Registration Nos: 2-41251
811-2214
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. 56 [ X ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 38 [ X ]
LIBERTY FUNDS TRUST I (FORMERLY COLONIAL 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, Esq. John M. Loder, Esq.
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):
[ ] Immediately upon filing pursuant to paragraph (b).
[ X ] On June 1, 1999 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 FUNDS TRUST I (FORMERLY COLONIAL TRUST I)
Cross Reference Sheet Pursuant to Rule 481(a)
(Stein Roe Advisor Tax-Managed Value Fund)
Classes A, B and C
Item Number of Form N-1A Prospectus Location or Caption
PART A
1 Front Cover Page; Back Cover Page
2 The Fund; Other Investment Strategies and Risks
3 The Fund
4 The Fund
5 Not Applicable
6 Front Cover; Managing the Fund; Your Account
7 Your Account
8 The Fund; Your Account
9 Not Applicable
<PAGE>
STEIN ROE ADVISOR TAX-MANAGED VALUE FUND PROSPECTUS, JUNE 1, 1999
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CLASS A, B AND C SHARES
Advised by Stein Roe & Farnham Incorporated
Although these securities have been registered with the Securities and Exchange
Commission, the Commission has not approved 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 .............................................. 2
Your Expenses ......................................................... 3
YOUR ACCOUNT .......................................................... 4
How to Buy Shares ..................................................... 4
Sales Charges ......................................................... 5
How to Exchange Shares ................................................ 7
How to Sell Shares .................................................... 7
Distribution and Service Fees ......................................... 8
Other Information About Your Account .................................. 9
MANAGING THE FUND ..................................................... 11
Investment Advisor .................................................... 11
Portfolio Manager ..................................................... 11
OTHER INVESTMENT STRATEGIES AND RISKS ................................. 12
</TABLE>
<PAGE>
THE FUND
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UNDERSTANDING TAX-MANAGED INVESTING
In managing the Fund, the advisor uses investment strategies that are designed
to reduce (but not eliminate) the payment by the fund of taxable distributions
to shareholders. These strategies include: buying stocks that pay low dividends
or no dividends at all; maintaining a low portfolio turnover rate which helps to
minimize the realization and distribution of taxable gains; deferring the sale
of a security until the realized gain would qualify as a long-term capital gain
rather than a short-term capital gain; selling securities to create a loss to
offset gains realized on other securities; and selling the higher cost basis
portion of a security holding before the lower cost basis portion. The advisor
will also utilize certain active, tax-management strategies. These include tax
switches, dividend rolls and selling and reinvesting strategies. See "Other
Investment Strategies and Risks" for further details.
From time to time, the Fund expects to distribute taxable income and capital
gains. Market conditions may limit the Fund's ability to generate tax losses or
to avoid dividend income. Additionally, the ability to use certain
tax management techniques may be curtailed or eliminated in the future by tax
legislation or regulation.
INVESTMENT GOAL
The Fund seeks long-term capital growth while reducing shareholder exposure to
taxes.
PRIMARY INVESTMENT STRATEGIES
The Fund invests primarily in large capitalization and middle capitalization
stocks that have at least $1 billion in equity market capitalization at the time
of purchase. The Fund also invests in foreign securities, including depositary
receipts.
In managing the Fund, the advisor uses a value investment strategy that focuses
on buying stocks cheaply when they are undervalued or "out of favor." The
advisor buys stocks that have attractive current prices, consistent operating
performance and/or favorable future growth prospects. The advisor's strategy
uses fact-based, quantitative analysis supported by fundamental business and
financial analysis.
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 cause you to lose money by investing in the Fund or prevent the Fund from
achieving its goal.
Market risk is the risk that the price of a security held by the Fund will fall
due to changing economic, political or market conditions. Credit risk is the
risk that the price of a security will fall due to unfavorable changes in the
financial condition of the company which issued the security.
Value stocks are securities of companies that the advisor believes are
undervalued. These companies may have experienced adverse business or industry
developments or may be subject to special risks that have caused the stocks to
be out of favor. If the advisor's assessment of a company's prospects is wrong,
the price of its stock may fall or may not approach the value the advisor has
placed on it.
2
<PAGE>
THE FUND
Foreign securities are subject to special risks. The Fund may invest in foreign
securities either indirectly (e.g., depositary receipts) or directly into
foreign stock markets. Foreign stock markets can be extremely volatile. The
liquidity of foreign securities may be more limited than domestic securities,
which means that the Fund may, at times, be unable to sell foreign
securities at desirable prices. Fluctuations in currency exchange rates may
impact the value of foreign securities. Brokerage commissions, custodial fees
and other fees are generally higher for foreign investments. In addition,
foreign governments may impose withholding taxes which would reduce the amount
of income available to distribute to shareholders. Other risks include the
following: possible delays in the settlement of transactions; less publicly
available information about companies; the impact of political, social or
diplomatic events; and possible seizure, expropriation or nationalization of the
company or its assets.
3
<PAGE>
THE FUND
UNDERSTANDING EXPENSES
SHAREHOLDER FEES are paid directly by shareholders to the Fund's distributor.
ANNUAL FUND OPERATING EXPENSES are deducted from the Fund. They include
management 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
- - No expense reductions in effect
YOUR EXPENSES
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Expenses are one of several factors to 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 (PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<CAPTION>
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
offering price) 1.00(2) 5.00 1.00
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Redemption fee(1) (as a percentage of amount
redeemed, if applicable) None None None
</TABLE>
ANNUAL FUND OPERATING EXPENSES (DEDUCTED DIRECTLY FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Management and administration fees (%) 1.00 1.00 1.00
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Distribution and service (12b-1) fees (%) 0.30 1.00 1.00
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Other expenses (%) (3) 0.67 0.67 0.67
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Total annual fund operating expenses (%) 1.97 2.67 2.67
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Expense Reimbursement(4) (%) 0.17 0.17 0.17
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Net Expenses (%) 1.80 2.50 2.50
</TABLE>
EXAMPLE EXPENSES (YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER)
<TABLE>
<CAPTION>
CLASS 1 YEAR 3 YEARS
<S> <C> <C>
Class A $764 $1,158
- --------------------------------------------------------------
Class B: did not sell your shares $270 $ 830
sold all your shares at
the end of the period $770 $1,130
- --------------------------------------------------------------
Class C: did not sell your shares $270 $ 830
sold all your shares at
the end of the period $370 $ 830
</TABLE>
(1) There is a $7.50 charge for wiring sale proceeds to your bank.
(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) "Other Expenses" are based on estimated amounts for the current fiscal
year.
(4) The Fund's advisor has agreed to bear the Fund's expenses such that "Other
expenses" do not exceed 0.50% annually. These payments made by the advisor
on behalf of the Fund are subject to reimbursement by the Fund to the
advisor. This will be accomplished by the payment of an expense
reimbursement fee by the Fund to the advisor computed and paid monthly,
with a limitation that immediately after such payment the Fund's "Other
expenses" will not exceed 0.50% annually. This arrangement terminates on
the earlier of (i) the date on which expense reimbursement payments by the
Fund equal the prior payment of such reimbursable expenses by the advisor,
or (ii) three years from the date the Fund's shares are offered for sale.
This arrangement may be terminated at an earlier date by the advisor.
4
<PAGE>
YOUR ACCOUNT
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INVESTMENT MINIMUMS(5)
<TABLE>
<S> <C>
Initial Investment ...................................... $1,000
Subsequent Investments .................................. $ 50
Automatic Purchase Plans ................................ $ 50
Retirement Plans ........................................ $ 25
</TABLE>
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 public offering price. In "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.
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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.
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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 (LOI) 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
another Fund at no additional cost. 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 (EFT)
1-800-422-3737. Your money may take up to two business days to
be invested. 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 automatically
investment plan from your bank account to your fund account. You can select a
pre-authorized amount to be sent via EFT. 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 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>
(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.
5
<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. Purchases of more
than $250,000 but less than $1 million can be made only in Class A or Class C
shares. Purchases of $1 million or more are automatically invested in Class A
shares. 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 investors.
SALES CHARGES
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 (SAI).
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. 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.
THE FUND
<TABLE>
<CAPTION>
AS A % OF
THE PUBLIC AS A %
OFFERING OF YOUR
AMOUNT OF PURCHASE PRICE INVESTMENT
<S> <C> <C>
Less than $50,000 5.75 6.10
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$50,000 to less than $100,000 4.50 4.71
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$100,000 to less than $250,000 3.50 3.63
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$250,000 to less than $500,000 2.50 2.56
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$500,000 to less than $1,000,000 2.00 2.04
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$1,000,000 or more(6) 0.00 0.00
</TABLE>
(6) Class A shares bought without an initial sales charge in accounts
aggregating $1 million to $5 million at the time of purchase, may be
subject to a 1% CDSC if the shares are sold within 18 months of the time
of purchase. 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. The 18-month period begins on the first day of the month
following each purchase.
6
<PAGE>
YOUR ACCOUNT
UNDERSTANDING CONTINGENT DEFERRED SALES CHARGES
Certain investments in Class A, B and C shares are subject to a CDSC. 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 NAV 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.
CLASS A SHARES For Class A share purchases of $1 million or more, financial
advisors receive a commission from the Fund's distributor, Liberty Funds
Distributor, Inc. (LFD), as follows:
PURCHASES OVER $1 MILLION
<TABLE>
<CAPTION>
AMOUNT PURCHASED COMMISSION %
<S> <C>
First $3 million 1.00
- -----------------------------------------------------------------------
Next $2 million 0.50
- -----------------------------------------------------------------------
Over $5 million 0.25(7)
</TABLE>
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 $50,000 within 13 months. If
your Statement of Intent purchases are not completed within 13 months, you will
be charged the applicable sales charge. 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 SAI 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 carry a CDSC, or back-end charge,
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. Class B shares automatically convert to Class A shares
after eight years. LFD pays the financial advisor firm an up-front commission of
5.00% on sales of Class B shares.
THE FUND
<TABLE>
<CAPTION>
% DEDUCTED WHEN
HOLDING PERIOD AFTER PURCHASE SHARES ARE SOLD
<S> <C>
Through first year 5.00
- ------------------------------------------------------------------------
Through second year 4.00
- ------------------------------------------------------------------------
Through third year 3.00
- ------------------------------------------------------------------------
Through fourth year 3.00
- ------------------------------------------------------------------------
Through fifth year 2.00
- ------------------------------------------------------------------------
Through sixth year 1.00
- ------------------------------------------------------------------------
Longer than six years 0.00
</TABLE>
(7) Paid over 12 months but only to the extent the shares remain outstanding.
7
<PAGE>
YOUR ACCOUNT
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% 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. LFD pays the financial advisor firm an up-front
commission of 1.00% on sales of Class C shares.
THE FUND
<TABLE>
<CAPTION>
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
You may exchange your shares for shares of the same share class of another fund
distributed by LFD at NAV. 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 the advisor's 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" 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.
However, if you purchased your shares by check, the Fund may delay the sale of
your shares for up to 15 days after your initial purchase to protect against
checks that are returned.
8
<PAGE>
YOUR ACCOUNT
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 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.
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By mail You may send a signed LOI or stock power form along with any
certificates to be sold to the address below. In your LOI,
note your 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 (IRA) owners. For details, call 1-800-345-6611.
Mail your LOI 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. These annual
distribution and service fees may equal up to 0.30% for Class A shares and 1.00%
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 eight years,
eliminating a portion of the distribution fee.
9
<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 NAV. The NAV is determined at the close of the NYSE,
usually 4:00 p.m. Eastern time on each business day that the NYSE is open
(typically Monday through 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 LFD. In most cases, in order to receive that day's price, LFD 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 its total net
assets by the number of 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 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 LFD.
10
<PAGE>
YOUR ACCOUNT
UNDERSTANDING FUND DISTRIBUTIONS
The Fund earns income from the securities it holds. The Fund also may experience
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/Ordinary Represents interest and dividends earned from securities held by
income the Fund; also includes short-term capital gains, which are
gains on sales of securities the Fund buys and then sells
within a 12-month period.
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Capital gains Represents capital gains on sales of securities held for
more than 12 months.
</TABLE>
DISTRIBUTION OPTIONS The Fund distributes dividends and any capital gains
(including short-term capital gains) at least annually. You can choose one of
the following options 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 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 EFT
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 dividends and short-term capital gains distributions 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 foreign, 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, local and foreign
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
will be reinvested in additional shares of the Fund.
11
<PAGE>
MANAGING THE FUND
INVESTMENT ADVISOR
Stein Roe & Farnham Incorporated (Stein Roe), located at One South Wacker Drive,
Suite 3500, Chicago, Illinois 60606, is the Fund's investment advisor. In its
duties as investment advisor, Stein Roe runs the Fund's day-to day business,
including placing all orders for the purchase and sale of the Fund's portfolio
securities. Stein Roe has been an investment advisor since 1932. As of April 30,
1999, Stein Roe managed over $30 million in assets.
Stein Roe's mutual funds and institutional investment advisory businesses are
managed together with that of its affiliate, Colonial Management Associates,
Inc. (Colonial), by a combined management team of employees from both companies.
Colonial also shares personnel, facilities and systems with Stein Roe that may
be used in providing administrative services to the Fund. Both Stein Roe and
Colonial are subsidiaries of Liberty Financial Companies, Inc.
The Fund pays Stein Roe an advisory fee of 0.80% of the Fund's average daily net
assets.
Stein Roe may use the services of AlphaTrade Inc., an affiliated broker-dealer,
when buying or selling equity securities for the Fund's portfolio, pursuant to
procedures adopted by the Board of Trustees.
PORTFOLIO MANAGER
SCOTT SCHERMERHORN, senior vice president of Stein Roe, has managed the Fund
since its inception. Prior to joining Stein Roe in October, 1998, Mr.
Schermerhorn was head of the value investment team at Federated Investors
(Federated) from 1996 to 1998. While at Federated, he managed American Leader
Fund, Federated Stock Trust, Federated Stock and Bond Fund as well as other
institutional accounts. Prior to 1996, Mr. Schermerhorn was a member of the
growth and income team at J&W Seligman.
The Fund is also managed by a team of investment professionals assigned to it by
Stein Roe.
12
<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
utilize other investment techniques. These securities and investment techniques
offer certain opportunities and carry various risks.
The Fund may elect not to buy all of these securities or use all of these other
techniques to the fullest extent permitted, 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 techniques, is
contained in the SAI.
TAX SWITCH
A tax switch involves selling one stock at a loss and simultaneously purchasing
a stock that the advisor believes has similar or better long-term growth
potential. The Fund will use tax switches to build inventories of losses, which
can be used to offset future gains for up to eight years, helping to increase
the potential for tax efficiency.
DIVIDEND ROLLS
A dividend roll program seeks to invest in high-dividend stocks shortly before
the dividend is paid and selling these stocks, at a loss, immediately after
collecting the dividend. The Fund's advisor use various dividend roll techniques
to offset fund management expenses, and increase the potential for tax
efficiency by converting operating losses into short-term capital loses which
can be used to offset future gains.
SELL AND REINVEST STRATEGIES
The Fund has a long-term perspective when investing in stocks. However, the
advisor may sell a stock at a short-term loss and repurchasing that same stock
after 30 days. The resulting short-term loss can be used to offset future gains
in the portfolio while the Fund continues to maintain it's position in that
company's long-term growth potential.
TEMPORARY DEFENSIVE STRATEGIES
At times, the advisor may determine that adverse market conditions make it
desirable to suspend temporarily 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.
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 SAI, which you may obtain by contacting LFD (see back cover for
address and phone number). Approval by the Fund's shareholders is not required
to modify or change the Fund's goal or investment strategies.
13
<PAGE>
OTHER INVESTMENT STRATEGIES AND RISKS
YEAR 2000 COMPLIANCE
Like other investment companies, financial and business organizations and
individuals around the world, the Fund could be adversely affected if the
computer systems used by the advisor and other service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. This is commonly known as the "Year 2000 Problem." The Fund's advisor,
administrator, distributor, and transfer agent (Liberty Companies) are taking
steps that they believe are reasonably designed to address the Year 2000
Problem, including communicating with vendors who furnish services, software and
systems to the Fund, to provide that date-related information and data can be
properly processed after January 1, 2000. Many Fund service providers and
vendors, including the Liberty Companies, are in the process of making Year 2000
modifications to their software and systems and believe that such modifications
will be completed on a timely basis prior to January 1, 2000. However, no
assurances can be given that all modifications required to ensure proper data
processing and calculation on and after January 1, 2000 will be timely made or
that services to the Fund will not be adversely affected.
14
<PAGE>
NOTES
15
<PAGE>
NOTES
16
<PAGE>
FOR MORE INFORMATION
More information about the Fund's investments will be published in the Fund's
semi-annual and annual reports to shareholders. The annual report will contain a
discussion of the market conditions and investment strategies that significantly
affected the Fund's performance over its last fiscal year.
You may wish to read the SAI for more information on the Fund and the securities
in which it invests. The SAI 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 SAI, 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 SEC 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
writing the:
Public Reference Room
Securities and Exchange Commission
Washington, DC 20549-6009
Information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
INVESTMENT COMPANY ACT FILE NUMBER:
Liberty Funds Trust I (formerly Colonial Trust I): 811-2214
- - Stein Roe Advisor Tax-Managed Value Fund
[Liberty Logo]
LIBERTY
COLONIAL - CRABBE HUSON - NEWPORT - STEIN ROE ADVISOR
Liberty Funds Distributor, Inc. (c) 1999
One Financial Center, Boston, MA 02111-2621, 1-800-426-3750
Visit us at www.libertyfunds.com
MV-01/144H-0599
<PAGE>
LIBERTY FUNDS TRUST I (FORMERLY COLONIAL TRUST I)
Cross Reference Sheet Pursuant to Rule 481(a)
(Stein Roe Advisor Tax-Managed Value Fund)
Class Z
Item Number of Form N-1A Prospectus Location or Caption
PART A
1 Front Cover Page; Back Cover Page
2 The Fund; Other Investment Strategies and Risks
3 The Fund
4 The Fund
5 Not Applicable
6 Front Cover; Managing the Fund; Your Account
7 Your Account
8 The Fund; Your Account
9 Not Applicable
<PAGE>
STEIN ROE ADVISOR TAX-MANAGED VALUE FUND PROSPECTUS, JUNE 1, 1999
CLASS Z SHARES
Advised by Stein Roe & Farnham Incorporated
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. (LFD) 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
advisor affiliates of LFD provided that the clients meet certain criteria
established by LFD and its affiliates.
Although these securities have been registered with the Securities and Exchange
Commission, the Commission has not approved 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
Insured
May Lose Value
No Bank Guarantee
TABLE OF CONTENTS
<TABLE>
<CAPTION>
THE FUND 2
<S> <C>
Investment Goal ............................................2
Primary Investment Strategies ..............................2
Primary Investment Risks ...................................2
Your Expenses ..............................................3
YOUR ACCOUNT 4
How to Buy Shares ..........................................4
Sales Charges ..............................................5
How to Exchange Shares .....................................5
How to Sell Shares .........................................5
Other Information About Your Account .......................7
MANAGING THE FUND 9
Investment Advisor .........................................9
Portfolio Manager ..........................................9
OTHER INVESTMENT 10
STRATEGIES AND RISKS
</TABLE>
<PAGE>
THE FUND
UNDERSTANDING TAX-MANAGED INVESTING
In managing the Fund, the advisor uses investment strategies that are designed
to reduce (but not eliminate) the payment by the fund of taxable distributions
to shareholders. These strategies include: buying stocks that pay low dividends
or no dividends at all; maintaining a low portfolio turnover rate which helps to
minimize the realization and distribution of taxable gains; deferring the sale
of a security until the realized gain would qualify as a long-term capital gain
rather than a short-term capital gain; selling securities to create a loss to
offset gains realized on other securities; and selling the higher cost basis
portion of a security holding before the lower cost basis portion. The advisor
will also utilize certain active, tax-management strategies. These include tax
switches, dividend rolls and selling and reinvesting strategies. See "Other
Investment Strategies and Risks" for further details.
From time to time, the Fund expects to distribute taxable income and capital
gains. Market conditions may limit the Fund's ability to generate tax losses or
to avoid dividend income. Additionally, the ability to use certain
tax management techniques may be curtailed or eliminated in the future by tax
legislation or regulation.
INVESTMENT GOAL
The Fund seeks long-term capital growth while reducing shareholder exposure to
taxes.
PRIMARY INVESTMENT STRATEGIES
The Fund invests primarily in large capitalization and middle capitalization
stocks that have at least $1 billion in equity market capitalization at the time
of purchase. The Fund also invests in foreign securities, including depositary
receipts.
In managing the Fund, the advisor uses a value investment strategy that focuses
on buying stocks cheaply when they are undervalued or "out of favor." The
advisor buys stocks that have attractive current prices, consistent operating
performance and/or favorable future growth prospects. The advisor's strategy
uses fact-based, quantitative analysis supported by fundamental business and
financial analysis.
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 cause you to lose money by investing in the Fund or prevent the Fund from
achieving its goal.
Market risk is the risk that the price of a security held by the Fund will fall
due to changing economic, political or market conditions. Credit risk is the
risk that the price of a security will fall due to unfavorable changes in the
financial condition of the company which issued the security.
Value stocks are securities of companies that the advisor believes are
undervalued. These companies may have experienced adverse business or industry
developments or may be subject to special risks that have caused the stocks to
be out of favor. If the advisor's assessment of a company's prospects is wrong,
the price of its stock may fall or may not approach the value the advisor has
placed on it.
2
<PAGE>
The Fund
Foreign securities are subject to special risks. The Fund may invest in foreign
securities either indirectly (e.g., depositary receipts) or directly into
foreign stock markets. Foreign stock markets can be extremely volatile. The
liquidity of foreign securities may be more limited than domestic securities,
which means that the Fund may, at times, be unable to sell foreign
securities at desirable prices. Fluctuations in currency exchange rates may
impact the value of foreign securities. Brokerage commissions, custodial fees
and other fees are generally higher for foreign investments. In addition,
foreign governments may impose withholding taxes which would reduce the amount
of income available to distribute to shareholders. Other risks include the
following: possible delays in the settlement of transactions; less publicly
available information about companies; the impact of political, social or
diplomatic events; and possible seizure, expropriation or nationalization of the
company or its assets.
3
<PAGE>
THE FUND
UNDERSTANDING EXPENSES
SHAREHOLDER FEES are paid directly by shareholders to the Fund's distributor.
ANNUAL FUND OPERATING EXPENSES are deducted from the Fund. They include
management 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
- - No expense reductions in effect
YOUR EXPENSES
Expenses are one of several factors to 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 (PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<CAPTION>
CLASS Z
<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
offering price) 0.00
- -------------------------------------------------------------------
Redemption fee(1) (as a percentage of amount
redeemed, if applicable) None
</TABLE>
ANNUAL FUND OPERATING EXPENSES (DEDUCTED DIRECTLY FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS A
<S> <C>
Management and administration fees (%) 1.00
- ---------------------------------------------------------------
Distribution and service (12b-1) fees (%) 0.00
- ---------------------------------------------------------------
Other expenses (%) (2) 0.67
- ---------------------------------------------------------------
Total annual fund operating expenses (%) 1.67
- ---------------------------------------------------------------
Expense Reimbursement(3)(%) 0.17
- ---------------------------------------------------------------
Net Expenses (%) 1.50
</TABLE>
EXAMPLE EXPENSES (YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER)
<TABLE>
<CAPTION>
CLASS 1 YEAR 3 YEARS
<S> <C> <C>
Class Z $170 $527
</TABLE>
(1) There is a $7.50 charge for wiring sale proceeds to your bank.
(2) "Other Expenses" are based on estimated amounts for the current fiscal year.
(3) The Fund's advisor has agreed to bear the Fund's expenses such that "Other
expenses" do not exceed 0.50% annually. These payments made by the advisor
on behalf of the Fund are subject to reimbursement by the Fund to the
advisor. This will be accomplished by the payment of an expense
reimbursement fee by the Fund to the advisor computed and paid monthly, with
a limitation that immediately after such payment the Fund's "Other expenses"
will not exceed 0.50% annually. This arrangement terminates on the earlier
of (i) the date on which expense reimbursement payments by the Fund equal
the prior payment of such reimbursable expenses by the advisor, or (ii)
three years from the date the Fund's shares are offered for sale. This
arrangement may be terminated at an earlier date by the advisor.
