--------------------------------------------------------------------------------
LIBERTY INCOME FUND Semiannual Report
--------------------------------------------------------------------------------
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 challenging for bond markets. With the
U.S. economy continuing to show exceptional strength, concerns about higher
inflation on the horizon brought significant issues for investors and the
Federal Reserve Board (the Fed). The Fed responded by continuing its policy of
raising short-term interest rates in an effort to slow the economy's growth.
This generally created unrest in the bond markets, driving interest rates on
many types of debt securities higher, which negatively affected bond values.
Although this has been a difficult environment, Liberty Income Fund continues to
pursue its investment style, owning a diversified portfolio of bonds. This
includes a mix of U.S. government bonds, high-yield corporate bonds and bonds
issued by foreign nations, including a small allocation in emerging market debt
securities. This approach helped to temper the generally negative movements that
took place in many parts of the bond market, most significantly among
high-yield, lower-grade corporate bonds. The Fund also seeks to enhance
performance by utilizing the expertise of its Advisor's in-house staff of credit
analysts, who help to identify specific issues they believe offer the best
return potential balanced with an appropriate level of risk.
While Liberty Income Fund's short-term performance was less than spectacular, it
maintains a solid, long-term record for its shareholders. We believe that over
time, individuals who wish to own a diversified portfolio of bonds may benefit
from the Fund's approach to fixed-income investing.
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 Income 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
---------------------------
Not FDIC May Lose Value
Insured No Bank Guarantee
---------------------------
<PAGE>
--------------------------------------------------------------------------------
Highlights
--------------------------------------------------------------------------------
o The bond market continues to struggle
After a difficult year in 1999, the first six months of 2000 followed a
similar pattern. In the United States, interest rates continued to trend
higher on most types of securities. One sector that was a significant
exception was long-term U.S. Treasury bonds. The yield on these bonds came
down dramatically, spurred on by budget surpluses and federal government
plans to buy back existing 30-year bonds. By contrast, mortgage-backed
securities (e.g., FNMA and GNMA bonds) and corporate bonds continued to
see interest rates creep higher.
o The inverted yield curve
An uncommon, but not unheard of, phenomenon occurred during this period.
With the Federal Reserve raising short-term interest rates and yields on
30-year Treasury bonds dropping, we witnessed an inverted yield curve.
This means that yields on shorter-term debt products were actually higher
than interest rates being paid on longer-term securities. This is unusual,
since investors usually earn a yield premium as a reward for taking the
risk of owning longer-term bonds. Of greater concern to the Fund was that
yields on corporate bonds, a major position in the portfolio, did not
enjoy the interest rate decline taking place on long-term government
bonds, and couldn't keep pace from a performance standpoint.
o Reasons for optimism
Toward the end of the six-month period, the market for corporate bonds
began to show signs of improvement. Yields started to decline, improving
their value. Based on historical trends, corporate bonds appear to offer
an extremely attractive value compared to U.S. Treasury securities. What's
more, there are signs that the Federal Reserve's aggressive efforts to
slow economic growth are helping to keep inflation in check. To date,
inflation numbers remain relatively low, and that's generally good news
for bond investors.
[The text below was depicted as a bar chart in the printed material.]
Liberty Income Fund(1) vs. Index and Peers
12/31/99 - 6/30/00
Liberty Income
Fund 1.98%
Lehman 4.18%
Lipper Category
Average 3.06%
(1) Performance of Class A shares without sales charges.
Past performance cannot predict future results. 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.
Neither the above fund nor Lipper returns include sales charges. The
Lehman Brothers Government/Corporate Bond Index (Lehman) is an unmanaged
index that tracks the performance of a selection of U.S. government and
investment grade 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.
Net asset value as of 6/30/00
Class A $5.86
--------------------------------
Class B $5.86
--------------------------------
Class C $5.86
--------------------------------
Distributions declared per
share from 1/1/00 - 6/30/00
Class A $0.234
--------------------------------
Class B $0.211
--------------------------------
Class C $0.216
--------------------------------
SEC yields on 6/30/00
Class A 7.37%
--------------------------------
Class B 6.97%
--------------------------------
Class C 7.13%
--------------------------------
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 6.96% for Class C shares. Past performance cannot predict
future results.
1
<PAGE>
--------------------------------------------------------------------------------
Portfolio Manager's Report
--------------------------------------------------------------------------------
Portfolio Structure Breakdown
as of 6/30/00
Corporate Bonds 69.7%
--------------------------------
U.S. Gov't & Agency
Bonds 21.3%
--------------------------------
Preferred Stocks 3.7%
--------------------------------
Foreign Gov't Bonds 4.8%
--------------------------------
Cash Equivalents 0.7%
--------------------------------
Other (0.2)%
--------------------------------
Quality Breakdown
as of 6/30/00
AAA 23.1%
--------------------------------
A 7.3%
--------------------------------
BBB 47.7%
--------------------------------
BB 8.3%
--------------------------------
B and Below 9.9%
--------------------------------
Equity and Other 3.7%
--------------------------------
Quality and portfolio structure breakdowns are calculated as a percentage of net
assets including short-term obligations. Ratings shown in the quality breakdown
represent the lowest rating assigned to a particular bond by one of the
following respected rating agencies: Standard & Poor's, Moody's or Fitch.
