UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-3009
---------------------
Liberty Funds Trust II
------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
One Financial Center, Boston, Massachusetts 02111
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Russell L. Kane, Esq.
Columbia Management Group, Inc.
One Financial Center
Boston, MA 02111
- ------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: 1-617-426-3363
-------------------
Date of fiscal year end: June 30, 2003
------------------
Date of reporting period: June 30, 2003
-----------------
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
LIBERTY MONEY MARKET FUND ANNUAL REPORT
JUNE 30, 2003
[photo of domed building]
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
Despite the uncertainty that hung over the markets and the economy as the nation
prepared to go to war in Iraq, the twelve-month period ended on a high note.
Virtually all major segments of the stock and bond markets posted positive
returns for the period. The economy, though still struggling, has made progress
toward recovery. And a new tax law is intended to boost consumer spending power
and make investing more attractive. The Jobs and Growth Tax Relief
Reconciliation Act of 2003 accelerates income tax rate cuts for virtually all
Americans and slashes the tax rates on dividends and long-term capital gains.
The government is counting on Americans to turn their good fortune into higher
spending. And the financial media has been full of advice on how to take
advantage of the new rate structure. As you debate what you will do if the lower
tax rate turns into a modest personal windfall, consider strategies that could
have a long-term impact on your portfolio. If your take-home pay increases as a
result of the tax break and any rebate check you are entitled to receive--and if
it's not eaten up by higher state taxesinvesting at least one third of it.
Consider adding it to your retirement account, using it to start an education
account for your child or setting it aside for an emergency. But make a
commitment and stick to it. Think of it as found money, because that is what it
is. You didn't have it before. But now that you've found it, you can put it to
work for a long-term goal.
And before you take advice from a television pundit or a magazine cover story,
talk to your financial advisor. There may be tax-related strategies that make
sense for you. But there are no one-size-fits-all solutions. Keep in mind that
tax rates change, and many of the provisions of this law are set to expire in
just a few short years.
CONSOLIDATION AND A NEW NAME: COLUMBIA
On a separate note, I am pleased to announce that, effective April 1, 2003, six
of the asset management firms brought together when Columbia Management Group,
Inc. was formed were consolidated and renamed Columbia Management Advisors, Inc.
(Columbia Management). This consolidation does not affect the management or
investment objectives of your fund and is the next step in our efforts to create
a consistent identity and to streamline our organization. By consolidating these
firms, we are able to create a more efficient organizational structure and
strengthen certain key functions, such as research. Although the name of the
asset manager familiar to you has changed, what hasn't changed is the commitment
of our specialized investment teams to a multi-disciplined approach to
investing, focused on our goal of offering shareholders the best products and
services.
The following report will provide you with more detailed information about the
performance of Liberty Money Market Fund and the strategies used by the fund's
portfolio manager, Karen Arneil. As always, we thank you for investing in
Liberty funds, and we remain committed to helping you build a strong financial
future.
Sincerely,
/s/ Joseph R. Palombo
Joseph R. Palombo
President
- --------------------------------------------------------------------------------
MEET THE NEW PRESIDENT -
Joseph R. Palombo, president and chairman of the Board of Trustees for Liberty
Funds, is also chief operating officer and executive vice president of Columbia
Management. Mr. Palombo has over 19 years of experience in the financial
services industry. Prior to joining Columbia Management, he was chief operating
officer and chief compliance officer for Putnam Mutual Funds. Prior to that, he
was a partner at Coopers & Lybrand. Mr. Palombo received his degree in
economics/accounting from the College of the Holy Cross, where he was a member
of Phi Beta Kappa. He earned his master's degree in taxation from Bentley
College and participated in the Executive Program at the Amos B. Tuck School at
Dartmouth College.
- --------------------------------------------------------------------------------
The examples provided should be viewed as illustrations. They do not constitute
tax or legal advice. Neither Columbia Management Advisors, Inc., nor its
affiliates, including Liberty Funds Distributor, Inc., provide tax or legal
advice. A tax advisor or attorney can provide you with answers to specific
questions about taxes and other legal issues.
Economic and market conditions change frequently. There is no assurance that the
trends described in this report will continue or commence.
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
PORTFOLIO MANAGER'S REPORT
For the 12-month period ended June 30, 2003, Liberty Money Market Fund class A
shares returned 0.60%. The fund's return was lower than the average return of
its peer group, the Lipper Money Market Funds Category, which was 0.72% for the
same period.1
INTEREST RATES FURTHER REDUCED
The Federal Reserve Board cut the federal funds rate twice during the 12-month
reporting period. These moves brought the key interbank overnight borrowing rate
down from 1.75% to 1.00%--a 45-year low. The most recent reduction in this
leading indicator for short-term interest rates took place late in June, as the
Fed once again tried to jump-start growth in a weak US economy. The lower rate
may have been a welcomed move for consumers and businesses, but the effect on
money market funds was to bring returns on eligible portfolio securities down to
an all-time low.
HIGH QUALITY AND LIQUIDITY REMAIN THE FUND'S FOCUS
As short-term rates declined, we remained committed to our universe of
government agency obligations and high quality corporate and bank obligations.
To strive for the highest available yield from these securities, we employed a
"barbell" management strategy. We invested in a mix of securities with
maturities ranging from one to three months and also securities with maturities
of one year. The shorter-term investments kept the portfolio liquid, while the
longer-term securities brought a higher return. We added taxable municipal
issues, which tend to trade at slightly higher rates than comparable commercial
paper. When we had a market anomaly during tax season, we also bought tax-exempt
municipals, which outyielded taxable investments significantly. For added yield
across all investments, we emphasized purchases in floating-rate debt, which
offered yields higher than commercial paper with comparable maturities. These
strategies brought higher levels of income to the fund and enabled us to sustain
an average portfolio maturity of 59 days.
1 Lipper Inc., a widely respected data provider in the industry, calculates
an average total return for mutual funds with similar investment objectives
as those of the fund.
