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LIBERTY HIGH YIELD SECURITIES FUND Semiannual Report
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June 30, 2000
[COVER PHOTO]
<PAGE>
President's Message
Dear Shareholder:
You may have noticed that your Fund has a new name. Beginning July 14, the names
of our funds changed to include Liberty. Rest assured, the investment objectives
and strategies employed by the Fund's managers are not affected by this name
change. We believe the new name better reflects that your Fund is part of the
Liberty Funds, a diverse family of funds representing a wide selection of
investment styles and specialized money management. The goal of all Liberty
funds is to help you reach for financial freedom -- however you define it.
The first six months of 2000 proved to be a volatile time for bond markets, with
ongoing inflation worries and rising interest rates creating a generally
unfavorable environment. The U.S. economy continued to grow at a rapid pace,
which prompted the Federal Reserve Board to keep boosting short-term interest
rates in an effort to keep the threat of inflation under control. The trend of
higher interest rates hurt the value of bonds.
This period proved to be particularly challenging for the high-yield bond
sector, where Liberty High Yield Securities Fund focuses its investments. Bonds
with a lower credit quality offered more attractive yields, and yields rose
significantly during the six-month period. This was in sharp contrast to
long-term U.S. Treasury bonds which, due to a variety of circumstances,
experienced declining interest rates. Since bond values move in the opposite
direction of yields, the rising interest rate trend in the high-yield market
created a difficult environment for the Fund.
For the six-month period ended June 30, 2000, the Fund returned negative 2.86%
for Class A shares, without a sales charge. By comparison, its peer group
average as measured by Lipper was negative 1.67%. Over three-year, five-year and
ten-year periods, the Fund has consistently outperformed its peer group
average.(1)
The following report will provide you with more specific information about the
factors that affected the Fund's performance over the past six months, and the
outlook for the remainder of the fiscal year. We appreciate that you've chosen
Liberty High Yield Securities Fund, and we look forward to continuing to help
you meet your investment needs.
Sincerely,
/s/ Stephen E. Gibson
Stephen E. Gibson
President
August 10, 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 High Current Yield Funds
Category was -1.67% for the 6 months ended June 30, 2000. The fund's Class A
Shares were ranked in the third quartile for one year (218 out of 351), in the
second quartile for three years (52 out of 196), in the first quartile for five
years (30 out of 122), and in the first quartile for ten years (8 out of 53).
Past performance cannot predict future results.
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>
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Highlights
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o Interest rates continued to trend higher
With the U.S. economy continuing its strong growth pace, the Federal
Reserve felt obligated to move short-term interest rates higher. That had
a generally negative effect on the bond market, including the high-yield
sector, as bond yields in this market rose, negatively affecting bond
values.
o Lower-rated bonds suffer a setback
Credit quality was a major issue for investors in the first half of 2000,
as concerns about the direction of the economy heightened. During the
period, the Fund's concentration was in bonds with a credit quality rating
of "B," and that segment of the market suffered in comparison to
higher-rated debt securities during the period.
o Cable holdings do an about-face
The Fund's holdings in bonds issued by cable television companies were
strong performers in 1999, but the situation changed abruptly in the
second quarter of this year. Triggered by price weakness in cable TV
stocks, bond issues from many of these companies also lost value. This was
in spite of the fact that most of these firms were in sound financial
shape and faced no significant credit concerns.
o Fund focuses on choosing individual issues
While we pay attention to activity in specific segments of the market, the
Fund's long-term success has been predicated on our ability to carefully
assess the credit quality and prospects of individual bond issuers. Thanks
to our extensive in-house research capabilities, the Fund's Advisor
continues to work hard to identify bonds we believe offer the best
long-term potential for shareholders.
[The table below was depicted as a bar chart in the printed material.]
Liberty High Yield Securities Fund Performance(1) vs. Index and Peers
12/31/99 - 6/30/00
Liberty High Yield
Securities Fund (2.86%)
Lipper Category
Average (1.67%)
CS First Boston Global
High Yield Index (0.84%)
(1) Performance of Class A shares without sales charges.
Past performance cannot predict future investment results.
The CS First Boston Global High Yield Index is a broad-based, unmanaged
index that tracks the performance of high-yield bonds. Unlike mutual
funds, indexes are not investments and do not incur fees or expenses. It
is not possible to invest directly in an index.
Lipper, Inc., a widely respected data provider in the industry, calculates
an average total return for mutual funds with similar investments as the
Fund.
Net asset value per share
as of 6/30/00
Class A $6.05
--------------------------------
Class B $6.05
--------------------------------
Class C $6.05
--------------------------------
Class Z $6.05
--------------------------------
Distribution per share
from 1/1/00 - 6/30/00
Class A $0.317
--------------------------------
Class B $0.292
--------------------------------
Class C $0.297
--------------------------------
Class Z $0.325
--------------------------------
SEC yields on 6/30/00(1)
Class A 10.91%
--------------------------------
Class B 10.67%
--------------------------------
Class C 10.83%
--------------------------------
Class Z 11.73%
--------------------------------
(1) 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 would have been 10.67% for Class C shares.
Past performance cannot predict future results.
1
<PAGE>
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Portfolio Managers' Report
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[The table below was depicted as a bar chart in the printed material.]
Top five sector breakdowns
6/30/00 vs. 12/31/99
Fund as of 6/30/00 Fund as of 12/31/99
------------------ -------------------
Telecommunications 20.4% 17.1%
Cable 15.5% 15.6%
Communications 7.5% 6.5%
Manufacturing 5.8% 6.3%
Chemicals 5.7% 5.9%
Sector breakdowns are calculated as a percentage of net assets. Because the Fund
is actively managed, there can be no guarantee the Fund will continue to
maintain the same sector breakdowns in the future.
Industry sectors in the following financial statements are based upon the
standard industrial classifications (SIC) as published by the U.S. Office of
Management and Budget. The sector classifications used on this page are based
upon the Advisor's defined criteria as used in the investment process.
HELD
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Cable TV (15.5% of net assets) Cable television companies continue to claim a
place of prominence in the media and telecommunications market. Most of these
companies boast very stable cash flows, which should assure timely payment of
interest and principal, and are backed by a substantial portfolio of assets.
A difficult time for high-yield bonds
For the six-month period ended June 30, 2000, the Fund's Class A shares had a
total return of negative 2.86%, not including the sales charge. This return was
lower than comparable income funds ranked by Lipper, which earned a return of
negative 1.67% for the same period.
The most significant factor affecting the market in the first six months of the
year was the widening of yield spreads between high-yield bonds and U.S.
Treasury bonds. Due to positive news about government surpluses and a buyback
program for long-term government securities, yields on Treasury bonds declined
dramatically. By contrast, yields on high-yield bonds increased as heavy
redemptions from mutual funds forced investors to sell into distressed markets.
That caused spreads on high-yield bonds to widen significantly in comparison to
Treasury bonds during the first six months of 2000.
Continued focus on asset-rich companies
Media and telecommunications companies continue to draw our interest. These
companies represent good examples of asset-rich firms that we believe can offer
better credit quality than many other bond issuers. While we believe the
long-term prospects of these securities remain strong, skillful selection of
individual issues remains the critical factor to successful investing in this
sector.
The Fund continued to trim its holdings in cyclical industries, such as auto
mobile, housing, paper and metals sectors, which were weak performers during the
period.
Experience, approach make a difference
The past six months were a particularly difficult time for the high-yield
sector, but the Fund was able to offset some of the pressure with successful
security selection. Our experienced, in-house research staff actually reviews
hundreds of issues in our quest to identify attractive investments and avoid
companies with deteriorating fundamentals.
2
<PAGE>
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Portfolio Managers' Report
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Performance was enhanced by underweight positions in the health care, auto
motive and entertainment industries, all of which performed poorly in the first
half of the year. Security selection in general was a positive contributor to
performance as the vast majority of individual companies owned by the Fund
continued to generate strong operating results.
Bonds at a bargain
Despite a rebound in June and July, the market for high-yield bonds remains very
depressed at this time. Yield spreads between high-yield bonds and Treasury
bonds are near historically wide levels and most bonds in the high-yield sector
are priced at least 10% below their par value. At the same time, we have
confidence in the fundamental strength of the issuers of the bonds represented
in the portfolio.
