<PAGE>
Registration Nos: 811-09095
333-66819
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 3 / X /
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
Amendment No. 3 / X /
LIBERTY FUNDS TRUST IX (FORMERLY LAMCO TRUST I)
(Exact Name of Registrant as Specified in Charter)
One Financial Center, Boston, Massachusetts 02111
(Address of Principal Executive Offices)
617-426-3750
(Registrant's Telephone Number, including Area Code)
Name and Address of
Agent for Service: Copy to:
Nancy L. Conlin, Esquire John M. Loder, Esquire
Colonial Management Associates, Inc. Ropes & Gray
One Financial Center One International Place
Boston, MA 02111 Boston, MA 02110-2624
It is proposed that this filing will become effective (check appropriate box):
/ X / Immediately upon filing pursuant to paragraph (b).
/ / On (date) pursuant to paragraph (b).
/ / 60 days after filing pursuant to paragraph (a)(1).
/ / On (date) pursuant to paragraph (a)(1) of Rule 485.
/ / 75 days after filing pursuant to paragraph (a)(2).
/ / On (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
/ / this post-effective amendment designates a new
effective date for a previously filed post-effective
amendment.
<PAGE>
LIBERTY ALL-STAR GROWTH AND INCOME FUND PROSPECTUS, MARCH 17, 2000
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CLASS A, B AND C SHARES
Advised by Liberty Asset Management Company
Although these securities have been registered with the Securities and Exchange
Commission, the Commission has not approved or disapproved any shares offered in
this prospectus or determined whether this prospectus is accurate or complete.
Any representation to the contrary is a criminal offense.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
THE FUND 2
Investment Goals 2
Primary Investment Strategies 2
Primary Investment Risks 3
Performance History 4
Your Expenses 5
YOUR ACCOUNT 6
How to Buy Shares 6
Sales Charges 7
How to Exchange Shares 10
How to Sell Shares 11
Distribution and Service Fees 12
Other Information About Your Account 13
MANAGING THE FUND 15
Investment Advisor 15
Portfolio Managers 17
OTHER INVESTMENT
STRATEGIES AND RISKS 18
FINANCIAL HIGHLIGHTS 20
</TABLE>
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
<PAGE>
THE FUND
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INVESTMENT GOALS
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The Fund seeks total return, comprised of long-term capital appreciation and
current income through investment primarily in a diversified portfolio of equity
securities.
PRIMARY INVESTMENT STRATEGIES
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The primary investment strategies of the Fund in making investments in
securities are described below. Under normal market conditions, the Fund
invests primarily in equity and equity related securities, which include common
stocks, bonds convertible into stocks, warrants and other rights to purchase
stocks.
The Fund's advisor utilizes a multi-manager concept. The advisor allocates the
Fund's portfolio assets on an approximately equal basis among a number of
independent investment management organizations (Portfolio Managers). There are
five Portfolio Managers as of the date of this prospectus, each of which employs
a different investment style. The advisor attempts to rebalance the portfolio
among the Portfolio Managers so as to maintain an approximately equal allocation
of the portfolio among them throughout all market cycles.
The Fund's current Portfolio Managers and investment styles are:
- - J.P. Morgan Investment Management Inc. uses a value approach by investing
in companies that are diversified across all sectors and that are
undervalued relative to the firm's projected growth rates.
- - OpCap Advisors uses a value approach by investing in companies that exhibit
the ability to generate excess cash flow while earning high returns on
invested capital.
- - Boston Partners Asset Management, L.P. uses a value approach by investing
in companies with low price-to-earnings and price-to-book ratios where a
catalyst for positive change has been identified.
2
<PAGE>
THE FUND
- - Westwood Management Corporation uses a growth approach by investing in
growth companies selling at reasonable valuations based on the firm's
earnings projections which are not yet reflected in consensus estimates.
- - TCW Investment Management Company uses a "bottom-up" approach by investing
in primarily large-cap companies that have distinct business model
advantages and incorporates secular growth trends.
The advisor continuously monitors the performance and investment
styles of the Fund's Portfolio Managers and from time to time may
recommend changes of Portfolio Managers based on factors such as:
- - Changes in a Portfolio Manager's investment style or a departure by a
Portfolio Manager from the investment style for which it had been selected;
- - A deterioration in a Portfolio Manager's performance relative to that of
other investment management firms practicing a similar style; or
- - Adverse changes in its ownership or personnel.
The advisor also may recommend Portfolio Manager changes to change the mix of
investment styles employed by the Fund's Portfolio Managers. The Board of
Trustees must approve all Portfolio Manager changes.
The Fund will remain substantially fully invested during periods when stock
prices generally rise and also during periods when they generally decline. The
Fund is intended to be a long-term investment vehicle and is not designed to
provide a means of speculating on short-term stock market movements.
Additional strategies that are not primary investment strategies and the risks
associated with them are described later under "Other Investment Strategies and
Risks."
PRIMARY INVESTMENT RISKS
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The primary risks of investing in the Fund are described below. There are many
circumstances (including additional risks that are not described here) which
could prevent the Fund from achieving its goals. It is possible to lose money by
investing in the Fund.
Market risk is the risk that the price of a security held by the Fund will fall
due to changing market, economic or political conditions. Market risk includes
interest rate risk.
3
<PAGE>
THE FUND
Interest rate risk is the risk of a change in the price of a bond when interest
rates increase or decline. In general, if interest rates rise, bond prices fall;
and if interest rates fall, bond prices rise. Changes in the values of bonds
usually will not affect the amount of income the Fund receives from them but
will affect the value of the Fund's shares. Interest rate risk is generally
greater for bonds with longer maturities.
PERFORMANCE HISTORY
Because the Fund commenced investment operations on March 1, 1999, and has not
completed one full year of investment performance, information related to the
Fund's performance(other than that included in the Financial Highlights)
has not been included in this prospectus.
4
<PAGE>
THE FUND
UNDERSTANDING EXPENSES
SALES CHARGES are paid directly by shareholders to Liberty Funds Distributor,
Inc., the Fund's distributor.
ANNUAL FUND OPERATING EXPENSES are deducted from the Fund. They include
management and administration fees, 12b-1 fees, brokerage costs, and
administrative costs including pricing and custody services.
EXAMPLE EXPENSES help you compare the cost of investing in the Fund to the cost
of investing in other mutual funds. The table does not take into account any
expense reduction arrangements discussed in the footnotes to the Annual Fund
Operating Expenses table. It uses the following hypothetical conditions:
- - $10,000 initial investment
- - 5% total return for each year
- - Fund operating expenses remain
the same
- - Assumes reinvestment of all dividends
and distributions
YOUR EXPENSES
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Fees and expenses are among the factors you should consider before you invest in
a mutual fund. The tables below describe the fees and expenses you may pay when
you buy, hold and sell shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES (1)(PAID DIRECTLY FROM YOUR INVESTMENT)
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CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Maximum sales charge (load) on purchases (%)
(as a percentage of the offering price) 5.75 0.00 0.00
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Maximum deferred sales charge (load) on
redemptions (%) (as a percentage of the
lesser of purchase price or redemption price) 1.00(2) 5.00 1.00
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Redemption fee(3)(%) (as a percentage of
amount redeemed, if applicable) (3) (3) (3)
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (DEDUCTED DIRECTLY FROM FUND ASSETS)
- ------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Management and administration fee (4)(%) 0.80 0.80 0.80
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Distribution and service (12b-1) fees (%) 0.25 1.00 1.00
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Other expenses (4)(%) 2.12 2.12 2.12
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Total annual fund operating expenses (4)(%) 3.17 3.92 3.92
</TABLE>
<TABLE>
EXAMPLE EXPENSES (YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER)
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CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $876 $1,496 $2,138 $3,850
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Class B: did not sell your shares $394 $1,195 $2,013 $3,978
sold all your shares at
the end of the period $894 $1,495 $2,213 $3,978
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Class C: did not sell your shares $394 $1,195 $2,013 $4,137
sold all your shares at
the end of the period $494 $1,195 $2,013 $4,137
</TABLE>
(1) A $10 annual fee is deducted from accounts of less than $1,000 and paid to
the transfer agent.
(2) This charge applies only to certain Class A shares bought without an initial
sales charge that are sold within 18 months of purchase.
(3) There is a $7.50 charge for wiring sale proceeds to your bank.
(4) The Fund's advisor and administrator have voluntarily agreed to waive
advisory and administration fees and reimburse the Fund for certain expenses
so that the total annual fund operating expenses (exclusive of distribution
and service fees, brokerage commissions, interest, taxes and extraordinary
expenses, if any) will not exceed 1.25%. As a result, the actual management
and administration fees for each share class would be 0.00%, other expenses
for each share class would be 1.25% and the total annual fund operating
expenses for Class A, B and C shares would be 1.50%, 2.25% and 2.25%,
respectively. The waiver is expected to continue at least until April 30,
2000.
5
<PAGE>
YOUR ACCOUNT
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INVESTMENT MINIMUMS(5)
<TABLE>
<S> <C>
Initial Investment $1,000
Subsequent Investments $50
Automatic Investment Plan $50
Retirement Plans $25
</TABLE>
HOW TO BUY SHARES
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Your financial advisor can help you establish an appropriate investment
portfolio, buy shares and monitor your investments. When the Fund receives your
purchase request in "good form," your shares will be bought at the next
calculated public offering price. "Good form" means that you placed your order
with your brokerage firm or your payment has been received and your application
is complete, including all necessary signatures.
<TABLE>
<CAPTION>
OUTLINED BELOW ARE THE VARIOUS OPTIONS FOR BUYING SHARES:
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METHOD INSTRUCTIONS
<S> <C>
Through your Your financial advisor can help you establish your
financial advisor account and buy Fund shares on your behalf.
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By check For new accounts, send a completed application and
(new account) check made payable to the Fund to the transfer agent,
Liberty Funds Services, Inc., P.O. Box 1722,
Boston, MA 02105-1722.
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By check For existing accounts, fill out and return the
(existing account) additional investment stub included in your quarterly
statement, or send a letter of instruction including
your Fund name and account number with a check
made payable to the Fund to Liberty Funds Services,
Inc., P.O. Box 1722, Boston, MA 02105-1722.
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By exchange You or your financial advisor may acquire shares by
exchanging shares you own in one fund for shares of
the same class of the Fund at no additional cost.
There may be an additional charge if exchanging
from a money market fund. To exchange by telephone,
call 1-800-422-3737.
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By wire You may purchase shares by wiring money from your
bank account to your fund account. To wire funds to
your fund account, call 1-800-422-3737 to obtain a
control number and the wiring instructions.
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By electronic funds You may purchase shares by electronically transferring
transfer money from your bank account to your fund account by
calling 1-800-422-3737. Electronic funds transfers may
take up to two business days to settle and be
considered in "good form." You must set up this feature
prior to your telephone request. Be sure to complete
the appropriate section of the application.
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Automatic You can make monthly or quarterly investments
investment plan automatically from your bank account to your fund
account. You can select a pre-authorized amount to be
sent via electronic funds transfer. Be sure to complete
the appropriate section of the application for this
feature.
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By dividend You may automatically invest dividends distributed by
diversification one fund into the same class of shares of the Fund at
no additional sales charge. To invest your dividends
in another fund, call 1-800-345-6611.
</TABLE>
(5) The Fund reserves the right to change the investment minimums. The Fund also
reserves the right to refuse a purchase order for any reason, including if
it believes that doing so would be in the best interest of the Fund and its
shareholders.
6
<PAGE>
YOUR ACCOUNT
CHOOSING A SHARE CLASS
The Fund offers three classes of shares in this prospectus -- CLASS A, B and C.
Each share class has its own sales charge and expense structure. Determining
which share class is best for you depends on the dollar amount you are investing
and the number of years for which you are willing to invest. If your financial
advisor firm participates in the Class B discount program, purchases of over $1
million can be made only in Class A or Class C shares. Otherwise, purchases in
excess of $250,000 must be for Class A or Class C shares only. Based on your
personal situation, your investment advisor can help you decide which class of
shares makes the most sense for you.
The Fund also offers an additional class of shares, Class Z shares, exclusively
to certain institutional and other investors. Class Z shares are made available
through a separate prospectus provided to eligible institutional and other
investors.
SALES CHARGES
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You may be subject to an initial sales charge when you purchase, or a contingent
deferred sales charge (CDSC) when you sell, shares of the Fund. These sales
charges are described below. In certain circumstances, these sales charges are
waived, as described below and in the Statement of Additional Information.
CLASS A SHARES Your purchases of Class A shares generally are at the public
offering price. This price includes a sales charge that is based on the amount
of your initial investment when you open your account. A portion of the sales
charge is the commission paid to the financial advisor firm on the sale of Class
A shares. The sales charge you pay on additional investments is based on the
total amount of your purchase and the current value of your account. The amount
of the sales charge differs depending on the amount you invest as shown in the
table below.
<TABLE>
<CAPTION>
CLASS A SALES CHARGES
- ----------------------------------------------------------------------------------------------
% OF OFFERING
AS A % OF PRICE
THE PUBLIC AS A % RETAINED BY
OFFERING OF YOUR FINANCIAL
AMOUNT OF PURCHASE PRICE INVESTMENT ADVISOR FIRM
<S> <C> <C> <C>
Less than $50,000 5.75 6.10 5.00
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$50,000 to less than $100,000 4.50 4.71 3.75
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$100,000 to less than $250,000 3.50 3.63 2.75
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$250,000 to less than $500,000 2.50 2.56 2.00
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$500,000 to less than $1,000,000 2.00 2.04 1.75
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$1,000,000 or more(6) 0.00 0.00 0.00
</TABLE>
For Class A share purchases of $1 million or more, financial advisors receive a
commission from the distributor as follows:
<TABLE>
<CAPTION>
PURCHASES OVER $1 MILLION
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AMOUNT PURCHASED COMMISSION %
<S> <C>
First $3 million 1.00
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Next $2 million 0.50
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Over $5 million 0.25(7)
</TABLE>
(6) Class A shares bought without an initial sales charge in accounts
aggregating $1 million to $5 million at the time of purchase are subject to
a 1% CDSC if the shares are sold within 18 months of the time of purchase.
Subsequent Class A share purchases that bring your account value above $1
million are subject to a 1% CDSC if redeemed within 18 months of their
purchase date. Purchases in accounts aggregating over $5 million are subject
to a 1% CDSC only to the extent that the sale of shares within 18 months
of purchase causes the value of the accounts to fall below the $5 million
level. The 18-month period begins on the first day of the month following
each purchase.
(7) Paid over 12 months but only to the extent the shares remain outstanding.
7
<PAGE>
YOUR ACCOUNT
UNDERSTANDING CONTINGENT DEFERRED SALES CHARGES (CDSC)
Certain investments in Class A, B and C shares are subject to a CDSC, a sales
charge applied at the time you sell your shares. You will pay the CDSC only on
shares you sell within a certain amount of time after purchase. The CDSC
generally declines each year until there is no charge for selling shares. The
CDSC is applied to the net asset value at the time of purchase or sale,
whichever is lower. For purposes of calculating the CDSC, the start of the
holding period is the month-end of the month in which the purchase is made.
Shares you purchase with reinvested dividends or capital gains are not subject
to a CDSC. When you place an order to sell shares, the Fund will automatically
sell first those shares not subject to a CDSC and then those you have held the
longest. This policy helps reduce and possibly eliminate the potential impact of
the CDSC.
REDUCED SALES CHARGES FOR LARGER INVESTMENTS There are two ways for you to pay a
lower sales charge when purchasing Class A shares. The first is through Rights
of Accumulation. If the combined value of the Fund accounts maintained by you,
your spouse or your minor children reaches a discount level (according to the
chart on the previous page), your next purchase will receive the lower sales
charge. The second is by signing a Statement of Intent within 90 days of your
purchase. By doing so, you would be able to pay the lower sales charge on all
purchases by agreeing to invest a total of at least $100,000 within 13 months.
If your Statement of Intent purchases are not completed within 13 months, you
will be charged the applicable sales charge on the amount you had invested to
that date. In addition, certain investors may purchase shares at a reduced sales
charge or net asset value (NAV), which is the value of a fund share excluding
any sales charges. See the Statement of Additional Information for a description
of these situations.
CLASS B SHARES Your purchases of Class B shares are at the Fund's NAV. Class B
shares have no front-end sales charge, but they do carry a CDSC that is imposed
only on shares sold prior to the completion of the periods shown in the chart
below. The CDSC generally declines each year and eventually disappears over
time. The distributor pays the financial advisor firm an up-front commission on
sales of Class B shares as depicted in the charts below.
PURCHASES OF LESS THAN $250,000:
CLASS B SALES CHARGES
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<TABLE>
<CAPTION>
% DEDUCTED WHEN
HOLDING PERIOD AFTER PURCHASE SHARES ARE SOLD
<S> <C>
Through first year 5.00
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Through second year 4.00
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Through third year 3.00
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Through fourth year 3.00
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Through fifth year 2.00
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Through sixth year 1.00
- -------------------------------------------------------------------------------
Longer than six years 0.00
</TABLE>
Commission to financial advisors is 5.00%.
Automatic conversion to Class A shares is eight years after purchase.
8
<PAGE>
YOUR ACCOUNT
You can pay a lower CDSC and reduce the holding period when making purchases of
Class B shares through a financial advisor firm which participates in the Class
B share discount program for larger purchases as described in the charts below.
Some financial advisor firms are not able to participate because their record
keeping or transaction processing systems are not designed to accommodate these
reductions. For non-participating firms, purchases of Class B shares must be
less than $250,000. Consult your financial advisor to see whether it
participates in the discount program for larger purchases. For participating
firms, Rights of Accumulation apply, so that if the combined value of the Fund
accounts maintained by you, your spouse or your minor children is at or above a
discount level, your next purchase will receive the lower CDSC and the
applicable reduced holding period.
PURCHASES OF $250,000 TO LESS THAN $500,000:
<TABLE>
<CAPTION>
CLASS B SALES CHARGES
% DEDUCTED WHEN
HOLDING PERIOD AFTER PURCHASE SHARES ARE SOLD
----------------------------- ---------------
<S> <C>
Through first year 3.00
- -------------------------------------------------------------------------------
Through second year 2.00
- -------------------------------------------------------------------------------
Through third year 1.00
- -------------------------------------------------------------------------------
Longer than three years 0.00
</TABLE>
Commission to financial advisors is 2.50%.
Automatic conversion to Class A shares is four years after purchase.
PURCHASES OF $500,000 TO LESS THAN $1 MILLION:
<TABLE>
<CAPTION>
CLASS B SALES CHARGES
% DEDUCTED WHEN
HOLDING PERIOD AFTER PURCHASE SHARES ARE SOLD
----------------------------- ---------------
<S> <C>
Through first year 3.00
- -------------------------------------------------------------------------------
Through second year 2.00
- -------------------------------------------------------------------------------
Through third year 1.00
</TABLE>
Commission to financial advisors is 1.75%.
Automatic conversion to Class A shares is three years after purchase.
9
<PAGE>
YOUR ACCOUNT
If you exchange into a fund participating in the Class B share discount program
or transfer your fund account from a financial advisor which does not
participate in the program to one who does, the exchanged or transferred shares
will retain the pre-existing CDSC but any additional purchases of Class B shares
which cause the exchanged or transferred account to exceed the applicable
discount level will receive the lower CDSC and the reduced holding period for
amounts in excess of the discount level. Your financial advisor will receive the
lower commission for purchases in excess of the applicable discount level. If
you exchange from a participating fund or transfer your account from a financial
advisor that does participate in the program into a fund or financial advisor
which does not, the exchanged or transferred shares will retain the pre-existing
CDSC but all additional purchases of Class B shares will be in accordance with
the higher CDSC and longer holding period of the non-participating fund or
financial advisor.
CLASS C SHARES Similar to Class B shares, your purchases of Class C shares are
at the Fund's NAV. Although Class C shares have no front-end sales charge, they
carry a CDSC of 1.00% that is applied to shares sold within the first year after
they are purchased. After holding shares for one year, you may sell them at any
time without paying a CDSC. The distributor pays the financial advisor firm an
up-front commission of 1.00% on sales of Class C shares.
<TABLE>
<CAPTION>
CLASS C SALES CHARGES
YEARS AFTER PURCHASE % DEDUCTED WHEN SHARES ARE SOLD
<S> <C>
Through first year 1.00
- -------------------------------------------------------------------------------
Longer than one year 0.00
</TABLE>
HOW TO EXCHANGE SHARES
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You may exchange your shares for shares of the same share class of another fund
distributed by Liberty Funds Distributor, Inc. at net asset value. If your
shares are subject to a CDSC, you will not be charged a CDSC upon the exchange.
However, when you sell the shares acquired through the exchange, the shares sold
may be subject to a CDSC, depending upon when you originally purchased the
shares you exchanged. For purposes of computing the CDSC, the length of time you
have owned your shares will be computed from the date of your original purchase
and the applicable CDSC will be the CDSC of the original fund. Unless your
account is part of a tax-deferred retirement plan, an exchange is a taxable
event. Therefore, you may realize a gain or a loss for tax purposes. The Fund
may terminate your exchange privilege if the advisor determines that your
exchange activity is likely to adversely impact its ability to manage the Fund.
To exchange by telephone, call 1-800-422-3737.
10
<PAGE>
YOUR ACCOUNT
HOW TO SELL SHARES
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Your financial advisor can help you determine if and when you should sell your
shares. You may sell shares of the Fund on any regular business day that the New
York Stock Exchange (NYSE) is open.
When the Fund receives your sales request in "good form," shares will be sold at
the next calculated price. In "good form" means that money used to purchase your
shares is fully collected. When selling shares by letter of instruction, "good
form" also means (i) your letter has complete instructions, the proper
signatures and signature guarantees, (ii) you have included any certificates for
shares to be sold, and (iii) any other required documents are attached. For
additional documents required for sales by corporations, agents, fiduciaries and
surviving joint owners, please call 1-800-345-6611. Retirement plan accounts
have special requirements; please call 1-800-799-7526 for more information.
The Fund will generally send proceeds from the sale to you within seven days
(usually on the next business day after your request is received in "good
form"). However, if you purchased your shares by check, the Fund may delay
sending the proceeds from the sale of your shares until the check clears which
may take up to 15 days after your purchase. No interest will be paid on uncashed
redemption checks.
11
<PAGE>
YOUR ACCOUNT
<TABLE>
<CAPTION>
OUTLINED BELOW ARE THE VARIOUS OPTIONS FOR SELLING SHARES:
- -------------------------------------------------------------------------------
Method Instructions
<S> <C>
Through your You may call your financial advisor to place your sell
financial advisor order. To receive the current trading day's price, your
financial advisor firm must receive your request prior to
the close of the NYSE, usually 4:00 p.m. Eastern time.
- -------------------------------------------------------------------------------
By exchange You or your financial advisor may sell shares by
exchanging from the Fund into the same share class of
another fund at no additional cost. To exchange by
telephone, call 1-800-422-3737.
- -------------------------------------------------------------------------------
By telephone You or your financial advisor may sell shares by
telephone and request that a check be sent to your
address of record by calling 1-800-422-3737, unless you
have notified the Fund of an address change within the
previous 30 days. The dollar limit for telephone sales
is $100,000 in a 30-day period. You do not need to set
up this feature in advance of your call. Certain
restrictions apply to retirement accounts. For details,
call 1-800-345-6611.
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By mail You may send a signed letter of instruction or stock power
form along with any certificates to be sold to the address
below. In your letter of instruction, note the Fund's
name, share class, account number, and the dollar value
or number of shares you wish to sell. All account owners
must sign the letter, and signatures must be guaranteed
by either a bank, a member firm of a national stock
exchange or another eligible guarantor institution.
Additional documentation is required for sales by
corporations, agents, fiduciaries, surviving joint owners
and individual retirement account owners. For details,
call 1-800-345-6611.
Mail your letter of instruction to Liberty Funds Services,
Inc., P.O. Box 1722, Boston, MA 02105-1722.
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By wire You may sell shares and request that the proceeds
be wired to your bank. You must set up this feature
prior to your telephone request. Be sure to complete the
appropriate section of the account application for this
feature.
- -------------------------------------------------------------------------------
By electronic You may sell shares and request that the proceeds be
funds transfer electronically transferred to your bank. Proceeds may
take up to two business days to be received by your bank.
You must set up this feature prior to your request. Be
sure to complete the appropriate section of the account
application for this feature.
</TABLE>
DISTRIBUTION AND SERVICE FEES
- -------------------------------------------------------------------------------
The Fund has adopted a plan under Rule 12b-1 that permits it to pay marketing
and other fees to support the sale and distribution of Class A, B and C shares
and the services provided to you by your financial advisor. The annual
distribution fee and service fee may equal up to 0.00% and 0.25%, respectively,
for Class A shares and 0.75% and 0.25%, respectively, for each of Class B and
Class C shares and are paid out of the assets of these classes. Over time, these
fees will increase the cost of your shares and may cost you more than paying
other types of sales charges.(8)
(8) Class B shares automatically convert to Class A shares after a certain
number of years, depending on the program you purchased your shares under,
eliminating the distribution fee upon conversion.
12
<PAGE>
Your Account
OTHER INFORMATION ABOUT YOUR ACCOUNT
- -------------------------------------------------------------------------------
HOW THE FUND'S SHARE PRICE IS DETERMINED The price of each class of the Fund's
shares is based on its net asset value (NAV). The NAV is determined at the close
of regular trading on the NYSE, usually 4:00 p.m. Eastern time, on each business
day that the NYSE is open (typically Monday through Friday). The NYSE is closed
on most national holidays and Good Friday.
When you request a transaction, it will be processed at the NAV (plus any
applicable sales charges) next determined after your request is received in
"good form" by the distributor. In most cases, in order to receive that day's
price, the distributor must receive your order before that day's transactions
are processed. If you request a transaction through your financial advisor's
firm, the firm must receive your order by the close of trading on the NYSE to
receive that day's price.
The Fund determines its NAV for each share class by dividing each class's total
net assets by the number of that class's shares outstanding. In determining the
NAV, the Fund must determine the price of each security in its portfolio at the
close of each trading day. Securities for which market quotations are available
are valued each day at the current market value. However, where market
quotations are unavailable, or when the advisor believes that subsequent events
have made them unreliable, the Fund may use other data to determine the fair
value of the securities.
You can find the daily prices of some share classes for the Fund in most major
daily newspapers under the caption "Liberty." You can find daily prices for all
share classes by visiting the Fund's web site at www.libertyfunds.com.
ACCOUNT FEES If your account value falls below $1,000 (other than as a result of
depreciation in share value), you may be subject to an annual account fee of
$10. This fee is deducted from the account in June each year. Approximately 60
days prior to the fee date, the Fund's transfer agent will send you written
notification of the upcoming fee. If you add money to your account and bring the
value above $1,000 prior to the fee date, the fee will not be deducted.
SHARE CERTIFICATES Share certificates are not available for Class B and C
shares. Certificates will be issued for Class A shares only if requested. If you
decide to hold share certificates, you will not be able to sell your shares
until you have endorsed your certificates and returned them to the distributor.
13
<PAGE>
YOUR ACCOUNT
UNDERSTANDING FUND DISTRIBUTIONS
The Fund earns income from the securities it holds. The Fund also may realize
capital gains and losses on sales of its securities. The Fund distributes
substantially all of its net investment income and capital gains to
shareholders. As a shareholder, you are entitled to a portion of the Fund's
income and capital gains based on the number of shares you own at the time these
distributions are declared.
DIVIDENDS, DISTRIBUTIONS, AND TAXES The Fund has the potential to make the
following distributions:
<TABLE>
TYPES OF DISTRIBUTIONS
- -------------------------------------------------------------------------------
<S> <C>
Dividend Represents interest and dividends earned from securities
held by the Fund.
- -------------------------------------------------------------------------------
Capital gains Represents net long-term capital gains on sales of
securities held for more than 12 months and net
short-term capital gains, which are gains on sales of
securities held for a 12-month period or less.
</TABLE>
DISTRIBUTION OPTIONS The Fund distributes dividends quarterly and any capital
gains (including short-term capital gains) at least annually. You can choose one
of the options listed in the table below for these distributions when you open
your account(9). To change your distribution option call 1-800-345-6611.
DISTRIBUTION OPTIONS
- -------------------------------------------------------------------------------
Reinvest all distributions in additional shares of your current fund
- -------------------------------------------------------------------------------
Reinvest all distributions in shares of another fund
- -------------------------------------------------------------------------------
Receive dividends in cash (see options below) and reinvest capital gains(10)
- -------------------------------------------------------------------------------
Receive all distributions in cash (with one of the following options)(10):
- send the check to your address of record
- send the check to a third party address
- transfer the money to your bank via electronic funds transfer
TAX CONSEQUENCES Regardless of whether you receive your distributions in cash or
reinvest them in additional Fund shares, all Fund distributions are subject to
federal income tax. Depending on the state where you live, distributions may
also be subject to state and local income taxes.
In general, any distributions of dividends, interest and short-term capital
gains are taxable as ordinary income. Distributions of long-term capital gains
are generally taxable as such, regardless of how long you have held your Fund
shares. You will be provided with information each year regarding the amount of
ordinary income and capital gains distributed to you for the previous year and
any portion of your distribution which is exempt from state and local taxes.
Your investment in the Fund may have additional personal tax implications.
Please consult your tax advisor on federal, state, local or other applicable tax
laws.
In addition to the dividends and capital gains distributions made by the Fund,
you may realize a capital gain or loss when selling and exchanging shares of the
Fund. Such transactions may be subject to federal, state and local income tax.
(9) If you do not indicate on your application your preference for handling
distributions, the Fund will automatically reinvest all distributions in
additional shares of the Fund.
(10) Distributions of $10 or less will automatically be reinvested in additional
Fund shares. If you elect to receive distributions by check and the check
is returned as undeliverable, or if you do not cash a distribution check
within six months of the check date, the distribution be reinvested in
additional shares of the Fund.
14
<PAGE>
MANAGING THE FUNDS
- -------------------------------------------------------------------------------
INVESTMENT ADVISOR
- -------------------------------------------------------------------------------
Liberty Asset Management Company (LAMCO), located at Federal Reserve Plaza, 600
Atlantic Avenue, Boston, Massachusetts 02110, is the Fund's investment advisor.
