<PAGE> 1
LIBERTY HIGH YIELD MUNICIPAL FUND SEMIANNUAL REPORT
MAY 31, 2000
[PHOTO]
<PAGE> 2
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
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.
Volatility was the watchword for the municipal markets during the past six
months. Early in the period, interest rates were rising. Yields on most bonds
followed suit, and as they rose, bond prices fell. The higher rates and yields
were prompted by Federal Reserve actions, as the Fed attempted to cool the
economy. Concerned that robust economic growth could ignite higher levels of
inflation, the Fed raised key short-term lending rates by 0.25% in both February
and March 2000.
Later, the municipal markets rallied. Although the Fed once again raised
short-term interest rates in May -- this time by 0.50% -- investors viewed it as
a positive move. Convinced that the central bankers were quite determined to
keep the economy and inflation from overheating, investors took some pressure
off municipal bond yields and prices recovered to some extent. In the end, the
municipal bond market, as measured by the Lehman Brothers Municipal Bond Index,
finished ahead by 1.02% for the period. However, high-yield municipal bonds did
not fare as well as the longer maturity investment-grade securities on which the
index focuses. Although steps were taken to mitigate the impact of rising rates,
the Fund's performance was affected by the general market volatility.
Despite the challenges facing investors, we believe the Fed's efforts to slow
the economy will eventually succeed. In the past, it has taken about one year
before interest rate increases have had a measurable impact. After ten months of
short-term interest rate increases, we would not be surprised to see the economy
start to slow in the second half of 2000.
In the pages that follow, fund manager Maureen G. Newman will provide you with
more specific information about the Fund's performance and investment
strategies. For more information, please contact your financial advisor or visit
us on the Internet at www.libertyfunds.com. As always, we thank you for choosing
Liberty High Yield Municipal Fund and for giving us the opportunity to serve
your investment needs.
Respectfully,
/s/Stephen E. Gibson
Stephen E. Gibson
President
July 17, 2000
--------------------------------
NOT FDIC | MAY LOSE VALUE
INSURED | NO BANK GUARANTEE
--------------------------------
<PAGE> 3
HIGHLIGHTS
- BOND MARKET BEGINNING TO PICK UP.
The bond market may be in the beginning stages of a recovery, after a
difficult year in 1999. Federal Reserve Board efforts to slow the
economy seem to be having some success, and the bond market
consequently saw several strong periods during the last six months.
- MUNICIPALS LAGGED BEHIND TREASURY BONDS.
Because they are more liquid than municipal bonds, Treasury bonds tend
to respond more quickly both in bond rallies and in downturns of the
bond market. This held true during the period, as Treasurys
outperformed municipals when the bond market was strong, but fell
behind municipals as the bond market declined.
SIX-MONTH CUMULATIVE TOTAL RETURNS FOR THE PERIOD ENDED 5/31/00
<TABLE>
<CAPTION>
Without With
sales sales
charge charge
---------------------------------------
<S> <C> <C>
Class A (1.61)% (6.28)%
---------------------------------------
Class B (1.98)% (6.76)%
---------------------------------------
Class C(1) (1.91)% (2.86)%
---------------------------------------
</TABLE>
(1) 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.
The "with sales charge" returns include the maximum 4.75% sales charge
for Class A shares and the maximum contingent deferred sales charge (CDSC) of 5%
and 1% respectively, for Class B and C shares.
Net asset value per share as of 5/31/00
<TABLE>
<S> <C>
Class A $ 9.16
-----------------------------
Class B $ 9.16
-----------------------------
Class C $ 9.16
-----------------------------
</TABLE>
Distributions declared from 12/01/99 to 5/31/00(2)
<TABLE>
<S> <C>
Class A $.275
-----------------------------
Class B $.240
-----------------------------
Class C $.247
-----------------------------
</TABLE>
(2) A portion of the Fund's income may be subject to the alternative minimum
tax. The Fund may at times purchase tax-exempt securities at a discount. Some or
all of this discount may be included in the Fund's ordinary income, and is
taxable when distributed.
1
<PAGE> 4
PORTFOLIO MANAGER'S REPORT
SEC YIELDS ON 5/31/00
<TABLE>
<S> <C>
Class A 5.87%
-----------------------
Class B 5.39%
-----------------------
Class C 5.53%
-----------------------
</TABLE>
The 30-day SEC yields reflect the portfolio's earning power, net of expenses,
expressed as an annualized percentage of the public offering price at the end of
the period. If the Advisor or its affiliates had not waived certain Fund
expenses, the SEC yield would have been 5.38% for Class C shares.
TAXABLE-EQUIVALENT SEC YIELDS ON 5/31/00
<TABLE>
<S> <C>
Class A 9.72%
-----------------------
Class B 8.92%
-----------------------
Class C 9.16%
-----------------------
</TABLE>
Taxable-equivalent SEC yields are based on the maximum effective 39.6% federal
income tax rate. This tax rate does not reflect the phase out of exemptions or
the reduction of otherwise allowable deductions which occur when Adjusted Gross
Income exceeds certain levels.
BOUGHT
CITY OF CARLTON, MN (INTER-FAITH SOCIAL SERVICES, INC.) (0.32% of net assets) is
replacing an existing nursing home with a new facility, and adding an assisted
living wing. The new construction is expected to fill quickly based on current
demand and the strong reputation of the facility. Sponsored by six churches in
and around Carlton, this group has been serving the community since 1967.
FUND PERFORMANCE LIMITED BY SEVERAL FACTORS
The Fund's performance reflects the difficulties of the bond market in general.
For the six-month period ended May 31, 2000, the Fund's Class A shares had a
total return of negative 1.61% without a sales charge. The Fund underperformed
the Lehman Brothers Municipal Bond Index, which returned 1.02% for the period.
However, the Index is a broad-based industry benchmark which focuses mainly on
higher quality investment-grade bonds, while the Fund invests mainly in
lower-rated bonds.
The high-yield bond market saw widening spreads during the period, which means
that investors sought increasingly higher yields in return for the added risk
associated with high-yield bonds. In particular, the finances of hospitals
suffered during the period due to cutbacks in government reimbursement programs.
As a result, the prices of their bonds suffered as well.
STRATEGY REMAINS UNCHANGED DURING UNCERTAIN TIMES
The Fund invests a large portion of its assets in small, non-rated municipal
issues. With the help of our dedicated credit research team, we were able to
identify numerous strong non-rated bonds with excellent yield potential. We
diversify the holdings in the Fund by industry as well as geographically to
reduce risk.
While the Fund seeks a high level of income, it is also managed for total
return. This means that while seeking a reasonably high level of income, we also
attempt to preserve the principal value of your investment.
PROBLEM HOLDINGS BEING DEALT WITH
We experienced unexpected problems with one of our long-time holdings during
this period. Management difficulties and changes in operations at a septage
treatment plant caused cash flow shortfalls at the company, which led to a
significant drop in the value of this asset. We are actively working toward a
resolution with consultants and members of management. In addition, several
problem holdings discussed in previous reports were eliminated from the
portfolio during this period. Fees and other costs associated with the final
sales also had a negative effect on the Fund's net asset value.
