISH GOVERNMENT BONDS
(1.5% of net assets). We added Turkish government bonds during the second half
of the period, which have benefited from the government's inflation-fighting
policies.
SOLD
- --------------------------------------------------------------------------------
U.K. GOVERNMENT BONDS
We sold some of the Fund's U.K. government holdings in mid-1999 as economic
conditions in that country improved, triggering inflation and interest-rate
concerns.
HELD
- --------------------------------------------------------------------------------
RIVERWOOD INTERNATIONAL (0.6% of net assets) and GAYLORD CONTAINER CORP. (0.2%
of net assets) continue to have attractive growth prospects as the world economy
rebounds and the price of paper improves.
We also held CHARTER COMMUNICATIONS (0.7% of net assets), the fourth largest
operator of cable television systems in the United States. Charter offers a full
range of cable services and has begun to offer such services as digital cable
television, interactive video programming and high-speed Internet access.
Through its acquisition of multiple cable companies, Charter has also expanded
its customer base.
Holdings are calculated as a percentage of net assets. Because the Fund is
actively managed, there can be no guarantee the Fund will continue to hold these
securities in the future.
<PAGE>
- --------------------------------------------------------------------------------
FUND HIGHLIGHTS PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
Performance of a $10,000
investment in share classes
12/31/89 - 12/31/99
Without With
sales sales
charge charge
- --------------------------------------------------------------------------------
Class A $22,236 $21,180
- --------------------------------------------------------------------------------
Class B $21,011 $21,011
- --------------------------------------------------------------------------------
Class C $21,907 $21,907
- --------------------------------------------------------------------------------
Class J $22,147 $21,482
- --------------------------------------------------------------------------------
Class Z $22,286 $22,286
- --------------------------------------------------------------------------------
PERFORMANCE OF A $10,000 INVESTMENT IN CLASS A SHARES 12/31/89 - 12/31/99
Without With
Sales Charge Sales Charge Lehman
- --------------------------------------------------------------------------------
12/31/89 $10,000 $ 9,525 $10,000
12/31/90 9,296 8,854 10,828
12/31/91 11,969 11,400 12,575
12/31/92 13,104 12,482 13,582
12/31/93 15,066 14,351 15,020
12/31/94 14,509 13,820 14,493
12/31/95 17,441 16,612 17,281
12/31/96 19,277 18,314 17,782
12/31/97 20,884 19,892 19,518
12/31/98 21,962 20,919 21,366
12/31/99 22,236 21,180 20,907
The Lehman Brothers Government/Corporate Bond Index is an unmanaged index that
tracks the performance of a selection of U.S. government and investment grade
U.S. corporate bonds. Unlike mutual funds, indexes are not investments and do
not incur fees or expenses. It is not possible to invest in an index.
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/99
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Share Class A B C J Z
Inception 4/21/77 5/15/92 7/1/97 11/1/98 1/29/99
- -----------------------------------------------------------------------------------------------------
Without With Without With Without With Without With Without
Sales Sales Sales Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge Charge Charge Charge
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year 1.28% (3.53)% 0.52% (4.14)% 0.67% (0.26)% 1.07% (1.96)% 1.50%
- -----------------------------------------------------------------------------------------------------
5 years 8.91 7.86 8.11 7.81 8.59 8.59 8.83 8.17 8.96
- -----------------------------------------------------------------------------------------------------
10 Years 8.43 7.79 7.71 7.71 8.16 8.16 8.28 7.95 8.34
- -----------------------------------------------------------------------------------------------------
</TABLE>
Past performance cannot predict future investment results. Returns and value of
an investment will vary, resulting in a gain or loss on sale. All results shown
assume reinvestment of distributions. The "with sales charge" returns include
the maximum 4.75% charge for Class A shares and 3% for Class J shares, and the
contingent deferred sales charge (CDSC) maximum charges of 5% for one year and
2% for five years for Class B and 1% for one year for Class C shares.
Performance results reflect any voluntary waivers or reimbursements of Fund
expenses by the Advisor or its affiliates. Absent these waivers or reimbursement
arrangements, performance results would have been lower.
Class B, Class C, Class J and Class Z 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 are not restated to reflect any expense differential
(e.g., Rule 12b-1 fees) between Class A shares and the newer class shares. Had
the expense differential been reflected, the returns for periods prior to the
inception of Class B, Class C and Class J shares would have been lower, and
Class Z shares would have been higher.
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------
December 31, 1999
(In thousands)
BONDS & NOTES - 94.6% PAR VALUE
- --------------------------------------------------------------------------------
CORPORATE FIXED INCOME BONDS & NOTES - 41.0%
- --------------------------------------------------------------------------------
CONSTRUCTION - 0.2%
BUILDING CONSTRUCTION
Atrium Companies, Inc.,
10.500% 05/01/09 $ 1,500 $ 1,463
Falcon Building Products, Inc.,
stepped coupon, (10.500% 06/15/02)
(a) 06/15/07 3,500 2,625
--------
4,088
--------
- --------------------------------------------------------------------------------
FINANCE, INSURANCE & REAL ESTATE - 1.1%
DEPOSITORY INSTITUTIONS - 0.1%
Sovereign Bancorp, Inc.,
10.500% 11/15/06 1,500 1,526
--------
FINANCIAL SERVICES - 1.0%
Ameriserve Finance Trust,
12.000% 09/15/06 (b) 4,165 3,415
Dresdner Funding Trust II,
5.790% 06/30/11 (b) 3,650 3,346
PDVSA Finance Ltd., Series 1999-I,
9.750% 02/15/10 (b) 13,590 13,013
U.S. Timberlands,
9.625% 11/15/07 4,000 3,725
--------
23,499
--------
- --------------------------------------------------------------------------------
MANUFACTURING - 14.0%