/s/ Carl C. Ericson /s/ Scott B. Richards
Carl C. Ericson and Scott B. Richards are portfolio co-managers of High Yield
Securities Fund. Mr. Ericson is a senior vice president of Colonial Management
Associates, Inc. (CMA) and director of the Taxable Fixed Income Department. Mr.
Richards is a senior vice president of CMA.
High-yield investing offers the potential for high income and attractive total
return, but also involves certain risks. These include credit risks associated
with lower-rated bonds, changes in interest rates and certain risks associated
with foreign investments.
Top 10 issuers as of 6/30/00
CSC Holdings 4.80%
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Nextel
Communications 4.06%
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NTL Inc. 3.59%
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Adelphia
Communications 2.90%
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Echostar
Communications 2.62%
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Tenet Healthcare
Corp. 1.41%
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ONO Finance PLC 1.37%
-----------------------------------------------------
Telewest
Communications 1.33%
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Williams Comm.
Group Inc. 1.24%
-----------------------------------------------------
Riverwood
International 1.19%
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Portfolio 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
maintain the same portfolio holdings in the future.
HELD
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Nextel (4.06% of net assets) is a major player in the wireless communications
industry. The company has an established business with real assets and real
profits. The firm is executing its business plan well and we believe it is
positioned to perform satisfactorily through nearly any portion of the economic
cycle.
3
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Performance Information
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Average Annual Total Returns as of 6/30/00
<TABLE>
<CAPTION>
Share Class A B C Z
Inception Date 3/31/80 6/8/92 1/15/96 1/8/99
--------------------------------------------------------------------------------------------
Without With Without With Without With Without
Sales Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge Charge
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Six-month (2.86)% (7.47)% (3.24)% (7.86)% (3.17)% (4.09)% (2.73)%
(cumulative)
--------------------------------------------------------------------------------------------
1 year (1.04) (5.74) (1.79) (6.29) (1.64) (2.54) (0.79)
--------------------------------------------------------------------------------------------
5 years 7.64 6.60 6.84 6.55 7.02 7.02 7.72
--------------------------------------------------------------------------------------------
10 years 10.86 10.32 10.20 10.20 10.54 10.54 10.90
--------------------------------------------------------------------------------------------
</TABLE>
Past performance cannot predict future results. Returns and value of an
investment will vary resulting in a gain or a loss on sale. All results shown
assume reinvestment of distributions. The "with sales charge" returns include
the maximum 4.75% sales charge for Class A shares, the appropriate Class B
contingent deferred sales charge for the holding period after purchase as
follows: through first year - 5%, second year - 4%, third year - 3%, fourth year
- 3%, fifth year - 2%, sixth year - 1%, thereafter - 0% and the Class C
contingent deferred sales charge of 1% for the first year only. Performance for
different share classes will vary based on differences in sales charges and fees
associated with each class.
Performance results reflect any voluntary waivers or reimbursements of Fund
expenses by the Advisor or its affiliates. Absent these waivers or reimbursement
arrangements, performance results would have been lower.
Classes B, C and Z share (newer classes) 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 the periods prior to the inception
of Class B and Class C shares would have been lower, and Class Z shares would
have been higher.
4
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Investment Portfolio
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June 30, 2000 (Unaudited)
(In thousands)
Bonds & Notes - 84.8% PAR VALUE
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CORPORATE FIXED-INCOME BONDS & NOTES - 84.6%
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CONSTRUCTION - 0.8%
Building Construction
Atrium Cos., Inc.,
10.500% 05/01/09 $ 2,255 $ 1,917
Morrison Knudsen,
11.000% 07/01/10 (a) 6,900 6,866
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8,783
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FINANCE, INSURANCE & REAL ESTATE - 0.4%
Depository Institutions
Sovereign Bancorp Inc.,
10.500% 11/15/06 3,875 3,843
----------
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MANUFACTURING - 28.3%
Chemicals & Allied Products - 5.7%
Agricultural Minerals Co., LP,
10.750% 09/30/03 3,335 2,168
Allied Waste North America, Inc.,
10.000% 08/01/09 12,175 10,166
Bio-Rad Laboratories, Inc.,
11.625% 02/15/07 (a) 3,375 3,476
Huntsman ICI Holdings LLC,
(b) 12/31/09 21,825 6,984
HydroChem Industrial Services, Inc.,
10.375% 08/01/07 5,480 4,192
Lyondell Chemical Co.,
10.875% 05/01/09 4,800 4,752
PCI Chemicals Canada, Inc.,
9.250% 10/15/07 7,550 4,757
Sterling Chemicals, Inc.,
11.750% 08/15/06 13,400 10,988
Terra Industries, Inc.,
10.500% 06/15/05 9,250 5,920
Texas Petrochemical Corp.,
11.125% 07/01/06 7,905 6,719
Trans Resources, Inc.,
10.750% 03/15/08 7,590 1,518
----------
61,640
----------
Electronic & Electrical Equipment - 1.5%
Amphenol Corp.,
9.875% 05/15/07 4,200 4,242
Condor Systems, Inc.,
11.875% 05/01/09 (a) 4,000 1,940
Flextronics International Ltd.,
9.875% 07/01/10 (a) 4,500 4,556
Gentek, Inc.,
11.000% 08/01/09 2,000 2,030
TransDigm, Inc.,
10.375% 12/01/08 4,450 3,783
----------
16,551
----------
Fabricated Metal - 0.4%
Earle M. Jorgensen & Co.,
9.500% 04/01/05 4,500 4,050
----------
Food & Kindred Products - 1.5%
Chattem, Inc.,
8.875% 04/01/08 9,750 7,800
New World Pasta Co.,
9.250% 02/15/09 2,000 1,160
Premier International Foods PLC,
12.000% 09/01/09 (a) 8,250 7,343
----------
16,303
----------
Furniture & Fixtures - 0.2%
Juno Lighting, Inc.,
11.875% 07/01/09 3,000 2,490
----------
Machinery & Computer Equipment - 1.8%
Globix Corp.,
12.500% 02/01/10 2,500 2,063
IMO Industries, Inc.,
11.750% 05/01/06 7,150 7,150
Numatics, Inc.,
9.625% 04/01/08 8,435 6,495
Tritel PCS, Inc.,
stepped coupon (12.750% 05/11/04)
(c) 05/15/09 5,500 3,630
----------
19,338
----------
Measuring & Analyzing Instruments - 0.5%
Envirosource, Inc.,
9.750% 06/15/03 12,501 5,625
----------
Miscellaneous Manufacturing - 5.9%
Amscan Holdings, Inc.,
9.875% 12/15/07 7,000 5,740
Blount, Inc.,
13.000% 08/01/09 8,200 8,364
Delco Remy International, Inc.,
10.625% 08/01/06 2,200 2,200
Eagle-Picher Industries, Inc.,
9.375% 03/01/08 4,075 3,443
ISG Resources, Inc.,
10.000% 04/15/08 4,500 4,106
Koppers Industries, Inc.,
9.875% 12/01/07 9,425 8,765
Moll Industries, Inc.,
10.500% 07/01/08 2,505 626
Newcor, Inc.,
9.875% 03/01/08 5,000 1,500
Owens-Illinois, Inc.,
7.500% 05/15/10 3,500 3,052
Pentacon, Inc.,
12.250% 04/01/09 4,000 2,200
Station Casinos,
9.875% 07/01/10 (a) 2,325 2,337
See notes to investment portfolio.