WALKING AN ECONOMIC TIGHTROPE
In the months to come, we anticipate stronger performance in the bond market. We
believe the Fed's efforts to rein in the economy will be successful, and that
long-term interest rates will continue to decline. However, there are still
strong indications that things could go either way. Consumer confidence and
spending remain very high. Workers continue to demand higher wages. The prices
of oil and other commodities continue to rise. Any of these could trigger higher
inflation, which would have a negative impact on the bond market.
2
<PAGE> 5
PORTFOLIO MANAGER'S REPORT (CONTINUED)
In response to these uncertainties, we are structuring the Fund to perform well
in a strong bond market, but we are also taking steps to cushion the effects of
a declining market. The Fund's core holdings are aggressive bonds with longer
maturities, which should take advantage of the bond market rally we anticipate.
However, we are attempting to reduce the possible effects of higher inflation by
employing a short-term hedging strategy using futures. In addition, we are
actively increasing the Fund's diversification. In doing so, we have expanded
the Fund's holdings in the multi-family housing sector, which is currently very
attractive.
/s/ Maureen G. Newman
Maureen G. Newman
Maureen G. Newman is portfolio manager of Liberty High Yield Municipal Fund and
a senior vice president of Colonial Management Associates, Inc. (CMA).
Tax-exempt investing offers current tax-free income, but also involves certain
risks. The value of the Fund will be affected by interest rate changes and the
creditworthiness of issues held in the Fund. The municipal bond management team
identifies problems and opportunities and reacts quickly to market changes.
QUALITY BREAKDOWN AS OF 5/31/00
<TABLE>
<S> <C>
AAA 8.5%
--------------------------------
AA 3.1%
--------------------------------
A 0.2%
--------------------------------
BBB 19.1%
--------------------------------
BB 2.6%
--------------------------------
CC 1.3%
--------------------------------
Non-rated 60.9%
--------------------------------
Cash equivalents 4.3%
--------------------------------
</TABLE>
TOP FIVE INDUSTRY SECTORS AS OF
5/31/00
<TABLE>
<S> <C>
Hospital 12.98%
--------------------------------
Multi-Family 9.41%
--------------------------------
Nursing 9.21%
--------------------------------
Assisted Living 8.29%
--------------------------------
Airport 5.32%
--------------------------------
</TABLE>
MATURITY BREAKDOWN
<TABLE>
<S> <C>
0-1 year 0.6%
--------------------------------
1-3 years 0.9%
--------------------------------
3-5 years 1.5%
--------------------------------
5-7 years 3.4%
--------------------------------
7-10 years 2.8%
--------------------------------
10-15 years 10.6%
--------------------------------
15-20 years 24.5%
--------------------------------
20-25 years 23.4%
--------------------------------
25+ years 28.0%
--------------------------------
Cash equivalents 4.3%
--------------------------------
</TABLE>
Quality, sector and maturity breakdowns are calculated as a percentage
of total investments, including short-term obligations. Ratings shown in the
Quality Breakdowns represent the highest rating assigned to a particular bond by
one of the following nationally-recognized rating agencies: Standard & Poor's
Corporation, Moody's Investors Services, Inc. or Fitch Investors Service, Inc.
Maturity breakdown is based on each security's effective maturity, which
reflects pre-refunding, mandatory puts and other conditions that affect a bond's
maturity.
Because the Fund is actively managed, there can be no guarantee the Fund will
continue to maintain these quality, sector and maturity breakdowns in the
future.
3
<PAGE> 6
PERFORMANCE INFORMATION
AVERAGE ANNUAL TOTAL RETURNS AS OF 5/31/00
<TABLE>
<CAPTION>
Share Class A B C
Inception Date 9/1/94 6/8/92 8/1/97
------------------------------------------------------------------------------------------------------------------------------------
w/o sales with sales w/o sales with sales w/o sales with sales
charge charge charge charge charge charge
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Six months
(cumulative) (1.61)% (6.28)% (1.98)% (6.76)% (1.91)% (2.86)%
------------------------------------------------------------------------------------------------------------------------------------
One year (6.17) (10.62) (6.87) (11.31) (6.73) (7.62)
------------------------------------------------------------------------------------------------------------------------------------
Five years 4.23 3.23 3.45 3.13 3.54 3.54
------------------------------------------------------------------------------------------------------------------------------------
Life of Fund 5.05 4.41 4.48 4.48 4.54 4.54
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS AS OF 3/31/00
<TABLE>
<CAPTION>
Share Class A B C
------------------------------------------------------------------------------------------------------------------------------------
w/o sales with sales w/o sales with sales w/o sales with sales
charge charge charge charge charge charge
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Six months
(cumulative) (2.31)% (6.95)% (2.68)% (7.42)% (2.60)% (3.55)%
------------------------------------------------------------------------------------------------------------------------------------
One year (5.24) (9.74) (5.96) (10.44) (5.81) (6.71)
------------------------------------------------------------------------------------------------------------------------------------
Five years 5.07 4.05 4.28 3.96 4.36 4.36
------------------------------------------------------------------------------------------------------------------------------------
Life of Fund 5.31 4.66 4.75 4.75 4.81 4.81
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Past performance cannot predict future results. Returns and value of an
investment will vary, resulting in a gain or loss on sale. All results shown
assume reinvestment of distributions. The "with sales charge" returns include
the maximum 4.75% sales charge for Class A shares, the appropriate Class B
contingent deferred sales charge for the holding period after purchase as
follows: through first year -5%, second year -4%, third year -3%, fourth year
-3%, fifth year -2%, sixth year -1%, thereafter -0% and the Class C contingent
deferred sales charge of 1% for the first year only. Performance for different
share classes will vary based on differences in sales charges and fees
associated with each class.
Performance results reflect any voluntary waivers or reimbursements of Fund
expenses by the Advisor of its affiliates. Absent these waivers or reimbursement
arrangements, performance results would have been lower.
Class A and C share (newer class shares) performance information includes
returns of the Fund's Class B shares (the oldest existing fund class) for
periods prior to the inception dates of the newer classes of shares. The Class B
share returns are not restated to reflect any expense differential (such as Rule
12b-1 fees) between Class B shares and newer classes of shares. If differences
in expenses were reflected, the returns for periods prior to the inception of
the newer classes of shares would be higher for Class A and the same for Class
C.