CHEMICALS & ALLIED PRODUCTS - 2.5%
Agricultural Minerals Co., L.P.,
10.750% 09/30/03 7,200 5,184
Allied Waste North America, Inc.,
10.000% 08/01/09 (b) 14,750 13,127
Huntsman Corp.:
9.500% 07/01/07 (b) 5,250 4,987
9.500% 07/01/07 (b) 3,000 2,850
Hydrochem Industrial Services, Inc.,
10.375% 08/01/07 4,420 3,790
LaRoche Industries, Inc.,
9.500% 09/15/07 5,250 1,418
Lyondell Chemical Co.,
10.875% 05/01/09 4,500 4,748
PCI Chemicals Canada, Inc.,
9.250% 10/15/07 3,050 2,349
Sterling Chemicals, Inc.:
11.750% 08/15/06 5,000 3,750
11.250% 04/01/07 7,150 5,220
Terra Industries, Inc.,
10.500% 06/15/05 750 540
Texas Petrochemical Corp.,
11.125% 07/01/06 3,425 2,980
Trans Resources, Inc.,
10.750% 03/15/08 4,000 3,560
--------
54,503
--------
ELECTRONIC & ELECTRICAL EQUIPMENT - 0.8%
Amphenol Corp.,
9.875% 05/15/07 750 780
Condor Systems, Inc.,
11.875% 05/01/09 (b) 4,000 3,000
Gentek, Inc.,
11.000% 08/01/09 (b) 2,750 2,860
Integrated Circuit Systems, Inc.,
11.500% 05/15/09 4,750 4,679
TransDigm, Inc.,
10.375% 12/01/08 6,500 5,720
--------
17,039
--------
FABRICATED METAL - 0.6%
Earle M. Jorgensen Co.,
9.500% 04/01/05 1,000 960
Euramax International, PLC,
11.250% 10/01/06 (c) 8,000 8,200
U.S. Can Corp.,
10.125% 10/15/06 4,000 4,080
--------
13,240
--------
FOOD & KINDRED PRODUCTS - 0.5%
Chattem, Inc.,
8.875% 04/01/08 5,250 4,909
New World Pasta Co.,
9.250% 02/15/09 2,000 1,860
Premier International Foods, PLC,
12.000% 09/01/09 (b) 4,000 3,980
--------
10,749
--------
FURNITURE & FIXTURES - 0.1%
Juno Lighting, Inc.,
11.875% 07/01/09 3,000 2,790
--------
MACHINERY & COMPUTER EQUIPMENT - 0.5%
IMO Industries, Inc.,
11.750% 05/01/06 5,680 5,680
Numatics, Inc.,
9.625% 04/01/08 3,000 2,250
Tritel PCS, Inc.,
stepped coupon, (12.750% 05/11/04)
(a) 05/15/09 (b) 5,500 3,465
--------
11,395
--------
MEASURING & ANALYZING INSTRUMENTS - 0.1%
Envirosource, Inc.,
9.750% 06/15/03 3,850 2,464
--------
MISCELLANEOUS MANUFACTURING - 2.5%
Amscan Holdings, Inc.,
9.875% 12/15/07 2,750 2,324
Associated Materials, Inc.,
9.250% 03/01/08 1,000 961
Blount, Inc.,
13.000% 08/01/09 (b) 4,000 4,220
Compass Aerospace,
10.125% 04/15/05 (b) 3,000 1,650
Delco Remy International, Inc.,
10.625% 08/01/06 2,600 2,691
Eagle-Picher Industries, Inc.,
9.375% 03/01/08 2,750 2,406
ISG Resources, Inc.,
10.000% 04/15/08 1,250 1,063
Koppers Industries, Inc.,
9.875% 12/01/07 7,125 6,555
Moll Industries,
10.500% 07/01/08 7,500 3,000
Newcor, Inc.,
9.875% 03/01/08 5,000 2,600
Owens-Illinois, Inc.:
7.350% 05/15/08 4,300 3,890
7.500% 05/15/10 3,700 3,309
Pentacon, Inc.,
12.250% 04/01/09 4,000 3,600
Special Devices, Inc.,
11.375% 12/15/08 2,000 1,540
Tekni-Plex, Inc.,
9.250% 03/01/08 2,000 2,030
Terex Corp.,
8.875% 04/01/08 3,750 3,544
Thermadyne Holdings Corp.,
9.875% 06/01/08 4,280 3,638
Tokheim Corp.,
11.375% 08/01/08 4,325 2,941
United Industries Corp.,
9.875% 04/01/09 1,250 1,144
Werner Holding Co.,
10.000% 11/15/07 1,750 1,715
--------
54,821
--------
PAPER PRODUCTS - 2.1%
Container Corp. of America, Series A,
11.250% 05/01/04 7,500 7,819
Gaylord Container Corp.,
9.750% 06/15/07 4,515 4,267
Georgia Gulf Corp.,
10.375% 11/01/07 (b) 1,500 1,566
Repap New Brunswick, Inc.:
9.000% 06/01/04 4,000 3,900
10.625% 04/15/05 8,000 7,440
Riverwood International Corp.:
10.625% 08/01/07 6,000 6,210
10.875% 04/01/08 7,500 7,425
Stone Container Corp.:
10.750% 10/01/02 6,750 6,944
12.250% 04/01/02 1,000 1,002
--------
46,573
--------
PETROLEUM REFINING - 0.0%
Benton Oil & Gas Co.,
9.375% 11/01/07 1,200 768
--------
PRIMARY METAL - 2.1%
Bayou Steel Corp.,
9.500% 05/15/08 5,000 4,663
Ivaco, Inc., 11.500% 09/15/05 1,500 1,624
Kaiser Aluminum & Chemical Corp.:
12.750% 02/01/03 2,000 2,000
10.875% 10/15/06 6,400 6,416
Keystone Consolidated Industries, Inc.,
9.625% 08/01/07 7,000 6,160
National Steel Corp.,
9.875% 03/01/09 3,500 3,596
Renco Metals, Inc.,
11.500% 07/01/03 6,000 4,920
Venture Holdings Trust Co.,
11.000% 06/01/07 1,500 1,455
WCI Steel, Inc.,
10.000% 12/01/04 7,900 8,058
Wheeling-Pittsburgh Corp.,
9.250% 11/15/07 8,000 7,600
--------
46,492
--------
PRINTING & PUBLISHING - 0.5%
American Lawyer Media, Inc.:
9.750% 12/15/07 8,500 8,245
stepped coupon, (12.250% 12/15/02)
(a) 12/15/08 4,500 3,116
--------
11,361
--------
RUBBER & PLASTIC - 0.2%
Berry Plastics Corp.,
12.250% 04/15/04 3,000 3,075
Burke Industries, Inc.,
10.000% 08/15/07 1,200 492
Portola Packaging, Inc.,
10.750% 10/01/05 2,000 2,010
--------
5,577
--------
STONE, CLAY, GLASS & CONCRETE - 0.1%
Anchor Glass Container Corp.,
11.250% 04/01/05 2,250 1,912
--------
TEXTILE MILL PRODUCTS - 0.1%
Holmes Products Corp.,
9.875% 11/15/07 4,000 2,920
--------
TRANSPORTATION EQUIPMENT - 1.3%
Collins & Aikman Products Co.,
11.500% 04/15/06 7,000 6,930
Dura Operating Corp.,
9.000% 05/01/09 4,000 3,770
Johnstown America Industries, Inc.,
11.750% 08/15/05 10,000 10,175
LDM Technologies, Inc.,
10.750% 01/15/07 7,100 6,461
Venture Holdings Trust, Series B,
9.500% 07/01/05 1,170 1,065
--------
28,401
--------
- -----------------------------------------------------------------------------
MINING & ENERGY - 2.5%
COAL MINING - 0.2%
AEI Resources, Inc.,
10.500% 12/15/05 (b) 7,500 5,625
--------
CRUDE PETROLEUM & NATURAL GAS - 0.1%
Ferrellgas Finance Corp., L.P.,
9.375% 06/15/06 2,500 2,450
TransAmerica Energy Corp.,
13.000% 06/15/02 (d) 6,250 609
--------
3,059
--------
METAL MINING - 0.4%
JL French Automotive Castings, Inc.,
11.500% 06/01/09 4,000 4,090
LTV Corp.,
11.750% 11/15/09 (b) 2,000 2,100
Metallurg, Inc.,
11.000% 12/01/07 2,000 1,800
--------
7,990
--------
OIL & GAS EXTRACTION - 1.4%
Gulf Canada Resources Ltd.,
8.350% 08/01/06 2,500 2,377
HS Resources, Inc.,
9.250% 11/15/06 12,500 12,375
Magnum Hunter Resources, Inc.,
10.000% 06/01/07 1,750 1,592
Mariner Energy Corp.,
10.500% 08/01/06 8,445 7,959
Petsec Energy, Inc.,
9.500% 06/15/07 (d) 4,000 1,680
Vintage Petroleum:
9.000% 12/15/05 3,250 3,242
9.750% 06/30/09 1,000 1,025
--------
30,250
--------
OIL & GAS FIELD SERVICES - 0.4%
Parker Drilling Corp.,
9.750% 11/15/06 3,500 3,430
Pool Energy Services Co.,
8.625% 04/01/08 2,500 2,506
Western Gas Resources, Inc.,
10.000% 06/15/09 2,250 2,329
--------
8,265
--------
- -----------------------------------------------------------------------------
RETAIL TRADE - 0.5%
FOOD STORES - 0.5%
Pathmark Stores, Inc.:
9.625% 05/01/03 11,350 8,513
