<PAGE>
- ----------------------------------------
COLONIAL MONEY MARKET FUND ANNUAL REPORT
- ----------------------------------------
June 30, 1999
[Graphic Omitted]
- -------------------------------
Not FDIC May Lose Value
Insured No Bank Guarantee
- -------------------------------
<PAGE>
COLONIAL MONEY MARKET FUND HIGHLIGHTS
JULY 1, 1998 - JUNE 30, 1999
INVESTMENT OBJECTIVE: Colonial Money Market Fund seeks maximum current income,
consistent with safety of capital and the maintenance of liquidity.
STRATEGY: The Fund pursues its objective by investing all of its assets in the
SR&F Cash Reserves Portfolio (Portfolio), a money market fund with the same
investment objective as the Fund.
PORTFOLIO MANAGER COMMENTARY: "We lengthened the Portfolio's average maturity
during the first half of the fiscal year to capture attractive yields in
anticipation of rate cuts by the Federal Reserve Board (Fed) in late 1998. In
1999, we shortened the Portfolio's average maturity so that we could reinvest at
higher yields after the widely anticipated rate hike by the Fed on June 30.
We've shifted from a defensive to a neutral stance, mirroring the Fed's shift."
- Jane Naeseth
COLONIAL MONEY MARKET FUND PERFORMANCE
CLASS A CLASS B CLASS C
Inception dates 1/30/81 6/8/92 7/1/94
- -------------------------------------------------------------------------------
Twelve-month distributions declared
per share $0.046 $0.036 $0.042
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7-day yields on 6/30/99(1) 4.21% 4.19% 3.79%
- -------------------------------------------------------------------------------
30-day yields on 6/30/99(1) 4.25% 3.23% 3.84%
PORTFOLIO BREAKDOWN(2) PORTFOLIO MATURITY(2)
(as of 6/30/99) (as of 6/30/99)
- --------------------------------------------------------------------------------
Commercial Paper ............ 79.1% 0 - 4 days .................. 9.6%
Letters of Credit ........... 8.2% 5 - 14 days ................ 51.5%
Yankee Certificate of 15 - 29 days ............... 15.2%
Deposit ..................... 7.1% 30 - 59 days ............... 12.3%
Corporate Notes ............. 5.6% 60+ days ................... 11.4%
(1) If the Advisor or its affiliates had not waived or borne certain Fund
expenses, the 7-day and 30-day yields would have been 4.02% and 4.06% for
Class A shares, 4.00% and 3.04% for Class B shares, and 3.00% and 3.05% for
Class C shares, respectively.
(2) Portfolio breakdown and maturity weightings are calculated as a percentage
of total market value of the investment portfolio. Because it is actively
managed, there can be no guarantee the Portfolio will continue to hold or
invest in these securities in the future.
An investment in the Fund is not insured or guaranteed by the U.S. government.
There can be no assurance that the $1.00 net asset value per share will be
maintained.
On March 2, 1998, the Fund became a feeder fund for the SR&F Cash Reserves
Portfolio, a money market fund managed by Stein Roe & Farnham Incorporated.
Prior to this transition, approximately two-thirds of the portfolio holdings
represented a selection of short-term U.S. government agency securities. The
Fund no longer invests primarily in U.S. government securities, but rather in
the Portfolio, which has the flexibility to search for the highest relative
yield among a variety of money market instruments.
<PAGE>
PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
[Photo of Stephen E. Gibson]
I am pleased to present the annual report for Colonial Money Market Fund for the
12-month period ended June 30, 1999.
The last half of 1998 and the first half of 1999 provided two very different
investment climates for money markets. Overall, though, money market funds
provided higher returns than most categories of fixed-income investments. Fear
of inflation outweighed the potential benefits of strong domestic economic
growth, driving down intermediate- and long-term bond prices.
In the second half of 1998, financial turmoil abroad and signs of a potential
slowdown in the U.S. economy prompted the Federal Reserve Board (Fed) to
implement a series of three interest rate cuts. These rate cuts helped boost the
value of most fixed-income investments, none more so than U.S. Treasury
securities, which experienced a significant rally due to their reputation as
safe and stable investments.
That flight to quality reversed as we passed from 1998 into 1999, although
investors feared inflation would return. That sentiment was confirmed in May
when the Fed announced it was inclined to raise short-term rates to slow growth
and head off inflation. The Fed followed through, hiking a key short-term
interest rate on June 30.
Going forward, we believe that the investment environment will benefit
fixed-income investments, as investors realize that inflation is unlikely to
rise significantly. For investors seeking a relatively stable environment for
their investment dollars and the potential for current income, Colonial Money
Market Fund remains an attractive option for their investment portfolio.
Thank you for choosing Colonial Money Market Fund and for giving us the
opportunity to serve your investment needs.