4
<PAGE>
YOUR ACCOUNT
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. In "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
financial advisor account and buy Fund shares on your behalf.
- ------------------------------------------------------------------------------------------
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.
- ------------------------------------------------------------------------------------------
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 (LOI)
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 of the Fund or Class A of another Fund at
no additional cost. 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 funds You may purchase shares by electronically transferring
transfer (EFT) money from your bank account to your fund account by
calling 1-800-422-3737. Your money may take up to two
business days to be invested. 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 auto-
investment plan matically from your bank account to your fund account.
You can select a pre-authorized amount to be sent via
EFT. Be sure to complete the appropriate section of
the application for this feature.
- ------------------------------------------------------------------------------------------
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
<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.
SALES CHARGES
Your purchases of Class Z shares generally are at net asset value (NAV), which
is the value of a Fund share excluding any sales charge and are not subject to
an initial sales charge when you purchase, or a contingent deferred sales charge
when you sell, shares of the Fund. 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 LFD 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 advisor affiliates of LFD provided that the clients meet certain
criteria established by LFD and its affiliates.
HOW TO EXCHANGE SHARES
You may exchange your shares for shares of the same share class of another fund
distributed by LFD or Class A shares of another fund at NAV. 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 the advisor's 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" 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.
The Fund will generally send proceeds from the sale to you within seven days.
However, if you purchased your shares by check, the Fund may delay the sale of
your shares for up to 15 days after your initial purchase to protect against
checks that are returned.
6
<PAGE>
YOUR ACCOUNT
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
financial advisor sell 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 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.
- -----------------------------------------------------------------------------------------
By mail You may send a signed LOI or stock power form to
the address below. In your LOI, note your 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 (IRA) owners. For details, call
1-800-345-6611.
Mail your LOI 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
funds transfer be 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>
7
<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 NAV. The NAV is determined at the close of the NYSE, usually
4:00 p.m. Eastern time on each business day that the NYSE is open (typically
Monday through Friday).
When you request a transaction, it will be processed at the NAV next determined
after your request is received in good form by LFD. In most cases, in order to
receive that day's price, LFD 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 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.
8
<PAGE>
YOUR ACCOUNT
UNDERSTANDING FUND DISTRIBUTIONS
The Fund earns income from the securities it holds. The Fund also may experience
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>
<CAPTION>
<S> <C>
Dividend/Ordinary Represents interest and dividends earned from
income securities held by the Fund; also includes short-term
capital gains which are gains on sales of securities the
Fund buys and then sells within a 12-month period.
- ---------------------------------------------------------------------------------
Capital gains Represents capital gains on sales of securities held for
more than 12 months.
</TABLE>
DISTRIBUTION OPTIONS The Fund distributes any dividends and any capital gains
(including short-term capital gains) at least annually. You can choose one of
the following options for these distributions when you open your account.(4) 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 and reinvest capital gains(5)
- -------------------------------------------------------------------------------
Receive all distributions in cash (with one of the following options):(5)
- -------------------------------------------------------------------------------
- - send the check to your address of record
- - send the check to a third party address
- - transfer the money to your bank via EFT
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 dividends and short-term capital gains distributions 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 foreign, 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 income tax.
(4) 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.
(5) 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.
9
<PAGE>
MANAGING THE FUND
INVESTMENT ADVISOR
Stein Roe & Farnham Incorporated (Stein Roe), located at One South Wacker Drive,
Suite 3500, Chicago, Illinois 60606, is the Fund's investment advisor. In its
duties as investment advisor, Stein Roe runs the Fund's day-to day business,
including placing all orders for the purchase and sale of the Fund's portfolio
securities. Stein Roe has been an investment advisor since 1932. As of April 30,
1999, Stein Roe managed over $30 million in assets.
Stein Roe's mutual funds and institutional investment advisory businesses are
managed together with that of its affiliate, Colonial Management Associates,
Inc. (Colonial), by a combined management team of employees from both companies.
Colonial also shares personnel, facilities and systems with Stein Roe that may
be used in providing administrative services to the Fund. Both Stein Roe and
Colonial are subsidiaries of Liberty Financial Companies, Inc.
The Fund pays Stein Roe an advisory fee of 0.80% of the Fund's average daily net
assets.
Stein Roe may use the services of AlphaTrade Inc., an affiliated broker-dealer,
when buying or selling equity securities for the Fund's portfolio, pursuant to
procedures adopted by the Board of Trustees.
PORTFOLIO MANAGER
Scott Schermerhorn, senior vice president of Stein Roe, has managed the Fund
since its inception. Prior to joining Stein Roe in October, 1998, Mr.
Schermerhorn was head of the value investment team at Federated Investors
(Federated) from 1996 to 1998. While at Federated, he managed American Leader
Fund, Federated Stock Trust, Federated Stock and Bond Fund as well as other
institutional accounts. Prior to 1996, Mr. Schermerhorn was a member of the
growth and income team at J&W Seligman.
The Fund is also managed by a team of investment professionals assigned to it by
Stein Roe.
10
<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
utilize other investment techniques. These securities and investment techniques
offer certain opportunities and carry various risks.
The Fund may elect not to buy all of these securities or use all of these other
techniques to the fullest extent permitted, 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 techniques, is
contained in the SAI.
TAX SWITCH
A tax switch involves selling one stock at a loss and simultaneously purchasing
a stock that the advisor believes has similar or better long-term growth
potential. The Fund will use tax switches to build inventories of losses, which
can be used to offset future gains for up to eight years, helping to increase
the potential for tax efficiency.
DIVIDEND ROLLS
A dividend roll program seeks to invest in high-dividend stocks shortly before
the dividend is paid and selling these stocks, at a loss, immediately after
collecting the dividend. The Fund's advisor use various dividend roll techniques
to offset fund management expenses, and increase the potential for tax
efficiency by converting operating losses into short-term capital loses which
can be used to offset future gains.
SELL AND REINVEST STRATEGIES
The Fund has a long-term perspective when investing in stocks. However, the
advisor may sell a stock at a short-term loss and repurchasing that same stock
after 30 days. The resulting short-term loss can be used to offset future gains
in the portfolio while the Fund continues to maintain its position in that
company's long-term growth potential.
TEMPORARY DEFENSIVE STRATEGIES
At times, the advisor may determine that adverse market conditions make it
desirable to suspend temporarily 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.
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 (SAI), which you may obtain by
contacting Liberty Funds Distributor, Inc. (LFD) (see back cover for address and
phone number). Approval by the Fund's shareholders is not required to modify or
change the Fund's goal or investment strategies.
11
<PAGE>
OTHER INVESTMENT STRATEGIES AND RISKS
YEAR 2000 COMPLIANCE
Like other investment companies, financial and business organizations and
individuals around the world, the Fund could be adversely affected if the
computer systems used by the advisor and other service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. This is commonly known as the "Year 2000 Problem." The Fund's advisor,
administrator, distributor and transfer agent (Liberty Companies) are taking
steps that they believe are reasonably designed to address the Year 2000
Problem, including communicating with vendors who furnish services, software and
systems to the Fund, to provide that date-related information and data can be
properly processed after January 1, 2000. Many Fund service providers and
vendors, including the Liberty Companies, are in the process of making Year 2000
modifications to their software and systems and believe that such modifications
will be completed on a timely basis prior to January 1, 2000. However, no
assurances can be given that all modifications required to ensure proper data
processing and calculation on and after January 1, 2000 will be timely made or
that services to the Fund will not be adversely affected.
12
<PAGE>
FOR MORE INFORMATION
More information about the Fund's investments will be published in the Fund's
semi-annual and annual reports to shareholders. The annual report will contain a
discussion of the market conditions and investment strategies that significantly
affected the Fund's performance over its last fiscal year.
You may wish to read the SAI for more information on the Fund and the securities
in which it invests. The SAI 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 SAI, 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 SEC 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
writing the:
Public Reference Room
Securities and Exchange Commission
Washington, DC 20549-6009
Information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
INVESTMENT COMPANY ACT FILE NUMBER:
Liberty Funds Trust I (formerly Colonial Trust I): 811-2214
- - Stein Roe Advisor Tax-Managed Value Fund
[LOGO]
L I B E R T Y
COLONIAL - CRABBE HUSON - NEWPORT - STEIN ROE ADVISOR
Liberty Funds Distributor, Inc. (C) 1999
One Financial Center, Boston, MA 02111-2621, 1-800-426-3750
Visit us at www.libertyfunds.com
MV-01/143H-0599
<PAGE>
LIBERTY FUNDS TRUST I (FORMERLY COLONIAL TRUST I)
Cross Reference Sheet Pursuant to Rule 481(a)
(Stein Roe Advisor Tax-Managed Value Fund)
<TABLE>
<CAPTION>
Location or Caption in Statement of
Item Number of Form N-1A Additional Information
<S> <C>
PART B
10. Cover Page; Table of Contents
11. Organization and History
12. Investment Objective and Policies; Fundamental Investment
Policies; Other Investment Policies
13. Fund Charges and Expenses; Management of the Funds
14. Fund Charges and Expenses; Management of the Funds
15. Fund Charges and Expenses; Management of the Fund
16. Fund Charges and Expenses; Management of the Funds
17. Management of the Funds
18. How to Buy Shares; Special Purchase Programs/Investor
Services; Programs for Reducing or Eliminating Sales
Charges; How to Sell Shares; How to Exchange Shares;
Determination of Net Asset Value
19. Taxes
20. Fund Charges and Expenses; Management of the Funds
21. Performance Measures
22. Not Applicable
</TABLE>
<PAGE>
<PAGE>
STEIN ROE ADVISOR TAX-MANAGED VALUE FUND
Statement of Additional Information
June 1, 1999
This Statement of Additional Information (SAI) contains information which may be
useful to investors but which is not included in the Prospectus of Stein Roe
Advisor Tax-Managed Value Fund (Fund). This SAI is not a prospectus and is
authorized for distribution only when accompanied or preceded by a Prospectus of
the Fund dated June 1, 1999. This SAI should be read together with the Fund's
Prospectus. Investors may obtain a free copy of a Prospectus from Liberty Funds
Distributor, Inc. (LFD), One Financial Center, Boston, MA 02111-2621.
Part 1 of this SAI contains specific information about the Fund. Part 2 includes
information about the funds distributed by LFD generally and additional
information about certain securities and investment techniques described in the
Fund's Prospectus.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART 1 PAGE
<S> <C>
Definitions b
Organization and History b
Investment Objective and Policies b
Fundamental Investment Policies b
Other Investment Policies c
Portfolio Turnover c
Fund Charges and Expenses c
Custodian f
Independent Accountants f
Management of the Fund f
</TABLE>
<TABLE>
<CAPTION>
PART 2 PAGE
<S> <C>
Miscellaneous Investment Practices 1
Taxes 11
Management of the Funds 13
Determination of Net Asset Value 19
How to Buy Shares 20
Special Purchase Programs/Investor Services 21
Programs for Reducing or Eliminating Sales Charges 22
How to Sell Shares 24
Distributions 26
How to Exchange Shares 26
Suspension of Redemptions 27
Shareholder Liability 27
Shareholder Meetings 27
Performance Measures 27
Appendix I 30
Appendix II 35
</TABLE>
MV-16/047H-0499
<PAGE>
PART 1
STEIN ROE ADVISOR TAX-MANAGED VALUE FUND
STATEMENT OF ADDITIONAL INFORMATION
JUNE 1, 1999
<TABLE>
<CAPTION>
DEFINITIONS
<S> <C>
"Trust" Liberty Funds Trust I
"Fund" Stein Roe Advisor Tax-Managed Value Fund
"Advisor" Stein Roe & Farnham Incorporated, the Fund's investment advisor
"Administrator" Colonial Management Associates, Inc., the Fund's administrator
"LFD" Liberty Funds Distributor, Inc., the Fund's distributor
"LFSI" Liberty Funds Services, Inc., the Fund's investor services and transfer agent
</TABLE>
ORGANIZATION AND HISTORY
The Trust is a Massachusetts business trust organized in 1985. The Fund
represents the entire interest in a separate portfolio of the Trust. The Fund
commenced investment operations on June 1, 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.
The Trust changed its name from "Colonial Trust I" to its current name on April
1, 1999.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's Prospectus describes its investment goals and investment strategies
and risks. Part 1 of this SAI includes additional information concerning, among
other things, the investment restrictions of the Fund. Part 2 contains
additional information about the following securities and investment techniques
that are utilized by the Fund:
Foreign Securities
Repurchase Agreements
Money Market Instruments
Securities Loans
Options on Securities
Future Contracts and Related Options
Foreign Currency Transactions
Rule 144A Securities
Except as indicated below 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, (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.
As fundamental investment policies, the Fund may:
1. Borrow from banks, other affiliated funds and other entities 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;
b
<PAGE>
2. Only own real estate acquired as a result of owning securities and not
more than 5% of total assets;
3. Not invest in commodities, except that the Fund may purchase and sell
futures contracts and related options to the extent that total initial
margin and premiums on the contracts do not exceed 5% of its total assets;
4. Underwrite securities issued by others only when disposing of portfolio
securities;
5. Make loans (a) through lending of securities, (b) through the purchase of
debt instruments or similar evidences of indebtedness typically sold
privately to financial institutions, (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 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; and
6. Not concentrate more than 25% of its total assets in any one industry or
with respect to 75% of total assets purchase any security (other than
obligations of the U.S. government and cash items including receivables)
if as a result more than 5% of its total assets would then be invested in
securities of a single issuer, or purchase voting securities of an issuer
if, as a result of such purchases, the Fund would own more than 10% of the
outstanding voting shares of such issuer.
OTHER INVESTMENT POLICIES
As non-fundamental investment policies which may be changed without a
shareholder vote, the Fund may not:
1. Purchase securities on margin, but the Fund may receive short-term credit
to clear securities transactions and may make initial or maintenance
margin deposits in connection with futures transactions;
2. Have a short securities position, unless the Fund owns, or owns rights
(exercisable without payment) to acquire, an equal amount of such
securities; and
3. Invest more than 15% of its net assets in illiquid assets.
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.
Total assets and net assets are determined at current value for purposes of
compliance with investment restrictions and policies. 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 the Act
diversification requirement, an issuer is the entity whose revenues support the
security.
PORTFOLIO TURNOVER
High portfolio turnover may cause the Fund to realize capital gains which, if
realized and distributed by the Fund, may be taxable to shareholders as ordinary
income. High portfolio turnover may result in correspondingly greater brokerage
commissions and other transaction costs, which will be borne directly by the
Fund.
FUND CHARGES AND EXPENSES
Under the Fund's management agreement, the Fund pays the Advisor a monthly fee
based on the average daily net assets of the Fund, at the annual rate of 0.80%.
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,
under a separate pricing and bookkeeping contract, a monthly fee of $2,250 plus
the following percentages of the Fund's average daily net assets over $50
million:
0.035% on the next $950 million
0.025% on the next $1 billion
0.015% on the next $1 billion
0.001% on the excess over $3 billion
Under the Fund's transfer agency and shareholder servicing agreement, the Fund
pays LFSI a monthly fee at the annual rate of 0.236% of average daily net
assets, plus certain out-of-pocket expenses.
TRUSTEES AND TRUSTEES' FEES
For the fiscal year ended October 31, 1998 and the calendar year ended December
31, 1998, the Trustees received the following compensation for serving as
Trustees (d):
c
<PAGE>
<TABLE>
<CAPTION>
Total Compensation From The Fund Complex
Aggregate Compensation From Fund For The Paid To The Trustees For The Calendar
Trustee Fiscal Year ended October 31, 1998(e) Year Ended December 31, 1998(f)
- ------- ------------------------------------- -------------------------------
<S> <C> <C>
Robert J. Birnbaum (g) $751 $ 99,429
Tom Bleasdale (g) 782(h) 115,000 (i)
John V. Carberry (j)(k) N/A N/A
Lora S. Collins (g) 751 97,429
James E. Grinnell (g) 782 103,071
William D. Ireland, Jr. (l) --- 35,333
Richard W. Lowry (g) 751 98,214
Salvatore Macera (m) 743 25,250
William E. Mayer (g) 782 99,286
James L. Moody, Jr. (g) 782(n) 105,857 (o)
John J. Neuhauser (g) 786 105,323
George L. Shinn (l) --- 31,334
Thomas E. Stitzel (m) 743 25,250
Robert L. Sullivan (g) 817 104,100
Anne-Lee Verville (g)(j) 743(p) 23,445 (q)
Sinclair Weeks, Jr. (l) --- 34,333
</TABLE>
(d) The Fund does not currently provide pension or retirement plan benefits to
the Trustees.
(e) Since the Fund has not completed its first full fiscal year, compensation
is estimated based upon future payments to be made and upon estimated
relative Fund net assets.
(f) At December 31, 1998, the complex consisted of 47 open-end and 5
closed-end management investment portfolios in the Colonial Funds
(Colonial Funds) and 9 open-end management investment portfolios in the
Liberty Variable Investment Trust (LVIT) (together, the Fund Complex).
(g) Elected by the shareholders of LVIT on October 30, 1998.
(h) Includes $398 payable in later years as deferred compensation.
(i) Includes $52,000 payable in later years as deferred compensation.
(j) Elected by the Trustees of the closed-end Colonial Funds on June 18, 1998
and by the shareholders of the open-end Colonial Funds on October 30,
1998.
(k) Does not receive compensation because he is an affiliated Trustee and
employee of Liberty Financial Companies, Inc. (Liberty Financial).
(l) Retired as a Trustee of the Trust on April 24, 1998.
(m) Elected by the shareholders of the open-end Colonial funds on October 30,
1998, and by the Trustees of the closed-end Colonial Funds on December 17,
1998.
(n) Total compensation of $782 for the fiscal year ended December 31, 1998,
will be payable in later years as deferred compensation.
(o) Total compensation of $105,857 for the calendar year ended December 31,
1998, will be payable in later years as deferred compensation.
(p) Total compensation of $743 for the fiscal year ended December 31, 1998,
will be payable in later years as deferred compensation.
(q) Total compensation of $23,445 for the calendar year ended December 31,
1998, will be payable in later years as deferred compensation.
For the calendar year ended December 31, 1998, some of the Trustees received the
following compensation in their capacities as Trustees or Directors of the
Liberty All-Star Equity Fund, the Liberty All-Star Growth Fund, Inc. and Liberty
Funds Trust IX (together, Liberty All-Star Funds):
<TABLE>
<CAPTION>
Total Compensation From Liberty All-Star Funds For
Trustee The Calendar Year Ended December 31, 1998 (r)
------- ---------------------------------------------
<S> <C>
Robert J. Birnbaum (s) $25,000
John V. Carberry (s)(t)(u) N/A
James E. Grinnell (s) 25,000
</TABLE>
d
<PAGE>
<TABLE>
<S> <C>
Richard W. Lowry (s) 25,000
William E. Mayer (s)(v) 14,000
John J. Neuhauser (s)(w) 25,000
</TABLE>
(r) The Liberty All-Star Funds are advised by Liberty Asset Management Company
(LAMCO). LAMCO is an indirect wholly-owned subsidiary of Liberty Financial
(an intermediate parent of the Advisor).
(s) Elected by the sole Trustee of Liberty Funds Trust IX on December 17,
1998.
(t) Does not receive compensation because he is an affiliated Trustee and
employee of Liberty Financial.
(u) Elected by the Trustees of the Liberty All-Star Funds on June 30, 1998.
(v) Elected by the shareholders of the Liberty All-Star Equity Fund on April
22, 1998 and by the Trustees of the Liberty All-Star Growth Fund, Inc. on
December 17, 1998.
(w) Elected by the shareholders of the Liberty All-Star Funds on April 22,
1998.
OWNERSHIP OF THE FUND
As of record on June 1, 1999, the officers and Trustees of the Trust as a group
owned less than 1% of the outstanding shares of the Fund.
As of record on June 1, 1999, the Administrator owned 100% of the Fund and,
therefore, may be deemed to "control" the Fund.
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 for each Class
except Class Z. 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 each Class of
shares. The Fund also pays LFD monthly a distribution fee at the annual rate of
0.05% of the average daily net assets attributed to Class A shares and at an
annual rate of 0.75% of the 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 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 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.
e
<PAGE>
Eight years after the end of the month in which a Class B share is purchased,
such share and a pro rata portion of any shares issued on the reinvestment of
distributions will be automatically converted into Class A shares having an
equal value, which are not subject to the distribution fee.
CUSTODIAN
The Chase Manhattan Bank, located at 270 Park Avenue, New York, NY 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.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, located at 160 Federal Street, Boston, MA
02110-2624, are the Fund's independent accountants providing audit services, tax
return review, other tax consulting services, and assistance and consultation in
connection with the review of various SEC filings.
MANAGEMENT OF THE FUND
INVESTMENT ADVISOR
The Advisor is an indirect wholly-owned subsidiary of Liberty Financial
Companies, Inc. (Liberty Financial), which in turn is a direct majority-owned
subsidiary of Liberty Corporate Holdings, Inc., which in turn is a direct
wholly-owned subsidiary of LFC Management Corporation, which in turn is a direct
wholly-owned subsidiary of LFC Holdings, Inc., which in turn is a direct
wholly-owned 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 U.S. Liberty Financial's address is 600
Atlantic Avenue, Boston, MA 02210. Liberty Mutual's address is 175 Berkeley
Street, Boston, MA 02117.
Under its Management Agreement with the Fund, the Advisor provides the Fund with
discretionary investment services. Specifically, the Advisor is responsible for
supervising and directing the investments of the Fund in accordance with the
Fund's investment objective, program, and restrictions as provided in the Fund's
prospectus and this SAI. The Advisor is also responsible for effecting all
security transactions on behalf of the Fund, including the allocation of
principal business and portfolio brokerage and the negotiation of commissions
(see "Portfolio Transactions" below). The Management Agreement provides for the
payment to the Advisor of the fee described in the Prospectus.
The Advisor and its predecessor have been providing investment advisory services
since 1932. The Advisor acts as investment advisor to wealthy individuals,
trustees, pension and profit sharing plans, charitable organizations and other
institutional investors. As of December 31, 1998, the Advisor managed over $29.7
billion in assets: over $11.1 billion in equities and over $18.6 billion in
fixed-income securities (including $1.1 billion in municipal securities). The
$29.7 billion in managed assets included over $8.9 billion held by open-end
mutual funds managed by the Advisor (approximately 14% of the mutual fund assets
were held by clients of the Advisor). These mutual funds were owned by over
293,000 shareholders. The $8.9 billion in mutual fund assets included over $685
million in over 44,000 Individual Retirement Accounts (IRAs). In managing those
assets, the Advisor utilizes a proprietary computer-based information system
that maintains and regularly updates information for approximately 7,500
companies. The Advisor also monitors over 1,400 issues via a proprietary credit
analysis system. At December 31, 1998, the Advisor employed 18 research analysts
and 54 account managers. The average investment-related experience of these
individuals was 17 years.
The directors of the Advisor are Kenneth R. Leibler, C. Allen Merritt, Jr. and
Thomas W. Butch. Mr. Leibler is President and Chief Executive Officer of Liberty
Financial; Mr. Merritt is Chief Operating Officer of Liberty Financial; and Mr.
Butch is President of the Advisor's Mutual Funds division. The business address
of Messrs. Leibler and Merritt is 600 Atlantic Avenue, Federal Reserve Plaza ,
Boston, Massachusetts 02210; that of Mr. Butch is One South Wacker Drive, Suite
3500, Chicago, Illinois 60606.
Under the Management Agreement, the Advisor is not liable for any error of
judgment or mistake of law or for any loss suffered by the Fund or the Fund in
connection with the matters to which such Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence in the
performance of its duties or from reckless disregard of its obligations and
duties under the Agreement.
See Part 2 of this SAI, "Management of the Funds" for information about the
trustees and officers of the Fund.
FUND TRANSACTIONS
The Advisor places the orders for the purchase and sale of the Fund's portfolio
securities and options and futures contracts. The Advisor's overriding objective
in effecting portfolio transactions is to seek to obtain the best combination of
price and execution. The best net price, giving effect to brokerage commissions,
if any, and other transaction costs, normally is an important factor in this
decision, but
f
<PAGE>
a number of other judgmental factors may also enter into the decision. These
include: the Advisor's knowledge of negotiated commission rates currently
available and other current transaction costs; the nature of the security being
traded; the size of the transaction; the desired timing of the trade; the
activity existing and expected in the market for the particular security;
confidentiality; the execution, clearance and settlement capabilities of the
broker or dealer selected and others which are considered; the Advisor's
knowledge of the financial stability of the broker or dealer selected and such
other brokers or dealers; and the Advisor's knowledge of actual or apparent
operational problems of any broker or dealer. Recognizing the value of these
factors, the Fund may pay a brokerage commission in excess of that which another
broker or dealer may have charged for effecting the same transaction.