Because the Fund is actively managed, there can be no guarantee the Fund will
continue to maintain these quality and portfolio structure breakdowns in the
future.
The bond market creates few attractive opportunities
For the six-month period ended June 30, 2000, the Fund's Class A shares had a
total return of 1.98%, not including the sales charge. This return was below
then comparable income funds ranked by Lipper, which earned a return of 3.06%
for the same period.
Troubles for the bond market continued, much as they did in 1999, thanks in
large part to the strength of the U.S. economy. Investors became more jittery
about the prospect of spiraling inflation. That drove many investors away from
the bond market, shrinking demand, forcing yields on many types of debt
securities higher, and hurting the values of existing bonds.
Corporate bonds struggle significantly
Our corporate bond holdings lagged much of the market during the period. The
period was especially difficult for those bonds in the high-yield sector which
have lower credit quality but pay the most attractive yields. While the Fund's
total exposure to the high-yield market did not change significantly during the
period, we did reduce our holdings of lower-quality bonds within the sector in
an effort to reduce the level of risk in the portfolio. In what proved to be a
difficult period for many lower-grade bonds, our internal research efforts paid
off. We were able to avoid any issues that went into default. Still, the market
was so challenging for these types of bonds that our high-yield exposure
resulted in a negative effect on the Fund's performance.
Aided by our diversified approach
The Fund is committed to maintaining a portfolio that is diversified among a
number of different types of bonds. High-yield bonds suffered from problems in
that sector. Our holdings in Treasury bonds performed better. We steadily
increased our position in this sector to almost one-quarter of the Fund's net
assets by May. That position was reduced in June, in favor of adding
investment-grade corporate bonds.
2
<PAGE>
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Portfolio Manager's Report
--------------------------------------------------------------------------------
Foreign bonds continued to play a role in the portfolio as well. We focused much
of our attention in this area on bonds of emerging markets, such as Mexico,
Brazil and Turkey. This diversified approach has benefited shareholders by
generating competitive returns and a relatively high yield, while reducing the
risk of having extensive exposure to any one market.
We see opportunity ahead
The bond market has been suffering for an extended period of time, dating back
to early 1999. But many positive signs have begun to appear on the horizon. For
starters, corporate bonds offer very attractive yields relative to long-term
U.S. Treasury securities, and that should draw the interest of more buyers. If
that occurs, higher bond values will result. We expect to maintain a heavy
exposure in the corporate sector. We believe that selected opportunities in
emerging markets could also benefit the Fund over the long term. What's more, it
seems likely that the Federal Reserve may be close to completing its long spell
of raising short-term interest rates in an effort to cool the U.S. economy. If
the Fed is successful in bringing the economy to a "soft landing" by reducing
the rate of growth without triggering a recession, the markets are likely to
respond favorably.
/s/ Richard A. Stevens
Richard Stevens is portfolio manager of Liberty Income Fund and is a vice
president of Colonial Management Associates, Inc. Mr. Stevens has managed or
co-managed the Fund since September 1995.
An investment in the Fund offers attractive income and total return
opportunities, but it also involves certain risks associated with the credit
quality of lower-rated bonds. International investing may pose special risks due
to currency fluctuations as well as political and social developments. The
Fund's manager seeks to manage the risk through diversification and allocation
limits.
BOUGHT
--------------------------------------------------------------------------------
Mexican debt securities
The recent election of Vincente Fox as president of Mexico, bringing a new party
into power for the first time in decades, seems to reinforce the attractiveness
of this market. The Fund has two major holdings here, government-issued bonds
(1.5% of net assets) and Pemex (1.6% of net assets), Mexico's state-owned oil
company. The bond market seems to be responding well to the election results.
HELD
--------------------------------------------------------------------------------
Utilities
While stocks of traditional power companies have struggled, bonds from two
utility issuers, Dominion Resources (1.5% of net assets) and Reliant Energy
(2.3% of net assets) offer attractive values. At the time of publication, both
offered a significant yield advantage compared to U.S. Treasury securities. Both
are considered to be of high credit quality (BBB), and offer excellent return
potential.
3
<PAGE>
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Performance Information
--------------------------------------------------------------------------------
Average Annual Total Returns as of 6/30/00
<TABLE>
<CAPTION>
Share Class A B C
Inception Date 12/1/69 5/15/92 8/1/97
--------------------------------------------------------------------------------------
Without With Without With Without With
Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Six-month 1.98% (2.87)% 1.57% (3.33)% 1.66% 0.68%
(cumulative)
--------------------------------------------------------------------------------------
1 year 1.59 (3.23) 0.84 (3.87) 0.99 0.05
--------------------------------------------------------------------------------------
5 years 5.47 4.45 4.68 4.37 5.10 5.10
--------------------------------------------------------------------------------------
10 years 7.49 6.97 6.84 6.84 7.30 7.30
--------------------------------------------------------------------------------------
</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.