DISTRIBUTIONS DECLARED PER
SHARE 7/1/02 - 6/30/03 ($)
Class A .006
- ------------------------------
Class B .002
- ------------------------------
Class C .003
- ------------------------------
Class Z .006
- ------------------------------
7-DAY YIELDS ON 6/30/03 (%)
Class A .18
- ------------------------------
Class B .10
- ------------------------------
Class C2 .10
- ------------------------------
Class Z .18
- ------------------------------
30-DAY YIELDS ON 6/30/03 (%)
Class A .24
- ------------------------------
Class B .10
- ------------------------------
Class C2 .10
- ------------------------------
Class Z .24
- ------------------------------
2 If the Advisor or its affiliates had not waived certain fund expenses, the
7-day and 30-day yields would have been -0.50% and -0.50%, respectively,
for class C shares.
1
PORTFOLIO MANAGER'S REPORT (CONTINUED)
STAYING THE COURSE
As we don't expect major rate changes in the foreseeable future, our strategy
remains unchanged. We will continue to pursue the highest possible returns from
high quality, liquid investments in this very low-rate environment.
/s/ Karen M. Arneil
Karen M. Arneil has managed Liberty Money Market Fund since July 1, 2002.
MUTUAL FUND PERFORMANCE CHANGES OVER TIME. PLEASE VISIT WWW.LIBERTYFUNDS.COM FOR
DAILY PERFORMANCE UPDATES.
An investment in the fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the fund.
Prior to July 29, 2002, the fund pursued its objective by investing all of its
assets in SR&F Cash Reserves Portfolio as part of a master fund/feeder fund
structure.
Economic and market conditions change frequently. There is not guarantee that
the trends described herein will continue or commence.
Past performance is no guarantee of future investment results. The principal
value and investment returns will fluctuate, resulting in a gain or loss on
sale.
PORTFOLIO BREAKDOWN3 AS OF 6/30/03 (%)
- --------------------------------------------
Commercial Paper......................63.6
Corporate Bonds.......................12.2
Government Agencies...................11.4
Certificate of Deposit.................9.5
Municipal Bonds........................5.1
Bank Notes.............................4.4
Repurchase Agreement...................0.03
PORTFOLIO MATURITY3 AS OF 6/30/03 (%)
- --------------------------------------------
1-4 Days..............................18.2
5-14 Days.............................26.0
15-29 Days............................13.8
30-59 Days............................17.2
More than 59 Days.....................24.8
3 Portfolio breakdown is unaudited and is calculated as a percentage of total
net assets. Maturity weightings are unaudited and are calculated as a
percentage of total investments. Because it is actively managed, there is no
guarantee the Portfolio will continue to hold or invest in these securities in
the future.
2
INVESTMENT PORTFOLIO -- LIBERTY MONEY MARKET FUND
June 30, 2003
INTEREST MATURITY
RATE DATE PAR VALUE
- --------------------------------------------------------------------------------
BANK NOTES - 4.4%
Bank One NA Illinois,
(cost of $30,020,119) 1.320% 04/13/04 (a) $30,000,000 $ 30,020,119
------------
CERTIFICATES OF DEPOSITS - 9.5%
Canadian Imperial
Bank of Canada,
1.200% 03/15/08 20,000,000 20,000,000
First Tennessee Bank NA,
1.240% 02/04/04 10,000,000 9,998,764
Rabobank Nederland NY,
1.330% 04/19/04 15,000,000 15,000,000
Toronto-Dominion Bank,
0.925% 09/23/03 20,000,000 20,000,233
------------
TOTAL CERTIFICATES OF DEPOSITS
(cost of $64,998,997) 64,998,997
------------
COMMERCIAL PAPER - 63.6%
Amstel Funding Corp.:
1.240% 07/07/03 (b) 25,000,000 24,994,833
1.270% 07/07/03 (b) 4,313,000 4,312,087
Aventis:
1.230% 07/10/03 (b) 6,000,000 5,998,155
1.230% 08/05/03 (b) 18,000,000 17,978,475
Credit Suisse First
Boston NY,
1.040% 10/01/03 25,000,000 24,933,556
Dexia Delaware,
1.240% 07/07/03 11,300,000 11,297,655
Falcon Asset
Securitization Corp.:
0.960% 07/23/03 (b) 22,000,000 21,987,093
0.980% 09/15/03 (b) 3,000,000 2,993,793
Fountain Square
Commercial
Funding Corp.,
1.230% 08/04/03 (b) 25,000,000 24,970,959
General Electric
Capital Corp.,
1.270% 08/04/03 7,000,000 6,991,604
Govco, Inc.,
1.230% 07/07/03 (b) 30,000,000 29,993,850
Johnson & Johnson,
1.160% 08/19/03 (b) 30,000,000 29,952,633
Jupiter Securitization
Corp.:
0.990% 07/25/03 (b) 20,000,000 19,986,800
1.230% 07/01/03 (b) 5,000,000 5,000,000
Koch Industries, Inc.,
1.230% 07/01/03 (b) 31,000,000 31,000,000
INTEREST MATURITY
RATE DATE PAR VALUE
- --------------------------------------------------------------------------------
Lloyds Bank PLC,
1.260% 07/28/03 (b) $ 5,000,000 $ 4,995,275
Novartis Finance Corp.,
1.230% 07/01/03 (b) 30,000,000 30,000,000
Old Line Funding
Corp.,
0.980% 08/01/03 (b) 30,000,000 29,974,683
Preferred Receivables
Funding:
0.960% 07/30/03 (b) 12,000,000 11,990,720
1.190% 07/11/03 (b) 18,000,000 17,994,050
Shell Finance,
1.270% 09/18/03 5,000,000 4,986,065
Toyota Motor Credit
Corp.,
1.180% 07/18/03 16,800,000 16,790,639
Variable Funding
Capital,
1.220% 07/08/03 (b) 25,000,000 24,994,070
UBS Finance, Inc.,
1.310% 07/01/03 31,000,000 31,000,000
------------
TOTAL COMMERCIAL PAPER
(cost of $435,116,995) 435,116,995
------------
CORPORATE BONDS - 12.2%
American Express
Credit Corp.:
1.123% 07/19/04 (a)(c) 12,000,000 12,000,000
1.123% 03/05/04 (a) 13,000,000 13,000,000
American Honda
Finance Corp.,
1.439% 07/15/04 (a)(c) 12,000,000 12,024,840
Autumn House at
Powder Mill, Inc.,
(LOC: SunTrust Bank)
1.100% 02/01/28 (a) 4,000,000 4,000,000
Citigroup, Inc.,
1.520% 03/09/04 (a) 25,000,000 25,050,258
General Electric
Capital Corp.:
7.250% 05/03/04 9,390,000 9,854,405
Morgan Stanley Dean
Witter & Co.,
1.549% 08/07/03 (a) 3,300,000 3,300,876
Toyota Motor
Credit Corp.,
5.625% 11/13/03 4,000,000 4,062,784
------------
TOTAL CORPORATE BONDS
(cost of $83,293,163) 83,293,163
------------
See notes to investment portfolio.