Evaluations of the reasonableness of brokerage commissions, based on the
foregoing factors, are made on an ongoing basis by the Advisor's staff while
effecting portfolio transactions. The general level of brokerage commissions
paid is reviewed by the Advisor, and reports are made annually to the Board of
Trustees of the Fund.
With respect to issues of securities involving brokerage commissions, when more
than one broker or dealer is believed to be capable of providing the best
combination of price and execution with respect to a particular portfolio
transaction for the Fund, the Advisor often selects a broker or dealer that has
furnished it with research products or services such as research reports,
subscriptions to financial publications and research compilations, compilations
of securities prices, earnings, dividends, and similar data, and computer data
bases, quotation equipment and services, research-oriented computer software and
services, and services of economic and other consultants. Selection of brokers
or dealers is not made pursuant to an agreement or understanding with any of the
brokers or dealers; however, the Advisor uses an internal allocation procedure
to identify those brokers or dealers who provide it with research products or
services and the amount of research products or services they provide, and
endeavors to direct sufficient commissions generated by its clients' accounts in
the aggregate, including the Fund, to such brokers or dealers to ensure the
continued receipt of research products or services that the Advisor feels are
useful. In certain instances, the Advisor receives from brokers and dealers
products or services which are used both as investment research and for
administrative, marketing, or other non-research purposes. In such instances,
the Advisor makes a good faith effort to determine the relative proportions of
such products or services which may be considered as investment research. The
portion of the costs of such products or services attributable to research usage
may be defrayed by the Advisor (without prior agreement or understanding, as
noted above) through transaction charges generated by transactions by clients
(including the Fund), while the portions of the costs attributable to
non-research usage of such products or services is paid by the Advisor in cash.
No person acting on behalf of the Fund is authorized, in recognition of the
value of research products or services, to pay a commission in excess of that
which another broker or dealer might have charged for effecting the same
transaction. Research products or services furnished by brokers and dealers may
be used in servicing any or all of the clients of the Advisor and not all such
research products or services are used in connection with the management of the
Fund.
With respect to the Fund's purchases and sales of portfolio securities
transacted with a broker or dealer on a net basis, the Advisor may also consider
the part, if any, played by the broker or dealer in bringing the security
involved to the Advisor's attention, including investment research related to
the security and provided to the Fund. The Fund has arranged for its custodian
to act as a soliciting dealer to accept any fees available to the custodian as a
soliciting dealer in connection with any tender offer for the Fund's portfolio
securities held by the Fund. The custodian will credit any such fees received
against its custodial fees. In addition, the Board of Trustees has reviewed the
legal developments pertaining to and the practicability of attempting to
recapture underwriting discounts or selling concessions when portfolio
securities are purchased in underwritten offerings. However, the Board has been
advised by counsel that recapture by a mutual fund currently is not permitted
under the Rules of Fair Practice of the National Association of Securities
Dealers.
The Advisor may use the services of AlphaTrade, Inc. (ATI), a registered
broker-dealer subsidiary of the Administrator, when buying or selling equity
securities for the Fund's portfolio pursuant to procedures adopted by the
Trustees and 1940 Act Rule 17e-1. Under the Rule, the Advisor must ensure that
commissions the Fund pays ATI on portfolio transactions are reasonable and fair
compared to commissions received by other broker-dealers in connection with
comparable transactions involving similar securities being bought or sold at
about the same time. The Advisor will report quarterly to the Trustees on all
securities transactions placed through ATI so that the Trustees may consider
whether such trades complied with these procedures and the Rule. ATI employs
electronic trading methods by which it seeks to obtain best price and execution
for the Fund, and will use a clearing broker to settle trades.
The Trustees have the authority to convert the Fund to a master fund/feeder fund
structure. Under this structure, 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. The primary reason to use the
master fund/feeder fund structure is to provide a mechanism to pool, in a single
master fund, investments of different investor classes, resulting in a larger
portfolio, investment and administrative efficiencies and economies of scale.
ADMINISTRATION AGREEMENT
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Pursuant to an Administration Agreement with the Fund, the Administrator
provides certain administrative services including: (i) providing office space,
equipment and clerical personnel necessary for maintaining the organization of
the Fund and for performing the administrative functions herein set forth; (ii)
arranging, if desired by the Trust, for Directors, officers and employees of the
Administrator to serve as Trustees, officers or agents of the Fund if duly
elected or appointed to such positions and subject to their individual consent
and to any limitations imposed by law; (iii) preparation of agendas and
supporting documents for and minutes of meetings of Trustees, committees of
Trustees and shareholders; (iv) coordinating and overseeing the activities of
the Fund's other third-party service providers; (v) maintaining certain books
and records of the Fund; and (vi) monitoring the tax-efficiency of the Fund. The
Administration Agreement has a one year term. The Administrator is paid a
monthly fee at the annual rate of average daily net assets set forth in the
Prospectus. The Administrator and/or its affiliate, Colonial Advisory Services,
Inc. (CASI), has rendered investment advisory services to investment company,
institutional and other clients since 1931. The Administrator currently serves
as investment advisor, sub-advisor and/or administrator for 47 open-end and 5
closed-end management investment company portfolios (collectively, The Funds).
Officers of the Trust who are also officers of the Administrator or its
affiliates will benefit from the administration fees, sales commissions and
other fees paid or allowed by the Trust. More than 30,000 financial advisors
have recommended the Funds to over 800,000 clients worldwide, representing more
than $17 billion in net assets.
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S:\FUNDS\SAIPART2.DOC
STATEMENT OF ADDITIONAL INFORMATION
PART 2
The following information applies generally to most funds advised by the
Advisor. "Funds" include each series of Liberty Funds Trust I (formerly Colonial
Trust I), Liberty Funds Trust II (formerly Colonial Trust II), Liberty Funds
Trust III (formerly Colonial Trust III), Liberty Funds Trust IV (formerly
Colonial Trust IV), Liberty Funds Trust V (formerly Colonial Trust V), Liberty
Funds Trust VI (formerly Colonial Trust VI), Liberty Funds Trust VII (formerly
Colonial Trust VII), Liberty Funds Trust VIII (formerly LFC Utilities Trust) and
Liberty Funds Trust IX (formerly LAMCO Trust I) . In certain cases, the
discussion applies to some but not all of the funds, and you should refer to
your Fund's Prospectus and to Part 1 of this SAI to determine whether the matter
is applicable to your Fund. You will also be referred to Part 1 for certain data
applicable to your Fund.
MISCELLANEOUS INVESTMENT PRACTICES
Part 1 of this SAI lists on page b which of the following investment practices
are available to your Fund. If an investment practice is not listed in Part 1 of
this SAI, it is not applicable to your Fund.
Short-Term Trading
In seeking the fund's investment objective, the Advisor will buy or sell
portfolio securities whenever it believes it is appropriate. The Advisor's
decision will not generally be influenced by how long the fund may have owned
the security. From time to time the fund will buy securities intending to seek
short-term trading profits. A change in the securities held by the fund is known
as "portfolio turnover" and generally involves some expense to the fund. These
expenses may include brokerage commissions or dealer mark-ups and other
transaction costs on both the sale of securities and the reinvestment of the
proceeds in other securities. If sales of portfolio securities cause the fund to
realize net short-term capital gains, such gains will be taxable as ordinary
income. As a result of the fund's investment policies, under certain market
conditions the fund's portfolio turnover rate may be higher than that of other
mutual funds. The fund's portfolio turnover rate for a fiscal year is the ratio
of the lesser of purchases or sales of portfolio securities to the monthly
average of the value of portfolio securities, excluding securities whose
maturities at acquisition were one year or less. The fund's portfolio turnover
rate is not a limiting factor when the Advisor considers a change in the fund's
portfolio.
Lower Rated Debt Securities
Lower rated debt securities are those rated lower than Baa by Moody's or BBB by
S&P, or comparable unrated debt securities. Relative to debt securities of
higher quality,
1. an economic downturn or increased interest rates may have a more
significant effect on the yield, price and potential for default for
lower rated debt securities;
2. the secondary market for lower rated debt securities may at times become
less liquid or respond to adverse publicity or investor perceptions,
increasing the difficulty in valuing or disposing of the bonds;
3. the Advisor's credit analysis of lower rated debt securities may have a
greater impact on the fund's achievement of its investment objective;
and
4. lower rated debt securities may be less sensitive to interest rate
changes, but are more sensitive to adverse economic developments.
In addition, certain lower rated debt securities may not pay interest in cash on
a current basis.
Small Companies
Smaller, less well established companies may offer greater opportunities for
capital appreciation than larger, better established companies, but may also
involve certain special risks related to limited product lines, markets, or
financial resources and dependence on a small management group. Their securities
may trade less frequently, in smaller volumes, and fluctuate more sharply in
value than securities of larger companies.
Foreign Securities
The fund may invest in securities traded in markets outside the United States.
Foreign investments can be affected favorably or unfavorably by changes in
currency rates and in exchange control regulations. There may be less publicly
available information about a foreign company than about a U.S. company, and
foreign companies may not be subject to accounting, auditing and financial
reporting standards comparable to those applicable to U.S. companies. Securities
<PAGE>
of some foreign companies are less liquid or more volatile than securities of
U.S. companies, and foreign brokerage commissions and custodian fees may be
higher than in the United States. Investments in foreign securities can involve
other risks different from those affecting U.S. investments, including local
political or economic developments, expropriation or nationalization of assets
and imposition of withholding taxes on dividend or interest payments. Foreign
securities, like other assets of the fund, will be held by the fund's custodian
or by a subcustodian or depository. See also "Foreign Currency Transactions"
below.
The fund may invest in certain Passive Foreign Investment Companies (PFICs)
which may be subject to U.S. federal income tax on a portion of any "excess
distribution" or gain (PFIC tax) related to the investment. This "excess
distribution" will be allocated over the fund's holding period for such
investment. The PFIC tax is the highest ordinary income rate in effect for any
period multiplied by the portion of the "excess distribution" allocated to such
period, and it could be increased by an interest charge on the deemed tax
deferral.
The fund may possibly elect to include in its income its pro rata share of the
ordinary earnings and net capital gain of PFICs. This election requires certain
annual information from the PFICs which in many cases may be difficult to
obtain. An alternative election would permit the fund to recognize as income any
appreciation (and to a limited extent, depreciation) on its holdings of PFICs as
of the end of its fiscal year. See "Taxation" below.
Other Investment Companies
The fund may invest in other investment companies. Such investments will involve
the payment of duplicative fees through the indirect payment of a portion of the
expenses, including advisory fees, of such other investment companies.
Zero Coupon Securities (Zeros)
The fund may invest in zero coupon securities, which are securities issued at a
significant discount from face value and do not pay interest at intervals during
the life of the security. Zero coupon securities include securities issued in
certificates representing undivided interests in the interest or principal of
mortgage-backed securities (interest only/principal only), which tend to be more
volatile than other types of securities. The fund will accrue and distribute
income from stripped securities and certificates on a current basis and may have
to sell securities to generate cash for distributions.
Step Coupon Bonds (Steps)
The fund may invest in debt securities which pay interest at a series of
different rates (including 0%) in accordance with a stated schedule for a series
of periods. In addition to the risks associated with the credit rating of the
issuers, these securities may be subject to more volatility risk than fixed rate
debt securities.
Tender Option Bonds
A tender option bond is a municipal security (generally held pursuant to a
custodial arrangement) having a relatively long maturity and bearing interest at
a fixed rate substantially higher than prevailing short-term tax-exempt rates,
that has been coupled with the agreement of a third party, such as a bank,
broker-dealer or other financial institution, pursuant to which such institution
grants the security holders the option, at periodic intervals, to tender their
securities to the institution and receive the face value thereof. As
consideration for providing the option, the financial institution receives
periodic fees equal to the difference between the municipal security's fixed
coupon rate and the rate, as determined by a remarketing or similar agent at or
near the commencement of such period, that would cause the securities, coupled
with the tender option, to trade at par on the date of such determination. Thus,
after payment of this fee, the security holder effectively holds a demand
obligation that bears interest at the prevailing short-term tax-exempt rate. The
Advisor will consider on an ongoing basis the creditworthiness of the issuer of
the underlying municipal securities, of any custodian, and of the third-party
provider of the tender option. In certain instances and for certain tender
option bonds, the option may be terminable in the event of a default in payment
of principal or interest on the underlying municipal securities and for other
reasons.
Pay-In-Kind (PIK) Securities
The fund may invest in securities which pay interest either in cash or
additional securities. These securities are generally high yield securities and,
in addition to the other risks associated with investing in high yield
securities, are subject to the risks that the interest payments which consist of
additional securities are also subject to the risks of high yield securities.
Money Market Instruments
Government obligations are issued by the U.S. or foreign governments, their
subdivisions, agencies and instrumentalities. Supranational obligations are
issued by supranational entities and are generally designed to promote economic
improvements. Certificates of deposits are issued against deposits in a
commercial bank with a defined return and maturity. Banker's acceptances are
used to finance the import, export or storage of goods and are "accepted" when
guaranteed at maturity by a bank. Commercial paper is promissory notes issued by
businesses to finance short-term needs (including those with floating or
variable interest rates, or including a frequent interval put feature).
Short-term corporate obligations are bonds and notes (with one year or less to
maturity at the time of purchase) issued by businesses to finance long-term
needs. Participation Interests include the underlying securities and any related
guaranty, letter of credit, or collateralization arrangement which the fund
would be allowed to invest in directly.
Securities Loans
The fund may make secured loans of its portfolio securities amounting to not
more than the percentage of its total assets specified in Part 1 of this SAI,
thereby realizing additional income. 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 banks and
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. The borrower pays to the fund
an amount equal to any dividends or interest received on securities lent. 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.
Forward Commitments ("When-Issued" and "Delayed Delivery" Securities)
The fund may enter into contracts to purchase securities for a fixed price at a
future date beyond customary settlement time ("forward commitments" and "when
issued securities") if the fund holds until the settlement date, in a segregated
account, cash or liquid securities in an amount sufficient to meet the purchase
price, or if the fund enters into offsetting contracts for the forward sale of
other securities it owns. Forward commitments may be considered securities in
themselves, and involve a risk of loss if the value of the security to be
purchased declines prior to the settlement date. Where such purchases are made
through dealers, the fund relies on the dealer to consummate the sale. The
dealer's failure to do so may result in the loss to the fund of an advantageous
yield or price. Although the fund will generally enter into forward commitments
with the intention of acquiring securities for its portfolio or for delivery
pursuant to options contracts it has entered into, the fund may dispose of a
commitment prior to settlement if the Advisor deems it appropriate to do so. The
fund may realize short-term profits or losses (generally taxed at ordinary
income tax rates in the hands of the shareholders) upon the sale of forward
commitments.
Mortgage Dollar Rolls
In a mortgage dollar roll, the fund sells a mortgage-backed security and
simultaneously enters into a commitment to purchase a similar security at a
later date. The fund either will be paid a fee by the counterparty upon entering
into the transaction or will be entitled to purchase the similar security at a
discount. As with any forward commitment, mortgage dollar rolls involve the risk
that the counterparty will fail to deliver the new security on the settlement
date, which may deprive the fund of obtaining a beneficial investment. In
addition, the security to be delivered in the future may turn out to be inferior
to the security sold upon entering into the transaction. Also, the transaction
costs may exceed the return earned by the fund from the transaction.
Mortgage-Backed Securities
Mortgage-backed securities, including "collateralized mortgage obligations"
(CMOs) and "real estate mortgage investment conduits" (REMICs), evidence
ownership in a pool of mortgage loans made by certain financial institutions
that may be insured or guaranteed by the U.S. government or its agencies. CMOs
are obligations issued by special-purpose trusts, secured by mortgages. REMICs
are entities that own mortgages and elect REMIC status under the Internal
Revenue Code. Both CMOs and REMICs issue one or more classes of securities of
which one (the Residual) is in the nature of equity. The funds will not invest
in the Residual class. Principal on mortgage-backed securities, CMOs and REMICs
may be prepaid if the underlying mortgages are prepaid. Prepayment rates for
mortgage-backed securities tend to increase as interest rates decline
(effectively shortening the security's life) and decrease as interest rates rise
(effectively lengthening the security's life). Because of the prepayment
feature, these securities may not increase in value as much as other debt
securities when interest rates fall. A fund may be able to invest prepaid
principal only at lower yields. The prepayment of such securities purchased at a
premium may result in losses equal to the premium.
Non-Agency Mortgage-Backed Securities
The fund may invest in non-investment grade mortgage-backed securities that are
not guaranteed by the U.S. Government or an Agency. Such securities are subject
to the risks described under "Lower Rated Debt Securities" and "Mortgage-Backed
Securities." In addition, although the underlying mortgages provide collateral
for the security, the fund may experience losses, costs and delays in enforcing
its rights if the issuer defaults or enters bankruptcy, and the fund may incur a
loss.
Repurchase Agreements
The fund may enter into repurchase agreements. A repurchase agreement is a
contract under which the fund acquires a security for a relatively short period
(usually not more than one week) subject to the obligation of the seller to
repurchase and the fund to resell such security at a fixed time and price
(representing the fund's cost plus interest). It is the fund's present intention
to enter into repurchase agreements only with commercial banks and registered
broker-dealers and only with respect to obligations of the U.S. government or
its agencies or instrumentalities. Repurchase agreements may also be viewed as
loans made by the fund which are collateralized by the securities subject to
repurchase. The Advisor will monitor such transactions to determine that the
value of the underlying securities is at least equal at all times to the total
amount of the repurchase obligation, including the interest factor. If the
seller defaults, the fund could realize a loss on the sale of the underlying
security to the extent that the proceeds of sale including accrued interest are
less than the resale price provided in the agreement including interest. In
addition, if the seller should be involved in bankruptcy or insolvency
proceedings, the fund may incur delay and costs in selling the underlying
security or may suffer a loss of principal and interest if the fund is treated
as an unsecured creditor and required to return the underlying collateral to the
seller's estate.
Reverse Repurchase Agreements
In a reverse repurchase agreement, the fund sells a security and agrees to
repurchase the same security at a mutually agreed upon date and price. A reverse
repurchase agreement may also be viewed as the borrowing of money by the fund
and, therefore, as a form of leverage. The fund will invest the proceeds of
borrowings under reverse repurchase agreements. In addition, the fund will enter
into a reverse repurchase agreement only when the interest income expected to be
earned from the investment of the proceeds is greater than the interest expense
of the transaction. The fund will not invest the proceeds of a reverse
repurchase agreement for a period which exceeds the duration of the reverse
repurchase agreement. The fund may not enter into reverse repurchase agreements
exceeding in the aggregate one-third of the market value of its total assets,
less liabilities other than the obligations created by reverse repurchase
agreements. Each fund will establish and maintain with its custodian a separate
account with a segregated portfolio of securities in an amount at least equal to
its purchase obligations under its reverse repurchase agreements. If interest
rates rise during the term of a reverse repurchase agreement, entering into the
reverse repurchase agreement may have a negative impact on a money market fund's
ability to maintain a net asset value of $1.00 per share.
Options on 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 the Advisor,
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.
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
when 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 (SEC) 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 intends to 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% (10%
in some cases, refer to your fund's Prospectus) 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 the Advisor 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 the Advisor deems it desirable to do so. Although
the fund will take an option position only if the Advisor 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.
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 option 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
Upon entering into futures contracts, in compliance with the SEC's requirements,
cash or liquid securities, equal in value to the amount of the fund's obligation
under the contract (less any applicable margin deposits and any assets that
constitute "cover" for such obligation), will be segregated with the fund's
custodian.
A futures contract sale creates an obligation by the seller to deliver the type
of 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 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 commodity exchanges or boards of trade -- known as "contract markets" --
approved for such trading by the Commodity Futures Trading Commission (CFTC),
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 commodities or securities, 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 or commodity 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.
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 a gain.
Such closing transactions involve additional commission costs.
Options on futures contracts. The fund will enter into written options on
futures contracts only when, in compliance with the SEC's requirements, cash or
liquid 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. 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 writing options directly on the underlying
securities or 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.
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RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS. Successful use
of futures contracts by the fund is subject to the Advisor'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 risks 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 contacts 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 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 of series of contracts or options), in which event the secondary market
on that exchange (or in the class or series of contracts 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.
USE BY TAX-EXEMPT FUNDS OF INTEREST RATE AND U.S. TREASURY SECURITY FUTURES
CONTRACTS AND OPTIONS. The funds investing in tax-exempt securities issued by
a government entity may purchase and sell futures contracts and related options
on interest rate and U.S. Treasury securities when, in the option of the
Advisor, price movements in these security futures and related options will
correlate closely with price movements in the tax-exempt securities which are
the subject of the hedge. Interest rate and U.S. Treasury securities futures
contracts require the seller to deliver, or the purchaser to take delivery of,
the type of security called for in the contract at a specified date and price.
Options on interest rate and U.S. Treasury security futures contracts give the
purchaser the right in return for the premium paid to assume a position in
futures contract at the specified option exercise price at any time during the
period of the option.
In addition to the risks generally involved in using futures contracts, there
is also a risk that price movements in interest rate and U.S. Treasury security
futures contracts and related options will not correlate closely with price
movements in markets for tax-exempt securities.
INDEX FUTURES CONTRACTS. 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 futures contracts, debt
index futures contracts, or other index futures contracts appropriate to its
objective(s). The fund may also purchase and sell options on index futures
contracts.
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 Advisor 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 the Advisor'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 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 of its portfolio securities. However, while
this could occur to a certain degree, the Advisor believes that over time the
value of the fund's portfolio will 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
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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
market are less onerous than margin requirements in the securities market, and
as a result the futures market may attract more speculators than the securities
market. Increased participation by speculators in the futures market may also
cause temporary price distortions. Due to the possibility of price distortions
in the futures market 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 Advisor may still not result
in a successful hedging transaction.
OPTIONS ON INDEX FUTURES. 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.
OPTIONS ON INDICES. As an alternative to purchasing call and put options on
index futures, the fund may purchase call and put options on the underlying
indices themselves. Such options could be used in a manner identical to the use
of options on index futures.
FOREIGN CURRENCY TRANSACTIONS
The fund may engage in currency exchange transactions to protect against
uncertainty in the level of future currency exchange rates.
The fund may engage in both "transaction hedging" and "position hedging." When
it engages in transaction hedging, the fund enters into foreign currency
transactions with respect to specific receivables or payables of the fund
generally arising in connection with the purchase or sale of its portfolio
securities. The fund will engage in transaction hedging when it desires to
"lock in" the U.S. dollar price of a security it has agreed to purchase or
sell, or the U.S. dollar equivalent of a dividend or interest payment in a
foreign currency. By transaction hedging the fund attempts to protect itself
against a possible loss resulting from an adverse change in the relationship
between the U.S. dollar and the applicable foreign currency during the period
between the date on which the security is purchased or sold, or on which the
dividend or interest payment is declared, and the date on which such payments
are made or received.
The fund may purchase or sell a foreign currency on a spot (or cash) basis at
the prevailing spot rate in connection with the settlement of transactions in
portfolio securities denominated in that foreign currency. The fund may also
enter into contracts to purchase or sell foreign currencies at a future date
("forward contracts") and purchase and sell foreign currency futures contracts.
For transaction hedging purposes the fund may also purchase exchange-listed and
over-the-counter call and put options on foreign currency futures contracts and
on foreign currencies. Over-the-counter options are considered to be illiquid by
the SEC staff. A put option on a futures contract give the fund the right to
assume a short position in the futures contract until expiration of the option.
A put option on currency gives the fund the right to sell a currency at an
exercise price until the expiration of the option. A call option on a futures
contract give the fund the right to assume a long position in the futures
contract until the expiration of the option. A call option on currency gives
the fund the right to purchase a currency at the exercise price until the
expiration of the option.
When it engages in position hedging, the fund enters into foreign currency
exchange transactions to protect against a decline in the values of the foreign
currencies in which its portfolio securities are denominated (or an increase in
the value of currency for securities which the fund expects to purchase, when
the fund holds cash or short-term investments). In connection with position
hedging, the fund may purchase put or call options on foreign currency and
foreign currency futures contracts and buy or sell forward contracts and
foreign currency futures contracts. The fund may also purchase or sell foreign
currency on a spot basis.
