NUMBER ________________
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET BECOME EFFECTIVE. THESE
SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO
THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS COMMUNICATION
SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH
OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
- --------------------------------------------------------------------------------
STEIN ROE ADVISOR TAX-MANAGED GROWTH FUND II PROSPECTUS, MARCH 1, 2000
- --------------------------------------------------------------------------------
CLASS A, B AND C SHARES
Advised by Stein Roe & Farnham Incorporated
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
THE FUND 2
- --------------------------------------------------------------------------------
Investment Goals ..............................................................2
Primary Investment Strategies .................................................2
Primary Investment Risks ......................................................2
Performance ...................................................................3
Your Expenses .................................................................4
YOUR ACCOUNT 5
- --------------------------------------------------------------------------------
How to Buy Shares .............................................................5
Sales Charges .................................................................6
How to Exchange Shares ........................................................9
How to Sell Shares ............................................................9
Distribution and Service Fees ................................................10
Other Information About Your Account..........................................11
MANAGING THE FUND 13
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Investment Advisor ...........................................................13
Portfolio Managers ...........................................................13
Advisor Performance Information ..............................................13
Although these securities have been registered with the Securities and Exchange
Commission, the COmmission has not approved or disapproved any shares offered in
this prospectus or determined whether this prospectus is accurate or complete.
Any representation to the contrary is a criminal offense.
------------------------------
Not FDIC May Lose Value
-------------------
Insured No Bank Guarantee
------------------------------
<PAGE>
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THE FUND
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INVESTMENT GOALS
- --------------------------------------------------------------------------------
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 may also invest in foreign securities. In selecting stocks
for the Fund, the Fund's investment advisor uses fundamental research analysis
and valuation techniques.
At times, the advisor may determine that adverse market conditions make it
desirable to temporarily suspend the Fund's normal investment activities. During
such times, the Fund may, but is not required to, invest in cash or
high-quality, short-term debt securities, without limit. Taking a temporary
defensive position may prevent the Fund from achieving its investment goals.
In seeking to achieve its goals, the Fund may invest in various types of
securities and engage in various investment techniques which are not the
principal focus of the Fund and therefore are not described in this prospectus.
These types of securities and investment practices are identified and discussed
in the Fund's Statement of Additional Information, which you may obtain free of
charge (see back cover). Approval by the Fund's shareholders is not required to
modify or change the Fund's investment goals or investment strategies.
PRIMARY INVESTMENT RISKS
- --------------------------------------------------------------------------------
The primary risks of investing in the Fund are described below. There are many
circumstances (including additional risks that are not described here) which
could prevent the Fund from achieving its goals. It is possible to lose money by
investing in the Fund.
Market risk is the risk that the price of a security held by the Fund will fall
due to changing market, economic or political conditions.
Foreign securities are subject to special risks. Foreign stock markets can be
extremely volatile. Fluctuations in currency exchange rates may impact the value
of foreign securities without a change in the intrinsic value of those
securities. 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. 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.
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.
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.
2
<PAGE>
The Fund
PERFORMANCE
- --------------------------------------------------------------------------------
The Fund's return is compared to the Standard & Poor's 500 Index (S&P Index), an
unmanaged index that tracks the performance of U.S. stock market securities.
Unlike the Fund, indices are not investments, do not incur fees or expenses and
are not professionally managed. It is not possible to invest directly in
indices. The Fund's return is also compared to the average return of the funds
included in the Lipper Growth Fund category (Lipper Average). This Lipper
Average, which is calculated by Lipper, Inc., is composed of funds with similar
investment objectives to the Fund. Sales charges are not reflected in the Lipper
Average.
Because the Fund is a new Fund and has not completed one full year of investment
performance, information related to the Fund's performance has not been included
in this prospectus.