3
INVESTMENT PORTFOLIO -- LIBERTY MONEY MARKET FUND (CONTINUED)
June 30, 2003
INTEREST MATURITY
RATE DATE PAR VALUE
- --------------------------------------------------------------------------------
MUNICIPAL BONDS - 5.1%
City of Baltimore MD,
(FSA INS)/(SPA:
Bank of America)
1.100% 10/15/22 (a) $12,350,000 $ 12,350,000
California Statewide
Communities
Development
Authority, (FHLB)
1.150% 06/01/36 (a) 2,500,000 2,500,000
New Jersey Economic
Development
Authority State
Pension Funding,
(FSA INS)/(SPA:Dexia)
1.040% 02/15/29 (a) 20,000,000 20,000,000
------------
TOTAL MUNICIPAL BONDS
(cost of $34,850,000) 34,850,000
------------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 11.4%
Federal Home Loan
Bank System:
1.310% 04/13/04 10,000,000 10,000,000
1.335% 05/07/04 7,000,000 7,000,000
4.875% 04/16/04 10,000,000 10,278,474
Federal Home Loan
Mortgage Corp.:
1.040% 05/20/04 (d) 8,500,000 8,420,440
3.500% 02/20/04 25,000,000 25,336,118
Federal National
Mortgage Association:
1.040% 05/28/04 (d) 7,333,000 7,262,668
1.300% 01/09/04 (d) 4,500,000 4,468,800
Student Loan
Marketing Association,
1.400% 02/20/04 5,000,000 5,000,000
------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(cost of $77,766,500) 77,766,500
------------
SHORT-TERM OBLIGATION - 0.0%
Repurchase agreement with
State Street Bank & Co., dated
06/30/03, due 07/01/03 at
1.050% collateralized by a
U.S. Government Agency
Obligation maturing 06/17/05,
market value $235,588
(repurchase proceeds $230,007)
(cost of $230,000) 230,000 230,000
------------
VALUE
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS - 106.2%
(cost of $726,275,774)(e) $726,275,774
------------
OTHER ASSETS & LIABILITIES, NET - (6.2)% (42,148,457)
------------
NET ASSETS - 100.0% $684,127,317
============
NOTES TO INVESTMENT PORTFOLIO:
(a) Floating rate note whose interest rate is reset periodically based on an
index. The rate shown reflects the rate in effect at June 30, 2003.
(b) Represents private placement securities exempt from registration by Section
4(2) of the Securities Act of 1933. These securities generally are issued to
investors who agree that they are purchasing the securities for investments
and not for public distribution. Any resale by the Fund must be in an exempt
transaction, normally to other institutional in investors. At June 30, 2003,
the aggregate amortized cost of the Fund's private placement securities were
$339,117,476 which represents 49.6% of net assets. None of these securities
were deemed illiquid.
(c) This security is exempt from registration under Rule 144A of the Securities
Act of 1933 and may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At June 30, 2003, the value of
these securities amounted to $24,024,840 which represents 3.5% of net
assets.
(d) These issuers show the rate of discount at time of purchase.
(e) Cost for both financial statement and federal income tax purposes is the
same.
ACRONYM NAME
--------- ----------
FSA Financial Security Assurance
INS Insured
FHLB Federal Home Loan Bank
LOC Letter of Credit
SPA Stand-by Purchase Agreement
See notes to financial statements.
4
LIBERTY MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2003
ASSETS:
Investments, at cost $726,275,774
------------
Investments, at value $726,275,774
Cash 610
Receivable for:
Fund shares sold 3,938,005
Interest 928,297
Expense reimbursement due from Advisor 83,092
Deferred Trustees' compensation plan 8,325
------------
Total Assets 731,234,103
------------
LIABILITIES:
Payable for:
Investments purchased 44,934,125
Fund shares repurchased 1,691,736
Distributions 5,150
Management fee 134,039
Administration fee 136,970
Transfer agent fee 90,192
Pricing and bookkeeping fees 34,399
Merger fee 7,192
Deferred Trustees' fees 8,325
Other liabilities 64,658
------------
Total Liabilities 47,106,786
------------
NET ASSETS $684,127,317
------------
COMPOSITION OF NET ASSETS:
Paid-in capital $684,091,174
Undistributed net investment income 42,533
Accumulated net realized loss (6,390)
============
NET ASSETS $684,127,317
============
CLASS A:
Net assets $266,601,926
Shares outstanding 266,620,591
============
Net asset value and offering price per share $ 1.00(a)
============
CLASS B:
Net assets $110,776,338
Shares outstanding 110,792,726
============
Net asset value and offering price per share $ 1.00(a)
============
CLASS C:
Net assets $ 17,323,948
Shares outstanding 17,326,109
============
Net asset value and offering price per share $ 1.00(a)
============
CLASS Z:
Net assets $289,425,105
Shares outstanding 289,649,196
============
Net asset value, offering and redemption
price per share $ 1.00
============
(a) Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
STATEMENT OF OPERATIONS
For the Year Ended June 30, 2003
INVESTMENT INCOME:
Interest $ 10,356,589
------------
EXPENSES:
Expenses allocated
from Portfolio $ 62,591
Management fee 1,604,484
Administration fee 1,618,442
Distribution fee:
Class B 935,260
Class C 149,072
Service fee:
Class B 311,753
Class C 49,713
Pricing and bookkeeping fees 248,577
Transfer agent fee 2,361,034
Trustees' fee 24,509
Custody fee 16,583
Merger expense 39,150
Other expenses 232,322
------------
Total Expenses 7,653,490
------------
Fees waived by the Advisor:
Class B (700,271)
Class C (12,527)
Fees waived by the Distributor - Class C (119,245)
Custody earnings credit (3,126)
------------
Net Expenses 6,818,321
------------
Net Investment Income $ 3,538,268
------------
See notes to financial statements.