In its duties as investment advisor, LAMCO runs the Fund's day-to-day business,
including placing all orders for the purchase and sale of the Fund's portfolio
securities. LAMCO has been an investment advisor since 1985. As of February 29,
2000, LAMCO managed over $1.6 billion in assets.
For the 1999 fiscal year, aggregate advisory fees paid to LAMCO by the Fund
amounted to 0.00% of average daily net assets of the Fund.
LAMCO is a manager of other investment managers which the advisor recommends to
the Board of Trustees for appointment pursuant to a portfolio management
agreement among the Trust, LAMCO and the Portfolio Manager. That management
agreement permits each Portfolio Manager to have full investment discretion and
authority over investment of a portion of the Fund's assets.
In LAMCO's opinion, the multi-manager concept provides advantages over the use
of a single manager for the following reasons:
- - Most equity investment firms consistently employ a distinct investment
"style" which causes them to emphasize stocks with particular
characteristics;
- - Because of changing investor preferences, any given style will move into and
out of market favor and will result in better investment performance under
certain market conditions, but less successful performance under other
conditions;
- - Consequently, by allocating the Fund's portfolio on an approximately equal
basis among Portfolio Managers employing different styles, the impact of any
one style on investment performance will be diluted, and the investment
performance of the total portfolio will be more consistent and less volatile
over the long term than if a single style were employed throughout the
entire period; and
- - More consistent performance at a given annual rate of return over time
produces a higher rate of return for the long term than more volatile
performance having the same average annual rate of return.
Out of the management fees the advisor pays each Portfolio Manager other than
OpCap Advisors a fee at the annual rate of 0.30% of the average daily net assets
of the portion of the Fund's assets assigned to that Portfolio Manager. The
agreement with OpCap Advisors provides for a fee of 0.40% per year of the
average daily net asset value of the portion of the Fund's portfolio assigned to
it up to $100 million and 0.30% of such average daily net asset value in excess
of $100 million. OpCap Advisors has voluntarily agreed, however, to waive any
fee in excess of 0.30% until the earlier of March 1, 2002 or the date the total
of the Fund's net assets reaches $100 million. Any increase in the fee payable
to OpCap Advisors following the expiration of its fee waiver agreement will be
borne by LAMCO.
15
<PAGE>
MANAGING THE FUNDS
No one individual at LAMCO is responsible for LAMCO's investment management of
the Fund. The following Portfolio Managers manage a portion of the Fund's
assets:
- - J.P. Morgan Investment Management, Inc.
- - OpCap Advisors
- - Boston Asset Management, L.P.
- - Westwood Management Corp.
- - TCW Investment Management Company
LAMCO is also the manager of Liberty All-Star Equity Fund, Variable Series, a
multi-managed, open-end fund available through variable annuity contracts and
variable life insurance policies of participating insurance companies. This fund
has the same investment objective and investment program as the Fund, and
currently has the same Portfolio Managers. LAMCO expects that both funds will
make corresponding changes if and when Portfolio Managers are changed in the
future.
A more complete description of each Portfolio Manager is included in the SAI.
The Trust and LAMCO have received an exemptive order from the Securities and
Exchange Commission that permits the Fund to change Portfolio Managers without a
vote of the shareholders. Information regarding any new Portfolio Manager is
sent to the Fund's shareholders within 90 days following the effective date of
the change.
16
<PAGE>
MANAGING THE FUNDS
PORTFOLIO MANAGERS
- -------------------------------------------------------------------------------
No one individual at LAMCO is responsible for LAMCO's investment management of
the Fund. The following individuals are responsible for the management of the
Fund's assets assigned to the particular Portfolio Manager.
HENRY D. CAVANNA, Managing Director of J.P. Morgan Investment Management, Inc.,
manages the portion of the Fund's portfolio assigned to that firm. J.P. Morgan
Investment Management, Inc. is a wholly-owned subsidiary of J.P. Morgan & Co.
Incorporated, a New York Stock Exchange listed bank holding company, the
principal banking subsidiary of which is Morgan Guaranty Trust Company of New
York.
JOHN LINDENTHAL, Managing Director of Oppenheimer Capital, the parent of OpCap
Advisors, manages the portion of the Fund's portfolio assigned to OpCap
Advisors.
MARK E. DONOVAN, Chairman of the Equity Strategy Committee of Boston Partners
Asset Management, L.P., manages the portion of the Fund's portfolio assigned to
that firm. Boston Partners Asset Management, L.P. (Boston Partners) was founded
in April, 1995 by three former principal officers of the Boston Company Asset
Management, Inc. Boston Partners is a limited partnership of which Boston
Partners, Inc. is the sole general partner.
SUSAN M. BYRNE, President and Chief Executive Officer of Westwood Management
Corp., a wholly-owned subsidiary of Southwest Securities Group, Inc., manages
the portion of the Fund's portfolio assigned to that firm.
GLEN E. BICKERSTAFF, Managing Director, U.S. Equities, manages the portion of
the Fund's portfolio assigned to TCW Investment Management Company (TCW). Prior
to joining TCW in 1998, Mr. Bickerstaff was a portfolio manager at Transamerica
Investment Services. TCW is a wholly-owned subsidiary of The TCW Group, Inc.
17
<PAGE>
OTHER INVESTMENT STRATEGIES AND RISKS
- -------------------------------------------------------------------------------
UNDERSTANDING THE FUND'S INVESTMENTS AND RISKS
The Fund's primary investments and risks are described under "The Fund - Primary
Investment Strategies" and "The Fund - Primary - Investment Risks." In seeking
to meet its investment goal, the Fund may also invest in other securities and
use certain investment techniques. These securities and investment techniques
offer opportunities and carry various risks.
The Fund may elect not to buy any of these securities or use any of these
techniques unless it believes that doing so will help the Fund achieve its
investment goal. The Fund may not always achieve its investment goals.
Additional information about the Fund's securities and investment techniques, as
well as the Fund's fundamental and non-fundamental investment policies, is
contained in the Statement of Additional Information.
The Fund's primary investment strategies and their associated risks are
described above. This section describes other investment that the Fund may
make and the risks associated with it. In seeking to achieve its goal, the Fund
may invest in various types of securities and engage in various investment
techniques which are not the principal focus of the Fund and therefore are not
described in this prospectus. These types of securities and investment practices
are identified and discussed in the Fund's Statement of Additional Information,
which you may obtain free of charge (see back cover). Approval by the Fund's
shareholders is not required to modify or change the Fund's investment goal or
any of the Fund's investment strategies.
DERIVATIVE STRATEGIES
- -------------------------------------------------------------------------------
The Fund may enter into a number of hedging strategies, including those that
employ futures and options, to gain or reduce exposure to particular securities
or markets. These strategies, commonly referred to as derivatives, involve the
use of financial instruments whose value depend on, or are derived from, the
value of an underlying security, index or currency. The Fund may use these
strategies to adjust the Fund's sensitivity to changes in interest rates or for
other hedging purposes (i.e., attempting to offset a potential loss in one
position by establishing an interest in an opposite position). Derivative
strategies involve the risk that they may exaggerate a loss, potentially losing
more money than the actual cost of the derivative, or limit a potential gain.
Also, with some derivative strategies there is the risk that the other party to
the transaction may fail to honor its contract terms, causing a loss to the
Fund.
TEMPORARY DEFENSIVE STRATEGIES
- -------------------------------------------------------------------------------
At times, the advisor may determine that adverse market, economic, political or
other conditions make it desirable to temporarily suspend the Fund's normal
investment activities. During such times, the Fund may, but is not required to,
invest in cash or high-quality, short-term debt securities, without limit.
Taking a temporary defensive position may prevent the Fund from achieving its
investment goal.
18
<PAGE>
OTHER INVESTMENT STRATEGIES & RISKS
19
<PAGE>
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the Fund's
financial performance. Information is shown for the period ended December 31,
1999. Certain information reflects financial results for a single Fund share.
The total returns in the table represent the rate that you would have earned (or
lost) on an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been derived from the Fund's financial
statements which have been audited by PricewaterhouseCoopers LLP, independent
accountants, whose report, along with the Fund's financial statements, is
included in the annual report. You can request a free annual report by calling
1-800-426-3750.
<TABLE>
<CAPTION>
THE FUND
- -------------------------------------------------------------------------------
PERIOD ENDED DECEMBER 31,
1999(b)
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Net asset value --
Beginning of period ($) 10.000 10.000 10.000
Income from Investment Operations ($):
Net investment income (loss) (a)(c) (0.003) (0.071) (0.071)
Net realized and unrealized gain 1.153 1.161 1.151
Total from Investment Operations 1.150 1.090 1.080
Net asset value --
End of period ($) 11.150 11.090 11.080
Total return (%) (d)(e)(f) 11.50 10.90 10.80
Ratios to average net assets (%):
Expenses (g)(h) 1.50 2.25 2.25
Net investment income (loss) (g)(h) (0.03) (0.78) (0.78)
Fees and expenses waived or borne
by the Advisor (g)(h) 1.69 1.69 1.69
Portfolio turnover (%) (f) 68 68 68
Net assets at end of period (000) ($) 3,708 13,706 4,087
(a) Net of fees and expenses waived or borne
by the Advisor which amounted to ($): 0.150 0.150 0.150
</TABLE>
(a)
(b) The Fund commenced investment operations on March 1, 1999. Per share data
reflects activity from that date.
(c) Per share data was calculated using average shares outstanding during the
period.
(d) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(e) Had the Advisor not waived or reimbursed a portion of expenses, total return
would have been reduced.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(h) Annualized.
20
<PAGE>
NOTES
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21
<PAGE>
NOTES
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22
<PAGE>
NOTES
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23
<PAGE>
FOR MORE INFORMATION
- -------------------------------------------------------------------------------
You can get more information about the Fund's investments in the Fund's
semi-annual report to shareholders. The annual report contains a discussion of
the market conditions and investment strategies that significantly affected the
Fund's performance since the Fund's inception.
You may wish to read the Statement of Additional Information for more
information on the Fund and the securities in which it invests. The Statement of
Additional Information is incorporated into this prospectus by reference, which
means that it is considered to be part of this prospectus.
You can get free copies of reports and the Statement of Additional Information,
request other information and discuss your questions about the Fund by writing
or calling the Fund's distributor at:
Liberty Funds Distributor, Inc.
One Financial Center
Boston, MA 02111-2621
1-800-426-3750
www.libertyfunds.com
Text-only versions of all Fund documents can be viewed online or downloaded from
the Edgar database on the Securities and Exchange Commission internet site at
www.sec.gov.
You can review and copy information about the Fund by visiting the following
location, and you can obtain copies, upon payment of a duplicating fee, by
electronic request at the E-mail address [email protected] or by writing the:
Public Reference Room
Securities and Exchange Commission
Washington, DC 20549-0102
Information on the operation of the Public Reference Room may be obtained by
calling 1-202-942-8090.
INVESTMENT COMPANY ACT FILE NUMBER:
Liberty Funds Trust IX (formerly LAMCO Trust I): 811-09095
- - Liberty All-Star Growth and Income Fund
[LIBERTY FUNDS LOGO]
Liberty Funds Distributor, Inc. (C)2000
One Financial Center, Boston, MA 02111-2621, 1-800-426-3750
www.libertyfunds.com
707-01/716A-0300
<PAGE>
- --------------------------------------------------------------------------------
LIBERTY ALL-STAR GROWTH AND INCOME FUND Prospectus March 17, 2000
- --------------------------------------------------------------------------------
CLASS Z SHARES
Advised by Liberty Asset Management Company
The following eligible institutional investors may purchase Class Z shares: (i)
any retirement plan with aggregate assets of at least $5 million at the time of
purchase of Class Z shares and which purchases shares directly from Liberty
Funds Distributor, Inc., the Fund's distributor, or through a third party
broker-dealer, (ii) any insurance company, trust company or bank purchasing
shares for its own account; and (iii) any endowment, investment company or
foundation. In addition, Class Z shares may be purchased directly or by exchange
by any clients of investment advisory affiliates of the distributor provided
that the clients meet certain criteria established by the distributor and its
affiliates.
Although these securities have been registered with the Securities and Exchange
Commission, the Commission has not approved or disapproved any shares offered in
this prospectus or determined whether this prospectus is accurate or complete.
Any representation to the contrary is a criminal offense.
- ---------------------------------
Not FDIC | May Lose Value
Insured |--------------------
| No Bank Guarantee
- ---------------------------------
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
THE FUND 2
- ----------------------------------------------
Investment Goal......................... 2
Primary Investment Strategies........... 2
Primary Investment Risks................ 3
Performance History..................... 4
Your Expenses........................... 5
YOUR ACCOUNT 6
- ----------------------------------------------
How to Buy Shares....................... 6
Sales Charges........................... 7
How to Exchange Shares.................. 7
How to Sell Shares...................... 7
Other Information About Your Account.... 9
MANAGING THE FUND 11
- ----------------------------------------------
Investment Advisor..................... 11
Portfolio Managers..................... 13
- ----------------------------------------------
OTHER INVESTMENT
STRATEGIES AND RISKS 14
- ----------------------------------------------
FINANCIAL HIGHLIGHTS 16
- ----------------------------------------------
</TABLE>
<PAGE>
THE FUND
- -------------------------------------------------------------------------------
INVESTMENT GOAL
- -------------------------------------------------------------------------------
The Fund seeks total return, comprised of long-term capital appreciation and
current income through investment primarily in a diversified portfolio of equity
securities.
PRIMARY INVESTMENT STRATEGIES
- -------------------------------------------------------------------------------
The primary investment strategies of the Fund in making investments in
securities are described below. Under normal market conditions, the Fund invests
primarily in equity and equity related securities, which include common stocks,
bonds convertible into stocks, warrants and other rights to purchase stocks.
The Fund's advisor utilizes a multi-manager concept. The advisor allocates the
Fund's portfolio assets on an approximately equal basis among a number of
independent investment management organizations (Portfolio Managers). There are
five Portfolio Managers as of the date of this prospectus, each of which employs
a different investment style. The advisor attempts to rebalance the portfolio
among the Portfolio Managers so as to maintain an approximately equal allocation
of the portfolio among them throughout all market cycles.
The Fund's current Portfolio Managers and investment styles are:
- - J.P. Morgan Investment Management Inc. uses a value approach by investing
in companies that are diversified across all sectors and that are
undervalued relative to the firm's projected growth rates.
- - OpCap Advisors uses a value approach by investing in companies that
exhibit the ability to generate excess cash flow while earning high
returns on invested capital.
- - Boston Partners Asset Management, L.P. uses a value approach by investing
in companies with low price-to-earnings and price-to-book ratios where a
catalyst for positive change has been identified.
2
<PAGE>
THE FUND
- - Westwood Management Corporation uses a growth approach by investing in
growth companies selling at reasonable valuations based on the firm's
earnings projections which are not yet reflected in consensus estimates.
- - TCW Investment Management Company uses a "bottom-up" approach by investing
in primarily large-cap companies that have distinct business model
advantages and incorporates secular growth trends.
The advisor continuously monitors the performance and investment styles of the
Fund's Portfolio Managers and from time to time may recommend changes of
Portfolio Managers based on factors such as:
- - Changes in a Portfolio Manager's investment style or a departure by a
Portfolio Manager from the investment style for which it had been
selected;
- - A deterioration in a Portfolio Manager's performance relative to that of
other investment management firms practicing a similar style; or
- - Adverse changes in its ownership or personnel.
The advisor also may recommend Portfolio Manager changes to change the mix of
investment styles employed by the Fund's Portfolio Managers. The Board of
Trustees must approve all Portfolio Manager changes.
The Fund will remain substantially fully invested during periods when stock
prices generally rise and also during periods when they generally decline. The
Fund is intended to be a long-term investment vehicle and is not designed to
provide a means of speculating on short-term stock market movements.
Additional strategies that are not primary investment strategies and the risks
associated with them are described later under "Other Investment Strategies and
Risks."
PRIMARY INVESTMENT RISKS
- -------------------------------------------------------------------------------
The primary risks of investing in the Fund are described below. There are many
circumstances (including additional risks that are not described here) which
could prevent the Fund from achieving its goal. It is possible to lose money by
investing in the Fund.
Market risk is the risk that the price of a security held by the Fund will fall
due to changing market, economic or political conditions. Market risk includes
interest rate risk.
3
<PAGE>
THE FUND
Interest rate risk is the risk of a change in the price of a bond when interest
rates increase or decline. In general, if interest rates rise, bond prices fall;
and if interest rates fall, bond prices rise. Changes in the values of bonds
usually will not affect the amount of income the Fund receives from them but
will affect the value of the Fund's shares. Interest rate risk is generally
greater for bonds with longer maturities.
PERFORMANCE HISTORY
- -------------------------------------------------------------------------------
Because the Fund commenced investment operations on March 1, 1999, and has not
completed one full year of investment performance, information related to the
Fund's performanc (other than that included in the Financial Highlights)
has not been included in this prospectus.
4
<PAGE>
THE FUND
UNDERSTANDING EXPENSES
SALES CHARGES are paid directly by shareholders to the Fund's distributor.
ANNUAL FUND OPERATING EXPENSES are deducted from the Fund. They include
management and administration fees, brokerage costs, and administrative costs
including pricing and custody services.
EXAMPLE EXPENSES help you compare the cost of investing in the Fund to the cost
of investing in other mutual funds. The table does not take into account any
expense reduction arrangements discussed in the footnotes to the Annual Fund
Operating Expenses table. It uses the following hypothetical conditions:
- - $10,000 initial investment
- - 5% total return for each year
- - Fund operating expenses remain the same
- - Assumes reinvestment of all dividends and distributions
YOUR EXPENSES
- -------------------------------------------------------------------------------
Fees and expenses are among the factors you should consider before you invest in
a mutual fund. The tables below describe the fees and expenses you may pay when
you buy, hold and sell shares of the Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES (1) (PAID DIRECTLY FROM YOUR INVESTMENT)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Maximum sales charge (load) on purchases (%)
(as a percentage of the offering price) 0.00
- ------------------------------------------------------------------------------------------
Maximum deferred sales charge (load) on redemptions (%)
(as a percentage of the lesser of purchase price or redemption price) 0.00
- ------------------------------------------------------------------------------------------
Redemption fee(2)(%) (as a percentage of amount redeemed, if
applicable) (2)
</TABLE>
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (DEDUCTED DIRECTLY FROM FUND ASSETS)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Management and administration fee(3) (%) 0.80
- ------------------------------------------------------------------------------------------
Distribution and service (12b-1) fees (%) 0.00
- ------------------------------------------------------------------------------------------
Other expenses(3) (%) 2.12
- ------------------------------------------------------------------------------------------
Total annual fund operating expenses(3) (%) 2.92
</TABLE>
- --------------------------------------------------------------------------------
EXAMPLE EXPENSES (YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER)
- --------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$295 $903 $1,537 $3,242
(1) A $10 annual fee is deducted from accounts of less than $1,000 and paid to
the transfer agent.
(2) There is a $7.50 charge for wiring sale proceeds to your bank.
(3) The Fund's advisor and administrator have voluntarily agreed to waive
advisory and administration fees and reimburse the Fund for certain
expenses so that the total annual fund operating expenses (exclusive of
distribution and service fees, brokerage commissions, interest, taxes and
extraordinary expenses, if any) will not exceed 1.25%. As a result, the
actual management and administration fees for Class Z shares would be
0.00%, other expenses would be 1.25% and the total annual fund operating
expenses for Class Z shares would be 1.25%. The waiver is expected to
continue at least until April 30, 2000.
5
<PAGE>
- --------------------------------------------------------------------------------
YOUR ACCOUNT
- --------------------------------------------------------------------------------
WHO IS ELIGIBLE TO BUY CLASS Z SHARES?
The following eligible institutional investors may purchase Class Z shares: (i)
any retirement plan with aggregate assets of at least $5 million at the time of
purchase of Class Z shares and which purchases shares directly from the
distributor or through a third party broker-dealer; (ii) any insurance company,
trust company or bank purchasing shares for its own account; and (iii) any
endowment, investment company or foundation. In addition, Class Z shares may be
purchased directly or by exchange by any clients of investment advisory
affiliates of the distributor provided that the clients meet certain criteria
established by the distributor and its affiliates.(4)
HOW TO BUY SHARES
- -------------------------------------------------------------------------------
Your financial advisor can help you establish an appropriate investment
portfolio, buy shares and monitor your investments. When the Fund receives your
purchase request in "good form," your shares will be bought at the next
calculated price. "Good form" means that you placed your order with your
brokerage firm or your payment has been received and your application is
complete, including all necessary signatures.
- --------------------------------------------------------------------------------
OUTLINED BELOW ARE THE VARIOUS OPTIONS FOR BUYING SHARES:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
METHOD INSTRUCTIONS
<S> <C>
Through your Your financial advisor can help you establish your account and
financial advisor buy Fund shares on your behalf.
- -------------------------------------------------------------------------------------
By check For new accounts, send a completed application and check made
(new account) payable to the Fund to the transfer agent, Liberty Funds
Services, Inc., P.O. Box 1722, Boston, MA 02105-1722.
- -------------------------------------------------------------------------------------
By check For existing accounts, fill out and return the additional
(existing account) investment stub included in your quarterly statement, or send a
letter of instruction including your Fund name and account
number with a check made payable to the Fund to Liberty
Funds Services, Inc., P.O. Box 1722, Boston, MA
02105-1722.
- -------------------------------------------------------------------------------------
By exchange You or your financial advisor may acquire shares by exchanging
shares you own in one fund for shares of the same class or
Class A of the Fund at no additional cost. There may be an
additional charge if exchanging from a money market fund. To
exchange by telephone, call 1-800-422-3737.
- -------------------------------------------------------------------------------------
By wire You may purchase shares by wiring money from your bank account
to your fund account. To wire funds to your fund account, call
1-800-422-3737 to obtain a control number and the wiring
instructions.
- -------------------------------------------------------------------------------------
By electronic You may purchase shares by electronically transferring money
funds transfer from your bank account to your fund account by calling
1-800-422-3737. Electronic funds transfers may take up to
two business days to settle and be considered in "good
form." You must set up this feature prior to your
telephone request. Be sure to complete the appropriate
section of the application.
- -------------------------------------------------------------------------------------
Automatic You can make monthly or quarterly investments automatically
investment plan from your bank account to your fund account. You can select a
pre-authorized amount to be sent via electronic funds
transfer. Be sure to complete the appropriate section of the
application for this feature.
- -------------------------------------------------------------------------------------
By dividend You may automatically invest dividends distributed by one fund
diversification into the same class of shares of the Fund at no additional
sales charge. To invest your dividends in another fund, call
1-800-345-6611.
</TABLE>
(4) The Fund reserves the right to change the criteria for eligible investors.
The Fund also reserves the right to refuse a purchase order for any
reason, including if it believes that doing so would be in the best
interest of the Fund and its shareholders.
6
<PAGE>
YOUR ACCOUNT
CHOOSING A SHARE CLASS
The Fund offers one class of shares in this prospectus -- CLASS Z.
The Fund also offers three additional classes of shares -- Class A, B and C
shares are available through a separate prospectus. Each share class has its own
sales charge and expense structure. Determining which share class is best for
you depends on the dollar amount you are investing and the number of years for
which you are willing to invest. Based on your personal situation, your
investment advisor can help you decide which class of shares makes the most
sense for you. In general, anyone who is eligible to purchase Class Z shares,
which do not incur Rule 12b-1 fees or sales charges, should do so in preference
over other classes.
SALES CHARGES
- --------------------------------------------------------------------------------
Your purchases of Class Z shares generally are at net asset value, which is the
value of a Fund share excluding any sales charge. Class Z shares are not subject
to an initial sales charge when purchased, or a contingent deferred sales charge
when sold.
HOW TO EXCHANGE SHARES
- --------------------------------------------------------------------------------
You may exchange your shares for shares of the same share class of another fund
or Class A shares of another fund distributed by Liberty Funds Distributor, Inc.
at net asset value. Unless your account is part of a tax-deferred retirement
plan, an exchange is a taxable event. Therefore, you may realize a gain or a
loss for tax purposes. The Fund may terminate your exchange privilege if the
advisor determines that your exchange activity is likely to adversely impact its
ability to manage the Fund. To exchange by telephone, call 1-800-422-3737.
HOW TO SELL SHARES
- --------------------------------------------------------------------------------
Your financial advisor can help you determine if and when you should sell your
shares. You may sell shares of the Fund on any regular business day that the New
York Stock Exchange (NYSE) is open.
When the Fund receives your sales request in "good form," shares will be sold at
the next calculated price. In "good form" means that money used to purchase your
shares is fully collected. When selling shares by letter of instruction, "good
form" also means (i) your letter has complete instructions, the proper
signatures and signature guarantees, and (ii) any other required documents are
attached. For additional documents required for sales by corporations, agents,
fiduciaries and surviving joint owners, please call 1-800-345-6611. Retirement
plan accounts have special requirements; please call 1-800-799-7526 for more
information.
7
<PAGE>
YOUR ACCOUNT
The Fund will generally send proceeds from the sale to you within seven days
(usually on the next business day after your request is received in "good
form"). However, if you purchased your shares by check, the Fund may delay
sending the proceeds from the sale of your shares until the check clears which
may take up to 15 days after your purchase. No interest will be paid on uncashed
redemption checks.
- --------------------------------------------------------------------------------
OUTLINED BELOW ARE THE VARIOUS OPTIONS FOR SELLING SHARES:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
METHOD INSTRUCTIONS
<S> <C>
Through your You may call your financial advisor to place your sell order.
financial advisor To receive the current trading day's price, your financial
advisor firm must receive your request prior to the close
of the NYSE, usually 4:00 p.m. Eastern time.
- -------------------------------------------------------------------------------------
By exchange You or your financial advisor may sell shares by exchanging
from the Fund into Class Z shares or Class A shares of another
fund at no additional cost. To exchange by telephone, call
1-800-422-3737.
- -------------------------------------------------------------------------------------
By telephone You or your financial advisor may sell shares by telephone and
request that a check be sent to your address of record by
calling 1-800-422-3737, unless you have notified the Fund of an
address change within the previous 30 days. The dollar limit
for telephone sales is $100,000 in a 30-day period. You do not
need to set up this feature in advance of your call. Certain
restrictions apply to retirement accounts. For details, call
1-800-345-6611.
- -------------------------------------------------------------------------------------
By mail You may send a signed letter of instruction or stock power form
to the address below. In your letter of instruction, note the
Fund's name, share class, account number, and the dollar value
or number of shares you wish to sell. All account owners must
sign the letter, and signatures must be guaranteed by either a
bank, a member firm of a national stock exchange or another
eligible guarantor institution. Additional documentation is
required for sales by corporations, agents, fiduciaries,
surviving joint owners and individual retirement account
owners. For details, call 1-800-345-6611.
Mail your letter of instruction to Liberty Funds Services,
Inc., P.O. Box 1722, Boston, MA 02105-1722.
- -------------------------------------------------------------------------------------
By wire You may sell shares and request that the proceeds be wired
to your bank. You must set up this feature prior to your
telephone request. Be sure to complete the appropriate
section of the account application for this feature.
- -------------------------------------------------------------------------------------
By electronic You may sell shares and request that the proceeds be
funds transfer electronically transferred to your bank. Proceeds may take up
to two business days to be received by your bank. You must
set up this feature prior to your request. Be sure to
complete the appropriate section of the account application
for this feature.
</TABLE>
8
<PAGE>
YOUR ACCOUNT
OTHER INFORMATION ABOUT YOUR ACCOUNT
- --------------------------------------------------------------------------------
HOW THE FUND'S SHARE PRICE IS DETERMINED The price of the Fund's Class Z shares
is based on its net asset value (NAV). The NAV is determined at the close of
regular trading on the NYSE, usually 4:00 p.m. Eastern time, on each business
day that the NYSE is open (typically Monday through Friday). The NYSE is closed
on most national holidays and Good Friday.
When you request a transaction, it will be processed at the NAV next determined
after your request is received in "good form" by the distributor. In most cases,
in order to receive that day's price, the distributor must receive your order
before that day's transactions are processed. If you request a transaction
through your financial advisor's firm, the firm must receive your order by the
close of trading on the NYSE to receive that day's price.
The Fund determines its NAV for its Class Z shares by dividing total net assets
attributable to Class Z shares by the number of Class Z shares outstanding. In
determining the NAV, the Fund must determine the price of each security in its
portfolio at the close of each trading day. Securities for which market
quotations are available are valued each day at the current market value.
However, where market quotations are unavailable, or when the advisor believes
that subsequent events have made them unreliable, the Fund may use other data to
determine the fair value of the securities.
You can find the daily prices of some share classes for the Fund in most major
daily newspapers under the caption "Liberty." You can find daily prices for all
share classes by visiting the Fund's web site at www.libertyfunds.com.
ACCOUNT FEES If your account value falls below $1,000 (other than as a result of
depreciation in share value) you may be subject to an annual account fee of $10.
This fee is deducted from the account in June each year. Approximately 60 days
prior to the fee date, the Fund's transfer agent will send you written
notification of the upcoming fee. If you add money to your account and bring the
value above $1,000 prior to the fee date, the fee will not be deducted.
SHARE CERTIFICATES Share certificates are not available for Class Z shares.
9
<PAGE>
YOUR ACCOUNT
UNDERSTANDING FUND DISTRIBUTIONS
The Fund earns income from the securities it holds. The Fund also may realize
capital gains and losses on sales of its securities. The Fund distributes
substantially all of its net investment income and capital gains to
shareholders. As a shareholder, you are entitled to a portion of the Fund's
income and capital gains based on the number of shares you own at the time these
distributions are declared.
DIVIDENDS, DISTRIBUTIONS, AND TAXES The Fund has the potential to make the
following distributions:
- --------------------------------------------------------------------------------
TYPES OF DISTRIBUTIONS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Dividend Represents interest and dividends earned from securities
held by the Fund.
- --------------------------------------------------------------------------------
Capital gains Represents net long-term capital gains on sales of
securities held for more than 12 months and net short-term
capital gains, which are gains on sales of securities held
for a 12-month period or less.