3
<PAGE>
The Fund
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(1)(paid directly from your investment)
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
Maximum sales charge (load) on purchases (%)
(as a percentage of the offering price) 5.75 0.00 0.00
- ----------------------------------------------- --------- --------- ---------
Maximum deferred sales charge (load) on
redemptions (%) (as a percentage of the
lesser of purchase price or redemption price) 1.00(2) 5.00 1.00
- ----------------------------------------------- --------- --------- ---------
Redemption fee (%) (as a percentage of
amount redeemed, if applicable) (3) (3) (3)
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses (deducted directly from Fund assets)
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
Management and administration fees (4) (%) 1.00 1.00 1.00
- ----------------------------------------------- --------- --------- ---------
Distribution and service (12b-1) fees (%) 0.25 1.00 1.00
- ----------------------------------------------- --------- --------- ---------
Other expenses (5)(6) (%) 0.43 0.43 0.43
- ----------------------------------------------- --------- --------- ---------
Total annual fund operating expenses (5) (%) 1.68 2.43 2.43
- --------------------------------------------------------------------------------
Example Expenses (your actual costs may be higher or lower)
- --------------------------------------------------------------------------------
CLASS 1 YEAR 3 YEARS
Class A $736 $1,074
- ----------------------------------------- ---------------- -----------------
Class B: did not sell your shares $246 $ 758
sold all your shares at
the end of the period $746 $1,058
- ----------------------------------------- ---------------- -----------------
Class C: did not sell your shares $246 $ 758
sold all your shares at
the end of the period $346 $ 758
UNDERSTANDING EXPENSES
SALES CHARGES are paid directly by shareholders to Liberty Funds Distributor,
Inc., the Fund's distributor.
ANNUAL FUND OPERATING EXPENSES are deducted from the Fund. They include
management and administration fees, 12b-1 fees, brokerage costs, and
administrative costs including pricing and custody services.
EXAMPLE EXPENSES help you compare the cost of investing in the Fund to the cost
of investing in other mutual funds. The table does not take into account any
expense reduction arrangements discussed in the footnotes to the Annual Fund
Operating Expenses table. It uses the following hypothetical conditions:
- - $10,000 initial investment
- - 5% total return for each year
- - Fund operating expenses remain the same
- - Assumes reinvestment of all dividends and distributions
(1) A $10 annual fee is deducted from accounts of less than $1,000 and paid to
the transfer agent.
(2) This charge applies only to certain Class A shares bought without an initial
sales charge that are sold within 18 months of purchase.
(3) There is a $7.50 charge for wiring sale proceeds to your bank.
(4) The Fund's advisor and administrator have voluntarily agreed to waive 0.10%
of the management and administrator fees on average net assets of the Fund
over $500 million. This arrangement may be terminated by the advisor or
administrator at any time.
(5) The Fund's advisor has agreed to bear the Fund's expenses such that "Other
expenses" do not exceed 0.25% of the first $100 million of average net
assets and 0.50% of average net assets over $100 million 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 0.25% of the first $100 million of
average net assets and 0.50% of average net assets over $100 million
annually. This arrangement terminates on the earlier of (i) the date on
which expense reimbursement payments by the Fund equal 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.
(6) "Other expenses" are based on estimated amounts for the current fiscal year.
4
<PAGE>
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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 public offering price. "Good form" means that you placed your order
with your brokerage firm or your payment has been received and your application
is complete, including all necessary signatures.
- --------------------------------------------------------------------------------
Outlined below are the various options for buying shares:
- --------------------------------------------------------------------------------
METHOD INSTRUCTIONS
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 check
(new account) 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 additional
(existing account) investment stub included in your quarterly statement, or
send a letter of instruction including your Fund name and
account number with a check made payable to the Fund to
Liberty Funds Services, Inc., P.O. Box 1722, Boston, MA
02105-1722.
- -------------------- -----------------------------------------------------------
By exchange You or your financial advisor may acquire shares by
exchanging shares you own in one fund for shares of the
same class of the Fund at no additional cost. There may
be an additional charge if exchanging from a money market
fund. To exchange by telephone, call 1-800-422-3737.
- -------------------- -----------------------------------------------------------
By wire You may purchase shares by wiring money from your bank
account to your fund account. To wire funds to your fund
account, call 1-800-422-3737 to obtain a control number
and the wiring instructions.
- -------------------- -----------------------------------------------------------
By electronic funds You may purchase shares by electronically transferring
transfer money from your bank account to your fund account by
calling 1-800-422-3737. Electronic funds transfers may
take up to two business days to settle and be considered
in "good form." You must set up this feature prior to
your telephone request. Be sure to complete the
appropriate section of the application.
- -------------------- -----------------------------------------------------------
Automatic You can make monthly or quarterly investments
investment plan automatically from your bank account to your fund
account. You can select a pre-authorized amount to be
sent via electronic funds transfer. Be sure to complete
the appropriate section of the application for this
feature.
- -------------------- -----------------------------------------------------------
By dividend You may automatically invest dividends distributed by one
diversification 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.