5
LIBERTY MONEY MARKET FUND -- STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED JUNE 30,
INCREASE (DECREASE) -----------------------------
IN NET ASSETS: 2003 (a) 2002
- -----------------------------------------------------------
OPERATIONS:
Net investment income $ 3,538,268 $ 3,766,522
------------ ------------
DISTRIBUTIONS DECLARED TO
SHAREHOLDERS:
From net investment income:
Class A (1,493,624) (2,973,519)
Class B (208,504) (644,928)
Class C (55,169) (156,549)
Class Z (1,763,556) --
------------ ------------
Total Distributions Declared
to Shareholders (3,520,853) (3,774,996)
------------ ------------
SHARE TRANSACTIONS:
Class A:
Subscriptions 910,150,826 863,868,895
Distributions reinvested 1,302,088 2,488,176
Redemptions (855,426,770) (845,560,093)
------------ ------------
Net Increase 56,026,144 20,796,978
------------ ------------
Class B:
Subscriptions 155,689,122 133,987,302
Distributions reinvested 158,062 555,248
Redemptions (141,953,170) (118,589,391)
------------ ------------
Net Increase 13,894,014 15,953,159
------------ ------------
Class C:
Subscriptions 120,063,340 106,686,947
Distributions reinvested 45,279 128,677
Redemptions (123,559,631) (96,052,718)
------------ ------------
Net Increase (Decrease) (3,451,012) 10,762,906
------------ ------------
Class Z:
Subscriptions 262,511,827 --
Proceeds received in
connection with merger 338,355,029 --
Distributions reinvested 1,710,449 --
Redemptions (313,151,895) --
------------ ------------
Net Increase 289,425,410 --
------------ ------------
Net Increase from
Share Transactions 355,894,556 47,513,043
------------ ------------
Total Increase in Net Assets 355,911,971 47,504,569
NET ASSETS:
Beginning of period 328,215,346 280,710,777
------------ ------------
End of period (including
undistributed (overdistributed)
net investment income of
$42,533 and $(14,032),
respectively) $684,127,317 $328,215,346
============ ============
YEAR ENDED JUNE 30,
----------------------------
2003 (a) 2002
- -----------------------------------------------------------
CHANGES IN SHARES:
Class A:
Subscriptions 910,150,825 863,870,771
Issued for distributions
reinvested 1,302,088 2,488,176
Redemptions (855,426,769) (845,563,936)
------------ ------------
Net Increase 56,026,144 20,795,011
------------ ------------
Class B:
Subscriptions 155,689,123 133,987,311
Issued for distributions
reinvested 158,062 555,248
Redemptions (141,953,166) (118,589,191)
------------ ------------
Net Increase 13,894,019 15,953,368
------------ ------------
Class C:
Subscriptions 120,063,342 106,687,018
Issued for distributions
reinvested 45,279 128,677
Redemptions (123,559,630) (96,052,717)
------------ ------------
Net Increase (Decrease) (3,451,009) 10,762,978
------------ ------------
Class Z:
Subscriptions 262,735,612 --
Issued in connection
with merger 338,355,029 --
Issued for distributions
reinvested 1,710,449 --
Redemptions (313,151,894) --
------------ ------------
Net Increase 289,649,196 --
------------ ------------
(a) Class Z shares commenced operations on July 29, 2002.
See notes to financial statements.
6
LIBERTY MONEY MARKET FUND -- NOTES TO FINANCIAL STATEMENTS
June 30, 2003
NOTE 1. ACCOUNTING POLICIES
ORGANIZATION:
Liberty Money Market Fund (the "Fund"), a series of Liberty Funds Trust II (the
"Trust"), 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 goal is to seek maximum
current income consistent with capital preservation and the maintenance of
liquidity. The Fund may issue an unlimited number of shares. The Fund offers
four classes of shares: Class A, Class B, Class C and Class Z shares. Class A
shares are sold at net asset value. A 1.00% contingent deferred sales charge
("CDSC") is assessed on redemptions made within eighteen months on an original
purchase of $1 million to $25 million. Class B shares are subject to a CDSC.
Class B shares will convert to Class A shares in three, four or eight years
after purchase, depending on the program under which shares were purchased.
Class C shares are subject to a CDSC on redemptions made within one year after
purchase. Class Z shares commenced operations on July 29, 2002 and are offered
continuously at net asset value. There are certain restrictions on the purchase
of Class Z shares, as described in the Fund's prospectus.
As of the end of business on July 26, 2002, the net assets of Stein Roe Cash
Reserves Fund were transferred to the Fund in a tax-free exchange and
shareholders of Stein Roe Cash Reserves Fund received shares of the Fund in
exchange for their shares as follows:
Net Assets of the Stein Roe Cash
Shares Issued Reserves Fund Received
------------- ----------------------
338,355,029 $338,355,029
Net Assets of Net Assets of Net Assets of the
the Liberty Stein Roe Cash Liberty Money
Money Market Reserves Fund Market Fund
Fund Prior Immediately Prior Immediately After
to Combination to Combination Combination
--------------- -------------- -----------
$354,468,496 $338,355,029 $692,823,525
Prior to July 29, 2002, the Fund invested substantially all of its assets in the
SR&F Cash Reserves Portfolio (the "Portfolio") as part of a master/feeder
structure. The Portfolio allocated income, expenses, realized and unrealized
gains (losses) to each investor on a daily basis, based on methods in compliance
with the Internal Revenue Service. Prior to the reorganization described above,
the Fund's pro-rata share of the net assets of the Portfolio were distributed to
the Fund based on allocation methods in compliance with the Internal Revenue
Service.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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 revenue and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of its financial statements.