5
<PAGE>
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Investment Portfolio (continued)
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June 30, 2000 (Unaudited)
(In thousands)
Bonds & Notes (continued) PAR VALUE
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Special Devices, Inc.,
11.375% 12/15/08 $ 4,000 $ 1,400
Syratech Corp.,
11.000% 04/15/07 4,000 2,240
Tekni-Plex, Inc.,
12.750% 06/15/10 4,025 4,015
Terex Corp.,
8.875% 04/01/08 4,250 3,825
Thermadyne Holdings Corp.,
9.875% 06/01/08 9,500 7,505
Werner Holding Co.,
10.000% 11/15/07 2,000 1,925
----------
63,243
----------
Paper Products - 2.9%
Gaylord Container Corp.:
9.375% 06/15/07 4,000 3,120
9.750% 06/15/07 7,600 6,004
Repap New Brunswick, Inc.,
10.625% 04/15/05 10,000 9,000
Riverwood International Corp.,
10.875% 04/01/08 14,600 12,848
----------
30,972
----------
Petroleum Refining - 0.5%
Benton Oil & Gas Co.:
9.375% 11/01/07 5,210 3,256
11.625% 05/01/03 2,540 1,842
----------
5,098
----------
Primary Metal - 3.9%
Algoma Steel, Inc.,
12.375% 07/15/05 5,000 4,300
Ivaco, Inc.,
11.500% 09/15/05 7,500 7,950
Kaiser Aluminum & Chemical Corp.:
10.875% 10/15/06 7,600 7,277
10.875% 10/15/06 500 479
Keystone Consolidated Industries, Inc.,
9.625% 08/01/07 7,800 6,084
Renco Metals, Inc.,
11.500% 07/01/03 3,000 1,140
WCI Steel, Inc.,
10.000% 12/01/04 8,000 7,600
Wheeling-Pittsburgh Corp.,
9.250% 11/15/07 11,000 7,370
----------
42,200
----------
Printing & Publishing - 0.8%
American Lawyer Media, Inc.:
stepped coupon (12.250% 12/15/02)
(c) 12/15/08 1,200 765
9.750% 12/15/07 5,675 5,150
Cable Satisfaction International, Inc.,
12.750% 03/01/10 2,585 2,559
----------
8,474
----------
Rubber & Plastic - 0.5%
Burke Industries, Inc.,
10.000% 08/15/07 3,815 1,526
Metromedia Fiber Network, Inc.,
10.000% 12/15/09 2,000 1,960
Owens-Illinois, Inc.,
7.150% 05/15/05 2,000 1,822
----------
5,308
----------
Stone, Clay, Glass & Concrete - 0.8%
Anchor Glass Container Corp.,
11.250% 04/01/05 2,250 1,665
Owens-Illinois, Inc.:
7.350% 05/15/08 5,500 4,847
8.100% 05/15/07 2,275 2,127
----------
8,639
----------
Textile Mill Products - 0.9%
Collins & Aikman Products Co.,
10.000% 01/15/07 9,950 9,652
----------
Transportation Equipment - 0.5%
LDM Technologies, Inc.,
10.750% 01/15/07 6,700 5,260
----------
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MINING & ENERGY - 6.9%
Coal Mining - 0.2%
AEI Resources, Inc.,
10.500% 12/15/05 (a) 10,000 2,000
----------
Crude Petroleum & Natural Gas - 0.0%
TransAmerican Energy Corp.,
11.500% 06/15/02 (d) 5,975 (k)
----------
Gold & Silver Mining - 0.3%
Callahan Nordrhein,
14.000% 07/15/10 (a) 3,300 3,308
----------
Metal Mining - 1.0%
JL French Automotive Castings, Inc.,
11.500% 06/01/09 1,500 1,365
LTV Corp.,
11.750% 11/15/09 2,000 1,680
Metallurg, Inc.,
11.000% 12/01/07 8,700 7,352
----------
10,397
----------
Oil & Gas Extraction - 4.6%
Belden & Blake Corp.,
9.875% 06/15/07 4,875 3,559
HS Resources, Inc.,
9.250% 11/15/06 9,375 9,141
Magnum Hunter Resources, Inc.,
10.000% 06/01/07 12,450 11,765
See notes to investment portfolio.
6
<PAGE>
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Investment Portfolio (continued)
--------------------------------------------------------------------------------
June 30, 2000 (Unaudited)
(In thousands)
PAR VALUE
--------------------------------------------------------------------------------
Mariner Energy, Inc.,
10.500% 08/01/06 $ 9,000 $ 8,280
Ocean Energy, Inc.,
8.875% 07/15/07 8,125 8,064
Petsec Energy, Inc.,
9.500% 06/15/07 (d) 6,825 2,662
Transtexas Gas Corp.,
15.000% 03/15/05 775 527
Vintage Petroleum, Inc.,
9.750% 06/30/09 5,350 5,417
----------
49,415
----------
Oil & Gas Field Services - 0.8%
Pioneer Natural Resources Co.,
9.625% 04/01/10 2,000 2,070
RBF Finance Co.,
11.000% 03/15/06 4,000 4,300
Western Gas Resources, Inc.,
10.000% 06/15/09 2,250 2,284
----------
8,654
----------
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RETAIL TRADE - 1.1%
Food Stores
Pathmark Stores, Inc.:
9.625% 05/01/03 (d) 11,100 7,659
10.750% 11/01/03 (d) 10,000 500
Richmont Marketing Specialist, Inc.,
10.125% 12/15/07 8,275 4,138
----------
12,297
----------
--------------------------------------------------------------------------------
SERVICES - 6.7%
Amusement & Recreation - 3.9%
Boyd Gaming Corp.,
9.500% 07/15/07 4,400 4,213
Coast Hotels & Casinos, Inc.,
9.500% 04/01/09 8,750 8,356
Hollywood Casino Corp.,
11.250% 05/01/07 8,150 8,333
Hollywood Casino Shreveport,
13.000% 08/01/06 (a) 3,800 4,038
Hollywood Park, Inc.,
9.250% 02/15/07 4,000 3,990
Horseshoe Gaming, LLC,
9.375% 06/15/07 9,000 8,910
Mohegan Tribal Gaming Authority,
8.750% 01/01/09 4,350 4,133
----------
41,973
----------
Health Services - 1.4%
InSight Health Services Corp.,
9.625% 06/15/08 800 716
Tenet Healthcare Corp.,
8.625% 01/15/07 14,550 13,932
----------
14,648
----------
Other Services - 0.8%
Intertek Finance PLC,
10.250% 11/01/06 (e) 10,125 8,303
----------
--------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 40.4%
Air Transportation - 0.9%
U.S. Air, Inc.,
10.375% 03/01/13 11,154 10,150
----------
Broadcasting - 3.6%
Allbritton Communications Co.,
9.750% 11/30/07 12,000 11,640
Cumulus Media, Inc.,
10.375% 07/01/08 1,325 1,153
Fox Family Worldwide, Inc.,
9.250% 11/01/07 9,350 8,509
LIN Holding Corp.,
stepped coupon (10.000% 03/01/03)
(c) 03/01/08 12,500 8,219
Sinclair Broadcast Group, Inc.:
9.000% 07/15/07 3,350 2,990
10.000% 09/30/05 7,055 6,764
----------
39,275
----------
Cable - 9.9%
Adelphia Communications Corp.,
9.875% 03/01/07 11,000 10,533
Avalon Cable Holdings LLC,
stepped coupon (11.875% 12/01/03)
(c) 12/01/08 6,000 3,840
Charter Communications Holding LLC,
stepped coupon (9.920% 04/02/04)
(c) 04/01/11 13,675 7,761
Comcast UK Cable Partners Ltd.,
stepped coupon (11.200% 11/15/00)
(c) 11/15/07 14,000 13,090
Diamond Cable Communications PLC,
stepped coupon (10.750% 02/15/02)
(c) 02/15/07 (e) 11,750 8,959
EchoStar DBS Corp.,
9.250% 02/01/06 16,250 15,763
FrontierVision Holdings LP,
stepped coupon (11.875% 09/15/01)
(c) 09/15/07 13,000 11,278
International CableTel, Inc.,
stepped coupon (11.500% 02/01/01)
(c) 02/01/06 5,000 4,600
See notes to investment portfolio.