The precise matching of the amounts of foreign currency exchange transactions
and the value of the portfolio securities involved will not generally be
possible since the future value of such securities in foreign currencies will
change as a consequence of market movements in the value of those securities
between the dates the currency exchange transactions are entered into and the
dates they mature.
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It is impossible to forecast with precision the market value of portfolio
securities at the expiration or maturity of a forward or futures contract.
Accordingly, it may be necessary for the fund to purchase additional foreign
currency on the spot market (and bear the expense of such purchase) if the
market value of the security or securities being hedged is less than the amount
of foreign currency the fund is obligated to deliver and if a decision is made
to sell the security or securities and make delivery of the foreign currency.
Conversely, it may be necessary to sell on the spot market some of the foreign
currency received upon the sale of the portfolio security or securities if the
market value of such security or securities exceeds the amount of foreign
currency the fund is obligated to deliver.
Transaction and position hedging do not eliminate fluctuations in the underlying
prices of the securities which the fund owns or intends to purchase or sell.
They simply establish a rate of exchange which one can achieve at some future
point in time. Additionally, although these techniques tend to minimize the risk
of loss due to a decline in the value of the hedged currency, they tend to limit
any potential gain which might result from the increase in value of such
currency.
CURRENCY FORWARD AND FUTURES CONTRACTS. Upon entering into such contracts, in
compliance with the SEC's requirements, cash or liquid securities, equal in
value to the amount of the fund's obligation under the contract (less any
applicable margin deposits and any assets that constitute "cover" for such
obligation), will be segregated with the fund's custodian.
A forward currency contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract as agreed by the parties, at a price set at the time of
the contract. In the case of a cancelable contract, the holder has the
unilateral right to cancel the contract at maturity by paying a specified fee.
The contracts are traded in the interbank market conducted directly between
currency traders (usually large commercial banks) and their customers. A
contract generally has no deposit requirement, and no commissions are charged at
any stage for trades. A currency futures contract is a standardized contract for
the future delivery of a specified amount of a foreign currency at a future date
at a price set at the time of the contract. Currency futures contracts traded in
the United States are designed and traded on exchanges regulated by the CFTC,
such as the New York Mercantile Exchange.
Forward currency contracts differ from currency futures contracts in certain
respects. For example, the maturity date of a forward contract may be any fixed
number of days from the date of the contract agreed upon by the parties, rather
than a predetermined date in a given month. Forward contracts may be in any
amounts agreed upon by the parties rather than predetermined amounts. Also,
forward contracts are traded directly between currency traders so that no
intermediary is required. A forward contract generally requires no margin or
other deposit.
At the maturity of a forward or futures contract, the fund may either accept or
make delivery of the currency specified in the contract, or at or prior to
maturity enter into a closing transaction involving the purchase or sale of an
offsetting contract. Closing transactions with respect to forward contracts are
usually effected with the currency trader who is a party to the original forward
contract. Closing transactions with respect to futures contracts are effected on
a commodities exchange; a clearing corporation associated with the exchange
assumes responsibility for closing out such contracts.
Positions in currency futures contracts may be closed out only on an exchange or
board of trade which provides a secondary market in such contracts. Although the
fund intends to purchase or sell currency futures contracts only on exchanges or
boards of trade where there appears to be an active secondary market, there is
no assurance that a secondary market on an exchange or board of trade will exist
for any particular contract or at any particular time. In such event, it may not
be possible to close a futures position and, in the event of adverse price
movements, the fund would continue to be required to make daily cash payments of
variation margin.
CURRENCY OPTIONS. In general, options on currencies operate similarly to options
on securities and are subject to many similar risks. Currency options are traded
primarily in the over-the-counter market, although options on currencies have
recently been listed on several exchanges. Options are traded not only on the
currencies of individual nations, but also on the European Currency Unit
("ECU"). The ECU is composed of amounts of a number of currencies, and is the
official medium of exchange of the European Economic Community's European
Monetary System.
The fund will only purchase or write currency options when the Advisor believes
that a liquid secondary market exists for such options. There can be no
assurance that a liquid secondary market will exist for a particular option at
any specified time. Currency options are affected by all of those factors which
influence exchange rates and investments generally. To the extent that these
options are traded over the counter, they are considered to be illiquid by the
SEC staff.
The value of any currency, including the U.S. dollars, may be affected by
complex political and economic factors applicable to the issuing country. In
addition, the exchange rates of currencies (and therefore the values of currency
options) may be significantly affected, fixed, or supported directly or
indirectly by government actions. Government intervention may increase risks
involved in purchasing or selling currency options, since exchange rates may not
be free to fluctuate in respect to other market forces.
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The value of a currency option reflects the value of an exchange rate, which in
turn reflects relative values of two currencies, the U.S. dollar and the foreign
currency in question. Because currency transactions occurring in the interbank
market involve substantially larger amounts than those that may be involved in
the exercise of currency options, investors may be disadvantaged by having to
deal in an odd lot market for the underlying currencies in connection with
options at prices that are less favorable than for round lots. Foreign
governmental restrictions or taxes could result in adverse changes in the cost
of acquiring or disposing of currencies.
There is no systematic reporting of last sale information for currencies and
there is no regulatory requirement that quotations available through dealers or
other market sources be firm or revised on a timely basis. Available quotation
information is generally representative of very large round-lot transactions in
the interbank market and thus may not reflect exchange rates for smaller odd-lot
transactions (less that $1 million) where rates may be less favorable. The
interbank market in currencies is a global, around-the-clock market. To the
extent that options markets are closed while the markets for the underlying
currencies remain open, significant price and rate movements may take place in
the underlying markets that cannot be reflected in the options markets.
SETTLEMENT PROCEDURES. Settlement procedures relating to the fund's investments
in foreign securities and to the fund's foreign currency exchange transactions
may be more complex than settlements with respect to investments in debt or
equity securities of U.S. issuers, and may involve certain risks not present in
the fund's domestic investments, including foreign currency risks and local
custom and usage. Foreign currency transactions may also involve the risk that
an entity involved in the settlement may not meet its obligations.
FOREIGN CURRENCY CONVERSION. Although foreign exchange dealers do not charge a
fee for currency conversion, they do realize a profit based on the difference
(spread) between prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to the fund at one rate,
while offering a lesser rate of exchange should the fund desire to resell that
currency to the dealer. Foreign currency transactions may also involve the risk
that an entity involved in the settlement may not meet its obligation.
MUNICIPAL LEASE OBLIGATIONS
Although a municipal lease obligation does not constitute a general obligation
of the municipality of which the municipality's taxing power is pledged, a
municipal lease obligation is ordinarily backed by the municipality's covenant
to budget for, appropriate and make the payments due under the municipal lease
obligation. However, certain lease obligations contain "non-appropriation"
clauses which provide that the municipality has no obligation to make lease or
installment purchase payments in future years unless money is appropriated for
such purpose in a yearly basis. Although "non-appropriation" lease obligations
are secured by the leased property, disposition of the property in the event of
foreclosure might prove difficult. In addition, the tax treatment of such
obligations in the event of non-appropriation is unclear.
Determinations concerning the liquidity and appropriate valuation of a municipal
lease obligation, as with any other municipal security, are made based on all
relevant factors. These factors include, among others: (1) the frequency of
trades and quotes for the obligation; (2) the number of dealers willing to
purchase or sell the security and the number of other potential buyers; (3) the
willingness of dealers to undertake to make a market in the security; and (4)
the nature of the marketplace trades, including the time needed to dispose of
the security, the method of soliciting offers, and the mechanics of the
transfer.
PARTICIPATION INTERESTS
The fund may invest in municipal obligations either by purchasing them directly
or by purchasing certificates of accrual or similar instruments evidencing
direct ownership of interest payments or principal payments, or both, on
municipal obligations, provided that, in the opinion of counsel to the initial
seller of each such certificate or instrument, any discount accruing on such
certificate or instrument that is purchased at a yield not greater than the
coupon rate of interest on the related municipal obligations will be exempt from
federal income tax to the same extent as interest on such municipal obligations.
The fund may also invest in tax-exempt obligations by purchasing from banks
participation interests in all or part of specific holdings of municipal
obligations. Such participations may be backed in whole or part by an
irrevocable letter of credit or guarantee of the selling bank. The selling bank
may receive a fee from the fund in connection with the arrangement. The fund
will not purchase such participation interests unless it receives an opinion of
counsel or a ruling of the Internal Revenue Service that interest earned by it
on municipal obligations in which it holds such participation interests is
exempt from federal income tax.
STAND-BY-COMMITMENTS
When the fund purchases municipal obligations it may also acquire stand-by
commitments from banks and broker-dealers with respect to such municipal
obligations. A stand-by commitment is the equivalent of a put option acquired by
the fund with respect to a particular municipal obligation held in its
portfolio. A stand-by commitment is a security independent of the municipal
obligation to which it relates. The amount payable by a bank or dealer during
the time a stand-by commitment is exercisable, absent unusual circumstances
relating to a change in market value, would be substantially the same as the
value of the underlying municipal obligation. A stand-by commitment might not be
transferable by the fund, although it could sell the underlying municipal
obligation to a third party at any time.
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The fund expects that stand-by commitments generally will be available without
the payment of direct or indirect consideration. However, if necessary and
advisable, the fund may pay for stand-by commitments either separately in cash
or by paying a higher price for portfolio securities which are acquired subject
to such a commitment (thus reducing the yield to maturity otherwise available
for the same securities). The total amount paid in either manner for outstanding
stand-by commitments held in the fund portfolio will not exceed 10% of the value
of the fund's total assets calculated immediately after each stand-by commitment
is acquired. The fund will enter into stand-by commitments only with banks and
broker-dealers that, in the judgment of the Trust's Board of Trustees, present
minimal credit risks.
INVERSE FLOATERS
Inverse floaters are derivative securities whose interest rates vary inversely
to changes in short-term interest rates and whose values fluctuate inversely to
changes in long-term interest rates. The value of certain inverse floaters will
fluctuate substantially more in response to a given change in long-term rates
than would a traditional debt security. These securities have investment
characteristics similar to leverage, in that interest rate changes have a
magnified effect on the value of inverse floaters.
RULE 144A SECURITIES
The fund may purchase securities that have been privately placed but that are
eligible for purchase and sale under Rule 144A of the Securities Act of 1933
("1933 Act"). That Rule permits certain qualified institutional buyers, such as
the fund, to trade in privately placed securities that have not been registered
for sale under the 1933 Act. The Advisor, under the supervision of the Board of
Trustees, will consider whether securities purchased under Rule 144A are
illiquid and thus subject to the fund's investment restriction on illiquid
securities. A determination of whether a Rule 144A security is liquid or not is
a question of fact. In making this determination, the Advisor will consider the
trading markets for the specific security, taking into account the unregistered
nature of a Rule 144A security. In addition, the Advisor could consider the (1)
frequency of trades and quotes, (2) number of dealers and potential purchasers,
(3) dealer undertakings to make a market, and (4) nature of the security and of
marketplace trades (e.g., the time needed to dispose of the security, the method
of soliciting offers, and the mechanics of transfer). The liquidity of Rule 144A
securities will be monitored and, if as a result of changed conditions, it is
determined by the Advisor that a Rule 144A security is no longer liquid, the
fund's holdings of illiquid securities would be reviewed to determine what, if
any, steps are required to assure that the fund does not invest more than its
investment restriction on illiquid securities allows. Investing in Rule 144A
securities could have the effect of increasing the amount of the fund's assets
invested in illiquid securities if qualified institutional buyers are unwilling
to purchase such securities.
TAXES
In this section, all discussions of taxation at the shareholder level relate to
federal taxes only. Consult your tax advisor for state, local and foreign tax
considerations and for information about special tax considerations that may
apply to shareholders that are not natural persons or not U.S. citizens or
resident aliens.
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.
FUNDS THAT INVEST IN 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.
FUND DISTRIBUTIONS. Distributions from the fund (other than exempt-interest
dividends, as discussed below) will be taxable to shareholders as ordinary
income to the extent derived from the fund's investment income and net
short-term gains.
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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 a 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 a 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 a fund's net asset value also reflects unrealized
losses.
DISTRIBUTIONS FROM TAX-EXEMPT FUNDS. Each tax-exempt fund will have at least 50%
of its total assets invested in tax-exempt bonds at the end of each quarter so
that dividends from net interest income on tax-exempt bonds will be exempt from
federal income tax when received by a shareholder. The tax-exempt portion of
dividends paid will be designated within 60 days after year-end based upon the
ratio of net tax-exempt income to total net investment income earned during the
year. That ratio may be substantially different from the ratio of net tax-exempt
income to total net investment income earned during any particular portion of
the year. Thus, a shareholder who holds shares for only a part of the year may
be allocated more or less tax-exempt dividends than would be the case if the
allocation were based on the ratio of net tax-exempt income to total net
investment income actually earned while a shareholder.
The Tax Reform Act of 1986 makes income from certain "private activity bonds"
issued after August 7, 1986, a tax preference item for the AMT at the maximum
rate of 28% for individuals and 20% for corporations. If the fund invests in
private activity bonds, shareholders may be subject to the AMT on that part of
the distributions derived from interest income on such bonds. Other provisions
of the Tax Reform Act affect the tax treatment of distributions for
corporations, casualty insurance companies and financial institutions; interest
on all tax-exempt bonds is included in corporate adjusted current earnings when
computing the AMT applicable to corporations. Seventy-five percent of the excess
of adjusted current earnings over the amount of income otherwise subject to the
AMT is included in a corporation's alternative minimum taxable-income.
Dividends derived from any investments other than tax-exempt bonds and any
distributions of short-term capital gains are taxable to shareholders as
ordinary income. Any distributions of long-term capital gains will in general be
taxable to shareholders as long-term capital gains (generally subject to a
maximum 20% tax rate for shareholders who are individuals) regardless of the
length of time fund shares are held.
A tax-exempt fund may at times purchase tax-exempt securities at a discount and
some or all of this discount may be included in the fund's ordinary income which
will be taxable when distributed. Any market discount recognized on a tax-exempt
bond purchased after April 30, 1993, with a term at time of issue of one year or
more is taxable as ordinary income. A market discount bond is a bond acquired in
the secondary market at a price below its "stated redemption price" (in the case
of a bond with original issue discount, its "revised issue price").
12
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Shareholders receiving social security and certain retirement benefits may be
taxed on a portion of those benefits as a result of receiving tax-exempt
income, including tax-exempt dividends from the fund.
SPECIAL TAX RULES APPLICABLE TO TAX-EXEMPT FUNDS. Income distributions to
shareholders who are substantial users or related persons of substantial users
of facilities financed by industrial revenue bonds may not be excludable from
their gross income if such income is derived from such bonds. Income derived
from the fund's investments other than tax-exempt instruments may give rise to
taxable income. The fund's shares must be held for more than six months in
order to avoid the disallowance of capital loss on the sale of fund shares to
the extent of tax-exempt dividends paid during that period. A shareholder who
borrows money to purchase the fund's shares will not be able to deduct the
interest paid with respect to such borrowed money.
SALES 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.
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, LFSI may be notified by the Internal Revenue
Service that a shareholder is subject to backup withholding.
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.
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; and (be) 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).
HEDGING TRANSACTIONS. If the fund engages in hedging transactions, including
hedging transactions in options, future contracts and straddles, or other
similar transactions, it will be subject to special tax rules (including
constructive sale, mark-to-market, straddle, wash sale, and short sale rules),
the effect of which may be to accelerate income to the fund, defer losses to the
fund, cause adjustments in the holding periods of the fund's securities, convert
long-term capital gains into short-term capital gains or convert short-term
capital losses into long-term capital losses. These rules could therefore
affect the amount, timing and character of distributions to shareholders. The
fund will endeavor to make any available elections pertaining to such
transactions in a manner believed to be in the best interest of the fund.
SECURITIES ISSUED AT A DISCOUNT. The fund's investment in securities issued at
a discount and certain other obligations will (and investments in securities
purchased at a discount may) require the fund to accrue and distribute income
not yet received. In such cases, the fund may be required to sell assets
(possibly at a time when it is not advantageous to do so) to generate the cash
necessary to distribute as dividends to its shareholders all of its income and
gains and therefore to eliminate any tax liability at the fund level.
FOREIGN CURRENCY-DENOMINATED SECURITIES AND RELATED HEDGING TRANSACTIONS. The
fund's transactions in foreign currencies, foreign currency-denominated debt
securities, certain foreign currency options, futures contracts and forward
contracts (and similar instruments) may give rise to ordinary income or loss to
the extent such income or loss results from fluctuations in the value of the
foreign currency concerned.
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If more than 50% of the fund's total assets at the end of its fiscal year are
invested in stock or securities of foreign corporate issuers, the fund may make
an election permitting its shareholders to take a deduction or credit for
federal tax purposes for their portion of certain qualified foreign taxes paid
by the fund. The Advisor will consider the value of the benefit to a typical
shareholder, the cost to the fund of compliance with the election, and
incidental costs to shareholders in deciding whether to make the election. A
shareholder's ability to claim such a foreign tax credit will be subject to
certain limitations imposed by the Code, including a holding period requirement,
as a result of which a shareholder may not get a full credit for the amount of
foreign taxes so paid by the fund. Shareholders who do not itemize on their
federal income tax returns may claim a credit (but not a deduction) for such
foreign taxes.
Investment by the fund in certain "passive foreign investment companies" could
subject the fund to a U.S. federal income tax (including interest charges) on
distributions received from the company or on proceeds received from the
disposition of shares in the company, which tax cannot be eliminated by making
distributions to fund shareholders. However, the fund may be able to elect to
treat a passive foreign investment company as a "qualified electing fund," in
which case the fund will be required to include its share of the company's
income and net capital gain annually, regardless of whether it receives any
distribution from the company. Alternatively, the fund may make an election to
mark the gains (and, to a limited extent, losses) in such holdings "to the
market" as though it had sold and repurchased its holdings in those passive
foreign investment companies on the last day of the fund's taxable year. Such
gains and losses are treated as ordinary income and loss. The qualified electing
fund and mark-to-market elections may have the effect of accelerating the
recognition of income (without the receipt of cash) and increase the amount
required to be distributed for the fund to avoid taxation. Making either of
these elections therefore may require a fund to liquidate other investments
(including when it is not advantageous to do so) in order to meet its
distribution requirement, which also may accelerate the recognition of gain and
affect a fund's total return.
MANAGEMENT OF THE FUNDS (IN THIS SECTION, AND THE FOLLOWING SECTIONS ENTITLED
"TRUSTEES AND OFFICERS," "THE MANAGEMENT AGREEMENT," "ADMINISTRATION AGREEMENT,"
"THE PRICING AND BOOKKEEPING AGREEMENT," "PORTFOLIO TRANSACTIONS," "INVESTMENT
DECISIONS," AND "BROKERAGE AND RESEARCH SERVICES," THE "ADVISOR" REFERS TO
COLONIAL MANAGEMENT ASSOCIATES, INC.)
The Advisor is the investment advisor to each of the funds (except for Colonial
Money Market Fund, Colonial Municipal Money Market Fund, Colonial Global
Utilities Fund, Stein Roe Advisor Tax-Managed Value Fund, Newport Tiger Fund,
Newport Tiger Cub Fund, Newport Japan Opportunities Fund, Newport Greater China
Fund and Newport Asia Pacific Fund - see Part I of each Fund's respective SAI
for a description of the investment advisor). The Advisor is a subsidiary of
Liberty Funds Group LLC (LFG), One Financial Center, Boston, MA 02111. LFG is an
indirect wholly-owned subsidiary of Liberty Financial Companies, Inc. (Liberty
Financial), which in turn is a direct majority-owned subsidiary of Liberty
Corporate Holdings, Inc., which in turn is a direct wholly-owned subsidiary of
LFC Management Corporation, which in turn is a direct wholly-owned 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 (THIS SECTION APPLIES TO ALL OF THE FUNDS)
<TABLE>
<CAPTION>
Name and Address Age Position with Fund Principal Occupation During Past Five Years
- ---------------- --- ------------------ --------------------------------------------
<S> <C> <C> <C>
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).
Tom Bleasdale 68 Trustee Retired (formerly Chairman of the Board and Chief
102 Clubhouse Drive #275 Executive Officer, Shore Bank & Trust Company from
Naples, Florida 34105 1992-1993); Director of The Empire Company since June,
1995.
John V. Carberry * 51 Trustee Senior Vice President of Liberty Financial (formerly
56 Woodcliff Road Managing Director, Salomon Brothers (investment banking)
Wellesley Hills, MA 02481 from January, 1988 to January, 1998).
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Lora S. Collins 63 Trustee Attorney (formerly Attorney, Kramer, Levin, Naftalis &
1175 Hill Road Frankel from September, 1986 to November, 1996).
Southold, NY 11971
James E. Grinnell 69 Trustee Private Investor since November, 1988.
22 Harbor Avenue
Marblehead, MA 01945
Richard W. Lowry 62 Trustee Private Investor since August, 1987.
10701 Charleston Drive
Vero Beach, FL 32963
Salvatore Macera 67 Trustee Private Investor (formerly Executive Vice President of
26 Little Neck Lane Itek Corp. and President of Itek Optical & Electronic
New Seabury, MA 02649 Industries, Inc. (electronics)).
William E. Mayer* 58 Trustee Partner, Development Capital, LLC (formerly Dean, College
500 Park Avenue, 5th Floor of Business and Management, University of Maryland from
New York, NY 10022 October, 1992 to November, 1996; Dean, Simon Graduate
School of Business,
University of
Rochester from
October, 1991 to
July, 1992).
James L. Moody, Jr. 67 Trustee Retired (formerly Chairman of the Board, Hannaford Bros.
16 Running Tide Road Co. from May, 1984 to May, 1997, and Chief Executive
Cape Elizabeth, ME 04107 Officer, Hannaford Bros. Co. from May, 1973 to May, 1992).
John J. Neuhauser 55 Trustee Dean, Boston College School of Management since
140 Commonwealth Avenue September, 1977.
Chestnut Hill, MA 02167
Thomas E. Stitzel 63 Trustee Professor of Finance, College of Business, Boise State
2208 Tawny Woods Place University (higher education); Business consultant and
Boise, ID 83706 author.
Robert L. Sullivan 71 Trustee Retired Partner, KPMG Peat Marwick LLP.
45 Sankaty Avenue
Siasconset, MA 02564
Anne-Lee Verville 53 Trustee Consultant (formerly General Manager, Global Education
359 Stickney Hill Road Industry from 1994 to 1997, and President, Applications
Hopkinton, NH 03229 Solutions Division from 1991 to 1994, IBM Corporation
(global education and global applications)).
</TABLE>
15
<PAGE>
<TABLE>
<S> <C> <C> <C>
Stephen E. Gibson 45 President President of the Funds since June, 1998, Chairman of
the Board since July, 1998, Chief Executive Officer and
President since December 1996 and Director, since July
1996 of the Advisor (formerly Executive Vice President
from July, 1996 to December, 1996); Director, Chief
Executive Officer and President of LFG since December,
1998 (formerly Director, Chief Executive Officer and
President of The Colonial Group, Inc. (TCG) from
December, 1996 to December, 1998); Assistant Chairman
of Stein Roe & Farnham Incorporated (SR&F) since
August, 1998 (formerly Managing Director of Marketing
of Putnam Investments, June, 1992 to July, 1996.)
J. Kevin Connaughton 34 Controller and Controller and Chief Accounting Officer of the Funds
Chief Accounting since February, 1998; Vice President of the Advisor
Officer since February, 1998 (formerly Senior 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; Vice President, The Boston Company (subsidiary
of Mellon Bank) from December, 1993 to March, 1994;
Assistant Vice President and Tax Manager, The Boston
Company from March, 1992 to December, 1993).
</TABLE>
16
<PAGE>
<TABLE>
<S> <C> <C> <C>
Timothy J. Jacoby 46 Treasurer and Treasurer and Chief Financial Officer of the Funds
Chief Financial since October, 1996 (formerly Controller and Chief
Officer Accounting Officer from October, 1997 to February,
1998); Senior Vice President of the Advisor since
September, 1996; Vice President, Chief Financial
Officer and Treasurer since December, 1998 of
LFG (formerly Vice President, Chief Financial Officer
and Treasurer from July, 1997 to December, 1998 of
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 and Assistant Treasurer to the Fidelity
Group of Funds from August, 1990 to September, 1993).