10.750% 11/01/03 5,500 605
Richmont Marketing,
10.125% 12/15/07 2,000 1,200
--------
10,318
--------
HOME FURNISHINGS & EQUIPMENT - 0.0%
Sealy Mattress Co.,
9.875% 12/15/07 1,000 990
--------
- -----------------------------------------------------------------------------
SERVICES - 4.7%
AMUSEMENT & RECREATION - 2.0%
Boyd Gaming Corp.,
9.500% 07/15/07 8,000 7,920
Coast Hotels & Casinos, Inc.,
9.500% 04/01/09 3,000 2,910
Hollywood Casino Corp.,
11.250% 05/01/07 7,500 7,762
Hollywood Casino Shreveport,
13.000% 08/01/06 3,000 3,210
Hollywood Park, Inc.:
9.250% 02/15/07 4,000 3,970
9.500% 08/01/07 1,500 1,496
Horseshoe Gaming LLC,
9.375% 06/15/07 8,315 8,273
Mohegan Tribal Gaming,
8.750% 01/01/09 3,345 3,320
Regal Cinemas,
9.500% 06/01/08 7,500 5,813
--------
44,674
--------
BUSINESS SERVICES - 0.6%
PSINet Inc.:
11.000% 08/01/09 4,000 4,100
11.500% 11/01/08 3,500 3,658
Unisys Corp.,
11.750% 10/15/04 6,000 6,570
--------
14,328
--------
HEALTH SERVICES - 1.0%
Columbia/HCA Healthcare Corp.:
7.000% 07/01/07 1,000 885
7.250% 05/20/08 1,000 891
Hanger Orthopedic Group,
11.250% 06/15/09 6,000 6,165
Tenet Healthcare Corp.:
8.125% 12/01/08 1,500 1,421
8.625% 01/15/07 10,000 9,625
--------
18,987
--------
HOTELS, CAMPS & LODGING - 0.8%
CapRock Communications Corp.,
11.500% 05/01/09 9,000 9,135
Eldorado Resorts Corp.,
10.500% 08/15/06 7,850 8,036
--------
17,171
--------
OTHER SERVICES - 0.3%
Intertek Finance, PLC,
10.250% 11/01/06 5,850 5,382
Packaging Corp. of America,
9.625% 04/01/09 2,000 2,050
--------
7,432
--------
- -----------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 17.9%
AIR TRANSPORTATION - 0.5%
Continental Airlines, Inc.,
9.500% 12/15/01 1,500 1,515
U.S. Airways Group, Inc.,
Pass-Through Certificates,
10.375% 03/01/13 9,500 9,144
--------
10,659
--------
BROADCASTING - 1.3%
Allbritton Communications Co.,
9.750% 11/30/07 7,650 7,650
Fox Family Worldwide, Inc.,
9.250% 11/01/07 6,000 5,580
LIN Holding Corp.,
stepped coupon, (10.000% 03/01/03)
(a) 03/01/08 8,000 5,400
LIN Television Corp.,
8.375% 03/01/08 2,250 2,109
Sinclair Broadcast Group, Inc.:
9.000% 07/15/07 4,000 3,760
10.000% 09/30/05 1,100 1,094
Young Broadcasting Corp.,
10.125% 02/15/05 3,000 3,083
--------
28,676
--------
CABLE - 5.2%
Adelphia Communications Corp.:
8.375% 02/01/08 2,500 2,331
9.875% 03/01/07 7,000 7,105
Charter Communications Holding L.L.C.,
stepped coupon, (9.920% 04/01/04)
(a) 04/01/11 26,775 15,697
Comcast UK Cable Partners Ltd.,
stepped coupon, (11.200% 11/15/00)
(a) 11/15/07 9,950 9,477
Diamond Cable Communications PLC,
stepped coupon, (10.750% 02/15/02)
(a) 02/15/07 (c) 8,770 7,191
EchoStar Communications Corp.,
4.875% 01/01/07 (b) 2,000 2,437
EchoStar DBS Corp.:
9.250% 02/01/06 16,000 16,120
9.375% 02/01/09 4,000 4,030
FrontierVision Holdings, L.P.:
stepped coupon, (11.875% 09/15/01)
(a) 09/15/07 6,465 5,754
(a) 09/15/07 1,000 890
International CableTel, Inc.,
stepped coupon, (12.750% 04/15/00)
(a) 04/15/05 5,500 5,514
NTL, Inc.:
10.000% 02/15/07 1,500 1,556
11.500% 10/01/08 1,750 1,899
stepped coupon, (9.750% 04/15/04)
(a) 04/15/09 13,000 12,023
Northland Cable Television, Inc.,
10.250% 11/15/07 8,500 8,521
Rogers Cablesystems, Inc.,
10.000% 03/15/05 3,000 3,210
Shop At Home, Inc.,
11.000% 04/01/05 1,250 1,250
Telewest Communication PLC,
stepped coupon, (11.000% 10/01/00)
(a) 10/01/07 (c) 12,000 11,220
--------
116,225
--------
COMMUNICATIONS - 1.9%
Call-Net Enterprises, Inc.,
stepped coupon, (8.940% 08/01/03)
(a) 05/15/09 14,000 6,720
Centennial Cellular Corp.,
10.750% 12/15/08 5,125 5,496
Diamond Holdings, PLC,
9.125% 02/01/08 (c) 750 742
Exodus Communications, Inc.,
10.750% 12/15/09 (b) 3,600 3,663
Focal Communications Corp.,
stepped coupon, (12.125% 02/15/03)
(a) 02/15/08 2,000 1,320
Loral Space & Communications Ltd.,
11.250% 01/15/07 2,380 1,785
Metromedia Fiber Network, Inc.,
10.000% 12/15/09 10,000 10,226
Nuevo Grupo Iusacell SA,
14.250% 12/01/06 (b) 1,000 1,035
Orbital Imaging Corp.,
11.625% 03/01/05 4,000 2,680
PTC International Finance BV,
stepped coupon, (10.750% 07/01/02)
(a) 07/01/07 1,700 1,148
Time Warner Telecom L.L.C.,
9.750% 07/15/08 3,400 3,502
Verio, Inc.,
11.250% 12/01/08 4,011 4,212
--------
42,529
--------
ELECTRIC SERVICES - 0.3%
The AES Corp.,
9.500% 06/01/09 7,000 7,096
--------
MOTOR FREIGHT & WAREHOUSING - 0.2%
MTL, Inc.,
10.000% 06/15/06 6,250 5,500
--------
TELECOMMUNICATION - 8.4%
AirGate PCS, Inc.,
stepped coupon, (13.500% 10/01/04)
(a) 10/01/09 5,250 2,914
Arch Communication Group, Inc.,
12.750% 07/01/07 3,000 2,370
Arch Escrow Corp.,
13.750% 04/15/08 1,000 810
Carrier1 International S.A.,
13.250% 02/15/09 6,000 6,120
Clearnet Communications, Inc.,
stepped coupon, (10.125% 12/15/00)
(a) 12/15/05 7,500 7,387
Crown Castle International Corp.,
stepped coupon, (10.375% 05/15/04)
(a) 05/15/11 10,000 6,250
Global Crossing Holding Ltd.,
9.125% 11/15/06 (b) 8,075 7,984
Hyperion Telecommunications, Inc.,
stepped coupon, (13.000% 04/15/01)
(a) 04/15/03 4,000 3,600
ICG Holding, Inc.,
stepped coupon, (13.500% 09/15/00)
(a) 09/15/05 5,000 4,379
ICG Services Inc.,
stepped coupon, (10.000% 02/15/03)
(a) 02/15/08 5,000 2,685
IntelCom Group (USA), Inc.,
stepped coupon, (12.500% 05/01/01)
(a) 05/01/06 2,000 1,546
Intermedia Communications of Florida, Inc.,
stepped coupon, (12.500% 05/15/01)
(a) 05/15/06 6,000 5,250
Jazztel PLC,
13.250% 12/15/09 (e) 3,500 3,540
KMC Telecom Holdings:
13.500% 05/15/09 (b) 6,000 6,000
stepped coupon, (12.500% 02/15/03)
(a) 02/15/08 2,000 1,100
Level 3 Communications, Inc.,
9.125% 05/01/08 5,430 5,138
McLeodUSA, Inc.,
stepped coupon, (10.5000% 03/01/02)
(a) 03/01/07 10,000 8,200
Metrocall, Inc.:
9.750% 11/01/07 4,050 2,430
10.375% 10/01/07 6,000 3,600
11.000% 09/15/08 2,000 1,260
MetroNet Communications Corp.,
12.000% 08/15/07 1,250 1,461
Microcell Telecommunications, Inc.,
stepped coupon, (14.000% 12/01/01)
(a) 06/01/06 3,000 2,655
Nextlink Communications, Inc.,
10.750% 11/15/08 7,500 7,762
Nextel Communications Inc.:
9.375% 11/15/09 (b) 14,000 13,755
stepped coupon (9.750% 02/15/99)
(a) 08/15/04 10,000 10,300
stepped coupon, (9.750% 10/31/02)
(a) 10/31/07 6,000 4,335
stepped coupon, (9.950% 02/15/03)
(a) 02/15/08 5,000 3,550
Nextel International, Inc.,
stepped coupon, (12.125% 04/15/03)
(a) 04/15/08 3,000 1,769
Ono Finance PLC,
13.000% 05/01/09 (b) 8,000 9,120
RCN Corp.