INVESTMENT MINIMUMS(7)
Initial Investment ............................................. $2,500
Subsequent Investments ......................................... $ 250
Automatic Investment Plan ...................................... $ 50
Retirement Plans ............................................... $ 25
(7) 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
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.
CLASS A SHARES Your purchases of Class A shares generally are at the public
offering price. This price includes a sales charge that is based on the amount
of your initial investment when you open your account. A portion of the sales
charge is the commission paid to the financial advisor firm on the sale of Class
A shares. The sales charge you pay on additional investments is based on the
total amount of your purchase and the current value of your account. The amount
of the sales charge differs depending on the amount you invest as shown in the
table below.
- --------------------------------------------------------------------------------
Class A Sales Charges
- --------------------------------------------------------------------------------
% OF
OFFERING
AS A % OF PRICE
THE PUBLIC AS A % RETAINED BY
OFFERING OF YOUR FINANCIAL
AMOUNT OF PURCHASE PRICE INVESTMENT ADVISOR FIRM
Less than $50,000 5.75 6.10 5.00
- ------------------------------------- -------------- -------------- ------------
$50,000 to less than $100,000 4.50 4.71 3.75
- ------------------------------------- -------------- -------------- ------------
$100,000 to less than $250,000 3.50 3.63 2.75
- ------------------------------------- -------------- -------------- ------------
$250,000 to less than $500,000 2.50 2.56 2.00
- ------------------------------------- -------------- -------------- ------------
$500,000 to less than $1,000,000 2.00 2.04 1.75
- ------------------------------------- -------------- -------------- ------------
$1,000,000 or more(8) 0.00 0.00 0.00
For Class A share purchases of $1 million or more, financial advisors receive a
commission from the distributor as follows:
- --------------------------------------------------------------------------------
Purchases Over $1 Million
- --------------------------------------------------------------------------------
AMOUNT PURCHASED COMMISSION %
First $3 million 1.00
- -------------------------------------------- -----------------------------------
Next $2 million 0.50
- -------------------------------------------- -----------------------------------
Over $5 million 0.25(9)
CHOOSING A SHARE CLASS
The Fund offers three classes of shares in the 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. Prior to February
1, 2000, purchases of $1 million or more are automatically invested in Class A
shares. Effective February 1, 2000, if your financial advisor firm participates
in the Class B discount program, purchases of over $1 million can be made only
in Class A or Class C shares. Otherwise, purchases in excess of $250,000 must be
for Class A or Class C shares only. Based on your personal situation, your
investment advisor can help you decide which class of shares makes the most
sense for you.
The Fund also offers an additional class of shares, Class Z shares, exclusively
to certain institutional and other investors. Class Z shares are made available
through a separate prospectus provided to eligible institutional and other
investors.
(8) Class A shares bought without an initial sales charge in accounts
aggregating $1 million to $5 million at the time of purchase are subject to
a 1% CDSC if the shares are sold within 18 months of the time of purchase.
Subsequent Class A share purchases that bring your account value above $1
million are subject to a 1% CDSC if redeemed within 18 months of their
purchase date. The 18-month period begins on the first day of the month
following each purchase.
(9) Paid over 12 months but only to the extent the shares remain outstanding.
6
<PAGE>
Your Account
UNDERSTANDING CONTINGENT DEFERRED SALES CHARGES (CDSC)
Certain investments in Class A, B and C shares are subject to a CDSC, a sales
charge applied at the time you sell your shares. You will pay the CDSC only on
shares you sell within a certain amount of time after purchase. The CDSC
generally declines each year until there is no charge for selling shares. The
CDSC is applied to the net asset value at the time of purchase or sale,
whichever is lower. For purposes of calculating the CDSC, the start of the
holding period is the month-end of the month in which the purchase is made.
Shares you purchase with reinvested dividends or capital gains are not subject
to a CDSC. When you place an order to sell shares, the Fund will automatically
sell first those shares not subject to a CDSC and then those you have held the
longest. This policy helps reduce and possibly eliminate the potential impact of
the CDSC.
REDUCED SALES CHARGES FOR LARGER INVESTMENTS There are two ways for you to pay a
lower sales charge when purchasing Class A shares. The first is through Rights
of Accumulation. If the combined value of the Fund accounts maintained by you,
your spouse or your minor children reaches a discount level (according to the
chart on the previous page), your next purchase will receive the lower sales
charge. The second is by signing a Statement of Intent within 90 days of your
purchase. By doing so, you would be able to pay the lower sales charge on all
purchases by agreeing to invest a total of at least $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 on the amount you had invested to that
date. In addition, certain investors may purchase shares at a reduced sales
charge or net asset value (NAV), which is the value of a fund share excluding
any sales charges. See the Statement of Additional Information for a description
of these situations.