Advisor
Nancy L. Conlin 45 Secretary Secretary of the Funds since April, 1998 (formerly
Assistant Secretary from July, 1994 to April, 1998);
Director, Senior Vice President, General Counsel, Clerk
and Secretary of the Advisor 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); (formerly Partner, Mintz, Levin, Cohn,
Ferris, Glovsky and Popeo from June, 1990 to June, 1994)
Joseph R. Palombo 46 Vice President Vice President of the Funds since April, 1999;
Executive Vice President and Director of the Advisor
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).
</TABLE>
* A Trustee who is an "interested person" (as defined in the Investment
Company Act of 1940 ("1940 Act")) of the fund or the Advisor.
The business address of the officers of each fund is One Financial Center,
Boston, MA 02111.
The Trustees serve as trustees of all funds for which each Trustee (except Mr.
Carberry) will receive an annual retainer of $45,000 and attendance fees of
$8,000 for each regular joint meeting and $1,000 for each special joint meeting.
Committee chairs
17
<PAGE>
receive an annual retainer of $5,000 and Committee chairs receive $1,000 for
each special meeting attended on a day other than a regular joint meeting day.
Committee members receive an annual retainer of $1,000 and $1,000 for each
special meeting attended on a day other than a regular joint meeting day.
Two-thirds of the Trustee fees are allocated among the funds based on each
fund's relative net assets and one-third of the fees are divided equally among
the funds.
The Advisor and/or its affiliate, Colonial Advisory Services, Inc. (CASI), has
rendered investment advisory services to investment company, institutional and
other clients since 1931. The Advisor currently serves as investment advisor or
administrator for 39 open-end and 5 closed-end management investment company
portfolios. Trustees and officers of the Trust, who are also officers of the
Advisor 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 the funds to over 800,000 clients worldwide,
representing more than $16.3 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.
The Trustees have the authority to convert the funds into a master fund/feeder
fund structure. Under this structure, a fund may invest all or a portion of its
investable assets in investment companies with substantially the same investment
objectives, policies and restrictions as the fund. The primary reason to use the
master fund/feeder fund structure is to provide a mechanism to pool, in a single
master fund, investments of different investor classes, resulting in a larger
portfolio, investment and administrative efficiencies and economies of scale.
THE MANAGEMENT AGREEMENT (THIS SECTION DOES NOT APPLY TO COLONIAL MONEY MARKET
FUND, COLONIAL MUNICIPAL MONEY MARKET FUND, COLONIAL GLOBAL UTILITIES FUND,
STEIN ROE ADVISOR TAX-MANAGED VALUE FUND, NEWPORT TIGER FUND, NEWPORT JAPAN
OPPORTUNITIES FUND, NEWPORT TIGER CUB FUND, NEWPORT GREATER CHINA FUND OR
NEWPORT ASIA PACIFIC FUND)
Under a Management Agreement (Agreement), the Advisor has contracted to furnish
each fund with investment research and recommendations or fund management,
respectively, and accounting and administrative personnel and services, and with
office space, equipment and other facilities. For these services and facilities,
each fund pays a monthly fee based on the average of the daily closing value of
the total net assets of each fund for such month. Under the Agreement, any
liability of the Advisor to the Trust, a 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 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 Agreement will
automatically terminate upon any assignment thereof and shall continue in effect
from year to year 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 1940 Act) of the
Advisor or the Trust, cast in person at a meeting called for the purpose of
voting on such approval.
The Advisor pays all salaries of officers of the Trust. The Trust pays all
expenses not assumed by the Advisor including, but not limited to, auditing,
legal, custodial, investor servicing and shareholder reporting expenses. The
Trust pays the cost of printing and mailing any Prospectuses sent to
shareholders. LFD pays the cost of printing and distributing all other
Prospectuses.
ADMINISTRATION AGREEMENT (THIS SECTION APPLIES ONLY TO COLONIAL MONEY MARKET
FUND, COLONIAL MUNICIPAL MONEY MARKET FUND, COLONIAL GLOBAL UTILITIES FUND,
STEIN ROE ADVISOR TAX-MANAGED VALUE FUND, NEWPORT TIGER FUND, NEWPORT JAPAN
OPPORTUNITIES FUND, NEWPORT TIGER CUB FUND, NEWPORT GREATER CHINA FUND AND
NEWPORT ASIA PACIFIC FUND AND THEIR RESPECTIVE TRUSTS).
Under an Administration Agreement with each fund named above, the Advisor, in
its capacity as the Administrator to each fund, has contracted to perform the
following administrative services:
(a) providing office space, equipment and clerical personnel;
(b) arranging, if desired by the respective Trust, for its
directors, officers and employees to serve as Trustees,
officers or agents of each fund;
18
<PAGE>
(c) preparing and, if applicable, filing all documents required
for compliance by each fund with applicable laws and
regulations;
(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 each fund's
other third-party service providers; and
(f) maintaining certain books and records of each fund.
With respect to Colonial Money Market Fund and Colonial Municipal Money Market
Fund, the Administration Agreement for these funds provides for the following
services in addition to the services referenced above:
(g) Monitoring compliance by the fund with Rule 2a-7 under the
(1940 Act and reporting to the Trustees from time to time with
respect thereto; and
(h) Monitoring the investments and operations of the following
Portfolios: SR&F Municipal Money Market Portfolio (Municipal
Money Market Portfolio) in which Colonial Municipal Money
Market Fund is invested;
SR&F Cash Reserves Portfolio in which Colonial Money Market
Fund is invested.
The Advisor is paid a monthly fee at the annual rate of average daily net assets
set forth in Part 1 of this SAI.
THE PRICING AND BOOKKEEPING AGREEMENT
The Advisor provides pricing and bookkeeping services to each fund pursuant to a
Pricing and Bookkeeping Agreement. The Advisor, in its capacity as the
Administrator to each of Colonial Money Market Fund, Colonial Municipal Money
Market Fund and Colonial Global Utilities Fund, is paid an annual fee of
$18,000, plus 0.0233% of average daily net assets in excess of $50 million. For
each of the other funds (except for Newport Tiger Fund, Newport Japan
Opportunities Fund, Newport Tiger Cub Fund, Newport Greater China Fund and
Newport Asia Pacific Fund), the Advisor is paid monthly a fee of $2,250 by each
fund, plus a monthly percentage fee based on net assets of the fund equal to the
following:
1/12 of 0.000% of the first $50 million;
1/12 of 0.035% of the next $950 million;
1/12 of 0.025% of the next $1 billion;
1/12 of 0.015% of the next $1 billion; and
1/12 of 0.001% on the excess over $3 billion
The Advisor provides pricing and bookkeeping services to Newport Tiger Fund,
Newport Japan Opportunities Fund, Newport Tiger Cub Fund, Newport Greater China
Fund and Newport Asia Pacific Fund for an annual fee of $27,000, plus 0.035% of
each fund's average daily net assets over $50 million.
Stein Roe & Farnham Incorporated, the investment advisor of the Municipal Money
Market Portfolio, provides pricing and bookkeeping services to the Portfolio for
a fee of $25,000 plus 0.0025% annually of average daily net assets of the
Portfolio over $50 million.
PORTFOLIO TRANSACTIONS
THE FOLLOWING SECTIONS ENTITLED "INVESTMENT DECISIONS" AND "BROKERAGE AND
RESEARCH SERVICES" DO NOT APPLY TO COLONIAL MONEY MARKET FUND, COLONIAL
MUNICIPAL MONEY MARKET FUND, STEIN ROE ADVISOR TAX-MANAGED VALUE FUND AND
COLONIAL GLOBAL UTILITIES FUND. FOR EACH OF THESE FUNDS, SEE PART 1 OF ITS
RESPECTIVE SAI. THE ADVISOR OF NEWPORT TIGER FUND, NEWPORT JAPAN OPPORTUNITIES
FUND, NEWPORT TIGER CUB FUND, NEWPORT GREATER CHINA FUND AND NEWPORT ASIA
PACIFIC FUND FOLLOWS THE SAME PROCEDURES AS THOSE SET FORTH UNDER "BROKERAGE AND
RESEARCH SERVICES."
INVESTMENT DECISIONS. The Advisor acts as investment advisor to each of the
funds (except for the Colonial Money Market Fund, Colonial Municipal Money
Market Fund, Colonial Global Utilities Fund, Stein Roe Advisor Tax-Managed Value
19
<PAGE>
Fund, Newport Tiger Fund, Newport Japan Opportunities Fund, Newport Tiger Cub
Fund, Newport Greater China Fund and Newport Asia Pacific Fund, each of which is
administered by the Advisor. The Advisor's affiliate, CASI, advises other
institutional, corporate, fiduciary and individual clients for which CASI
performs various services. Various officers and Trustees of the Trust also serve
as officers or Trustees of other funds and the other corporate or fiduciary
clients of the Advisor. The funds and clients advised by the Advisor or the
funds administered by the Advisor sometimes invest in securities in which the
fund also invests and sometimes engage in covered option writing programs and
enter into transactions utilizing stock index options and stock index and
financial futures and related options ("other instruments"). If the fund, such
other funds and such other clients desire to buy or sell the same portfolio
securities, options or other instruments at about the same time, the purchases
and sales are normally made as nearly as practicable on a pro rata basis in
proportion to the amounts desired to be purchased or sold by each. Although in
some cases these practices could have a detrimental effect on the price or
volume of the securities, options or other instruments as far as the fund is
concerned, in most cases it is believed that these practices should produce
better executions. It is the opinion of the Trustees that the desirability of
retaining the Advisor as investment advisor to the funds outweighs the
disadvantages, if any, which might result from these practices.
The portfolio managers of Colonial Utilities Fund, a series of Liberty Funds
Trust IV (formerly Colonial Trust IV), will use the trading facilities of Stein
Roe & Farnham Incorporated, an affiliate of the Advisor, to place all orders for
the purchase and sale of this fund's portfolio securities, futures contracts and
foreign currencies.
BROKERAGE AND RESEARCH SERVICES. Consistent with the Rules of Fair Practice of
the National Association of Securities Dealers, Inc., and subject to seeking
"best execution" (as defined below) and such other policies as the Trustees may
determine, the Advisor may consider sales of shares of the funds as a factor in
the selection of broker-dealers to execute securities transactions for a fund.
The Advisor places the transactions of the funds with broker-dealers selected by
the Advisor and, if applicable, negotiates commissions. Broker-dealers may
receive brokerage commissions on portfolio transactions, including the purchase
and writing of options, the effecting of closing purchase and sale transactions,
and the purchase and sale of underlying securities upon the exercise of options
and the purchase or sale of other instruments. The funds from time to time also
execute portfolio transactions with such broker-dealers acting as principals.
The funds do not intend to deal exclusively with any particular broker-dealer or
group of broker-dealers.
It is the Advisor's policy generally to seek best execution, which is to place
the funds' transactions where the funds can obtain the most favorable
combination of price and execution services in particular transactions or
provided on a continuing basis by a broker-dealer, and to deal directly with a
principal market maker in connection with over-the-counter transactions, except
when it is believed that best execution is obtainable elsewhere. In evaluating
the execution services of, including the overall reasonableness of brokerage
commissions paid to, a broker-dealer, consideration is given to, among other
things, the firm's general execution and operational capabilities, and to its
reliability, integrity and financial condition.
Securities transactions of the funds may be executed by broker-dealers who also
provide research services (as defined below) to the Advisor and the funds. The
Advisor may use all, some or none of such research services in providing
investment advisory services to each of its investment company and other
clients, including the fund. To the extent that such services are used by the
Advisor, they tend to reduce the Advisor's expenses. In the Advisor's opinion,
it is impossible to assign an exact dollar value for such services.
The Trustees have authorized the Advisor to cause the Funds to pay a
broker-dealer which provides brokerage and research services to the Advisor an
amount of commission for effecting a securities transaction, including the sale
of an option or a closing purchase transaction, for the funds in excess of the
amount of commission which another broker-dealer would have charged for
effecting that transaction. As provided in Section 28(e) of the Securities
Exchange Act of 1934, "brokerage and research services" include advice as to the
value of securities, the advisability of investing in, purchasing or selling
securities and the availability of securities or purchasers or sellers of
securities; furnishing analyses and reports concerning issues, industries,
securities, economic factors and trends and portfolio strategy and performance
of accounts; and effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement). The Advisor must
determine in good faith that such greater commission is reasonable in relation
to the value of the brokerage and research services provided by the executing
broker-dealer viewed in terms of that particular transaction or the Advisor's
overall responsibilities to the funds and all its other clients.
The Trustees have authorized the Advisor to utilize the services of a clearing
agent with respect to all call options written by funds that write options and
to pay such clearing agent commissions of a fixed amount per share (currently
1.25 cents) on the sale of the underlying security upon the exercise of an
option written by a fund.
20
<PAGE>
The Advisor may use the services of AlphaTrade Inc. (ATI), its registered
broker-dealer subsidiary, when buying or selling equity securities for a fund's
portfolio pursuant to procedures adopted by the Trustees and 1940 Act Rule
17e-1. Under the Rule, the Advisor must ensure that commissions a Fund pays ATI
on portfolio transactions are reasonable and fair compared to commissions
received by other broker-dealers in connection with comparable transactions
involving similar securities being bought or sold at about the same time. The
Advisor will report quarterly to the Trustees on all securities transactions
placed through ATI so that the Trustees may consider whether such trades
complied with these procedures and the Rule. ATI employs electronic trading
methods by which it seeks to obtain best price and execution for the fund, and
will use a clearing broker to settle trades.
PRINCIPAL UNDERWRITER
LFD is the principal underwriter of the Trust's shares. LFD has no obligation to
buy the funds' shares, and purchases the funds' shares only upon receipt of
orders from authorized FSFs or investors.
INVESTOR SERVICING AND TRANSFER AGENT
LFSI is the Trust's investor servicing agent (transfer, plan and dividend
disbursing agent), for which it receives fees which are paid monthly by the
Trust. The fee paid to LFSI is based on the average daily net assets of each
fund plus reimbursement for certain out-of-pocket expenses. SEE "FUND CHARGES
AND EXPENSES" IN PART 1 OF THIS SAI FOR INFORMATION ON FEES RECEIVED BY LFSI.
The agreement continues indefinitely but may be terminated by 90 days' notice by
the fund to LFSI or generally by 6 months' notice by LFSI to the fund. The
agreement limits the liability of LFSI to the fund for loss or damage incurred
by the fund to situations involving a failure of LFSI 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 LFSI against, among other things, loss or
damage incurred by LFSI on account of any claim, demand, action or suit made on
or against LFSI not resulting from LFSI's bad faith or negligence and arising
out of, or in connection with, its duties under the agreement.
DETERMINATION OF NET ASSET VALUE
Each fund determines net asset value (NAV) per share for each class as of the
close of the New York Stock Exchange (Exchange) (generally 4:00 p.m. Eastern
time, 3:00 p.m. Central time) each day the Exchange is open. Currently, the
Exchange is closed Saturdays, Sundays and the following holidays: New Year's
Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas. Funds with portfolio
securities which are primarily listed on foreign exchanges may experience
trading and changes in NAV on days on which such fund does not determine NAV due
to differences in closing policies among exchanges. This may significantly
affect the NAV of the fund's redeemable securities on days when an investor
cannot redeem such securities. The net asset value of the Municipal Money Market
Portfolio will not be determined on days when the Exchange is closed unless, in
the judgment of the Municipal Money Market Portfolio's Board of Trustees, the
net asset value of the Municipal Money Market Portfolio should be determined on
any such day, in which case the determination will be made at 3:00 p.m., Central
time. 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 Advisor 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
Advisor in good faith under the direction of the Trust's Board of 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,
U.S. government securities, and tax-exempt 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 each 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 Board of Trustees.
(The following two paragraphs are applicable only to Newport Tiger Fund, Newport
Japan Opportunities Fund, Newport Tiger Cub Fund, Newport Greater China Fund and
Newport Asia Pacific Fund. " Advisor" in these two paragraphs refers to each
fund's investment advisor, Newport Fund Management, Inc.)
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<PAGE>
Trading in securities on stock exchanges and over-the-counter markets in the Far
East is normally completed well before the close of the business day in New
York. Trading on Far Eastern securities markets may not take place on all
business days in New York, and trading on some Far Eastern securities markets
does take place on days which are not business days in New York and on which the
fund's NAV is not calculated.
The calculation of the fund's NAV accordingly may not take place
contemporaneously with the determination of the prices of the fund's portfolio
securities used in such calculations. Events affecting the values of portfolio
securities that occur between the time their prices are determined and the close
of the Exchange (when the fund's NAV is calculated) will not be reflected in the
fund's calculation of NAV unless the Advisor, acting under procedures
established by the Board of Trustees of the Trust, deems that the particular
event would materially affect the fund's NAV, in which case an adjustment will
be made. Assets or liabilities initially expressed in terms of foreign
currencies are translated prior to the next determination of the NAV of the
fund's shares into U.S. dollars at prevailing market rates.
AMORTIZED COST FOR MONEY MARKET FUNDS (THIS SECTION CURRENTLY DOES NOT APPLY TO
COLONIAL MONEY MARKET FUNDS, - SEE "AMORTIZED COST FOR MONEY MARKET FUNDS" UNDER
"OTHER INFORMATION CONCERNING THE PORTFOLIO" IN PART 1 OF THE SAI OF AND
COLONIAL MUNICIPAL MONEY MARKET FUND FOR INFORMATION RELATING TO THE MUNICIPAL
MONEY MARKET PORTFOLIO)
Money market funds generally value their portfolio securities at amortized cost
according to Rule 2a-7 under the 1940 Act.
Portfolio instruments are valued under the amortized cost method, whereby the
instrument is recorded at cost and thereafter amortized to maturity. This method
assures a constant NAV but may result in a yield different from that of the same
portfolio under the market value method. The Trust's Trustees have adopted
procedures intended to stabilize a money market fund's NAV per share at $1.00.
When a money market fund's market value deviates from the amortized cost of
$1.00, and results in a material dilution to existing shareholders, the Trust's
Trustees will take corrective action that may include: realizing gains or
losses; shortening the portfolio's maturity; withholding distributions;
redeeming shares in kind; or converting to the market value method (in which
case the NAV per share may differ from $1.00). All investments will be
determined pursuant to procedures approved by the Trust's Trustees to present
minimal credit risk.
See the Statement of Assets and Liabilities in the shareholder report of the
Colonial Money Market Fund for a specimen price sheet showing the computation of
maximum offering price per share of Class A shares.
HOW TO BUY SHARES
The Prospectus contains 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. 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 LFSI,
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 or checkwriting privilege checks for which there are
insufficient funds in a shareholder's account to cover redemption will subject
such purchaser or shareholder 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.
LFSI 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
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<PAGE>
sales commission. Shareholders may change FSFs at any time by written notice to
LFSI, provided the new FSF has a sales agreement with LFD.
Shares credited to an account are transferable upon written instructions in good
order to LFSI 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, T or Z
shares. The Colonial money market funds will not issue certificates.
Shareholders may send any certificates which have been previously acquired to
LFSI for deposit to their account.
SPECIAL PURCHASE PROGRAMS/INVESTOR SERVICES
The following special purchase programs/investor services may be changed or
eliminated at any time.
FUNDAMATIC PROGRAM. As a convenience to investors, shares of most funds advised
by Colonial, Newport Fund Management, Inc., Crabbe Huson Group, Inc. and Stein
Roe & Farnham Incorporated may be purchased through the Fundamatic Program.
Preauthorized monthly bank drafts or electronic funds transfers for a fixed
amount of at least $50 are used to purchase a 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 Colonial, Newport Fund Management, Inc., Crabbe Huson
Group, Inc. and Stein Roe & Farnham Incorporated 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.
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 $10 annual fee unless the plan maintains an omnibus account with LFSI.
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 LFSI. 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 LFSI, 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.
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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 a fund automatically invested in the same class of shares of
another fund. An ADD account must be in the same name as the shareholder's
existing open account with the particular fund. Call LFSI for more information
at 1-800-422-3737.
PROGRAMS FOR REDUCING OR ELIMINATING SALES CHARGES
RIGHT OF ACCUMULATION AND STATEMENT OF INTENT (Class A and Class T shares only)
(Class T shares can only be purchased by the shareholders of Newport Tiger Fund
who already own Class T shares). Reduced sales charges on Class A and T 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 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, T and Z
shares).
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 LFSI. A fund may terminate or
amend this Right of Accumulation.
Any person may qualify for reduced sales charges on purchases of Class A and T
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, T 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, LFSI will hold shares in escrow to secure
payment of the higher sales charge applicable to Class A or T 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 a 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, LFSI 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 LFSI at 1-800-345-6611.
COLONIAL ASSET BUILDER INVESTMENT PROGRAM (THIS SECTION CURRENTLY APPLIES ONLY
TO THE CLASS A SHARES OF COLONIAL SELECT VALUE FUND AND THE COLONIAL FUND, EACH
A SERIES OF LIBERTY FUNDS TRUST III (FORMERLY COLONIAL TRUST III)). A reduced
sales charge applies to a purchase of certain funds' Class A shares under a
Statement of Intent for the Colonial Asset Builder Investment Program (Program).
The Program offer may be withdrawn at any time without notice. A completed
Program may serve as the initial investment for a new Program, subject to the
maximum of $4,000 in initial investments per investor. Shareholders in this
program are subject to a 5% sales charge. LFSI will escrow shares to secure
payment of the additional sales charge on amounts invested if the Program is not
completed. Escrowed shares are credited with distributions and will be released
when the Program has ended. Shareholders are subject to a 1% fee on the amount
invested if they do not complete the Program. Prior to
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completion of the Program, only scheduled Program investments may be made in a
fund in which an investor has a Program account. The following services are not
available to Program accounts until a Program has ended:
<TABLE>
<S> <C>
Systematic Withdrawal Plan Share Certificates
Sponsored Arrangements Exchange Privilege
$50,000 Fast Cash Colonial Cash Connection
Right of Accumulation Automatic Dividend Diversification
Telephone Redemption Reduced Sales Charges for any "person"
Statement of Intent
</TABLE>
* Exchanges may be made to other funds offering the Program.
Because of the unavailability of certain services, this Program may not be
suitable for all investors.
The FSF receives 3% of the investor's intended purchases under a Program at the
time of initial investment and 1% after the 24th monthly payment. LFD may
require the FSF to return all applicable commissions paid with respect to a
Program terminated within six months of inception, and thereafter to return
commissions in excess of the FSF discount applicable to shares actually
purchased.
Since the Asset Builder plan involves continuous investment regardless of the
fluctuating prices of funds shares, investors should consult their FSF to
determine whether it is appropriate. The Plan does not assure a profit nor
protect against loss in declining markets.
REINSTATEMENT PRIVILEGE. An investor who has redeemed Class A, B, C or T 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 any fund at the NAV next determined
after LFSI 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 LFSI. 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 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 COLONIAL EMPLOYEES OR FINANCIAL SERVICE FIRMS (IN THIS SECTION,
THE "ADVISOR" REFERS TO COLONIAL MANAGEMENT ASSOCIATES, INC. IN ITS CAPACITY AS
THE ADVISOR OR ADMINISTRATOR TO CERTAIN FUNDS). Class A shares of certain funds
may be sold at NAV to the following individuals whether currently employed or
retired: Trustees of funds advised or administered by the Advisor; directors,
officers and employees of the Advisor, LFD and other companies affiliated with
the Advisor; registered representatives and employees of FSFs (including their
affiliates) that are parties to dealer agreements or other sales arrangements
with LFD; and such persons' families and their beneficial accounts.
SPONSORED ARRANGEMENTS. Class A and Class T shares (Class T shares can only be
purchased by the shareholders of Newport Tiger Fund who already own Class T
shares) of certain funds may be purchased at a 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
characteristics of the members of its group. The funds reserve the right to
revise the terms of or to suspend or discontinue sales pursuant to sponsored
plans at any time.
Class A and Class T shares (Class T shares can only be purchased by the
shareholders of Newport Tiger Fund who already own Class T shares) of certain
funds 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 funds are included as investment options in programs
involving fee-based compensation arrangements, and by participants in certain
retirement plans.
WAIVER OF CONTINGENT DEFERRED SALES CHARGES (CDSCS) (IN THIS SECTION, THE
"ADVISOR" REFERS TO COLONIAL MANAGEMENT ASSOCIATES, INC. IN ITS CAPACITY AS THE
ADVISOR OR ADMINISTRATOR TO CERTAIN FUNDS) (Classes A, B and C) CDSCs may be
waived on redemptions in the following situations with the proper documentation:
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<TABLE>
<S> <C>
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 LFSI, 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
"Investor Services - 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 funds distributed by
LFD for at least two years.