4
<PAGE> 7
INVESTMENT PORTFOLIO
May 31, 2000 (Unaudited, in thousands)
<TABLE>
<CAPTION>
MUNICIPAL BONDS - 95.0% PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
EDUCATION - 2.8%
EDUCATION - 2.1%
CA Statewide Communities Development
Authority, Crossroads School for
Arts & Sciences,
Series 1998,
6.000% 8/1/28 (a)(b) $1,180 $1,079
MA State Industrial Finance Agency,
St. John's High School,
Series 1998,
5.350% 6/1/28 400 326
MI Southfield Economic Development
Corp., Lawrence University,
Series 1998 A,
5.400% 2/1/18 750 639
OR State Health, Housing, Educational &
Cultural Facilities Authority,
Linfield College,
Series 2000 A,
6.500% 10/1/15 1,000 989
------
3,033
------
STUDENT LOAN - 0.7%
OH Cincinnati Student Loan Funding Corp.,
Series B,
6.750% 1/1/07 1,075 1,075
------
HEALTHCARE - 29.2%
CONGREGATE CARE RETIREMENT - 4.9%
FL Lee County Industrial Development
Authority, Shell Point Village Project,
Series 1999 A,
5.500% 11/1/29 250 189
KY State Economic Development Finance
Authority, Christian Church Homes of
Kentucky, Inc.,
Series 1998,
5.500% 11/15/30 530 398
MA Boston Industrial Development
Finance Authority, Springhouse, Inc.,
Series 1988,
5.875% 7/1/20 500 403
MA State Development Finance Agency,
Series 1999 A,
5.625% 7/1/15 250 208
MI State Strategic Fund, Holland Home,
Series 1998,
5.750% 11/15/28 400 302
MN Columbia Heights, Crest View Corp.,
Series 1998,
6.000% 3/1/33 740 600
NH State Higher Educational & Health
Facilities Authority,
Rivermead at Peterborough,
Series 1998:
5.625% 7/1/18 500 402
5.750% 7/1/28 665 525
PA Philadelphia Authority for Industrial
Development, Baptist Home of
Philadelphia, Series 1998 A:
5.500% 11/15/18 530 408
5.600% 11/15/28 860 627
TN Metropolitan Government, Nashville
and Davidson County, Blakeford at
Green Hills,
Series 1998,
5.650% 7/1/24 575 431
TX Abilene Health Facilities Development
Corp., Sears Methodist Retirement
Obligation Group:
Series 1998 A,
5.900% 11/15/25 1,000 775
Series 1999,
5.875% 11/15/18 500 401
WI State Health & Educational
Facilities Authority:
Attic Angel Obligated Group,
5.750% 11/15/27 875 681
Clement Manor,
Series 1998,
5.750% 8/15/24 450 354
United Lutheran Program for Aging, Inc.,
5.700% 3/1/28 750 579
------
7,283
------
HEALTH SERVICES - 0.4%
IL State Health Facilities Authority, Midwest
Physician Group, Ltd.,
Series 1998,
5.500% 11/15/19 90 70
MA State Development Finance Agency,
Boston Biomedical Research Institute,
Series 1999:
5.650% 2/1/19 120 103
5.750% 2/1/29 550 460
------
633
------
HOSPITALS - 12.9%
AL Alabama Special Care Facilities
Authority, Montgomery Healthcare,
Series 1989,
11.000% 10/1/19 (c) 204 10
</TABLE>
See notes to investment portfolio.
5
<PAGE> 8
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2000 (Unaudited, in thousands)
<TABLE>
<CAPTION>
MUNICIPAL BONDS (CONTINUED) PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
HOSPITALS (CONTINUED)
CO La Junta, Arkansas Valley Regional
Medical Center,
Series 1999,
6.100% 4/1/24 $ 400 $ 338
CO State Health Care Facilities
Authority, National Jewish Medical &
Research Center,
Series 1998,
5.375% 1/1/23 830 632
GA Forsyth County Hospital Authority,
Georgia Baptist Heathcare System,
Series 1998,
6.000% 10/1/08 1,000 959
IL Health Facilities Authority, Thorek
Hospital & Medical Center,
5.375% 8/15/28 500 370
IL Southwestern Illinois Development
Authority, Anderson Hospital,
Series 1999,
5.375% 8/15/15 500 404
IN State Health Facilities Financing
Authority, Riverview Hospital,
Series 1999,
5.500% 8/1/24 275 219
MI Dickinson County,
Series 1999,
5.800% 11/1/24 800 615
MI Flint Hospital Building Authority,
Hurley Medical Center,
Series 1998 A,
5.375% 7/1/20 625 464
MI State Hospital Finance Authority,
Detroit Medical Center,
Series 1998 A,
5.250% 8/15/28 600 419
MN Washington County Housing &
Redevelopment Authority, Healtheast, Inc.,
Series 1998,
5.250% 11/15/12 1,250 992
MS State Business Finance Corp.,
Medical Foundation, Inc.,
Series 1998,
5.625% 7/1/23 1,150 885
NH State Higher Educational & Health
Facilities Authority, Littleton Hospital
Association, Inc.:
5.900% 5/1/18 500 414
5.900% 5/1/28 675 516
OH Belmont County, East Ohio
Regional Hospital,
Series 1998,
5.700% 1/1/13 (d) 1,500 1,253
OH Franklin County, Doctors
OhioHealth Corp.,
Series 1998 A,
5.600% 12/1/28 1,600 1,133
OH Highland County Joint Township
Hospital District,
Series 1999,
6.750% 12/1/29 750 633
OH Miami County, Upper Valley Medical
Center, Inc.:
Series 1996 A,
6.250% 5/15/16 500 443
Series 1996 C,
6.250% 5/15/13 285 261
OH Sandusky County,
Series 1998,
5.150% 1/1/10 250 222
PA Allegheny County Hospital Development,
Ohio Valley General Hospital,
Series 1998 A,
5.450% 1/1/28 (d) 1,550 1,170
PA Pottsville Hospital Authority, Pottsville
Hospital & Warne Clinic,
Series 1998,
5.625% 7/1/24 1,000 782
TX Harris County Health Facilities
Development Authority,
Series 1999,
6.678% 7/1/19 5,000 4,053
TX Lufkin Health Facilities Development
Corp., Memorial Health Systems of
East Texas, Series 1998,
5.700% 2/15/28 750 568
TX Richardson Hospital Authority, Baylor
Richardson Medical Center,
Series 1998,
5.625% 12/1/28 800 612
VT State Educational & Health Buildings
Finance Authority:
Brattleboro Memorial Hospital,
5.375% 3/1/28 750 558
Springfield Hospital,
Series A,
7.750% 1/1/13 235 250
-------
19,175
-------
</TABLE>
See notes to investment portfolio.