CLASS B SHARES Your purchases of Class B shares are at the Fund's NAV. Class B
shares have no front-end sales charge, but they do carry a CDSC that is imposed
only on shares sold prior to the completion of the periods shown in the charts
below. The CDSC generally declines each year and eventually disappears over
time. The distributor pays the financial advisor firm an up-front commission on
sales of Class B shares as depicted in the charts below.
PURCHASES OF LESS THAN $250,000:
- --------------------------------------------------------------------------------
Class B Sales Charges
- --------------------------------------------------------------------------------
% DEDUCTED WHEN
HOLDING PERIOD AFTER PURCHASE SHARES ARE SOLD
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
Commission to financial advisors is 5.00%.
Automatic conversion to Class A shares is eight years after purchase.
Effective for purchases on and after February 1, 2000, you can pay a lower CDSC
and reduce the holding period when making purchases of Class B shares through a
financial advisor firm which participates in the Class B share discount program
for larger purchases as described in the charts below. Some financial advisor
firms are not able to participate because their record keeping or transaction
processing systems are not designed to accommodate these reductions. For
non-participating firms, purchases of B shares must be less than $250,000.
Consult your financial advisor to see whether it participates in the discount
program for larger purchases. For participating firms, Rights
7
<PAGE>
Your Account
of Accumulation apply, so that if the combined value of the Fund accounts
maintained by you, your spouse or your minor children is at or above a discount
level, your next purchase will receive the lower CDSC and the applicable reduced
holding period.
PURCHASES OF $250,000 TO LESS THAN $500,000:
- --------------------------------------------------------------------------------
Class B Sales Charges
- --------------------------------------------------------------------------------
% DEDUCTED WHEN
HOLDING PERIOD AFTER PURCHASE SHARES ARE SOLD
Through first year 3.00
- -------------------------------------------------- -----------------------------
Through second year 2.00
- -------------------------------------------------- -----------------------------
Through third year 1.00
- -------------------------------------------------- -----------------------------
Longer than three years 0.00
Commission to financial advisors is 2.50%.
Automatic conversion to Class A shares is four years after purchase.
PURCHASES OF $500,000 TO LESS THAN $1 MILLION:
- --------------------------------------------------------------------------------
Class B Sales Charges
- --------------------------------------------------------------------------------
% DEDUCTED WHEN
HOLDING PERIOD AFTER PURCHASE SHARES ARE SOLD
Through first year 3.00
- -------------------------------------------------- -----------------------------
Through second year 2.00
- -------------------------------------------------- -----------------------------
Through third year 1.00
Commission to financial advisors is 1.75%.
Automatic conversion to Class A shares is three years after purchase.
If you exchange into a fund participating in the Class B share discount program
or transfer your fund account from a financial advisor which does not
participate in the program to one who does, the exchanged or transferred shares
will retain the pre-existing CDSC but any additional purchases of Class B shares
which cause the exchanged or transferred account to exceed the applicable
discount level will receive the lower CDSC and the reduced holding period for
amounts in excess of the discount level. Your financial advisor will receive the
lower commission for purchases in excess of the applicable discount level. If
you exchange from a participating fund or transfer your account from a financial
advisor that does participate in the program into a fund or financial advisor
which does not, the exchanged or transferred shares will retain the pre-existing
CDSC but all additional purchases of Class B shares will be in accordance with
the higher CDSC and longer holding period of the non-participating fund or
financial advisor.
CLASS C SHARES Similar to Class B shares, your purchases of Class C shares are
at the Fund's NAV. Although Class C shares have no front-end sales charge, they
carry a CDSC of 1.00% that is applied to shares sold within the first year after
they are
8
<PAGE>
Your Account
purchased. After holding shares for one year, you may sell them at any time
without paying a CDSC. The distributor pays the financial advisor firm an
up-front commission of 1.00% on sales of Class C shares.