Performance for different share classes will vary based on differences in sales
charges and fees associated with each class.
Class B and C share (newer class shares) performance information includes
returns of the Fund's Class A shares (the oldest existing fund class) for
periods prior to the inception dates 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 newer class shares. Had the expense
differential been reflected, the returns for the periods prior to the inception
of the class shares would have been lower.
4
<PAGE>
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Investment Portfolio
--------------------------------------------------------------------------------
June 30, 2000 (Unaudited)
(In thousands)
Corporate Fixed Income
Bonds & Notes 69.7% PAR VALUE
--------------------------------------------------------------------------------
CONSTRUCTION - 4.5%
Building Construction
Centex Corp.,
9.750% 06/15/05 $2,000 $2,009
Morrison Knudsen,
11.000% 07/01/10 (a) 1,000 995
Pulte Corp.,
8.375% 08/15/04 3,000 2,904
------
5,908
------
--------------------------------------------------------------------------------
FINANCE, INSURANCE & REAL ESTATE - 5.5%
Depository Institutions - 2.7%
Bank of Tokyo-Mitsubishi Ltd.,
8.400% 04/15/10 3,000 3,033
Sovereign Bancorp, Inc.,
10.500% 11/15/06 500 496
------
3,529
------
Financial Services - 0.7%
PDVSA Finance Ltd.,
Series 1999 I, 9.750% 02/15/10 1,000 975
------
Insurance Carriers - 2.1%
Jefferson-Pilot Capital Trust,
8.285% 03/01/46 (a) 3,000 2,712
------
--------------------------------------------------------------------------------
MANUFACTURING - 11.4%
Chemicals & Allied Products - 3.5%
Equistar Chemicals LP,
8.750% 02/15/09 3,000 2,919
Lockheed Martin Corp.,
8.200% 12/01/09 1,500 1,515
Texas Petrochemical Corp.,
11.125% 07/01/06 255 217
------
4,651
------
Electronic & Electrical Equipment - 0.4%
Flextronics International Ltd.,
9.875% 07/01/10 (a) 500 506
------
Machinery & Computer Equipment - 0.3%
IMO Industries, Inc.,
11.750% 05/01/06 425 425
------
Miscellaneous Manufacturing - 2.3%
Reliant Energy,
8.125% 07/15/05 (a) 3,000 2,996
------
Petroleum Refining - 3.8%
USX Corp.,
9.375% 02/15/12 2,700 2,975
Valero Energy Corp.,
8.375% 06/15/05 2,000 2,026
------
5,001
------
Primary Metal - 0.4%
A.K. Steel Corp.,
9.125% 12/15/06 500 480
------
Transportation Equipment - 0.7%
Dura Operating Corp.,
9.000% 05/01/09 1,000 870
------
--------------------------------------------------------------------------------
MINING & ENERGY - 7.4%
Coal Mining - 0.1%
AEI Resources, Inc.,
10.500% 12/15/05 (a) 1,000 200
------
Metal Mining - 2.3%
Noranda, Inc.,
8.125% 06/15/04 3,000 2,984
------
Miscellaneous Metal Ores - 1.5%
Cyprus Amax Minerals Co.,
10.125% 01/01/02 2,000 2,071
------
Oil & Gas Extraction - 2.7%
HS Resources, Inc.,
9.250% 11/15/06 1,500 1,463
Pemex Finance Ltd.,
9.030% 02/15/11 (a) 2,000 2,047
------
3,510
------
Oil & Gas Field Services - 0.8%
R&B Falcon Corp.,
9.500% 12/15/08 1,000 1,003
------
--------------------------------------------------------------------------------
RETAIL TRADE - 6.3%
General Merchandise Stores - 3.9%
Kmart Corp.,
12.500% 03/01/05 1,000 1,080
ShopKo Stores, Inc.,
9.000% 11/15/04 4,000 4,120
------
5,200
------
Miscellaneous Retail - 2.4%
Discover Credit,
9.070% 03/16/12 3,000 3,179
------
--------------------------------------------------------------------------------
SERVICES - 4.5%
Amusement & Recreation - 0.7%
Mohegan Tribal Gaming Authority,
8.750% 01/01/09 1,000 950
------
Hotels, Camps & Lodging - 2.2%
Jupiters Ltd.,
8.500% 03/01/06 1,000 933
MGM Grand, Inc.,
9.750% 06/01/07 2,000 2,030
------
2,963
------
Other Services - 1.6%
ERAC USA Finance Co.,
9.125% 12/15/04 (a) 2,000 2,082
------
See notes to investment portfolio.