</TABLE>
DISTRIBUTION OPTIONS The Fund distributes dividends quarterly and any capital
gains (including short-term capital gains) at least annually. You can choose one
of the options listed in the table below for these distributions when you open
your account.(5) To change your distribution option call 1-800-345-6611.
- --------------------------------------------------------------------------------
DISTRIBUTION OPTIONS
- --------------------------------------------------------------------------------
Reinvest all distributions in additional shares of your current fund
- -------------------------------------------------------------------------------
Reinvest all distributions in shares of another fund
- -------------------------------------------------------------------------------
Receive dividends in cash (see options below) and reinvest capital gains(6)
- -------------------------------------------------------------------------------
Receive all distributions in cash (with one of the following options) (6):
- - send the check to your address of record
- - send the check to a third party address
- - transfer the money to your bank via electronic funds transfer
TAX CONSEQUENCES Regardless of whether you receive your distributions in cash or
reinvest them in additional Fund shares, all Fund distributions are subject to
federal income tax. Depending on the state where you live, distributions may
also be subject to state and local income taxes.
In general, any distributions of dividends, interest and short-term capital
gains are taxable as ordinary income. Distributions of long-term capital gains
are generally taxable as such, regardless of how long you have held your Fund
shares. You will be provided with information each year regarding the amount of
ordinary income and capital gains distributed to you for the previous year and
any portion of your distribution which is exempt from state and local taxes.
Your investment in the Fund may have additional personal tax implications.
Please consult your tax advisor on federal, state, local or other applicable tax
laws.
In addition to the dividends and capital gains distributions made by the Fund,
you may realize a capital gain or loss when selling and exchanging shares of the
Fund. Such transactions may be subject to federal, state and local income tax.
(5) If you do not indicate on your application your preference for handling
distributions, the Fund will automatically reinvest all distributions in
additional shares of the Fund.
(6) Distributions of $10 or less will automatically be reinvested in
additional Fund shares. If you elect to receive distributions by check and
the check is returned as undeliverable, or if you do not cash a
distribution check within six months of the check date, the distribution
will be reinvested in additional shares of the Fund.
10
<PAGE>
- --------------------------------------------------------------------------------
MANAGING THE FUND
- --------------------------------------------------------------------------------
INVESTMENT ADVISOR
- --------------------------------------------------------------------------------
Liberty Asset Management Company (LAMCO), located at Federal Reserve Plaza, 600
Atlantic Avenue, Boston, Massachusetts 02110, is the Fund's investment advisor.
In its duties as investment advisor, LAMCO runs the Fund's day-to-day business,
including placing all orders for the purchase and sale of the Fund's portfolio
securities. LAMCO has been an investment advisor since 1985. As of February 29,
2000, LAMCO managed over $1.6 billion in assets.
For the 1999 fiscal year, aggregate advisory fees paid to LAMCO by the Fund
amounted to 0.00% of average daily net assets of the Fund.
LAMCO is a manager of other investment managers which the advisor recommends to
the Board of Trustees for appointment pursuant to a portfolio management
agreement among the Trust, LAMCO and the Portfolio Manager. That management
agreement permits each Portfolio Manager to have full investment discretion and
authority over investment of a portion of the Fund's assets.
In LAMCO's opinion, the multi-manager concept provides advantages over the use
of a single manager for the following reasons:
- - Most equity investment management firms consistently employ a distinct
investment "style" which causes them to emphasize stocks with particular
characteristics;
- - Because of changing investor preferences, any given investment style will
move into and out of market favor and will result in better investment
performance under certain market conditions, but less successful
performance under other conditions;
- - Consequently, by allocating the Fund's portfolio on an approximately equal
basis among Portfolio Managers employing different styles, the impact of
any one style on investment performance will be diluted, and the
investment performance of the total portfolio will be more consistent and
less volatile over the long term than if a single style were employed
throughout the entire period; and
- - More consistent performance at a given annual rate of return over time
produces a higher rate of return for the long term than more volatile
performance having the same average annual rate of return.
Out of the management fees the advisor pays each Portfolio Manager other than
OpCap Advisors a fee at the annual rate of 0.30% of the average daily net assets
of the portion of the Fund's assets assigned to that Portfolio Manager. The
agreement with OpCap Advisors provides for a fee of 0.40% per year of the
average daily net asset value of the portion of the Fund's portfolio assigned to
it up to $100 million and 0.30% of such average daily net asset value in excess
of $100 million. OpCap Advisors has voluntarily agreed, however, to waive any
fee in excess of 0.30% until the earlier of March 1, 2002 or the date the total
of the Fund's net assets reaches $100 million. Any increase in the fee payable
to OpCap Advisors following the expiration of its fee waiver agreement will be
borne by LAMCO.
11
<PAGE>
MANAGING THE FUNDS
No one individual at LAMCO is responsible for LAMCO's investment management of
the Fund. The following Portfolio Managers manage a portion of the Fund's
assets:
- - J.P. Morgan Investment Management, Inc.
- - OpCap Advisors
- - Boston Partners Asset Management, L.P.
- - Westwood Management Corp.
- - TCW Investment Management Company
LAMCO is also the manager of Liberty All-Star Equity Fund, Variable Series, a
multi-managed, open-end fund available through variable annuity contracts and
variable life insurance policies of participating insurance companies. This fund
has the same investment objective and investment program as the Fund, and
currently has the same Portfolio Managers. LAMCO expects that both funds will
make corresponding changes if and when Portfolio Managers are changed in the
future.
A more complete description of each Portfolio Manager is included in the SAI.
The Trust and LAMCO have received an exemptive order from the Securities and
Exchange Commission that permits the Fund to change Portfolio Managers without a
vote of the shareholders. Information regarding any new Portfolio Manager is
sent to the Fund's shareholders within 90 days following the effective date of
the change.
12
<PAGE>
MANAGING THE FUNDS
PORTFOLIO MANAGERS
- -------------------------------------------------------------------------------
No one individual at the LAMCO is responsible for LAMCO's investment
management of the Fund. The following individuals are responsible for the
management of the Fund's assets assigned to the particular Portfolio Manager.
HENRY D. CAVANNA, Managing Director of J.P. Morgan Investment Management, Inc.,
manages the portion of the Fund's portfolio assigned to that firm. J.P. Morgan
Investment Management, Inc. is a wholly-owned subsidiary of J.P. Morgan & Co.
Incorporated, a New York Stock Exchange listed bank holding company, the
principal banking subsidiary of which is Morgan Guaranty Trust Company of New
York.
JOHN LINDENTHAL, Managing Director of Oppenheimer Capital, the parent of OpCap
Advisors, manages the portion of the Fund's portfolio assigned to OpCap
Advisors.
MARK E. DONOVAN, Chairman of the Equity Strategy Committee of Boston Partners
Asset Management, L.P., manages the portion of the Fund's portfolio assigned to
that firm. Boston Partners Asset Management, L.P. (Boston Partners) was founded
in April, 1995 by three former principal officers of the Boston Company Asset
Management, Inc. Boston Partners is a limited partnership of which Boston
Partners, Inc. is the sole general partner.
SUSAN M. BYRNE, President and Chief Executive Officer of Westwood Management
Corp., a wholly-owned subsidiary of Southwest Securities Group, Inc., manages
the portion of the Fund's portfolio assigned to that firm.
GLEN E. BICKERSTAFF, Managing Director, U.S. Equities, manages the portion of
the Fund's portfolio assigned to TCW Investment Management Company (TCW). Prior
to joining TCW in 1998, Mr. Bickerstaff was a portfolio manager at Transamerica
Investment Services. TCW is a wholly-owned subsidiary of The TCW Group, Inc.
13
<PAGE>
- --------------------------------------------------------------------------------
OTHER INVESTMENT STRATEGIES AND RISKS
- --------------------------------------------------------------------------------
UNDERSTANDING THE FUND'S OTHER INVESTMENTS AND RISKS
The Fund's primary investments and risks are described under "The Fund - Primary
Investment Strategies" and "The Fund - Primary Investment Risks." In seeking to
meet its investment goal, the Fund may also invest in other securities and use
certain investment techniques. These securities and investment techniques offer
opportunities and carry various risks.
The Fund may elect not to buy any of these securities or use any of these
techniques unless it believes that doing so will help the Fund achieve its
investment goal. The Fund may not always achieve its investment goal.
Additional information about the Fund's securities and investment techniques, as
well as the Fund's fundamental and non-fundamental investment policies, is
contained in the Statement of Additional Information.
The Fund's primary investment strategies and their associated risks are
described above. This section describes other investment that the Fund may
make and the risks associated with it. In seeking to achieve its goal, the Fund
may invest in various types of securities and engage in various investment
techniques which are not the principal focus of the Fund and therefore are not
described in this prospectus. These types of securities and investment practices
are identified and discussed in the Fund's Statement of Additional Information,
which you may obtain free of charge (see back cover). Approval by the Fund's
shareholders is not required to modify or change the Fund's investment goal or
any of the Fund's investment strategies.
DERIVATIVE STRATEGIES
- -------------------------------------------------------------------------------
The Fund may enter into a number of hedging strategies, including those that
employ futures and options, to gain or reduce exposure to particular securities
or markets. These strategies, commonly referred to as derivatives, involve the
use of financial instruments whose value depend on, or are derived from, the
value of an underlying security, index or currency. The Fund may use these
strategies to adjust the Fund's sensitivity to changes in interest rates or for
other hedging purposes (i.e., attempting to offset a potential loss in one
position by establishing an interest in an opposite position). Derivative
strategies involve the risk that they may exaggerate a loss, potentially losing
more money than the actual cost of the derivative, or limit a potential gain.
Also, with some derivative strategies there is the risk that the other party to
the transaction may fail to honor its contract terms, causing a loss to the
Fund.
TEMPORARY DEFENSIVE STRATEGIES
- -------------------------------------------------------------------------------
At times, the advisor may determine that adverse market, economic, political or
other conditions make it desirable to temporarily suspend the Fund's normal
investment activities. During such times, the Fund may, but is not required to,
invest in cash or high-quality, short-term debt securities, without limit.
Taking a temporary defensive position may prevent the Fund from achieving its
investment goal.
14
<PAGE>
OTHER INVESTMENT STRATEGIES AND RISKS
15
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the Fund's
financial performance. Information is shown for the period ended December 31,
1999. Certain information reflects financial results for a single Fund share.
The total returns in the table represent the rate that you would have earned (or
lost) on an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been derived from the Fund's financial
statements which have been audited by PricewaterhouseCoopers LLP, independent
accountants, whose report, along with the Fund's financial statements is
included in the annual report. You can request a free annual report by calling
1-800-426-3750.
THE FUND
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Period ended
December 31,
1999 (b)
CLASS Z
<S> <C>
Net asset value --
Beginning of period ($) 10.000
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS ($):
Net investment income (a)(c) 0.019
- --------------------------------------------------------------------------------
Net realized and unrealized gain 1.151
- --------------------------------------------------------------------------------
Total from Investment Operations 1.170
- --------------------------------------------------------------------------------
Net asset value --
End of period ($) 11.170
- --------------------------------------------------------------------------------
Total return (%) (d)(e)(f) 11.70
- --------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (%):
Expenses (g)(h) 1.25
- --------------------------------------------------------------------------------
Net investment income (g)(h) 0.22
- --------------------------------------------------------------------------------
Fees and expenses waived or borne
by the Advisor (g)(h) 1.69
- --------------------------------------------------------------------------------
Portfolio turnover (%) (f) 68
- --------------------------------------------------------------------------------
Net assets at end of period (000) ($) 2,234
- --------------------------------------------------------------------------------
(a) Net of fees and expenses waived or borne
by the Advisor which amounted to ($): 0.150
- --------------------------------------------------------------------------------
</TABLE>
(b) The Fund commenced investment operations on March 1, 1999. Per share data
reflects activity from that date.
(c) Per share data was calculated using average shares outstanding during the
period.
(d) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(e) Had the Advisor not waived or reimbursed a portion of expenses, total
return would have been reduced.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(h) Annualized.
16
<PAGE>
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17
<PAGE>
NOTES
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18
<PAGE>
NOTES
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19
<PAGE>
FOR MORE INFORMATION
- -------------------------------------------------------------------------------
You can get more information about the Fund's investments in the Fund's
semi-annual report to shareholders. The annual report contains a discussion of
the market conditions and investment strategies that significantly affected the
Fund's performance since the Fund's inception.
You may wish to read the Statement of Additional Information for more
information on the Fund and the securities in which it invests. The Statement of
Additional Information is incorporated into this prospectus by reference, which
means that it is considered to be part of this prospectus.
You can get free copies of reports and the Statement of Additional Information,
request other information and discuss your questions about the Fund by writing
or calling the Fund's distributor at:
Liberty Funds Distributor, Inc.
One Financial Center
Boston, MA 02111-2621
1-800-426-3750
www.libertyfunds.com
Text-only versions of all Fund documents can be viewed online or downloaded from
the Edgar database on the Securities and Exchange Commission internet site at
www.sec.gov.
You can review and copy information about the Fund by visiting the following
location, and you can obtain copies, upon payment of a duplicating fee, by
electronic request at the E-mail address [email protected] or by writing the:
Public Reference Room
Securities and Exchange Commission
Washington, DC 20549-0102
Information on the operation of the Public Reference Room may be obtained by
calling 1-202-942-8090.
INVESTMENT COMPANY ACT FILE NUMBER:
Liberty Funds Trust IX (formerly LAMCO Trust I): 811-09095
- - Liberty All-Star Growth and Income Fund
- --------------------------------------------------------------------------------
[LIBERTY FUNDS LOGO]
Liberty Funds Distributor, Inc. (C)2000
One Financial Center, Boston, MA 02111-2621, 1-800-426-3750
www.libertyfunds.com
707-01/717A-0300
<PAGE>
LIBERTY ALL-STAR GROWTH AND INCOME FUND
A SERIES OF LIBERTY FUNDS TRUST IX
STATEMENT OF ADDITIONAL INFORMATION
MARCH 17, 2000
This Statement of Additional Information (SAI) contains information which may be
useful to investors but which is not included in the Prospectus of Liberty
All-Star Growth and Income Fund (Fund). This SAI is not a prospectus and is
authorized for distribution only when accompanied or preceded by the Prospectus
of the Fund dated March 17, 2000. This SAI should be read together with the
Prospectus and the Fund's most recent Annual Report dated December 31, 1999.
Investors may obtain a free copy of the Prospectus and the Annual Report from
Liberty Funds Distributor, Inc. (LFD), One Financial Center, Boston, MA
02111-2621. The Financial Statements and report of Independent Accountants
appearing in the December 31, 1999 Annual Report are incorporated in this SAI by
reference.
This SAI contains specific information about the Fund and additional information
about certain securities and investment techniques described in the Fund's
Prospectus.
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
<S> <C>
Definitions 2
Organization and History 2
Investment Objective and Policies 2
Fundamental Investment Policies 2
Other Investment Policies 3
Investment Management and Other Services 3
Portfolio Turnover 5
Other Charges and Expenses 5
Investment Performance 9
Custodian 9
Independent Accountants 10
Description of Certain Investments 10
Taxes 16
Management of the Fund 19
Determination of Net Asset Value 25
How to Buy Shares 25
Special Purchase Programs/Investor Services 26
Programs for Reducing or Eliminating Sales Charges 27
How to Sell Shares 30
Distributions 31
How to Exchange Shares 31
Suspension of Redemptions 32
Shareholder Liability 32
Shareholder Meetings 32
Performance Measures 33
</TABLE>
707-01/716A-0300
<PAGE>
<TABLE>
<CAPTION>
DEFINITIONS
<S> <C>
"Trust" Liberty Funds Trust IX
"Fund" Liberty All-Star Growth and Income Fund
"Advisor" Liberty Asset Management Company, the Fund's investment advisor
"Administrator" Colonial Management Associates, Inc., the Fund's administrator
"LFD" Liberty Funds Distributor, Inc., the Fund's distributor
"LFS" Liberty Funds Services, Inc., the Fund's shareholder services and transfer agent
</TABLE>
ORGANIZATION AND HISTORY
The Trust is a Massachusetts business trust organized in 1998. The Fund, a
diversified portfolio of the Trust, represents the entire interest in a separate
portfolio of the Trust. The Fund commenced investment operations on March 1,
1999 and its registration statement was declared effective by the Securities and
Exchange Commission (SEC) on January 15, 1999.
The Trust is not required to hold annual shareholder meetings, but special
meetings may be called for certain purposes. Shareholders receive one vote for
each Fund share. Shares of the Fund and any other series of the Trust that may
be in existence from time to time generally vote together except when required
by law to vote separately by fund or by class. Shareholders owning in the
aggregate ten percent of Trust shares may call meetings to consider removal of
Trustees. Under certain circumstances, the Trust will provide information to
assist shareholders in calling such a meeting. See "Shareholder Meetings."
The Trust changed its name from "LAMCO Trust I" to its current name on April 1,
1999.
INVESTMENT OBJECTIVE AND POLICIES
This SAI contains additional information about the principal strategies and
risks that are described or referred to in the Prospectus as well as information
about the non-principal strategies, risks and fundamental investment policies of
the Fund.
Except as indicated under "Fundamental Investment Policies," the Fund's
investment policies are not fundamental and the Trustees may change the policies
without shareholder approval.
FUNDAMENTAL INVESTMENT POLICIES
The Investment Company Act of 1940 (Act) provides that a "vote of a majority of
the outstanding voting securities" means the affirmative vote of the lesser of
(1) more than 50% of the outstanding shares of the Fund, or (2) 67% or more of
the shares present at a meeting if more than 50% of the outstanding shares are
represented at the meeting in person or by proxy. The following fundamental
investment policies can not be changed without such a vote.
The Fund may:
1. Borrow from banks, other affiliated funds and other persons to the
extent permitted by applicable law, provided that the Fund's
borrowings shall not exceed 33 1/3% of the value of its total assets
(including the amount borrowed) less liabilities (other than
borrowings) or such other percentage permitted by law;
2. Own real estate only if acquired as the result of owning securities and
not more than 5% of total assets;
3. Purchase and sell futures contracts and related options as long as the
total initial margin and premiums do not exceed 5% of total assets;
4. Not issue senior securities except as provided in paragraph 1 above and
to the extent permitted by the Act;
5. Underwrite securities issued by others only when disposing of portfolio
securities;
6. Make loans only (a) through lending of securities, (b) through the
purchase of debt instruments or similar evidences of indebtedness
typically sold privately to financial institutions or traded in public
securities markets, (c) through an interfund lending program with other
affiliated funds provided that no such loan may be made if, as a
result, the aggregate of such interfund loans would exceed 33 1/3% of
the value of its total assets (taken at market value at the time of
such loans), and (d) through repurchase agreements;
2
<PAGE>
7. Not concentrate 25% or more of its total assets in any industry (other
than securities issued or guaranteed as to principal and interest by
the Government of the United States or any agency or instrumentality
thereof). Notwithstanding the investment policies and restrictions of
the Fund, the Fund may invest all or a portion of its investable assets
in investment companies with substantially the same investment
objective, policies and restrictions as the Fund; and
8. Not purchase securities of any one issuer, if
(a) more than 5% of the Fund's total assets taken at market value
would at the time be invested in the securities of such issuer, except
that such restriction does not apply to securities issued or guaranteed
by the U.S. Government or its agencies or instrumentalities or
corporations sponsored thereby, and except that up to 25% of the Fund's
total assets may be invested without regard to this limitation; or
(b) such purchase would at the time result in more than 10% of the
outstanding voting securities of such issuer being held by the Fund,
except that up to 25% of the Fund's total assets may be invested
without regard to this limitation.
OTHER INVESTMENT POLICIES
As non-fundamental investment policies which may be changed without a
shareholder vote, the Fund may not:
1. Have a short sales position, unless the Fund owns, or owns rights
(exercisable without payment) to acquire, an equal amount of
securities;
2. Invest more than 15% of its net assets in illiquid assets; and
3. Purchase additional securities for the Fund's portfolio if borrowing
does not exceed 5% of the Fund's total assets.
Total assets and net assets are determined at current value for purposes of
compliance with investment restrictions and policies. Except for the
restrictions on borrowings and investments in illiquid assets, all percentage
limitations will apply at the time of investment and are not violated unless an
excess or deficiency occurs as a result of such investment. For the purpose of
restriction 7 above, an issuer is the entity whose revenues support the
security.
INVESTMENT MANAGEMENT AND OTHER SERVICES
GENERAL
The Fund's investment program is based upon the Advisor's multi-manager concept.
The Advisor allocates the Fund's portfolio assets on an equal basis among a
number of independent investment management organizations (Portfolio Managers)--
currently five in number--each of which employs a different investment style,
and periodically rebalances the Fund's portfolio among the Portfolio Managers so
as to maintain an approximately equal allocation of the portfolio among them
throughout all market cycles. Each Portfolio Manager provides these services
under a Portfolio Management Agreement (Portfolio Management Agreements) among
the Trust, on behalf of the Fund, the Advisor and such Portfolio Manager. Under
a Fund Management Agreement with the Fund, the Advisor monitors the investment
performance and styles of, and from time to time recommends changes in, the
Portfolio Managers, and allocates and reallocates the Fund's portfolio assets
among them. For these services, the Fund pays the Advisor a monthly fee based on
the average of the daily closing value of the total net assets of the Fund at
the annual rate of 0.60%. From this fee, the Advisor pays each Portfolio Manager
other than OpCap Advisors a monthly fee at the annual rate of 0.30% on the
average of the daily closing value of the net assets of the Fund assigned to
that Portfolio Manager. OpCap Advisors' agreement provides for a fee of 0.40% on
the average of the daily closing value of the net assets assigned to it up to
$100 million and 0.30% on such average daily closing value in excess of $100
million. OpCap Advisors has voluntarily agreed, however, to waive any fee in
excess of 0.30% until the earlier of March 1, 2002 or the date the total of the
Fund's net assets reaches $100 million. Under the Fund Management Agreement, any
liability of the Advisor to the Trust, the Fund and/or its shareholders is
limited to situations involving the Advisor's own willful misfeasance, bad
faith, gross negligence or reckless disregard of its duties.
The Fund Management Agreement may be terminated with respect to the Fund at any
time on 60 days' written notice by the Advisor or by the Trustees of the Trust
or by a vote of a majority of the outstanding voting securities of the Fund. The
Fund Management Agreement will automatically terminate upon any assignment
thereof and shall continue in effect following its second anniversary and from
year to year thereafter only so long as such continuance is approved at least
annually (i) by the Trustees of the Trust or by a vote of a majority of the
outstanding voting securities of the Fund and (ii) by vote of a majority of the
Trustees who are not interested persons (as such term is defined in the Act) of
the Advisor or the Trust, cast in person at a meeting called for the purpose of
voting on such approval.
3
<PAGE>
The Advisor or an affiliate thereof pays all salaries of officers of the Trust.
The Fund pays all expenses not assumed by the Advisor including, but not limited
to, auditing, legal, custodial, investor servicing and shareholder reporting
expenses. The Fund pays the cost of printing and mailing any Prospectuses sent
to shareholders. LFD pays the cost of printing and distributing all other
Prospectuses.
As of the date of this Statement of Additional Information, the following
entities serve as the Fund's Portfolio Managers:
J.P. Morgan Investment Management, Inc. J.P. Morgan Investment Management
Inc., 522 Fifth Avenue, New York, New York 10036, is a wholly-owned
subsidiary of J.P. Morgan & Co. Incorporated, a New York Stock Exchange
listed bank holding company the principal banking subsidiary of which is
Morgan Guaranty Trust Company of New York. J.P. Morgan's principal
executive officer is Keith M. Schappert, and its directors are Mr.
Schappert and William L. Cobb, Jr., C. Nicolas Potter, Michael R.
Granito, John R. Thomas, Thomas M. Luddy, Michael E. Patterson, Jean
Louis Pierre Brunel, Robert A. Anselmi, Milan Steven Soltis and K. Warren
Anderson.
OpCap Advisors. OpCap Advisors, Oppenheimer Tower, World Financial
Center, New York, New York 10281, is a majority-owned subsidiary of
Oppenheimer Capital, which inturn is a wholly-owned subsidiary of PIMCO
Advisors L.P. OpCap Advisors' principal executive officer is Bernard H.
Garil.
Boston Partners Asset Management, L.P. ("Boston Partners"), 28 State
Street, Boston, Massachusetts 02109, was founded in April, 1985 by three
former principal officers of The Boston Company Asset Management, Inc.
Boston Partners is a limited partnership of which Boston Partners, Inc.,
One Financial Center, Boston, Massachusetts, is the sole general partner.
Westwood Management Corp. Westwood Management Corp., 300 Crescent Court,
Suite 1300, Dallas, Texas 75201, is a wholly owned subsidiary of
Southwest Securities Group, Inc., a New York Stock Exchange listed
securities firm. Its principal executive officer is Susan M. Byrne. Its
directors are Ms. Byrne, Raymond E. Wooldridge, Don A. Buchhotz, David M.
Glatstein and Patricia R. Fraze.
TCW Investment Management Company. TCW Investment Management Company
("TCW"), located at 865 South Figueroa Street, Los Angeles, CA 90017, is a
wholly-owned subsidiary of The TCW Group, Inc. ("TCW Group"). Established
in 1971, TCW Group's direct and indirect subsidiaries, including TCW,
provide a variety of trust, investment management and investment advisory
services. Ownership of the TCW Group lies approximately 95% with its
employees and 5% with its directors. Robert A. Day, who is Chairman of the
Board of Directors of TCW Group, may be deemed to be a control person of
TCW by virtue of the aggregate ownership by Mr. Day and his family of more
than 25% of the outstanding voting stock of the TCW Group.
Under the Fund Management and Portfolio Management Agreements, neither the
Advisor nor the Portfolio Managers are liable for actions taken by them in good
faith and without gross negligence or willful misfeasance. Although the
Portfolio Managers' activities are subject to general oversight by the Advisor
and the Trustees and officers of the Trust, neither the Advisor nor such
Trustees and officers evaluate, or have liability for, the investment merits of
the Portfolio Managers' selections of individual securities.
EXPENSE LIMITATIONS
The Advisor and Administrator have agreed to waive or reimburse all expenses,
including management and administration fees, but excluding 12b-1 distribution
and service fees, interest, taxes, brokerage, other expenses which are
capitalized in accordance with generally accepted accounting principles, and
extraordinary expenses, incurred by the Fund in excess of 1.25% of average net
assets per annum. Such arrangement may be terminated by the Advisor and the
Administrator at any time.
4
<PAGE>
PORTFOLIO TURNOVER
The Fund cannot accurately predict portfolio turnover, but the Advisor
anticipates that it will not exceed 100% annually. If the Fund writes a
substantial number of call or put options (on securities or indexes) or engages
in the use of futures contracts or options on futures contracts (all referred to
as "Collateralized Transactions"), and the market prices of the securities
underlying the Collateralized Transactions move inversely to the Collateralized
Transaction, there may be a very substantial turnover of the portfolio. The Fund
pays brokerage commissions in connection with options and futures transactions
and effecting closing purchase or sale transactions, as well as for the
purchases and sales of other portfolio securities other than fixed income
securities. High portfolio turnover may result in correspondingly greater
brokerage commissions and other transaction costs, which would be borne directly
by the Fund, and may result in the realization of distributable capital gains,
which are taxable to non-exempt shareholders. Changes in the Fund's Portfolio
Managers and rebalancings of its portfolio among the Portfolio Managers may
result in higher portfolio turnover than would otherwise be the case.
OTHER CHARGES AND EXPENSES
Under the Fund's administration agreement, the Fund pays the Administrator a
monthly fee at the annual rate of 0.20% of the average daily net assets and a
monthly pricing and bookkeeping fee of $3,000 plus the following percentages per
annum of the Fund's average daily net assets over $50 million:
0.035% annually on the next $950 million
0.025% annually on the next $1 billion
0.015% annually on the next $1 billion
0.001% annually on the excess over $3 billion
Under the Fund's transfer agency and shareholder servicing agreement, the Fund
pays LFS a monthly fee at the annual rate of 0.236% of average daily net assets,
plus certain out-of-pocket expenses.
RECENT FEES PAID TO THE ADVISOR, LFD AND LFS (dollars in thousands)
<TABLE>
<CAPTION>
PERIOD MARCH 1, 1999
(COMMENCEMENT OF INVESTMENT OPERATIONS)
THROUGH DECEMBER 31, 1999
<S> <C>
Management fee $71
Administration fee 24
Bookkeeping fee 30
Shareholder service and transfer agent fee 31
12b-1 fees:
Service fee (Classes A, B and C) 25
Distribution fee (Class B) 47
Distribution fee (Class C) 15
Fees or expenses waived or borne by
the Advisor/Administrator (199)
</TABLE>
BROKERAGE COMMISSIONS (dollars in thousands)
<TABLE>
<CAPTION>
PERIOD MARCH 1, 1999
(COMMENCEMENT OF INVESTMENT OPERATIONS)
THROUGH DECEMBER 31, 1999
<S> <C>
Total commissions $33
Directed transactions 0
Commissions on directed transactions 0
</TABLE>
5
<PAGE>
TRUSTEES AND TRUSTEES' FEES
For the period ended December 31, 1999, the Trustees received the following
compensation in their capacities as Trustees of the Trust and of the Liberty
Funds Complex (a):
<TABLE>
<CAPTION>
Total Compensation From Liberty Funds
Aggregate Compensation From The Trust For The Complex Paid To The Directors/Trustees For
Trustee Period Ended December 31, 1999(b) The Calendar Year Ended December 31, 1999(c)
- ------- --------------------------------------------- ------------------------------------------
<S> <C> <C>
Robert J. Birnbaum $ 2,549 $112,000
John V. Carberry 0(d) 0(d)
James E. Grinnell 2,549 125,000
Richard W. Lowry 2,549 112,000
William E. Mayer 2,549 126,000
John J. Neuhauser 2,549 126,252
</TABLE>
(a) The Trust does not currently provide pension or retirement plan benefits
to the Trustees.
(b) The Trust, Liberty All-Star Equity Fund and Liberty All-Star Growth Fund,
Inc., each of which has the same Board of Trustees, pay aggregate
Trustees' fees of $25,000 per annum, assuming a minimum of four meetings
are held and attended, one third of which is allocated among the three
funds on a per fund basis and the remaining two thirds of which is
allocated based on net assets.