SECURITY VALUATION AND TRANSACTIONS:
The Fund utilizes the amortized cost method to value its investments. This
technique approximates market value and involves valuing an instrument at cost
on the purchase date 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 and does not take into account
unrealized securities gains or losses. Other assets are valued at fair value as
determined in good faith by or under the direction of the Board of Trustees.
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 or losses from investment transactions are
reported on an identified cost basis.
DETERMINATION OF CLASS NET ASSET VALUES:
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.
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:
Dividends from net investment income are declared daily and paid monthly.
OTHER:
The Fund's custodian takes possession through the federal book-entry system of
securities collateralizing repurchase agreements. Collateral is marked-to-market
daily to ensure that the market value of the underlying assets remains
sufficient to protect the Fund. The Fund may experience costs and delays in
liquidating the collateral if the issuer defaults or enters bankruptcy.
NOTE 2. FEDERAL TAX INFORMATION
Income and capital gain distributions are determined in accordance with income
tax regulations, which may differ from accounting principles generally accepted
in the United States of America. These differences are primarily due to
differing treatments for current year distribution payable, capital loss
carryforwards and non-deductible expenses. 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.
7
LIBERTY MONEY MARKET FUND -- NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 2003
For the year ended June 30, 2003, permanent items identified and reclassified
among the components of net assets are as follows:
Undistributed Accumulated
Net Investment Net Realized Paid-In
Income Loss Capital
------ ---- -------
$39,150 $(2,702) $(36,448)
Net investment income, net realized gains (losses) and net assets were not
affected by this reclassification. Included in the reclassification are book to
tax timing differences which were acquired as part of the merger.
The tax character of distributions paid for the years ended June 30, 2003 and
2002 was as follows:
2003 2002
----- ----
Distributions paid from
Ordinary income $3,520,853 $3,774,996
As of June 30, 2003, the component of distributable earnings on a tax basis was
as follows:
Undistributed
Ordinary
Income
------
$77,786
The following capital loss carryforwards, determined as of June 30, 2003 are
available to reduce taxable income arising from future net realized gains on
investments, if any, to the extent permitted by the Internal Revenue Code:
Capital Loss
Year of Expiration Carryforwards
------------------ -------------
2005 $ 266
2006 2,756
2007 1,437
2008 1,578
2009 355
-------
Total $ 6,392
-------
Expired capital loss carryforwards, if any, are recorded as a reduction of
paid-in capital.
Of the capital loss carryforwards attributable to Liberty Money Market Fund,
$33,164 ($29,134 expired June 30, 2003, $266 expiring June 30, 2005, $2,756
expiring June 30, 2006, $13 expiring June 30, 2007 and $995 expiring June 30,
2008) was obtained in the merger with Stein Roe Cash Reserves Fund, of which
$4,030 remains. (See Note 1.)
Utilization of Stein Roe Cash Reserves Fund's capital loss carryforwards could
be subject to merger limitations imposed by the Internal Revenue Code.
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES
On April 1, 2003, Stein Roe & Farnham Incorporated ("Stein Roe"), the investment
advisor and administrator to the Fund, and Colonial Management Associates, Inc.
("Colonial"), the pricing and bookkeeping agent, merged into Columbia Management
Advisors, Inc. ("Columbia"), formerly known as Columbia Management Co., an
indirect, wholly-owned subsidiary of FleetBoston Financial Corporation. At the
time of the merger, Columbia assumed the obligations of Stein Roe and Colonial
with respect to the Fund. The merger did not change the way the Fund is managed,
the investment personnel assigned to manage the Fund or the fees paid by the
Fund.
MANAGEMENT FEE:
Columbia is the investment advisor of the Fund and receives a monthly fee as
follows:
Average Daily Net Assets Annual Fee Rate
- ----------------------------------------------------------------------------
First $500 million 0.250%
Over $500 million 0.225%
Prior to July 29, 2002, the management fee was paid by the Portfolio at the same
rates.
ADMINISTRATOR:
Columbia also provides accounting and other services for a monthly fee as
follows:
Average Daily Net Assets Annual Fee Rate
- ----------------------------------------------------------------------------
First $500 million 0.250%
Next $500 million 0.200%
Over $1 billion 0.150%
PRICING AND BOOKKEEPING FEES:
Columbia is responsible for providing pricing and bookkeeping services to the
Fund under a Pricing and Bookkeeping Agreement. Under a separate agreement (the
"Outsourcing Agreement"), Columbia has delegated those functions to State Street
Bank and Trust Company ("State Street"). Columbia pays fees to State Street
under the Outsourcing Agreement.
Under its pricing and bookkeeping agreement with the Fund, Columbia receives
from the Fund an annual flat fee of $10,000, paid monthly, and in any month that
the Fund's average daily net assets are more than $50 million, a monthly fee
equal to the average daily net assets of the Fund for that month multiplied by a
fee rate that is calculated by taking into account the fees payable to State
Street under the Outsourcing Agreement. For the year ended June 30, 2003, the
annualized net asset based fee rate was 0.034%. The Fund also pays out-of-pocket
costs for pricing services.
Prior to July 29, 2002, Columbia received from the Fund an annual flat fee of
$5,000 and Columbia received from the Portfolio an annual flat fee of $10,000
for pricing and bookkeeping services.
8
LIBERTY MONEY MARKET FUND -- NOTES TO FINANCIAL STATEMENTS (CONTINUED)
June 30, 2003
TRANSFER AGENT FEE:
Liberty Funds Services, Inc. (the "Transfer Agent"), an affiliate of Columbia,
provides shareholder services for a monthly fee equal to 0.06% annually of the
Fund's average daily net assets plus charges based on the number of shareholder
accounts and transactions. The Transfer Agent also receives reimbursement for
certain out-of-pocket expenses.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES:
Liberty Funds Distributor, Inc. (the "Distributor"), an affiliate of Columbia,
is the Fund's principal underwriter. For the year ended June 30, 2003, the Fund
has been advised that the Distributor received contingent deferred sales charges
("CDSC") of $270,386, $1,224,387 and $104,612 on Class A, Class B and Class C
share redemptions, respectively.