7
<PAGE>
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Investment Portfolio (continued)
--------------------------------------------------------------------------------
June 30, 2000 (Unaudited)
(In thousands)
Bonds & Notes (continued) CURRENCY PAR VALUE
--------------------------------------------------------------------------------
NTL, Inc.:
10.000% 02/15/07 $ 3,000 $ 2,850
11.500% 10/01/08 1,750 1,750
Northland Cable Television, Inc.,
10.250% 11/15/07 9,600 7,968
Shop at Home, Inc.,
11.000% 04/01/05 3,750 3,675
Telewest Communication PLC,
stepped coupon (11.000% 10/01/00)
(c) 10/01/07 (e) 15,000 14,344
----------
106,411
----------
Communications - 7.7%
Orbital Imaging Corp.,
11.625% 03/01/05 4,000 1,830
Call-Net Enterprises, Inc.,
stepped coupon (10.800% 05/15/04)
(c) 05/15/09 13,750 5,225
CapRock Communications Corp.,
11.500% 05/01/09 7,600 6,840
Centennial Cellular Corp.,
10.750% 12/15/08 5,800 5,800
Covad Communications Group, Inc.,
12.500% 02/15/09 1,000 870
Diamond Holdings PLC,
9.125% 02/01/08 (e) 8,000 7,440
Exodus Communications, Inc.:
10.750% 12/15/09 (a) 5,500 5,308
11.625% 07/15/10 (a) 4,500 4,523
Grapes Communications NV,
13.500% 05/15/10 (a)(f) Eu 3,000 2,664
Grupo Iusacell S.A.,
14.250% 12/01/06 1,000 1,023
Metrocall, Inc.,
9.750% 11/01/07 2,275 1,502
Orbcomm Global LP,
14.000% 08/15/04 965 753
Spectrasite Holdings, Inc.,
stepped coupon (11.250% 04/15/04)
(c) 04/15/09 15,250 8,845
Spectrasite Holdings, Inc.,
10.750% 03/15/10 1,325 1,318
Tele1 Europe BV,
11.875% 12/01/09 (a)(f) Eu 750 695
Time Warner Telecom LLC,
9.750% 07/15/08 9,700 9,409
United Pan-Europe Communications NV:
stepped coupon (13.750% 02/01/05)
(c) 02/01/10 5,000 2,400
11.500% 02/01/10 5,670 5,046
Verio, Inc.,
11.250% 12/01/08 10,421 11,567
----------
83,058
----------
Electric Services - 1.2% AES Corp.,
9.500% 06/01/09 11,750 11,515
Tenet Healthcare Corp.,
8.125% 12/01/08 1,360 1,251
----------
12,766
----------
Motor Freight & Warehousing - 0.3%
MTL, Inc.,
10.000% 06/15/06 5,000 3,750
----------
Telecommunication - 16.9%
AirGate PCS, Inc.,
stepped coupon (13.500% 10/01/04)
(c) 10/01/09 8,405 4,959
Arch Communication Group, Inc.,
12.750% 07/01/07 4,000 3,200
Crown Castle International Corp.,
10.750% 08/01/11 1,200 1,218
Carrier1 International SA,
13.250% 02/15/09 6,000 5,910
Clearnet Communications, Inc.,
stepped coupon (14.750% 12/15/00)
(c) 12/15/05 8,100 8,343
Covad Communications Group, Inc.,
12.000% 02/15/10 (a) 1,300 1,092
Crown Castle International Corp.:
stepped coupon (10.375% 05/15/04)
(c) 05/15/11 4,615 2,815
(10.625% 11/15/02)
(d) 11/15/07 3,000 2,228
Flag Telecom Holding Ltd.,
11.625% 03/30/10 (a) 1,180 1,133
Flag Telecom Holdings Ltd.,
11.625% 03/30/10 (g) Eu 3,765 3,451
Global Crossing Holding Ltd.,
9.625% 05/15/08 300 292
Global Crossing Ltd.,
9.125% 11/15/06 9,210 8,865
Hyperion Telecommunications, Inc.,
stepped coupon (13.000% 04/15/01)
(c) 04/15/03 (a) 3,100 2,883
IPCS Inc.,
stepped coupon (14.000% 07/15/05)
(c) 07/15/10 (a) 2,500 1,363
Jazztel PLC,
13.250% 12/15/09 (h) Eu 2,600 2,309
KMC Telecom Holdings, Inc.,
13.500% 05/15/09 3,000 2,640
See notes to investment portfolio.
8
<PAGE>
--------------------------------------------------------------------------------
Investment Portfolio (continued)
--------------------------------------------------------------------------------
June 30, 2000 (Unaudited)
(In thousands)
CURRENCY PAR VALUE
--------------------------------------------------------------------------------
Level 3 Communications, Inc.:
9.125% 05/01/08 (a) $ 3,000 $ 2,693
11.000% 03/15/08 (a) 6,250 6,188
McLeodUSA, Inc.,
8.375% 03/15/08 7,000 6,405
MetroNet Communications Corp.,
12.000% 08/15/07 1,250 1,416
Metromedia Fiber Network, Inc.,
10.000% 11/15/08 10,000 9,900
Microcell Telecommunications, Inc.,
stepped coupon (14.000% 12/01/01)
(c) 06/01/06 7,000 6,493
Nextel Communications, Inc.:
stepped coupon (9.750% 10/31/02)
(c) 10/31/07 9,700 7,227
9.375% 11/15/09 2,500 2,400
Nextel International, Inc.,
stepped coupon (12.125% 04/15/03)
(c) 04/15/08 5,000 3,259
Nextel Partners, Inc.,
11.000% 03/15/10 (a) 1,900 1,891
Nextlink Communications, Inc.,
10.750% 06/01/09 5,850 5,777
Ono Finance PLC:
13.000% 05/01/09 (h) Eu 5,700 5,586
14.000% 07/15/10 (a)(h) Eu 8,300 7,901
RCN Corp.,
stepped coupon (11.125% 10/15/02)
(c) 10/15/07 4,755 2,901
Rhythms NetConnections, Inc.,
12.750% 04/15/09 4,000 2,800
Rogers Cantel, Inc.,
9.750% 06/01/16 10,000 10,600
Tele1 Europe BV,
11.875% 12/01/09 (f) Eu 2,250 2,084
TeleCorp PCS, Inc.,
stepped coupon (11.625% 04/15/04)
(c) 04/15/09 11,475 7,545
US Unwired, Inc.,
stepped coupon (13.375% 11/01/04)
(c) 11/01/09 5,000 2,750
UbiquiTel Operating Co.,
stepped coupon (14.000% 04/15/05)
(c) 04/15/10 5,250 3,019
Viatel, Inc.,
11.500% 03/15/09 4,000 3,040
Williams Communications Group, Inc.,
10.875% 10/01/09 13,700 13,358
WinStar Communications Unit,
12.750% 04/15/10 (a) 1,395 1,346
WinStar Equipment Corp.,
12.500% 04/15/08 5,950 5,801
Worldwide Fiber, Inc.,
12.000% 08/01/09 5,430 5,159
XM Satellite Radio Holdings, Inc.,
14.000% 03/15/10 (a) 2,000 1,770
----------
182,010
----------
Water Transportation - 0.5%
Azurix Corp.:
10.375% 02/15/07 (a) 1,500 1,448
10.750% 02/15/10 (a) 4,125 3,960
----------
5,408
----------
--------------------------------------------------------------------------------
WHOLESALE TRADE - 0.2%
Durable Goods - 0.2%
Holmes Products Corp.,
9.875% 11/15/07 2,500 1,750
----------
TOTAL CORPORATE FIXED-INCOME
BONDS & NOTES
(cost of $973,967) 913,042
----------
CORPORATE CONVERTIBLE BONDS - 0.2%
--------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 0.2%
Communications
EchoStar Communications Corp.,
4.875% 01/01/07 (a)
(cost of $2,000) 2,000 1,894
----------
TOTAL BONDS & NOTES
(cost of $975,967) 914,936
----------
Preferred Stocks - 9.4% SHARES
--------------------------------------------------------------------------------
MANUFACTURING - 0.0%
Fabricated Metal
TransTexas Gas Corp. 833 83
----------
--------------------------------------------------------------------------------
RETAIL TRADE - 0.0%
Food Stores
Supermarkets General Holdings,
3.520% (i) 69 69
----------
--------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 9.4%
Broadcasting - 0.7%
Granite Broadcasting Corp., PIK
12.750% (i) 4 3,351
PriMedia Inc.:
9.200% 31 2,776
10.000% 15 1,448
----------
7,575
----------
See notes to investment portfolio.