6
<PAGE> 9
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2000 (Unaudited, in thousands)
<TABLE>
<CAPTION>
PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
INTERMEDIATE CARE FACILITIES - 1.9%
IN State Health Facilities Financing
Authority, Hoosier Care, Inc.,
Series 1999 A,
7.125% 6/1/34 $1,095 $ 961
PA State Economic Development Financing
Authority, Northwestern Human
Services, Inc., Series 1998 A,
5.250% 6/1/14 2,150 1,791
-------
2,752
-------
NURSING HOMES - 9.1%
AK Juneau, St. Ann's Care Center,
Series 1999,
6.875% 12/1/25 600 535
CO State Health Facilities Authority,
Volunteers of America Care Facilities, Inc.:
Series 1998 A:
5.450% 7/1/08 250 227
5.750% 7/1/20 700 568
Series 1999 A,
6.000% 7/1/29 520 421
DE State Economic Development Authority,
Churchman Village Project,
Series A,
10.000% 3/1/21 720 824
DE Sussex County, Healthcare Facility,
Delaware Health Corporation,
Series 1994 A,
7.600% 1/1/24 990 885
FL Gadsden County Industrial Development
Authority, Florida Properties, Inc.,
Series 1988 A,
10.450% 10/1/18 330 331
IA State Finance Authority, Care
Initiatives Project:
Series 1996,
9.250% 7/1/25 500 603
Series 1998 B:
5.750% 7/1/18 600 482
5.750% 7/1/28 1,475 1,125
IN State Health Facilities Financing
Authority, Metro Health Indiana, Inc.,
Series 1998,
6.400% 12/1/33 1,000 821
MA State Development Finance Agency,
Alliance Health Care Facilities,
Series 1999,
7.100% 7/1/32 1,000 906
MA State Industrial Finance Agency,
GF/Massachusetts Inc.,
Series 1994,
8.300% 7/1/23 940 987
MI Cheboygan County Economic
Development Corp., Metro Health
Foundation Project,
Series 1993,
10.000% 11/1/22 (c) 600 455
MN Carlton Inter-Faith Social Services, Inc.:
Series 2000,
7.500% 4/1/19 250 238
Series 2000,
7.750% 4/1/29 250 240
MN Minneapolis, Walker Methodist Senior
Services Group,
Series 1998 A,
6.000% 11/15/28 (b) 250 200
MN New Hope, North Ridge Care
Center, Inc., Series 1999,
5.875% 3/1/29 500 394
MN Sartell, Foundation for Healthcare,
Series 1999 A,
6.625% 9/1/29 1,000 861
NJ Economic Development Authority
Geriatric and Medical Service, Inc.,
Series A,
10.500% 5/1/04 60 59
PA Chester County Industrial Development,
Pennsylvania Nursing Home, Inc.,
Series 1989,
10.125% 5/1/19 (c) 434 317
PA Delaware County Authority, Main Line
and Haverford Nursing, Series 1992,
9.000% 8/1/22 50 53
PA Lackawanna County Industrial Authority,
Greenridge Nursing Center,
10.500% 12/1/10 175 181
PA Luzerna County Industrial Development
Authority, Millville Nursing Center,
10.500% 12/1/12 210 217
TX Kirbyville Health Facilities Development
Corp., Heartway III Project:
Series 1997 A,
10.000% 3/20/18 575 512
Series 1997 B,
(e) 3/20/04 100 59
WA Kitsap County Housing Authority,
Martha & Mary Nursing Home,
7.100% 2/20/36 1,000 1,090
-------
13,591
-------
</TABLE>
See notes to investment portfolio.
7
<PAGE> 10
INVESTMENT PORTFOLIO (CONTINUED)
MAY 31, 2000 (UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
MUNICIPAL BONDS (CONTINUED) PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
HOUSING - 22.1%
ASSISTED LIVING/SENIOR - 8.2%
CA Abag Finance Authority for Nonprofit Corps.,
Eskaton Gold River Lodge,
Series 1998:
6.375% 11/15/15 (f) $ 750 $ 668
6.375% 11/15/28 (g) 550 465
DE Kent County, Heritage at Dover,
Series 1999,
7.625% 1/1/30 1,000 941
GA Columbus Housing Authority,
The Gardens at Calvary, Series 1999,
7.000% 11/15/29 1,000 898
IL Clarendon Hills Residential Facilities,
Churchill Estate,
Series 1998 A:
6.750% 3/1/24 1,050 957
6.750% 3/1/31 1,365 1,230
IL State Development Finance Authority,
Care Institute, Inc.,
8.250% 6/1/25 2,000 2,080
MN Roseville, Care Institute, Inc.,
Series 1993,
7.750% 11/1/23 1,270 1,133
NC State Medical Care Commission, DePaul
Community Facilities Project,
Series 1999,
7.625% 11/1/29 750 712
NY Glen Cove Housing Authority,
8.250% 10/1/26 2,000 2,098
TX Bell County Health Facilities
Development Corp., Care Institutions, Inc.,
9.000% 11/1/24 (d) 1,000 1,064
-------
12,246
-------
MULTI-FAMILY - 9.3%
DE Wilmington, Electra Arms Senior
Association Project,
6.250% 6/1/28 990 851
FL Broward County Housing Finance
Authority, Chaves Lake Apartment Project,
Series 2000,
7.500% 7/1/40 500 495
FL Clay County Housing Finance
Authority, Madison Commons Apartments,
Series 2000 A,
7.450% 7/1/40 500 491
GA Clayton County Housing Authority,
Magnolia Park Apartments,
Series 1999 A,
6.250% 6/1/30 (d) 750 673
MN Lakeville, Southfork Apartment Project,
Series 1989 A,
9.875% 2/1/20 700 692
MN Washington County Housing &
Redevelopment Authority, Cottages of
Aspen, Series 1992,
9.250% 6/1/22 485 501
MN White Bear Lake, Birch Lake
Townhomes Project,
Series 1989 A,
9.750% 7/15/19 750 764
NC Eastern Carolina Regional Housing
Authority, New River Apartments-
Jacksonville, Series 1994,
8.250% 9/1/14 1,310 1,331
Resolution Trust Corp., Pass Through
Certificates, Series 1993 A,
9.250% 12/1/16 (b) 4,248 4,261
SC State Housing Finance and Development
Multi-Family Housing Finance Revenue,
Westbridge Apartments,
Series A,
9.500% 9/1/20 600 584
TN Franklin Industrial Board, Landings
Apartment Project, Series 1996 B,
8.750% 4/1/27 1,745 1,797
TX Galveston Health Facilities Center,
Driftwood Apartments,
8.000% 8/1/23 (b) 1,000 996
VA Alexandria Redevelopment & Housing
Authority, Courthouse Commons
Apartments,
Series 1990 A,
10.000% 1/1/21 (b) 500 455
-------
13,891
-------
SINGLE FAMILY - 4.6%
CO Housing Finance Authority:
Series D-1,
7.375% 6/1/26 (d) 1,275 1,331
Series 1997 A-2,
7.250% 5/1/27 (d) 680 717
MO State Housing Development
Commission, Series C,
7.250% 9/1/26 2,135 2,243
PA State Housing Finance Agency,
Series 1994 42,
6.850% 4/1/25 2,400 2,491
-------
6,782
-------
</TABLE>
See notes to investment portfolio.
8
<PAGE> 11
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2000 (Unaudited, in thousands)
<TABLE>
<CAPTION>
PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
INDUSTRIAL - 8.1%
FOOD PRODUCTS - 3.3%
IN Hammond, American Maize
Products Co.,
Series 1994,
8.000% 12/1/24 $2,000 $2,137
LA Port New Orleans Industrial
Development Continental Grain Co.,
Series 1993,
7.500% 7/1/13 2,000 1,965
MI State Strategic Fund, Michigan Sugar
Co., Sebewaing Project,
Series 1998 A,
6.250% 11/1/15 1,000 866
------
4,968
------
FOREST PRODUCTS - 1.6%
GA Rockdale County Development
Authority, Solid Waste Disposal,
Visy Paper Inc.,
Series 1993,
7.500% 1/1/26 1,800 1,834
GA Wayne County Development Authority,
Solid Waste Disposal, ITT Rayonier Inc.,
Series 1990,
8.000% 7/1/15 500 511
------
2,345
------
MANUFACTURING - 1.1%
IL Will-Kankakee Regional Development
Authority, Flanders Corp./Precisionaire
Project, Series 1997,
6.500% 12/15/17 940 901
MN Brooklyn Park, TL Systems Corp.,
Series 1991,
10.000% 9/1/16 495 557
NV Dongsung America,
6.625% 11/1/10 (c) 204 163
VA State Small Business Financing Authority,
Donsung America,
Series 1998,
7.250% 11/1/15 156 97
------
1,718
------
METALS & MINING - 2.1%
MD Baltimore County, Bethlehem Steel
Corp. Project, Series B,
7.500% 6/1/15 2,000 2,000
NV State Department of Business & Industry,
Wheeling-Pittsburgh Steel Corp.,
Series 1999 A,
8.000% 9/1/14 250 246
VA Greensville County Industrial
Development Authority, Wheeling Steel,
Series 1999 A:
6.375% 4/1/04 70 68
7.000% 4/1/14 375 338
VA Peninsula Ports Authority, Ziegler
Coal Project,
Series 1997,
6.900% 5/2/22 500 426
------
3,078
------
--------------------------------------------------------------------------------
OTHER - 4.1%
OTHER - 0.4%
MD Baltimore, Park Charles Project,
Series 1986,
8.000% 1/1/10 515 531
------
REFUNDED/ESCROWED (h) - 3.7%
FL Clearwater Housing Authority,
Hampton Apartments,
Series 1994,
8.250% 5/1/24 1,382 1,555
MA State Health & Educational
Facilities Authority,
Corporation for Independent Living,
8.100% 7/1/18 565 622
MA State Industrial Finance Agency,
Series 1990,
9.000% 10/1/20 895 923
MN Mille Lacs Capital Improvement
Authority, Mille Lacs Band of Chippewa,
Series 1992 A,
9.250% 11/1/12 585 649
NC Lincoln County,
Lincoln County Hospital,
9.000% 5/1/07 250 277
PA Montgomery County Industrial
Development Authority, Assisted
Living Facility, Series 1993 A,
8.250% 5/1/23 590 640
TN Shelby County, Health, Education,
& Housing Facilities Board, Open Arms
Development Center:
Series 1992 A,
9.750% 8/1/19 325 410
Series 1999 C,
9.750% 8/1/19 320 403
------
5,479
------
</TABLE>
See notes to investment portfolio.