stepped coupon, (11.125% 10/15/02)
(a) 10/15/07 6,000 4,260
Rhythms NetConnections, Inc.,
12.750% 04/15/09 4,000 3,860
Rogers Cantel, Inc.,
9.750% 06/01/16 1,990 2,219
Sprint Spectrum, L.P.,
stepped coupon, (12.500% 08/15/01)
(a) 08/15/06 5,650 5,269
Tele1 Europe BV
11.875% 12/01/09 (b) (f) 2,250 2,287
TeleCorp PCS, Inc.,
stepped coupon, (11.625% 04/15/04)
(a) 04/15/09 14,250 8,978
US Unwired, Inc.,
13.375% 11/01/09 (b) 5,000 2,900
Viatel, Inc.,
11.500% 03/15/09 6,000 6,090
Williams Communications Group, Inc.,
10.875% 10/01/09 8,685 9,098
Worldwide Fiber, Inc.,
12.000% 08/01/09 (b) 3,700 3,820
--------
186,051
--------
TRANSPORTATION SERVICES - 0.1%
Moog, Inc.,
10.000% 05/01/06 1,125 1,150
--------
- -----------------------------------------------------------------------------
WHOLESALE TRADE - 0.1%
NONDURABLE GOODS
Revlon Consumer Products Corp.,
9.000% 11/01/06 1,915 1,436
--------
TOTAL CORPORATE FIXED INCOME
BONDS & NOTES (cost of $987,465) 908,529
--------
- -----------------------------------------------------------------------------
CORPORATE CONVERTIBLE BONDS & NOTES - 0.1%
OIL & GAS FIELD SERVICES
Northern Offshore ASA, (cost of $3,000)
10.000% 05/15/05 3,000 1,830
--------
TOTAL CORPORATE BONDS & NOTES (cost of $990,465) 910,359
--------
- -----------------------------------------------------------------------------
U.S. GOVERNMENT & AGENCIES OBLIGATIONS - 25.8%
- -----------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.:
5.556% 2000 20,400 20,400
7.500% 2016 103 102
8.000% 2016 591 595
8.500% 2007-2009 594 607
8.750% 2005-2008 199 204
9.000% 2004-2022 667 692
9.250% 2008-2014 532 552
9.500% 2008-2016 518 544
9.750% 2008-2016 60 63
10.000% 2016-2019 659 699
10.500% 2020 373 403
10.750% 2010-2013 622 673
11.250% 2010 322 349
--------
25,883
--------
Federal National Mortgage Association:
6.500% 2026 (g) 8,000 7,537
7.500% 2003-2006 356 357
8.000% 2008-2009 429 439
8.250% 2007 88 88
8.500% 2008-2015 1,068 1,103
9.000% 2009-2021 2,200 2,290
9.250% 2016 189 197
10.000% 2016 794 850
10.500% 2016 958 1,034
--------
13,895
--------
Government National Mortgage Association:
7.000% 2024 (g) 9,000 8,691
8.500% 2006 35 37
9.000% 2008-2016 7,047 7,426
9.500% 2009-2017 3,077 3,280
10.000% 2001-2015 890 959
10.500% 2001-2018 221 242
11.000% 2009-2015 1,476 1,625
11.750% 2013 36 41
12.000% 2014 2 2
--------
22,303
--------
Sallie Mae:
5.286% 2000 10,755 10,755
--------
U.S. Treasury Bonds:
11.625% 11/15/04 62,206 75,133
12.000% 08/15/13 (h) 100,248 133,862
--------
208,995
--------
U.S. Treasury Notes:
8.875% 02/15/19 40,314 49,070
10.375% 11/15/12 (h) 58,131 70,665
11.875% 11/15/03 143,155 168,967
--------
288,702
--------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS (cost of $596,375) 570,533
--------
CURRENCY
- -----------------------------------------------------------------------------
FOREIGN GOVERNMENT & AGENCY OBLIGATIONS - 27.7%
Government of France,
8.500% 10/25/08 Eu 24,063 29,547
Government of Mexico,
11.375% 09/15/16 (i) 53,965 61,067
Government of New Zealand,
8.000% 11/15/06 NZ 52,776 28,785
Hellenic Republic:
8.600% 03/26/08 GD 4,640,000 16,034
8.800% 06/19/07 GD 3,660,000 12,653
8.900% 03/21/04 GD 12,450,000 41,371
Kingdom of Norway:
6.750% 01/15/07 NK 60,300 7,785
9.500% 10/31/02 NK 278,350 37,757
Kingdom of Sweden,
10.250% 05/05/03 SK 150,000 20,220
Poland Non-US Global Registered
Bond, 5.000% 10/27/14 (j) 4,875 4,314
Republic of Argentina:
11.250% 04/10/06 (k) DM 18,950 10,141
11.375% 01/30/17 (l) 31,920 31,840
Republic of Brazil:
10.125% 05/15/27 (m) 51,395 44,097
14.500% 10/15/09 (m) 16,690 18,443
Republic of Bulgaria,
6.500% 07/28/11 (n) 38,400 30,288
Republic of Panama,
8.875% 09/30/27 (o) 26,462 22,228
Republic of Turkey:
12.375% 06/15/09 (p) 16,250 17,428
11.875% 11/05/04 (p) 14,470 14,977
Republic of Venezuela:
9.250% 09/15/27 (q) 45,950 30,327
Russian Federation:
11.000% 07/24/18 (r) 25,625 15,503
United Kingdom Treasury:
10.000% 02/26/01 KB 13,860 23,284
10.000% 09/08/03 KB 23,995 43,319
United Mexican States:
10.375% 01/29/03 (s) DM 21,640 12,109
Victoria Treasury Corp:
12.000% 09/22/01 A$ 30,220 21,599
12.500% 10/15/03 A$ 12,609 9,806
West Australia Treasury Corp.:
8.000% 10/15/07 A$ 14,184 9,693
---------
TOTAL FOREIGN GOVERNMENT & AGENCY OBLIGATIONS (cost of $645,606) 614,615
---------
TOTAL BONDS & NOTES (cost of $2,232,446) 2,095,507
---------
PREFERRED STOCKS - 2.3% SHARES
- -----------------------------------------------------------------------------
FINANCE, INSURANCE & REAL ESTATE - 0.1%
DEPOSITORY INSTITUTIONS
California Federal Bancorp, Inc.,
9.125%, Series A 59 1,269
--------
- -----------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 2.2%
BROADCASTING - 0.3%
Granite Broadcasting,
12.750% PIK 2 1,836
Primedia, Inc.:
8.625% 8 653
9.200% 12 1,119
10.000% 35 3,439
--------
7,047
--------
CABLE - 1.1%
CSC Holdings Ltd.:
11.125% PIK 171 18,736
11.750% PIK 48 5,243
--------
23,979
--------
PAPER & PLASTICS - 0.2%
Packaging Corp. of America,
12.375% PIK 42 4,634
--------
TELECOMMUNICATION - 0.6%
Concentric Network Corp.,
13.500% PIK 2 2,408
Dobson Communications, Inc.,
12.250% PIK 2 1,569
Nextel Communications, Inc.:
11.125% PIK 5 4,640
13.000% PIK 5 5,693
--------
14,310
--------
TOTAL PREFERRED STOCKS
(cost of $51,757) 51,239
--------
COMMON STOCKS (t) - 0.4% SHARES VALUE
- -----------------------------------------------------------------------------
CONSTRUCTION - 0.1%
BUILDING CONSTRUCTION
Calton, Inc. 356 $ 601
U.S. Home Corp. 31 798
--------
1,399
--------
- -----------------------------------------------------------------------------
MANUFACTURING - 0.0%
FOOD & KINDRED PRODUCTS - 0.0%
Darling International, Inc. 80 170
--------
- -----------------------------------------------------------------------------
MINING & ENERGY - 0.0%
OIL & GAS EXTRACTION
Forest Oil Corp. 16 217
--------
- -----------------------------------------------------------------------------
SERVICES - 0.0%
BUSINESS SERVICES - 0.0%
Iron Mountain Inc. 1 58
--------
HEALTH SERVICES - 0.0%
Kuala Healthcare Affiliates, Inc. 177 17
Total Renal Care Holdings, Inc. 55 368
--------
385
--------
- -----------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 0.3%
LOCAL & SUBURBAN TRANSIT 0.0%
Greyhound Lines, Inc.,
12.500% EscrowReceipt (u) 1 (v)
MOTOR FREIGHT & WAREHOUSING - 0.0%
St. Johnsbury Trucking Co. (v) 31 (v)
Sun Carriers, Inc. (u) 130 1
--------
1
--------
TELECOMMUNICATION - 0.3%
Nextel Communications, Inc. Class A 9 959
Price Communications Corp. 180 4,995
--------
5,954
--------
TOTAL COMMON STOCKS
(cost of $6,541) 8,184
--------
WARRANTS (t) - 0.1%
- -----------------------------------------------------------------------------
FINANCE, INSURANCE & REAL ESTATE - 0.0%
DEPOSITORY INSTITUTIONS
KMC Telecom Holdings, Inc.,
expires 04/15/08 2 5
--------
- -----------------------------------------------------------------------------
MANUFACTURING - 0.0%
RUBBER & PLASTIC - 0.0%
BPC Holdings Corp.