5
<PAGE>
--------------------------------------------------------------------------------
Investment Portfolio (continued)
--------------------------------------------------------------------------------
June 30, 2000 (Unaudited)
(In thousands)
Corporate Fixed Income
Bonds & Notes (continued) PAR VALUE
--------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION,
ELECTRIC, GAS AND SANITARY SERVICES - 30.1%
Air Transportation - 6.8%
AMR Corp.,
9.000% 08/01/12 $ 3,000 $ 2,966
Delta Air Lines, Inc.,
10.375% 02/01/11 3,000 3,261
Federal Express Corp.,
9.650% 06/15/12 2,500 2,757
-------
8,984
-------
Broadcasting - 6.2%
CBS Corp., (formerly
Westinghouse Electric Corp.),
8.625% 08/01/12 3,000 3,141
Fox Family Worldwide, Inc.,
9.250% 11/01/07 500 455
Liberty Media Group.,
7.875% 07/15/09 1,500 1,444
News America Holdings, Inc.,
9.250% 02/01/13 3,000 3,201
-------
8,241
-------
Cable - 2.7%
Adelphia Communications Corp.,
10.500% 07/15/04 1,000 1,000
Charter Communications Holding LLC,
stepped coupon, (9.920% 01/01/04) 1,000 568
04/01/11
EchoStar DBS Corp.,
9.250% 02/01/06 1,500 1,455
NTL, Inc.,
10.000% 02/15/07 500 475
-------
3,498
-------
Communications - 2.2%
MetroNet Communications Corp.,
stepped coupon, (9.950% 06/01/03) 3,000 2,385
(b) 04/01/11
Verio, Inc.,
11.250% 12/01/08 500 555
-------
2,940
-------
Electric Services - 1.5%
Endesa-Chile Overseas Co.,
8.500% 04/01/09 2,000 1,960
-------
Gas Services - 2.5%
Coastal Corp.,
9.625% 05/15/12 3,000 3,362
-------
Telecommunication - 8.2%
Dominion Resources,
8.125% 06/15/10 2,000 2,017
Global Crossing Ltd.,
9.125% 11/15/06 (a) 1,000 963
Metromedia Fiber Network, Inc.,
10.000% 11/15/08 500 495
Nextel Communications, Inc.,
stepped coupon, (10.000% 10/31/02) 1,000 745
(b) 10/31/07
Sprint Spectrum LP,
stepped coupon, (12.500% 08/15/01)
(b) 08/15/06 3,020 2,883
Tele-Communications, Inc.,
9.800% 02/01/12 2,400 2,725
Williams Communications Group, Inc.,
10.700% 10/01/07 1,000 990
-------
10,818
-------
TOTAL CORPORATE FIXED INCOME
BONDS & NOTES
(cost of $97,949) 91,998
-------
U.S. Government & Agency Obligations - 21.3%
--------------------------------------------------------------------------------
Federal National Mortgage Association:
9.000% 2019-2020 263 271
-------
Government National Mortgage Association:
10.000% 2017-2019 16 17
10.500% 2016-2020 170 184
11.500% 2013 42 46
12.500% 2010-2013 105 119
13.000% 2011 6 6
14.000% 2011 5 5
-------
377
-------
U.S. Treasury Bond:
7.125% 02/15/23 4,000 4,446
10.750% 08/15/05 10,000 11,920
-------
16,366
-------
U.S. Treasury Note,
10.375% 11/15/2012 (c) 9,000 11,066
-------
TOTAL U.S. GOVERNMENT
& AGENCY OBLIGATIONS
(cost of $30,551) 28,080
-------
Foreign Government &
Agency Obligations - 4.8% COUNTRY
--------------------------------------------------------------------------------
Government of New Zealand,
10.000% 03/15/02 NZ 3,500 1,722
Republic of Brazil,
14.500% 10/15/09 (d) 1,250 1,337
Republic of Turkey,
12.375% 06/15/09 (e) 1,250 1,326
See notes to investment portfolio.
6
<PAGE>
--------------------------------------------------------------------------------
Investment Portfolio (continued)
--------------------------------------------------------------------------------
June 30, 2000 (Unaudited)
(In thousands)
Foreign Government &
Agency Obligations (cont'd) COUNTRY PAR VALUE
-------------------------------------------------------------------------------
United Mexican States,
9.875% 01/15/07 (f) $1,000 $ 1,030
United Mexican States Global,
8.625% 03/12/08 (g) DM 1,000 963
--------
TOTAL FOREIGN GOVERNMENT
& AGENCY OBLIGATIONS
(cost of $6,619) 6,378
--------
Preferred Stocks - 3.7% SHARES
-------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION,
ELECTRIC, GAS & SANITARY SERVICES - 3.7%
Cable - 1.0%
CSC Holdings Ltd.,
11.250% PIK 12 1,284
--------
Electric Services - 2.7%
ComEd Finance I,
Series 8.480% 78 1,775
TU Electric Capital,
8.250%, TOPRS 80 1,810
--------
3,585
--------
TOTAL PREFERRED STOCKS
(cost of $5,389) 4,869
--------
Warrants (h) - 0.0%
-------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 0.0%
Telecommunication
American Telecasting, Inc.