9
<PAGE> 12
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2000 (Unaudited, in thousands)
<TABLE>
<CAPTION>
MUNICIPAL BONDS (CONTINUED) PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
OTHER REVENUE - 3.1%
HOTELS - 1.3%
PA Philadelphia Authority for Industrial
Development, Doubletree Project,
6.500% 10/1/27 $2,000 $1,883
------
RECREATION - 0.6%
NM Red River Sports Facility,
Red River Ski Area Project,
Series 1998,
6.450% 6/1/07 915 868
------
RETAIL - 1.2%
OH Lake County,
North Madison Properties,
Series 1993,
8.819% 9/1/11 (b) 545 583
VA Virginia Beach Development
Authority, SC Diamond Associates, Inc.,
8.000% 12/1/10 1,210 1,261
------
1,844
------
RESOURCE RECOVERY - 4.6%
DISPOSAL - 3.0%
CT State Development Authority,
Sewer Sludge Disposal Facilities,
Series 1996,
8.250% 12/1/06 840 907
CT State Disposal Facility,
NETCO Waterbury Ltd.,
Series 1995,
9.375% 6/1/16 1,300 1,425
MA State Industrial Finance Agency,
Massachusetts Environmental Services,
Series 1994 A,
8.750% 11/1/21 (c) 980 490
Peabody Monofill Associates, Inc.,
Series 1995,
9.000% 9/1/05 765 793
UT Carbon County,
Laidlaw Environmental,
Series A,
7.450% 7/1/17 1,000 870
------
4,485
------
RESOURCE RECOVERY - 1.6%
MA State Industrial Finance Agency,
Ogden Hill Project,
Series 1998 A,
5.500% 12/1/13 500 442
PA Delaware County Industrial
Development Authority,
Series A,
6.200% 7/1/19 2,225 1,947
------
2,389
------
TAX-BACKED - 4.9%
SPECIAL NON-PROPERTY TAX - 0.6%
IL State Development Finance Authority,
City of Marion Project,
Series 1991,
9.625% 9/15/21 1,145 859
------
SPECIAL PROPERTY TAX - 4.3%
CA Carson,
Series 1992,
7.375% 9/2/22 920 948
CA Orange County Community Facilities
District, Ladera Ranch,
Series 1999 A,
6.700% 8/15/29 300 294
CA Pleasanton Joint Powers Financing
Reassessment Subordinated Revenue,
Series 1993-B,
6.750% 9/2/17 1,740 1,779
CA Poway Community Facilities District,
No. 88-1 Parkway Business Center,
Series 1998,
6.750% 8/15/15 575 587
FL Lexington Oaks Community
Development District:
Series 1998 A,
6.125% 5/1/19 290 268
Series 1998 B,
5.500% 5/1/05 520 501
Series 2000 A,
7.200% 5/1/30 100 99
Series 2000 D,
6.700% 5/1/07 150 149
FL Northern Palm Beach County
Improvement District,
Series 1999,
5.900% 8/1/19 500 452
FL Orlando, Conroy Road
Interchange Project,
Series 1998 A:
5.500% 5/1/10 125 117
5.800% 5/1/26 500 430
</TABLE>
See notes to investment portfolio.
10
<PAGE> 13
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2000 (Unaudited, in thousands)
<TABLE>
<CAPTION>
PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
FL Stoneybrook Community
Development District,
Series 1998 B,
5.700% 5/1/08 $ 855 $ 814
--------
6,438
--------
TRANSPORTATION - 6.0%
AIR TRANSPORTATION - 0.3%
PA Philadelphia Authority for Industrial
Development, Aero Philadelphia,
Series 1999,
5.250% 1/1/09 500 460
--------
AIRPORT - 5.3%
CO Denver City and County Airport,
Series A,
8.500% 11/15/23 225 232
MN Minneapolis & St.Paul Metropolitan
Airports Commission, IFRN (variable
rate), Series 1999,
5.695% 1/1/22 (b) 4,900 3,757
NC Charlotte Apartments,
Series 1999, IFRN (variable rate),
7.400% 4/20/19 (b) 4,000 3,869
--------
7,858
--------
TOLL FACILITIES - 0.4%
CO Public Highway Authority,
Series 2000 B,
(d) 9/1/35 8,750 605
--------
UTILITY - 10.1%
INDEPENDENT POWER PRODUCER - 3.8%
NY Port Authority of New York &
New Jersey, KIAC Partners,
Series 1996 IV,
6.750% 10/1/11 2,000 2,035
PA State Economic Development
Finance Authority: Clover Project,
Series D,
7.150% 12/1/18 1,650 1,663
Northampton Generating,
Series A,
6.500% 1/1/13 1,000 959
PR Commonwealth of Puerto Rico
Industrial, Educational, Medical &
Environmental Cogeneration Facilities,
AES Project,
Series 2000,
6.625% 6/1/26 1,000 1,006
--------
5,663
--------
INVESTOR OWNED - 1.3%
CT State Development Authority,
Connecticut Light & Power Co.,
Series 1993 B,
5.950% 9/1/28 $ 300 $ 260
LA Calcasieu Parish Industrial Development
Board, Entergy Gulf States, Inc.,
Series 1999,
5.450% 7/1/10 (c) 500 459
MS State Business Finance Corp.,
Systems Energy Resources Project,
Series 1998,
5.875% 4/1/22 1,500 1,262
--------
1,981
--------
MUNICIPAL ELECTRIC - 4.4%
TX Lower Colorado River Authority,
Series 1999,
6.928% 5/15/21(b) 7,500 6,578
--------
WATER & SEWER - 0.5%
LA Public Facility Belmont Water Authority,
9.000% 3/15/24 (b)(c)(h) 585 497
MS Five Lakes Utility District,
8.250% 7/15/24 (b)(c) 400 320
--------
817
--------
TOTAL MUNICIPAL BONDS
(cost of $153,564) (j) 141,308
--------
SHORT-TERM OBLIGATIONS - 4.3%
--------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (k)
IA Woodbury County,
Siouxland Medical Educational Foundation,
Series 1996,
4.300% 11/1/16 450 450
ID State Health Facilities Authority,
St. Lukes Regional Medical Facility,
Series 1995,
4.400% 5/1/22 2,800 2,800
IL State Development Finance Authority,
Council for Jewish Elderly,
Series 1995,
4.300% 3/1/15 400 400
MN Minneapolis,
Series 1996,
4.100% 12/1/06 1,100 1,100
NY New York City,
4.450% 10/1/20 600 600
</TABLE>
See notes to investment portfolio.