- --------------------------------------------------------------------------------
Class C Sales Charges
- --------------------------------------------------------------------------------
YEARS AFTER PURCHASE % DEDUCTED WHEN SHARES ARE SOLD
Through first year 1.00
- -------------------------------------------- -----------------------------------
Longer than one year 0.00
HOW TO EXCHANGE SHARES
- --------------------------------------------------------------------------------
You may exchange your shares for shares of the same share class of another fund
distributed by Liberty Funds Distributor, Inc. at net asset value. If your
shares are subject to a CDSC, you will not be charged a CDSC upon the exchange.
However, when you sell the shares acquired through the exchange, the shares sold
may be subject to a CDSC, depending upon when you originally purchased the
shares you exchanged. For purposes of computing the CDSC, the length of time you
have owned your shares will be computed from the date of your original purchase
and the applicable CDSC will be the CDSC of the original fund. Unless your
account is part of a tax-deferred retirement plan, an exchange is a taxable
event. Therefore, you may realize a gain or a loss for tax purposes. The Fund
may terminate your exchange privilege if the advisor determines that your
exchange activity is likely to adversely impact its ability to manage the Fund.
To exchange by telephone, call 1-800-422-3737.
HOW TO SELL SHARES
- --------------------------------------------------------------------------------
Your financial advisor can help you determine if and when you should sell your
shares. You may sell shares of the Fund on any regular business day that the New
York Stock Exchange (NYSE) is open.
When the Fund receives your sales request in "good form," shares will be sold at
the next calculated price. In "good form" means that money used to purchase your
shares is fully collected. When selling shares by letter of instruction, "good
form" also means (i) your letter has complete instructions, the proper
signatures and signature guarantees, (ii) you have included any certificates for
shares to be sold, and (iii) any other required documents are attached. For
additional documents required for sales by corporations, agents, fiduciaries and
surviving joint owners, please call 1-800-345-6611. Retirement plan accounts
have special requirements; please call 1-800-799-7526 for more information.
The Fund will generally send proceeds from the sale to you within seven days
(usually on the next business day after your request is received in "good
form"). However, if you purchased your shares by check, the Fund may delay
sending the proceeds from the sale of your shares for up to 15 days after your
purchase to protect against checks that are returned. No interest will be paid
on uncashed redemption checks.
9
<PAGE>
Your Account
- --------------------------------------------------------------------------------
Outlined below are the various options for selling shares:
- --------------------------------------------------------------------------------
METHOD INSTRUCTIONS
Through your You may call your financial advisor to place your sell
financial advisor order. To receive the current trading day's price, your
financial advisor firm must receive your request prior to
the close of the NYSE, usually 4:00 p.m. Eastern time.
- -------------------- -----------------------------------------------------------
By exchange You or your financial advisor may sell shares by
exchanging from the Fund into the same share class of
another fund at no additional cost. To exchange by
telephone, call 1-800-422-3737.
- -------------------- -----------------------------------------------------------
By telephone You or your financial advisor may sell shares by
telephone and request that a check be sent to your
address of record by calling 1-800-422-3737, unless you
have notified the Fund of an address change within the
previous 30 days. The dollar limit for telephone sales is
$100,000 in a 30-day period. You do not need to set up
this feature in advance of your call. Certain
restrictions apply to retirement accounts. For details,
call 1-800-345-6611.
- -------------------- -----------------------------------------------------------
By mail You may send a signed letter of instruction or stock
power form along with any certificates to be sold to the
address below. In your letter of instruction, note the
Fund's name, share class, account number, and the dollar
value or number of shares you wish to sell. All account
owners must sign the letter, and signatures must be
guaranteed by either a bank, a member firm of a national
stock exchange or another eligible guarantor institution.
Additional documentation is required for sales by
corporations, agents, fiduciaries, surviving joint owners
and individual retirement account owners. For details,
call 1-800-345-6611.
Mail your letter of instruction to Liberty Funds
Services, Inc., P.O. Box 1722, Boston, MA 02105-1722.
- -------------------- -----------------------------------------------------------
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.
DISTRIBUTION AND SERVICE FEES
- --------------------------------------------------------------------------------
The Fund has adopted a plan under Rule 12b-1 that permits it to pay marketing
and other fees to support the sale and distribution of Class A, B and C shares
and the services provided to you by your financial advisor. The annual
distribution fee and service fee may equal up to 0.00% and 0.25%, respectively,
for Class A shares and 0.75% and 0.25%, respectively, for each of Class B and
Class C shares and are paid out of the assets of these classes. Over time, these
fees will increase the cost of your shares and may cost you more than paying
other types of sales charges.(10)
(10) Class B shares automatically convert to Class A shares after a certain
number of years, depending on the program you purchased your shares under,
eliminating the distribution fee upon conversion.