Respectfully,
/s/ Stephen E. Gibson
Stephen E. Gibson
President
August 11, 1999
Because economic and market conditions change frequently, there can be no
assurance that the trends described here will continue.
<PAGE>
SR&F CASH RESERVES PORTFOLIO
INVESTMENT PORTFOLIO
JUNE 30, 1999 (IN THOUSANDS)
COMMERCIAL PAPER - 86.9% (a) PAR VALUE
- -----------------------------------------------------------------------------
BEVERAGES - 3.2%
Coca-Cola Enterprises (b)
4.919% 7/7/99 $25,000 $24,980
-------
- -----------------------------------------------------------------------------
COMPUTER SERVICES - 2.4%
Electronic Data Systems (b)
4.922% 7/2/99 19,000 18,997
-------
- -----------------------------------------------------------------------------
CONSULTING SERVICES - 1.7%
CSC Enterprises (gtd. by Computer Sciences)
5.034% 7/6/99 12,835 12,826
-------
- -----------------------------------------------------------------------------
FINANCIAL SERVICES - 64.0%
AUTO LENDING - 3.2%
American Honda Motor
(gtd. by American Honda Motor)
4.878% 7/7/99 25,000 24,980
-------
DIVERSIFIED FINANCIAL SERVICES - 4.5%
Finova Capital
4.967% 7/12/99 35,000 34,947
-------
LEASING - 4.6%
Enterprise Funding (b)
5.140% - 5.876% 07/1-09/08/99 35,547 35,396
-------
OTHER FINANCIAL - 6.5%
Asset Securitization (b)
5.212% 7/14/99 38,000 37,929
Caterpillar Financial Services
5.307% 7/9/99 12,000 11,986
---------
49,915
---------
SPECIAL PURPOSE ENTITY - 45.2%
Citic Pacific Finance (LOC Bank of America)
4.942%-5.253% 07/12-07/28/99 38,000 37,875
CSN Overseas (LOC Barclay's Bank PLC)
5.163% 7/26/99 25,000 24,911
Falcon Asset Securitization(b)
5.276% 8/3/99 35,000 34,831
Harley-Davidson Funding (gtd. By Eaglemark, Inc.)(b)
4.940%-4.950% 07/6-07/07/99 34,000 33,975
Old Line Funding (b)
4.891%-4.938% 7/6/99 35,000 34,976
Preferred Receivables Funding (b)
4.883% 7/8/99 33,500 33,468
Receivables Capital (b)
4.902% 7/7/99 29,905 29,881
Special Purpose Accounts Receivable (b)
5.348% 8/4/99 35,000 34,824
Superior Funding (b)
5.097% 7/21/99 35,000 34,901
Thames Asset Global
Securitization No. 1 (b)
4.979%-5.061% 7/8-7/15/99 35,606 35,557
Windmill Funding (b)
5.004% 7/16/99 14,000 13,971
---------
349,170
---------
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MANUFACTURING - 4.5%
Eaton (b)
5.208% 7/9/99 35,000 34,959
---------
- -----------------------------------------------------------------------------
MEDICAL PRODUCTS - 4.5%
Baxter International
5.014%-5.110% 7/6-7/8/99 34,500 34,474
---------
- -----------------------------------------------------------------------------
RETAIL - CONVENIENCE STORES - 6.6%
Southland (gtd. By Ito-Yokado)
4.912% 7/9/99 15,785 15,768
Toys R' Us
4.933% 7/1/99 35,000 35,000
---------
50,768
---------
TOTAL COMMERCIAL PAPER
(cost of $671,412) 671,412
---------
CORPORATE NOTES - 5.5%
- -----------------------------------------------------------------------------
FINANCIAL SERVICES - 5.5%
Household Finance
8.836% 9/15/99 10,000 10,077
Transamerica Financial
8.466% 10/1/99 7,800 7,872
Goldman Sachs Group
5.020% 2/17/00 25,000 25,000
---------
42,949
---------
YANKEE CERTIFICATES OF DEPOSIT - 7.1%
- -----------------------------------------------------------------------------
BANKS - 7.1%
ABN-AMRO Canada
4.933% 10/12/99 25,000 24,656
Commerzbank New York
5.087% 2/16/00 30,000 29,994
---------
54,650
---------
TOTAL INVESTMENTS - 99.5% (amortized cost of $769,011)(c) 769,011
---------
OTHER ASSETS & LIABILITIES - 0.5% 3,450
- -----------------------------------------------------------------------------
NET ASSETS - 100.0% $ 772,461
---------
NOTES TO INVESTMENT PORTFOLIO:
- -----------------------------------------------------------------------------
(a) The interest rate is the effective rate at the date of purchase except for
variable rate notes, for which the interest rate represents the current rate
as of June 30, 1999.