expires 04/15/09 (u) 5 60
--------
- -----------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 0.1%
CABLE - 0.0%
Wireless One, Inc.
expires 10/19/00 (u) 14 (v)
--------
COMMUNICATIONS - 0.0%
Clearnet Communications, Inc.
expires 09/15/05 25 371
--------
TELECOMMUNICATION - 0.1%
AirGate PCS, Inc.
expires 10/01/09 5 609
Carrier 1 International
expires 02/19/09 6 120
Hyperion Telecommunications, Inc.,
expires 04/15/01 3 569
MetroNet Communications, Inc.,
expires 08/15/07 (b) 1 145
Ono Finance
expires 05/31/09 8 80
Splitrock Services, Inc.,
expires 07/15/08 (b) 2 189
---------
1,712
---------
TOTAL WARRANTS (cost of $1,636) 2,148
---------
TOTAL INVESTMENTS
(cost of $2,292,380) (w) 2,157,078
---------
SHORT-TERM OBLIGATIONS - 1.0% PAR
- ----------------------------------------------------------------------------
Repurchase agreement with SBC Warburg Ltd.,
dated 12/31/99, due 01/03/00 at 2.500%,
collateralized by U.S. Treasury bonds and/or
notes with various maturities to 2021, market
value $22,236 (repurchase proceeds $21,791) $ 21,786 21,786
----------
FORWARD CURRENCY CONTRACTS - 0.0% (x) 679
- -----------------------------------------------------------------------------
OTHER ASSETS & LIABILITIES, NET - 1.6% 34,882
- -----------------------------------------------------------------------------
NET ASSETS - 100.0% $2,214,425
==========
NOTES TO INVESTMENT PORTFOLIO:
- -----------------------------------------------------------------------------
(a) Currently zero coupon. Shown parenthetically is the interest rate to be paid
and the date the Fund will begin accruing this rate.
(b) These securities are exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in transactions
exempt from registration, normally to qualified institutional buyers. At
December 31, 1999, the value of these securities amounted to $122,539 or
5.5% of net assets.
(c) This is a British security. Par amount is stated in U.S. dollars.
(d) This issuer is in default of certain debt covenants. Income is not being
accrued.
(e) This is a British security. Par amount is stated in Euro dollars.
(f) This is a Netherland security. Par amount is stated in Euro dollars.
(g) These securities have been purchased on a delayed delivery basis whereby the
terms that are fixed are the purchase price, interest rate, and the
settlement date. The exact quantity purchased may be slightly more or less
than the amount shown.
(h) These securities, or a portion thereof, with a total market value of
$106,920 are being used to collateralize the delayed delivery purchases
indicated in note (g) above and the forward currency contracts shown on the
following page.
(i) This is a Mexican security. Par amount is stated in U.S. dollars.
(j) This is a Polish security. Par amount is stated in U.S. dollars.
(k) This is an Argentinean security. Par amount is stated in German
Deutschemarks.
(l) This is an Argentinean security. Par amount is stated in U.S. dollars.
(m) This is a Brazilian security. Par amount is stated in U.S. dollars.
(n) This is a Bulgarian security. Par amount is stated in U.S. dollars. Interest
rate shown is a floating rate coupon which changes every six months.
(o) This is a Panamanian security. Par amount is stated in U.S. dollars.
(p) This is a Turkish security. Par amount is stated in U.S. dollars.
(q) This is a Venezuelan security. Par amount is stated in U.S. dollars.
(r) This is a Russian security. Par amount is stated in U.S. dollars.
(s) This is a Mexican security. Par amount is stated in German Deutschemarks.
(t) Non-income producing.
(u) Represents fair value as determined in good faith under the direction of the
Trustees.
(v) Rounds to less than one.
(w) Cost for federal income tax purposes is $2,292,417.
(x) As of December 31, 1999, the Fund had entered into the following forward
currency exchange contracts:
NET UNREALIZED
APPRECIATION
CONTRACTS IN EXCHANGE (DEPRECIATION)
TO DELIVER FOR SETTLEMENT DATE (U.S.$)
- ------------------------------------------------------------------------------
KB 24,594 US$ 40,438 02/07/00 $ 701
NZ 56,100 US$ 28,917 02/09/00 (484)
SK 86,150 US$ 10,606 01/31/00 462
-----
$ 679
=====
SUMMARY OF SECURITIES
BY COUNTRY COUNTRY VALUE % OF TOTAL
- ------------------------------------------------------------------------------
United States $1,516,474 70.3
United Kingdom UK 90,305 4.2
Mexico Mx 73,176 3.4
Greece Gr 70,058 3.3
Brazil Bz 62,540 2.9
Norway No 45,542 2.1
Argentina Ar 41,981 2.0
Australia Au 41,098 1.9
Turkey Tu 32,405 1.5
Venezuela Ve 30,327 1.4
Bulgaria Bu 30,288 1.4
France Fr 29,547 1.4
New Zealand NZ 28,785 1.3
Panama Pa 22,228 1.0
Sweden Sw 20,220 0.9
Russia Ru 15,503 0.7
Poland Po 4,314 0.2
Netherland Ne 2,287 0.1
---------- -----
$2,157,078 100.0
========== =====
Certain securities are listed by country of underlying exposure but may trade
predominantly on other exchanges.