(cost of $30) (i) 1 (j)
--------
TOTAL INVESTMENTS
(cost of $140,508) (k) 131,325
--------
Short-Term Obligations - 0.7% PAR
-------------------------------------------------------------------------------
Repurchase agreement with SBC Warburg
Ltd., dated 06/30/00, due 07/03/00 at
6.600%, collateralized by U.S. Treasury
notes with various maturities to 2026,
market value $977 (repurchase
proceeds $958) $ 957 957
--------
Forward Currency Contracts - (l) 19
--------
Other Assets and Liabilities, Net - (0.2)% (357)
--------
Net Assets - 100% $131,944
--------
Notes to Investment Portfolio:
--------------------------------------------------------------------------------
(a) Securities 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 $12,501 or 9.5% of net
assets.
(b) Currently zero coupon. Shown parenthetically is the interest rate to be
paid and the date the Fund will begin accruing this rate.
(c) This security, or a portion thereof, with a total market value of $6,014
is being used to collateralize foreign currency exchange contracts
indicated in note (l) below.
(d) This is a Brazilian security. Par amount is stated in U.S. dollars.
(e) This is a Turkish security. Par amount is stated in U.S. dollars.
(f) This is a Mexican security. Par amount is stated in U.S. dollars.
(g) This is a Mexican security. Par amount is stated in German Deutschmarks.
(h) Non-income producing.
(i) The value of this security represents fair value as determined in good
faith under the direction of the Trustees.
(j) Rounds to less than one.
(k) Cost for federal income tax purposes is the same.
(l) As of June 30, 2000, the Fund had entered into the following forward
currency exchange contracts:
Net Unrealized
Contracts In Exchange Settlement Appreciation
to Deliver For Date U.S. $
----------- ----------- ---------- --------------
NK 1,980 US $ 442 07/26/00 $19
NK 1,980 US $ 456 07/26/00 (6)
NZ 1,920 US $ 906 08/09/00 6
---
$19
===
Summary of Securities
by Country Country Value % of Total
--------------------- ------- -------- ----------
United States $124,947 95.1
Mexico Mx 1,993 1.5
New Zealand NZ 1,722 1.3
Turkey Tu 1,326 1.1
Brazil Bz 1,337 1.0
-------- -----
$131,325 100.0
======== =====
Certain securities are listed by country of underlying exposure but may trade
predominantly on other exchanges.
Acronym Name
------- --------------------------
DM German Deutschmarks
NK Norwegian Kroner
NZ New Zealand Dollar
PIK Payment-In-Kind
TOPRS Trust Originated Preferred
Redeemable Securities
See notes to financial statements.
7
<PAGE>
--------------------------------------------------------------------------------
Statement of Assets and Liabilities
--------------------------------------------------------------------------------
June 30, 2000 (Unaudited)
(In thousands except for per share amounts and footnotes)
Assets
Investments at value (cost $140,508) $ 131,325
Short-term obligations 957
---------
132,282
Unrealized appreciation on forward
currency contracts $ 19
Receivable for:
Investments sold 7,917
Interest 2,594
Fund shares sold 31
Other 13 10,574
--------- ---------
Total Assets 142,856
Liabilities
Payable for:
Investments purchased 10,021
Fund shares repurchased 457
Distributions 271
Accrued:
Management fee 54
Bookkeeping fee 5
Transfer Agent fee 31
Deferred Trustees' fees 5
Other 68
---------
Total Liabilities 10,912
---------
Net Assets $ 131,944
=========
Net asset value & redemption price per share -
Class A ($95,055/16,245) $ 5.86(a)
=========
Maximum offering price per share -
Class A ($5.86/0.9525) $ 6.15(b)
=========
Net asset value & offering price per share -
Class B ($34,111/5,829) $ 5.86(a)
=========
Net asset value & offering price per share -
Class C ($2,778/475) $ 5.86(a)
=========
Composition of Net Assets
Capital paid in 148,472
Overdistributed net investment income (337)
Accumulated net realized loss (7,026)
Net unrealized appreciation (depreciation) on:
Investments (9,183)
Foreign currency transactions 18
---------
$ 131,944
=========
(a) Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
(b) On sales of $50,000 or more the offering price is reduced.