(b) Represents private placement securities exempt from registration by Section
4(2) of the Securities Act of 1933. These securities are issued to investors
who agree that they are purchasing the securities for investment and not
with a view to public distribution. Any resale by the Portfolio must be in
an exempt transaction, normally to other institutional investors. At June
30, 1999, the aggregate value of the Fund's private placement securities was
$438,645, which represented 56.8 percent of net assets.
None of these securities were deemed illiquid.
(c) At June 30, 1999, the cost of investments for financial reporting and
federal income tax purposes was identical.
See notes to financial statements.
<PAGE>
SR&F CASH RESERVES PORTFOLIO
STATEMENT OF ASSETS & LIABILITIES
JUNE 30, 1999
(in thousands)
ASSETS
Investments at amortized cost $ 769,011
Cash $ 2,526
Interest receivable 1,162 3,688
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Total Assets 772,699
LIABILITIES
Payable to investment Advisor 157
Other liabilities 81
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Total Liabilities 238
---------
NET ASSETS applicable to investors' beneficial interests $ 772,461
---------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1999
(in thousands)
INVESTMENT INCOME
Interest income $ 39,905
EXPENSES
Management fees $ 1,809
Accounting fees 42
Other 121 1,972
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Net Investment Income 37,933
---------
NET REALIZED LOSS ON PORTFOLIO POSITIONS
Net realized loss (4)
---------
Increase in Net Assets from Operations $ 37,929
---------
See notes to financial statements.
<PAGE>
SR&F CASH RESERVES PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
Year ended Period ended
(in thousands) June 30 June 30
----------- -----------
INCREASE IN NET ASSETS 1999 1998 (a)
Operations:
Net investment income $ 37,933 $ 12,145
Net realized loss (4) --
----------- -----------
Net Increase from Operations 37,929 12,145
Transactions in investors'
beneficial interests:
Contributions 1,549,789 1,158,202
Withdrawals (1,501,534) (484,070)
----------- -----------
Net transactions in investors'
beneficial interest 48,255 674,132
----------- -----------
Net increase in net assets 86,184 686,277
NET ASSETS
Beginning of period 686,277 --
----------- -----------
End of period $ 772,461 $ 686,277
----------- -----------
(a) From commencement of operations on March 2, 1998.
FINANCIAL HIGHLIGHTS
Year ended Period ended
June 30 June 30
---------- ------------
RATIOS TO AVERAGE NET ASSETS 1999 1998(a)
Expenses 0.25% 0.26%(b)
Net investment income 4.83% 5.45%(b)
(a) From commencement of operations on March 2, 1998.
(b) Annualized.
See notes to financial statements.
<PAGE>
SR&F CASH RESERVES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
NOTE 1. ORGANIZATION OF THE SR&F CASH RESERVES PORTFOLIO
- --------------------------------------------------------------------------------
SR&F Cash Reserves Portfolio (the "Portfolio") is a separate series of SR&F Base
Trust, a Massachusetts common law trust organized under an Agreement and
Declaration of Trust dated August 23, 1993. The Declaration of Trust permits the
Trustees to issue non-transferable interests in the Portfolio. The investment
objective of the Portfolio is to seek maximum current income consistent with
capital preservation and maintenance of liquidity.
The Portfolio commenced operations on March 2, 1998. At commencement, Stein Roe
Cash Reserves Fund and Colonial Money Market Fund contributed $493,223,678 and
$187,536,920, respectively, in securities and other assets in exchange for
beneficial ownership of the Portfolio. The Portfolio allocates income, expenses
and realized gains (losses) to each investor on a daily basis, based on their
respective percentage of ownership. At June 30, 1999, Stein Roe Cash Reserves
Fund and Colonial Money Market Fund owned 65.5 percent and 34.5 percent,
respectively, of the Portfolio.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
The following summarizes the significant accounting policies of the Portfolio.
These policies are in conformity with generally accepted accounting principles,
which require management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying notes. Actual
results could differ from those estimates.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME:
Investment transactions are accounted for on trade date. Interest income,
including discount accretion and premium amortization, is recorded daily on the
accrual basis. Realized gains (losses) from investment transactions are reported
on an identified cost basis.
The Portfolio is permitted to invest in repurchase agreements involving
securities issued or guaranteed by the U.S. Government or by its agencies or
instrumentalities. The Portfolio requires issuers of repurchase agreements to
transfer the securities underlying those agreements to the Portfolio's custodian
at the time of origination.