10
<PAGE>
Your Account
OTHER INFORMATION ABOUT YOUR ACCOUNT
- --------------------------------------------------------------------------------
HOW THE FUND'S SHARE PRICE IS DETERMINED The price of each class of the Fund's
shares is based on its net asset value (NAV). The NAV is determined at the close
of regular trading on the NYSE, usually 4:00 p.m. Eastern time, on each business
day that the NYSE is open (typically Monday through Friday).
When you request a transaction, it will be processed at the NAV (plus any
applicable sales charges) next determined after your request is received in
"good form" by the distributor. In most cases, in order to receive that day's
price, the distributor must receive your order before that day's transactions
are processed. If you request a transaction through your financial advisor's
firm, the firm must receive your order by the close of trading on the NYSE to
receive that day's price.
The Fund determines its NAV for each share class by dividing each class's total
net assets by the number of that class's shares outstanding. In determining the
NAV, the Fund must determine the price of each security in its portfolio at the
close of each trading day. Securities for which market quotations are available
are valued each day at the current market value. However, where market
quotations are unavailable, or when the advisor believes that subsequent events
have made them unreliable, the Fund may use other data to determine the fair
value of the securities.
You can find the daily prices of some share classes for the Fund in most major
daily newspapers under the caption "Liberty." You can find daily prices for all
share classes by visiting the Fund's web site at www.libertyfunds.com.
ACCOUNT FEES If your account value falls below $1,000 (other than as a result of
depreciation in share value) you may be subject to an annual account fee of $10.
This fee is deducted from the account in June each year. Approximately 60 days
prior to the fee date, the Fund's transfer agent will send you written
notification of the upcoming fee. If you add money to your account and bring the
value above $1,000 prior to the fee date, the fee will not be deducted.
SHARE CERTIFICATES Share certificates are not available for Class B and C
shares. Certificates will be issued for Class A shares only if requested. If you
decide to hold share certificates, you will not be able to sell your shares
until you have endorsed your certificates and returned them to the distributor.
11
<PAGE>
Your Account
DIVIDENDS, DISTRIBUTIONS, AND TAXES The Fund has the potential to make the
following distributions:
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Types of Distributions
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Dividend Represents interest and dividends earned from securities
held by the Fund.
- ------------------ -------------------------------------------------------------
Capital gains Represents long-term capital gains on sales of
securities held for more than 12 months and short-term
capital gains, which are gains on sales of securities held
for a 12-month period or less.
DISTRIBUTION OPTIONS The Fund distributes dividends and any capital gains
(including short-term capital gains) at least annually. You can choose one of
the options listed in the table below for these distributions when you open your
account.(11) To change your distribution option call 1-800-345-6611.
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Distribution Options
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Reinvest all distributions in additional shares of your current fund
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Reinvest all distributions in shares of another fund
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Receive dividends in cash (see options below) and reinvest capital gains(12)
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Receive all distributions in cash (with one of the following options) (12):
- - send the check to your address of record
- - send the check to a third party address
- - transfer the money to your bank via electronic funds transfer
TAX CONSEQUENCES Regardless of whether you receive your distributions in cash or
reinvest them in additional Fund shares, all Fund distributions are subject to
federal income tax. Depending on the state where you live, distributions may
also be subject to state and local income taxes.
In general, any distributions of dividends, interest and short-term capital
gains are taxable as ordinary income. Distributions of long-term capital gains
are generally taxable as such, regardless of how long you have held your Fund
shares. You will be provided with information each year regarding the amount of
ordinary income and capital gains distributed to you for the previous year and
any portion of your distribution which is exempt from state and local taxes.
Your investment in the Fund may have additional personal tax implications.
Please consult your tax advisor on [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 and local income tax.
UNDERSTANDING FUND DISTRIBUTIONS
The Fund earns income from the securities it holds. The Fund also may realize
capital gains and losses on sales of its securities. The Fund distributes
substantially all of its net investment income and capital gains to
shareholders. As a shareholder, you are entitled to a portion of the Fund's
income and capital gains based on the number of shares you own at the time these
distributions are declared.
(11) 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.
(12) 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.
12
<PAGE>
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MANAGING THE FUND
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INVESTMENT ADVISOR
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Stein Roe & Farnham Incorporated (Stein Roe), located at One South Wacker Drive,
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 January 31, 2000,
Stein Roe managed over $__ billion in assets.