ACRONYM NAME
- --------------------- ---------------------------------------
A$ Australian Dollars
Eu Euro
GD Greek Drachmas
KB British Pounds
NK Norwegian Krone
NZ New Zealand Dollar
PIK Payment-In-Kind
SK Swedish Krona
DM German Deutschemarks
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- ---------------------------------------------------------------------------------------------
December 31, 1999
(In thousands except for per share amounts and footnotes)
ASSETS
<S> <C> <C>
Investments at value (cost $2,292,380) $ 2,157,078
Short-term obligations 21,786
-----------
2,178,864
Cash including foreign currencies $ 1
Unrealized appreciation on forward currency contracts 1,163
Receivable for:
Interest 50,690
Fund shares sold 6,117
Foreign tax reclaims 349
Investments sold 65
Other 94 58,479
------- -----------
Total assets 2,237,343
LIABILITIES
Unrealized depreciation on forward currency contracts 484
Payable for:
Investments purchased 16,429
Fund shares repurchased 5,404
Distributions 1
Accrued:
Distribution fee - Class J 171
Deferred Trustees fees 22
Other 407
-------
Total liabilities 22,918
-----------
NET ASSETS $ 2,214,425
-----------
Net asset value & redemption price per share - Class A ($669,795/
101,162) $ 6.62(a)
-----------
Maximum offering price per share - Class A ($6.62/0.9525) $ 6.95(b)
-----------
Net asset value & offering price per share Class B ($914,145/
138,103) $ 6.62(a)
-----------
Net asset value & offering price per share Class C ($57,246/8,648) $ 6.62(a)
-----------
Net asset value & offering price per share Class J ($568,311/
85,895) $ 6.62(a)
-----------
Maximum offering price per share --
Class J ($6.62/0.9700) $ 6.82
-----------
Net asset value & offering price per share Class Z ($4,928/744) $ 6.62
-----------
COMPOSITION OF NET ASSETS
Capital paid in $ 2,460,249
Undistributed net investment income 251
Accumulated net realized loss (110,602)
Net unrealized depreciation on:
Investments (135,302)
Foreign currency transactions (171)
-----------
$ 2,214,425
-----------
(a) Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
(b) On sales of $50,000 or more the offering price is reduced.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- ---------------------------------------------------------------------------------------------
For the Year Ended December 31, 1999
(In thousands)
INVESTMENT INCOME
<S> <C> <C>
Interest $ 192,467
Dividends 4,533
-----------
Total Investment Income (net of nonrebatable foreign taxes
withheld at source which amounted to $24) 197,000
EXPENSES
Management fee $12,878
Service fee - Class A, B, C, J 4,951
Distribution fee - Class B 7,080
Distribution fee - Class C 389
Distribution fee - Class J 1,232
Transfer agent fee 5,081
Bookkeeping fee 616
Trustees fee 89
Custodian fee 335
Audit fee 97
Legal fee 21
Registration fee 79
Reports to shareholders 80
Other 517
-------
Total expenses 33,445
Fees waived by the Distributor - Class C (80)
-------
33,365
-----------
Net investment income 163,635
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
PORTFOLIO POSITIONS
Net realized gain (loss) on:
Investments (19,345)
Foreign currency transactions 1,332
-------
Net Realized Loss (18,013)
Net change in unrealized appreciation/depreciation during the
period on:
Investments (124,792)
Foreign currency transactions (1,994)
-------
Net Change in Unrealized
Appreciation/Depreciation (126,786)
-----------
Net Loss (144,799)
-----------
Increase in net assets from operations $ 18,836
-----------
Class Z shares were initially offered on January 29, 1999.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
(In thousands)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
------------------------------
INCREASE (DECREASE) IN NET ASSETS 1999(a) 1998(b)
- ---------------------------------------------------------------------------------------------------------------
OPERATIONS
<S> <C> <C>
Net investment income $ 163,635 $ 126,069
Net realized loss (18,013) (5,102)
Net change in unrealized appreciation/depreciation (126,786) (41,403)
---------- ----------
Net increase from operations 18,836 79,564
DISTRIBUTIONS
From net investment income -- Class A (60,735) (63,872)
From net investment income -- Class B (72,238) (61,506)
From net investment income -- Class C (4,063) (1,566)
From net investment income -- Class J (29,151) (467)
From net investment income -- Class Z (311) --
----------- -----------
(147,662) (47,847)
----------- -----------
FUND SHARE TRANSACTIONS
Receipt for shares sold -- Class A 81,985 115,635
Value of distributions reinvested -- Class A 33,396 35,620
Cost of shares repurchased -- Class A (181,419) (148,991)
---------- ----------
(66,038) 2,264
---------- ----------
Receipt for shares sold -- Class B 239,747 221,748
Value of distributions reinvested -- Class B 38,770 31,198
Cost of shares repurchased -- Class B (216,394) (143,157)
---------- ----------
62,123 109,789
---------- ----------
Receipt for shares sold -- Class C 35,531 35,128
Value of distributions reinvested -- Class C 2,870 1,004
Cost of shares repurchased -- Class C (14,349) (4,635)
---------- ----------
24,052 31,497
---------- ----------
Receipt for shares sold -- Class J 590,145 49,584
Value of distributions reinvested -- Class J 8 1
Cost of shares repurchased -- Class J (46,669) (331)
---------- ----------
543,484 49,254
---------- ----------
Receipt for shares sold -- Class Z 6,758 --
Value of distributions reinvested -- Class Z 311 --
Cost of shares repurchased -- Class Z (1,865) --
---------- ----------
5,204 --
---------- ----------
Net Increase from Fund Share Transactions 568,825 192,804
---------- ----------
Total Increase 421,163 144,957
NET ASSETS
Beginning of period 1,793,262 1,648,305
---------- ----------
End of period (including undistributed net investment income
of $251 and $4,804, respectively) $2,214,425 $1,793,262
========== ==========
(a) Class Z shares were initially offered on January 29, 1999.
(b) Class J shares were initially offered on November 2, 1998.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS (CONT.)
- ---------------------------------------------------------------------------------------------
(In thousands)
YEARS ENDED DECEMBER 31
------------------------------
1999(a) 1998(b)
NUMBER OF FUND SHARES
<S> <C> <C>
Sold -- Class A 11,923 15,962
Issued for distributions reinvested -- Class A 4,891 4,936
Repurchased -- Class A (26,401) (20,628)
------- -------
(9,587) 270
------- -------
Sold -- Class B 34,776 30,863
Issued for distributions reinvested -- Class B 5,686 4,326
Repurchased -- Class B (31,737) (19,799)
------- -------
8,725 15,390
------- -------
Sold -- Class C 5,149 4,851
Issued for distributions reinvested -- Class C 422 140
Repurchased -- Class C (2,116) (647)
------- -------
3,455 4,344
------- -------
Sold -- Class J 85,835 6,963
Issued for distributions reinvested -- Class J 1 (c)
Repurchased -- Class J (6,858) (46)
------- -------
78,978 6,917
------- -------
Sold -- Class Z 977 --
Issued for distributions reinvested -- Class Z 46 --
Repurchased -- Class Z (279) --
------- -------
744 --
------- -------
(a) Class Z shares were initially offered on January 29, 1999.
(b) Class J shares were initially offered on November 2, 1998.
(c) Rounds to less than one.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. ACCOUNTING POLICIES
ORGANIZATION
Colonial Strategic Income Fund (the Fund), a series of Liberty Funds Trust I,
formerly Colonial Trust I, 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's investment
objective is to seek as high a level of current income and total return, as is
consistent with prudent risk, by diversifying investments primarily in U.S.
and foreign government and lower rated corporate debt securities. The Fund may
issue an unlimited number of shares. The Fund offers five classes of shares:
Class A, Class B, Class C, Class J and Class Z. Class A shares are sold with a
front-end sales charge. A 1.00% contingent deferred sales charge is assessed
on redemptions made within eighteen months on an original purchase of $1
million to $5 million. Class B shares are subject to an annual distribution
fee and a contingent deferred sales charge. Class B shares will convert to
Class A shares when they have been outstanding approximately eight years.
Class C shares are subject to a contingent deferred sales charge on
redemptions made within one year after purchase and an annual distribution
fee. Class J shares are subject to an annual distribution fee and are
available for purchase only by residents or citizens of Japan. Effective
January 29, 1999, the Fund began offering Class Z shares which are offered
continuously at net asset value. In addition, there are certain restrictions
on the purchase of Class Z shares, as described in the Fund's prospectus.
The accompanying financial statements are prepared under accounting principles
generally accepted in the United States.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States 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.
Equity securities generally are valued at the last sale price or, in the case
of unlisted or listed securities for which there were no sales during the day,
at current quoted bid prices.
Forward currency contracts are valued based on the weighted value of the
exchange traded contracts with similar durations.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
The value of all assets and liabilities quoted in foreign currencies are
translated into U.S. dollars at that day's exchange rates.
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 U.S. federal income tax
purposes.
The Fund may trade securities on other than normal settlement terms. This may
increase the risk if the other party to the transaction fails to deliver and
causes the Fund to subsequently invest at less advantageous prices.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS
All income, expenses (other than the Class A, Class B, Class C and Class J
service fees and Class B, Class C and Class J distribution fees), 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 A, Class B, Class C and Class J 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 service fee applicable to Class A,
Class B, Class C and Class J shares and the distribution fee applicable to
Class B, Class C and Class J 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 U.S. 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; premium and market discount are not amortized or
accreted.
The value of additional securities received as an interest payment is recorded
as income and as the cost basis of such securities.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded on the ex-date.
The amount and character of income and gains to be distributed are determined
in accordance with U.S. 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 U.S. income tax regulations.
FOREIGN CURRENCY TRANSACTIONS
Net realized and unrealized gains (losses) on foreign currency transactions
includes the fluctuation in exchange rates on gains (losses) between trade and
settlement dates on securities transactions, gains (losses) arising from the
disposition of foreign currency and currency gains (losses) between the
accrual and payment dates on dividends and interest income and foreign
withholding taxes.