INVESTMENT VALUATIONS:
The Portfolio utilizes the amortized cost method to value its investments. This
technique approximates market value and involves valuing a security initially at
cost and, thereafter assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest rates on
the market value of the instrument. In the event that a deviation of .50 of 1
percent or more exists between the Fund's $1.00 per-share net asset value,
calculated at amortized cost, and the net asset value calculated by reference to
market quotations, the Board of Trustees would consider what action, if any,
should be taken. Other assets are valued at fair value as determined in good
faith by or under the direction of the Board of Trustees.
FEDERAL INCOME TAXES:
No provision is made for federal income taxes because the Portfolio is treated
as a partnership for federal income tax purposes and all of its income is
allocated to its owners based on their respective percentages of ownership.
NOTE 3. PORTFOLIO COMPOSITION
- --------------------------------------------------------------------------------
Under normal market conditions, the Portfolio will invest a least 25 percent of
its total assets in securities of issuers in the financial services industry
(which includes, but is not limited to, banks, consumer and business credit
institutions, and other financial services companies). At June 30, 1999, 76.6
percent of the Portfolio's net assets were invested in the financial services
industry. See the portfolio of investments for additional information regarding
portfolio composition.
NOTE 4. TRUSTEES FEES AND TRANSACTIONS WITH AFFILIATES
- --------------------------------------------------------------------------------
The Portfolio pays a monthly management fee to Stein Roe & Farnham Incorporated
(the "Advisor"), an indirect, majority-owned subsidiary of Liberty Mutual
Insurance Company, for its services as investment Advisor and manager. The
management fee for the Portfolio is computed at an annual rate of .25 of 1
percent of the first $500 million of average daily net assets, and .225 of 1
percent thereafter. The Advisor also provides accounting services.
Certain officers and trustees of the Trust are also officers of the Advisor.
Compensation is paid to trustees not affiliated with the Advisor. The
compensation of trustees not affiliated with the Advisor for the period ended
June 30, 1999, was $21,500. No remuneration was paid to any other trustee or
officer of the Trust.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
TO THE HOLDERS OF INVESTORS' BENEFICIAL INTERESTS OF SR&F
CASH RESERVES PORTFOLIO AND THE BOARD OF
TRUSTEES OF THE SR&F BASE TRUST
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of SR&F Cash Reserves Portfolio as of
June 30, 1999, and the related statement of operations for the year then ended,
the statements of changes in net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods indicated
therein. These financial statements and financial highlights are the
responsibility of the Portfolio's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatements. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of June 30, 1999, by correspondence with the custodian. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
SR&F Cash Reserves Portfolio at June 30, 1999, and the results of its
operations, the changes in its net assets, and financial highlights for each of
the periods referred to above, in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Chicago, Illinois
August 11, 1999
<PAGE>
COLONIAL MONEY MARKET FUND
STATEMENT OF ASSETS & LIABILITIES
JUNE 30, 1999
(in thousands except for per share amounts)
ASSETS
Investment in SR&F Cash Reserves
Portfolio $266,875
Receivable for:
Fund shares sold $ 12,147
Other 10 12,157
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Total Assets 279,032
LIABILITIES
Payable for:
Fund shares repurchased 24,711
Distributions 304
Payable to custodian 151
Accrued:
Deferred Trustees fees 5
Other 56
---------
Total Liabilities 25,227
--------
NET ASSETS $253,805
========
Net asset value:
Class A ($157,790/157,791) $ 1.00 (a)
========
Class B ($93,821/93,818) $ 1.00 (a)
========
Class C ($2,194/2,194) $ 1.00 (a)
========
COMPOSITION OF NET ASSETS
Capital paid in $253,801
Undistributed net investment income 7
Accumulated net realized loss (3)
--------
$253,805
========
(a) Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
See notes to financial statements.
<PAGE>
COLONIAL MONEY MARKET FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1999
(in thousands)
INVESTMENT INCOME
Interest income from
SR&F Cash Reserves Portfolio $13,463
Expenses allocated from
SR&F Cash Reserves Portfolio (666)
-------
12,797
EXPENSES
Administration fee $ 637
Service fee - Class B 203
Service fee - Class C 7
Distribution fee - Class B 613
Distribution fee - Class C 22
Transfer agent 635
Bookkeeping fee 66
Trustees fee 19
Custodian fee 7
Audit fee 22
Legal fee 7
Registration fee 77
Reports to shareholders 10
Other 62
-----
2,387
Fee waived by the Administrator (484)
Fee waived by the Distributor - Class C (18) 1,885
----- -------
Net Investment Income 10,912
-------
NET REALIZED LOSS ON PORTFOLIO POSITIONS
Net realized loss (2)
-------
Increase in Net Assets from Operations $10,910
=======
See notes to financial statements.