--------------------------------------------------------------------------------
Statement of Operations
--------------------------------------------------------------------------------
For the Six Months Ended June 30, 2000 (Unaudited)
(In thousands)
Investment Income
Interest $ 5,632
Dividends 235
-------
Total Investment Income 5,867
Expenses
Management fee $ 342
Service fee 171
Distribution fee - Class B 135
Distribution fee - Class C 11
Transfer agent fee 200
Bookkeeping fee 29
Trustees' fees 5
Custodian fee 4
Audit fee 10
Legal fee 1
Registration fee 28
Reports to shareholders 7
Other (a)
-------
Total expenses 943
Fees waived by the
Distributor - Class C (2) 941
------- -------
Net Investment Income 4,926
-------
Net Realized & Unrealized Gain (Loss)
on Portfolio Positions
Net realized gain (loss) on:
Investments (3,579)
Foreign currency transactions 203
-------
Net Realized Loss (3,376)
Net change in unrealized appreciation /depreciation
during the period on:
Investments 709
Foreign currency transactions (17)
-------
Net Change in Unrealized
Appreciation/Depreciation 692
-------
Net Loss (2,684)
-------
Increase in Net Assets from Operations $ 2,242
=======
(a) Rounds to less than one.
See notes to financial statements.
8
<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
--------------------------------------------------------------------------------
Operations:
Net investment income $ 4,926 $ 10,788
Net realized loss (3,376) (2,507)
Net change in unrealized appreciation/
depreciation 692 (11,547)
--------- ---------
Net Increase (Decrease)
from Operations 2,242 (3,266)
Distributions:
From net investment income - Class A (3,911) (8,130)
In excess of net investment income - Class A -- (59)
From net investment income - Class B (1,298) (2,693)
In excess of net investment income - Class B -- (19)
From net investment income - Class C (111) (213)
In excess of net investment income - Class C -- (1)
--------- ---------
(3,078) (14,381)
--------- ---------
Fund Share Transactions:
Receipts for shares sold - Class A 4,853 12,620
Value of distributions reinvested -
Class A 2,049 4,558
Cost of shares repurchased - Class A (12,671) (22,909)
--------- ---------
(5,769) (5,731)
--------- ---------
Receipts for shares sold - Class B 2,822 11,848
Value of distributions reinvested -
Class B 719 1,610
Cost of shares repurchased - Class B (8,138) (10,940)
--------- ---------
(4,597) (2,518)
--------- ---------
Receipts for shares sold - Class C 1,997 4,638
Value of distributions reinvested -
Class C 76 168
Cost of shares repurchased - Class C (1,958) (4,391)
--------- ---------
115 415
--------- ---------
Net Decrease from
Fund Share Transactions (10,251) (2,798)
--------- ---------
Total Decrease (13,329) (17,179)
Net Assets
Beginning of period 145,273 162,452
--------- ---------
End of period (net of overdistributed
and including undistributed investment
income of $337 and $57, respectively) $ 131,944 $ 145,273
========= =========
Number of Fund Shares
Sold - Class A 825 2,017
Issued for distributions reinvested - Class A 349 730
Repurchased - Class A (2,154) (3,667)
--------- ---------
(980) (920)
--------- ---------
Sold - Class B 480 1,879
Issued for distributions reinvested - Class B 122 258
Repurchased - Class B (1,384) (1,752)
--------- ---------
(782) (385)
--------- ---------
Sold - Class C 337 729
Issued for distributions reinvested - Class C 13 27
Repurchased - Class C (332) (699)
--------- ---------
18 57
--------- ---------
See notes to financial statements.
9
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements
--------------------------------------------------------------------------------
June 30, 2000 (Unaudited)
Note 1. Interim Financial Statements
In the opinion of management of Liberty Income Fund (formerly Colonial Income
Fund) (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 as high a level
of current income and total return, as is consistent with prudent risk, by
investing primarily in corporate debt securities. The Fund may issue an
unlimited number of shares. The Fund offers three classes of shares: Class A,
Class B and Class C. Class A shares are sold with a front-end sales charge. A
1.00% contingent deferred sales charge is assessed to Class A shares purchased
without an initial sales charge on redemptions made within eighteen months on an
original purchase of $1 million to $25 million. Class B shares are subject to an
annual distribution fee and a contingent deferred sales charge. 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
Class C shares are subject to a contingent deferred sales charge on redemptions
made within one year after purchase and an annual distribution fee.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Fund in the
preparation of its financial statements.
Security valuation and transactions
Debt securities generally are valued by a pricing service based upon market
transactions for normal, institutional-size trading units of similar securities.
When management deems it appropriate, an over-the-counter or exchange bid
quotation is used.
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 federal income tax
purposes.
The Fund may trade securities on other than normal settlement terms. This may
increase the risk if the other party to the transaction fails to deliver and
causes the Fund to subsequently invest at less advantageous prices.
Determination of class net asset values and financial highlights
All income, expenses (other than Class B and Class C distribution fees), and
realized and unrealized gains (losses), are allocated to each class
proportionately on a daily basis for purposes of determining the net asset value
of each class.
Class B and Class C per share data and ratios are calculated by adjusting the
expense and net investment income ratios for the Fund for the entire period by
the distribution fee applicable to Class B and Class C shares only.
Federal income taxes
Consistent with the Fund's policy to qualify as a regulated investment company
and to distribute all of its taxable 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.