(c) At December 31, 1999, the Liberty Funds Complex consisted of 51 open-end
and 10 closed-end management investment company portfolios advised by the
Administrator or its affiliates, The Crabbe Huson Group (Crabbe Huson),
Newport Fund Management Inc. (Newport) and Stein Roe & Farnham
Incorporated (Stein Roe), 9 funds of Liberty Variable Investment Trust
advised by Liberty Advisory Services Corp., an affiliate of the Advisor,
and the closed-end Liberty All-Star Equity and Liberty All-Star Growth
Fund, Inc. advised by the Advisor.
(d) Mr. Carberry does not receive compensation because he is an affiliated
Trustee and an employee of Liberty Financial Companies, Inc. (Liberty
Financial)
The Fund, the Advisor and LFD have adopted codes of ethics under Rule 17j-1 of
the Act which permit personnel subject to the codes to invest in securities,
including securities that may be purchased or held by the Fund.
OWNERSHIP OF THE FUND
As of record on February 29, 2000, the Trustees and officers of the Trust as a
group owned less than 1% of the outstanding shares of the Fund.
As of record on February 29, 2000, the following shareholders of record owned 5%
or more of one or more of each class of the Fund's outstanding shares:-.
Class A Shares
Peter Stovall Cook TTEE
Peter Stovall Cook Living Trust
U/A 01/21/1999
1763 Las Gallinas
San Rafael, CA 94903 (20,621 shares, 5.83%)
Rodney G. Island
PO Box 528
Redwood Valley,CA 95470 (30,239 shares, 8.55%)
6
<PAGE>
Class C Shares
Russell Ohlson &
Susan Ohlson JTWROS
PO Box 806
Bodega Bay, CA 94923 (47,125 shares, 12.21%)
Tresch Electric, Inc.
PO Box 71
Novato, CA 94945 (20,708 shares, 5.36%)
RGB Display Corp
22525 Kingston Lane
Grass Valley, CA 95949 (40,270 shares, 10.43%)
Class Z Shares
Liberty Asset Management Company
Attn Michael Santilli
600 Atlantic Avenue
Boston, MA 02210 (199,906 shares, 100%)
As of record on February 29, 2000, the officers and Trustees of the Trust as a
group owned less than 1% of the then outstanding shares of the Fund.
As of record on February 29, 2000 there were 239 Class A, 1,248 Class B,
88 Class C and 1 Class Z record holders of the Fund.
<TABLE>
<CAPTION>
<S> <C>
SALES CHARGES (dollars in thousands) Class A Shares
March 1, 1999
(commencement of investment operations)
through December 31
1999
Aggregate initial sales charges on Fund share sales $229
Initial sales charges retained by LFD 13
Aggregate contingent deferred sales charge (CDSC) on
Fund redemptions retained by LFD (e)
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Class B Shares
March 1, 1999
(commencement of investment operations)
through December 31
1999
Aggregate CDSC on Fund redemptions retained by LFD $34
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Class C Shares
March 1, 1999
(commencement of investment operations)
through December 31
1999
Aggregate CDSC on Fund redemptions retained by LFD $9
</TABLE>
(e) Rounds to less than one.
12B-1 PLAN, CDSC AND CONVERSION OF SHARES
The Fund offers four classes of shares - Class A, Class B, Class C and Class Z.
The Fund may in the future offer other classes of shares. The Trustees have
approved a 12b-1 Plan (Plan) pursuant to Rule 12b-1 under the Act. Under the
Plan, the Fund pays LFD monthly a service fee at an annual rate of 0.25% of the
Fund's net assets attributed to Class A, Class B and Class C shares issued and
outstanding thereafter. The Fund also pays LFD monthly a distribution fee at an
annual rate of 0.75% of average daily net assets attributed to Class B and Class
C shares. LFD may use the entire amount of such fees to defray the cost of
commissions and service fees paid to financial service firms (FSFs) and for
certain other purposes. Since the distribution and service fees are payable
regardless of the amount of LFD's expenses, LFD may realize a profit from the
fees. The Plan authorizes any other payments by the Fund to LFD and its
affiliates (including the Advisor and the Administrator) to the extent that such
payments might be construed to be indirect financing of the distribution of Fund
shares.
The Trustees believe the Plan could be a significant factor in the growth and
retention of Fund assets resulting in a more advantageous expense ratio and
increased investment flexibility which could benefit each class of Fund
shareholders. The Plan will continue in effect from year to year so long as
continuance is specifically approved at least annually by a vote of the
Trustees, including the Trustees who are not interested persons of the Trust and
have no direct or indirect financial interest in the operation of the Plan or in
any agreements related to the Plan (Independent Trustees), cast in person at a
meeting called for the purpose of voting on the Plan. The Plan may not be
amended to increase the fee materially without approval by vote of a majority of
the outstanding voting securities of the relevant class of shares, and all
material amendments of the Plan must be approved by the Trustees in the manner
provided in the foregoing sentence. The Plan may be terminated at any time by
vote of a majority of the Independent Trustees or by vote of a majority of the
outstanding voting securities of the relevant class of shares. The continuance
of the Plan will only be effective if the selection and nomination of the
Trustees of the Trust who are not interested persons of the Trust is effected by
such disinterested Trustees.
Class A shares are offered at net asset value plus varying sales charges which
may include a CDSC. Class B shares are offered at net asset value and are
subject to a CDSC if redeemed within six years after purchase. Class C shares
are offered at net asset value and are subject to a 1.00% CDSC on redemptions
within one year after purchase. Class Z shares are offered at net asset value
and are not subject to a CDSC. The CDSCs are described in the Prospectus.
No CDSC will be imposed on shares derived from reinvestment of distributions or
amounts representing capital appreciation. In determining the applicability and
rate of any CDSC, it will be assumed that a redemption is made first of shares
representing capital appreciation, next of shares representing reinvestment of
distributions and finally of other shares held by the shareholder for the
longest period of time.
A certain number of years, depending on the program you purchased your shares
under, after the end of the month in which a Class B share is purchased, such
share and of any shares issued on the reinvestment of distributions on such
share will be automatically converted into a number of Class A shares having an
equal value. Class A shares are not subject to the 0.75% distribution fee.
8
<PAGE>
SALES-RELATED EXPENSES (dollars in thousands) of LFD relating to the Fund were:
<TABLE>
<CAPTION>
Period Ended December 31, 1999
Class A Class B Class C Class Z
<S> <C> <C> <C> <C>
Fees to FSFs $7 $644 $34 ---
Cost of sales material relating to the Fund
(including printing and mailing expenses) 12 51 13 ---
Allocated travel, entertainment and other
promotional 12 45 11 ---
Expenses (including advertising)
</TABLE>
INVESTMENT PERFORMANCE
The Fund's Class A, Class B, Class C and Class Z share average annual total
returns at December 31, 1999 were (f):
<TABLE>
<CAPTION>
Class A Shares
Period March 1, 1999
(commencement of investment operations)
through December 31, 1999
<S> <C>
With sales charge of 5.75% 5.09%
Without sales charge 11.50%
</TABLE>
<TABLE>
<CAPTION>
Class B Shares
Period March 1, 1999
(commencement of investment operations)
through December 31, 1999
<S> <C>
With applicable CDSC 5.90% (5.00% CDSC)
Without CDSC 10.90%
</TABLE>
<TABLE>
<CAPTION>
Class C Shares
Period March 1, 1999
(commencement of investment operations)
through December 31, 1999
<S> <C>
With applicable CDSC 9.80% (1.00% CDSC)
Without CDSC 10.80%
</TABLE>
<TABLE>
<CAPTION>
Class Z Shares
Period March 1, 1999
(commencement of investment operations)
through December 31, 1999
<S> <C>
Net Asset Value 11.70%
</TABLE>
(fe) Performance results reflect any voluntary waiver or reimbursement by
the Advisor and/or its affiliates of class expenses. Absent this waiver
or reimbursement arrangement, performance results would have been
lower. See the prospectus for details.
See "Performance Measures" for how calculations are made.
CUSTODIAN
9
<PAGE>
The Chase Manhattan Bank, located at 270 Park Avenue, New York, New York
10017-2070, is the Fund's custodian. The custodian is responsible for
safeguarding the Fund's cash and securities, receiving and delivering securities
and collecting the Fund's interest and dividends.
10
<PAGE>
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, located at 160 Federal Street, Boston, Massachusetts
02110-2624, are the Fund's independent accountants providing audit and tax
return preparation services and assistance and consultation in connection with
the review of various SEC filings. The Financial Statements incorporated by
reference in this SAI have been so incorporated, and the financial highlights
included in the Prospectuses have been so included, in reliance upon the report
of PricewaterhouseCoopers LLP given on the authority of said firm as experts in
accounting and auditing.
DESCRIPTION OF CERTAIN INVESTMENTS
The following is a description of certain types of investments which may be made
by the Fund.
CASH RESERVES AND REPURCHASE AGREEMENTS
As stated in the Prospectus, the Fund may invest in U.S. Government securities
(including direct U.S. Government obligations and U.S. Government Agency
securities described below), certificates of deposit, bankers' acceptances, time
deposits, high quality commercial paper and repurchase agreements. The money
market instruments that may be used by the Fund may include:
UNITED STATES GOVERNMENT OBLIGATIONS. These consist of various types of
marketable securities issued by the U.S. Treasury, i.e., bills, notes and bonds.
Such securities are direct obligations of the U.S. Government and differ mainly
in the length of their maturity. Treasury bills, the most frequently issued
marketable government security, have a maturity of up to one year and are issued
on a discount basis.
UNITED STATES GOVERNMENT AGENCY SECURITIES. These consist of debt securities
issued by agencies and instrumentalities of the U.S. Government, including the
various types of instruments currently outstanding or which may be offered in
the future. Agencies include, among others, the Federal Housing Administration,
Government National Mortgage Association, Farmer's Home Administration,
Export-Import Bank of the United States, Maritime Administration, and General
Services Administration. Instrumentalities include, for example, each of the
Federal Home Loan Banks, the National Bank for Cooperatives, the Federal Home
Loan Mortgage Corporation, the Farm Credit Banks, the Federal National Mortgage
Association, and the United States Postal Service. These securities are either:
(i) backed by the full faith and credit of the U.S. Government (e.g., U.S.
Treasury Bills); (ii) guaranteed by the U.S. Treasury (e.g., Government National
Mortgage Association mortgage-backed securities); (iii) supported by the issuing
agency's or instrumentality's right to borrow from the U.S. Treasury (e.g.,
Federal National Mortgage Association Discount Notes); or (iv) supported only by
the issuing agency's or instrumentality's own credit (e.g., securities issued by
the Farmer's Home Administration).
BANK AND SAVINGS AND LOAN OBLIGATIONS. These include certificates of deposit and
bankers' acceptances. Certificates of deposit generally are short-term,
interest-bearing negotiable certificates issued by commercial banks or savings
and loan associations against funds deposited in the issuing institution.
Bankers' acceptances are time drafts drawn on a commercial bank by a borrower,
usually in connection with an international commercial transaction (e.g., to
finance the import, export, transfer, or storage of goods). With a bankers'
acceptance, the borrower is liable for payment as is the bank, which
unconditionally guarantees to pay the draft at its face amount on the maturity
date. Most bankers' acceptances have maturities of six months or less and are
traded in secondary markets prior to maturity. Time deposits are generally
short-term, interest-bearing negotiable obligations issued by commercial banks
against funds deposited in the issuing institutions. The Funds will not invest
in any security issued by a commercial bank or a savings and loan association
unless the bank or savings and loan association is organized and operating in
the United States, has total assets of at least one billion dollars, and is a
member of the Federal Deposit Insurance Corporation (FDIC), in the case of
banks, or insured by the FDIC in the case of savings and loan associations;
provided, however, that such limitation will not prohibit investments in foreign
branches of domestic banks which meet the foregoing requirements. The Fund will
not invest in time-deposits maturing in more than seven days.
11
<PAGE>
SHORT-TERM CORPORATE DEBT INSTRUMENTS. These include commercial paper (i.e.,
short-term, unsecured promissory notes issued by corporations to finance
short-term credit needs). Commercial paper is usually sold on a discount basis
and has a maturity at the time of issuance not exceeding nine months. Also
included are non-convertible corporate debt securities (e.g., bonds and
debentures). Corporate debt securities with a remaining maturity of less than 13
months are liquid (and tend to become more liquid as their maturities lessen)
and are traded as money market securities. The Fund may purchase corporate debt
securities having greater maturities.
REPURCHASE AGREEMENTS. The Fund may invest in repurchase agreements. A
repurchase agreement is an instrument under which the investor (such as the
Fund) acquires ownership of a security (known as the "underlying security") and
the seller (i.e., a bank or primary dealer) agrees, at the time of the sale, to
repurchase the underlying security at a mutually agreed upon time and price,
thereby determining the yield during the term of the agreement. This results in
a fixed rate of return insulated from market fluctuations during such period,
unless the seller defaults on its repurchase obligations. The underlying
securities will consist only of securities issued by the U.S. Government, its
agencies or instrumentalities (U.S. Government Securities). Repurchase
agreements are, in effect, collateralized by such underlying securities, and,
during the term of a repurchase agreement, the seller will be required to
mark-to-market such securities every business day and to provide such additional
collateral as is necessary to maintain the value of all collateral at a level at
least equal to the repurchase price. Repurchase agreements usually are for short
periods, often under one week, and will not be entered into by the Fund for a
duration of more than seven days if, as a result, more than 15% of the value of
the Fund's net assets would be invested in such agreements or other securities
which are illiquid.
The Fund will seek to assure that the amount of collateral with respect to any
repurchase agreement is adequate. As with any extension of credit, however,
there is risk of delay in recovery or the possibility of inadequacy of the
collateral should the seller of the repurchase agreement fail financially. In
addition, the Fund could incur costs in connection with disposition of the
collateral if the seller were to default. The Fund will enter into repurchase
agreements only with sellers deemed to be creditworthy under creditworthiness
standards approved by the Board of Trustees and only when the economic benefit
to the Fund is believed to justify the attendant risks. The Board of Trustees
believes these standards are designed to reasonably assure that such sellers
present no serious risk of becoming involved in bankruptcy proceedings within
the time frame contemplated by the repurchase agreement. The Fund may enter into
repurchase agreements only with commercial banks or registered broker-dealers.
OPTIONS ON SECURITIES
The Fund may purchase and sell options on individual securities.
WRITING COVERED OPTIONS. The Fund may write covered call options and covered put
options on securities held in its portfolio when, in the opinion of a Portfolio
Manager, such transactions are consistent with the Fund's investment objective
and policies. Call options written by the Fund give the purchaser the right to
buy the underlying securities from the Fund at a stated exercise price; put
options give the purchaser the right to sell the underlying securities to the
Fund at a stated price.
The Fund may write only covered options, which means that, so long as the Fund
is obligated as the writer of a call option, it will own the underlying
securities subject to the option (or comparable securities satisfying the cover
requirements of securities exchanges). In the case of put options, the Fund will
hold cash and/or high-grade short-term debt obligations equal to the price to be
paid if the option is exercised. In addition, the Fund will be considered to
have covered a put or call option if and to the extent that it holds an option
that offsets some or all of the risk of the option it has written. The Fund may
write combinations of covered puts and calls on the same underlying security.
The Fund will receive a premium from writing a put or call option, which
increases the Fund's return on the underlying security if the option expires
unexercised or is closed out at a profit. The amount of the premium reflects,
among other things, the relationship between the exercise price and the current
market value of the underlying security, the volatility of the underlying
security, the amount of time remaining until expiration, current interest rates,
and the effect of supply and demand in the options market and in the market for
the underlying security. By writing a call option, the Fund limits its
opportunity to profit from any increase in the market value of the underlying
security above the exercise price of the option but continues to bear the risk
of a decline in the value of the underlying security. By writing a put option,
the Fund assumes the risk that it may be required to purchase the underlying
security for an exercise price higher than its then-current market value,
resulting in a potential capital loss unless the security subsequently
appreciates in value.
12
<PAGE>
The Fund may terminate an option that it has written prior to its expiration by
entering into a closing purchase transaction in which it purchases an offsetting
option. The Fund realizes a profit or loss from a closing transaction if the
cost of the transaction (option premium plus transaction costs) is less or more
than the premium received from writing the option. Because increases in the
market price of a call option generally reflect increases in the market price of
the security underlying the option, any loss resulting from a closing purchase
transaction may be offset in whole or in part by unrealized appreciation of the
underlying security.
If the Fund writes a call option but does not own the underlying security, and
then it writes a put option, the Fund may be required to deposit cash or
securities with its broker as "margin" or collateral for its obligation to buy
or sell the underlying security. As the value of the underlying security varies,
the Fund may have to deposit additional margin with the broker. Margin
requirements are complex and are fixed by individual brokers, subject to minimum
requirements currently imposed by the Federal Reserve Board and by stock
exchanges and other self-regulatory organizations.
PURCHASING PUT OPTIONS. The Fund may purchase put options to protect its
portfolio holdings in an underlying security against a decline in market value.
Such hedge protection is provided during the life of the put option since the
Fund, as holder of the put option, is able to sell the underlying security at
the put exercise price regardless of any decline in the underlying security's
market price. For a put option to be profitable, the market price of the
underlying security must decline sufficiently below the exercise price to cover
the premium and transaction costs. By using put options in this manner, the Fund
will reduce any profit it might otherwise have realized from appreciation of the
underlying security by the premium paid for the put option and by transaction
costs.
PURCHASING CALL OPTIONS. The Fund may purchase call options to hedge against an
increase in the price of securities that the Fund wants ultimately to buy. Such
hedge protection is provided during the life of the call option since the Fund,
as holder of the call option, is able to buy the underlying security at the
exercise price regardless of any increase in the underlying security's market
price. In order for a call option to be profitable, the market price of the
underlying security must rise sufficiently above the exercise price to cover the
premium and transaction costs. These costs will reduce any profit the Fund might
have realized had it bought the underlying security at the time it purchased the
call option.
OVER-THE-COUNTER (OTC) OPTIONS. The Staff of the Division of Investment
Management of the Securities and Exchange Commission has taken the position that
OTC options purchased by the Fund and assets held to cover OTC options written
by the Fund are illiquid securities. Although the Staff has indicated that it is
continuing to evaluate this issue, pending further developments, the Fund will
enter into OTC options transactions only with primary dealers in U.S. Government
Securities and, in the case of OTC options written by the Fund, only pursuant to
agreements that will assure that the Fund will at all times have the right to
repurchase the option written by it from the dealer at a specified formula
price. The Fund will treat the amount by which such formula price exceeds the
amount, if any, by which the option may be "in the money" as an illiquid
investment. It is the present policy of the Fund not to enter into any OTC
option transaction if, as a result, more than 15% of the Fund's net assets would
be invested in (i) illiquid investments (determined under the foregoing formula)
relating to OTC options written by the Fund, (ii) OTC options purchased by the
Fund, (iii) securities which are not readily marketable and (iv) repurchase
agreements maturing in more than seven days.
RISK FACTORS IN OPTIONS TRANSACTIONS. The successful use of the Fund's options
strategies depends on the ability of a Portfolio Manager to forecast interest
rate and market movements correctly.
When it purchases an option, the Fund runs the risk that it will lose its entire
investment in the option in a relatively short period of time, unless the Fund
exercises the option or enters into a closing sale transaction with respect to
the option during the life of the option. If the price of the underlying
security does not rise (in the case of a call) or fall (in the case of a put) to
an extent sufficient to cover the option premium and transaction costs, the Fund
will lose part or all of its investment in the option. This contrasts with an
investment by the Fund in the underlying securities, since the Fund may continue
to hold its investment in those securities notwithstanding the lack of a change
in price of those securities.
The effective use of options also depends on the Fund's ability to terminate
option positions at times when a Portfolio Manager deems it desirable to do so.
Although the Fund will take an option position only if a Portfolio Manager
believes there is a liquid secondary market for the option, there is no
assurance that the Fund will be able to effect closing transactions at any
particular time or at an acceptable price.
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<PAGE>
If a secondary trading market in options were to become unavailable, the Fund
could no longer engage in closing transactions. Lack of investor interest might
adversely affect the liquidity of the market for particular options or series of
options. A marketplace may discontinue trading of a particular option or options
generally. In addition, a market could become temporarily unavailable if unusual
events--such as volume in excess of trading or clearing capability--were to
interrupt normal market operations.
A marketplace may at times find it necessary to impose restrictions on
particular types of options transactions, which may limit the Fund's ability to
realize its profits or limit its losses.
Disruptions in the markets for the securities underlying options purchased or
sold by the Fund could result in losses on the options. If trading is
interrupted in an underlying security, the trading of options on that security
is normally halted as well. As a result, the Fund as purchaser or writer of an
option will be unable to close out its positions until options trading resumes,
and it may be faced with losses if trading in the security reopens at a
substantially different price. In addition, the Options Clearing Corporation
(OCC) or other options markets may impose exercise restrictions. If a
prohibition on exercise is imposed at the time when trading in the option has
also been halted, the Fund as purchaser or writer of an option will be locked
into its position until one of the two restrictions has been lifted. If a
prohibition on exercise remains in effect until an option owned by the Fund has
expired, the Fund could lose the entire value of its option.
Special risks are presented by internationally-traded options. Because of time
differences between the United States and various foreign countries, and because
different holidays are observed in different countries, foreign options markets
may be open for trading during hours or on days when U.S. markets are closed. As
a result, option premiums may not reflect the current prices of the underlying
interest in the United States.
FUTURES CONTRACTS AND RELATED OPTIONS
The Fund may buy and sell certain future contracts (and in certain cases related
options), to the extent and for the purposes specified in the Prospectus.
A futures contract sale creates an obligation by the seller to deliver the type
of financial instrument called for in the contract in a specified delivery month
for a stated price. A futures contract purchase creates an obligation by the
purchaser to take delivery of the type of financial instrument called for in the
contract in a specified delivery month at a stated price. The specific
instruments delivered or taken at settlement date are not determined until on or
near that date. The determination is made in accordance with the rules of the
exchanges on which the futures contract was made. Futures contracts are traded
in the United States only on a commodity exchange or boards of trade--known as
"contract markets"--approved for such trading by the Commodity Futures Trading
Commission, and must be executed through a futures commission merchant or
brokerage firm which is a member of the relevant contract market.
Although futures contracts by their terms call for actual delivery or acceptance
of the underlying financial instruments, the contracts usually are closed out
before the settlement date without the making or taking of delivery. Closing out
a futures contract sale is effected by purchasing a futures contract for the
same aggregate amount of the specific type of financial instrument with the same
delivery date. If the price of the initial sale of the futures contract exceeds
the price of the offsetting purchase, the seller is paid the difference and
realizes a gain. Conversely, if the price of the offsetting purchase exceeds the
price of the initial sale, the seller realizes a loss. Similarly, the closing
out of a futures contract purchase is effected by the purchaser's entering into
a futures contract sale. If the offsetting sale price exceeds the purchase
price, the purchaser realizes a gain, and if the purchase price exceeds the
offsetting sale price, the purchaser realizes a loss.
Unlike when the Fund purchases or sells a security, no price is paid or received
by the Fund upon the purchase or sale of a futures contract, although the Fund
is required to deposit with its custodian in a segregated account in the name of
the futures broker an amount of cash and/or U.S. Government Securities. This
amount is known as "initial margin." The nature of initial margin in futures
transactions is different from that of margin in security transactions in that
futures contract margin does not involve the borrowing of funds by the Fund to
finance the transactions. Rather, initial margin is in the nature of a
performance bond or good faith deposit on the contract that is returned to the
Fund upon termination of the futures contract, assuming all contractual
obligations have been satisfied. Futures contracts also involve brokerage costs.
14
<PAGE>
Subsequent payments, called "variation margin," to and from the broker (or the
custodian) are made on a daily basis as the price of the underlying security or
commodity fluctuates, making the long and short positions in the futures
contract more or less valuable, a process known as "marking to market."
The Fund may elect to close some or all of its futures positions at any time
prior to their expiration. The purpose of making such a move would be to reduce
or eliminate the hedge position then currently held by the Fund. The Fund may
close its positions by taking opposite positions which will operate to terminate
the Fund's position in the futures contracts. Final determinations of variation
margin are then made, additional cash is required to be paid by or released to
the Fund, and the Fund realizes a loss or gain. Such closing transactions
involve additional commission costs.
The Fund will enter into futures contracts only when, in compliance with the
SEC's requirements, cash or high quality liquid debt securities equal in value
to the commodity value (less any applicable margin deposits) have been deposited
in a segregated account of the Fund's custodian.
OPTIONS ON FUTURES CONTRACTS. The Fund may purchase and write call and put
options on futures contracts it may buy or sell and enter into closing
transactions with respect to such options to terminate existing positions. The
Fund may use such options on futures contracts in lieu of purchasing and selling
the underlying futures contracts. Such options generally operate in the same
manner as options purchased or written directly on the underlying investments.
As with options on securities, the holder or writer of an option may terminate
his position by selling or purchasing an offsetting option. There is no
guarantee that such closing transactions can be effected.
The Fund will be required to deposit initial margin and maintenance margin with
respect to put and call options on futures contracts written by it pursuant to
brokers' requirements similar to those described above. The Fund will enter into
written options on futures contracts only when, in compliance with the SEC's
requirements, cash or equivalents equal in value to the commodity value (less
any applicable margin deposits) have been deposited in a segregated account of
the Fund's custodian.
RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS. Successful use
of futures contracts by the Fund is subject to a Portfolio Manager's ability to
predict correctly movements in the direction of interest rates and other factors
affecting securities markets.
Compared to the purchase or sale of futures contracts, the purchase of call or
put options on futures contracts involves less potential risk to the Fund
because the maximum amount at risk is the premium paid for the options (plus
transaction costs). However, there may be circumstances when the purchase of a
call or put option on a futures contract would result in a loss to the Fund when
the purchase or sale of a futures contract would not, such as when there is no
movement in the prices of the hedged investments. The writing of an option on a
futures contract involves risks similar to those relating to the sale of futures
contracts.
There is no assurance that higher than anticipated trading activity or other
unforeseen events might not at times render certain market clearing facilities
inadequate, and thereby result in the institution by exchanges of special
procedures which may interfere with the timely execution of customer orders.
To reduce or eliminate a hedge position held by the Fund, the Fund may seek to
close out a position. The ability to establish and close out positions will be
subject to the development and maintenance of a liquid secondary market. It is
not certain that this market will develop or continue to exist for a particular
futures contract. Reasons for the absence of a liquid secondary market on an
exchange include the following: (i) there may be insufficient trading interest
in certain contracts or options; (ii) restrictions may be imposed by an exchange
on opening transactions or closing transactions or both; (iii) trading halts,
suspensions or other restrictions may be imposed with respect to particular
classes or series of contracts or options, or underlying securities; (iv)
unusual or unforeseen circumstances may interrupt normal operations on an
exchange; (v) the facilities of an exchange or a clearing corporation may not at
all times be adequate to handle current trading volume; or (vi) one or more
exchanges could, for economic or other reasons, decide or be compelled at some
future date to discontinue the trading of contracts or options (or a particular
class or series of contracts or options), in which event the secondary market on
that exchange (or in the class or series of contacts or options), would cease to
exist, although outstanding contracts or options on the exchange that had been
issued by a clearing corporation as a result of trades on that exchange would
continue to be exercisable in accordance with their terms.
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<PAGE>
INDEX FUTURES CONTRACTS AND RELATED OPTIONS; ASSOCIATED RISKS. An index futures
contract is a contract to buy or sell units of an index at a specified future
date at a price agreed upon when the contract is made. Entering into a contract
to buy units of an index is commonly referred to as buying or purchasing a
contract or holding a long position in the index. Entering into a contract to
sell units of an index is commonly referred to as selling a contract or holding
a short position. A unit is the current value of the index. The Fund may enter
into stock index future contracts, debt index futures contracts, or other index
futures contracts (e.g., an interest rate futures contract), as specified in the
Prospectus. The Fund may also purchase and sell options on index futures
contracts, to the extent specified in the Prospectus.
There are several risks in connection with the use by the Fund of index futures
as a hedging device. One risk arises because of the imperfect correlation
between movements in the prices of the index futures and movements in the prices
of securities which are the subject of the hedge. The Fund's Portfolio Managers
will attempt to reduce this risk by selling, to the extent possible, futures on
indices the movements of which will, in its judgment, have a significant
correlation with movements in the prices of the Fund's portfolio securities
sought to be hedged.
Successful use of index futures by the Fund for hedging purposes is also subject
to a Portfolio Manager's ability to predict correctly movements in the direction
of the market. It is possible that, where the Fund has sold futures to hedge its
portfolio against a decline in the market, the index on which the futures are
written may advance and the value of securities subject to the hedge held in the
Fund's portfolio may decline. If this occurs, the Fund would lose money on the
futures and also experience a decline in the value in its portfolio securities.
However, while this could occur to a certain degree, over time the value of the
Fund's portfolio should tend to move in the same direction as the market indices
which are intended to correlate to the price movements of the portfolio
securities sought to be hedged. It is also possible that, if the Fund has hedged
against the possibility of a decline in the market adversely affecting
securities held in its portfolio and securities prices increase instead, the
Fund will lose part or all of the benefit of the increased values of those
securities that it has hedged because it will have offsetting losses in its
futures positions. In addition, in such situations, if the Fund has insufficient
cash, it may have to sell securities to meet daily variation margin
requirements.
In addition to the possibility that there may be an imperfect correlation, or no
correlation at all, between movements in the index futures and the securities of
the portfolio being hedged, the prices of index futures may not correlate
perfectly with movements in the underlying index due to certain market
distortions. First, all participants in the futures markets are subject to
margin deposit and maintenance requirements. Rather than meeting additional
margin deposit requirements, investors may close futures contracts through
offsetting transactions which would distort the normal relationship between the
index and futures markets. Second, margin requirements in the futures markets
are less onerous than margin requirements in the securities markets, and as a
result the futures markets may attract more speculators than the securities
markets. Increased participation by speculators in the futures markets may also
cause temporary price distortions. Due to the possibility of price distortions
in the futures markets and also because of the imperfect correlation between
movements in the index and movements in the prices of index futures, even a
correct forecast of general market trends by the Fund's Portfolio Managers may
still not result in a successful hedging transaction.