<PAGE>
COLONIAL MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
Year ended Period ended
(in thousands) June 30 June 30 (a)
----------- ------------
INCREASE (DECREASE) IN 1999 1998
NET ASSETS
Operations:
Net investment income $ 10,912 $ 7,476
Net realized loss (2) -
----------- -----------
Net Increase from Operations 10,910 7,476
Distributions:
From net investment income - Class A (7,849) (5,343)
From net investment income - Class B (2,956) (1,940)
From net investment income - Class C (125) (126)
----------- -----------
(20) 67
----------- -----------
Fund Share Transactions:
Receipts for shares sold - Class A 1,246,973 1,173,914
Receipts for shares issued in the acquisition of
Crabbe Huson Money Market Fund 87,134 -
Value of distributions reinvested - Class A 7,069 4,381
Cost of shares repurchased - Class A (1,312,028) (1,193,752)
----------- -----------
29,148 (15,457)
----------- -----------
Receipts for shares sold - Class B 230,456 182,273
Value of distributions reinvested - Class B 2,569 1,545
Cost of shares repurchased - Class B (201,012) (192,276)
----------- -----------
32,013 (8,458)
----------- -----------
Receipts for shares sold - Class C 7,368 10,122
Value of distributions reinvested - Class C 114 104
Cost of shares repurchased - Class C (8,591) (9,827)
----------- -----------
(1,109) 399
----------- -----------
Net Increase (Decrease) from Fund
Share Transactions 60,052 (23,516)
----------- -----------
Total Increase (Decrease) 60,032 (23,449)
NET ASSETS
Beginning of period 193,773 217,222
----------- -----------
End of period (undistributed net investment
income of $7 and $25, respectively) $ 253,805 $ 193,773
=========== ===========
(a) The Fund changed its fiscal year end from August 31 to June 30. Information
presented is for the period September 1, 1997 through June 30, 1998.
Statement of Changes in Net Assets continued on following page.
See notes to financial statements.
<PAGE>
COLONIAL MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS - CONT.
Year ended Period ended
(in thousands) June 30 June 30 (a)
----------- ------------
NUMBER OF FUND SHARES 1999 1998
Sold - Class A 1,246,974 1,173,913
Issued in the acquisition of Crabbe Huson
Money Market Fund 87,140 -
Issued for distributions reinvested - Class A 7,069 4,381
Repurchased - Class A (1,312,028) (1,193,752)
----------- -----------
29,155 (15,458)
----------- -----------
Sold - Class B 230,455 182,273
Issued for distributions reinvested - Class B 2,569 1,545
Repurchased - Class B (201,012) (192,275)
----------- -----------
32,012 (8,457)
----------- -----------
Sold - Class C 7,368 10,122
Issued for distributions reinvested - Class C 114 104
Repurchased - Class C (8,592) (9,827)
----------- -----------
(1,110) 399
----------- -----------
(a) The Fund changed its fiscal year end from August 31 to June 30. Information
presented is for the period September 1, 1997 through June 30, 1998.
See notes to financial statements.
<PAGE>
COLONIAL MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
NOTE 1. ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
ORGANIZATION: Colonial Money Market Fund (the Fund), a series of Liberty Funds
Trust II, formerly Colonial Trust II, is a diversified portfolio of a
Massachusetts business trust, registered under the Investment Company Act of
1940, as amended, as an open-end, management investment company. The Fund
invests all of its investable assets in interests in the SR&F Cash Reserves
Portfolio (the Portfolio), a Massachusetts common trust, having the same
investment objective as the Fund. The value of the Fund's investment in the
Portfolio reflects the Fund's proportionate interest in the net assets of the
Portfolio (34.5% at June 30, 1999). The performance of the Fund is directly
affected by the performance of the Portfolio.
The financial statements of the Portfolio, including the portfolio of
investments, are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements. The Fund may issue an
unlimited number of shares. The Fund offers three classes of shares: Class A,
Class B and Class C shares. 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 service and distribution fee and a
contingent deferred sales charge. Class B shares will convert to Class A shares
when they have been outstanding approximately eight years. Class C shares are
subject to a contingent deferred sales charge on redemptions made within one
year after purchase and an annual service and distribution fee.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies followed by the Fund in the preparation of its
financial statements.
SECURITY VALUATION AND TRANSACTIONS: Valuation of securities by the Portfolio is
discussed in Note 1 of the Portfolio's Notes to Financial Statements which are
included elsewhere in this report.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS: All income,
expenses (other than the Class B and Class C service and distribution fees), and
realized and unrealized gains (losses), are allocated to each class
proportionately on a daily basis for purposes of determining the net asset value
of each class.
Class B and Class C per share data and ratios are calculated by adjusting the
net investment income per share data and ratios for Class A for the entire
period by the service fee and distribution fee applicable to Class B and Class C
shares only.