9
<PAGE>
--------------------------------------------------------------------------------
Investment Portfolio (continued)
--------------------------------------------------------------------------------
June 30, 2000 (Unaudited)
(In thousands)
Preferred Stock (continued) SHARES VALUE
--------------------------------------------------------------------------------
Cable - 5.7%
Adelphia Communications Corp.,
13.000% 90 $ 9,450
CSC Holdings Ltd. PIK:
11.125% 73 7,782
11.750% 409 43,949
----------
61,181
----------
Communications - 0.3%
Dobson Communication Corp., PIK,
12.250% 3 2,889
----------
Telecommunication - 2.7%
Global Crossing Ltd., PIK,
10.500% 15 1,474
Nextel Communications, Inc., PIK:
11.125% 22 20,559
13.000% 7 7,479
----------
29,512
----------
TOTAL PREFERRED STOCK
(cost of $167,082) 101,309
----------
Common Stocks - 2.5%
--------------------------------------------------------------------------------
FINANCE, INSURANCE & REAL ESTATE - 0.0%
Real Estate
Host Marriott Corp. 8 77
----------
--------------------------------------------------------------------------------
MANUFACTURING - 1.0%
Chemicals & Allied Products - 0.0%
Caremark International, Inc. 14 174
----------
Communications Equipment - 1.0%
EchoStar Communications Corp.
Class A (i) 320 10,595
----------
Fabricated Metal - 0.0%
TransTexas Gas Corp. Class A 4 20
----------
Food & Kindred Products - 0.0%
Darling International, Inc. (i) 52 59
----------
--------------------------------------------------------------------------------
MINING & ENERGY - 0.1%
Crude Petroleum & Natural Gas - 0.0%
Coho Energy, Inc. (i) 1 6
----------
Oil & Gas Extraction - 0.1%
Gulf Canada Resources, Ltd. 150 722
Pioneer Natural Resources Co. 7 89
----------
811
----------
Oil & Gas Field Services - 0.0%
Parker Drilling Co. (i) 100 619
----------
Miscellaneous Retail - 0.0%
Macleod-Stedman, Inc. (i)(j) 425 4
----------
--------------------------------------------------------------------------------
SERVICES - 0.2%
Business Services - 0.0%
Iron Mountain Inc. (i) 1 38
----------
Hotels, Camps & Lodging - 0.2%
Crestline Capital Corp. (i) 1 13
Isle of Capri Casinos, Inc. (i) 150 2,034
Loral Space & Communications Ltd. 12 48
----------
2,095
----------
--------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 1.1%
Communications - 0.0%
Tele1 Europe Holding AB ADR 28 339
----------
Electric Services - 0.0%
BayCorp Holdings, Ltd. (i) 1
----------
Local & Suburban Transit - 0.0%
Greyhound Lines, Inc.:
12.500% Escrow Receipt (i)(j) 2
13.000% Escrow Receipt (i)(j) 1 (j)
----------
Motor Freight & Warehousing - 0.0%
St. Johnsbury Trucking Co. (a)(i)(j) 79 1
Sun Carriers, Inc. (a)(i)(j) 326 3
----------
4
----------
Telecommunication - 1.1%
Metrocall, Inc. 100 901
Nextel Communications, Inc., Class A (i) 100 6,119
Price Communications Corp. (i) 210 4,942
----------
11,962
----------
--------------------------------------------------------------------------------
WHOLESALE TRADE - 0.1%
Durable Goods
Associated Materials, Inc. 50 750
----------
TOTAL COMMON STOCKS
(cost of $28,189) 27,554
----------
Warrants (i) - 0.3%
--------------------------------------------------------------------------------
MANUFACTURING - 0.0%
Rubber & Plastic
BPC Holdings Corp.,
(expires 04/15/04) (j) 4 70
----------
--------------------------------------------------------------------------------
SERVICES - 0.0%
Health Services
Wright Medical Technology,
(expires 06/15/03) 1 (k)
----------
See notes to investment portfolio.
10
<PAGE>
--------------------------------------------------------------------------------
Investment Portfolio (continued)
--------------------------------------------------------------------------------
June 30, 2000 (Unaudited)
(In thousands)
Warrants (continued) SHARES VALUE
-------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 0.3%
Cable - 0.0%
Cable Satisfaction,
(expires 03/01/10) 3 $ 3
Wireless One, Inc.,
(expires 10/19/00) (j) 20 (k)
----------
3
Telecommunication - 0.3% AirGate PCS, Inc.,
(expires 10/01/09) 12 646
American Telecasting, Inc.,
(expires 08/01/00) (j) 9 (k)
Carrier 1 International,
(expires 02/19/09) 3 917
Intermedia Communication of Florida, Inc.,
(expires 06/01/00) 1 161
MetroNet Communications Corp.,
(expires 08/15/07) (a) 1 113
Ono Finance PLC,
(expires 05/31/09) (a)(e) 6 855
----------
2,692
----------
TOTAL WARRANTS
(cost of $10,017) 2,765
----------
TOTAL INVESTMENTS
(cost of $1,181,255) (l) 1,046,564
----------
Short-Term Obligations - 2.5% PAR
-------------------------------------------------------------------------------
Repurchase agreement with SBC Warburg
Ltd., dated 6/30/00 due 07/03/00 at
6.600% collateralized by U.S. Treasury
notes with various maturities to 2026,
market value $27,326 (repurchase
proceeds $26,779) $26,764 26,764
----------
Forward Currency Contracts (m) (107)
-------------------------------------------------------------------------------
Other Assets & Liabilities, Net - 0.5% 5,356
-------------------------------------------------------------------------------
NET ASSETS - 100% $1,078,577
----------
Notes to Investment Portfolio:
-------------------------------------------------------------------------------
(a) 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
June, 30 2000 the value of these securities amounted to $77,039 or 7.1% of
net assets.
(b) Zero coupon bond.
(c) Currently zero coupon. Shown parenthetically is the interest to be paid
and the date the Fund will begin accruing this rate.
(d) This issuer is in default of certain debt covenants. Income is not being
accrued.
(e) This is a British security. Par amount is stated in U.S. dollars.
(f) This is a Netherlands security. Par amount is stated in Euro dollars.
(g) This is a Luxembourg security. Par amount is stated in Euro dollars.
(h) This is a British security. Par amount is stated in Euro dollars.
(i) Non-income producing.
(j) The value of this security represents fair value as determined in good
faith under the direction of the Trustees.
(k) Rounds to less than one.
(l) Cost for federal income tax purposes is the same.
(m) As of June 30, 2000, the Fund had entered into the following forward
currency exchange contracts:
Net Unrealized
Contracts In Exchange Depreciation
to Deliver For Settlement Date (U.S.$)
--------------------------------------------------------------------------------
Eu 19,828 US$ 19,026 09/18/00 $ 107
Summary of Securities
by Country Country Value % of Total
--------------------------------------------------------------------------------
United States $1,021,694 97.6
United Kingdom UK 15,976 1.5
Netherlands NE 5,443 0.5
Luxembourg BM 3,451 0.4
---------- -----
$1,046,564 100.0%
========== =====
Acronym Name
------- ---------------
EU Euro
PIK Payment-In-Kind
ADR American Depositary Receipt
See notes to financial statements.
11
<PAGE>
--------------------------------------------------------------------------------
Statement of Assets and Liabilities
--------------------------------------------------------------------------------
June 30, 2000 (Unaudited)
(In thousands except for per share amounts and footnotes)
Assets
Investments at value (cost $1,181,255) $ 1,046,564
Short-term obligations 26,764
-----------
1,073,328
Cash including foreign currencies
(cost of $3,392) $ 3,521
Receivable for:
Investments sold 11,601
Interest 20,266
Fund shares sold 1,555
Dividends 907
Other 322 38,172
----------- -----------
Total Assets 1,111,500
Liabilities
Unrealized depreciation on forward
currency contracts 107
Payable for:
Investments purchased 25,735
Distributions 2,835
Fund shares repurchased 2,978
Accrued:
Management fee 537
Bookkeeping fee 32
Transfer agent fee 643
Deferred Trustees fees 15
Other 41
-----------
Total Liabilities 32,923
-----------
Net Assets $ 1,078,577
===========
Net asset value & redemption price per share -
Class A ($475,933/78,562) $ 6.05(a)
===========
Maximum offering price per share -
Class A ($6.05/0.9525) $ 6.35(b)
===========
Net asset value & offering price per share -
Class B ($547,116/90,312) $ 6.05(a)
===========
Net asset value & offering price per share -
Class C ($54,984/9,076) $ 6.05(a)
===========
Net asset value, redemption & offering price per share -
Class Z ($544/90) $ 6.05
===========
Composition of Net Assets
Capital paid in $ 1,263,418
Overdistributed net investment income (1,064)
Accumulated net realized loss (48,975)
Net unrealized depreciation on:
Investments (134,691)
Foreign currency transactions (111)
-----------
$ 1,078,577
===========
--------------------------------------------------------------------------------
Statement of Operations
--------------------------------------------------------------------------------
For the Six Months Ended June 30, 2000 (Unaudited)
(In thousands)
Investment Income
Interest $ 54,992
Dividends 5,969
--------
Total Investment Income 60,961
Expenses
Management fee $ 3,415
Service fee - Class A, Class B, Class C 1,413
Distribution fee - Class B 2,175
Distribution fee - Class C 208
Transfer agent fee 1,435
Bookkeeping fee 197
Trustees fees 32
Custodian fee 2
Audit fee 19
Legal fee 6
Registration fee 39
Reports to shareholders 17
Other 56
--------
Total expenses 9,014
Fees waived by the
Distributor - Class C (42) 8,972
-------- --------
Net Investment Income 51,989
--------
Net Realized & Unrealized Gain (Loss)
on Portfolio Positions
Net realized gain (loss) on:
Investments (21,920)
Foreign currency transactions 312
--------
Net Realized Loss (21,608)
Net change in unrealized appreciation/depreciation
during the period on:
Investments (64,415)
Foreign currency transactions (224)
--------
Net Change in Unrealized
Appreciation/Depreciation (64,639)
--------
Net Loss (86,247)
--------
Decrease in Net Assets from Operations $(34,258)
========
(a) Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
(b) On sales of $50,000 or more the offering price is reduced.