The Fund has adopted a 12b-1 plan (the "Plan"), which requires the payment of a
monthly service fee to the Distributor equal to 0.25% annually of the average
daily net assets attributable to Class B and Class C shares. The Plan also
requires the payment of a monthly distribution fee to the Distributor equal to
0.75% annually of the average daily net assets attributable to Class B and Class
C shares only. 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. In
addition, the Advisor has voluntarily agreed to waive a portion of both Class B
and Class C share distribution fees.
The CDSC and the fees received from the 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
Columbia or its affiliates.
The Fund's Independent 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.
The Fund has an agreement with its custodian bank under which $3,126 of custody
fees were reduced by balance credits for the year ended June 30, 2003. The Fund
could have invested a portion of the assets utilized in connection with the
expense offset arrangement in an income-producing asset if it had not entered
into such an agreement.
Expenses allocated from the Portfolio on the Statement of Operations include
$62,591 paid to affiliates, prior to the liquidation of the Portfolio. These
affiliated fees include: management, pricing and bookkeeping, transfer agent and
trustees' fees.
9
LIBERTY MONEY MARKET FUND -- FINANCIAL HIGHLIGHTS
Selected data for a share outstanding throughout each period is as follows:
YEAR ENDED JUNE 30,
--------------------------------------------------------------
CLASS A SHARES 2003 2002 2001 2000 1999
- -------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.006(b) 0.015 0.052 0.052 0.046
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.006) (0.015) (0.052) (0.052) (0.046)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======== ========
Total return (c) 0.60% 1.56% 5.34%(d) 5.26%(d) 4.70%(d)
======== ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Expenses (a) 0.89%(e) 1.01% 0.70% 0.65%(e) 0.68%(e)
Net investment income (a) 0.61%(e) 1.54% 5.31% 5.13%(e) 4.61%(e)
Waiver/reimbursement -- -- 0.19% 0.19% 0.19%
Net assets, end of period (000's) $266,602 $210,616 $189,822 $178,678 $157,790
(a)The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's
proportionate share of the income and expenses of the SR&F Cash Reserves Portfolio, prior to the merger.
(b)Per share data was calculated using average shares outstanding during the period.
(c)Total return at net asset value assuming all distributions reinvested and no initial sales charge or
contingent deferred sales charge.
(d)Had the Administrator and/or Distributor not waived a portion of expenses,
total return would have been reduced.
(e)The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
10
LIBERTY MONEY MARKET FUND -- FINANCIAL HIGHLIGHTS
Selected data for a share outstanding throughout each period is as follows:
YEAR ENDED JUNE 30,
--------------------------------------------------------------
CLASS B SHARES 2003 2002 2001 2000 1999
- -------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.002(b) 0.007 0.042 0.041 0.036
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.002) (0.007) (0.042) (0.041) (0.036)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======== ========
Total return (c)(d) 0.17% 0.73% 4.31% 3.99% 3.68%
======== ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Expenses (a) 1.41%(e) 1.84% 1.70% 1.65%(e) 1.68%(e)
Net investment income (a) 0.10%(e) 0.71% 4.31% 4.13%(e) 3.61%(e)
Waiver/reimbursement 0.56% 0.17% 0.19% 0.19% 0.19%
Net assets, end of period (000's) $110,776 $ 96,827 $ 80,879 $ 69,214 $ 93,821
(a)The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's
proportionate share of the income and expenses of the SR&F Cash Reserves Portfolio, prior to the merger.
(b)Per share data was calculated using average shares outstanding for the period.
(c)Total return at net asset value assuming all distributions reinvested and no initial sales charge or
contingent deferred sales charge.
(d)Had the Administrator and/or Distributor not waived a portion of expenses,
total return would have been reduced.
(e)The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
11
LIBERTY MONEY MARKET FUND -- FINANCIAL HIGHLIGHTS
Selected data for a share outstanding throughout each period is as follows:
YEAR ENDED JUNE 30,
--------------------------------------------------------------
CLASS C SHARES 2003 2002 2001 2000 1999
- -------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.003(b) 0.011 0.048 0.048 0.042
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.003) (0.011) (0.048) (0.048) (0.042)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======== ========
Total return (c)(d) 0.27% 1.16% 4.93% 4.71% 4.30%
======== ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Expenses (a) 1.23%(e) 1.41% 1.10% 1.05%(e) 1.08%(e)
Net investment income (a) 0.30%(e) 1.14% 4.91% 4.73%(e) 4.21%(e)
Waiver/reimbursement 0.66% 0.60% 0.79% 0.79% 0.79%
Net assets, end of period (000's) $ 17,324 $ 20,772 $ 10,010 $ 3,950 $ 2,194
(a)The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's
proportionate share of the income and expenses of the SR&F Cash Reserves Portfolio, prior to
the merger.
(b)Per share data was calculated using average shares outstanding for the period.
(c)Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(d)Had the Administrator and Distributor not waived a portion of expenses, total return would have
been reduced.
(e)The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
12
LIBERTY MONEY MARKET FUND -- FINANCIAL HIGHLIGHTS
Selected data for a share outstanding throughout each period is as follows:
PERIOD
ENDED
JUNE 30,
CLASS Z SHARES 2003 (a)
- --------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000
--------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (b) 0.006
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.006)
--------
NET ASSET VALUE, END OF PERIOD $ 1.000
========
Total return (c)(d) 0.55%
========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Expenses (e)(f) 0.89%
Net investment income (e)(f) 0.61%
Net assets, end of period (000's) $289,425
(a)Class Z shares were initially offered on July 29, 2002. Per share data and
total return reflect activity from that date.
(b)Per share data was calculated using average shares outstanding during the
period.
(c)Total return at net asset value assuming all distributions reinvested.
(d)Not annualized.
(e)The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(f)Annualized.