</TABLE>
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.
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 LFSI, 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, LFSI and many banks. Additional documentation is required
for sales by corporations, agents, fiduciaries, surviving joint owners and
individual retirement account holders. Call LFSI 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 LFSI and may charge for this service.
SYSTEMATIC WITHDRAWAL PLAN
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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 any fund designated by the
shareholder 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 such 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.
A 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, LFSI 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.
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 (except for
Newport Tiger Cub Fund, Newport Japan Opportunities Fund, Newport Asia Pacific
Fund and Newport Greater China Fund) 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 guarantee request. Telephone redemption privileges for larger amounts
and for Newport Tiger Cub Fund, Newport Japan Opportunities Fund, Newport
Greater China Fund and Newport Asia Pacific Fund may be elected on the
Application. LFSI 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.
CHECKWRITING (IN THIS SECTION, THE "ADVISOR" REFERS TO COLONIAL MANAGEMENT
ASSOCIATES, INC. IN ITS CAPACITY AS THE ADVISOR OR ADMINISTRATOR OF CERTAIN
FUNDS) (Available only on the Class A shares of certain funds) Shares may be
redeemed by check if a shareholder has previously completed an Application and
Signature Card. LFSI will provide checks to be drawn on BankBoston (the "Bank").
These checks may be made payable to the order of any person in the amount of not
less than $500 nor more than $100,000. The shareholder will continue to earn
dividends on shares until a check is presented to the Bank for payment. At such
time a sufficient number of full and fractional shares will be redeemed at the
next determined net asset value to cover the amount of the check. Certificate
shares may not be redeemed in this manner.
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Shareholders utilizing checkwriting drafts will be subject to the Bank's rules
governing checking accounts. There is currently no charge to the shareholder for
the use of checks. The shareholder should make sure that there are sufficient
shares in his or her open account to cover the amount of any check drawn since
the net asset value of shares will fluctuate. If insufficient shares are in the
shareholder's open account, the check will be returned marked "insufficient
funds" and no shares will be redeemed; the shareholder will be charged a $15
service fee for each check returned. It is not possible to determine in advance
the total value of an open account because prior redemptions and possible
changes in net asset value may cause the value of an open account to change.
Accordingly, a check redemption should not be used to close an open account. In
addition, a check redemption, like any other redemption, may give rise to
taxable capital gains.
NON CASH REDEMPTIONS. For redemptions of any single shareholder within any
90-day period exceeding the lesser of $250,000 or 1% of a fund's net asset
value, a fund may make the payment or a portion of the payment with portfolio
securities held by that 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.
Shares of most funds that pay daily dividends will normally earn dividends
starting with the date the fund receives payment for the shares and will
continue through the day before the shares are redeemed, transferred or
exchanged. The daily dividends for Colonial Municipal Money Market Fund will be
earned starting with the day after that fund receives payments for the shares.
HOW TO EXCHANGE SHARES
Shares of the Fund may be exchanged for the same class of shares of the other
continuously offered funds (with certain exceptions) on the basis of the NAVs
per share at the time of exchange. Class T and Z shares may be exchanged for
Class A shares of the other funds. The prospectus of each 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 funds are not available to residents of all states.
Consult LFSI before requesting an exchange.
By calling LFSI, 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 LFSI 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. LFSI
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, LFSI will require customary additional documentation.
Prospectuses of the other funds are available from the LFD Literature Department
by calling 1-800-426-3750.
A loss to a shareholder may result from 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 and Class T shares for five months before
exchanging to certain funds having a higher maximum sales charge. Consult your
FSF or LFSI. 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 open-end funds generally may exchange their shares at
NAV for the same class of shares of the fund.
An exchange is generally a capital sale transaction for federal income tax
purposes. The exchange privilege may be revised, suspended or terminated at any
time.
SUSPENSION OF REDEMPTIONS
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A 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 fund or 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 a particular 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" in the Prospectus of
each fund, 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.
PERFORMANCE MEASURES
TOTAL RETURN
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN. Average annual total return is the
actual return on a $10,000 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.
Total return for a newer class of shares for periods prior to inception includes
(a) the performance of the newer class of shares since inception and (b) the
performance of the oldest existing class of shares from the inception date up to
the date the newer class was offered for sale. In calculating total rate of
return for a newer class of shares in accordance with certain formulas required
by the SEC, the performance will be adjusted to take into account the fact that
the newer class is subject to a different sales charge than the oldest class
(e.g., if the newer class is Class A shares, the total rate of return quoted
will reflect the deduction of the initial sales charge applicable to Class A
shares; if the newer class is Class B or Class C shares, the total rate of
return quoted will reflect the deduction of the CDSC applicable to Class B or
Class C shares). However, the performance will not be adjusted to take into
account the fact that the newer class of shares bears different class specific
expenses than the oldest class of shares (e.g., Rule 12b-1 fees). Therefore, the
total rate of return quoted for a newer class of shares will differ from the
return that would be quoted had the newer class of shares been outstanding for
the entire period over which the calculation is based (i.e., the total rate of
return quoted for the newer class will be higher than the return that would have
been quoted had the newer class of shares been outstanding for the entire period
over which the calculation is based if the class specific expenses for the newer
class are higher than the class specific expenses of the oldest class, and the
total rate of return quoted for the newer class will be lower than the return
that would be quoted had the newer class of shares been
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outstanding for this entire period if the class specific expenses for the newer
class are lower than the class specific expenses of the oldest class).
Performance results reflect any voluntary waivers or reimbursements of fund
expenses by the Advisor, Administrator or its affiliates. Absent these waivers
or reimbursements, performance results would have been lower.
YIELD
MONEY MARKET. A money market fund's yield and effective yield is computed in
accordance with the SEC's formula for money market fund yields.
NON-MONEY MARKET. The yield for each class of shares of a fund is determined by
(i) calculating the income (as defined by the SEC for purposes of advertising
yield) during the base period and subtracting actual expenses for the period
(net of any reimbursements), and (ii) dividing the result by the product of the
average daily number of shares of the fund that were entitled to dividends
during the period and the maximum offering price of the fund on the last day of
the period, (iii) then annualizing the result assuming semi-annual compounding.
Tax-equivalent yield is calculated by taking that portion of the yield which is
exempt from income tax and determining the equivalent taxable yield which would
produce the same after-tax yield for any given federal and, in some cases, state
tax rate, and adding to that the portion of the yield which is fully taxable.
Adjusted yield is calculated in the same manner as yield except that expenses
voluntarily borne or waived by the Advisor or its affiliates have been added
back to actual expenses.
DISTRIBUTION RATE. The distribution rate for each class of shares of a 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 to be reputable, and publications in
the press pertaining to a fund's performance or to the Advisor or its
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 and 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, including the New ValueTM investment strategy
that expands upon the principles of traditional value investing; 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.
The fund may also quote evaluations mentioned in independent radio or television
broadcasts, and use charts and graphs to illustrate the past performance of
various indices such as those mentioned in Appendix II and illustrations using
hypothetical rates of return to illustrate the effects of compounding and
tax-deferral. The fund may advertise examples of the effects of periodic
investment plans, including the principle of dollar cost averaging. In such a
program, an investor invests a fixed dollar amount in a fund at periodic
intervals, thereby purchasing fewer shares when prices are high and more shares
when prices are low.
From time to time, the fund may also discuss or quote the views of its
distributor, its investment 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
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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.
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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.
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.
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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:
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.
35
<PAGE>
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.
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.
36
<PAGE>
APPENDIX II
1998
<TABLE>
<CAPTION>
SOURCE CATEGORY RETURN (%)
<S> <C>
CREDIT SUISSE FIRST BOSTON:
First Boston High Yield 0.58
LIPPER, INC.:
AMEX Composite Index P 0.64
AMEX Computer Tech IX P 81.46
AMEX Institutional IX P 37.59
AMEX Major Market IX P 18.32
Aust Crdtstlt:Osh IX P N/A
Bse Sensex Index -16.50
CAC 40:FFR IX P 31.47
CD Rate 1 Month Index Tr 5.61
CD Rate 3 Month Index Tr 5.59
CD Rate 6 Month Index Tr 5.58
Consumer Price Index 1.61
Copnhgn SE:Dkr IX P N/A
DAX:Dm IX Tr 17.71
Dow Jones 65 Comp Av P 10.10
Dow Jones Ind Average P 16.10
Dow Jones Ind Dly Reinv 18.13
Dow Jones Ind Mth Reinv 18.15
Dow Jones Trans Av P -3.29
Dow Jones Trans Av Tr 0.02
Dow Jones Util Av P 14.37
Dow Jones Util Av Tr 18.88
FT-SE 100:Pd IX P 14.55
Hang Seng:Hng Kng $ IX -6.29
Jakarta Composite Index N/A
Jasdaq Index:Yen P N/A
Klse Composite Index -1.40
Kospi Index N/A
Lear High Growth Rate IX 1.53
Lear Low Priced Value IX -1.52
Lehman 1-3 Govt/Corp Tr 6.96
Lehman Aggregate Bd P 2.03
Lehman Aggregate Bd Tr 8.69
Lehman Cp Bd Int Tr 8.29
Lehman Govt Bd Int P 1.99
Lehman Govt Bd Int Tr 8.49
Lehman Govt Bd Long P 6.59
Lehman Govt Bd Long Tr 13.41
Lehman Govt Bd P 3.27
Lehman Govt Bd Tr 9.85
Lehman Govt/Cp Bd P 2.70
Lehman Govt/Cp Bd Tr 9.47
Lehman Govt/Cp Int P 1.78
Lehman Govt/Cp Int Tr 8.44
Lehman High Yield P -6.46
Lehman High Yield Tr 1.60
Lehman Muni 10 Yr IX Tr 6.76
Lehman Muni 3 Yr IX Tr 5.21
</TABLE>
37
<PAGE>
<TABLE>
<S> <C>
Lehman Muni Bond IX Tr 6.48
Lehman 7-Year Muni Bond 6.23
ML 0-3 Yr Muni IX P 0.02
ML 0-3 Yr Muni IX Tr 5.01
ML 1-3 Yr Treasury IX P 0.60
ML 1-3 Yr Treasury IX Tr 7.00
ML 1-5 Yr Gv/Cp Bd IX P 1.12
ML 1-5 Yr Gv/Cp Bd IX Tr 7.68
ML 1-5 Yr Treasury IX P 1.32
ML 1-5 Yr Treasury IX Tr 7.74
ML 10+ Yr Treasury IX Tr 13.55
ML 15 Yr Mortgage IX P 0.85
ML 15 Yr Mortgage IX Tr 7.30
ML 3-5 Yr Govt IX P 2.40
ML 3-5 Yr Govt IX Tr 8.87
ML Corp Master Index P 1.47
ML Corp Master Index Tr 8.72
ML Glbl Govt Bond Inx P 7.71
ML Glbl Govt Bond Inx Tr 14.12
ML Glbl Gv Bond IX II P 8.32
ML Glbl Gv Bond IX II Tr 14.97
ML Global Bond Index P 6.07
ML Global Bond Index Tr 12.78
ML Gov Corp Master IX P 2.69
ML Gov Corp Master IX Tr 9.53
ML Govt Master Index P 3.17
ML Govt Master Index Tr 9.85
ML High Yld Master IX P -5.59
ML High Yld Master IX Tr 3.66
ML Mortgage Master IX P 0.68
ML Mortgage Master IX Tr 7.19
ML Treasury Master IX P 3.35
ML Treasury Master IX Tr 10.03
MSCI AC Americas Free GD 25.77
MSCI AC Americas Free ID 23.77
MSCI AC Asia Fr-Ja IX GD -7.79
MSCI AC Asia Fr-Ja IX ID -10.27
MSCI AC Asia Pac - Ja GD -4.77
MSCI AC Asia Pac - Ja ID -7.30
MSCI AC Asia Pac Fr-J GD -4.42
MSCI AC Asia Pac Fr-J ID -7.12
MSCI AC Asia Pac IX GD 2.03
MSCI AC Asia Pac IX ID 0.53
MSCI AC Europe IX GD 27.18
MSCI AC Europe IX ID 24.84
MSCI AC Fe - Ja IX GD -4.83
MSCI AC Fe - Ja IX ID -7.16
MSCI AC Fe Fr-Ja IX GD -4.82
MSCI AC Fe Fr-Ja IX ID -7.39
MSCI AC Fe Free IX GD 3.38
MSCI AC Fe Free IX ID 2.07
MSCI AC Pac Fr-Jpn IX GD -2.07
MSCI AC Pac Fr-Jpn IX ID -4.86
MSCI AC World Fr-USA GD 14.46
MSCI AC World Fr-USA ID 12.36
MSCI AC World Free IX GD 21.97
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
MSCI AC World IX GD 21.72
MSCI AC World IX ID 19.69
MSCI AC World-USA IX GD 14.09
MSCI AC Wrld Fr-Ja IX GD 24.09
MSCI AC Wrld Fr-Ja IX ID 21.93
MSCI AC Wrld-Ja IX GD 23.80
MSCI AC Wrld-Ja IX ID 21.64
MSCI Argentina IX GD -24.30
MSCI Argentina IX ID -27.30
MSCI Australia IX GD 7.06
MSCI Australia IX ID 3.80
MSCI Australia IX ND 6.07
MSCI Austria IX GD 0.77
MSCI Austria IX ID -0.91
MSCI Austria IX ND 0.35
MSCI Belgium IX GD 68.73
MSCI Belgium IX ID 64.84
MSCI Belgium IX ND 67.75
MSCI Brazil IX GD -39.62
MSCI Brazil IX ID -44.07
MSCI Canada IX GD -5.70
MSCI Canada IX ID -7.44
MSCI Canada IX ND -6.14
MSCI Chile IX GD -28.50
MSCI Chile IX ID -30.65
MSCI China Dom Fr IX ID -51.52
MSCI China Free IX ID -43.83
MSCI China Non Dom IX ID -42.06
MSCI Colombia IX GD -42.17
MSCI Colombia IX ID -45.32
MSCI Czech Rep IX GD 0.54
MSCI Czech Rep IX ID -0.66
MSCI Denmark IX GD 9.38
MSCI Denmark IX ID 7.82
MSCI Denmark IX ND 8.99
MSCI EAFE + Canada IX GD 19.11
MSCI EAFE + Canada IX ID 17.02
MSCI EAFE + Canada IX ND 18.76
MSCI EAFE + EMF IX GD 15.25
MSCI EAFE + EMF IX ID 13.13
MSCI EAFE + Em IX GD 14.94
MSCI EAFE + Em IX ID 12.84
MSCI EAFE - UK IX GD 21.02
MSCI EAFE - UK IX ID 19.17
MSCI EAFE - UK IX ND 20.59
MSCI EAFE Fr IX ID 18.32
MSCI EAFE GDP Wt IX GD 27.12
MSCI EAFE GDP Wt IX ID 25.12
MSCI EAFE GDP Wt IX ND 26.71
MSCI EAFE IX GD 20.33
MSCI EAFE IX ID 18.23
MSCI EAFE IX ND 20.00
MSCI EASEA IX GD 25.42
MSCI EASEA IX ID 22.94
MSCI EASEA IX ND 25.03
MSCI EMF Asia IX GD -11.00
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
MSCI EMF Asia IX ID -12.36
MSCI EMF Far East IX GD -6.23
MSCI EMF Far East IX ID -7.33
MSCI EMF IX GD -25.34
MSCI EMF IX ID -27.52
MSCI EMF Latin Am IX GD -35.11
MSCI EMF Latin Am IX ID -38.04
MSCI Em Asia IX GD -8.57
MSCI Em Asia IX ID -9.90
MSCI Em Eur/Mid East GD -26.01
MSCI Em Eur/Mid East ID -27.37
MSCI Em Europe IX GD -30.11
MSCI Em Europe IX ID -31.17
MSCI Em Far East IX GD -4.12
MSCI Em Far East IX ID -5.28
MSCI Em IX GD -23.21
MSCI Em IX ID -25.30
MSCI Em Latin Am IX GD -35.29
MSCI Em Latin Am IX ID -38.19
MSCI Europe - UK IX GD 33.95
MSCI Europe - UK IX ID 31.86
MSCI Europe - UK IX ND 33.38
MSCI Europe GDP Wt IX ID 31.74
MSCI Europe IX GD 28.91
MSCI Europe IX ID 26.53
MSCI Europe IX ND 28.53
MSCI European Union GD 30.44
MSCI European Union ID 27.93
MSCI Far East Free IX ID 1.52
MSCI Far East IX GD 2.56
MSCI Far East IX ID 1.22
MSCI Far East IX ND 2.39
MSCI Finland IX GD 122.63
MSCI Finland IX ID 119.10
MSCI Finland IX ND 121.64
MSCI France IX GD 42.06
MSCI France IX ID 40.00
MSCI France IX ND 41.54
MSCI Germany IX GD 29.88
MSCI Germany IX ID 28.17
MSCI Germany IX ND 29.43
MSCI Greece IX GD 78.11
MSCI Greece IX ID 75.01
MSCI Hongkong IX GD -2.92
MSCI Hongkong IX ID -7.60
MSCI Hongkong IX ND -2.92
MSCI Hungary IX GD -8.16
MSCI Hungary IX ID -8.70
MSCI India IX GD -21.24
MSCI India IX ID -22.89
MSCI Indonesia IX GD -31.53
MSCI Indonesia IX ID -32.40
MSCI Ireland IX ID 32.99
MSCI Israel Dom IX ID -16.20
MSCI Israel IX ID -7.91
MSCI Israel Non Dom Ixid 42.21
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
MSCI Italy IX GD 53.20
MSCI Italy IX ID 50.99
MSCI Italy IX ND 52.52
MSCI Japan IX GD 5.25
MSCI Japan IX ID 4.27
MSCI Japan IX ND 5.05
MSCI Jordan IX GD -11.01
MSCI Jordan IX ID -14.26
MSCI Kokusai IX GD 27.46
MSCI Kokusai IX ID 25.30
MSCI Kokusai IX ND 26.96
MSCI Korea IX GD 141.15
MSCI Korea IX ID 137.54
MSCI Luxembourg IX ID 8.63
MSCI Malaysia IX GD -29.49
MSCI Malaysia IX ID -31.04
MSCI Mexico Free IX GD -33.53
MSCI Mexico Free IX ID -34.50
MSCI Mexico IX GD -34.18
MSCI Mexico IX ID -35.12
MSCI Netherland IX GD 23.93
MSCI Netherland IX ID 21.13
MSCI Netherland IX ND 23.23
MSCI New Zealand IX GD -21.48
MSCI New Zealand IX ID -25.23
MSCI New Zealand IX ND -22.62
MSCI Nordic IX GD 23.83
MSCI Nordic IX ID 21.78
MSCI Nordic IX ND 23.25
MSCI Norway IX GD -29.67
MSCI Norway IX ID -31.21
MSCI Norway IX ND -30.06
MSCI Nth Amer IX GD 29.04
MSCI Nth Amer IX ID 27.11
MSCI Nth Amer IX ND 28.46
MSCI Pac - Japan IX GD -6.22
MSCI Pac - Japan IX ID -9.55
MSCI Pac - Japan IX ND -6.64
MSCI Pacific Fr-Jpn ID -8.40
MSCI Pacific Free IX ID 1.43
MSCI Pacific IX GD 2.69
MSCI Pacific IX ID 1.16
MSCI Pacific IX ND 2.44
MSCI Pakistan IX GD -56.61
MSCI Pakistan IX ID -60.56
MSCI Peru IX GD -40.22
MSCI Peru IX ID -42.11
MSCI Philippines Fr Ixgd 13.45
MSCI Philippines Fr Ixid 12.60
MSCI Philippines IX GD 16.10
MSCI Philippines IX ID 14.89
MSCI Portugal IX GD 27.90
MSCI Portugal IX ID 25.42
MSCI Russia IX GD -82.99
MSCI Russia IX ID -83.16
MSCI Sing/Mlysia IX GD -12.88
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
MSCI Sing/Mlysia IX ID -14.62
MSCI Sing/Mlysia IX ND -12.88
MSCI Singapore Fr IX GD -3.59
MSCI Singapore Fr IX ID -5.31
MSCI South Africa IX GD -27.56
MSCI South Africa IX ID -29.84
MSCI Spain IX GD 50.58
MSCI Spain IX ID 47.87
MSCI Spain IX ND 49.90
MSCI Sri Lanka IX GD -25.57
MSCI Sri Lanka IX ID -27.30
MSCI Sweden IX GD 14.54
MSCI Sweden IX ID 12.62
MSCI Sweden IX ND 13.96
MSCI Swtzrlnd IX GD 24.05
MSCI Swtzrlnd IX ID 22.57
MSCI Swtzrlnd IX ND 23.53
MSCI Taiwan IX GD -20.64
MSCI Taiwan IX ID -21.45
MSCI Thailand IX GD 19.09
MSCI Thailand IX ID 18.74
MSCI Turkey IX GD -52.51
MSCI Turkey IX ID -53.53
MSCI UK IX GD 17.80
MSCI UK IX ID 14.84
MSCI UK IX ND 17.80
MSCI USA IX GD 30.72
MSCI USA IX ID 28.79
MSCI USA IX ND 30.14
MSCI Venezuela IX GD -49.16
MSCI Venezuela IX ID -52.69
MSCI World - UK IX GD 25.63
MSCI World - UK IX ID 23.73
MSCI World - UK IX ND 25.11
MSCI World - USA IX GD 19.11
MSCI World - USA IX ID 17.02
MSCI World - USA IX ND 18.76
MSCI World GDP Wt IX ID 25.61
MSCI World IX Free ID 22.82
MSCI World IX GD 24.80
MSCI World IX ID 22.78
MSCI World IX ND 24.34
MSCI Wrld - Austrl IX GD 25.03
MSCI Wrld - Austrl IX ID 23.03
MSCI Wrld - Austrl IX ND 24.58
Madrid SE:Pst IX P 37.19
NASDAQ 100 IX P 85.31
NASDAQ Bank IX P -11.77
NASDAQ Composite IX P 39.63
NASDAQ Industrial IX P 6.82
NASDAQ Insurance IX P -0.06
NASDAQ Natl Mkt Cmp IX 40.23
NASDAQ Natl Mkt Ind IX 6.27
NASDAQ Transport IX P -7.85
NYSE Composite P 16.55
NYSE Finance IX P 5.13
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
NYSE Industrials IX P 17.97
NYSE Transportation IX 3.46
NYSE Utilities IX P 33.04
Nikkei 225 Avg:Yen P -9.28
Oslo SE Tot:Fmk IX P N/A
PSE Technology IX P 54.60
Philippines Composite IX N/A
Russell 1000(R)Grow IX Tr 38.71
Russell 1000(R)IX P 25.12
Russell 1000(R)IX Tr 27.02
Russell 1000(R)Value IX Tr 15.63
Russell 2000(R)Grow IX Tr 1.23
Russell 2000(R)IX P -3.45
Russell 2000(R)IX Tr -2.55
Russell 2000(R)Value IX Tr -6.45
Russell 3000(R)IX P 22.32
Russell 3000(R)IX Tr 24.14
Russell Midcap(TM)Grow IX 17.86
Russell Midcap(TM)Inx Tr 10.09
Russell Midcap(TM)Value IX 5.09
S & P 100 Index P 31.33
S & P 500 Daily Reinv 28.58
S & P 500 Index P 26.67
S & P 500 Mnthly Reinv 28.60
S & P 600 Index P -2.10
S & P 600 Index Tr -1.31
S & P Financial IX Tr 11.43
S & P Financial Idx P 9.58
S & P Industrial IX Tr 33.71
S & P Industrials P 31.91
S & P Midcap 400 IX P 17.68
S & P Midcap 400 IX Tr 19.11
S & P Transport IX Tr -1.94
S & P Transport Index P -3.03
S & P Utility Index P 10.10
S & P Utility Index Tr 14.77
S & P/Barra Growth IX Tr 42.15
S & P/Barra Value IX Tr 14.68
S Afr All Mng:Rnd IX P 3.72
SB Cr-Hdg Nn-US Wd IX Tr 11.53
SB Cr-Hdg Wd Gv Bd IX Tr 11.03
SB Non-US Wd Gv Bd IX Tr 17.79
SB USD 3month Dom CD IX 5.74
SB USD 3month Euro CD IX 6.19
SB USD 3month Eurodep IX 5.74
SB USD 3month Tbill IX 5.11
SB Wd Gv Bd:Austrl IX Tr 3.88
SB Wd Gv Bd:Germny IX Tr 19.76
SB Wd Gv Bd:Japan IX Tr 15.85
SB Wd Gv Bd:UK IX Tr 20.88
SB Wd Gv Bd:US IX Tr 10.00
SB World Govt Bond IX Tr 15.31
SB World Money Mkt IX Tr 9.11
Straits Times Index -7.62
Swiss Perf:Sfr IX Tr 15.37
T-Bill 1 Year Index Tr 4.93
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
T-Bill 3 Month Index Tr 4.88
T-Bill 6 Month Index Tr 4.94
Taiwan SE:T$ IX P -15.56
Thailand Set Index -4.53
Tokyo 2nd Sct:Yen IX P N/A
Tokyo Se(Topix):Yen IX N/A
Toronto 300:C$ IX P -3.19
Toronto SE 35:C$ IX P -2.05
Value Line Cmp IX-Arth 5.82
Value Line Cmp IX-Geom -3.79
Value Line Industrl IX -7.27
Value Line Railroad IX -9.93
Value Line Utilities IX 7.61
Wilshire 4500 Index Tr 8.63
Wilshire 5000 (Cap Wt)Tr 23.43
Wilshire 5000 Index P 21.71
Wilshire Lg Cp Gro IX Tr N/A
Wilshire Lg Cp Val IX Tr N/A