See notes to financial statements.
12
<PAGE>
--------------------------------------------------------------------------------
Statement of Changes in Net Assets
--------------------------------------------------------------------------------
(In thousands)
(Unaudited)
Six months
ended Year ended,
June 30, December 31,
----------- ------------
Increase (Decrease) in Net Assets 2000 1999 (a)
--------------------------------------------------------------------------------
Operations:
Net investment income $ 51,989 $ 106,710
Net realized loss (21,608) (10,225)
Net change in unrealized appreciation/
depreciation (64,639) (27,169)
----------- -----------
Net Increase (Decrease)
from Operations (34,258) 69,316
Distributions:
From net investment income - Class A (25,232) (51,998)
From net investment income - Class B (26,798) (52,296)
From net investment income - Class C (2,604) (4,009)
From net investment income - Class Z (26) (18)
----------- -----------
(54,660) (108,321)
----------- -----------
Fund Share Transactions:
Receipts for shares sold - Class A 77,819 222,739
Value of distributions reinvested -
Class A 11,541 25,230
Cost of shares repurchased - Class A (114,421) (258,259)
----------- -----------
(25,061) (10,290)
----------- -----------
Receipts for shares sold - Class B 80,418 250,148
Value of distributions reinvested -
Class B 11,721 25,137
Cost of shares repurchased - Class B (126,733) (202,175)
----------- -----------
(34,594) 73,110
----------- -----------
Receipts for shares sold - Class C 13,237 37,981
Value of distributions reinvested -
Class C 1,638 2,685
Cost of shares repurchased - Class C (11,634) (17,215)
----------- -----------
3,241 23,451
----------- -----------
Receipts for shares sold - Class Z 168 457
Value of distributions reinvested -
Class Z 24 18
Cost of shares repurchased - Class Z (27) (50)
----------- -----------
165 425
----------- -----------
Net Increase (Decrease) from
Fund Share Transactions (56,249) 86,696
----------- -----------
Total Increase (Decrease) (145,167) 47,691
Net Assets
Beginning of period 1,223,744 1,176,053
----------- -----------
End of period (net of overdistributed and
including undistributed net investment
income of $1,064 and $1,607, respectively) $ 1,078,577 $ 1,223,744
=========== ===========
Number of Fund Shares
Sold - Class A 12,413 33,114
Issued for distributions reinvested - Class A 1,839 3,771
Repurchased - Class A (18,144) (38,489)
----------- -----------
(3,892) (1,604)
----------- -----------
Sold - Class B 12,800 37,269
Issued for distributions reinvested - Class B 1,868 3,760
Repurchased - Class B (20,063) (30,197)
----------- -----------
(5,395) (10,832)
----------- -----------
Sold - Class C 2,100 5,670
Issued for distributions reinvested - Class C 261 402
Repurchased - Class C (1,842) (2,591)
----------- -----------
519 3,481
----------- -----------
Sold - Class Z 26 68
Issued for distributions reinvested - Class Z 4 3
Repurchased - Class Z (4) (7)
----------- -----------
26 64
----------- -----------
(a) Class Z shares were initially offered on January 8, 1999.
See notes to financial statements.
13
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements
--------------------------------------------------------------------------------
June 30, 2000 (Unaudited)
Note 1. Interim Financial Statements
In the opinion of management of Liberty High Yield Securities Fund (formerly
Colonial High Yield Securities) (the Fund), a series of Liberty Funds Trust I,
the accompanying financial statements contain all normal and recurring
adjustments necessary for the fair presentation of the financial position of the
Fund at June 30, 2000, and the results of its operations, the changes in its net
assets and the financial highlights for the six months then ended.
Note 2. Accounting Policies
Organization
The Fund is a 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 high
current income and total return by investing primarily in lower rated corporate
debt securities. The Fund may issue an unlimited number of shares. The Fund
offers four classes of shares: Class A, Class B, Class C and Class Z. Class A
shares are sold with a front-end sales charge. A 1.00% contingent deferred sales
charge is assessed to Class A shares purchased without an initial sales charge
on redemptions made within eighteen months on an original purchase of $1 million
to $25 million. Class B shares are subject to an annual distribution fee and a
contingent deferred sales charge. Effective February 1, 2000, Class B shares
will convert to Class A shares as follows:
Converts to
Original purchase Class A shares
-------------------------------- --------------
Less than $250,000 8 years
$250,000 to less than $500,000 4 years
$500,000 to less than $1,000,000 3 years
C shares are subject to a contingent deferred sales charge on redemptions made
within one year after purchase and an annual distribution fee. Class Z shares
are offered continuously at net asset value. There are certain restrictions on
the purchase of Class Z shares, as described in the Fund's prospectus.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies that are consistently followed by the Fund in
the preparation of its financial statements.
Security valuation and transactions
Debt securities generally are valued by a pricing service based upon market
transactions for normal, institutional-size trading units of similar securities.
When management deems it appropriate, an over-the-counter or exchange bid
quotation is used.
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.
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 (losses) are based upon the specific identification
method for both financial statement and federal income tax purposes.
The Fund may trade securities on other than normal settlement terms. This may
increase the risk if the other party to the transaction fails to deliver and
causes the Fund to subsequently invest at less advantageous prices.
Determination of class net asset values and financial highlights
All income, expenses (other than Class A, Class B and Class C service fees and
Class B and Class C distribution fees), and realized and unrealized gains
(losses), are allocated to each class proportionately on a daily basis for
purposes of determining the net asset value of each class.
Class A, Class B and Class C per share data and ratios are calculated by
adjusting the expense and net investment income per share data and ratios for
the Fund for the entire period by the service fee applicable to Class A, Class B
and Class C shares and the distribution fee applicable to Class B and Class C
shares only.
Federal income taxes
Consistent with the Fund's policy to qualify as a regulated investment company
and to distribute all of its taxable income, no federal income tax has been
accrued.
Interest income, debt discount and premium
Interest income is recorded on the accrual basis. Original issue discount is
accreted to interest income over the life of a security with a corresponding
increase in the cost basis; premium and market discount are not amortized or
accreted.
The value of additional securities received as an interest or dividend payment
is recorded as income and as the cost basis of such securities.
Distributions to shareholders
The Fund declares and records distributions daily and pays monthly.
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. Reclassifications are made
14
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
June 30, 2000 (Unaudited)
to the Fund's capital accounts to reflect income and gains available for
distribution (or available capital loss carryforwards) under 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) from 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 Fund may also enter into forward currency
contracts to hedge certain other foreign currency denominated assets. The
contracts are used to minimize the exposure to foreign exchange rate
fluctuations during the period between trade and settlement date of the
contracts. 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 nonreclaimable 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 3. Fees and Compensation Paid to Affiliates
Management fee
Colonial Management Associates, Inc. (the Advisor) is the investment Advisor of
the Fund and furnishes accounting and other services and office facilities for a
monthly fee equal to 0.60% annually of the Fund's average net assets.