13
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Shareholders and Board of Trustees of Liberty Funds Trust II
Liberty Money Market Fund
We have audited the accompanying statement of assets and liabilities, including
the investment portfolio, of Liberty Money Market Fund (the "Fund") (a series of
Liberty Funds Trust II) as of June 30, 2003, and the related statement of
operations for the year then ended, the statement 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 Fund'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 auditing standards generally accepted
in the United States. 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 misstatement. 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, 2003, by correspondence with the
custodian and brokers or by other appropriate auditing procedures where replies
from brokers were not received. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating 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 the
Liberty Money Market Fund (a series of Liberty Funds Trust II) at June 30, 2003,
the results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the periods indicated therein, in conformity with
accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Boston, Massachusetts
August 19, 2003
14
TRUSTEES AND OFFICERS
The Trustees serve terms of indefinite duration. The names, addresses and ages
of the Trustees and officers of the Liberty Funds, the year each was first
elected or appointed to office, their principal business occupations during at
least the last five years, the number of portfolios overseen by each Trustee and
other directorships they hold are shown below. Each officer listed below serves
as an officer of each of the Liberty Funds. The Statement of Additional
Information (SAI) contains additional information about the Trustees and is
available without charge upon request by calling the fund's distributor at
800-345-6611.
Number of
Year First Portfolios in
Elected or Liberty Funds Other
Position with Appointed Principal Occupation(s) Complex Overseen Directorships
Name, Address and Age Liberty Funds to Office1 During Past Five Years by Trustee Held
- ------------------------------------------------------------------------------------------------------------------------------------
DISINTERESTED TRUSTEES
Douglas A. Hacker (Age 47) Trustee 1996 Executive Vice President - Strategy of United 85 None
P.O. Box 66100 Airlines (airline) since December, 2002 (formerly
Chicago, IL 60666 President of UAL Loyalty Services (airline) from
September, 2001 to December, 2002; Executive
Vice President and Chief Financial Officer of United
Airlines from March, 1993 to September, 2001; Senior
Vice President and Chief Financial Officer of UAL,
Inc. prior thereto).
Janet Langford Kelly (Age 45) Trustee 1996 Executive Vice President-Corporate Development 85 None
One Kellogg Square and Administration, General Counsel and Secretary,
Battle Creek, MI 49016 Kellogg Company (food manufacturer), since
September, 1999; Senior Vice President, Secretary and
General Counsel, Sara Lee Corporation (branded,
packaged, consumer-products manufacturer) from
January, 1995 to September, 1999.
Richard W. Lowry (Age 67) Trustee 1995 Private Investor since August, 1987 (formerly 87(4) None
10701 Charleston Drive Chairman and Chief Executive Officer, U.S. Plywood
Vero Beach, FL 32963 Corporation (building products manufacturer)).
Charles R. Nelson (Age 60) Trustee 1981 Professor of Economics, University of Washington, 120(2) None
Department of Economics since January, 1976; Ford and Louisa Van Voorhis
University of Washington Professor of Political Economy, University of
Seattle, WA 98195 Washington, since September, 1993; Director, Institute
for Economic Research, University of Washington, since
September, 2001; Adjunct Professor of Statistics,
University of Washington, since September, 1980;
Associate Editor, Journal of Money Credit and Banking,
since September, 1993; consultant on econometric and
statistical matters.
John J. Neuhauser (Age 60) Trustee 1985 Academic Vice President and Dean of Faculties since 88(4,5) Saucony, Inc.
84 College Road August, 1999, Boston College (formerly Dean, Boston (athletic
Chestnut Hill, MA 02467-3838 College School of Management from September, 1977 footwear);
to September, 1999. SkillSoft Corp.
(E-Learning)
Thomas E. Stitzel (Age 67) Trustee 1998 Business Consultant since 1999 (formerly Professor of 85 None
2208 Tawny Woods Place Finance from 1975 to 1999 and Dean from 1977 to 1991,
Boise, ID 83706 College of Business, Boise State University); Chartered
Financial Analyst.
15
TRUSTEES AND OFFICERS (CONTINUED)
Number of
Year First Portfolios in
Elected or Liberty Funds Other
Position with Appointed Principal Occupation(s) Complex Overseen Directorships
Name, Address and Age Liberty Funds to Office1 During Past Five Years by Trustee Held
- ------------------------------------------------------------------------------------------------------------------------------------
DISINTERESTED TRUSTEES
Thomas C. Theobald (Age 66) Trustee 1996 Managing Director, William Blair Capital Partners 85 Anixter
27 West Monroe Street, Suite 3500 (private equity investing) since September, 1994 International
Chicago, IL 60606 (formerly Chief Executive Officer and Chairman (network support
of the Board of Directors, Continental Bank equipment
Corporation prior thereto). distributor),
Jones Lang
LaSalle (real
estate
management
services)
and MONY Group
(life insurance).
Anne-Lee Verville (Age 58) Trustee 1998 Author and speaker on educational systems needs 86(5) Chairman of
359 Stickney Hill Road (formerly General Manager, Global Education the Board of
Hopkinton, NH 03229 Industry from 1994 to 1997, and President, Directors,
Applications Solutions Division from 1991 to 1994, Enesco Group,
IBM Corporation (global education and Inc. (designer,
global applications)). importer and
distributor of
giftware and
collectibles).
INTERESTED TRUSTEES
William E. Mayer3 (Age 63) Trustee 1994 Managing Partner, Park Avenue Equity Partners 87(4) Lee Enterprises
399 Park Avenue (private equity) since February, 1999 (formerly (print media),
Suite 3204 Founding Partner, Development Capital LLC WR Hambrecht + Co.
New York, NY 10022 from November 1996 to February, 1999; Dean and (financial service
Professor, College of Business and Management, provider) and
University of Maryland from October, 1992 to First Health
November, 1996). (healthcare).