The Fund does not distinguish that portion of gains (losses) on investments
which is due to changes in foreign exchange rates from that which is due to
changes in market prices of the investments. Such fluctuations are included
with the net realized and unrealized gains (losses) on investments.
FORWARD CURRENCY CONTRACTS
The Fund may enter into forward currency contracts to purchase or sell foreign
currencies at predetermined exchange rates in connection with the settlement
of purchases and sales of securities. The contracts are used to minimize the
exposure to foreign exchange rate fluctuations during the period between trade
and settlement date of the contracts. The Fund may also enter into forward
currency contracts to hedge certain other foreign currency denominated assets.
All contracts are marked-to-market daily, resulting in unrealized gains
(losses) which become realized at the time the forward currency contracts are
closed or mature. Realized and unrealized gains (losses) arising from such
transactions are included in net realized and unrealized gains (losses) on
foreign currency transactions. Forward currency contracts do not eliminate
fluctuations in the prices of the Fund's portfolio securities. While the
maximum potential loss from such contracts is the aggregate face value in U.S.
dollars at the time the contract was opened, exposure is typically limited to
the change in value of the contract (in U.S. dollars) over the period it
remains open. Risks may also arise if counterparties fail to perform their
obligations under the contracts.
OTHER
Corporate actions are recorded on the ex-date (except for certain foreign
securities which are recorded as soon after ex-date as the Fund becomes aware
of such), net of nonrebatable tax withholdings. Where a high level of
uncertainty as to collection exists, income on securities is recorded net of
all tax withholdings with any rebates recorded when received.
The Fund's custodian takes possession through the federal book-entry system of
securities collateralizing repurchase agreements. Collateral is marked-to-
market daily to ensure that the market value of the underlying assets remains
sufficient to protect the Fund. The Fund may experience costs and delays in
liquidating the collateral if the issuer defaults or enters bankruptcy.
NOTE 2. FEES AND COMPENSATION PAID TO AFFILIATES
MANAGEMENT FEE
Colonial Management Associates, Inc. (the Advisor) is the investment Advisor
of the Fund and furnishes accounting and other services and office facilities
for a monthly fee based on the Fund's average net assets as follows:
Average Net Assets Annual Fee Rate
------------------ ---------------
First $1 billion 0.65%
Next $1 billion 0.60%
Over $2 billion 0.55%
BOOKKEEPING FEE
The Advisor provides bookkeeping and pricing services for a monthly fee equal
to $27,000 annually plus a percentage of the Fund's average net assets as
follows:
Average Net Assets Annual Fee Rate
------------------ ---------------
First $50 million No charge
Next $950 million 0.035%
Next $1 billion 0.025%
Next $1 billion 0.015%
TRANSFER AGENT FEE
Liberty Fund Services, Inc. (the Transfer Agent), an affiliate of the Advisor,
provides shareholder services for a monthly fee equal to 0.20% annually of the
Fund's average net assets 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 year ended December 31, 1999, the
Fund has been advised that the Distributor retained net underwriting discounts
of $170,239 on sales of the Fund's Class A shares and received contingent
deferred sales charges (CDSC) of $19,063, $2,500,440 and $42,029 on Class A,
Class B and Class C share redemptions, respectively.
The Fund has adopted a 12b-1 plan which requires the payment of a distribution
fee to the Distributor equal to 0.75% annually of the average net assets
attributable to Class B and Class C shares and 0.35% annually of the average
net assets attributable to Class J shares. The Distributor has voluntarily
agreed, until further notice, to waive a portion of the Class C share
distribution fee so that it does not exceed 0.60% annually. The plan also
requires the payment of a service fee to the Distributor as follows:
Value of shares
outstanding on the 20th of
each month which were issued Annual Fee Rate
---------------------------- ---------------
Prior to January 1, 1993 0.15%
On or after January 1, 1993 0.25%
The CDSC and the fees received from the 12b-1 plan are used principally as
repayment to the Distributor for amounts paid by the Distributor to dealers
who sold such shares.
OTHER
The Fund pays no compensation to its officers, all of whom are employees of
the Advisor.
The Fund's Trustees may participate in a deferred compensation plan which may
be terminated at any time. Obligations of the plan will be paid solely out of
the Fund's assets.
NOTE 3. PORTFOLIO INFORMATION
INVESTMENT ACTIVITY
For the year ended December 31, 1999, purchases and sales of investments,
other than short-term obligations, were $1,453,514,662 and $915,964,844,
respectively, of which $283,631,791 and $234,463,259, respectively, were U.S.
government securities.
Unrealized appreciation (depreciation) at December 31, 1999 based on cost of
investments for U.S. federal income tax purposes was:
Gross unrealized appreciation $ 41,484,353
Gross unrealized depreciation (176,823,247)
-------------
Net unrealized depreciation $(135,338,894)
=============
CAPITAL LOSS CARRYFORWARDS
At December 31, 1998, capital loss carryforwards available (to the extent
provided in U.S. Federal Income tax regulations) to offset future realized
gains were approximately as follows:
Year of Capital loss
expiration carryforward
---------- -------------
2000 $ 23,761,000
2001 3,442,000
2002 42,652,000
2003 18,825,000
2007 21,542,000
------------
$110,222,000
============
Expired capital loss carryforwards, if any, are recorded as a reduction of
capital paid in.
To the extent loss carryforwards are used to offset any future realized gains,
it is unlikely that such gains would be distributed since they may be taxable
to U.S. shareholders as ordinary income.
OTHER
There are certain additional risks involved when investing in foreign
securities that are not inherent with investments in domestic securities.
These risks may involve foreign currency exchange rate fluctuations, adverse
political and economic developments and the possible prevention of foreign
currency exchange or the imposition of other foreign governmental laws or
restrictions.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
NOTE 4. LINE OF CREDIT
The Fund may borrow up to 33 1/3% of its net assets under a line of credit for
temporary or emergency purposes. Any borrowings bear interest at one of the
following options determined at the inception of the loan: (1) federal funds
rate plus 1/2 of 1%, (2) the lending bank's base rate or (3) IBOR offshore
loan rate plus 1/2 of 1%. There were no borrowings under the line of credit
during the year ended December 31, 1999.
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of each class outstanding
throughout each period are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999
----------------------------------------------------------
CLASS A CLASS B CLASS C CLASS Z CLASS Z(b)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.110 $ 7.110 $ 7.110 $ 7.100 $ 7.100
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) 0.563 0.511 0.522(c) 0.539 0.531
Net realized and unrealized loss (0.477) (0.477) (0.477) (0.467) (0.468)
-------- -------- -------- ------- --------
Total from Investment Operations 0.086 0.034 0.045 0.072 0.063
-------- -------- -------- ------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income (d) (0.576) (0.524) (0.535)(f) (0.552) (0.543)
-------- -------- -------- ------- --------
NET ASSET VALUE, END OF PERIOD $ 6.620 $ 6.620 $ 6.620 $ 6.620 $ 6.620
-------- -------- -------- ------- --------
Total return (e) 1.28% 0.52% 0.67%(f) 1.07% 1.50%(f)(g)
-------- -------- -------- ------- --------
RATIOS TO AVERAGE NET ASSETS
Expenses (h) 1.19% 1.94% 1.79%(c) 1.54% 0.95%(i)
Net investment income (h) 8.30% 7.55% 7.70%(c) 7.95% 8.54%(i)
Portfolio turnover 44% 44% 44% 44% 44%
Net assets at end of period (000) $669,795 $914,145 $ 57,246 $568,311 $ 4,928
(a)The per share net investment income amounts do not reflect the period's reclassification of differences
between book and tax basis net investment income.
(b)Class Z shares were initially offered on January 29, 1999. Per share amounts reflect activity from that date.
(c)Net of fees waived by the Distributor for Class C shares which amounted to $0.010 per share and 0.15%.
(d)Distributions from income include currency gains and gains on securities treated as ordinary income for tax purposes.
(e)Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred sales
charge.
(f)Had the Distributor not waived a portion of expenses, total return would have been reduced.
(g)Not annualized.
(h)The benefits derived from custody credits and directed brokerage arrangements had no impact.