Distributions to shareholders
The Fund declares and records distributions daily and pays monthly.
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforwards) under income tax regulations.
Foreign currency transactions
Net realized and unrealized gains (losses) on foreign currency transactions
includes the gains (losses) arising from the fluctuation in exchange rates
between trade and settlement dates on securities transactions, gains
10
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
June 30, 2000 (Unaudited)
(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 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 or
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. When 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 0.50% 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 0.035% of the Fund's average net assets over $50 million.
Transfer agent
Liberty Funds Services, Inc. (the Transfer Agent), an affiliate of the Advisor,
provides shareholder services for a monthly fee equal to 0.17% 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 continues to receive
reimbursement for certain out-of-pocket expenses.
Underwriting discounts, service and distribution fees
Liberty Funds Distributor, Inc. (the Distributor) a subsidiary of the Advisor,
is the Fund's principal underwriter. For the six month's ended June 30, 2000,
the Fund has been advised that the Distributor retained net underwriting
discounts of $3,109 on sales of the Fund's Class A shares and received
contingent deferred sales charges (CDSC) of $55, $50,760, and $542 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
shares and Class C shares. The Distributor has agreed to waive a portion of the
Class C share distribution fee so that it does 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.
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 $63,560,689 and $67,887,793,
respectively, of which $27,627,514 and $22,238,390, respectively, were U.S.
government securities. 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 $ 415,454
Gross unrealized depreciation (9,598,586)
-----------
Net unrealized depreciation $(9,183,132)
-----------
11
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
June 30, 2000 (Unaudited)
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
---------- ------------
2002 $ 1,007,000
2007 1,857,000
-----------
$ 2,864,000
===========
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 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 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 month's ended June 30, 2000.
12
<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 C
------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value - Beginning of Period $ 5.980 $ 5.980 $ 5.980
------- ------- -------
Income from Investment Operations:
Net investment income (a) 0.217 0.194 0.199 (b)
Net realized and unrealized loss (0.103) (0.103) (0.103)
------- ------- -------
Total from Investment Operations 0.114 0.091 0.096
------- ------- -------
Less Distributions Declared to Shareholders:
From net investment income (0.234) (0.211) (0.216)
------- ------- -------
Net Asset Value - End of Period $ 5.860 $ 5.860 $ 5.860
======= ======= =======
Total return (c)(d) 1.98% 1.57% 1.66% (e)
======= ======= =======
Ratios to Average Net Assets
Expenses (f)(g) 1.17% 1.92% 1.77% (b)
Net investment income (f)(g) 7.41% 6.66% 6.81% (b)
Portfolio turnover (d) 48% 48% 48%
Net assets at end of period (000) $95,055 $34,111 $ 2,778
</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 C
--------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value - Beginning of Period $ 6.560 $ 6.560 $ 6.560
-------- -------- --------
Income from Investment Operations:
Net investment income (a) 0.449 0.401 0.411 (b)
Net realized and unrealized loss (0.567) (0.567) (0.567)
-------- -------- --------
Total from Investment Operations (0.118) (0.166) (0.156)
-------- -------- --------
Less Distributions Declared to Shareholders:
From net investment income (0.459) (0.411) (0.421)
In excess of net investment income (0.003) (0.003) (0.003)
-------- -------- --------
Total Distributions Declared to Shareholders (0.462) (0.414) (0.424)
-------- -------- --------
Net Asset Value - End of Period $ 5.980 $ 5.980 $ 5.980
======== ======== ========
Total return (c) (1.86)% (2.60)% (2.45)% (d)
======== ======== ========
Ratios to Average Net Assets
Expenses (e) 1.13% 1.88% 1.73% (b)
Net investment income (e) 7.15% 6.40% 6.55% (b)
Portfolio turnover 102% 102% 102%
Net assets at end of period (000) $103,011 $ 39,532 $ 2,730
</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 $0.009 per share
and 0.15%.
(c) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(d) Had the Distributor not waived a portion of expenses, total return would
have been reduced.
(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
13
<PAGE>
Financial Highlights (continued)
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
Years ended December 31
------------------------------------------------------------------------------
1998 1997
---------------------------------- ------------------------------------
Class A Class B Class C Class A Class B Class C (a)
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value - Beginning of Period $ 6.500 $ 6.500 $ 6.500 $ 6.410 $ 6.410 $ 6.530
-------- -------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income 0.455 0.405 0.415 (b) 0.439 0.391 0.171 (b)
Net realized and unrealized gain (loss) 0.057 0.057 0.057 0.095 0.095 (0.032) (c)
-------- -------- -------- -------- -------- --------
Total from Investment Operations 0.512 0.462 0.472 0.534 0.486 0.139
-------- -------- -------- -------- -------- --------
Less Distributions Declared to Shareholders:
From net investment income (0.452) (0.402) (0.412) (0.444) (0.396) (0.169)
-------- -------- -------- -------- -------- --------
Net Asset Value - End of Period $ 6.560 $ 6.560 $ 6.560 $ 6.500 $ 6.500 $ 6.500
======== ======== ======== ======== ======== ========
Total return (d) 8.13% 7.32% 7.48% (e) 8.67% 7.87% 2.17% (e)(f)
======== ======== ======== ======== ======== ========
Ratios to Average Net Assets
Expenses (g) 1.09% 1.84% 1.69% (b) 1.11% 1.86% 1.71% (b)(h)
Net investment income (g) 7.16% 6.41% 6.56% (b) 6.98% 6.23% 6.35% (b)(h)
Portfolio turnover 161% 161% 161% 281% 281% 281%
Net assets at end of period (000) $119,002 $ 40,828 $ 2,622 $120,336 $ 36,128 $ 240
</TABLE>
(a) Class C shares were initially offered on August 1, 1997. Per share data
reflects activity from that date.