FEDERAL INCOME TAXES: Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
DISTRIBUTIONS TO SHAREHOLDERS: The Fund declares and records distributions daily
and pays monthly.
NOTE 2. FEES AND COMPENSATION PAID TO AFFILIATES
- --------------------------------------------------------------------------------
ADMINISTRATION FEE: Colonial Management Associates, Inc. (the Administrator)
provides accounting and other services and office facilities for a monthly fee
equal to 0.25% annually of the Fund's average net assets. The Administrator has
voluntarily agreed to waive a portion of the administration fee so that it does
not exceed 0.06% annually.
BOOKKEEPING FEE: The Advisor provides bookkeeping and pricing services for a
monthly fee equal to $18,000 annually plus 0.0233% of the Fund's average net
assets over $50 million.
TRANSFER AGENT: Liberty Funds Services, Inc. (the Transfer Agent),
an affiliate of the Administrator, provides shareholder services for
a monthly fee equal to 0.20% annually of the Fund's average net assets and
receives reimbursement for certain out-of-pocket expenses.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES: Liberty Funds
Distributor, Inc. (the Distributor), a subsidiary of the Administrator, is the
Fund's principal underwriter. For the year ended June 30, 1999, the Fund has
been advised that the Distributor received contingent deferred sales charges
(CDSC) of $58,247, $567,308 and $9,477 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 Class B and Class C net assets as of
the 20th of each month. The plan also requires the payment of a distribution fee
to the Distributor equal to 0.75% annually of the average net assets
attributable to Class B and Class C shares. The Distributor has voluntarily
agreed to waive a portion of the Class C share distribution fee so that it does
not exceed 0.15% annually.
EXPENSE LIMITS: The Administrator has agreed, until further notice, to waive
fees and bear certain Fund expenses to the extent that total expenses (inclusive
of the Fund's proportionate share of the Portfolio's expenses and exclusive of
service and distribution fees, brokerage commissions, interest, taxes and
extraordinary expenses, if any) exceed 1.00% annually of the Fund's average net
assets.
For the year ended June 30, 1999, the Fund's total expenses as defined above did
not exceed the 1.00% expense limit.
OTHER: The Fund pays no compensation to its officers, all of whom are
employees of the Administrator.
The Fund's Trustees may participate in a deferred compensation plan which may be
terminated at any time. Obligations of the plan will be paid solely out of the
Fund's assets.
NOTE 3. OTHER RELATED PARTY TRANSACTIONS
- --------------------------------------------------------------------------------
At June 30, 1999, Colonial Investment Services, Inc. owned 9%, of the Fund's
shares outstanding.
NOTE 4. MERGER
- --------------------------------------------------------------------------------
On October 16, 1998, Crabbe Huson Money Market Fund (CHMMF) was merged into the
Fund by a non-taxable exchange of 87,140,110 Class A shares of the Fund (valued
at $87,133,699) for the 87,140,110 CHMMF shares outstanding. The aggregate net
assets of the Fund and CHMMF immediately after the merger were $353,822,519.
<PAGE>
COLONIAL MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are
as follows:
Year ended June 30
--------------------------------------
1999
Class A Class B Class C
------- ------- -------
Net asset value -
Beginning of period $ 1.000 $ 1.000 $ 1.000
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income (a)(b) 0.046 0.036 0.042 (c)
------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment
income (0.046) (0.036) (0.042)
------- ------- -------
Net asset value -
End of period $ 1.000 $ 1.000 $ 1.000
------- ------- -------
Total return (d)(e) 4.70% 3.68% 4.30%
------- ------- -------
RATIOS TO AVERAGE NET ASSETS
Expenses (a)(b)(f) 0.68% 1.68% 1.08% (c)
Net investment
income (a)(b)(f) 4.61% 3.61% 4.21% (c)
Net assets at end
of period (000) $157,790 $ 93,821 $ 2,194
(a) Net of fees waived by the Administrator which amounted to $0.002 per share
and 0.19%.
(b) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
SR&F Cash Reserves Portfolio.
(c) Net of fees waived by the Distributor which amounted to $0.006 per share
and 0.60%.
(d) Total return at net asset value assuming all distributions reinvested and
no contingent deferred sales charge.
(e) Had the Administrator and 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.
<PAGE>
COLONIAL MONEY MARKET FUND
FINANCIAL HIGHLIGHTS - CONT.