Options on index futures are similar to options on securities except that
options on index futures give the purchaser the right, in return for the premium
paid, to assume a position in an index futures contract (a long position if the
option is a call and a short position if the option is a put), at a specified
exercise price at any time during the period of the option. Upon exercise of the
option, the delivery of the futures position by the writer of the option to the
holder of the option will be accompanied by delivery of the accumulated balance
in the writer's futures margin account which represents the amount by which the
market price of the index futures contract, at exercise, exceeds (in the case of
a call) or is less than (in the case of a put) the exercise price of the option
on the index future. If an option is exercised on the last trading day prior to
the expiration date of the option, the settlement will be made entirely in cash
equal to the difference between the exercise price of the option and the closing
level of the index on which the future is based on the expiration date.
Purchasers of options who fail to exercise their options prior to the exercise
date suffer a loss of the premium paid.
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<PAGE>
SECURITIES LOANS
The Fund may make loans of its portfolio securities amounting to not more than
30% of its total assets. The risks in lending portfolio securities, as with
other extensions of credit, consist of possible delay in recovery of the
securities or possible loss of rights in the collateral should the borrower fail
financially. As a matter of policy, securities loans are made to broker-dealers
pursuant to agreements requiring that loans be continuously secured by
collateral in cash or short-term debt obligations at least equal at all times to
the value of the securities on loan. This collateral is deposited with the
Trust's custodian which segregates and identifies these assets on its books as
security for the loan. The borrower pays to the Fund an amount equal to any
dividends, interest or other distributions received on securities lent. The
borrower is obligated to return identical securities on termination of the loan.
The Fund retains all or a portion of the interest received on investment of the
cash collateral or receives a fee from the borrower. Although voting rights or
rights to consent with respect to the loaned securities pass to the borrower,
the Fund retains the right to call the loans at any time on reasonable notice,
and it will do so in order that the securities may be voted by the Fund if the
holders of such securities are asked to vote upon or consent to matters
materially affecting the investment. The Fund may also call such loans in order
to sell the securities involved. The Trust has adopted these policies, in part,
so that interest, dividends and other distributions received on the loaned
securities, the interest or fees paid by the borrower to the Fund for the loan,
and the investment income from the collateral will qualify under certain
investment limitations under Subchapter M of the Internal Revenue Code.
TAXES
The following discussion is a brief summary of some of the important federal
(and, where noted, state) income tax consequences affecting the Fund and its
shareholders. The discussion is very general and should not be viewed as a
substitute for careful tax planning. Prospective investors are urged to consult
their tax advisors regarding the effect an investment in the Fund that may apply
to shareholders that are not natural persons or not U.S. citizens or resident
aliens.
TAXATION OF THE FUND.
FEDERAL TAXES. The Fund (even if it is a fund in a Trust with multiple series)
is treated as a separate entity for federal income tax purposes under the
Internal Revenue Code of 1986, as amended (the "Code"). The Fund has elected (or
in the case of a new Fund, intends to elect) to be, and intends to qualify to be
treated each year as, a "regulated investment company" under Subchapter M of the
Code by meeting all applicable requirements of Subchapter M, including
requirements as to the nature of the Fund's gross income, the amount of its
distributions (as a percentage of both its overall income and any tax-exempt
income), and the composition of its portfolio assets. As a regulated investment
company, the Fund will not be subject to any federal income or excise taxes on
its net investment income and net realized capital gains that it distributes to
shareholders in accordance with the timing requirements imposed by the Code. The
Fund's foreign-source income, if any, may be subject to foreign withholding
taxes. If the Fund failed to qualify as a "regulated investment company" in any
year, it would incur a regular federal corporate income tax on all of its
taxable income, whether or not distributed, and Fund distributions would
generally be taxable as ordinary dividend income to the shareholders.
EXCISE TAX. To the extent that the Fund does not annually distribute
substantially all taxable income and realized gains, it is subject to an excise
tax. The Advisor intends to avoid this tax except when the cost of processing
the distribution is greater than the tax.
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TAX ACCOUNTING PRINCIPLES. To qualify as a "regulated investment company," the
Fund must (a) derive at least 90% of its gross income from dividends, interest,
payments with respect to securities loans, gains from the sale or other
disposition of stock securities or foreign currencies or other income (including
but not limited to gains from options, futures or forward contracts) derived
with respect to its business of investing in such stock securities or
currencies; (b) diversify its holdings so that, at the close of each quarter of
its taxable year, (i) at least 50% of the value of its total assets consists of
cash, cash items, U.S. Government securities, and other securities limited
generally with respect to any one issuer to not more than 5% of the total assets
of the Fund and not more than 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of its total assets is invested
in the securities of any issuer (other than U.S. Government securities) and (c)
must distribute at least 90% of its ordinary income (inclusive of net short-term
capital gains) earned each year.
MASSACHUSETTS TAXES. As long as it qualifies as a regulated investment company
under the Code, the Fund will not be required to pay Massachusetts income or
excise taxes.
TAXATION OF SHAREHOLDERS.
FUND DISTRIBUTIONS. Distributions from the Fund will be taxable to shareholders
as ordinary income to the extent derived from the Fund's investment income and
net short-term gains. Distributions of long-term capital gains (that is, the
excess of net gains from capital assets held for more than one year over net
losses from capital assets held for not more than one year) will be taxable to
shareholders as such, regardless of how long a shareholder has held the shares
in the Fund. In general, any distributions of net capital gains will be taxed to
shareholders who are individuals at a maximum rate of 20%.
Distributions will be taxed as described above whether received in cash or in
Fund shares. Dividends and distributions on the Fund's shares are generally
subject to federal income tax as described herein to the extent they do not
exceed the Fund's realized income and gains, even though such dividends and
distributions may economically represent a return of a particular shareholder's
investment. Such distributions are likely to occur in respect of shares
purchased at a time when the Fund's net asset value reflects gains that are
either unrealized, or realized but not distributed. Such realized gains may be
required to be distributed even when the Fund's net asset value also reflects
unrealized losses.
DISPOSITIONS OF SHARES. The sale, exchange or redemption of Fund shares may give
rise to a gain or loss. In general, any gain realized upon a taxable disposition
of shares generally will be treated as long-term capital gain if the shares have
been held for more than 12 months. Otherwise the gain on the sale, exchange or
redemption of Fund shares will be treated as short-term capital gain. In
general, any loss realized upon a taxable disposition of shares will be treated
as long-term loss if the shares have been held more than 12 months, and
otherwise as short-term loss. However, any loss realized upon a taxable
disposition of shares held for six months or less will be treated as long-term,
rather than short-term, capital loss to the extent of any long-term capital gain
distributions received by the shareholder with respect to those shares. All or a
portion of any loss realized upon a taxable disposition of shares will be
disallowed if other shares are purchased within 30 days before or after the
disposition. In such a case, the basis of the newly purchased shares will be
adjusted to reflect the disallowed loss.
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ALTERNATIVE MINIMUM TAX. Distributions derived from interest that is exempt from
regular federal income tax may subject corporate shareholders to or increase
their liability under the corporate alternative minimum tax (AMT). A portion of
such distributions may constitute a tax preference item for individual
shareholders and may subject them to or increase their liability under the AMT.
DIVIDENDS RECEIVED DEDUCTIONS. Distributions will qualify for the corporate
dividends received deduction only to the extent that dividends earned by the
fund qualify. Any such dividends are, however, includable in adjusted current
earnings for purposes of computing corporate AMT. The dividends received
deduction for eligible dividends is subject to a holding period requirement.
RETURN OF CAPITAL DISTRIBUTIONS. To the extent that a distribution is a return
of capital for federal tax purposes, it reduces the cost basis of the shares on
the record date and is similar to a partial return of the original investment
(on which a sales charge may have been paid). There is no recognition of a gain
or loss, however, unless the return of capital exceeds the cost basis in the
shares.
U.S. GOVERNMENT SECURITIES. Many states grant tax-free status to dividends paid
to shareholders of mutual funds from interest income earned by the Fund from
direct obligations of the U.S. Government. Investments in mortgage-backed
securities (including GNMA, FNMA and FHLMC Securities) and repurchase agreements
collateralized by U.S. Government securities do not qualify as direct federal
obligations in most states. Shareholders should consult with their own tax
advisors about the applicability of state and local intangible property, income
or other taxes to their Fund shares and distributions and redemption proceeds
received from the Fund.
DIVIDEND/ACCOUNTING POLICIES. The Fund's current dividend and accounting
policies will affect the amount, timing, and character of distributions to
shareholders and may, under certain circumstances, make an economic return of
capital taxable to shareholders.
CERTAIN SPECIFIC INVESTMENTS. Any investment in zero-coupon bonds, deferred
interest bonds, payment-in-kind bonds, certain stripped securities, and certain
securities purchased at a market discount will cause the Fund to recognize
income prior to the receipt of cash payments with respect to those securities.
In order to distribute this income and avoid a tax on the Fund, the Fund may be
required to liquidate portfolio securities that it might otherwise have
continued to hold, potentially resulting in additional taxable gain or loss to
the Fund.
OPTIONS AND FUTURES CONTRACTS. The Fund's transactions in options and futures
contracts will be subject to special tax rules that may affect the amount,
timing and character of Fund income and distributions to shareholders. For
example, certain positions will be marked to market (i.e., treated as if closed
out) on that day, and any gain or loss associated with the positions will be
treated as 60% long-term and 40% short-term capital gain or loss. Certain
positions held by the Fund that substantially diminish its risk of loss with
respect to other positions in its portfolio may constitute "straddles," and may
be subject to special tax rules that would cause deferral of Fund losses,
adjustments in the holding periods of Fund securities, and conversion of
short-term into long-term capital losses. Certain tax elections exist for
straddles that may alter the effects of these rules. The Fund intends to limit
its activities in options and futures contracts to the extent necessary to meet
the requirements of Subchapter M of the Code.
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FOREIGN INVESTMENTS. Special tax considerations apply with respect to foreign
investments by the Fund. Foreign exchange gains and losses realized by the Fund
will generally be treated as ordinary income and loss. Use of non-U.S.
currencies for non-hedging purposes and investment by the Fund in certain
"passive foreign investment companies" may be limited in order to avoid a tax on
the Fund. The Fund may elect to mark to market any investments in "passive
foreign investment companies" on the last day of each taxable year. This
election may cause the Fund to recognize income prior to the receipt of cash
payments with respect to those investments; in order to distribute this income
and avoid a tax on the Fund, the Fund may be required to liquidate portfolio
securities that it might otherwise have continued to hold.
FOREIGN INCOME TAXES. Investment income received by the Fund from foreign
securities may be subject to foreign income taxes withheld at the source; the
Fund does not expect to be able to pass through to shareholders foreign tax
credits with respect to such foreign taxes. The United States has entered into
tax treaties with many foreign countries that may entitle the Fund to a reduced
rate of tax or an exemption from tax on such income; the Fund intends to qualify
for treaty reduced rates where available. It is not possible, however, to
determine the Fund's effective rate of foreign tax in advance, since the amount
of the Fund's assets to be invested within various countries is not known.
U.S. TAXATION OF NON-U.S. PERSONS. Dividends and certain other payments to
persons who are not citizens or residents of the United States or U.S. entities
("Non-U.S. Persons") are generally subject to U.S. tax withholding at the rate
of 30%. The Fund intends to withhold U.S. federal income tax at the rate of 30%
(or any lower rate permitted under an applicable treaty) on taxable dividends
and other payments to Non-U.S. Persons that are subject to such withholding. Any
amounts overwithheld may be recovered by such persons by filing a claim for
refund with the U.S. Internal Revenue Service within the time period appropriate
to such claims.
BACKUP WITHHOLDING. Certain distributions and redemptions may be subject to a
31% backup withholding unless a taxpayer identification number and certification
that the shareholder is not subject to the withholding is provided to the Fund.
This number and form may be provided by either a Form W-9 or the accompanying
application. In certain instances, LFS may be notified by the Internal Revenue
Service that a shareholder is subject to backup withholding.
MANAGEMENT OF THE FUND
The Advisor is the investment advisor to the Fund. The Advisor is a indirect
subsidiary of Liberty Financial, which in turn is a direct majority-owned
subsidiary of Liberty Corporate Holdings, Inc., which in turn is a direct
majority-owned subsidiary of LFC Management Corporation, which in turn is a
direct subsidiary of Liberty Mutual Equity Corporation, which in turn is a
direct wholly-owned subsidiary of Liberty Mutual Insurance Company (Liberty
Mutual). Liberty Mutual is an underwriter of workers' compensation insurance and
a property and casualty insurer in the United States Liberty Financial's address
is 600 Atlantic Avenue, Boston, MA 02210. Liberty Mutual's address is 175
Berkeley Street, Boston, MA 02117.
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust, together with information as to their
principal addresses and business occupations during the last five years, are
shown below.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Position
Name and Address Age with the Trust Principal Occupations During Past Five Years
- ---------------- --- -------------- --------------------------------------------
Robert J. Birnbaum 71 Trustee Consultant (formerly Special Counsel, Dechert Price &
313 Bedford Road Rhoads from September, 1988 to December, 1993, President,
Ridgewood, NJ 07450 New York Stock Exchange from May, 1985 to June, 1988,
President, American Stock Exchange, Inc. from 1977 to
May, 1985).
John V. Carberry* 52 Chairman of the Senior Vice President of Liberty Financial Companies,
Federal Reserve Plaza Board and Trustee Inc. (formerly Managing Director, Salomon Brothers
600 Atlantic Avenue (investment banking) from January, 1988 to January, 1998).
Boston, MA 02110
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Position
Name and Address Age with the Trust Principal Occupation During Past Five Years
- ---------------- --- -------------- -------------------------------------------
James E. Grinnell 70 Trustee Private Investor since November, 1988.
22 Harbor Avenue
Marblehead, MA 01945
Richard W. Lowry 63 Trustee Private Investor since August, 1987.
10701 Charleston Drive
Vero Beach, FL 32963
William E. Mayer 59 Trustee Partner, Development Capital, LLC (venture capital)
500 Park Avenue, 5th Floor (formerly Dean, College of Business and Management,
New York, NY 10022 University of Maryland from October, 1992 to November,
1996); Director, John Mansville; Director, Lee
Enterprises.
John J. Neuhauser 56 Trustee Academic Vice President and Dean of Faculties since
84 College Road August, 1999, Boston College (formerly Dean, Boston
Chestnut Hill, MA 02467-3838 College School of Management from September, 1977 to
September, 1999).
Christopher S. Carabell 36 Vice President Senior Vice President-Product Development and Marketing
Federal Reserve Plaza of the Advisor since January, 1999 (formerly Vice
600 Atlantic Avenue President-Investments, March, 1996 to January, 1999);
Boston, MA 02210 Associate Director, U.S. Equity Research, Rogers Casey &
Associates, January, 1995 to March, 1996; Director of
Investments, Boy Scouts of America, Inc., June, 1990 to
January, 1995.
J. Kevin Connaughton 35 Controller and Controller and Chief Accounting Officer of the Liberty
One Financial Center Chief Accounting Funds Group-Boston (Liberty Funds) since February, 1998;
Boston, MA 02111 Officer Vice President of Colonial Management Associates, Inc.
(Administrator) since February, 1998 (formerlySenior Tax Manager,
Coopers & Lybrand, LLP from April, 1996 to January, 1998;
Vice President, 440 Financial Group/First Data Investor Services
Group from March, 1994 to April,1996).
Mark T. Haley 35 Vice President Vice President-Investments of the Advisor since January,
Federal Reserve Plaza 1999 (formerly Director of Investment Analysis from
600 Atlantic Avenue December, 1996 to December, 1998); Investment Analyst
Boston, MA 02210 from January, 1994 to November, 1996).
Timothy J. Jacoby 47 Treasurer and Treasurer and Chief Financial Officer of the Liberty
One Financial Center Chief Financial Funds since October, 1996 (formerly Controller and Chief
Boston, MA 02111 Officer Accounting Officer from October, 1997 to February, 1998);
Senior Vice President of the Administrator since September, 1996;
Vice President,Chief Financial Officer and Treasurer since
December, 1998 of Liberty Funds Group LLC (LFG) (formerly
Vice President, Chief Financial Officer and Treasurer from
July, 1997 to December, 1998 of The Colonial Group
(TCG)); Senior Vice President of SR&F since August, 1998
(formerly Senior Vice President, Fidelity Accounting
and Custody Services from September, 1993 to September, 1996).
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Position
Name and Address Age with the Trust Principal Occupation During Past Five Years
- ---------------- --- -------------- -------------------------------------------
<S> <C> <C> <C>
Nancy L. Conlin 46 Secretary Secretary of the Liberty Funds since April, 1998
One Financial Center (formerly Assistant Secretary from July, 1994 to April,
Boston, MA 02111 1998); Director, Senior Vice President, General Counsel,
Clerk and Secretary of the Administrator since April, 1998 (formerly
Vice President, Counsel, Assistant Secretary and Assistant Clerk from
July, 1994 to April, 1998); Vice President, General Counsel and
Secretary of LFG since December, 1998 (formerly Vice President, General
Counsel and Clerk of TCG from April, 1998 to December, 1998 (formerly
Assistant Clerk from July, 1994 to April, 1998).
Joseph R. Palombo 46 Vice President Vice President of the Liberty Funds since April, 1999;
One Financial Center Executive Vice President and Director of the
Boston, MA 02111 Administrator since April, 1999; Executive Vice President
and Chief Administrative Officer of LFG since April, 1999
(formerly Chief Operating Officer, Putnam Mutual Funds
from 1994 to 1998).
William R. Parmentier, Jr. 47 President, Chief President and Chief Executive Officer (since June, 1998)
Federal Reserve Plaza Executive Office and Chief Investment Officer (since May, 1995), Senior
600 Atlantic Avenue and Chief Vice President (from May, 1995 to June, 1998) of the
Boston, MA 02210 Investment Advisor; Consultant (from October, 1994 to May, 1995);
Officer President, GQ Asset Management, Inc. (from July, 1993 to
October, 1994).
</TABLE>
22
<PAGE>
23
<PAGE>
As indicated in the above table, certain Trustees and officers of the Trust also
hold positions with the Advisor, Liberty Financial, the Administrator, Stein Roe
and/or certain of their affiliates. Certain of the Trustees and officers of the
Trust hold comparable positions with certain other investment companies.
* A Trustee who is an "interested person" (as defined in the Act) of the
Trust or the Advisor.
The business address of the officers of the Trust is 600 Atlantic Avenue,
Boston, MA 02110.
The Boards of Trustees or Directors of the Trust, Liberty All-Star Equity Fund
and Liberty All-Star Growth Fund, Inc. are comprised of the same persons and
expect to hold their regular meetings concurrently. Each Trustee or Director
will receive an aggregate annual retainer of $10,000 and attendance fees of
$3,000 for each joint meeting attended, with a minimum total of $25,000 if less
than five meetings are held and all meetings are attended, plus out-of-pocket
expenses relating to attendance at meetings. One third of the aggregate of the
Trustees and Directors fees and expenses will be allocated among the Trust,
Liberty All-Star Equity Fund and Liberty All-Star Growth Fund, Inc. on a per
fund basis, and the remaining two-thirds will be allocated based on the relative
net assets of the three funds.
The Administrator and/or its affiliate, Colonial Advisory Services, Inc., has
rendered investment advisory services to investment company, institutional and
other clients since 1931. The Administrator currently serves as investment
advisor and/or administrator for 39 open-end and 5 closed-end management
investment company portfolios (collectively, Colonial funds). Trustees and
officers of the Trust, who are also officers of the Advisor, the Administrator
or its affiliates, will benefit from the advisory fees, sales commissions and
agency fees paid or allowed by the Trust. More than 30,000 financial advisors
have recommended Colonial funds to over 800,000 clients worldwide, representing
more than $17 billion in assets.
The Agreement and Declaration of Trust (Declaration) of the Trust provides that
the Trust will indemnify its Trustees and officers against liabilities and
expenses incurred in connection with litigation in which they may be involved
because of their offices with the Trust but that such indemnification will not
relieve any officer or Trustee of any liability to the Trust or its shareholders
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of his or her duties. The Trust, at its expense, provides liability
insurance for the benefit of its Trustees and officers.
Under an Administration Agreement with the Fund, the Administrator has
contracted to perform the following administrative services:
(a) providing office space, equipment and clerical personnel;
(b) arranging, if desired by the Trust, for its Directors,
officers and employees to serve as Trustees, officers or
agents of the Trust;
(c) preparing and, if applicable, filing all documents required
for compliance by the Fund with applicable laws and
regulations;
24
<PAGE>
(d) preparation of agendas and supporting documents for and
minutes of meetings of Trustees, committees of Trustees and
shareholders;
(e) coordinating and overseeing the activities of the Fund's other
third-party service providers; and
(f) maintaining certain books and records of the Fund.
The Advisor is paid a monthly fee at the annual rate of average daily net
assets. See "Investment Management and Other Services - General."
PORTFOLIO TRANSACTIONS AND BROKERAGE
Each of the Fund's Portfolio Managers has discretion to select brokers and
dealers to execute portfolio transactions initiated by the Portfolio Manager for
the portion of the Fund's portfolio assets allocated to it, and to select the
markets in which such transactions are to be executed. The portfolio management
agreements with the Fund provide, in substance, that in executing portfolio
transactions and selecting brokers or dealers, the primary responsibility of the
Portfolio Manager is to seek to obtain best net price and execution for the
Fund.
The Portfolio Managers are authorized to cause the Fund to pay a commission to a
broker or dealer who provides research products and services to the Portfolio
Manager for executing a portfolio transaction which is in excess of the amount
of commission another broker or dealer would have charged for effecting that
transaction. The Portfolio Managers must determine in good faith, however, that
such commission was reasonable in relation to the value of the research products
and services provided to them, viewed in terms of that particular transaction or
in terms of all the client accounts (including the Fund) over which the
Portfolio Manager exercises investment discretion. It is possible that certain
of the services received by a Portfolio Manager attributable to a particular
transaction will primarily benefit one or more other accounts for which
investment discretion is exercised by the Portfolio Manager.
In addition, the portfolio management agreements with the Fund's Portfolio
Managers provide that the Advisor has the right to request that transactions
giving rise to brokerage commissions, in amounts to be agreed upon from time to
time between the Advisor and the Portfolio Manager, be executed by brokers and
dealers (to be agreed upon from time to time between the Advisor and the
Portfolio Manager) which provide or make available research products and
services to the Advisor. The commissions paid on such transactions may exceed
the amount of commission another broker would have charged for effecting that
transaction. Research products and services made available to the Advisor
through brokers and dealers executing transactions for the Fund and other
clients of the Advisor include performance and other qualitative and
quantitative data relating to investment managers in general and the Portfolio
Managers in particular; data relating to the historic performance of categories
of securities associated with particular investment styles; mutual fund
portfolio and performance data; data relating to portfolio manager changes by
pension plan fiduciaries; and related computer hardware and software, all of
which are used by the Advisor in connection with its selection and monitoring of
Portfolio Managers, the assembly of an appropriate mix of investment styles, and
the determination of overall portfolio strategies. These research products and
services may also be used by the Advisor in connection with its management of
other multi-managed clients of the Advisor. In instances where the Advisor
receives from or through brokers and dealers products or services which are used
both for research purposes and for administrative or other non-research
purposes, the Advisor makes a good faith effort to determine the relative
proportions of such products or services which may be considered as investment
research, based primarily on anticipated usage, and pays for the costs
attributable to the non-research usage in cash.
The Advisor from time to time reaches understandings with each of the Fund's
Portfolio Managers as to the amount of the portfolio transactions for the Fund
and other multi-managed clients of the Advisor initiated by such Portfolio
Manager that are to be directed to brokers and dealers that provide or make
available research products and services to the Advisor and the commissions to
be charged to the Fund in connection therewith. These amounts may differ among
the Portfolio Managers based on the nature of the market for the types of
securities managed by them and other factors.
25
<PAGE>
Although the Fund does not permit a Portfolio Manager to act or have a
broker-dealer affiliate act as broker for Fund portfolio transactions initiated
by it, the Portfolio Managers are permitted to place Fund portfolio transactions
initiated by them with another Portfolio Manager or its broker-dealer affiliate
for execution on an agency basis, provided the commission does not exceed the
usual and customary broker's commission being paid to other brokers for
comparable transactions and is otherwise in accordance with the Fund's
procedures adopted pursuant to Rule 17e-1 under the Act.
PRINCIPAL UNDERWRITER
LFD, located at One Financial Center, Boston, Massachusetts 02111, is the
principal underwriter of the Fund's shares. LFD has no obligation to buy the
Fund's shares, and purchases the Fund's shares only upon receipt of orders from
authorized financial service firms (FSFs) or investors.
INVESTOR SERVICING AND TRANSFER AGENT
LFS is the Fund's investor servicing agent (transfer, plan and dividend
disbursing agent), for which it receives fees which are paid monthly by the
Fund. The fee paid to LFS is based on the average daily net assets of the Fund
plus reimbursement for certain out-of-pocket expenses. See "Other Charges and
Expenses" in this SAI for information on fees received by LFS. The agreement
continues indefinitely but may be terminated by 90 days' notice by the Fund to
LFS or generally by 6 months' notice by LFS to the Fund. The agreement limits
the liability of LFS to the Fund for loss or damage incurred by the Fund to
situations involving a failure of LFS to use reasonable care or to act in good
faith in performing its duties under the agreement. It also provides that the
Fund will indemnify LFS against, among other things, loss or damage incurred by
LFS on account of any claim, demand, action or suit made on or against LFS not
resulting from LFS's bad faith or negligence and arising out of, or in
connection with, its duties under the agreement.
DETERMINATION OF NET ASSET VALUE
The Fund determines net asset value (NAV) per share for each Class as of the
close (normally 4:00 p.m. Eastern time) of the New York Stock Exchange
(Exchange) each day the Exchange is open. Currently, the Exchange is closed
Saturdays, Sundays and the following holidays: New Year's Day, Martin Luther
King Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving and Christmas. Debt securities generally are valued by a
pricing service which determines valuations based upon market transactions for
normal, institutional-size trading units of similar securities. However, in
circumstances where such prices are not available or where the Administrator
deems it appropriate to do so, an over-the-counter or exchange bid quotation is
used. Securities listed on an exchange or on NASDAQ are valued at the last sale
price. Listed securities for which there were no sales during the day and
unlisted securities are valued at the last quoted bid price. Options are valued
at the last sale price or in the absence of a sale, the mean between the last
quoted bid and offering prices. Short-term obligations with a maturity of 60
days or less are valued at amortized cost pursuant to procedures adopted by the
Trustees. The values of foreign securities quoted in foreign currencies are
translated into U.S. dollars at the exchange rate for that day. Portfolio
positions for which there are no such valuations and other assets are valued at
fair value as determined by the Administrator in good faith under the direction
of the Trust's Trustees.
Generally, trading in certain securities (such as foreign securities) is
substantially completed each day at various times prior to the close of the
Exchange. Trading on certain foreign securities markets may not take place on
all business days in New York, and trading on some foreign securities markets
takes place on days which are not business days in New York and on which the
Fund's NAV is not calculated. The values of these securities used in determining
the NAV are computed as of such times. Also, because of the amount of time
required to collect and process trading information as to large numbers of
securities issues, the values of certain securities (such as convertible bonds
and U.S. Government securities) are determined based on market quotations
collected earlier in the day at the latest practicable time prior to the close
of the Exchange. Occasionally, events affecting the value of such securities may
occur between such times and the close of the Exchange which will not be
reflected in the computation of the Fund's NAV. If events materially affecting
the value of such securities occur during such period, then these securities
will be valued at their fair value following procedures approved by the Trust's
Trustees.
HOW TO BUY SHARES
The Prospectuses contain a general description of how investors may buy shares
of the Fund and tables of charges. This SAI contains additional information
which may be of interest to investors.
The Fund will accept unconditional orders for shares to be executed at the
public offering price based on the NAV per share next determined after the order
is placed in good order. The public offering price is the NAV plus the
applicable sales charge, if any.
26
<PAGE>
In the case of orders for purchase of shares placed through FSFs, the public
offering price will be determined on the day the order is placed in good order,
but only if the FSF receives the order prior to the time at which shares are
valued and transmits it to the Fund before the Fund processes that day's
transactions. If the FSF fails to transmit before the Fund processes that day's
transactions, the customer's entitlement to that day's closing price must be
settled between the customer and the FSF. If the FSF receives the order after
the time at which the Fund values its shares, the price will be based on the NAV
determined as of the close of the Exchange on the next day it is open. If funds
for the purchase of shares are sent directly to LFS, they will be invested at
the public offering price next determined after receipt in good order. Payment
for shares of the Fund must be in U.S. dollars; if made by check, the check must
be drawn on a U.S. bank.
The Fund receives the entire NAV of shares sold. For shares subject to an
initial sales charge, LFD's commission is the sales charge shown in the Fund's
Prospectus less any applicable FSF discount. The FSF discount is the same for
all FSFs, except that LFD retains the entire sales charge on any sales made to a
shareholder who does not specify a FSF on the Investment Account Application
(Application). LFD generally retains 100% of any asset-based sales charge
(distribution fee) or contingent deferred sales charge. Such charges generally
reimburse LFD for any up-front and/or ongoing commissions paid to FSFs.
Checks presented for the purchase of shares of the Fund which are returned by
the purchaser's bank will subject such purchaser to a $15 service fee for each
check returned. Checks must be drawn on a U.S. bank and must be payable in U.S.
dollars.
LFS acts as the shareholder's agent whenever it receives instructions to carry
out a transaction on the shareholder's account. Upon receipt of instructions
that shares are to be purchased for a shareholder's account, the designated FSF
will receive the applicable sales commission. Shareholders may change FSFs at
any time by written notice to LFS, provided the new FSF has a sales agreement
with LFD.
Shares credited to an account are transferable upon written instructions in good
order to LFS and may be redeemed as described under "How to Sell Shares" in the
Prospectus. Certificates will not be issued for Class A shares unless
specifically requested and no certificates will be issued for Class B, C or Z
shares. Shareholders may send any certificates which have been previously
acquired to LFS for deposit to their account.