Joseph R. Palombo3 (Age 50) Trustee, 2000 Executive Vice President and Chief Operating Officer 86(6) None
One Financial Center Chairman of of Columbia Management Group, Inc. (Columbia
Boston, MA 02111 the Board and Management) since December, 2001 and Director,
President Executive Vice President and Chief Operating Officer of
the Advisor since April, 2003 (formerly Chief Operations
Officer of Mutual Funds, Liberty Financial Companies,
Inc. from August, 2000 to November, 2001; Executive
Vice President of Stein Roe & Farnham Incorporated
(Stein Roe) from April, 1999 to April, 2003; Director
of Colonial Management Associates, Inc. (Colonial)
from April, 1999 to April, 2003; Director of Stein Roe
from September, 2000 to April, 2003) President of
Liberty Funds and Galaxy Funds since February, 2003
(formerly Vice President from September 2002 to
February 2003); Manager of Stein Roe Floating Rate
Limited Liability Company since October, 2000;
(formerly Vice President of the Liberty Funds from
April, 1999 to August, 2000; Chief Operating Officer
and Chief Compliance Officer, Putnam Mutual Funds
from December, 1993 to March, 1999).
1 In December, 2000, the boards of each of the Liberty Funds and former Stein
Roe funds were combined into one board of trustees with common membership.
The date shown is the earliest date on which a trustee was elected to either
the Liberty Funds board or the former Stein Roe funds board.
2 In addition to serving as a disinterested Trustee of the Liberty Funds, Mr.
Nelson serves as a disinterested Director or Trustee of the Columbia Funds
and CMG Funds, currently consisting of 15 funds and 20 funds, respectively,
which are advised by the Advisor.
3 Mr. Mayer is an "interested person" (as defined in the Investment Company
Act of 1940 (1940 Act)) by reason of his affiliation with WR Hambrecht +
Co. Mr. Palombo is an interested person as an employee of the Advisor.
4 In addition to serving as trustees of Liberty Funds, Messrs. Lowry, Neuhauser
and Mayer each serve as a director/trustee of the Liberty All-Star Funds,
currently consisting of 2 funds, which are advised by an affiliate of the
Advisor.
5 In addition to serving as disinterested trustees of the Liberty Funds, Mr.
Neuhauser and Ms. Verville serve as disinterested directors of Columbia
Management Multi-Strategy Hedge Fund, LLC, which is advised by the Advisor.
6 In addition to serving as an interested trustee of the Liberty Funds, Mr.
Palombo serves as an interested director of Columbia Management
Multi-Strategy Hedge Fund, LLC, which is advised by the Advisor.
16
OFFICERS AND TRANSFER AGENT
Year First
Elected or
Position with Appointed
Name, Address and Age Liberty Funds to Office Principal Occupation(s) During Past Five Years
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICERS
Vicki L. Benjamin (Age 41) Chief 2001 Controller of the Liberty Funds and of the Liberty All-Star Funds since May,
One Financial Center Accounting 2002; Chief Accounting Officer of the Liberty Funds and Liberty All-Star
Boston, MA 02111 Officer and Funds since June, 2001; Controller and Chief Accounting Officer of the
Controller Galaxy Funds since September, 2002 (formerly Vice President, Corporate
Audit, State Street Bank and Trust Company from May, 1998 to April, 2001;
Audit Manager from July, 1994 to June, 1997; Senior Audit Manager from July,
1997 to May, 1998, Coopers & Lybrand, LLP).
J. Kevin Connaughton (Age 39) Treasurer 2000 Treasurer of the Liberty Funds and of the Liberty All-Star Funds since
One Financial Center December, 2000; Vice President of the Advisor since April, 2003 (formerly
Boston, MA 02111 Controller of the Liberty Funds and of the Liberty All-Star Funds from
February, 1998 to October, 2000); Treasurer of the Galaxy Funds since
September, 2002; Treasurer, Columbia Management Multi-Strategy Hedge Fund,
LLC since December, 2002 (formerly Vice President of Colonial from February,
1998 to October, 2000 and Senior Tax Manager, Coopers & Lybrand, LLP from
April, 1996 to January, 1998).
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Liberty Money Market Fund is:
Liberty Funds Services, Inc.
PO Box 8081
Boston, MA 02266-8081
The fund mails one shareholder report to each shareholder address. If you would
like more than one report, please call shareholder services at 800-345-6611 and
additional reports will be sent to you.
This report has been prepared for shareholders of Liberty 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 with the most recent copy of
the Liberty Funds Performance Update.
Annual Report:
Liberty Money Market Fund
17
LIBERTY MONEY MARKET FUND ANNUAL REPORT
757-02/6190-0603 (08/03) 03/2214
ITEM 2. CODE OF ETHICS.
Not applicable at this time.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable at this time.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Not applicable at this time.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable at this time.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES
Not applicable at this time.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) The Registrant's Chief Executive Officer and Chief Financial Officer, based
on their evaluation of the Registrant's disclosure controls and procedures as of
a date within 90 days of the filing date of this report, have concluded that
such controls and procedures are adequately designed to ensure that information
required to be disclosed by the Registrant in its reports that it files or
submits under the Securities Exchange Act of 1934, as amended, is accumulated
and communicated to the Registrant's management, including the Chief Executive
Officer and Chief Financial Officer, or persons performing similar functions, as
appropriate, to allow timely decisions regarding required disclosure.
(b) There was no change in the registrant's internal control over financial
reporting that occurred over the registrant's last fiscal half-year that has
affected, or is reasonably likely to materially affect, the registrant's
internal control over financial reporting.
ITEM 10. EXHIBITS.
(a) File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(a)(1) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit: Not applicable at
this time.
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2(a) under
the Investment Company Act of 1940 (17270.30a-2(a)). Attached hereto as
Exhibit 99.CERT.
(b) A separate certification for each principal executive officer and principal
financial officer of the registrant as required by Rule 30a-2(b) under the
Investment Company Act of 1940 (17270.30a-2(b)). Attached hereto as
Exhibit 99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Liberty Funds Trust II
-----------------------------------------------------------
By (Signature and Title) /s/ Joseph R. Palombo
----------------------------------------------
Joseph R. Palombo, President
Date September 5, 2003
-------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title) /s/ Joseph R. Palombo
----------------------------------------------
Joseph R. Palombo, President
Date September 5, 2003
-------------------------------------------------------------------
By (Signature and Title) /s/ J. Kevin Connaughton
----------------------------------------------
J. Kevin Connaughton, Treasurer
Date September 5, 2003
-------------------------------------------------------------------