11
<PAGE> 14
INVESTMENT PORTFOLIO (CONTINUED)
May 31, 2000 (Unaudited, in thousands)
<TABLE>
<CAPTION>
SHORT-TERM OBLIGATIONS (CONTINUED) PAR VALUE
--------------------------------------------------------------------------------
<S> <C> <C>
VARIABLE RATE DEMAND NOTES (k) (CONTINUED)
WI State Health & Educational
Facilities Authority,
Monroe Joint Venture, Inc.,
Series 2000,
4.300% 1/1/30 $1,000 $ 1,000
--------
TOTAL SHORT-TERM OBLIGATIONS 6,350
--------
OTHER ASSETS & LIABILITIES, NET - 0.7% 1,014
--------
Net Assets - 100.0% $148,672
--------
</TABLE>
NOTES TO INVESTMENT PORTFOLIO:
(a) This is a restricted security which was acquired on August 21, 1998 and
August 31, 1998 at an aggregate cost of $1,180. This security
represents 0.7% of the Fund's net assets as of May 31, 2000.
(b) These securities are exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in transactions
exempt from registration, normally to qualified institutional buyers.
At May 31, 2000, the value of these securities amounted to $23,377 or
15.7% of net assets.
(c) This issuer is in default of certain debt covenants. Income is not
being accrued.
(d) These securities, or a portion thereof, with a total market value of
$9,472, are being used to collateralize open futures contracts.
(e) Zero coupon bond.
(f) This is a restricted security which was acquired on July 30, 1998 at a
cost of $746. This security represents 0.4% of the Fund's net assets as
of May 31, 2000.
(g) This is a restricted security which was acquired on July 30, 1998 at a
cost of $541. This security represents 0.3% of the Fund's net assets as
of May 31, 2000.
(h) The Fund has been informed that each issuer has placed direct
obligations of the U.S. Government in an irrevocable trust, solely for
the payment of the principal and interest.
(i) This is a restricted security which was acquired on March 22, 1994 at a
cost of $585. This security represents 0.3% of the Fund's net assets as
of May 31, 2000.
(j) Cost for federal income tax purposes is the same.
(k) Variable rate demand notes are considered short-term obligations.
Interest rates change periodically on specified dates. These securities
are payable on demand and are secured by either letters of credit or
other credit support agreements from banks. The rates listed are as of
May 31, 2000.
Short futures contracts open at May 31, 2000:
<TABLE>
<CAPTION>
Par value Unrealized
covered by Expiration depreciation
Type contracts month at 5/31/00
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Treasury Bond 7,600 September $ 83
</TABLE>
See notes to financial statements.
12
<PAGE> 15
STATEMENT OF ASSETS AND LIABILITIES
May 31, 2000 (Unaudited)
(In thousands except for per share amounts and footnotes)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value (cost $153,564) $ 141,308
Short-term obligations 6,350
---------
147,658
Receivable for:
Interest $ 3,417
Fund shares sold 277
Investments sold 185
Other 88 3,967
--------- ---------
Total Assets 151,625
LIABILITIES
Payable for:
Investments purchased 1,978
Fund shares repurchased 421
Distributions 254
Variation margin on futures 40
Accrued:
Management fee 71
Transfer Agent fee 19
Bookkeeping fee 5
Deferred Trustees fee 5
Other 160
---------
Total Liabilities 2,953
---------
NET ASSETS 148,672
=========
Net asset value & redemption price per share --
Class A ($55,508/6,058) $ 9.16(a)
---------
Maximum offering price per share --
Class A ($9.16/0.9525) $ 9.62(b)
---------
Net asset value & offering price per share --
Class B ($90,569/9,885) $ 9.16(a)
---------
Net asset value & offering price per share --
Class C ($2,595/283) $ 9.16(a)
---------
COMPOSITION OF NET ASSETS
Capital paid in $ 166,816
Overdistributed net investment income (196)
Accumulated net realized loss (5,609)
Net unrealized depreciation on:
Investments (12,256)
Open futures contracts (83)
---------
$ 148,672
=========
</TABLE>
(a) Redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
(b) On sales of $50,000 or more the offering price is reduced.
STATEMENT OF OPERATIONS
For the Six Months Ended May 31, 2000 (Unaudited)
(In thousands)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest $ 5,856
EXPENSES
Management fee $ 454
Service fee 198
Distribution fee -- Class B 374
Distribution fee -- Class C 10
Transfer agent fee 133
Bookkeeping fee 33
Trustees fee 8
Custodian fee 2
Audit fee 14
Legal fee 4
Registration fee 22
Reports to shareholders 10
Other 24
-------
1,286
Fees waived by the Distributor -- Class C (2) 1,284
------- -------
Net Investment Income 4,572
-------
NET REALIZED & UNREALIZED GAIN (LOSS) ON
PORTFOLIO POSITIONS
Net realized gain (loss) on:
Investments (1,617)
Closed futures contracts 213
-------
Net Realized Loss (1,404)
Net change in unrealized appreciation/
depreciation during the period on:
Investments (6,169)
Open futures contracts (148)
-------
Net Change in Unrealized
Appreciation/Depreciation (6,317)
-------
Net Loss (7,721)
-------
Decrease in Net Assets from Operations $(3,149)
=======
</TABLE>
See notes to financial statements.