LFD may, at its expense, provide special sale incentives (such as cash payments
in addition to the commissions specified in the Fund's SAI) to FSFs that agree
to promote the sale of shares of the Fund or other funds that LFD distributes.
At its discretion, LFD may offer special sales incentives only to selected FSFs
or FSFs who have previously sold or expect to sell significant amounts of the
Fund's shares.
SPECIAL PURCHASE PROGRAMS/INVESTOR SERVICES
The following special purchase programs/investor services may be changed or
eliminated at any time.
AUTOMATIC INVESTMENT PLAN (INVESTMENT PLAN). As a convenience to investors,
shares of the Fund may be purchased through the Investment Plan. Preauthorized
monthly bank drafts or electronic funds transfer for a fixed amount of at least
$50 are used to purchase the Fund's shares at the public offering price next
determined after LFD receives the proceeds from the draft (normally the 5th or
the 20th of each month, or the next business day thereafter). If your Fundamatic
purchase is by electronic funds transfer, you may request the Fundamatic
purchase for any day. Further information and application forms are available
from FSFs or from LFD.
AUTOMATED DOLLAR COST AVERAGING (CLASSES A, B AND C). The Automated Dollar Cost
Averaging program allows you to exchange $100 or more on a monthly basis from
any mutual fund advised by the Administrator, Crabbe Huson, Newport and Stein
Roe in which you have a current balance of at least $5,000 into the same class
of shares of up to four other funds. Complete the Automated Dollar Cost
Averaging section of the Application. The designated amount will be exchanged on
the third Tuesday of each month. There is no charge for exchanges made pursuant
to the Automated Dollar Cost Averaging program. Exchanges will continue so long
as your fund balance is sufficient to complete the transfers. Your normal rights
and privileges as a shareholder remain in full force and effect. Thus you can
buy any fund, exchange between the same Class of shares of funds by written
instruction or by telephone exchange if you have so elected and withdraw amounts
from any fund, subject to the imposition of any applicable CDSC.
27
<PAGE>
Any additional payments or exchanges into your Fund will extend the time of the
Automated Dollar Cost Averaging program.
An exchange is generally a capital sale transaction for federal income tax
purposes.
You may terminate your program, change the amount of the exchange (subject to
the $100 minimum), or change your selection of funds, by telephone or in
writing; if in writing by mailing your instructions to Liberty Funds Services,
Inc. P.O. Box 1722, Boston, MA 02105-1722.
You should consult your FSF or investment advisor to determine whether or not
the Automated Dollar Cost Averaging program is appropriate for you.
LFD offers several plans by which an investor may obtain reduced initial or
contingent deferred sales charges . These plans may be altered or discontinued
at any time. See "Programs For Reducing or Eliminating Sales Charges" for more
information.
TAX-SHELTERED RETIREMENT PLANS. LFD offers prototype tax-qualified plans,
including Individual Retirement Accounts (IRAs), and Pension and Profit-Sharing
Plans for individuals, corporations, employees and the self-employed. The
minimum initial Retirement Plan investment is $25. Investors Bank & Trust
Company is the Trustee of LFD prototype plans and charges a $15 annual fee.
Detailed information concerning these Retirement Plans and copies of the
Retirement Plans are available from LFD.
Participants in non-LFD prototype Retirement Plans (other than IRAs) also are
charged a $15 annual fee unless the plan maintains an omnibus account with LFS.
Participants in LFD prototype Plans (other than IRAs) who liquidate the total
value of their account will also be charged a $15 close-out processing fee
payable to LFS. The fee is in addition to any applicable CDSC. The fee will not
apply if the participant uses the proceeds to open a LFD IRA Rollover account in
any fund, or if the Plan maintains an omnibus account.
Consultation with a competent financial and tax advisor regarding these Plans
and consideration of the suitability of fund shares as an investment under the
Employee Retirement Income Security Act of 1974 or otherwise is recommended.
TELEPHONE ADDRESS CHANGE SERVICES. By calling LFS, shareholders or their FSF of
record may change an address on a recorded telephone line. Confirmations of
address change will be sent to both the old and the new addresses. Telephone
redemption privileges are suspended for 30 days after an address change is
effected.
CASH CONNECTION. Dividends and any other distributions, including Systematic
Withdrawal Plan (SWP) payments, may be automatically deposited to a
shareholder's bank account via electronic funds transfer. Shareholders wishing
to avail themselves of this electronic transfer procedure should complete the
appropriate sections of the Application.
AUTOMATIC DIVIDEND DIVERSIFICATION. The automatic dividend diversification
reinvestment program (ADD) generally allows shareholders to have all
distributions from the Fund automatically invested in the same class of shares
of another fund distributed by LFD. An ADD account must be in the same name as
the shareholder's existing open account with the particular fund. Call LFS for
more information at 1-800-422-3737.
PROGRAMS FOR REDUCING OR ELIMINATING SALES CHARGES
RIGHT OF ACCUMULATION AND STATEMENT OF INTENT (Available only on the Class A
shares). Reduced sales charges on Class A shares can be effected by combining a
current purchase with prior purchases of Class A, B, C, T and Z shares of the
funds distributed by LFD. The applicable sales charge is based on the combined
total of:
1. the current purchase; and
2. the value at the public offering price at the close of business on the
previous day of all Liberty Funds' Class A shares held by the
shareholder (except shares of any money market fund, unless such shares
were acquired by exchange from Class A shares of another fund other
than a money market fund and Class B, C and Z shares).
28
<PAGE>
LFD must be promptly notified of each purchase which entitles a shareholder to a
reduced sales charge. Such reduced sales charge will be applied upon
confirmation of the shareholder's holdings by LFS. The Fund may terminate or
amend this Right of Accumulation.
Any person may qualify for reduced sales charges on purchases of Class A shares
made within a thirteen-month period pursuant to a Statement of Intent
(Statement). A shareholder may include, as an accumulation credit toward the
completion of such Statement, the value of all Class A, B, C and Z shares held
by the shareholder on the date of the Statement in funds (except shares of any
money market fund, unless such shares were acquired by exchange from Class A
shares of another non-money market fund). The value is determined at the public
offering price on the date of the Statement. Purchases made through reinvestment
of distributions do not count toward satisfaction of the Statement.
During the term of a Statement, LFS will hold shares in escrow to secure payment
of the higher sales charge applicable to Class A shares actually purchased.
Dividends and capital gains will be paid on all escrowed shares and these shares
will be released when the amount indicated has been purchased. A Statement does
not obligate the investor to buy or the Fund to sell the amount of the
Statement.
If a shareholder exceeds the amount of the Statement and reaches an amount which
would qualify for a further quantity discount, a retroactive price adjustment
will be made at the time of expiration of the Statement. The resulting
difference in offering price will purchase additional shares for the
shareholder's account at the applicable offering price. As a part of this
adjustment, the FSF shall return to LFD the excess commission previously paid
during the thirteen-month period.
If the amount of the Statement is not purchased, the shareholder shall remit to
LFD an amount equal to the difference between the sales charge paid and the
sales charge that should have been paid. If the shareholder fails within twenty
days after a written request to pay such difference in sales charge, LFS will
redeem that number of escrowed Class A shares to equal such difference. The
additional amount of FSF discount from the applicable offering price shall be
remitted to the shareholder's FSF of record.
Additional information about and the terms of Statements of Intent are available
from your FSF, or from LFS at 1-800-345-6611.
REINSTATEMENT PRIVILEGE. An investor who has redeemed Class A, B or C shares
may, upon request, reinstate within one year a portion or all of the proceeds of
such sale in shares of the same Class of the Fund at the NAV next determined
after LFS receives a written reinstatement request and payment. Any CDSC paid at
the time of the redemption will be credited to the shareholder upon
reinstatement. The period between the redemption and the reinstatement will not
be counted in aging the reinstated shares for purposes of calculating any CDSC
or conversion date. Investors who desire to exercise this privilege should
contact their FSF or LFS. Shareholders may exercise this Privilege an unlimited
number of times. Exercise of this privilege does not alter the Federal income
tax treatment of any capital gains realized on the prior sale of the Fund
shares, but to the extent any such shares were sold at a loss, some or all of
the loss may be disallowed for tax purposes. Consult your tax advisor.
PRIVILEGES OF EMPLOYEES OR FINANCIAL SERVICE FIRMS. Class A shares of the Fund
may be sold at NAV to the following individuals whether currently employed or
retired: Trustees of the Trust; directors, officers and employees of the Advisor
and the Administrator, LFD and other companies affiliated with the Advisor and
the Administrator; registered representatives; employees of FSFs (including
their affiliates) and the Portfolio Managers and such Portfolio Managers'
immediate families that are parties to dealer agreements or other sales
arrangements with LFD; and such persons' families and their beneficial accounts.
SPONSORED ARRANGEMENTS. Class A shares of the Fund may be purchased at reduced
or no sales charge pursuant to sponsored arrangements, which include programs
under which an organization makes recommendations to, or permits group
solicitation of, its employees, members or participants in connection with the
purchase of shares of the fund on an individual basis. The amount of the sales
charge reduction will reflect the anticipated reduction in sales expense
associated with sponsored arrangements. The reduction in sales expense, and
therefore the reduction in sales charge, will vary depending on factors such as
the size and stability of the organization's group, the term of the
organization's existence and certain
29
<PAGE>
characteristics of the members of its group. The Fund reserves the right to
revise the terms of or to suspend or discontinue sales pursuant to sponsored
plans at any time.
Class A shares of the Fund may also be purchased at reduced or no sales charge
by clients of dealers, brokers or registered investment advisors that have
entered into agreements with LFD pursuant to which the Fund is included as an
investment option in programs involving fee-based compensation arrangements, and
by participants in certain retirement plans.
WAIVER OF CONTINGENT DEFERRED SALES CHARGES (CDSCS) (Classes A, B, and C) CDSCs
may be waived on redemptions in the following situations with the proper
documentation:
1. Death. CDSCs may be waived on redemptions within one year following the
death of (i) the sole shareholder on an individual account, (ii) a
joint tenant where the surviving joint tenant is the deceased's spouse,
or (iii) the beneficiary of a Uniform Gifts to Minors Act (UGMA),
Uniform Transfers to Minors Act (UTMA) or other custodial account. If,
upon the occurrence of one of the foregoing, the account is transferred
to an account registered in the name of the deceased's estate, the CDSC
will be waived on any redemption from the estate account occurring
within one year after the death. If the Class B shares are not redeemed
within one year of the death, they will remain subject to the
applicable CDSC, when redeemed from the transferee's account. If the
account is transferred to a new registration and then a redemption is
requested, the applicable CDSC will be charged.
2. Systematic Withdrawal Plan (SWP). CDSCs may be waived on redemptions
occurring pursuant to a monthly, quarterly or semi-annual SWP
established with LFS, to the extent the redemptions do not exceed, on
an annual basis, 12% of the account's value, so long as at the time of
the first SWP redemption the account had had distributions reinvested
for a period at least equal to the period of the SWP (e.g., if it is a
quarterly SWP, distributions must have been reinvested at least for the
three month period prior to the first SWP redemption); otherwise CDSCs
will be charged on SWP redemptions until this requirement is met; this
requirement does not apply if the SWP is set up at the time the account
is established, and distributions are being reinvested. See below under
How to Sell Shares - Systematic Withdrawal Plan."
3. Disability. CDSCs may be waived on redemptions occurring within one
year after the sole shareholder on an individual account or a joint
tenant on a spousal joint tenant account becomes disabled (as defined
in Section 72(m)(7) of the Internal Revenue Code). To be eligible for
such waiver, (i) the disability must arise AFTER the purchase of shares
AND (ii) the disabled shareholder must have been under age 65 at the
time of the initial determination of disability. If the account is
transferred to a new registration and then a redemption is requested,
the applicable CDSC will be charged.
4. Death of a trustee. CDSCs may be waived on redemptions occurring upon
dissolution of a revocable living or grantor trust following the death
of the sole trustee where (i) the grantor of the trust is the sole
trustee and the sole life beneficiary, (ii) death occurs following the
purchase AND (iii) the trust document provides for dissolution of the
trust upon the trustee's death. If the account is transferred to a new
registration (including that of a successor trustee), the applicable
CDSC will be charged upon any subsequent redemption.
5. Returns of excess contributions. CDSCs may be waived on redemptions
required to return excess contributions made to retirement plans or
individual retirement accounts, so long as the FSF agrees to return the
applicable portion of any commission paid by Colonial.
6. Qualified Retirement Plans. CDSCs may be waived on redemptions required
to make distributions from qualified retirement plans following normal
retirement (as stated in the Plan document). CDSCs also will be waived
on SWP redemptions made to make required minimum distributions from
qualified retirement plans that have invested in Colonial funds for at
least two years.
The CDSC also may be waived where the FSF agrees to return all or an agreed upon
portion of the commission earned on the sale of the shares being redeemed.
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HOW TO SELL SHARES
Shares may also be sold on any day the Exchange is open, either directly to the
Fund or through the shareholder's FSF. Sale proceeds generally are sent within
seven days (usually on the next business day after your request is received in
good form). However, for shares recently purchased by check, the Fund may delay
selling your shares for up to 15 days in order to protect the Fund against
financial losses and dilution in net asset value caused by dishonored purchase
payment checks.
To sell shares directly to the Fund, send a signed letter of instruction or
stock power form to LFS, along with any certificates for shares to be sold. The
sale price is the net asset value (less any applicable contingent deferred sales
charge) next calculated after the Fund receives the request in proper form.
Signatures must be guaranteed by a bank, a member firm of a national stock
exchange or another eligible guarantor institution. Stock power forms are
available from FSFs, LFS, and many banks. Additional documentation is required
for sales by corporations, agents, fiduciaries, surviving joint owners and
individual retirement account holders. Call LFS for more information
1-800-345-6611.
FSFs must receive requests before the time at which the Fund's shares are valued
to receive that day's price, are responsible for furnishing all necessary
documentation to LFS and may charge for this service.
SYSTEMATIC WITHDRAWAL PLAN
If a shareholder's account balance is at least $5,000, the shareholder may
establish a SWP. A specified dollar amount or percentage of the then current net
asset value of the shareholder's investment in the Fund will be paid monthly,
quarterly or semi-annually to a designated payee. The amount or percentage the
shareholder specifies generally may not, on an annualized basis, exceed 12% of
the value, as of the time the shareholder makes the election, of the
shareholder's investment. Withdrawals from Class B and Class C shares of the
Fund under a SWP will be treated as redemptions of shares purchased through the
reinvestment of Fund distributions, or, to the extent such shares in the
shareholder's account are insufficient to cover Plan payments, as redemptions
from the earliest purchased shares of the Fund in the shareholder's account. No
CDSCs apply to a redemption pursuant to a SWP of 12% or less, even if, after
giving effect to the redemption, the shareholder's account balance is less than
the shareholder's base amount. Qualified plan participants who are required by
Internal Revenue Service regulation to withdraw more than 12%, on an annual
basis, of the value of their Class B and Class C share account may do so but
will be subject to a CDSC ranging from 1% to 5% of the amount withdrawn in
excess of 12% annually. If a shareholder wishes to participate in a SWP, the
shareholder must elect to have all of the shareholder's income dividends and
other Fund distributions payable in shares of the Fund rather than in cash.
A shareholder or a shareholder's FSF of record may establish a SWP account by
telephone on a recorded line. However, SWP checks will be payable only to the
shareholder and sent to the address of record. SWPs from retirement accounts
cannot be established by telephone.
A shareholder may not establish a SWP if the shareholder holds shares in
certificate form. Purchasing additional shares (other than through dividend and
distribution reinvestment) while receiving SWP payments is ordinarily
disadvantageous because of duplicative sales charges. For this reason, a
shareholder may not maintain a plan for the accumulation of shares of the fund
(other than through the reinvestment of dividends) and a SWP at the same time.
SWP payments are made through share redemptions, which may result in a gain or
loss for tax purposes, may involve the use of principal and may eventually use
up all of the shares in a shareholder's account.
The Fund may terminate a shareholder's SWP if the shareholder's account balance
falls below $5,000 due to any transfer or liquidation of shares other than
pursuant to the SWP. SWP payments will be terminated on receiving satisfactory
evidence of the death or incapacity of a shareholder. Until this evidence is
received, LFS will not be liable for any payment made in accordance with the
provisions of a SWP.
The cost of administering SWPs for the benefit of shareholders who participate
in them is borne by the Fund as an expense of all shareholders.
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Shareholders whose positions are held in "street name" by certain FSFs may not
be able to participate in a SWP. If a shareholder's Fund shares are held in
"street name," the shareholder should consult his or her FSF to determine
whether he or she may participate in a SWP.
TELEPHONE REDEMPTIONS. All Fund shareholders and/or their FSFs are automatically
eligible to redeem up to $100,000 of the Fund's shares by calling 1-800-422-3737
toll-free any business day between 9:00 a.m. and the close of trading of the
Exchange (normally 4:00 p.m. Eastern time). Transactions received after 4:00
p.m. Eastern time will receive the next business day's closing price. Telephone
redemptions are limited to a total of $100,000 in a 30-day period. Redemptions
that exceed $100,000 may be accomplished by placing a wire order trade through a
broker or furnishing a signature guaranteed request. Telephone redemption
privileges for larger amounts may be elected on the Application. LFS will employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine. Telephone redemptions are not available on accounts with an address
change in the preceding 30 days and proceeds and confirmations will only be
mailed or sent to the address of record unless the redemption proceeds are being
sent to a pre-designated bank account. Shareholders and/or their FSFs will be
required to provide their name, address and account number. FSFs will also be
required to provide their broker number. All telephone transactions are
recorded. A loss to a shareholder may result from an unauthorized transaction
reasonably believed to have been authorized. No shareholder is obligated to
execute the telephone authorization form or to use the telephone to execute
transactions.
NON CASH REDEMPTIONS. For redemptions of any single shareholder within any
90-day period exceeding the lesser of $250,000 or 1% of the Fund's net asset
value, the Fund may make the payment or a portion of the payment with portfolio
securities held by the Fund instead of cash, in which case the redeeming
shareholder may incur brokerage and other costs in selling the securities
received.
DISTRIBUTIONS
Distributions are invested in additional shares of the same Class of the Fund at
net asset value unless the shareholder elects to receive cash. Regardless of the
shareholder's election, distributions of $10 or less will not be paid in cash,
but will be invested in additional shares of the same Class of the Fund at net
asset value. Undelivered distribution checks returned by the post office will be
reinvested in your account. If a shareholder has elected to receive dividends
and/or capital gain distributions in cash and the postal or other delivery
service selected by the Transfer Agent is unable to deliver checks to the
shareholder's address of record, such shareholder's distribution option will
automatically be converted to having all dividend and other distributions
reinvested in additional shares. No interest will accrue on amounts represented
by uncashed distribution or redemption checks. Shareholders may reinvest all or
a portion of a recent cash distribution without a sales charge. A shareholder
request must be received within 30 calendar days of the distribution. A
shareholder may exercise this privilege only once. No charge is currently made
for reinvestment.
HOW TO EXCHANGE SHARES
Shares of the Fund may be exchanged for the same class of shares of the other
continuously offered funds distributed by LFD (with certain exceptions) on the
basis of the NAVs per share at the time of exchange. Class Z shares may be
exchanged for Class A shares of the other funds. The prospectus of each
LFD-distributed fund describes its investment objective and policies, and
shareholders should obtain a prospectus and consider these objectives and
policies carefully before requesting an exchange. Shares of certain
LFD-distributed funds are not available to residents of all states. Consult LFS
before requesting an exchange.
By calling LFS, shareholders or their FSF of record may exchange among accounts
with identical registrations, provided that the shares are held on deposit.
During periods of unusual market changes or shareholder activity, shareholders
may experience delays in contacting LFS by telephone to exercise the telephone
exchange privilege. Because an exchange involves a redemption and reinvestment
in another fund, completion of an exchange may be delayed under unusual
circumstances, such as if the fund suspends repurchases or postpones payment for
the fund shares being exchanged in accordance with federal securities law. LFS
will also make exchanges upon receipt of a written exchange request and, share
certificates, if any. If the shareholder is a corporation, partnership, agent,
or surviving joint owner, LFS will require customary additional documentation.
Prospectuses of the other funds are available from the Colonial Literature
Department by calling 1-800-426-3750.
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A loss to a shareholder may result form an unauthorized transaction reasonably
believed to have been authorized. No shareholder is obligated to use the
telephone to execute transactions.
You need to hold your Class A shares for five months before exchanging to
certain funds having a higher maximum sales charge. Consult your FSF or LFS. In
all cases, the shares to be exchanged must be registered on the records of the
fund in the name of the shareholder desiring to exchange.
Shareholders of the other LFD-distributed open-end funds generally may exchange
their shares at NAV for the same class of shares of the Fund.
An exchange is a capital sale transaction for federal income tax purposes. The
exchange privilege may be revised, suspended-or terminated at any time.
SUSPENSION OF REDEMPTIONS
The Fund may not suspend shareholders' right of redemption or postpone payment
for more than seven days unless the Exchange is closed for other than customary
weekends or holidays, or if permitted by the rules of the SEC during periods
when trading on the Exchange is restricted or during any emergency which makes
it impracticable for the fund to dispose of its securities or to determine
fairly the value of its net assets, or during any other period permitted by
order of the SEC for the protection of investors.
SHAREHOLDER LIABILITY
Under Massachusetts law, shareholders could, under certain circumstances, be
held personally liable for the obligations of the Trust. However, the
Declaration disclaims shareholder liability for acts or obligations of the Fund
and the Trust and requires that notice of such disclaimer be given in each
agreement, obligation, or instrument entered into or executed by the Trust's
Trustees. The Declaration provides for indemnification out of Fund property for
all loss and expense of any shareholder held personally liable for the
obligations of the Fund. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances (which are
considered remote) in which the Fund would be unable to meet its obligations and
the disclaimer was inoperative.
The risk of the Fund incurring financial loss on account of another fund of the
Trust is also believed to be remote, because it would be limited to
circumstances in which the disclaimer was inoperative and the other fund was
unable to meet its obligations.
SHAREHOLDER MEETINGS
As described under the caption "Organization and History", the Fund will not
hold annual shareholders' meetings. The Trustees may fill any vacancies in the
Board of Trustees except that the Trustees may not fill a vacancy if,
immediately after filling such vacancy, less than two-thirds of the Trustees
then in office would have been elected to such office by the shareholders. In
addition, at such times as less than a majority of the Trustees then in office
have been elected to such office by the shareholders, the Trustees must call a
meeting of shareholders. Trustees may be removed from office by a written
consent signed by a majority of the outstanding shares of the Trust or by a vote
of the holders of a majority of the outstanding shares at a meeting duly called
for the purpose, which meeting shall be held upon written request of the holders
of not less than 10% of the outstanding shares of the Trust. Upon written
request by the holders of 1% of the outstanding shares of the Trust stating that
such shareholders of the Trust, for the purpose of obtaining the signatures
necessary to demand a shareholders' meeting to consider removal of a Trustee,
request information regarding the Trust's shareholders, the Trust will provide
appropriate materials (at the expense of the requesting shareholders). Except as
otherwise disclosed in the Prospectus and this SAI, the Trustees shall continue
to hold office and may appoint their successors.
At any shareholders' meetings that may be held, shareholders of all series would
vote together, irrespective of series, on the election of Trustees or the
selection of independent accountants, but each series would vote separately from
the others on other matters, such as changes in the investment policies of that
series or the approval of the management agreement for that series.
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PERFORMANCE MEASURES
TOTAL RETURN
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN. Average annual total return is the
actual return on a $1,000 investment in a particular class of shares of the
Fund, made at the beginning of a stated period, adjusted for the maximum sales
charge or applicable CDSC for the class of shares of the Fund and assuming that
all distributions were reinvested at NAV, converted to an average annual return
assuming annual compounding.
NONSTANDARDIZED TOTAL RETURN. Nonstandardized total returns may differ from
standardized average annual total returns in that they may relate to
nonstandardized periods, represent aggregate (i.e. cumulative) rather than
average annual total returns or may not reflect the sales charge or CDSC.
DISTRIBUTION RATE. The distribution rate for each class of shares of the Fund is
usually calculated by dividing annual or annualized distributions by the maximum
offering price of that class on the last day of the period. Generally, the
Fund's distribution rate reflects total amounts actually paid to shareholders,
while yield reflects the current earning power of the Fund's portfolio
securities (net of the Fund's expenses). The Fund's yield for any period may be
more or less than the amount actually distributed in respect of such period.
The Fund may compare its performance to various unmanaged indices published by
such sources as are listed in Appendix II.
The Fund may also refer to quotations, graphs and electronically transmitted
data from sources believed by the Advisor and the Administrator to be reputable,
and publications in the press pertaining to a Fund's performance or to the
Advisor and the Administrator or their affiliates, including comparisons with
competitors and matters of national and global economic and financial interest.
Examples include Forbes, Business Week, Money Magazine, The Wall Street Journal,
The New York Times, The Boston Globe, Barron's National Business & Financial
Weekly, Financial Planning, Changing Times, Reuters Information Services,
Wiesenberger Mutual Funds Investment Report, Lipper Analytical Services
Corporation, Morningstar, Inc., Sylvia Porter's Personal Finance Magazine, Money
Market Directory, SEI Funds Evaluation Services, FTA World Index, Disclosure
Incorporated, Bloomberg and Ibbotson.
All data are based on past performance and do not predict future results.
TAX-RELATED ILLUSTRATIONS. The Fund also may present hypothetical illustrations
(i) comparing the Fund's and other mutual fund's pre-tax and after-tax total
returns and (ii) showing the effects of income, capital gain and estate taxes on
performance.
GENERAL. From time to time, the Fund may discuss or quote its current portfolio
manager as well as other investment personnel and members of the tax management
oversight team, including such person's views on: the economy; securities
markets; portfolio securities and their issuers; investment philosophies,
strategies, techniques and criteria used in the selection of securities to be
purchased or sold for the Fund, the Fund's portfolio holdings; the investment
research and analysis process; the formulation and evaluation of investment
recommendations; and the assessment and evaluation of credit, interest rate,
market and economic risks and similar or related matters.
From time to time, the Fund may also discuss or quote the views of LFD, the
Advisor and other financial planning, legal, tax, accounting, insurance, estate
planning and other professionals, or from surveys, regarding individual and
family financial planning. Such views may include information regarding:
retirement planning; general investment techniques (e.g., asset allocation and
disciplined saving and investing); business succession; issues with respect to
insurance (e.g., disability and life insurance and Medicare supplemental
insurance); issues regarding financial and health care management for elderly
family members; and similar or related matters.
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APPENDIX I
DESCRIPTION OF BOND RATINGS
STANDARD & POOR'S CORPORATION (S&P)
The following descriptions are applicable to municipal bond funds:
AAA bonds have the highest rating assigned by S&P. Capacity to pay interest and
repay principal is extremely strong.
AA bonds have a very strong capacity to pay interest and repay principal, and
they differ from AAA only in small degree.
A bonds have a strong capacity to pay interest and repay principal, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB bonds are regarded as having an adequate capacity to pay interest and repay
principal. Whereas they normally exhibit adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal than for bonds in the A
category.
BB, B, CCC, CC and C bonds are regarded as having predominantly speculative
characteristics with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and C the highest degree. While such debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or large exposures to adverse conditions.
BB bonds have less near-term vulnerability to default than other speculative
issues. However, they face major ongoing uncertainties or exposure to adverse
business, financial, or economic conditions which could lead to inadequate
capacity to meet timely interest and principal payments. The BB rating category
is also used for debt subordinated to senior debt that is assigned an actual or
implied BBB- rating.
B bonds have a greater vulnerability to default but currently have the capacity
to meet interest payments and principal repayments. Adverse business, financial,
or economic conditions will likely impair capacity or willingness to pay
interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
CCC bonds have a currently identifiable vulnerability to default, and are
dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, the bonds are not likely to have
the capacity to pay interest and repay principal. The CCC rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied B or B- rating.
CC rating typically is applied to debt subordinated to senior debt that is
assigned an actual or implied CCC rating.
C rating typically is applied to debt subordinated to senior debt which assigned
an actual or implied CCC- debt rating. The C rating may be used to cover a
situation where a bankruptcy petition has been filed, but debt service payments
are continued.
CI rating is reserved for income bonds on which no interest is being paid.
D bonds are in payment default. The D rating category is used when interest
payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
Plus(+) or minus(-) ratings from AA to CCC may be modified by the addition of a
plus or minus sign to show relative standing within the major rating categories.
PROVISIONAL RATINGS. The letter "p" indicates that the rating is provisional. A
provisional rating assumes the successful completion of the project being
financed by the debt being rated and indicates that payment of debt service
requirements is largely or entirely dependent upon the successful and timely
completion of the project. This rating, however, although addressing credit
quality subsequent to completion of the project, makes no comments on the
likelihood of, or the risk of default upon failure of, such completion. The
investor should exercise his own judgment with respect to such likelihood and
risk.
MUNICIPAL NOTES:
SP-1. Notes rated SP-1 have very strong or strong capacity to pay principal and
interest. Those issues determined to possess overwhelming safety characteristics
are designated as SP-1+.
SP-2. Notes rated SP-2 have satisfactory capacity to pay principal and interest.
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Notes due in three years or less normally receive a note rating. Notes maturing
beyond three years normally receive a bond rating, although the following
criteria are used in making that assessment:
Amortization schedule (the larger the final maturity relative to other
maturities, the more likely the issue will be rated as a note).
Source of payment (the more dependent the issue is on the market for
its refinancing, the more likely it will be rated as a note).
DEMAND FEATURE OF VARIABLE RATE DEMAND SECURITIES:
S&P assigns dual ratings to all long-term debt issues that have as part of their
provisions a demand feature. The first rating addresses the likelihood of
repayment of principal and interest as due, and the second rating addresses only
the demand feature. The long-term debt rating symbols are used for bonds to
denote the long-term maturity, and the commercial paper rating symbols are
usually used to denote the put (demand) option (for example, AAA/A-1+).
Normally, demand notes receive note rating symbols combined with commercial
paper symbols (for example, SP-1+/A-1+).
COMMERCIAL PAPER:
A. Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are further refined with
the designations 1, 2, and 3 to indicate the relative degree to safety.