Stein Roe's mutual funds and institutional investment advisory businesses are
part of a larger business unit that includes several separate legal entities
known as Liberty Funds Group LLC (LFG). LFG includes certain affiliates of Stein
Roe, principally Colonial Management Associates, Inc. (Colonial). Stein Roe and
the LFG business unit are managed by a single management team. Stein Roe,
Colonial and the other LFG entities also share personnel, facilities and systems
that may be used in providing administrative or operational services to the
Fund. Colonial is a registered investment advisor. Stein Roe, Colonial and the
other entities that make up LFG are subsidiaries of Liberty Financial Companies,
Inc.
Stein Roe can 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 MANAGERS
- --------------------------------------------------------------------------------
The Fund is managed by a team of investment professionals assigned to it by
Stein Roe. No single individual has primary management responsibility over the
Fund's portfolio securities.
ADVISOR PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The Fund is managed by the same team of investment professionals that currently
manage Stein Roe Advisor Tax-Managed Growth Fund (Fund I). Fund I's investment
goals of long-term capital growth while reducing shareholder exposure to taxes
is identical to the Fund's investment goals.
The following table includes the average annual and cumulative total returns for
Fund I from December 30, 1996 (Fund I's inception date) through December 31,
1999. These performance figures take into account the estimated expenses of the
Fund's Class A shares, excluding any fee waiver or reimbursement and including
the sales charges on Class A shares.
13
<PAGE>
Managing the Fund
Periods Ended December 31, 1999
-------------------------------
Average Annual Cumulative
Total Return Total Return
------------ ------------
One Year
Two Years
Three Years
Since December 30, 1996
(inception of Fund I)
Fund I's returns assume annual fees and expenses of %. The gross investment
performance for the Account has been examined by PricewaterhouseCoopers LLP in
accordance with standards established by the American Institute of Certified
Public Accountants, for use in connection with the registration statement of the
Trust under the Securities Act of 1933, as amended. The gross investment
performance (i) represents total return, assuming reinvestment of all dividends
and proceeds from capital transactions; and (ii) has been adjusted for estimated
fees and expenses that would be imposed on Class A shares of the Fund. In
addition, the performance calculation reflects the deduction of the sales charge
applicable to Class A shares of the Fund. This method for calculating
performance produces a different result than if the performance information were
calculated using the Securities and Exchange Commission's method of calculating
total return of a mutual fund. In addition, the returns would have been
different if expenses and sales loads applicable to classes other than Class A
had been applied. PricewaterhouseCoopers LLP has not examined the net investment
performance presented herein.
FUND I'S PERFORMANCE FIGURES DO NOT REPRESENT PAST PERFORMANCE OF THE FUND AND
SHOULD NOT BE VIEWED AS INDICATIVE OF FUTURE PERFORMANCE RESULTS FOR THE FUND.
Among other things, the fees, expenses and sales charges applicable to an
investment in the Fund may be higher than those assumed in calculating the Fund
I's returns, which would negatively impact the Fund's performance relative to
the Fund I's performance. Cash flows into and out of the Fund may also
negatively impact the Fund's performance relative to the Fund I's performance.
14
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NOTES
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15
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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 Statement of Additional Information for more
information on the Fund and the securities in which it invests. The Statement of
Additional Information is incorporated into this prospectus by reference, which
means that it is considered to be part of this prospectus.
You can get free copies of reports and the Statement of Additional Information,
request other information and discuss your questions about the Fund by writing
or calling the Fund's distributor at:
Liberty Funds Distributor, Inc.
One Financial Center
Boston, MA 02111-2621
1-800-426-3750
www.libertyfunds.com
Text-only versions of all Fund documents can be viewed online or downloaded from
the Securities and Exchange Commission at www.sec.gov.
You can review and copy information about the Fund by visiting the following
location, and you can obtain copies, upon payment of a duplicating fee by
electronic request at the E-mail address [email protected] or by writing the:
Public Reference Room
Securities and Exchange Commission
Washington, DC 20549-6009
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: 811-2214
- - Stein Roe Advisor Tax-Managed Growth Fund II
- --------------------------------------------------------------------------------
[LIBERTY FUNDS LOGO]
Liberty Funds Distributor, Inc. (c)2000
One Financial Center, Boston, MA 02111-2621, 1-800-426-3750
www.libertyfunds.com
TM-01/353A-0200