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
Period ended June 30
----------------------------------------------
1998 (a)(b)
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Net asset value -
Beginning of period $ 1.000 $ 1.000 $ 1.000
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.041(d)(e) 0.032(d)(e) 0.037(d)(e)(f)
------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.041) (0.032) (0.037)
------- ------- -------
Net asset value - End of period $ 1.000 $ 1.000 $ 1.000
------- ------- -------
Total return (g) 4.17% (h)(i) 3.28% (h)(i) 3.81%(h)(i)
------- ------- -------
RATIOS TO AVERAGE NET ASSETS
Expenses (j) 0.69%(d)(e)(k) 1.69%(d)(e)(k) 1.09%(d)(e)(f)(k)
Net investment income (j) 4.93%(d)(e)(k) 3.93%(d)(e)(k) 4.53%(d)(e)(f)(k)
Net assets at end of period (000) $128,658 $ 61,811 $ 3,304
(a) The Fund changed its fiscal year end from August 31 to June 30. Information presented is for
the period September 1, 1997 through June 30, 1998.
(b) Effective March 2, 1998, SR&F became the investment Advisor of the Fund.
(c) Effective July 1, 1997, Class D shares were redesignated Class C shares.
(d) The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's
proportionate share of the income and expenses of SR&F Cash Reserves Portfolio.
(e) Net of fees waived by the Administrator which amounted to $0.001 per share
and 0.19% (annualized).
(f) Net of fees waived by the Distributor which amounted to $0.005 per share and 0.60%
(annualized).
(g) Total return at net asset value assuming all distributions reinvested and no contingent
deferred sales charge.
(h) Not annualized.
(i) Had the Administrator and Distributor not waived a portion of expenses, total return would
have been reduced.
(j) The benefits derived from custody credits and directed brokerage arrangements had no impact.
(k) Annualized.
</TABLE>
<PAGE>
COLONIAL MONEY MARKET FUND
FINANCIAL HIGHLIGHTS - CONT.
Year ended August 31
- ------------------------------------------------------------------------------
1997 1996
Class A Class B Class C (c) Class A Class B Class C
------- ------- ---------- ------- ------- -------
$ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- ------- ------- ------- ------- -------
0.048 0.038 0.039 0.048 0.038 0.038
------- ------- ------- ------- ------- -------
(0.048) (0.038) (0.039) (0.048) (0.038) (0.038)
------- ------- ------- ------- ------- -------
$ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- ------- ------- ------- ------- -------
4.90% 3.82% 3.97% 4.93% 3.86% 3.85%
------- ------- ------- ------- ------- -------
0.72% 1.72% 1.64% 0.70% 1.70% 1.70%
4.73% 3.73% 3.81% 4.76% 3.76% 3.76%
$144,076 $ 70,242 $ 2,904 $ 115,063 $ 76,539 $ 4,435
<PAGE>
COLONIAL MONEY MARKET FUND
FINANCIAL HIGHLIGHTS - CONT.
Selected data for a share of each class outstanding throughout each period
are as follows:
Year ended August 31
------------------------------------
1995
Class A Class B Class C
------- ------- --------
Net asset value -
Beginning of period $ 1.000 $ 1.000 $ 1.000
------- ------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.050 0.040 0.040
------- ------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.050) (0.040) (0.040)
------- ------- --------
Net asset value -
End of period $ 1.000 $ 1.000 $ 1.000
------- ------- --------
Total return (c)(d) 5.14% 4.08% 4.07%
------- ------- --------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.69% 1.69% 1.69%
Fees and expenses waived
or borne by the Advisor 0.04% 0.04% 0.04%
Net investment
income 4.96% 3.96% 3.96%
Net assets at end
of period (000) $ 83,086 $55,441 $ 625
(a) Net of fees and expenses waived or borne by the Advisor which amounted to:
$0.000 $0.000 $0.000
(b) Class C shares were initially offered on July 1, 1994. Per share amounts
reflect activity from that date.
(c) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(d) Had the Advisor not waived or reimbursed a portion of expenses, total return
would have been reduced.
(e) Not annualized.
(f) Annualized.
<PAGE>
COLONIAL MONEY MARKET FUND
FINANCIAL HIGHLIGHTS - CONT.