Wilshire MD Cp Gro IX Tr N/A
Wilshire MD Cp Val IX Tr N/A
Wilshire Sm Cp Gro IX Tr -2.46
Wilshire Sm Cp Val IX Tr -4.87
</TABLE>
<TABLE>
<CAPTION>
THE NATIONAL ASSOCIATION OF REAL ESTATE INVESTMENT TRUST:
<S> <C>
Real Estate Investment Trust Index -17.50
SALOMON SMITH BARNEY:
10 Year U.S. Government (Sovereign) 10.00
10 Year United Kingdom (Sovereign) 19.55
10 Year France (Sovereign) 12.59
10 Year Germany (Sovereign) 10.94
10 Year Japan (Sovereign) 0.50
10 Year Canada (Sovereign) 9.41
</TABLE>
44
<PAGE>
45
<PAGE>
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
46
<PAGE>
PART C. OTHER INFORMATION
Item 23. Exhibits:
STEIN ROE ADVISOR TAX-MANAGED VALUE FUND (SRATMVF)
(a)(1) Amendment No. 3 to the Agreement and Declaration of Trust (3)
(a)(2) Amendment No. 4 to the Agreement and Declaration of Trust(5)
(b) Amended By-Laws dated 4/1/99
(c) Form of Specimen of 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)
and is hereby incorporated by reference and made a part of
this Registration Statement
(d) Form of Management Agreement between Liberty Funds Trust I
(formerly Colonial Trust I), with respect to SRATMVF and Stein
Roe & Farnham Incorporated
(e)(1) Distribution Agreement between the Registrant and Liberty
Funds Distributor, Inc. - filed as Exhibit 6.(a) in Part C,
Item 24(b) of Post-Effective Amendment No. 17 to the
Registration Statement on Form N-1A of Liberty Funds Trust VI
(formerly Colonial Trust VI) (File Nos. 33-45117 and 811-6529)
and is hereby incorporated by reference and made a part of
this Registration Statement
(e)(2) 12b-1 Plan Implementing Agreement between the Registrant and
Liberty Funds Distributor, Inc. - filed as Exhibit 6.(b) in
Part C, Item 24(b) of Post-Effective Amendment No. 17 to the
Registration Statement on Form N-1A of Liberty Funds Trust VI
(formerly Colonial Trust VI) (File Nos. 33-45117 and 811-6529)
and is hereby incorporated by reference and made a part of
this Registration Statement
(e)(3) Form of Selling Agreement with Liberty Funds Distributor,
Inc.(4)
(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 IV
(formerly Colonial Trust VI) (File Nos. 33-45117 and 811-6529)
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
Colonial Trust VI (File Nos. 33-45117 and 811-6529) and is
hereby incorporated by reference and made a part of this
Registration Statement
(g)(2) Amendment 4 to Appendix A of Custody Agreement with the Chase
Manhattan Bank
<PAGE>
(h)(1) Pricing and Bookkeeping Agreement - filed as Exhibit 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 and 811-6529)
and is hereby incorporated by reference and made a part of
this Registration Statement
(h)(2) Amendment to Appendix I of Pricing and Bookkeeping
Agreement(6)
(h)(3) Form of Administration Agreement with Colonial Management
Associates, Inc. (SRATMVF)
(h)(4) 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)
and is hereby incorporated by reference and made a part of
this Registration Statement
(h)(5) Amendment No. 13 to Schedule A of Amended and Restated
Shareholders' Servicing and Transfer Agent Agreement as
amended(6)
(h)(6) Amendment No. 19 to Appendix I of Amended and Restated
Shareholders' Servicing and Transfer Agent Agreement as
amended(6)
(h)(7) Credit Agreement - filed as Exhibit 9.(f) in Part C, Item
24(b) of Post-Effective Amendment No. 19 to the Registration
Statement on Form N-1A of Liberty Funds Trust V (formerly
Colonial Trust V) (File Nos. 33-12109 & 811-5030) and is
hereby incorporated by reference and made a part of this
Registration Statement
(h)(8) Amendment No. 1 to the Credit Agreement - filed as Exhibit
9(f) in Part C, Item 24(b) of Post-Effective Amendment No. 99
to the Registration Statement on Form N-1A of Liberty Funds
Trust III (formerly Colonial Trust III) (File Nos. 2-15184 and
811-881) and is hereby incorporated by reference and made a
part of this Registration Statement
(h)(9) Amendment No. 2 to the Credit Agreement - filed as Exhibit
9(g) in Part C, Item 24(b) of Post-Effective Amendment No. 99
to the Registration Statement on Form N-1A of Liberty Funds
Trust III (formerly Colonial Trust III) (File Nos. 2-15184 and
811-881) and is hereby incorporated by reference and made a
part of this Registration Statement
(h)(10) Amendment No. 3 to the Credit Agreement - filed as Exhibit
9(h) in Part C, Item 24(b) of Post-Effective Amendment No. 99
to the Registration Statement on Form N-1A of Liberty Funds
Trust III (formerly Colonial Trust III) (File Nos. 2-15184 and
811-881) and is hereby incorporated by reference and made a
part of this Registration Statement
(h)(11) Amendment No. 4 to the Credit Agreement - filed as Exhibit
9(h)
<PAGE>
in Part C, Item 24(b) of Post-Effective Amendment No. 102 to
the Registration Statement on Form N-1A of Liberty Funds Trust
III (formerly Colonial Trust III) (File Nos. 2-15184 &
811-881) and is hereby incorporated by reference and made a
part of this Registration Statement
(i) Opinion and Consent of Counsel (2)
(j) Not applicable
(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 (incorporated herein as reference to Exhibit (o)
Post-Effective Amendment No. 107 total Registration Statement
of Liberty Funds Trust III (formerly Colonial Trust III),
Registration Nos. 2-15184 and 811-881 filed with the
Commission on or about December 3, 1998)
Power of Attorney for: Robert J. Birnbaum, Tom Bleasdale, John V. Carberry, Lora
S. Collins, James E. Grinnell, Richard W. Lowry, Salvatore Macera, William E.
Mayer, James L. Moody, Jr., John J. Neuhauser, Thomas E. Stitzel, Robert L.
Sullivan and Anne-Lee Verville - filed as Exhibit 18(a) in Part C, Item 24(b) of
Post-Effective Amendment No. 50 to the Registration Statement on Form N-1A of
Liberty Funds Trust IV (formerly Colonial Trust IV) (File Nos. 2-62492 and
811-2865) and is hereby incorporated by reference and made a part of this
Registration Statement
(1) Incorporated by reference to Post-Effective Amendment No. 40
filed with the Commission via EDGAR on April 15, 1996.
(2) Incorporated by reference to Post-Effective Amendment No. 41
filed with the Commission via EDGAR on October 15, 1996
(3) Incorporated by reference to Post-Effective Amendment No. 42
filed with the Commission via EDGAR on April 22, 1997.
(4) Incorporated by reference to Post-Effective Amendment No. 49
filed with the Commission via EDGAR on November 20, 1998.
(5) Incorporated by reference to Post-Effective Amendment No. 55
filed with the Commission via EDGAR on April 30, 1999.
(6) Incorporated by reference to Post-Effective Amendment No. 54
filed with the Commission via EDGAR on March 18, 1999.
Item 24. Persons Controlled by or under Common Control with Registrant
None
Item 25. Indemnification
<PAGE>
See Article VIII of Amendment No. 3 to the Agreement and
Declaration of Trust filed as Exhibit 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.
Item 26. Business and Other Connections of Investment Adviser
The following sets forth business and other connections of
each director and officer of Stein Roe & Farnham Incorporated:
Stein Roe & Farnham Incorporated (SR&F) is a wholly owned subsidiary of
SteinRoe Services Inc. ("SSI"), which in turn is a wholly owned subsidiary
of Liberty Financial Companies, Inc., which is a majority owned subsidiary of
Liberty Corporate Holdings, Inc., which is a wholly owned
subsidiary of LFC Holdings, Inc., which in turn is a subsidiary of
Liberty Mutual Equity Corporation, which in turn is a subsidiary of
Liberty Mutual Insurance Company. SR&F acts as investment
adviser to individuals, trustees, pension and profit-sharing
plans, charitable organizations, and other investors. In addition
to LFC Utilities Trust, it also acts as investment adviser to other
investment companies having different investment policies.
For a two-year business history of officers and directors of the
Adviser, please refer to the Form ADV of SR&F as filed with the SEC.
Certain directors and officers of the SR&F also serve and have
during the past two years served in various capacities as
officers, directors, or trustees of SSI and other investment companies
managed by SR&F. (The listed entities are located at One South Wacker Drive,
Chicago, Illinois 60606, except for SteinRoe Variable Investment Trust, which
is located at Federal Reserve Plaza, Boston, MA 02210
and LFC Utilities Trust and Liberty Variable Investment Trust, which are located
at One Financial Center, Boston, MA 02111.) A list of such capacities is
given below.
POSITION FORMERLY
HELD WITHIN
CURRENT POSITION PAST TWO YEARS
------------------- --------------
STEINROE SERVICES INC.
Gary A. Anetsberger Vice President
Kenneth J. Kozanda Vice President; Treasurer
Kenneth R. Leibler Director
C. Allen Merritt, Jr. Director; Vice President
Heidi J. Walter Vice President; Secretary
Hans P. Ziegler Director; President; Chairman
SR&F BASE TRUST
William D. Andrews Executive Vice-President
Gary A. Anetsberger Sr. Vice-President Treasurer
Thomas W. Butch President Executive V-P;
Trustee
Kevin M. Carome Vice-President; Asst. Secy.
Loren A. Hansen Executive Vice-President
Heidi J. Walter Vice-President; Secretary
Hans P. Ziegler Executive Vice-President
STEIN ROE INCOME TRUST; STEIN ROE INSTITUTIONAL TRUST; AND
STEIN ROE TRUST
William D. Andrews Executive Vice-President
Gary A. Anetsberger Sr. Vice-President Treasurer
Thomas W. Butch President Exec. V-P;
V-P; Trustee
Kevin M. Carome Vice-President; Asst. Secy.
Loren A. Hansen Executive Vice-President
Michael T. Kennedy Vice-President
Stephen F. Lockman Vice-President
Steven P. Luetger Vice-President
Lynn C. Maddox Vice-President
Jane M. Naeseth Vice-President
Heidi J. Walter Vice-President; Secretary
Hans P. Ziegler Executive Vice-President
STEIN ROE INVESTMENT TRUST
William D. Andrews Executive Vice-President
Gary A. Anetsberger Sr. Vice-President Treasurer
David P. Brady Vice-President
Thomas W. Butch President Exec. V-P;
V-P; Trustee
Daniel K. Cantor Vice-President
Kevin M. Carome Vice-President; Asst. Secy.
E. Bruce Dunn Vice-President
Erik P. Gustafson Vice-President
Loren A. Hansen Executive Vice-President
James P. Haynie Vice-President
Harvey B. Hirschhorn Vice-President
Eric S. Maddix Vice-President
Lynn C. Maddox Vice-President
Arthur J. McQueen Vice-President
Gita R. Rao Vice-President
Michael E. Rega Vice-President
M. Gerard Sandel Vice-President
Gloria J. Santella Vice-President
Heidi J. Walter Vice-President; Secretary
Hans P. Ziegler Executive Vice-President
STEIN ROE ADVISOR TRUST
William D. Andrews Executive Vice-President
Gary A. Anetsberger Sr. Vice-President Treasurer
David P. Brady Vice-President
Thomas W. Butch President Exec. V-P;
V-P; Trustee
Daniel K. Cantor Vice-President
Kevin M. Carome Vice-President; Asst. Secy.
E. Bruce Dunn Vice-President
Erik P. Gustafson Vice-President
Loren A. Hansen Executive Vice-President
James P. Haynie Vice-President
Harvey B. Hirschhorn Vice-President
Michael T. Kennedy Vice-President
Stephen F. Lockman Vice-President
Eric S. Maddix Vice-President
Lynn C. Maddox Vice-President
Arthur J. McQueen Vice-President
Maureen G. Newman Vice-President
Gita R. Rao Vice-President
Michael E. Rega Vice-President
M. Gerard Sandel Vice-President
Gloria J. Santella Vice-President
Heidi J. Walter Vice-President; Secretary
Hans P. Ziegler Executive Vice-President
STEIN ROE MUNICIPAL TRUST
William D. Andrews Executive Vice-President
Gary A. Anetsberger Sr. Vice-President Treasurer
Thomas W. Butch President Exec. V-P;
V-P; Trustee
Kevin M. Carome Vice-President; Asst. Secy.
Joanne T. Costopoulos Vice-President
Loren A. Hansen Executive Vice-President
Brian M. Hartford Vice-President
William C. Loring Vice-President
Lynn C. Maddox Vice-President
Maureen G. Newman Vice-President
Veronica M. Wallace Vice-President
Heidi J. Walter Vice-President; Secretary
Hans P. Ziegler Executive Vice-President
STEINROE VARIABLE INVESTMENT TRUST
William D. Andrews Executive Vice-President
Gary A. Anetsberger Senior Vice-President Treasurer
Thomas W. Butch President
Kevin M. Carome Vice-President; Asst. Secretary
E. Bruce Dunn Vice President
William M. Garrison Vice President
Erik P. Gustafson Vice President
Loren A. Hansen Executive Vice-President
Harvey B. Hirschhorn Vice President
Michael T. Kennedy Vice President
Jane M. Naeseth Vice President
Steven M. Salopek Vice President
William M. Wadden IV Vice President
Heidi J. Walter Vice President
Hans P. Ziegler Executive Vice-President
STEIN ROE FLOATING RATE LIMITED LIABILITY COMPANY
William D. Andrews Executive Vice-President
Gary A. Anetsberger Senior Vice-President
Thomas W. Butch President; Manager
Kevin M. Carome Vice-President; Asst. Secretary
Loren A. Hansen Executive Vice-President
Heidi J. Walter Vice-President; Secretary
Hans P. Ziegler Executive V-P
STEIN ROE FLOATING RATE INCOME TRUST; STEIN ROE INSTITUTIONAL
FLOATING RATE INCOME TRUST
William D. Andrews Executive Vice-President
Gary A. Anetsberger Senior Vice-President
Thomas W. Butch President; Trustee
Kevin M. Carome Vice-President; Asst. Secretary
Brian W. Good Vice-President
James R. Fellows Vice-President
Loren A. Hansen Executive Vice-President
Heidi J. Walter Vice-President; Secretary
Hans P. Ziegler Executive V-P
LFC UTILITIES TRUST
Gary A. Anetsberger Vice President
Ophelia L. Barsketis Vice President
Deborah A. Jansen Vice President
LIBERTY VARIABLE INVESTMENT TRUST
Ophelia L. Barsketis Vice President
Deborah A. Jansen Vice President
Kevin M. Carome Vice President
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-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
Anetsberger, Gary Sr. V.P. None
Babbitt, Debra V.P. and None
Comp. Officer
Ballou, Rick Sr. V.P. None
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
Butch, Tom Sr. V.P. None
Campbell, Patrick V.P. None
Chrzanowski, V.P. None
Daniel
Clapp, Elizabeth A. Managing Director 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
Feldman, David Managing Director None
Fifield, Robert V.P. None
Gariepy, Tom V.P. None
Gauger, Richard V.P. None
Gerokoulis, Sr. V.P. None
Stephen A.
Gibson, Stephen E. Director; Chairman President
of the Board
Goldberg, Matthew Sr. V.P. None
Gupta, Neeti V.P. None
Guenard, Brian V.P. None
Harrington, Tom Sr. V.P. None
Harris, Carla V.P. None
Hodgkins, Joseph Sr. 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
Libutti, Chris 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
Piken, Keith V.P. None
Place, Jeffrey Managing Director None
Powell, Douglas V.P. None
Predmore, Tracy 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
Sandberg, Travis V.P. None
Santosuosso, Louise Sr. V.P. None
Schulman, David Sr. 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 None
Tasiopoulos, Lou President None
VanEtten, Keith H. Sr. V.P. None
Walter, Heidi 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.
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
adviser and/or 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 Custodian is One
Financial Center, Boston, MA 02111. The 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 I (formerly Colonial Trust I) is on file with the Secretary of State 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 certifies that it meets all the requirements
for effectiveness of the Registration Statement pursuant to Rule 485(b) and has
duly caused this Post-Effective Amendment No. 56 to its Registration Statement
under the Securities Act of 1933 and Amendment No. 38 under the Investment
Company Act of 1940, to be signed in this City of Boston, and The Commonwealth
of Massachusetts on this 27th day of May, 1999.
LIBERTY FUNDS TRUST I (FORMERLY COLONIAL TRUST I)
By: STEPHEN E. GIBSON
----------------------------
Stephen E. Gibson, 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>
STEPHEN E. GIBSON President (chief May 27, 1999
- -------------------- Executive officer)
Stephen E. Gibson
TIMOTHY J. JACOBY Treasurer and Chief Financial Officer May 27, 1999
- ----------------- (principal financial officer)
Timothy J. Jacoby
J. KEVIN CONNAUGHTON Controller and Chief Accounting May 27, 1999
- -------------------- Officer (principal accounting officer)
J. Kevin Connaughton
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ROBERT J. BIRNBAUM* Trustee
Robert J. Birnbaum
TOM BLEASDALE* Trustee
Tom Bleasdale
JOHN V. CARBERRY* Trustee
John V. Carberry
LORA S. COLLINS* Trustee
Lora S. Collins
JAMES E. GRINNELL* Trustee
James E. Grinnell
RICHARD W. LOWRY* Trustee */s/ SUZAN M. BARRON
Richard W. Lowry Suzan M. Barron
Attorney-in-fact
For each Trustee
SALVATORE MACERA* Trustee May 27, 1999
Salvatore Macera
WILLIAM E. MAYER* Trustee
William E. Mayer
JAMES L. MOODY, JR.* Trustee
James L. Moody, Jr.
JOHN J. NEUHAUSER* Trustee
John J. Neuhauser
THOMAS E. STITZEL* Trustee
Thomas E. Stitzel
ROBERT L. SULLIVAN* Trustee
Robert L. Sullivan
ANNE-LEE VERVILLE* Trustee
Anne-Lee Verville
</TABLE>
<PAGE>
EXHIBITS
<TABLE>
<S> <C>
(b) Amended By-Laws dated 4/1/99
(d) Form of Management Agreement between Liberty Funds Trust I
(formerly Colonial Trust I), with respect to SRATMVF and
Stein Roe & Farnham Incorporated
(g)(2) Amendment 4 to Appendix A of Custody Agreement with the Chase Manhattan Bank
(h)(3) Form of Administration Agreement with Colonial Management Associates, Inc. (SRATMVF)
(m) Rule 12b-1 Distribution Plan
</TABLE>
Amended 10/9/92 - Sec. 11
Amended 2/16/96 - Sec. 3.1, Paragraph 2
Amended 4/1/99 - Name, Sec. 1.1
BY-LAWS
OF
LIBERTY FUNDS TRUST I
Section 1. Agreement and Declaration of Trust and Principal Office
1.1 Agreement and Declaration of Trust. These By-Laws shall be subject to
the Agreement and Declaration of Trust, as from time to time in effect
(the "Declaration of Trust"), of Liberty Funds Trust I, a Massachusetts
business trust established by the Declaration of Trust (the "Trust").
1.2 Principal Office of the Trust. The principal office of the
Trust shall be located in Boston, Massachusetts.
Section 2. Shareholders
2.1 Shareholder Meetings. A meeting of the shareholders of the Trust or of
any one or more series or classes of shares may be called at any time
by the Trustees, by the president or, if the Trustees and the president
shall fail to call any meeting of shareholders for a period of 30 days
after written application of one or more shareholders who hold at least
10% of all outstanding shares of the Trust, if shareholders of all
series are required under the Declaration of Trust to vote in the
aggregate and not by individual series at such meeting, or of any
series or class, if shareholders of such series or class are entitled
under the Declaration of Trust to vote by individual series or class at
such meeting, then such shareholders may call such meeting. If the
meeting is a meeting of the shareholders of one or more series or
classes of shares, but not a meeting of all shareholders of the Trust,
then only the shareholders of such one or more series or classes shall
be entitled to notice of and to vote at the meeting. Each call of a
meeting shall state the place, date, hour and purpose of the meeting.
2.2 Place of Meetings. All meetings of the shareholders shall be held at
the principal office of the Trust, or, to the extent permitted by the
Declaration of Trust, at such other place within the United States as
shall be designated by the Trustees or the president of the Trust.
2.3 Notice of Meetings. A written notice of each meeting of shareholders,
stating the place, date and hour and the purposes of the meeting, shall
be given at least seven days before the meeting to each shareholder
entitled to vote thereat by leaving such notice with him or her or at
his or her residence or usual place of business or by mailing it,
postage prepaid, and addressed to such shareholder at his or her
address as it appears in the records of the Trust. Such notice shall be
given by the secretary or an assistant secretary or by an officer
designated by the Trustees. No notice of any meeting of shareholders
need be given to a shareholder if a written waiver of notice, executed
before or after the meeting by such shareholder or his or her attorney
thereunto duly authorized, is filed with the records of the meeting.
<PAGE>
2.4 Ballots. No ballot shall be required for any election unless requested
by a shareholder present or represented at the meeting and entitled to
vote in the election.
2.5 Proxies. Shareholders entitled to vote may vote either in person or by
proxy in writing dated not more than six months before the meeting
named therein, which proxies shall be filed with the secretary or other
person responsible to record the proceedings of the meeting before
being voted. Unless otherwise specifically limited by their terms, such
proxies shall entitle the holders thereof to vote at any adjournment of
such meeting but shall not be valid after the final adjournment of such
meeting. The placing of a shareholder's name on a proxy pursuant to
telephonic or electronically transmitted instructions obtained pursuant
to procedures reasonably designed to verify that such instructions have
been authorized by such shareholder shall constitute execution of such
proxy by or on behalf of such shareholder.
Section 3. Trustees
3.1 Committees and Advisory Board. The Trustees may appoint from their
number an executive committee and other committees. Except as the
Trustees may otherwise determine, any such committee may make rules for
conduct of its business. The Trustees may appoint an advisory board to
consist of not less than two nor more than five members. The members of
the advisory board shall be compensated in such manner as the Trustees
may determine and shall confer with and advise the Trustees regarding
the investments and other affairs of the Trust. Each member of the
advisory board shall hold office until the first meeting of the
Trustees following the next meeting of the shareholders and until his
or her successor is elected and qualified, or until he or she sooner
dies, resigns, is removed or becomes disqualified, or until the
advisory board is sooner abolished by the Trustees.
In addition, the Trustees may appoint a Dividend Committee of not less
than three persons, who may (but need not) be Trustees.
No special compensation shall be payable to members of the Dividend
Committee. Each member of the Dividend Committee will hold office until
the successors are elected and qualified or until the member dies,
resigns, is removed, becomes disqualified or until the Committee is
abolished by the Trustees.