(b) 1998 information is net of fees waived by the Distributor which amounted
to $0.010 per share and 0.15%. 1997 information is net of fees waived by
the Distributor which amounted to $0.004 per share and 0.15% (annualized).
(c) The amount shown for a share oustanding does not correspond with the
aggregate net gain 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.
(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.
<TABLE>
<CAPTION>
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 $ 6.640 $ 6.640 $ 5.950 $ 5.950
-------- -------- -------- --------
Income from Investment Operations
Net investment income 0.460 0.412 0.472 0.425
Net realized and unrealized gain (loss) (0.240) (0.240) 0.698 0.698
-------- -------- -------- --------
Total from Investment Operations 0.220 0.172 1.170 1.123
-------- -------- -------- --------
Less Distributions Declared to Shareholders:
From net investment income (0.450) (0.402) (0.480) (0.433)
-------- -------- -------- --------
Net Asset Value - End of Period $ 6.410 $ 6.410 $ 6.640 $ 6.640
======== ======== ======== ========
Total return (a) 3.59% 2.82% 20.30% 19.42%
======== ======== ======== ========
Ratios to Average Net Assets
Expenses (b) 1.10% 1.85% 1.09% 1.84%
Net investment income (b) 7.12% 6.37% 7.45% 6.70%
Portfolio turnover 253% 253% 85% 85%
Net assets at end of period (000) $129,681 $ 35,770 $143,834 $ 38,203
</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 directed brokerage
arrangements had no impact.
14
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<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 Equity Partners (formerly Dean, College of Business and
Management, University of Maryland; Dean, Simon Graduate School of Business,
University of Rochester; Chairman and Chief Executive Officer, CS First Boston
Merchant Bank; and President and Chief Executive Officer, The First Boston
Corporation)
James L. Moody, Jr.
Retired (formerly Chairman of the Board, Chief Executive Officer and Director,
Hannaford Bros. Co.)
John J. Neuhauser
Academic Vice President and Dean of Faculties, Boston College (formerly Dean,
Boston College School of Management)
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 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 Liberty 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 Fund and with the most recent copy of
the Liberty Funds Performance Update.
Semiannual Report:
Liberty Income Fund
<PAGE>
--------------------------------------------------------------------------------
Choose Liberty
--------------------------------------------------------------------------------
Because no single investment manager can be all things to all investors.(SM)
L I B E R T Y
---------------------------------
F U N D S
ALL-STAR Institutional money management approach for individual
investors.
COLONIAL Fixed income and value style equity investing.
CRABBE
HUSON A contrarian approach to fixed income and equity investing.
NEWPORT A leader in international investing.(SM)
STEIN ROE
ADVISOR Innovative solutions for growth and income investing.
[KEYPORT 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 INCOME 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
-------------
717-03/249C-0700 (8/00) 00/1366
<PAGE>
--------------------------------------------------------------------------------
Choose Liberty
--------------------------------------------------------------------------------
Because no single investment manager can be all things to all investors.(SM)
L I B E R T Y
---------------------------------
F U N D S
ALL-STAR Institutional money management approach for individual
investors.
COLONIAL Fixed income and value style equity investing.
CRABBE
HUSON A contrarian approach to fixed income and equity investing.
NEWPORT A leader in international investing.(SM)
STEIN ROE
ADVISOR Innovative solutions for growth and income investing.
[KEYPORT 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 INCOME 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
717-03/249C-0700 (8/00) 00/1366
<PAGE>
--------------------------------------------------------------------------------
Choose Liberty
--------------------------------------------------------------------------------
Because no single investment manager can be all things to all investors.(SM)
L I B E R T Y
---------------------------------
F U N D S
ALL-STAR Institutional money management approach for individual
investors.
COLONIAL Fixed income and value style equity investing.
CRABBE
HUSON A contrarian approach to fixed income and equity investing.
NEWPORT A leader in international investing.(SM)
STEIN ROE
ADVISOR Innovative solutions for growth and income investing.
[KEYPORT 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 INCOME 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
717-03/249C-0700 (8/00) 00/1366