13
<PAGE> 16
STATEMENT OF CHANGES IN NET ASSETS
(In thousands)
<TABLE>
<CAPTION>
(Unaudited)
Six months Year ended
ended May 31, November 30,
-------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS 2000 1999
<S> <C> <C>
Operations:
Net investment income $ 4,572 $ 9,489
Net realized loss (1,404) (1,770)
Net change in unrealized appreciation/depreciation (6,317) (17,386)
--------- ---------
Net Decrease from Operations (3,149) (9,667)
Distributions:
From net investment income -- Class A (1,702) (3,564)
From net investment income -- Class B (2,554) (5,760)
From net investment income -- Class C (67) (160)
--------- ---------
(7,472) (19,151)
--------- ---------
Fund Share Transactions:
Receipts for shares sold -- Class A 6,153 21,332
Value of distributions reinvested -- Class A 732 1,688
Cost of shares repurchased -- Class A (13,148) (16,678)
--------- ---------
(6,263) 6,342
--------- ---------
Receipts for shares sold -- Class B 4,223 20,850
Value of distributions reinvested -- Class B 1,114 2,640
Cost of shares repurchased -- Class B (21,048) (31,059)
--------- ---------
(15,711) (7,569)
--------- ---------
Receipts for shares sold -- Class C 544 2,470
Value of distributions reinvested -- Class C 32 107
Cost of shares repurchased -- Class C (822) (1,904)
--------- ---------
(246) 673
--------- ---------
Net Decrease from Fund Share Transactions (22,220) (554)
--------- ---------
Total Decrease (29,692) (19,705)
NET ASSETS
Beginning of period 178,364 198,069
--------- ---------
End of period (net of overdistributed net investment
income of $196 and $445, respectively) $ 148,672 $ 178,364
--------- ---------
NUMBER OF FUND SHARES
Sold -- Class A 660 2,086
Issued for distributions reinvested -- Class A 79 166
Repurchased -- Class A (1,405) (1,647)
--------- ---------
(666) 605
--------- ---------
Sold -- Class B 452 2,019
Issued for distributions reinvested -- Class B 120 259
Repurchased -- Class B (2,259) (3,056)
--------- ---------
(1,687) (778)
--------- ---------
Sold -- Class C 59 239
Issued for distributions reinvested -- Class C 3 10
Repurchased -- Class C (88) (188)
--------- ---------
(26) 61
--------- ---------
</TABLE>
See notes to financial statements.
14
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
May 31, 2000 (Unaudited)
NOTE 1. INTERIM FINANCIAL STATEMENTS
In the opinion of management of Liberty High Yield Municipal Fund (formerly
Colonial High Yield Municipal Fund) (the Fund) a series of Liberty Funds Trust
IV, the accompanying financial statements contain all normal and recurring
adjustments necessary for the fair presentation of the financial position of the
Fund at May 31, 2000, and the results of its operations, the changes in its net
assets and the financial highlights for the six months then ended.
NOTE 2. ACCOUNTING POLICIES
ORGANIZATION:
The Fund is a 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 a high
level of after-tax total return by pursuing current income exempt from ordinary
federal income tax and opportunities for long-term appreciation from a portfolio
primarily invested in municipal bonds. The Fund may issue an unlimited number
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 on redemptions made within eighteen months on
an original purchase of $1 million to $5 million. Class B shares are subject to
an annual distribution fee and a contingent deferred sales charge. Class B
shares will convert to Class A shares as follows:
<TABLE>
<CAPTION>
ORIGINAL PURCHASE CONVERTS TO CLASS A SHARES
--------------------------------------------------------------------------------
<S> <C>
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
</TABLE>
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 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.
Futures contracts are valued based on the difference between the last sale price
and the opening price of the contract.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
Portfolio positions for which market quotations are not readily available are
valued at fair value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains (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 the Class B and Class C distribution fees), and
realized and unrealized gains (losses), are allocated to each class
proportionately on a daily basis for purposes of determining the net asset value
of each class.
Class B and Class C per share data and ratios are calculated by adjusting the
expense and net investment income per share data and ratios for the Fund for the
entire period by the distribution fee applicable to Class B and Class C shares
only.
FEDERAL INCOME TAXES:
Consistent with the Fund's policy to qualify as a regulated investment company
and to distribute all of its taxable income, no federal income tax has been
accrued.
INTEREST INCOME, DEBT DISCOUNT AND PREMIUM:
Interest income is recorded on the accrual basis. Original issue discount is
accreted to interest income over the life of a security with a corresponding
increase in the cost basis; market discount is not accreted. Premium is
amortized against interest income with a corresponding decrease in the cost
basis.
DISTRIBUTIONS TO SHAREHOLDERS:
The Fund declares and records distributions daily and pays monthly.
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforwards) under income tax regulations.
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES MANAGEMENT FEE:
Colonial Management Associates, Inc. (the Advisor) is the investment Advisor of
the Fund and furnishes accounting and other services and office facilities for a
monthly fee based on each fund's pro-rata portion of the combined average net
assets of the Fund,
15
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
May 31, 2000 (Unaudited)
Liberty Tax-Exempt Fund and Liberty Tax-Exempt Insured Fund as follows:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS ANNUAL FEE RATE
--------------------------------------------------------------------------------
<S> <C>
First $1 billion 0.06%
Next $2 billion 0.55%
Next $1 billion 0.50%
Over $4 billion 0.45%
</TABLE>
BOOKKEEPING FEE:
The Advisor provides bookkeeping and pricing services for $27,000 annually plus
0.035% annually of the Fund's average net assets over $50 million.
TRANSFER AGENT FEE:
Liberty Funds Services, Inc. (the Transfer Agent), an affiliate of the Advisor,
provides shareholder services for a monthly fee equal to 0.13% annually of the
Fund's average net assets and receives reimbursement for certain out-of-pocket
expenses.
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.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES:
Liberty Funds Distributor, Inc. (the Distributor), a subsidiary of the Advisor,
is the Fund's principal underwriter. For the six months ended May 31, 2000, the
Fund has been advised that the Distributor retained net underwriting discounts
of $6,114 on sales of the Fund's Class A shares and received contingent deferred
sales charges (CDSC) of $9,323, $209,466 and $1,667 on Class A, Class B and
Class C share redemptions, respectively.
The Fund has adopted a 12b-1 plan which requires the payment of a service fee to
the Distributor 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% annually of the average net assets attributable to
Class B and Class C shares. The Distributor has voluntarily agreed, until
further notice, to waive a portion of the Class C share distribution fee so that
it does not exceed 0.60% annually.
The 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 May 31, 2000, purchases and sales of investments,
other than short-term obligations were $4,683,284 and $32,106,333, respectively.
Unrealized appreciation (depreciation) at May 31, 2000, based on cost of
investments for both financial statement and federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation $ 2,151,224
Gross unrealized depreciation (14,407,152)
------------
Net unrealized depreciation $(12,255,928)
============
</TABLE>
CAPITAL LOSS CARRYFORWARDS:
At November 30, 1999, capital loss carryforwards, available (to the extent
provided in regulations) to offset future realized gains were approximately as
follows:
<TABLE>
<CAPTION>
YEAR OF EXPIRATION CAPITAL LOSS CARRYFORWARD
<S> <C>
2003 $ 684,000
2005 1,526,000
2007 1,932,000
----------
$4,142,000
==========
</TABLE>
Expired capital loss carryforwards, if any, are recorded as a reduction of
capital paid in.
To the extent loss carryforwards are used to offset any future realized gains,
it is unlikely that such gains would be distributed since they may be taxable to
shareholders as ordinary income.
OTHER:
There are certain risks arising from geographic concentration in any state.
Certain revenue or tax related events in a state may impair the ability of
certain issuers of municipal securities to pay principal and interest on their
obligations.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
The Fund may purchase or sell municipal and Treasury bond futures contracts and
purchase and write options on futures. The Fund will invest in these instruments
to hedge against the effects of changes in the value of portfolio securities due
to anticipated changes in interest rates and/or market conditions, for duration
management, or when the transactions are economically appropriate to the
reduction of risk inherent in the management of the Fund and not for trading
purposes. The use of futures contracts and options involves certain risks which
include (1) imperfect correlation between the price movement of the instruments
and the underlying securities, (2) inability to close out a position due to
different trading hours or the temporary absence of a liquid market for either
the instrument or the underlying securities or (3) an inaccurate prediction by
the Advisor of the future direction of interest rates. Any of these risks may
involve amounts exceeding the variation margin recognized in the Fund's
Statement of Assets and Liabilities at any given time.