3.2 Regular Meetings. Regular meetings of the Trustees may be held without
call or notice at such places and at such times as the Trustees may
from time to time determine, provided that notice of the first regular
meeting following any such determination shall be given to absent
Trustees.
3.3 Special Meetings. Special meetings of the Trustees may be held at any
time and at any place designated in the call of the meeting, when
called by the president or the treasurer or by two or more Trustees,
sufficient notice thereof being given to each Trustee by the secretary
or an assistant secretary or by the officer or one of the Trustees
calling the meeting.
3.4 Notice. It shall be sufficient notice to a Trustee to send notice by
mail at least forty-eight hours or by telegram at least twenty-four
hours before the meeting addressed to the Trustee at his or her usual
or last known business or residence address or to give notice to him or
her in person or by telephone at least twenty-four hours before the
meeting. Notice of a meeting need not be given to any Trustee if a
written waiver of notice, executed by him or her before or after the
<PAGE>
meeting, is filed with the records of the meeting, or to any Trustee
who attends the meeting without protesting prior thereto or at its
commencement the lack of notice to him or her. Neither notice of a
meeting nor a waiver of a notice need specify the purposes of the
meeting.
3.5 Quorum. At any meeting of the Trustees one-third of the Trustees then
in office shall constitute a quorum; provided, however, a quorum shall
not be less than two. Any meeting may be adjourned from time to time by
a majority of the votes cast upon the question, whether or not a quorum
is present, and the meeting may be held as adjourned without further
notice.
Section 4. Officers and Agents
4.1 Enumeration; Qualification. The officers of the Trust shall be a
president, a treasurer, a secretary and such other officers, if any, as
the Trustees from time to time may in their discretion elect or
appoint. The Trust may also have such agents, if any, as the Trustees
from time to time may in their discretion appoint. Any officer may be
but none need be a Trustee or shareholder. Any two or more offices may
be held by the same person.
4.2 Powers. Subject to the other provisions of these By-Laws, each officer
shall have, in addition to the duties and powers herein and in the
Declaration of Trust set forth, such duties and powers as are commonly
incident to his or her office as if the Trust were organized as a
Massachusetts business corporation and such other duties and powers as
the Trustees may from time to time designate, including without
limitation the power to make purchases and sales of portfolio
securities of the Trust pursuant to recommendations of the Trust's
investment adviser in accordance with the policies and objectives of
that series of shares set forth in its prospectus and with such general
or specific instructions as the Trustees may from time to time have
issued.
4.3 Election. The president, the treasurer and the secretary shall be
elected annually by the Trustees. Other elected officers are elected by
the Trustees. Assistant officers are appointed by the elected officers.
4.4 Tenure. The president, the treasurer and the secretary shall hold
office until their respective successors are chosen and qualified, or
in each case until he or she sooner dies, resigns, is removed or
becomes disqualified. Each other officer shall hold office at the
pleasure of the Trustees. Each agent shall retain his or her authority
at the pleasure of the Trustees.
4.5 President and Vice Presidents. The president shall be the chief
executive officer of the Trust. The president shall preside at all
meetings of the shareholders and of the Trustees at which he or she is
present, except as otherwise voted by the Trustees. Any vice president
shall have such duties and powers as shall be designated from time to
time by the Trustees.
4.6 Treasurer and Controller. The treasurer shall be the chief financial
officer of the Trust and subject to any arrangement made by the
Trustees with a bank or trust company or other organization as
custodian or transfer or shareholder services agent, shall be in charge
of its valuable papers and shall have such other duties and powers as
may be designated from time to time by the Trustees or by the
president. Any assistant treasurer shall have such duties and powers as
shall be designated from time to time by the Trustees.
<PAGE>
The controller shall be the chief accounting officer of the Trust and
shall be in charge of its books of account and accounting records. The
controller shall be responsible for preparation of financial statements
of the Trust and shall have such other duties and powers as may be
designated from time to time by the Trustees or the president.
4.7 Secretary and Assistant Secretaries. The secretary shall record all
proceedings of the shareholders and the Trustees in books to be kept
therefor, which books shall be kept at the principal office of the
Trust. In the absence of the secretary from any meeting of shareholders
or Trustees, an assistant secretary, or if there be none or he or she
is absent, a temporary clerk chosen at the meeting shall record the
proceedings thereof in the aforesaid books.
Section 5. Resignations and Removals
Any Trustee, officer or advisory board member may resign at any time by
delivering his or her resignation in writing to the president, the treasurer or
the secretary or to a meeting of the Trustees. The Trustees may remove any
officer elected by them with or without cause by the vote of a majority of the
Trustees then in office. Except to the extent expressly provided in a written
agreement with the Trust, no Trustee, officer, or advisory board member
resigning, and no officer or advisory board member removed shall have any right
to any compensation for any period following his or her resignation or removal,
or any right to damages on account of such removal.
Section 6. Vacancies
A vacancy in any office may be filled at any time. Each successor shall hold
office for the unexpired term, and in the case of the presidents, the treasurer
and the secretary, until his or her successor is chosen and qualified, or in
each case until he or she sooner dies, resigns, is removed or becomes
disqualified.
Section 7. Shares of Beneficial Interest
7.1 Share Certificates. No certificates certifying the ownership of shares
shall be issued except as the Trustees may otherwise authorize. In the
event that the Trustees authorize the issuance of share certificates,
subject to the provisions of Section 7.3, each shareholder shall be
entitled to a certificate stating the number of shares owned by him or
her, in such form as shall be prescribed from time to time by the
Trustees. Such certificate shall be signed by the president or a vice
president and by the treasurer or an assistant treasurer. Such
signatures may be facsimiles if the certificate is signed by a transfer
agent or by a registrar, other than a Trustee, officer or employee of
the Trust. In case any officer who has signed or whose facsimile
signature has been placed on such certificate shall have ceased to be
such officer before such certificate is issued, it may be issued by the
Trust with the same effect as if he or she were such officer at the
time of its issue.
In lieu of issuing certificates for shares, the Trustees or the
transfer agent may either issue receipts therefor or keep accounts upon
the books of the Trust for the record holders of such shares, who shall
in either case be deemed, for all purposes hereunder, to be the holders
of certificates for such shares as if they had accepted such
certificates and shall be held to have expressly assented and agreed to
the terms hereof.
7.2 Loss of Certificates. In the case of the alleged loss or destruction or
the mutilation of a share certificate, a duplicate certificate may be
issued in place thereof, upon such terms as the Trustees may prescribe.
<PAGE>
7.3 Discontinuance of Issuance of Certificates. The Trustees may at any
time discontinue the issuance of share certificates and may, by written
notice to each shareholder, require the surrender of share certificates
to the Trust for cancellation. Such surrender and cancellation shall
not affect the ownership of shares in the Trust.
Section 8. Record Date and Closing Transfer Books
The Trustees may fix in advance a time, which shall not be more than 90 days
before the date of any meeting of shareholders or the date for the payment of
any dividend or making of any other distribution to shareholders, as the record
date for determining the shareholders having the right to notice and to vote at
such meeting and any adjournment thereof or the right to receive such dividend
or distribution, and in such case only shareholders of record on such record
date shall have such right, notwithstanding any transfer of shares on the books
of the Trust after the record date; or without fixing such record date the
Trustees may for any of such purposes close the transfer books for all or any
part of such period.
Section 9. Seal
The seal of the Trust shall, subject to alteration by the Trustees, consist of a
flat-faced circular die with the word "Massachusetts" together with the name of
the Trust and the year of its organization, cut or engraved thereon; but, unless
otherwise required by the Trustees, the seal shall not be necessary to be placed
on, and its absence shall not impair the validity of, any document, instrument
or other paper executed and delivered by or on behalf of the Trust.
Section 10. Execution of Papers
Except as the Trustees may generally or in particular cases authorize the
execution thereof in some other manner, all deeds, leases, transfers, contracts,
bonds, notes, checks, drafts and other obligations made, accepted or endorsed by
the Trust shall be signed, and all transfers of securities standing in the name
of the Trust shall be executed, by the president or by one of the vice
presidents or by the treasurer or by whomsoever else shall be designated for
that purpose by the vote of the Trustees and need not bear the seal of the
Trust.
Section 11. Fiscal Year
Except as from time to time otherwise provided by the Trustees, President,
Secretary, Controller or Treasurer, the fiscal year of the Trust shall end on
December 31.
Section 12. Amendments
These By-Laws may be amended or repealed, in whole or in part, by a majority of
the Trustees then in office at any meeting of the Trustees, or by one or more
writings signed by such a majority.
MANAGEMENT AGREEMENT
AGREEMENT dated as of June 1, 1999 between LIBERTY FUNDS TRUST I, a
Massachusetts business trust (Trust), with respect to STEIN ROE ADVISOR
TAX-MANAGED VALUE Fund (Fund), and STEIN ROE & FARNHAM INCORPORATED, a Delaware
corporation (Advisor).
In consideration of the promises and covenants herein, the parties agree as
follows:
1. The Advisor will manage the investment of the assets of the Fund in
accordance with its prospectus and statement of additional information
and will perform the other services herein set forth, subject to the
supervision of the Board of Trustees of the Trust. The Advisor may
delegate to an affiliate the responsibility for placing orders to
effect the investment of the Fund's available cash pursuant to written
instructions of the Advisor.
2. In carrying out its investment management obligations, the Advisor shall:
(a) evaluate such economic, statistical and financial information and
undertake such investment research as it shall believe advisable; (b)
purchase and sell securities and other investments for the Fund in
accordance with the procedures described in its prospectus and
statement of additional information; and (c) report results to the
Board of Trustees of the Trust.
3. The Advisor shall be free to render similar services to others so long
as its services hereunder are not impaired thereby.
4. The Fund shall pay the Advisor monthly a fee at the annual rate of
0.80% of the average daily net assets of the Fund.
5. The Advisor may waive its compensation (and bear expenses of the Fund)
to the extent that expenses of the Fund exceed any expense limitation
the Advisor declares to be effective.
6. This Agreement shall become effective as of the date of its execution,
and
(a) unless otherwise terminated, shall continue until two years from its
date of execution and from year to year thereafter so long as approved
annually in accordance with the 1940 Act; (b) may be terminated without
penalty on sixty days' written notice to the Advisor either by vote of
the Board of Trustees of the Trust or by vote of a majority of the
outstanding shares of the Fund; (c) shall automatically terminate in the
event of its assignment; and (d) may be terminated without penalty by
the Advisor on sixty days' written notice to the Trust.
7. This Agreement may be amended in accordance with the 1940 Act.
8. For the purpose of the Agreement, the terms "vote of a majority of the
outstanding shares", "affiliated person" and "assignment" shall have
their respective meanings defined in the 1940 Act and exemptions and
interpretations issued by the Securities and Exchange Commission under
the 1940 Act.
<PAGE>
9. The Advisor shall maintain, keep current and preserve on behalf of the
Fund, in the manner required by the 1940 Act, records identified by
the Trust from time to time. Advisor agrees to make such records
available upon request to the Trust and its auditors during regular
business hours at the Advisor's offices. Advisor further agrees that
such records are the property of the Trust and will be surrendered to
the Trust promptly upon request.
10. In the absence of willful misfeasance, bad faith or gross negligence
on the part of the Advisor, or reckless disregard of its obligations
and duties hereunder, the Advisor shall not be subject to any
liability to the Trust or the Fund, to any shareholder of the Trust or
the Fund or to any other person, firm or organization, for any act or
omission in the course of, or connected with, rendering services
hereunder.
LIBERTY FUNDS TRUST I on behalf of
STEIN ROE ADVISOR tax-managed VALUE Fund
By: __________________________
Title: Treasurer and Chief
Financial Officer
STEIN ROE & FARNHAM INCORPORATED
By: __________________________
Title:
A copy of the document establishing the Trust is filed with the Secretary of The
Commonwealth of Massachusetts. 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 Fund.
a:/funds/trusti/sratmvf/mangment.doc
AMENDMENT NO. 4 TO SCHEDULE A
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first-above written.
CUSTOMER
Trust Series
Liberty Funds Trust I Colonial High Yield Securities Fund
Colonial Income Fund
Colonial Strategic Income Fund
Stein Roe Advisor Tax-Managed Growth Fund
Stein Roe Advisor Tax-Managed Value Fund
Liberty Funds Trust II Colonial Money Market Fund
Colonial Intermediate U.S. Government Fund
Colonial Short Duration U.S. Government Fund
Newport Tiger Cub Fund
Newport Japan Opportunities Fund
Newport Greater China Fund
Liberty Funds Trust III Colonial Select Value Fund
The Colonial Fund
Colonial Federal Securities Fund
Colonial Global Equity Fund
Colonial International Horizons Fund
Colonial Global Utilities Fund
Colonial Strategic Balanced Fund
Liberty Funds Trust IV Colonial Tax-Exempt Fund
Colonial Tax-Exempt Insured Fund
Colonial Municipal Money Market Fund
Colonial High Yield Municipal Fund
Colonial Utilities Fund
Colonial Intermediate Tax-Exempt Fund
Colonial Counselor Select Income Portfolio
Colonial Counselor Select Balanced Portfolio
Colonial Counselor Select Growth Portfolio
Liberty Funds Trust V Colonial Massachusetts Tax-Exempt Fund
Colonial Minnesota Tax-Exempt Fund
Colonial Michigan Tax-Exempt Fund
Colonial New York Tax-Exempt Fund
Colonial Ohio Tax-Exempt Fund
Colonial California Tax-Exempt Fund
Colonial Connecticut Tax-Exempt Fund
Colonial Florida Tax-Exempt Fund
Colonial North Carolina Tax-Exempt Fund
Liberty Funds Trust VI Colonial U.S. Growth & Income Fund
Colonial Small Cap Value Fund
Colonial Value Fund
Newport Asia Pacific Fund
Liberty Funds Trust VII Colonial Newport Tiger Fund
Colonial Intermediate High Income Fund
Colonial InterMarket Income Trust I
Colonial Municipal Income Trust
Colonial High Income Municipal Trust
Colonial Investment Grade Municipal Trust
<PAGE>
Liberty All-Star Growth Fund, Inc.
Liberty All-Star Equity Fund
Liberty Variable Investment
Trust Colonial Growth and Income Fund, Variable Series
Stein Roe Global Utilities Fund, Variable Series
Colonial International Fund for Growth, Variable Series
Colonial U.S. Stock Fund, Variable Series
Colonial Strategic Income Fund, Variable Series
Newport Tiger Fund, Variable Series
Liberty All-Star Equity Fund, Variable Series
Colonial High Yield Securities Fund, Variable Series
Colonial Small Cap Value Fund, Variable Series
By:
Nancy L. Conlin
June 1, 1999
THE CHASE MANHATTAN BANK
By:
Rosemary M. Stidmon
June 1, 1999
S:\FUNDS\GENERAL\CONTRACT\CHASE2.DOC
Page 2 of 2
ADMINISTRATION AGREEMENT
AGREEMENT dated as of June 1, 1999, between LIBERTY FUNDS TRUST I, a
Massachusetts business trust (Trust), with respect to STEIN ROE ADVISOR
TAX-MANAGED VALUE FUND (Fund), and COLONIAL MANAGEMENT ASSOCIATES, INC., a
Massachusetts corporation (Administrator).
In consideration of the promises and covenants herein, the parties agree as
follows:
1. Subject to the general direction and control of the Board of Trustees of
the Trust, the Administrator shall perform such administrative services
as may from time to time be reasonably requested by the Trust, which
shall include without limitation: (a) providing office space, equipment
and clerical personnel necessary for maintaining the organization of the
Fund and for performing the administrative functions herein set forth; (b)
arranging, if desired by the Trust, for Directors, officers and employees
of the Administrator to serve as Trustees, officers or agents of the Fund
if duly elected or appointed to such positions and subject to their
individual consent and to any limitations imposed by law; (c) preparation
of agendas and supporting documents for and minutes of meetings of
Trustees, committees of Trustees and shareholders; (d) coordinating
and overseeing the activities of the Fund's other third-party service
providers; (e) maintaining books and records of the Fund (exclusive of
records required by Section 31(a) of the 1940 Act); and (f)
monitoring the tax-efficiency of the Fund. Notwithstanding the
foregoing, the Administrator shall not be deemed to have assumed or have
any responsibility with respect to functions specifically assumed by any
transfer agent or custodian of the Fund.
2. The Administrator shall be free to render similar services to others so
long as its services hereunder are not impaired thereby.
3. The Fund shall pay the Administrator monthly a fee at the annual rate of
0.20% of the average daily net assets of the Fund.
4. This Agreement shall become effective as of the date of its execution, and
may be terminated without penalty by the Board of Trustees of the Trust or
by the Administrator, in each case on sixty days' written notice to the
other party.
5. This Agreement may be amended only by a writing signed by both parties.
6. In the absence of willful misfeasance, bad faith or gross negligence on the
part of the Administrator, or reckless disregard of its obligations and
duties hereunder, the Administrator shall not be subject to any liability
to the Trust or Fund, to any shareholder of the Trust or the Fund or to any
other person, firm or organization, for any act or omission in the course
of, or connected with, rendering services hereunder.
<PAGE>
LIBERTY FUNDS TRUST I
on behalf of STEIN ROE ADVISOR TAX-MANAGED VALUE FUND
By: _____________________________
Title: Treasurer and Chief
Financial Officer
COLONIAL MANAGEMENT ASSOCIATES, INC.
By: _____________________________
Title: Executive Vice President
A copy of the document establishing the Trust is filed with the Secretary of The
Commonwealth of Massachusetts. 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 Fund.
s:\funds\trusti\sratmvf\admin.doc
The Colonial Funds
The Newport Funds
The Crabbe Huson Funds
Stein Roe Advisor Tax-Managed Growth Fund
Rule 12b-1 Distribution Plan
June 1, 1999
Each Massachusetts Business Trust (Trust) designated in Appendix 1 as
revised from time to time, acting severally, 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 that Trust.
I. A. 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.
Colonial Money Market Fund and Colonial Municipal Money Market Fund do
not pay a service fee on Class A shares.
Colonial California Tax-Exempt Fund, Colonial Connecticut Tax-Exempt
Fund, Colonial Florida Tax-Exempt Fund, Colonial Massachusetts Tax-Exempt Fund,
Colonial Michigan Tax-Exempt Fund, Colonial Minnesota Tax-Exempt Fund, Colonial
New York Tax-Exempt Fund, Colonial North Carolina Tax-Exempt Fund and Colonial
Ohio Tax-Exempt Fund each pays a service fee at the annual rates of:
(A) 0.10% of the net assets attributable to its outstanding Class
A and Class B Shares issued prior to December 1, 1994, and
(B) 0.25% of the net assets attributable to its outstanding Class
A, B and C Shares issued thereafter.
The Colonial Fund and Colonial Select Value Fund each pays a service
fee at the annual rates of:
(A) 0.15% of the net assets attributable to its outstanding Class A and
B Shares issued prior to April 1, 1989, and (B) 0.25% of the net assets
attributable to its outstanding Class A, B and C Shares issued
thereafter.
Colonial Strategic Income Fund pays a service fee at the annual rates
of:
(A) 0.15% of its net assets attributable to its outstanding Class A and
B Shares issued prior to January 1, 1993, and (B) 0.25% of the net
assets attributable to its outstanding Class A, B and C Shares issued
thereafter.
Colonial Short Duration U.S. Government Fund and Colonial Intermediate
Tax-Exempt Fund each pays a service fee at the annual rate of 0.20% of the net
assets of its Class A, B and C Shares and a distribution fee at an annual rate
of 0.65% of the average daily net assets of its Class B and C Shares.
Colonial Strategic Balanced Fund also pays an annual distribution fee
not exceeding 0.10% of the average net assets of its Class A Shares.
B. PLANS APPLYING TO OTHER CLASSES OF SHARES
Stein Roe Advisor Tax-Managed Growth Fund:
Class E Shares. Class E shares pay a service fee at the annual rate of
0.25% of the net assets of the Class and a distribution fee at the annual rate
of 0.10% of the average daily net assets of the Class.
Class F Shares. Class F Shares pay a service fee at the annual rate of
0.25% of the net assets of the Class and a distribution fee at the annual rate
of 0.75% of the average daily net assets of the Class.
Class G Shares. Class G Shares pay LFDI a service fee at the annual
rate of 0.25% of the net assets of the Class and a distribution fee at the
annual rate of 0.10% of the aggregate net asset value of Class G Shares
outstanding less than five years from the date of purchase and 0.25% of the
average daily net assets of Class G Shares outstanding for five years or more.
Class H Shares. Class H Shares pay a service fee at the annual rate of
0.25% of the net assets of the Class and a distribution fee at the annual rate
of 0.75% of the average daily net assets of the Class.
Colonial Strategic Income Fund:
Class J Shares Class J Shares pay a service fee at the annual rate of
0.25% of the net assets of the Class and a distribution fee at the annual rate
of 0.35% of the average daily net assets of the Class.
Stein Roe Advisor Tax-Managed Value Fund also pays an annual
distribution fee not exceeding 0.05% of the average net assets of its Class A
Shares.
The following Funds do not have 12b-1 Plans for the specified classes of shares:
Crabbe Huson Small Cap Fund, Crabbe Huson Equity Fund, Crabbe Huson
Managed Income & Equity Fund, Crabbe Huson Contrarian Income Fund:
Class I Shares.
Newport Tiger Fund: Class T and Class Z Shares.
<PAGE>
Colonial Strategic Income Fund, Colonial Income Fund, Colonial
Intermediate U.S. Government Fund, Colonial Federal Securities Fund, Newport
Greater China Fund, Colonial International Horizons Fund, Crabbe Huson Real
Estate Investment Fund, Colonial Counselor Select Income Portfolio, Colonial
Counselor Select Balanced Portfolio, Colonial Counselor Select Growth Portfolio,
Newport Asia Pacific Fund, Colonial Small Cap Value Fund, Colonial U.S. Growth &
Income Fund, The Colonial Fund, Colonial High Yield Securities Fund, Colonial
Utilities Fund, Colonial Value Fund, Colonial Select Value Fund, Stein Roe
Advisor Tax-Managed Growth Fund, Newport Tiger Cub Fund, Newport Japan
Opportunities Fund, Stein Roe Advisor Tax-Managed Value 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.
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 Each Trust
<PAGE>
APPENDIX 1
Trust Series
Liberty Funds Trust I
Colonial High Yield Securities Fund
Colonial Income Fund
Colonial Strategic Income Fund
Stein Roe Advisor Tax-Managed Growth Fund
Stein Roe Advisor Tax-Managed Value Fund
Liberty Funds Trust II
Colonial Money Market Fund
Colonial Intermediate U.S. Government Fund
Colonial Short Duration U.S. Government Fund
Newport Tiger Cub Fund
Newport Japan Opportunities Fund
Newport Greater China Fund
Liberty Funds Trust III
Colonial Select Value Fund
The Colonial Fund
Colonial Federal Securities Fund
Colonial Global Equity Fund
Colonial International Horizons Fund
Colonial Strategic Balanced Fund
Colonial Global Utilities Fund
Crabbe Huson Small Cap Fund
The Crabbe Huson Special Fund
Crabbe Huson Equity Fund
Crabbe Huson Real Estate Investment Fund
Crabbe Huson Managed Income & Equity Fund
Crabbe Huson Oregon Tax-Free Fund
Crabbe Huson Contrarian Income Fund
Crabbe Huson Contrarian Fund
Liberty Funds Trust IV
Colonial High Yield Municipal Fund
Colonial Intermediate Tax-Exempt Fund
Colonial Tax-Exempt Fund
Colonial Tax-Exempt Insured Fund
Colonial Municipal Money Market Fund
Colonial Utilities Fund
Colonial Counselor Select Income Portfolio
Colonial Counselor Select Balanced Portfolio
Colonial Counselor Select Growth Portfolio
Liberty Funds Trust V
Colonial Massachusetts Tax-Exempt Fund
Colonial Connecticut Tax-Exempt Fund
Colonial California Tax-Exempt Fund
Colonial Michigan Tax-Exempt Fund
Colonial Minnesota Tax-Exempt Fund
Colonial New York Tax-Exempt Fund
Colonial North Carolina Tax-Exempt Fund
Colonial Ohio Tax-Exempt Fund
Colonial Florida Tax-Exempt Fund
Liberty Funds Trust VI
Colonial U.S. Growth & Income Fund
Colonial Small Cap Value Fund
Colonial Value Fund
Newport Asia Pacific Fund
Liberty Funds Trust VII
Newport Tiger Fund