A-1. This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are designed A-1+.
CORPORATE BONDS:
The description of the applicable rating symbols and their meanings is
substantially the same as the Municipal Bond ratings set forth above.
The following descriptions are applicable to equity and taxable bond funds:
AAA bonds have the highest rating assigned by S&P. The obligor's capacity to
meet its financial commitment on the obligation is extremely strong.
AA bonds differ from the highest rated obligations only in small degree. The
obligor's capacity to meet its financial commitment on the obligation is very
strong.
A bonds are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than obligations in higher rated
categories. However, the obligor's capacity to meet its financial commitment on
the obligation is still strong.
BBB bonds exhibit adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity of the obligor to meet its financial commitment on the obligation.
BB, B, CCC and CC bonds are regarded, as having significant speculative
characteristics. BB indicates the least degree of speculation and C the highest.
While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.
BB bonds are less vulnerable to non-payment than other speculative issues.
However, they face major ongoing uncertainties or exposure to adverse business,
financial, or economic conditions which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.
B bonds are more vulnerable to nonpayment than obligations rated BB, but the
obligor currently has the capacity to meet its financial commitment on the
obligation. Adverse business, financial, or economic conditions will likely
impair the obligor's capacity or willingness to meet its financial commitment on
the obligation.
CCC bonds are currently vulnerable to nonpayment, and are dependent upon
favorable business, financial, and economic conditions for the obligor to meet
its financial commitment on the obligation. In the event of adverse business,
financial, or economic conditions, the obligor is not likely to have the
capacity to meet its financial commitment on the obligation.
CC bonds are currently highly vulnerable to nonpayment.
C ratings may be used to cover a situation where a bankruptcy petition has been
filed or similar action has been taken, but payments on the obligation are being
continued.
D bonds are in payment default. The D rating category is used when payments on
an obligation are not made on the date due even if the applicable grace period
has not expired, unless S&P believes that such payments will be made during such
grace period. The D rating also will be used upon the filing of a bankruptcy
petition or the taking of a similar action if payments on an obligation are
jeopardized.
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Plus (+) or minus(-): The ratings from AA to CCC may be modified by the addition
of a plus or minus sign to show relative standing within the major rating
categories.
R This symbol is attached to the rating of instruments with significant
noncredit risks. It highlights risks to principal or volatility of expected
returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk, such as interest-only or
principal-only mortgage securities; and obligations with unusually risky
interest terms, such as inverse floaters.
MOODY'S INVESTORS SERVICE, INC. (MOODY'S)
Aaa bonds are judged to be of the best quality. They carry the smallest degree
of investment risk and are generally referred to as "gilt edge". Interest
payments are protected by a large or by an exceptionally stable margin and
principal is secure. While various protective elements are likely to change,
such changes as can be visualized are most unlikely to impair a fundamentally
strong position of such issues.
Aa bonds are judged to be of high quality by all standards. Together with Aaa
bonds they comprise what are generally known as high-grade bonds. They are rated
lower than the best bonds because margins of protection may not be as large in
Aaa securities or fluctuation of protective elements may be of greater amplitude
or there may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
Those bonds in the Aa through B groups that Moody's believes possess the
strongest investment attributes are designated by the symbol Aa1, A1 and Baa1.
A bonds possess many favorable investment attributes and are to be considered as
upper-medium-grade obligations. Factors giving security to principal and
interest are considered adequate, but elements may be present that suggest a
susceptibility to impairment sometime in the future.
Baa bonds are considered as medium grade obligations, i.e., they are neither
highly protected nor poorly secured. Interest payments and principal security
appear adequate for the present but certain protective elements may be lacking
or may be characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact, have speculative
characteristics as well.
Ba bonds are judged to have speculative elements: their future cannot be
considered as well secured. Often, the protection of interest and principal
payments may be very moderate, and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position characterizes bonds in
this class.
B bonds generally lack characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the contract
over any long period of time may be small.
Caa bonds are of poor standing. Such issues may be in default or there may be
present elements of danger with respect to principal or interest.
Ca bonds represent obligations which are speculative in a high degree. Such
issues are often in default or have other marked shortcomings.
C bonds are the lowest rated class of bonds and issues so rated can be regarded
as having extremely poor prospects of ever attaining any real investment
standing.
CONDITIONAL RATINGS. Bonds for which the security depends upon the completion of
some act or the fulfillment of some condition are rated conditionally. These are
bonds secured by (a) earnings of projects under construction, (b) earnings of
projects unseasoned in operating experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting
conditions attach. Parenthetical rating denotes probable credit stature upon
completion of construction or elimination of basis of condition.
MUNICIPAL NOTES:
MIG 1. This designation denotes best quality. There is present strong protection
by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.
MIG 2. This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
MIG 3. This designation denotes favorable quality. All security elements are
accounted for, but there is lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well established.
DEMAND FEATURE OF VARIABLE RATE DEMAND SECURITIES:
Moody's may assign a separate rating to the demand feature of a variable rate
demand security. Such a rating may include:
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VMIG 1. This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.
VMIG 2. This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
VMIG 3. This designation denotes favorable quality. All security elements are
accounted for, but there is lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well established.
COMMERCIAL PAPER:
Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment capacity of rated issuers:
Prime-1 Highest Quality
Prime-2 Higher Quality
Prime-3 High Quality
If an issuer represents to Moody's that its Commercial Paper obligations are
supported by the credit of another entity or entities, Moody's, in assigning
ratings to such issuers, evaluates the financial strength of the indicated
affiliated corporations, commercial banks, insurance companies, foreign
governments, or other entities, but only as one factor in the total rating
assessment.
CORPORATE BONDS:
The description of the applicable rating symbols (Aaa, Aa, A) and their meanings
is identical to that of the Municipal Bond ratings as set forth above, except
for the numerical modifiers. Moody's applies numerical modifiers 1, 2, and 3 in
the Aa and A classifications of its corporate bond rating system. The modifier 1
indicates that the security ranks in the higher end of its generic rating
category; the modifier 2 indicates a midrange ranking; and the modifier 3
indicates that the issuer ranks in the lower end of its generic rating category.
FITCH INVESTORS SERVICE
INVESTMENT GRADE BOND RATINGS
AAA bonds are considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and/or
dividends and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA bonds are considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated 'AAA'. Because bonds rated in the
'AAA' and 'AA' categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated 'F-1+'.
A bonds are considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than debt securities with higher ratings.
BBB bonds are considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest or dividends and repay principal
is considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these
securities and, therefore, impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is higher than for
securities with higher ratings.
CONDITIONAL
A conditional rating is premised on the successful completion of a project or
the occurrence of a specific event.
SPECULATIVE-GRADE BOND RATINGS
BB bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified, which could assist the
obligor in satisfying its debt service requirements.
B bonds are considered highly speculative. While securities in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC bonds have certain identifiable characteristics that, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
33
<PAGE>
C bonds are in imminent default in payment of interest or principal.
DDD, DD, AND D bonds are in default on interest and/or principal payments. Such
securities are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. 'DDD'
represents the highest potential for recovery on these securities, and 'D'
represents the lowest potential for recovery.
DUFF & PHELPS CREDIT RATING CO.
AAA - Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+, AA, AA - High credit quality. Protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic conditions.
A+, A, A - Protection factors are average but adequate. However, risk factors
are more available and greater in periods of economic stress.
BBB+, BBB, BBB - Below average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles.
BB+, BB, BB - Below investment grade but deemed likely to meet obligations when
due. Present or prospective financial protection factors fluctuate according to
industry conditions or company fortunes. Overall quality may move up or down
frequently within this category.
B+, B, B - Below investment grade and possessing risk that obligations will not
be met when due. Financial protection factors will fluctuate widely according to
economic cycles, industry conditions and/or company fortunes. Potential exists
for frequent changes in the rating within this category or into a higher or
lower rating grade.
CCC - Well below investment grade securities. Considerable uncertainty exists as
to timely payment of principal, interest or preferred dividends. Protection
factors are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company developments.
DD - Defaulted debt obligations. Issuer failed to meet scheduled principal
and/or interest payments.
34
<PAGE>
APPENDIX II
1999
<TABLE>
<CAPTION>
SOURCE CATEGORY RETURN (%)
- ------ -------- ----------
<S> <C> <C>
CREDIT SUISSE FIRST
BOSTON:
First Boston High Yield Index- 3.28
Global
LIPPER, INC.:
AMEX Composite Index P 27.28
AMEX Computer Tech IX P 75.02
AMEX Institutional IX P 24.46
AMEX Major Market IX P 17.76
Bse Sensex Index 63.83
CAC 40:FFR IX P 51.12
CD Rate 1 Month Index Tr 5.31
CD Rate 3 Month Index Tr 5.46
CD Rate 6 Month Index Tr 5.59
Consumer Price Index 2.99
Copnhgn SE:Dkr IX P 20.46
DAX:Dm IX Tr 39.10
Domini 400 Social Index 24.50
Dow Jones 65 Comp Av P 11.97
Dow Jones Ind Average P 25.22
Dow Jones Ind Dly Reinv 27.21
Dow Jones Ind Mth Reinv 27.29
Dow Jones Trans Av P -5.47
Dow Jones Trans Av Tr -4.52
Dow Jones Util Av P -9.27
Dow Jones Util Av Tr -6.02
Ft/S&P Act Wld Ex US IX N/A
Ft/S&P Actuaries Wld IX N/A
FT-SE 100:Pd IX P 17.81
FT-SE Gold Mines IX 0.20
Hang Seng:Hng Kng $ IX 68.80
Jakarta Composite Index 70.06
Jasdaq Index:Yen P 244.48
Klse Composite Index 38.59
Kospi Index 82.78
Lear High Growth Rate IX N/A
Lear Low Priced Value IX N/A
Lehman 1-3 Govt/Corp P -2.89
Lehman 1-3 Govt/Corp Tr 3.15
Lehman Aggregate Bd P -7.03
Lehman Aggregate Bd Tr -0.82
Lehman Cp Bd Int P -6.43
Lehman Cp Bd Int Tr 0.16
Lehman Govt Bd Int P -5.36
Lehman Govt Bd Int Tr 0.49
Lehman Govt Bd Long P -14.59
Lehman Govt Bd Long Tr -8.73
Lehman Govt Bd P -8.08
Lehman Govt Bd Tr -2.23
Lehman Govt/Cp Bd P -8.26
Lehman Govt/Cp Bd Tr -2.15
Lehman Govt/Cp Int P -5.70
Lehman Govt/Cp Int Tr 0.39
</TABLE>
35
<PAGE>
<TABLE>
<S> <C>
Lehman High Yield P -6.64
Lehman High Yield Tr 2.39
Lehman Muni 10 Yr IX P -6.08
Lehman Muni 10 Yr IX Tr -1.25
Lehman Muni 3 Yr IX P -3.36
Lehman Muni 3 Yr IX Tr 1.96
Lehman Muni Bond IX P -7.08
Lehman Muni Bond IX Tr -2.06
Lipper 1000 N/A
Lipper Mgmt Co Price IX 12.57
Madrid SE:Pst IX P 16.22
ML 10+ Yr Treasury IX Tr -8.61
ML 1-3 Yr Muni IX P -2.72
ML 1-3 Yr Muni IX Tr 2.51
ML 1-3 Yr Treasury IX P -2.85
ML 1-3 Yr Treasury IX Tr 3.06
ML 1-5 Yr Gv/Cp Bd IX P -3.84
ML 1-5 Yr Gv/Cp Bd IX Tr 2.19
ML 15 Yr Mortgage IX P -4.14
ML 15 Yr Mortgage IX Tr 2.17
ML 1-5 Yr Treasury IX P -3.83
ML 1-5 Yr Treasury IX Tr 2.04
ML 3 MO T-Bill IX Tr 4.85
ML 3-5 Yr Govt IX P -5.45
ML 3-5 Yr Govt IX Tr 0.32
ML 3-7 Yr Muni IX Tr 0.66
ML Corp Master Index P -8.53
ML Corp Master Index Tr -1.89
ML Glbl Govt Bond Inx P -6.83
ML Glbl Govt Bond Inx Tr -1.66
ML Glbl Gv Bond IX II P -9.65
ML Glbl Gv Bond IX II Tr -4.52
ML Global Bond Index P -9.04
ML Global Bond Index Tr -3.50
ML Gov Corp Master IX Tr -2.05
ML Govt Master Index P -8.02
ML Govt Master Index Tr -2.11
ML Govt/Corp Master IX P -8.19
ML High Yld Master IX P -7.86
ML High Yld Master IX Tr 1.57
ML Master Muni IX Tr -6.35
ML Mortgage Master IX P -4.86
ML Mortgage Master IX Tr 1.61
ML Treasury Master IX P -8.31
ML Treasury Master IX Tr -2.38
MSCI AC Americas Free ID 22.71
MSCI AC Asia Fr-Ja IX GD 64.67
MSCI AC Asia Fr-Ja IX ID 61.95
MSCI AC Asia Pac - Ja GD 55.23
MSCI AC Asia Pac - Ja ID 52.30
MSCI AC Asia Pac Fr-J GD 49.83
MSCI AC Asia Pac Fr-J ID 46.80
MSCI AC Asia Pac IX GD 59.66
MSCI AC Asia Pac IX ID 57.86
MSCI AC Europe IX GD 17.35
MSCI AC Europe IX ID 15.22
MSCI AC Fe - Ja IX GD 67.83
MSCI AC Fe - Ja IX ID 65.24
MSCI AC Fe Free IX GD 61.81
MSCI AC Fe Free IX ID 60.29
</TABLE>
36
<PAGE>
<TABLE>
<S> <C>
MSCI AC Fe Fr-Ja IX GD 62.11
MSCI AC Fe Fr-Ja IX ID 59.40
MSCI AC Pac Fr-Jpn IX GD 46.89
MSCI AC Pac Fr-Jpn IX ID 43.84
MSCI AC World Free IX GD 26.82
MSCI AC World Fr-USA GD 30.91
MSCI AC World Fr-USA ID 28.80
MSCI AC World IX GD 27.31
MSCI AC World IX ID 25.49
MSCI AC World-USA IX GD 31.79
MSCI AC Wrld Fr-Ja IX GD 23.07
MSCI AC Wrld Fr-Ja IX ID 21.20
MSCI AC Wrld-Ja IX GD 23.64
MSCI AC Wrld-Ja IX ID 21.77
MSCI Argentina IX GD 34.29
MSCI Argentina IX ID 30.05
MSCI Australia IX GD 18.67
MSCI Australia IX ID 15.19
MSCI Australia IX ND 17.62
MSCI Austria IX GD -8.66
MSCI Austria IX ID -10.47
MSCI Austria IX ND -9.11
MSCI Belgium IX GD -13.75
MSCI Belgium IX ID -15.77
MSCI Belgium IX ND -14.26
MSCI Brazil IX GD 67.23
MSCI Brazil IX ID 61.57
MSCI Canada IX GD 54.40
MSCI Canada IX ID 51.78
MSCI Canada IX ND 53.74
MSCI Chile IX GD 39.01
MSCI Chile IX ID 36.45
MSCI China Dom Fr IX ID 31.10
MSCI China Free IX ID 9.94
MSCI China Non Dom IX ID 5.82
MSCI Colombia IX GD -13.69
MSCI Colombia IX ID -19.14
MSCI Czech Rep IX GD 5.35
MSCI Czech Rep IX ID 3.97
MSCI Denmark IX GD 12.47
MSCI Denmark IX ID 10.85
MSCI Denmark IX ND 12.06
MSCI EAFE - UK IX GD 31.45
MSCI EAFE - UK IX ID 29.63
MSCI EAFE - UK IX ND 31.01
MSCI EAFE + Canada IX GD 28.27
MSCI EAFE + Canada IX ID 26.22
MSCI EAFE + Canada IX ND 27.93
MSCI EAFE + Em IX GD 31.03
MSCI EAFE + EM IX ID 28.93
MSCI EAFE + EMF IX GD 30.33
MSCI EAFE + EMF IX ID 28.24
MSCI EAFE Fr IX ID 25.03
MSCI EAFE GDP Wt IX GD 31.38
MSCI EAFE GDP Wt IX ID 29.49
MSCI EAFE GDP Wt IX ND 31.00
MSCI EAFE IX GD 27.30
MSCI EAFE IX ID 25.27
MSCI EAFE IX ND 26.96
MSCI EASEA IX GD 18.12
</TABLE>
37
<PAGE>
<TABLE>
<S> <C>
MSCI EASEA IX ID 15.90
MSCI EASEA IX ND 17.77
MSCI Em Asia IX GD 69.73
MSCI Em Asia IX ID 67.96
MSCI Em Eur/Mid East GD 79.61
MSCI Em Eur/Mid East ID 76.67
MSCI Em Europe IX GD 83.98
MSCI Em Europe IX ID 81.28
MSCI Em Far East IX GD 67.27
MSCI Em Far East IX ID 65.67
MSCI Em IX GD 68.82
MSCI Em IX ID 66.18
MSCI Em Latin Am IX GD 65.45
MSCI Em Latin Am IX ID 61.81
MSCI EMF Asia IX GD 69.41
MSCI EMF Asia IX ID 67.65
MSCI EMF Far East IX GD 65.50
MSCI EMF Far East IX ID 63.97
MSCI EMF IX GD 66.41
MSCI EMF IX ID 63.70
MSCI EMF Latin Am IX GD 58.89
MSCI EMF Latin Am IX ID 55.48
MSCI Europe - UK IX GD 17.84
MSCI Europe - UK IX ID 16.00
MSCI Europe - UK IX ND 17.35
MSCI Europe GDP Wt IX ID 14.08
MSCI Europe IX GD 16.23
MSCI Europe IX ID 14.12
MSCI Europe IX ND 15.89
MSCI European Union GD 19.22
MSCI European Union ID 16.99
MSCI Far East Free IX ID 59.99
MSCI Far East IX GD 62.63
MSCI Far East IX ID 61.10
MSCI Far East IX ND 62.41
MSCI Finland IX GD 153.33
MSCI Finland IX ID 150.71
MSCI Finland IX ND 152.60
MSCI France IX GD 29.69
MSCI France IX ID 28.00
MSCI France IX ND 29.27
MSCI Germany IX GD 20.53
MSCI Germany IX ID 18.70
MSCI Germany IX ND 20.04
MSCI Greece IX GD 49.64
MSCI Greece IX ID 47.58
MSCI Hongkong IX GD 59.52
MSCI Hongkong IX ID 54.85
MSCI Hongkong IX ND 59.52
MSCI Hungary IX GD 11.66
MSCI Hungary IX ID 10.81
MSCI India IX GD 87.35
MSCI India IX ID 84.67
MSCI Indonesia IX GD 93.46
MSCI Indonesia IX ID 92.04
MSCI Ireland IX ID -14.02
MSCI Israel Dom IX ID 51.10
MSCI Israel IX ID 56.29
MSCI Israel Non Dom Ixid 47.06
MSCI Italy IX GD 0.19
</TABLE>
38
<PAGE>
<TABLE>
<S> <C>
MSCI Italy IX ID -1.48
MSCI Italy IX ND -0.26
MSCI Japan IX GD 61.77
MSCI Japan IX ID 60.56
MSCI Japan IX ND 61.53
MSCI Jordan IX GD 6.26
MSCI Jordan IX ID 2.00
MSCI Kokusai IX GD 21.26
MSCI Kokusai IX ID 19.43
MSCI Kokusai IX ND 20.84
MSCI Korea IX GD 92.42
MSCI Korea IX ID 90.17
MSCI Luxembourg IX ID 50.50
MSCI Malaysia IX GD 109.92
MSCI Malaysia IX ID 107.23
MSCI Mexico Free IX GD 80.07
MSCI Mexico Free IX ID 78.50
MSCI Mexico IX GD 81.76
MSCI Mexico IX ID 80.19
MSCI Netherland IX GD 7.43
MSCI Netherland IX ID 5.25
MSCI Netherland IX ND 6.88
MSCI New Zealand IX GD 14.30
MSCI New Zealand IX ID 9.70
MSCI New Zealand IX ND 12.90
MSCI Nordic IX GD 87.75
MSCI Nordic IX ID 85.11
MSCI Nordic IX ND 87.00
MSCI Norway IX GD 32.43
MSCI Norway IX ID 29.52
MSCI Norway IX ND 31.70
MSCI Nth Amer IX GD 23.47
MSCI Nth Amer IX ID 21.91
MSCI Nth Amer IX ND 23.00
MSCI Pac - Japan IX GD 43.20
MSCI Pac - Japan IX ID 39.35
MSCI Pac - Japan IX ND 42.58
MSCI Pacific Free IX ID 55.19
MSCI Pacific Fr-Jpn ID 34.95
MSCI Pacific IX GD 57.96
MSCI Pacific IX ID 56.17
MSCI Pacific IX ND 57.63
MSCI Pakistan IX GD 49.62
MSCI Pakistan IX ID 42.24
MSCI Peru IX GD 18.86
MSCI Peru IX ID 16.34
MSCI Philippines Fr Ixgd 3.32
MSCI Philippines Fr Ixid 2.33
MSCI Philippines IX GD 8.90
MSCI Philippines IX ID 7.62
MSCI Portugal IX GD -8.45
MSCI Portugal IX ID -10.86
MSCI Russia IX GD 247.06
MSCI Russia IX ID 246.20
MSCI Sing/Mlysia IX GD 99.40
MSCI Sing/Mlysia IX ID 97.08
MSCI Sing/Mlysia IX ND 99.40
MSCI Singapore Fr IX GD 60.17
MSCI Singapore Fr IX ID 58.43
MSCI South Africa IX GD 57.20
</TABLE>
39
<PAGE>
<TABLE>
<S> <C>
MSCI South Africa IX ID 53.43
MSCI Spain IX GD 5.27
MSCI Spain IX ID 3.53
MSCI Spain IX ND 4.83
MSCI Sri Lanka IX GD -6.27
MSCI Sri Lanka IX ID -9.73
MSCI Sweden IX GD 80.60
MSCI Sweden IX ID 77.76
MSCI Sweden IX ND 79.74
MSCI Swtzrlnd IX GD -6.59
MSCI Swtzrlnd IX ID -7.81
MSCI Swtzrlnd IX ND -7.02
MSCI Taiwan IX GD 52.71
MSCI Taiwan IX ID 51.52
MSCI Thailand IX GD 40.92
MSCI Thailand IX ID 40.49
MSCI Turkey IX GD 252.41
MSCI Turkey IX ID 244.36
MSCI UK IX GD 12.45
MSCI UK IX ID 9.74
MSCI UK IX ND 12.45
MSCI USA IX GD 22.38
MSCI USA IX ID 20.86
MSCI USA IX ND 21.92
MSCI Venezuela IX GD 8.71
MSCI Venezuela IX ID 1.68
MSCI World - UK IX GD 26.83
MSCI World - UK IX ID 25.17
MSCI World - UK IX ND 26.38
MSCI World - USA IX GD 28.27
MSCI World - USA IX ID 26.22
MSCI World - USA IX ND 27.93
MSCI World GDP Wt IX ID 27.26
MSCI World IX Free ID 23.45
MSCI World IX GD 25.34
MSCI World IX ID 23.56
MSCI World IX ND 24.93
MSCI Wrld - Austrl IX GD 25.42
MSCI Wrld - Austrl IX ID 23.67
MSCI Wrld - Austrl IX ND 25.03
NASDAQ 100 IX P 101.95
NASDAQ Bank IX P -7.98
NASDAQ Composite IX P 85.59
NASDAQ Industrial IX P 71.67
NASDAQ Insurance IX P 5.54
NASDAQ Natl Mkt Cmp IX 85.87
NASDAQ Natl Mkt Ind IX 72.04
NASDAQ Transport IX P 1.82
Nikkei 225 Avg:Yen P 36.79
NYSE Composite P 9.15
NYSE Finance IX P -0.92
NYSE Industrials IX P 11.37
NYSE Transportation IX -3.25
NYSE Utilities IX P 14.62
Oslo SE Tot:Fmk IX P 45.54
Philippines Composite IX 8.85
PSE Technology IX P 116.40
Russell 1000 Grow IX Tr 33.16
Russell 1000 IX P 19.46
Russell 1000 IX Tr 20.91
</TABLE>
40
<PAGE>
<TABLE>
<S> <C>
Russell 1000 Value IX Tr 7.35
Russell 2000 Grow IX Tr 43.09
Russell 2000 IX P 19.62
Russell 2000 IX Tr 21.26
Russell 2000 Value IX Tr -1.49
Russell 3000 IX P 19.43
Russell 3000 IX Tr 20.90
Russell Midcap Grow IX 51.29
Russell Midcap IX Tr 18.23
Russell Midcap Value IX -0.11
S & P 100 Index P 31.26
S & P 500 Daily Reinv 21.04
S & P 500 Index P 19.53
S & P 500 Mnthly Reinv 21.03
S & P 600 Index P 11.52
S & P 600 Index Tr 12.41
S & P Financial IX P 2.19
S & P Financial IX Tr 3.97
S & P Industrial IX Tr 25.87
S & P Industrials P 24.52
S & P Midcap 400 IX P 13.35
S & P Midcap 400 IX Tr 14.72
S & P Transport Index P -10.69
S & P Transport IX Tr -9.32
S & P Utility Index P -12.48
S & P Utility Index Tr -8.88
S & P/Barra Growth IX Tr 27.98
S & P/Barra Value IX Tr 12.72
SB Cr-Hdg Nn-US Wd IX Tr 2.88
SB Cr-Hdg Wd Gv Bd IX Tr 1.31
SB Non-US Wd Gv Bd IX Tr -5.07
SB Wd Gv Bd:Austrl IX Tr 4.07
SB Wd Gv Bd:Germny IX Tr -16.42
SB Wd Gv Bd:Japan IX Tr 15.53
SB Wd Gv Bd:UK IX Tr -4.30
SB Wd Gv Bd:US IX Tr -2.45
SB World Govt Bond IX Tr -4.27
SB World Money Mkt IX Tr 0.39
Straits Times Index 77.54
Swiss Perf:Sfr IX Tr 11.69
Taiwan SE:T$ IX P 42.86
T-Bill 1 Year Index Tr 4.91
T-Bill 3 Month Index Tr 4.74
T-Bill 6 Month Index Tr 4.85
Thailand Set Index 35.44
Tokyo 2nd Sct:Yen IX P 121.27
Tokyo Se(Topix):Yen IX 58.44
Toronto 300:C$ IX P 29.72
Toronto SE 35:C$ IX P 36.42
Value Line Cmp IX-Arth 10.56
Value Line Cmp IX-Geom -1.40
Value Line Industrl IX -0.05
Value Line Railroad IX -9.93
Value Line Utilties IX -7.10
Lipper CE Pac Ex Jpn IX 73.32
Lipper Pac Ex-Jpn Fd IX 74.88
THE NATIONAL ASSOCIATION
OF REAL ESTATE INVESTMENT
TRUST:
Real Estate Investment Trust Index -4.62
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
SALOMON SMITH BARNEY WGBI
MARKET SECTORS: LOCAL CURRENCY U.S. DOLLARS
<S> <C> <C>
U.S. Government (Sovereign) -2.45 -2.45
United Kingdom (Sovereign) -1.20 -4.3
France (Sovereign) -2.95 -17.16
Germany (Sovereign) -2.08 -16.42
Japan (Sovereign) 4.83 15.53
Canada (Sovereign) -1.46 4.29
</TABLE>
Each Russell Index listed above is a trademark/service mark of the Frank Russell
Company. Russell(TM) is a trademark of the Frank Russell Company.
*in U.S. currency
<PAGE>
PART C. OTHER INFORMATION
Item 23. Exhibits:
LIBERTY ALL-STAR GROWTH AND INCOME FUND (LASGIF)
(a)(1) Agreement and Declaration of Trust(1)
(a)(2) Amendment No. 1 to Agreement and Declaration of
Trust (2)
(b) Amended By-Laws dated 10/27/99 (2)
(c) Form of Specimen Share Certificate - filed as
Exhibit 4 in Part C, Item 24(b) of Post-Effective
Amendment No. 45 to the Registration Statement on
Form N-1A of Liberty Funds Trust IV (formerly
Colonial Trust IV) (File Nos. 2-62492 and 811-2865),
filed with the Commission on or about March 21,
1997, and is hereby incorporated by reference and
made a part of this Registration Statement
(d)(1) Form of Fund Management Agreement between Registrant
and Liberty Asset Management Company (LAMCO)(1)
(d)(2) Form of Portfolio Management Agreement among
Registrant, LAMCO and Portfolio Managers other than
OpCap Advisors(1)
(d)(3) Form of Portfolio Management Agreement among
Registrant, LAMCO and OpCap Advisors(2)
(e)(1) Distributor's Contract between the Registrant and
Liberty Funds Distributor, Inc.
(e)(2) 12b-1 Plan Implementing Agreement between the
Registrant and Liberty Funds Distributor, Inc.