(i)Annualized.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
------------------------------------------------------------------------------------------------------
1998 1997
----------------------------------------------------- -----------------------------------------
CLASS A CLASS B CLASS C CLASS J(a) CLASS A CLASS B CLASS C(b)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 7.320 $ 7.320 $ 7.320 $ 7.000 $ 7.310 $ 7.310 $ 7.240
---------- ---------- --------- --------- ---------- ---------- ----------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.561 0.506 0.517(c) 0.083 0.578 0.524 0.271
Net realized and
unrealized gain (loss (0.195) (0.195) (0.195) 0.109(d) 0.025 0.025 0.092
---------- ---------- --------- --------- ---------- ---------- ----------
Total from
Investment Operations 0.366 0.311 0.322 0.192 0.603 0.549 0.363
---------- ---------- --------- --------- ---------- ---------- ----------
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS
From net investment
income (e) (0.576) (0.521) (0.532) (0.092) (0.593) (0.539) (0.283)
---------- ---------- --------- --------- ---------- ---------- ----------
NET ASSET VALUE, END
OF PERIOD $ 7.110 $ 7.110 $ 7.110 $ 7.100 $ 7.320 $ 7.320 $ 7.320
---------- ---------- --------- --------- ---------- ---------- ----------
Total return (f) 5.17% 4.38% 4.54%(g) 2.74%(h) 8.61% 7.81% 5.06%(g)(h)
---------- ---------- --------- --------- ---------- ---------- ----------
RATIOS TO AVERAGE NET ASSETS
Expenses (i) 1.15% 1.90% 1.75%(c) 1.49%(j) 1.18% 1.93% 1.78%(j)
Net investment income(i) 7.88% 7.13% 7.28%(c) 7.76%(j) 7.78% 7.03% 7.13%(j)
Portfolio turnover 64% 64% 64% 64% 111% 111% 111%
Net assets at end of
period (000) $ 787,461 $ 919,740 $ 36,918 $ 49,143 $ 808,228 $ 833,865 $ 6,212
(a)Class J shares were initially offered on November 2, 1998. Per share amounts reflect activity from that date.
(b)Class C shares were initially offered on July 1, 1997. Per share amounts reflect activity from that date.
(c)Net of fees waived by the Distributor for Class C shares which amounted to $0.011 per share and 0.15%.
(d)The amount shown for a share outstanding does not correspond with the aggregate net loss on investments for the period
due to the timing of sales and repurchases of Fund shares in relation to fluctuating market values of the investments
of the Fund.
(e)Distributions from income include currency gains and gains on securities treated as ordinary income for tax purposes.
(f)Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred
sales charge.
(g)Had the Distributor not waived a portion of expenses, total return would have been reduced.
(h)Not annualized.
(i)The benefits derived from custody credits and directed brokerage arrangements had no impact.
(j)Annualized.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
- ----------------------------------------------------------------------------------------------------------
Selected data for a share of each class outstanding
throughout each period are as follows:
YEARS ENDED DECEMBER 31
-------------------------------------------------------
1996 1995
--------------------- -----------------------
CLASS A CLASS B CLASS A CLASS B
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.220 $ 7.220 $ 6.530 $ 6.530
-------- -------- ------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.623 0.569 0.621 0.569
Net realized and unrealized gain 0.081 0.081 0.650 0.650
-------- -------- ------- --------
Total from Investment Operations 0.704 0.650 1.271 1.219
-------- -------- ------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income (0.614)(a) (0.560)(a) (0.581) (0.529)
-------- -------- ------- --------
NET ASSET VALUE, END OF PERIOD $ 7.310 $ 7.310 $ 7.220 $ 7.220
-------- -------- ------ --------
Total return (b) 10.24% 9.43% 20.17% 19.29%
-------- -------- ------- --------
RATIOS TO AVERAGE NET ASSETS
Expenses (c) 1.18% 1.93% 1.18% 1.97%
Net investment income (c) 8.01% 7.26% 8.42% 7.63%
Portfolio turnover 110% 110% 83% 83%
Net assets at end of period (000) $755,352 $783,620 $714,961 $714,049
(a)Distributions from income include currency gains and gains on securities treated as ordinary income
for tax purposes.
(b)Total return at net asset value assuming all distributions reinvested and no initial sales charge
or contingent deferred sales charge.
(c)The benefits derived from custody credits and directed brokerage arrangements had no impact.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE TRUSTEES OF LIBERTY FUNDS TRUST I AND THE SHAREHOLDERS OF COLONIAL
STRATEGIC INCOME FUND
In our opinion, the accompanying statement of assets and liabilities,
including the investment portfolio, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in
all material respects, the financial position of Colonial Strategic Income
Fund (the "Fund") (a series of Liberty Funds Trust I, formerly Colonial Trust
I), at December 31, 1999, the results of its operations, the changes in its
net assets and the financial highlights for the periods indicated, in
conformity with accounting principles generally accepted in the United States.
These financial statements and the financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with audit standards generally accepted in the United
States which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of portfolio positions at December 31,
1999 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 11, 2000
<PAGE>
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<PAGE>
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<PAGE>
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<PAGE>
<TABLE>
<CAPTION>
TRUSTEES & TRANSFER AGENT
- ---------------------------------------------------------------------------------------------------------
<S> <C>
TOM BLEASDALE JAMES L. MOODY, JR.
Retired (formerly Chairman of the Board and Retired (formerly Chairman of the Board,
Chief Executive Officer, Shore Bank & Trust Chief Executive Officer and Director,
Company) Hannaford Bros. Co.)
JOHN V. CARBERRY JOHN J. NEUHAUSER
Senior Vice President of Liberty Financial Academic Vice President and Dean of Faculties,
Companies, Inc. (formerly Managing Boston College (formerly Dean, Boston
Director, Salomon Brothers) College School of Management)
LORA S. COLLINS THOMAS E. STITZEL
Attorney (formerly Attorney, Kramer, Levin, Professor of Finance, College of Business, Boise
Naftalis & Frankel) State University; Business Consultant and Author
JAMES E. GRINNELL ROBERT L. SULLIVAN
Private Investor (formerly Senior Vice Retired Partner, KPMG LLP (formerly
President-Operations, The Rockport Management Consultant, Saatchi and Saatchi
Company) Consulting Ltd. and Principal and
International Practice Director, Management
RICHARD W. LOWRY Consulting, Peat Marwick Main & Co.)
Private Investor (formerly Chairman and
Chief Executive Officer, U.S. Plywood ANNE-LEE VERVILLE
Corporation) Consultant (formerly General Manager,
Global Education Industry, and President,
SALVATORE MACERA Applications Solutions Division, IBM
Private Investor (formerly Executive Vice Corporation)
President of Itek Corp. and President of Itek
Optical & Electronic Industries, Inc.)
WILLIAM E. MAYER
Partner, Development Capital, LLC (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)
- ---------------------------------------------------------------------------------------------------------
</TABLE>
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial Strategic Income Fund is:
Liberty Funds Services, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
The Fund mails one shareholder report to each shareholder address. If you would
like more than one report, please call 1-800-426-3750 and additional reports
will be sent to you.
This report has been prepared for shareholders of Colonial Strategic Income 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 Funds and with the most recent copy of
the Liberty Funds Distributor, Inc. Performance Update.
ANNUAL REPORT:
COLONIAL STRATEGIC INCOME FUND
<PAGE>
Liberty offers the independent thinking and collective strength of six financial
specialists. Our distinguished product line helps financial advisors and their
clients build diversified investment portfolios for long-term financial goals.
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L I B E R T Y
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F U N D S
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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 Innovative approach for growth and income investing.
ADVISOR
[graphic omitted]
KEYPORT 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.
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COLONIAL STRATEGIC INCOME FUND ANNUAL REPORT
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BULK RATE
[Graphic U.S. POSTAGE
Omitted] L I B E R T Y PAID
----------------- HOLLISTON, MA
F U N D S PERMIT NO. 20
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ALL-STAR o COLONIAL o CRABBE HUSON o NEWPORT o STEIN ROE ADVISOR
Liberty Funds Distributor, Inc. (C)2000
One Financial Center, Boston, MA 02111-2621, 1-800-426-3750
www.libertyfunds.com
716-02/227A-0100 (2/00) 00/114