NOTE 5. LINE OF CREDIT
The Fund may borrow up to 33 1/3% of its net assets under a line of credit for
temporary or emergency purposes. Any borrowings bear interest at one of the
following options determined at the inception of the loan: (1) federal funds
rate plus 1/2 of 1%, (2) the lending bank's base rate or (3) IBOR offshore loan
rate plus 1/2 of 1%. There were no borrowings under the line of credit during
the six months ended May 31, 2000.
16
<PAGE> 19
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED MAY 31, 2000
CLASS A CLASS B CLASS C
--------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.590 $ 9.590 $ 9.590
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.251 0.242 0.244(a)
Net realized and unrealized loss (0.406) (0.432) (0.427)
------- ------- -------
Total from Investment Operations (0.155) (0.190) (0.183)
------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.275) (0.240) (0.247)
------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 9.160 $ 9.160 $ 9.160
======= ======= =======
Total return (b)(c) (1.61)% (1.98)% (1.91)%(d)
======= ======= =======
RATIOS TO AVERAGE NET ASSETS
Expenses (e)(f) 1.13% 1.88% 1.73%(a)
Net investment income (e)(f) 6.23% 5.48% 5.63%(a)
Portfolio turnover (c) 3% 3% 3%
Net assets at end of period (000) $55,508 $90,569 $ 2,595
</TABLE>
(a) Net of fees waived by the Distributor which amounted to $0.007 per share
and 0.15% (annualized).
(b) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(c) Not annualized.
(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.
(f) Annualized.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30, 1999
CLASS A CLASS B CLASS C
--------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.580 $ 10.580 $10.580
------- -------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.546 0.470 0.485(a)
Net realized and unrealized loss (0.991) (0.991) (0.991)
------- -------- -------
Total from Investment Operations (0.445) (0.521) (0.506)
------- -------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.545) (0.469) (0.484)
------- -------- -------
NET ASSET VALUE, END OF PERIOD $ 9.590 $ 9.590 $ 9.590
======= ======== =======
Total return (b) (4.36)% (5.08)% (4.94)%(c)
======= ======== =======
RATIOS TO AVERAGE NET ASSETS
Expenses (d) 1.13% 1.88% 1.73%(a)
Net investment income (d) 5.35% 4.60% 4.75%(a)
Portfolio turnover 50% 50% 50%
Net assets at end of period (000) $64,458 $110,939 $ 2,967
</TABLE>
(a) Net of fees waived by the Distributor which amounted to $0.015 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 directed brokerage
arrangements had no impact.
17
<PAGE> 20
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30, 1998
CLASS A CLASS B CLASS C
--------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.340 $ 10.340 $10.340
------- -------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.561 0.480 0.496(a)
Net realized and unrealized gain 0.260 0.260 0.260
------- -------- -------
Total from Investment Operations 0.821 0.740 0.756
------- -------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.565) (0.487) (0.502)
In excess of net investment income (0.016) (0.013) (0.014)
------- -------- -------
Total Distributions Declared to Shareholders (0.581) (0.500) (0.516)
------- -------- -------
NET ASSET VALUE, END OF PERIOD $10.580 $ 10.580 $10.580
======= ======== =======
Total return (b) 8.11% 7.29% 7.45%(c)
======= ======== =======
RATIOS TO AVERAGE NET ASSETS
Expenses (d) 1.07% 1.82% 1.67%(a)
Net investment income (d) 5.37% 4.62% 4.77%(a)
Portfolio turnover 36% 36% 36%
Net assets at end of period (000) $64,749 $130,691 $ 2,629
</TABLE>
(a) Net of fees waived by the Distributor which amounted to $0.016 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 directed brokerage
arrangements had no impact.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30, 1997
CLASS A CLASS B CLASS C (a)
--------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.160 $ 10.160 $10.320
------- -------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.592 0.516 0.176
Net realized and unrealized gain 0.188 0.188 0.018(b)
------- -------- -------
Total from Investment Operations 0.780 0.704 0.194
------- -------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.594) (0.518) (0.174)
In excess of net investment income (0.006) (0.006) --
------- -------- -------
Total Distributions Declared to Shareholders (0.600) (0.524) (0.174)
------- -------- -------
NET ASSET VALUE, END OF PERIOD $10.340 $ 10.340 $10.340
======= ======== =======
Total return (c) 7.95% 7.15% 1.90%(d)
======= ======== =======
RATIOS TO AVERAGE NET ASSETS
Expenses (e) 1.11% 1.86% 1.72%(f)
Net investment income (e) 5.83% 5.08% 5.14%(f)
Portfolio turnover 23% 23% 23%
Net assets at end of period (000) $52,847 $142,287 $ 341
</TABLE>
(a) Class C shares were initially offered on August 1, 1997. Per share amounts
reflect activity from that date.
(b) The amount shown for a share outstanding 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.
(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> 21
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1996 1995
CLASS A CLASS B CLASS A CLASS B
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.230 $ 10.230 $ 9.330 $ 9.330
------- -------- ------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.624 0.548 0.656 0.583
Net realized and unrealized gain (loss) (0.051) (0.051) 0.912 0.912
------- -------- ------- --------
Total from Investment Operations 0.573 0.497 1.568 1.495
------- -------- ------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.643) (0.567) (0.668) (0.595)
------- -------- ------- --------
NET ASSET VALUE, END OF PERIOD $10.160 $ 10.160 $10.230 $ 10.230
======= ======== ======= ========
Total return (a) 5.86% 5.07% 17.28% 16.42%
======= ======== ======= ========
RATIOS TO AVERAGE NET ASSETS
Expenses (b) 1.10% 1.85% 1.17% 1.92%
Net investment income (b) 6.19% 5.44% 6.67% 5.92%
Portfolio turnover 8% 8% 26% 26%
Net assets at end of period (000) $37,420 $145,200 $17,997 $137,893
</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.
19
<PAGE> 22
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<PAGE> 23
TRUSTEES & TRANSFER AGENT
--------------------------------------------------------------------------------
TOM BLEASDALE
Retired (formerly Chairman of the Board and Chief Executive Officer, Shore Bank
& Trust Company)
JOHN V. CARBERRY
Senior Vice President of Liberty Financial Companies, Inc. (formerly Managing
Director, Salomon Brothers)
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, Development Capital, LLC (formerly Dean, College of Business and
Management, University of Maryland; Dean, Simon Graduate School of Business,
University of Rochester; Chairman and Chief Executive Officer, CS First Boston
Merchant Bank; and President and Chief Executive Officer, The First Boston
Corporation)
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 Municipal 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 Municipal
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 MUNICIPAL FUND
<PAGE> 24
Liberty offers the independent thinking and collective strength of six financial
specialists. Our distinguished product line helps financial advisors and their
clients build diversified investment portfolios for long-term financial goals.
[LIBERTY LOGO]
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 Growth style equity 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 HIGH YIELD MUNICIPAL FUND SEMIANNUAL REPORT
[LIBERTY LOGO]
ALL-STAR - COLONIAL - CRABBE HUSON - NEWPORT - STEIN ROE ADVISOR
783-03/769B-0600 (7/00) 00/1166