(e)(3) Form of Selling Agreement - filed as Exhibit 6.(b)
in Part C, Item 24(b) of Post-Effective Amendment
No. 49 to the Registration Statement on Form N-1A of
Liberty Funds Trust I (formerly Colonial Trust I)
(File Nos. 2-41251 and 811-2214), filed with the
Commission on or about November 20, 1998, and is
hereby incorporated by reference and made a part of
this Registration Statement
(e)(4) Form of Asset Retention Agreement - filed as Exhibit
6.(d) in Part C, Item 24(b) of Post-Effective
Amendment No. 10 to the Registration Statement on
Form N-1A of Liberty Funds Trust VI (formally
Colonial Trust VI) (File Nos. 33-45117 and
811-6529), filed with the Commission on or about
September 27, 1996, and is hereby incorporated by
reference and made a part of this Registration
Statement
(f) Not applicable
(g)(1) Global Custody Agreement with The Chase Manhattan
Bank - filed as Exhibit 8. in Part C, Item 24(b) of
Post-Effective Amendment No. 13 to the Registration
Statement on Form N-1A of Liberty Funds Trust VI
(formerly Colonial Trust VI) (File Nos. 33-45117
<PAGE>
and 811-6529), filed with the Commission on or about
October 24, 1997, and is hereby incorporated by
reference and made a part of this Registration
Statement
(g)(2) Amendment No. 11 to Appendix A of Global Custody
Agreement with The Chase Manhattan Bank - filed as
Exhibit (g)(2) in Part C, Item 23 of Post-Effective
Amendment No. 60 to the Registration Statement on
Form N-1A of Liberty Funds Trust I (formerly
Colonial Trust I) (File Nos. 2-41251 and 811-2214),
filed with the Commission on or about March 1, 2000,
and is hereby incorporated by reference and made a
part of this Registration Statement
(h)(1) Amended and Restated Shareholders' Servicing and
Transfer Agent Agreement as amended - filed as
Exhibit No. 9.(b) in Part C, Item 24(b) of
Post-Effective Amendment No. 10 to the Registration
Statement on Form N-1A of Liberty Funds Trust VI
(formerly Colonial Trust VI)(File Nos. 33-45117 &
811-6529), filed with the Commission on or about
September 27, 1996, and is hereby incorporated by
reference and made a part of this Registration
Statement
(h)(2) Amendment No. 17 to Schedule A of Amended and
Restated Shareholders' Servicing and Transfer Agent
Agreement as amended - filed as Exhibit (h)(2) in
Part C, Item 23 of Post-Effective Amendment No. 60
to the Registration Statement on Form N-1A of
Liberty Funds Trust I (File Nos. 811-2214 and
2-41251), filed with the Commission on or about
March 1, 2000, and is hereby incorporated by
reference and made a part of this Registration
Statement
(h)(3) Amendment No. 22 to Appendix I of Amended and
Restated Shareholders' Servicing and Transfer Agent
Agreement as amended - filed as Exhibit (h)(3) in
Part C, Item 23 of Post-Effective Amendment No. 60
to the Registration Statement on Form N-1A of
Liberty Funds Trust I (File Nos. 811-2214 and
2-41251), filed with the Commission on or about
March 1, 2000, and is hereby incorporated by
reference and made a part of this Registration
Statement
(h)(4) Pricing and Bookkeeping Agreement(1)
(h)(5) Amended and Restated Credit Agreement with Bank of
America - filed as Exhibit (h)(8) in Part C, Item 23
of Post-Effective Amendment No. 110 to the
Registration Statement on Form N-1A of Liberty Funds
Trust III (formerly Colonial Trust III)(File Nos.
2-15184 and 811-881), filed with the Commission on
or about August 12, 1999, and is hereby incorporated
by reference and made a part of this Registration
Statement
(h)(6) Administration Agreement between Registrant and
Colonial Management Associates, Inc.(1)
(h)(7) Stock Subscription Agreement between Registrant and
LAMCO(2)
(i) Opinion of Counsel(4)
<PAGE>
(j) Consent of Independent Accountants
(k) Not applicable
(l) Not applicable
(m) Rule 12b-1 Distribution Plan
(n) Not applicable
(o) Plan pursuant to Rule 18f-3(d) under the Investment
Company Act of 1940(4)
(p) Code of Ethics of Colonial, the Funds and Liberty
Funds Distributor, Inc. - filed as Exhibit (p) in
Part C, Item 23 of Post-Effective Amendment No. 59
to the Registration Statement on Form N-1A of
Liberty Funds Trust IV (File Nos. 811-2865 and
2-62492), filed with the Commission on or about
March 17, 2000, and is hereby incorporated by
reference and made a part of this Registration
Statement
Power of Attorney for: Robert J. Birnbaum, John V. Carberry, James E. Grinnell,
Richard W. Lowry, William E. Mayer, and John J. Neuhauser(4)
(1) Incorporated by reference to the Registrant's
Registration Statement on Form N-1A, filed with the
Commission on or about November 5, 1998.
(2) Incorporated by reference to the Registrant's
Pre-Effective Amendment No. 1 on Form N-1A, filed
with the Commission on or about January 12, 1999.
(3) Incorporated by reference to the Registrant's
Post-Effective Amendment No. 1 on Form N-1A, filed
with the Commission on or about December 1, 1999.
(4) Incorporated by reference to the Registrant's
Post-Effective Amendment No. 2 on Form N-1A, filed
with the Commission on or about February 16, 2000.
Item 24. Persons Controlled by our under Common Control with
Registrant
None
Item 25. Indemnification
See Article VII of the Amended and Restated Agreement
and Declaration of Trust filed as Exhibit (a)(1)
hereto.
The Registrant's administrator, Colonial Management
Associates, Inc., has an ICI Mutual Insurance Company
Directors and Officers/Errors and Omissions Liability
insurance policy. The policy provides indemnification
to the Registrant's trustees and officers.
<PAGE>
Item 26. Business and Other Connections of Investment Adviser
Certain information pertaining to business and other
connections of the Registrant's investment adviser,
Liberty Asset Management Company (LAMCO), which in
turn is a indirect wholly-owned subsidiary of Liberty
Financial Companies, Inc. (LFCI), which in turn is a
majority owned subsidiary of LFC Management
Corporation, which in turn is a wholly owned
subsidiary of Liberty Corporate Holdings, Inc., which
in turn is a wholly owned subsidiary of LFC Holdings,
Inc., which in turn is a wholly owned subsidiary of
Liberty Mutual Equity Corporation, which in turn is a
wholly owned subsidiary of Liberty Mutual Insurance
Company. LAMCO serves as investment adviser to the
Liberty All-Star Growth and Income Fund and is
primarily engaged in the provision of its
multi-management services to Liberty All-star Equity
Fund and Liberty All-Star Growth Fund, Inc.,
multi-managed closed-end investment companies, and
Liberty All-Star Equity Fund, Variable Series, a
multi-managed open-end investment company that serves
as an investment vehicle for variable annuity
contracts and variable life insurance policies issued
by insurance companies. LAMCO also provides
investment management services to Colonial Counselor
Select Portfolios, an open-end investment company.
The information required above is incorporated herein
by reference from LAMCO's Form ADV, as most recently
filed with the Securities and Exchange Commission.
The business and other connections of the officers,
directors or partners of the Portfolio Managers of
LASGIF is incorporated by reference from the
respective Portfolio Manager's Form ADV, as most
recently filed with the Securities and Exchange
Commission. The file numbers of such ADV Forms are as
follows:
OpCap Advisors 801-27180
J.P. Morgan Investment Management Inc. 801-9755
Westwood Management Corporation 801-18727
Boston Partners Asset Management, L.P. 801-49059
TCW Investment Management Company 801-29075
Item 27 Principal Underwriter
- ------- ---------------------
(a) Liberty Funds Distributor, Inc. (LFDI), a subsidiary of Colonial
Management Associates, Inc., is the Registrant's principal
underwriter. LFDI acts in such capacity for each series of Liberty Funds
Trust I, Liberty Funds Trust II, Liberty Funds Trust III, Liberty Funds
Trust IV, Liberty Funds Trust V, Liberty Funds Trust VI, Liberty Funds
Trust VII, Liberty Funds Trust IX, Liberty Variable Investment Trust,
Liberty-Stein Roe Advisor Trust, Stein Roe Income Trust, Stein Roe
Municipal Trust, Stein Roe Investment Trust, Stein Roe Floating Rate
Income Fund, Stein Roe Institutional Floating Rate Income Fund,
SteinRoe Variable Investment Trust and Stein Roe Trust.
(b) The table below lists each director or officer of the principal
underwriter named in the answer to Item 21.
(1) (2) (3)
Position and Offices Positions and
Name and Principal with Principal Offices with
Business Address* Underwriter Registrant
- ------------------ ------------------- --------------
Anderson, Judith V.P. None
Babbitt, Debra V.P. and None
Comp. Officer
Bartlett, John Managing Director None
Blakeslee, James Sr. V.P. None
Blumenfeld, Alex V.P. None
Bozek, James Sr. V.P. None
Brown, Beth V.P. None
Burtman, Tracy V.P. None
Carroll, Sean V.P. None
Campbell, Patrick V.P. None
Chrzanowski, V.P. None
Daniel
Clapp, Elizabeth A. Managing Director None
Claiborne, Doug V.P. None
Conlin, Nancy L. Dir; Clerk Secretary
Davey, Cynthia Sr. V.P. None
Desilets, Marian V.P. Asst. Sec
Devaney, James Sr. V.P. None
Downey, Christopher V.P. None
Dupree, Robert V.P. None
Emerson, Kim P. Sr. V.P. None
Erickson, Cynthia G. Sr. V.P. None
Evans, C. Frazier Managing Director None
Evitts, Stephen V.P. None
Feldman, David Managing Director None
Fifield, Robert V.P. None
Fragasso, Philip Managing Director None
Gerokoulis, Sr. V.P. None
Stephen A.
Gibson, Stephen E. Director; Chairman President
of the Board
Goldberg, Matthew Sr. V.P. None
Grace, Anthony V.P. None
Guenard, Brian V.P. None
Harrington, Tom Sr. V.P. None
Hodgkins, Joseph Sr. V.P. None
Huennekens, James V.P. None
Hussey, Robert Sr. V.P. None
Iudice, Jr., Philip Treasurer and CFO None
Jones, Cynthia V.P. None
Jones, Jonathan V.P. None
Kelley, Terry M. V.P. None
Kelson, David W. Sr. V.P. None
Lichtenberg, Susyn V.P. None
Lynn, Jerry V.P. None
Marsh, Curtis Sr. V.P. None
Martin, John Sr. V.P. None
Martin, Peter V.P. None
McCombs, Gregory Sr. V.P. None
McKenzie, Mary V.P. None
Menchin, Catherine Sr. V.P. None
Miller, Anthony V.P. None
Moberly, Ann R. Sr. V.P. None
Morse, Jonathan V.P. None
Nickodemus, Paul V.P. None
O'Shea, Kevin Managing Director None
Palombo, Joseph R. Director Vice President
Piken, Keith V.P. None
Place, Jeffrey Managing Director None
Powell, Douglas V.P. None
Quirk, Frank V.P. None
Raftery-Arpino, Linda Sr. V.P. None
Ratto, Gregory V.P. None
Reed, Christopher B. Sr. V.P. None
Riegel, Joyce V.P. None
Robb, Douglas V.P. None
Santosuosso, Louise Sr. V.P. None
Schulman, David Sr. V.P. None
Scully-Power, Adam V.P. None
Shea, Terence V.P. None
Sideropoulos, Lou V.P. None
Sinatra, Peter V.P. None
Smith, Darren V.P. None
Soester, Trisha V.P. None
Studer, Eric V.P. None
Sweeney, Maureen V.P. None
Tambone, James CEO; Co-President None
Tasiopoulos, Lou Co-President None
Torrisi, Susan V.P. None
VanEtten, Keith H. Sr. V.P. None
Warfield, James V.P. None
Wess, Valerie Sr. V.P. None
Young, Deborah V.P. None
- --------------------------
* The address for each individual is One Financial Center, Boston, MA 02111.
<PAGE>
Item 28. Location of Accounts and Records
Persons maintaining physical possession of accounts,
books and other documents required to be maintained
by Section 31(a) of the Investment Company Act of
1940 and the Rules thereunder include Registrant's
Secretary; Registrant's investment advisor, Liberty
Asset Management Company, Registrant's administrator,
Colonial Management Associates, Inc.; Registrant's
principal underwriter, Liberty Funds Distributor,
Inc.; Registrant's transfer and dividend disbursing
agent, Liberty Funds Services, Inc.; and the
Registrant's custodian, The Chase Manhattan Bank. The
address for each person except the Registrant's
investment advisor and custodian is One Financial
Center, Boston, MA 02111. The Registrant's investment
advisor's address is Federal Reserve Plaza, 600
Atlantic Avenue, Boston, MA 02110. The Registrant's
custodian's address is 270 Park Avenue, New York, NY
10017-2070.
Item 29. Management Services
See Item 5, Part A and Item 16, Part B
Item 30. Undertakings
Not applicable.
<PAGE>
******************
NOTICE
A copy of the Agreement and Declaration of Trust, as amended, of Liberty Funds
Trust IX (formerly LAMCO Trust I) (the "Trust") is on file with the Secretary of
The Commonwealth of Massachusetts and notice is hereby given that the instrument
has been executed on behalf of the Trust by an officer of the Trust as an
officer and by its Trustees as trustees and not individually and the obligations
of or arising out of this instrument are not binding upon any of the Trustees,
officers or shareholders individually but are binding only upon the assets and
property of the Trust.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant, Liberty Funds Trust IX (formerly LAMCO
Trust I), certifies that it meets all of the requirements for effectiveness of
the Registration Statement pursuant to Rule 485(b) and has duly caused this
Post-Effective Amendment No. 3 to its Registration Statement under the
Securities Act of 1933 and the Amendment No. 3 to its Registration Statement
under the Investment Company Act of 1940, to be signed in this City of Boston,
and The Commonwealth of Massachusetts on this 17th day of March, 2000.
LIBERTY FUNDS TRUST IX
(Formerly LAMCO Trust I)
By:/s/ WILLIAM R. PARMENTIER
----------------------------------
William R. Parmentier
President
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment has been signed below by the following persons in their capacities and
on the date indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
<S> <C> <C>
/s/WILLIAM R. PARMENTIER President (chief March 17, 2000
---------------------
William R. Parmentier Executive officer)
/s/TIMOTHY J. JACOBY Treasurer and Chief Financial Officer March 17, 2000
-----------------
Timothy J. Jacoby (principal financial officer)
/s/J. KEVIN CONNAUGHTON Controller and Chief Accounting March 17, 2000
--------------------
J. Kevin Connaughton Officer (principal accounting officer)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
ROBERT J. BIRNBAUM* Trustee
Robert J. Birnbaum
JOHN V. CARBERRY* Trustee
John V. Carberry
JAMES E. GRINNELL* Trustee
James E. Grinnell
RICHARD W. LOWRY* Trustee */s/ NANCY L. CONLIN
Richard W. Lowry Nancy L. Conlin
Attorney-in-fact
For each Trustee
March 17, 2000
WILLIAM E. MAYER* Trustee
William E. Mayer
JOHN J. NEUHAUSER* Trustee
John J. Neuhauser
</TABLE>
<PAGE>
Exhibit Index
(e)(1) Distributor's Contract between the Registrant and
Liberty Funds Distributor, Inc.
(e)(2) 12b-1 Plan Implementing Agreement between the
Registrant and Liberty Funds Distributor, Inc.
(j) Consent of Independent Accountants
(m) Rule 12b-1 Distribution Plan
DISTRIBUTOR'S CONTRACT
LAMCO Trust I, a Massachusetts business trust (the "Trust"), and Liberty
Funds Distributor, Inc. ("LFDI"), a Massachusetts corporation, agree effective
March 1, 1999 as follows:
1. APPOINTMENT OF LFDI. The Trust may offer an unlimited number of
separate investment series ("Funds"), each of which may have multiple classes of
shares (Shares). The Trust appoints LFDI as the principal underwriter and
distributor of Shares of Liberty All-Star Growth and Income Fund, the initial,
and as of the date set forth above the sole, Fund of the Trust (which
appointment shall be exclusive except as provided in Section 2(b) below). This
Contract will apply to each additional Fund as set forth on Appendix 2 as
Appendix 2 may be amended from time to time with the latest effective date and
signed.
2. SALE OF SHARES.
a. LFDI's Right to Purchase Shares From the Fund. LFDI, acting as
principal for its own account and not as agent for the Trust, shall
have the right to purchase Shares and shall sell Shares in accordance
with a Fund's prospectus on a "best efforts" basis. LFDI shall purchase
Shares at a price equal to the net asset value only as needed to fill
orders. LFDI will receive all sales charges. LFDI will notify the Trust
at the end of each business day of the Shares of each Fund to be
purchased.
b. Appointment of Agent for Certain Sales of Shares at Net Asset Value.
The Trust may at any time designate its shareholder servicing, transfer
and dividend disbursing agent as its agent to accept orders for (i)
Class A Shares of the Funds at net asset value, or (ii) Class I Shares,
or (iii) Class Z Shares, in either case from individuals or entities
that are entitled to purchase such shares as provided in the Trust's
prospectus, and to issue Shares directly to such purchasers.
c. Refusal to Sell Shares; Direct Issue of Shares. The Trust may at any
time (i) refuse to sell Shares hereunder or (ii) issue Shares directly
to shareholders as a stock split or dividend.
3. REDEMPTION OF SHARES. The Trust will redeem in accordance with a Fund's
prospectus all Shares tendered by LFDI pursuant to shareholder redemption
requests. LFDI will notify the Trust at the end of each business day of the
Shares of each Fund tendered.
4. COMPLIANCE. LFDI will comply with applicable provisions of the
prospectus of a Fund and with applicable laws and rules relating to the sale of
Shares and indemnifies the Trust for any damage or expense from unlawful acts by
LFDI and persons acting under its direction or authority.
5. EXPENSES. The Trust will pay all expenses associated with:
a. the registration and qualification of Shares for sale;
b. shareholder meetings and proxy solicitation;
c. Share certificates;
d. communications to shareholders; and
e. taxes payable upon the issuance of Shares to LFDI.
LFDI will pay all expenses associated with advertising and sales literature
including those of printing and distributing prospectuses and shareholder
reports, proxy materials and other shareholder communications used as sales
literature.
6. 12b-1 PLAN. Except as indicated in Appendix 1 which may be revised from
time to time, dated and signed, this Section 6 constitutes each Fund's
distribution plan (the "Plan") adopted pursuant to Rule 12b-1 (the "Rule") under
the Investment Company Act of 1940 (the "Act").
A. The Fund shall pay LFDI monthly a service fee at the annual
rate of 0.25% of the net assets of its Class A, B and C Shares on the
20th of each month and a distribution fee at the
<PAGE>
annual rate of 0.75% of the average daily net assets of its Class B and
C Shares. Each of the Funds identified on Appendix 1 as having a Class
E share 12b-1 Plan shall pay LFDI monthly a service fee at the annual
rate of 0.25% of the net assets of its Class E Shares on the 20th of
each month and a distribution fee at the annual rate of 0.10% of the
average daily net assets of its Class E Shares. Each of the Funds
identified on Appendix 1 as having a Class F share 12b-1 Plan shall pay
LFDI monthly a service fee at the annual rate of 0.25% of the net
assets of its Class F Shares on the 20th of each month and a
distribution fee at the annual rate of 0.75% of the average daily net
assets of its Class F Shares. Each of the Funds identified on Appendix
1 as having a Class G share 12b-1 Plan shall pay LFDI monthly a service
fee at the annual rate of 0.25% of the net assets of its Class G Shares
on the 20th of each month and a distribution fee at the annual rate of
0.10% of the average daily net assets of its Class G Shares outstanding
less than five years from the date of purchase and 0.25% of the average
daily net assets of its Class G Shares outstanding for five years or
more. Each of the Funds identified on Appendix 1 as having a Class H
share 12b-1 Plan shall pay LFDI monthly a service fee at the annual
rate of 0.25% of the net assets of its Class H Shares on the 20th of
each month and a distribution fee at the annual rate of 0.75% of the
average daily net assets of its Class H Shares. Each of the Funds
identified on Appendix 1 as having a Class J share 12b-1 Plan shall pay
LFDI monthly a service fee at the annual rate of 0.25% of the net
assets of its Class J Shares on the 20th of each month and a
distribution fee at the annual rate of 0.35% of the average daily net
assets of its Class J Shares. LFDI may pay part or all of the service
and distribution fees received from the Fund as commissions to
financial service firms that sell Fund Shares or as reimbursements to
financial service firms or other entities that provide shareholder
services to record or beneficial owners of shares (including third
party administrators of qualified plans). LFDI shall provide to the
Trust's Trustees, and the Trustees shall review, at least quarterly,
reports setting forth all Plan expenditures, and the purposes for those
expenditures. Amounts payable under this paragraph are subject to any
limitations on such amounts prescribed by applicable laws or rules.
B. Payments by the Trust to LFDI and its affiliates (including
Colonial Management Associates, Inc.) other than any prescribed by
Section 6A which may be indirect financing of distribution costs are
authorized by this Plan.
C. The Plan shall continue in effect with respect to a Class of
Shares only so long as specifically approved for that Class at least
annually as provided in the Rule. The Plan may not be amended to
increase materially the service fee or distribution fee with respect to
a Class of Shares without such shareholder approval as is required by
the Rule and any applicable orders of the Securities and Exchange
Commission, and all material amendments of the Plan must be approved in
the manner described in the Rule. The Plan may be terminated with
respect to a Class of Shares at any time as provided in the Rule
without payment of any penalty. The continuance of the Plan shall be
effective only if the selection and nomination of the Trust's Trustees
who are not interested persons (as defined under the Act) of the Trust
is effected by such non-interested Trustees as required by the Rule.
7. CONTINUATION, AMENDMENT OR TERMINATION. This Contract (a) supersedes
and replaces any contract or agreement relating to the subject matter hereof in
effect prior to the date hereof, (b) shall continue in effect only so long as
specifically approved at least annually by the Trustees or shareholders of the
Trust and (c) may be amended at any time by written agreement of the parties,
each in accordance with the Act. This Contract (a) shall terminate immediately
upon the effective date of any later dated agreement relating to the subject
matter hereof, and (b) may be terminated upon 60 days notice without penalty by
a vote of the Trustees or by LFDI or otherwise in accordance with the Act and
will terminate immediately in the event of assignment (as defined under the
Act). Upon termination the obligations of the parties under this Contract shall
cease except for unfulfilled obligations and liabilities arising prior to
termination. All notices shall be in writing and delivered to the office of the
other party.
2
<PAGE>
8. AGREEMENT AND DECLARATION OF TRUST. A copy of the document establishing
the Trust is filed with the Secretary of The Commonwealth of Massachusetts. This
Contract is executed by officers not as individuals and is not binding upon any
of the Trustees, officers or shareholders of the Trust individually but only
upon the assets of the Fund.
Agreed:
<TABLE>
<S> <C>
LAMCO TRUST I LIBERTY FUNDS DISTRIBUTOR, INC.
By: By:
---------------------------------------- -----------------------------------------
John L. Davenport, Secretary Marilyn Karagiannis, Managing Director
</TABLE>
3
<PAGE>
APPENDIX 1
THE FOLLOWING IS APPLICABLE TO THE 12b-1 PLAN OF THE FUNDS DESIGNATED BELOW:
(No exceptions and no Funds with classes other than Class A, B, C and Z,
as of March 1, 1999)
Dated: March 1, 1999
By:
------------------------------------------------
John L. Davenport, Secretary for LAMCO Trust I
By:
------------------------------------------------
Marilyn Karagiannis, Managing Director
Liberty Funds Distributor, Inc.
4
<PAGE>
APPENDIX 2
None as of March 1, 1999
By: ------------------------------------------------------
John L. Davenport, Secretary for LAMCO Trust I
By: ------------------------------------------------------
Marilyn Karagiannis, Managing Director
Liberty Funds Distributor, Inc.
Dated: , 1999
5
12B1- PLAN IMPLEMENTING AGREEMENT
Liberty Funds Trust IX (Trust) and Liberty Funds Distributor, Inc. (LFDI),
a Massachusetts corporation, agree effective April 29, 1999:
1. 12B-1 PLAN. The Trust, on behalf of its Fund, has adopted a so-called
"Rule 12b-1 Plan" (the "Plan") pursuant to Rule 12b-1 (the "Rule") under the
Investment Company Act of 1940 (the "Act"). Under the Rule, the Fund may,
pursuant to the Plan, pay LFDI a specified portion of its assets to be used for
the purposes specified in its Plan. The Plan shall continue in effect with
respect to a Class of Shares only so long as specifically approved for that
Class at least annually as provided in the Rule. The Plan may not be amended to
increase materially the service fee or distribution fee with respect to a Class
of Shares without such shareholder approval as is required by the Rule or any
applicable orders of the Securities and Exchange Commission, and all material
amendments of the Plan must be approved in the manner described in the Rule. The
Plan may be terminated with respect to a Class of Shares at any time as provided
in the Rule without payment of any penalty.
This Agreement shall apply to each Fund named in Appendix 1 as that
Appendix may be amended from time to time by the parties, in writing.
2. PAYMENTS, EXPENDITURES AND REPORTS.
A. The Fund shall pay LFDI the amount then due LFDI under a Plan on the
20th day of each month, or, if such day is not a business day, the next business
day thereafter, during the term of this Agreement.
B. LFDI shall expend the amounts paid to it by the Fund under a Plan in
its discretion, so long as such expenditures are consistent with the Rule, the
Plan, and any instructions LFDI may receive from the Trustees of the Trust.
C. LFDI shall make all reports required under the Act, the Rule or a
Plan to the Trustees of the Trust, as provided in the Act, the Rule and any Plan
or as requested by the Trustees.
3. CONTINUATION; AMENDMENT; TERMINATION; NOTICE.
A. This Agreement (i) supersedes and replaces any contract or agreement
relating to the subject matter hereof in effect prior to the date hereof, (ii)
shall continue in effect as to the Trust or the Fund only so long as
specifically approved at least annually by the Trustees or shareholders of the
Trust or Fund and (iii) may be amended at any time by written agreement of the
parties, each in accordance with the Act and the Rule.
B. This Agreement (i) shall terminate immediately upon the effective
date of any later dated agreement relating to the subject matter hereof, and
(ii) may be terminated upon 60 days' notice without penalty by a vote of the
Trustees or by LFDI or otherwise in accordance with the Act, and (iii) will
terminate immediately in the event of its assignment (as defined in the Act).
Upon termination the obligations of the parties under this Agreement shall cease
except for unfulfilled obligations and liabilities arising prior to termination.
C. All notices required under this Agreement shall be in writing and
delivered to the office of the other party.
<PAGE>
4. AGREEMENT AND DECLARATION OF TRUST. A copy of the document establishing
the Trust is filed with the Secretary of The Commonwealth of Massachusetts. As
to the Trust this Agreement is executed by officers not as individuals and is
not binding upon any of the Trustees, officers or shareholders of the Trust
individually but only upon the assets of the relevant Fund.
Agreed:
LIBERTY FUNDS TRUST IX LIBERTY FUNDS DISTRIBUTOR, INC.
By: By:
---------------------------------- ------------------------------------
Nancy L. Conlin, Secretary Maureen Sweeney, Managing Director
<PAGE>
APPENDIX 1
Trust Series
Liberty Trust IX
Liberty All-Star Growth and Income Fund
By:
----------------------------------------------
Nancy L. Conlin, Secretary
Liberty Funds Distributor, Inc.
By:
----------------------------------------------
Maureen Sweeney, Managing Director
Dated: April 29, 1999
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Post-Effective
Amendment No. 3 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated February 11, 2000, relating to the financial
statements and financial highlights which appear in the December 31, 1999 Annual
Report to Shareholders of Liberty All-Star Growth & Income Fund, which are also
incorporated by reference into the Registration Statement. We also consent to
the references to us under the headings "Financial Highlights" and "Independent
Accountants" in such Registration Statement.
PricewaterhouseCoopers LLP
Boston, Massachusetts
March 17, 2000
LIBERTY FUNDS TRUST IX
RULE 12B-1 DISTRIBUTION PLAN
APRIL 29, 1999
Liberty Funds Trust IX (Trust), adopts the following distribution plan
(the Plan) pursuant to Rule 12b-1 (the Rule) under the Investment Company Act of
1940 (Act) on behalf of each Fund in the Trust designated in Appendix 1 as
revised from time to time.
I. PLANS APPLYING TO CLASS A, B AND C SHARES
Except as indicated below, each Fund having Class A, B or C Shares
shall pay a service fee at the annual rate of 0.25% of the net assets of its
Class A, B and C Shares, and a distribution fee at the annual rate of 0.75% of
the average daily net assets of its Class B and C Shares.
THE FOLLOWING FUNDS DO NOT HAVE 12B-1 PLANS FOR THE SPECIFIED CLASSES OF SHARES:
LIBERTY ALL-STAR GROWTH AND INCOME FUND: Class Z shares.
II. PAYMENTS OF FEES UNDER THE PLAN
Each Fund shall make all payments of service and distribution fees
under this Plan to Liberty Funds Distributor, Inc. (LFDI) monthly, on the 20th
day of each month or, if such day is not a business day, on the next business
day thereafter. No Fund shall pay, nor shall LFDI be entitled to receive, any
amount under this Plan if such payment would result in LFDI receiving amounts in
excess of those permitted by applicable law or by rules of the National
Association of Securities is Dealers, Inc.
III. USE OF FEES.
LFDI may pay part or all of the service and distribution fees it
receives from a Fund as commissions to financial service firms that sell Fund
Shares or as reimbursements to financial service firms or other entities that
provide shareholder services to record or beneficial owners of shares (including
third party administrators of qualified plans). This provision does not obligate
LFDI to make any such payments nor limit the use that LFDI may make of the fees
it receives.
IV. REPORTING
LFDI shall provide to the Trust's Trustees, and the Trustees shall
review, at least quarterly, reports setting forth all Plan expenditures, and the
purposes for those expenditures. Amounts payable under this paragraph are
subject to any limitations on such amounts prescribed by applicable laws or
rules.
V. OTHER PAYMENTS AUTHORIZED
Payments by the Trust to LFDI and its affiliates (including Colonial
Management Associates, Inc.) other than as set forth in Section I which may be
indirect financing of distribution costs are authorized by this Plan.
<PAGE>
VI. CONTINUATION; AMENDMENT; TERMINATION
This Plan shall continue in effect with respect to a Class of Shares
only so long as specifically approved for that Class at least annually as
provided in the Rule. The Plan may not be amended to increase materially the
service fee or distribution fee with respect to a Class of Shares without such
shareholder approval as is required by the Rule and any applicable orders of the
Securities and Exchange Commission, and all material amendments of the Plan must
be approved in the manner described in the Rule. The Plan may be terminated with
respect to any Class of Shares at any time as provided in the Rule without
payment of any penalty. The continuance of the Plan shall be effective only if
the selection and nomination of the Trust's Trustees who are not interested
persons (as defined under the Act) of the Trust is effected by such
non-interested Trustees as required by the Rule.
Approved by the Trustees as of the date set forth above:
By: _____________________________________
Nancy L. Conlin, Secretary For The Trust
<PAGE>
APPENDIX 1
Trust Series
Liberty Funds Trust IX
Liberty All-Star Growth and Income Fund