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%
Over $3 billion 0.001%
Transfer agent fee
Liberty Funds Services, Inc. (the Transfer Agent), an affiliate of the Advisor,
provided shareholder services for a monthly fee equal to 0.25% annually of the
Fund's average net assets and receives reimbursement for certain out-of-pocket
expenses through December 31, 1999.
Effective January 1, 2000, the Transfer Agent fee was changed to a fee comprised
of 0.07% annually of average net assets plus charges based on the number of
shareholder accounts and transactions. The Transfer Agent 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. During the six months ended June 30, 2000,
the Fund has been advised that the Distributor retained net underwriting
discounts of $26,052 on sales of the Fund's Class A shares and received
contingent deferred sales charges (CDSC) of $50,315, $1,233,024 and $13,494 on
Class A, Class B and Class C share redemptions, respectively.
The Fund has adopted a 12b-1 plan which requires it to pay the Distributor a
service fee equal to 0.25% annually of the Fund's 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% 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 will not exceed 0.60% annually.
The CDSC and the fees received from the 12b-1 plan are used principally as
repayment to the Distributor for amounts paid by the Distributor to dealers who
sold such shares.
Other
The Fund pays no compensation to its officers, all of whom are employees of the
Advisor.
The Fund's Trustees may participate in a deferred compensation plan which may be
terminated at any time. Obligations of the plan will be paid solely out of the
Fund's assets.
15
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
June 30, 2000 (Unaudited)
Note 4. Portfolio Information
Investment activity
During the six months ended June 30, 2000, purchases and sales of investments,
other than short-term obligations were $158,655,314 and $216,405,753,
respectively.
Unrealized appreciation (depreciation) at June 30, 2000, based on cost of
investments for both financial statement and federal income tax purposes was:
Gross unrealized appreciation $ 43,244,395
Gross unrealized depreciation (177,935,440)
-------------
Net unrealized depreciation $(134,691,045)
-------------
Capital loss carryforwards
At December 31, 1999, capital loss carryforwards available (to the extent
provided in regulations) to offset future realized gains were approximately as
follows:
Year of Capital loss
expiration carryforward
---------- ------------
2003 $11,710,000
2007 11,245,000
-----------
$22,955,000
-----------
Expired capital loss carryforwards, if any, are recorded as a reduction of
capital paid in.
To the extent loss carryforwards are used to offset any future realized gains,
it is unlikely that such gains would be distributed since they may be taxable to
shareholders as ordinary income.
Other
There are certain 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 currency exchange or 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 5. Line of Credit
The Fund may borrow up to 33 1/3% of its net assets under a line of credit for
temporary or emergency purposes. Any borrowings bear interest at one of the
following options determined at the inception of the loan: (1) federal funds
rate plus 1/2 of 1%, (2) the lending bank's base rate or (3) IBOR offshore loan
rate plus 1/2 of 1%. There were no borrowings under the line of credit during
the six months ended June 30, 2000.
16
<PAGE>
--------------------------------------------------------------------------------
Financial Highlights
--------------------------------------------------------------------------------
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
(Unaudited)
Six months ended June 30, 2000
--------------------------------------------------------
Class A Class B Class A Class Z
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 6.550 $ 6.550 $ 6.550 $ 6.550
-------- -------- ------- -------
Income from Investment Operations:
Net investment income (a) 0.302 0.277 0.282(b) 0.310(b)
Net realized and unrealized loss (0.485) (0.485) (0.485) (0.485)
-------- -------- ------- -------
Total from Investment Operations (0.183) (0.208) (0.203) (0.175)
-------- -------- ------- -------
Less Distributions Declared to Shareholders:
From net investment income (0.317) (0.292) (0.297) (0.325)
-------- -------- ------- -------
Net Asset Value, End of Period $ 6.050 $ 6.050 $ 6.050 $ 6.050
======== ======== ======= =======
Total return (c)(d) (2.86%) (3.24%) (3.17%)(e) (2.73%)
======== ======== ======= =======
Ratios to Average Net Assets
Expenses (f)(g) 1.18% 1.93% 1.78%(b) 0.93%
Net investment income (f)(g) 9.57% 8.82% 8.97%(b) 9.82%
Portfolio turnover (d) 15% 15% 15% 15%
Net assets at end of period (000) $475,933 $547,116 $54,984 $ 544
</TABLE>
(a) The per share net investment income amounts do not reflect the period's
reclassification of differences between book and tax basis net investment
income.
(b) Net of fees waived by the Distributor which amounted to $0.004 per share
and 0.15% (annualized).
(c) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(d) Not annualized.
(e) Had the Distributor not waived a portion of expenses, total return would
have been reduced.
(f) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(g) Annualized.
<TABLE>
<CAPTION>
Year ended December 31, 1999
--------------------------------------------------------
Class A Class B Class A Class Z(a)
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 6.760 $ 6.760 $ 6.760 $ 6.760
-------- -------- ------- -------
Income from Investment Operations:
Net investment income (b) 0.604 0.554 0.564(c) 0.602
Net realized and unrealized loss (0.200) (0.200) (0.200) (0.230)
-------- -------- ------- -------
Total from Investment Operations 0.404 0.354 0.364 0.372
-------- -------- ------- -------
Less Distributions Declared to Shareholders:
From net investment income (0.614) (0.564) (0.574) (0.612)
-------- -------- ------- -------
Net Asset Value, End of Period $ 6.550 $ 6.550 $ 6.550 $ 6.550
======== ======== ======= =======
Total return (d) 6.17% 5.38% 5.54%(e) 5.83%(f)
======== ======== ======= =======
Ratios to Average Net Assets
Expenses (g) 1.21% 1.96% 1.81%(c) 0.95%(h)
Net investment income (g) 9.02% 8.27% 8.42%(c) 9.22%(h)
Portfolio turnover 42% 42% 42% 42%
Net assets at end of period (000) $540,201 $627,057 $56,068 $ 418
</TABLE>
(a) Class Z shares were initially offered on January 8, 1999. Per share data
reflects activity from that date.
(b) The per share net investment income amounts do not reflect the period's
reclassification of differences between book and tax basis net investment
income.
(c) Net of fees waived by the Distributor which amounted to $0.010 per share
and 0.15%.
(d) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(e) Had the Distributor not waived a portion of expenses, total return would
have been reduced.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(h) Annualized.
17
<PAGE>
--------------------------------------------------------------------------------
Financial Highlights (continued)
--------------------------------------------------------------------------------
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
Year ended December 31, 1998
--------------------------------------
Class A Class B Class C
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $ 7.230 $ 7.230 $ 7.230
-------- -------- -------
Income from Investment Operations:
Net investment income 0.628 0.574 0.585(a)
Net realized and unrealized loss (0.474) (0.474) (0.474)
-------- -------- -------
Total from Investment Operations 0.154 0.100 0.111
-------- -------- -------
Less Distributions Declared to Shareholders:
From net investment income (0.624) (0.570) (0.581)
-------- -------- -------
Net Asset Value, End of Period $ 6.760 $ 6.760 $ 6.760
======== ======== =======
Total return (b) 2.12% 1.36% 1.51%(c)
======== ======== =======
Ratios to Average Net Assets
Expenses (d) 1.21% 1.96% 1.81%(a)
Net investment income (d) 8.81% 8.06% 8.21%(a)
Portfolio turnover 97% 97% 97%
Net assets at end of period (000) $568,125 $573,626 $34,302
</TABLE>
(a) Net of fees waived by the Distributor which amounted to $0.011 per share
and 0.15%.
(b) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(c) Had the Distributor not waived a portion of expenses, total return would
have been reduced.
(d) The benefits derived from custody credits and direct brokerage
arrangements had an impact of 0.01%.