Year ended August 31
---------------------------------------
1994
Class A Class B Class C (b)
------- ------- -------
Net asset value -
Beginning of period $ 1.000 $ 1.000 $ 1.000
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.028 0.018 0.005
------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.028) (0.018) (0.005)
------- ------- -------
Net asset value -
End of period $ 1.000 $ 1.000 $ 1.000
------- ------- -------
Total return (c)(d) 2.85% 1.82% 0.45%(e)
------- ------- -------
RATIOS TO AVERAGE NET ASSETS
Expenses 0.73% 1.73% 1.73% (f)
Fees and expenses waived
or borne by the Advisor 0.20% 0.20% 0.20% (f)
Net investment income 3.01% 2.01% 2.01% (f)
Net assets at end
of period (000) $97,115 $ 54,535 $ 518
$ 0.002 $ 0.002 $ 0.002
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
T0 THE TRUSTEES OF LIBERTY FUNDS TRUST II AND THE SHAREHOLDERS OF
COLONIAL MONEY MARKET FUND
In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Colonial Money Market Fund (the "Fund") (a series of Liberty Funds Trust II,
formerly Colonial Trust II) at June 30, 1999, the results of its operations, the
changes in its net assets and the financial highlights for the periods
indicated, in conformity with generally accepted accounting principles. These
financial statements and the financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of investments owned at
June 30, 1999, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
August 11, 1999
<PAGE>
HOW TO REACH US
BY PHONE OR BY MAIL
BY TELEPHONE
CUSTOMER CONNECTION - 1-800-345-6611
For 24-hour account information, call from your touch-tone phone. (Rotary
callers will be automatically connected to a representative during business
hours.) A recorded message will guide you through the menu:
For fund prices, dividends and capital gains information .............. press 1
For account information ............................................... press 2
To speak to a service representative .................................. press 3
For yield and total return information ................................ press 4
For duplicate statements or new supply of checks ...................... press 5
To order duplicate tax forms and year-end statements .................. press 6
(February through May)
To review your options at any time during your call ................... press *
To speak with a shareholder services representative about your account, call
Monday to Friday, 8:00 a.m. to 8:00 p.m. ET, and Saturdays from February through
mid-April, 10:00 a.m. to 2:00 p.m. ET.
LIBERTY TRANSACTION DEPARTMENT - 1-800-422-3737
To purchase, exchange or sell shares by telephone, call Monday to Friday, 9:00
a.m. to 7:00 p.m. ET. Transactions received after the close of the New York
Stock Exchange will receive the next business day's closing price.
LITERATURE - 1-800-426-3750
To request literature on any fund distributed by Liberty Funds Distributor,
Inc., call Monday to Friday, 8:30 a.m. to 6:30 p.m. ET.
BY MAIL
LIBERTY FUNDS SERVICES, INC.
P.O. BOX 1722
BOSTON, MA 02105-1722
<PAGE>
SHAREHOLDER COMMUNICATIONS
TO KEEP YOU INFORMED
To make recordkeeping easy and keep you up-to-date on the performance of your
investments, you can expect to receive the following information about your
account:
TRANSACTION CONFIRMATIONS: Each time you make a purchase, sale or exchange, you
receive a confirmation statement within just a few days.
QUARTERLY STATEMENTS: Every three months, if any transactions are made that
affect your share balance, this statement reports on your account activity
during the quarter (including any reinvestment of dividends). This statement
also provides year-to-date information.
LIBERTY FUNDS DISTRIBUTOR INVESTOR OPPORTUNITIES: Mailed with your quarterly
account statements, this newsletter highlights timely investment strategies,
portfolio manager commentary and shareholder service updates.
TAX FORMS AND YEAR-END TAX GUIDE: Easy-to-use forms and timely information are
designed to make tax reporting simpler. (Usually mailed in January.)
AVERAGE COST BASIS STATEMENTS: If you sold or exchanged shares during the year,
this statement may help you calculate your gain/loss for tax purposes. (Usually
mailed in February.)
<PAGE>
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial Money Market Fund is:
Liberty Funds Services, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Colonial Money Market Fund mails one shareholder report to each shareholder
address. If you would like more than one report, please call 1-800-426-3750 and
additional reports will be sent to you.
This report has been prepared for shareholders of Colonial Money Market Fund.
This report may also be used as sales literature when preceded or accompanied by
the current prospectus which provides details of sales charges, investment
objectives and operating policies of the Fund and the most recent copy of the
Liberty Funds Distributor, Inc. Performance Update.
<PAGE>
TRUSTEES
ROBERT J. BIRNBAUM
Consultant (formerly Special Counsel, Dechert, Price & Rhoads; President and
Chief Operating Officer, New York Stock Exchange, Inc.; President, American
Stock Exchange Inc.)
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
Dean, Boston College School of Management
THOMAS E. STITZEL
Professor of Finance, College of Business, Boise State University; Business
Consultant and Author
ROBERT L. SULLIVAN
Retired Partner, KPMG LLP (formerly Management Consultant, Saatchi and Saatchi
Consulting Ltd. and Principal and International Practice Director, Management
Consulting, Peat Marwick Main & Co.)
ANNE-LEE VERVILLE
Consultant (formerly General Manager, Global Education Industry, and President,
Applications Solutions Division, IBM Corporation)
[logo] L I B E R T Y
ALL STAR o COLONIAL o CRABBE HUSON o NEWPORT o STEIN ROE ADVISOR
Liberty Funds Distributor, Inc. (C)1999
One Financial Center, Boston, MA 02111-2621, 1-800-426-3750
Visit us at www.libertyfunds.com
MM-02/403H-0799 (8/99) 99/957