<TABLE>
<CAPTION>
Years ended December 31
--------------------------------------------------------------------------
1997 1996
----------------------------------- ------------------------------------
Class A Class B Class C(a) Class A Class B Class C(b)
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 6.920 $ 6.920 $ 6.920 $ 6.750 $ 6.750 $ 6.780
-------- -------- ------- -------- -------- -------
Income from Investment Operations:
Net investment income 0.610 0.557 0.562 0.625 0.574 0.554
Net realized and unrealized gain 0.312 0.312 0.312 0.160 0.160 0.130
-------- -------- ------- -------- -------- -------
Total from Investment Operations 0.922 0.869 0.874 0.785 0.734 0.684
-------- -------- ------- -------- -------- -------
Less Distributions Declared to Shareholders:
From net investment income (0.612) (0.559) (0.564) (0.615) (0.564) (0.544)
-------- -------- ------- -------- -------- -------
Net Asset Value, End of Period $ 7.230 $ 7.230 $ 7.230 $ 6.920 $ 6.920 $ 6.920
======== ======== ======= ======== ======== =======
Total return (c) 13.87% 13.03% 13.11% 12.21% 11.38% 10.56%(d)
======== ======== ======= ======== ======== =======
Ratios to Average Net Assets
Expenses (e) 1.20% 1.95% 1.85% 1.20% 1.95% 1.95%(f)
Net investment income (e) 8.53% 7.78% 7.88% 9.02% 8.27% 8.27%(f)
Portfolio turnover 115% 115% 115% 145% 145% 145%
Net assets at end of period (000) $600,107 $513,977 $17,977 $528,063 $411,124 $ 6,054
</TABLE>
(a) Class D shares were redesignated Class C shares on July 1, 1997.
(b) Class C shares were initially offered on January 15, 1996. Per share data
reflects activity from that date.
(c) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(d) Not annualized.
(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(f) Annualized.
18
<PAGE>
--------------------------------------------------------------------------------
Financial Highlights (continued)
--------------------------------------------------------------------------------
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
Year ended December 31, 1995
-------------------------------
Class A Class B
------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period $ 6.300 $ 6.300
-------- --------
Income from Investment Operations:
Net investment income 0.615 0.566
Net realized and unrealized gain 0.452 0.452
-------- --------
Total from Investment Operations 1.067 1.018
-------- --------
Less Distributions Declared to Shareholders:
From net investment income (0.603) (0.555)
In excess of net investment income (0.014) (0.013)
-------- --------
Total Distributions Declared to Shareholders (0.617) (0.568)
-------- --------
Net Asset Value, End of Period $ 6.750 $ 6.750
======== ========
Total return (a) 17.65% 16.78%
======== ========
Ratios to Average Net Assets
Expenses (b) 1.21% 1.96%
Net investment income (b) 9.14% 8.39%
Portfolio turnover 95% 95%
Net assets at end of period (000) $466,905 $351,068
</TABLE>
(a) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(b) The benefits derived from custody credits and direct brokerage
arrangements had no impact.
19
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
Trustees & Transfer Agent
--------------------------------------------------------------------------------
Tom Bleasdale
Retired (formerly Chairman of the Board and Chief Executive Officer, Shore Bank
& Trust Company)
Lora S. Collins
Attorney (formerly Attorney, Kramer, Levin, Naftalis & Frankel)
James E. Grinnell
Private Investor (formerly Senior Vice President-Operations, The Rockport
Company)
Richard W. Lowry
Private Investor (formerly Chairman and Chief Executive Officer, U.S. Plywood
Corporation)
Salvatore Macera
Private Investor (formerly Executive Vice President of Itek Corp. and President
of Itek Optical & Electronic Industries, Inc.)
William E. Mayer
Partner, Park Avenue Partners (formerly Dean, College of Business and
Management, University of Maryland; Dean, Simon Graduate School of Business,
University of Rochester; Chairman and Chief Executive Officer, CS First Boston
Merchant Bank; and President and Chief Executive Officer, The First Boston
Corporation)
James L. Moody, Jr.
Retired (formerly Chairman of the Board, Chief Executive Officer and Director,
Hannaford Bros. Co.)
John J. Neuhauser
Academic Vice President and Dean of Faculties, Boston College (formerly Dean,
Boston College School of Management)
Thomas E. Stitzel
Business Consultant and Chartered Financial Analyst (formerly Professor of
Finance, College of Business, Boise State University)
Anne-Lee Verville
Consultant (formerly General Manager, Global Education Industry, and President,
Applications Solutions Division, IBM Corporation)
--------------------------------------------------------------------------------
Important Information About This Report
The Transfer Agent for Liberty High Yield Securities 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 High Yield Securities
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 Distributor, Inc. Performance Update.
Semiannual Report:
Liberty High Yield Securities Fund
<PAGE>
--------------------------------------------------------------------------------
Choose Liberty
--------------------------------------------------------------------------------
Because no single investment manager can be all things to all investors.(SM)
L I B E R T Y
---------------------------------
F U N D S
ALL-STAR Institutional money management approach for individual investors.
COLONIAL Fixed income and value style equity investing.
CRABBE A contrarian approach to fixed income and equity investing.
HUSON
NEWPORT A leader in international investing.(SM)
STEIN ROE Innovative solutions for growth and income investing.
ADVISOR
[KEYPORT LOGO] A leading provider of innovative annuity products.
Liberty's mutual funds are offered by prospectus through Liberty Funds
Distributor, Inc.
Before you invest, consult your financial advisor.
Your financial advisor can help you develop a long-term plan for reaching your
financial goals.
--------------------------------------------------------------------------------
LIBERTY HIGH YIELD SECURITIES FUND Semiannual Report
--------------------------------------------------------------------------------
[LOGO] L I B E R T Y
----------------------
F U N D S
ALL-STAR o COLONIAL o CRABBE HUSON o NEWPORT o STEIN ROE ADVISOR
Liberty Funds Distributor, Inc. (C)2000
One Financial Center, Boston, MA 02111-2621, 1-800-426-3750
www.libertyfunds.com
-------------
BULK RATE
U.S. POSTAGE
PAID
HOLLISTON, MA
PERMIT NO. 20
-------------
730-03/250C-0700 (8/00) 00/1367
<PAGE>
--------------------------------------------------------------------------------
Choose Liberty
--------------------------------------------------------------------------------
Because no single investment manager can be all things to all investors.(SM)
L I B E R T Y
---------------------------------
F U N D S
ALL-STAR Institutional money management approach for individual investors.
COLONIAL Fixed income and value style equity investing.
CRABBE A contrarian approach to fixed income and equity investing.
HUSON
NEWPORT A leader in international investing.(SM)
STEIN ROE Innovative solutions for growth and income investing.
ADVISOR
[KEYPORT LOGO] A leading provider of innovative annuity products.
Liberty's mutual funds are offered by prospectus through Liberty Funds
Distributor, Inc.
Before you invest, consult your financial advisor.
Your financial advisor can help you develop a long-term plan for reaching your
financial goals.
--------------------------------------------------------------------------------
LIBERTY HIGH YIELD SECURITIES FUND Semiannual Report
--------------------------------------------------------------------------------
[LOGO] L I B E R T Y
----------------------
F U N D S
ALL-STAR o COLONIAL o CRABBE HUSON o NEWPORT o STEIN ROE ADVISOR
Liberty Funds Distributor, Inc. (C)2000
One Financial Center, Boston, MA 02111-2621, 1-800-426-3750
www.libertyfunds.com
730-03/250C-0700 (8/00) 00/1367
<PAGE>
--------------------------------------------------------------------------------
Choose Liberty
--------------------------------------------------------------------------------
Because no single investment manager can be all things to all investors.(SM)
L I B E R T Y
---------------------------------
F U N D S
ALL-STAR Institutional money management approach for individual investors.
COLONIAL Fixed income and value style equity investing.
CRABBE A contrarian approach to fixed income and equity investing.
HUSON
NEWPORT A leader in international investing.(SM)
STEIN ROE Innovative solutions for growth and income investing.
ADVISOR
[KEYPORT LOGO] A leading provider of innovative annuity products.
Liberty's mutual funds are offered by prospectus through Liberty Funds
Distributor, Inc.
Before you invest, consult your financial advisor.
Your financial advisor can help you develop a long-term plan for reaching your
financial goals.
--------------------------------------------------------------------------------
LIBERTY HIGH YIELD SECURITIES FUND Semiannual Report
--------------------------------------------------------------------------------
[LOGO] L I B E R T Y
----------------------
F U N D S
ALL-STAR o COLONIAL o CRABBE HUSON o NEWPORT o STEIN ROE ADVISOR
730-03/250C-0700 (8/00) 00/1367
