SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section
14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ X ] Preliminary Proxy Statement
[ ] Confidential, For Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
LIBERTY FUNDS TRUST I
Liberty Tax Managed Growth Fund
Liberty Tax Managed Growth Fund II
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
LIBERTY TAX-MANAGED GROWTH FUND
LIBERTY TAX-MANAGED GROWTH FUND II
Each a series of Liberty Funds Trust I
One Financial Center, Boston, Massachusetts 02111
Dear Shareholder:
Your Fund will hold a special meeting on December 27, 2000 at 10:00 a.m.,
Eastern Time, at the offices of Colonial Management Associates, Inc. (Colonial).
A formal Notice of Special Meetings of Shareholders appears on the next page,
followed by the proxy statement which explains in more detail the proposals to
be considered. We hope that you can attend the Meeting in person; however, we
urge you in any event to vote your shares at your earliest convenience.
YOUR VOTE IS IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. YOU CAN VOTE
EASILY AND QUICKLY AT OUR WEB SITE, BY MAIL, BY FAX (NOT AVAILABLE FOR ALL
SHAREHOLDERS; REFER TO ENCLOSED PROXY CARD OR INSERT), BY PHONE OR IN PERSON.
TO VOTE THROUGH OUR WEB SITE, JUST FOLLOW THE SIMPLE INSTRUCTIONS THAT APPEAR ON
THE ENCLOSED PROXY CARD OR INSERT. A SELF-ADDRESSED, POSTAGE-PAID ENVELOPE HAS
BEEN ENCLOSED FOR YOUR CONVENIENCE. PLEASE HELP YOUR FUND AVOID THE EXPENSE
OF A FOLLOW-UP MAILING BY VOTING TODAY!
Your Fund is using Shareholder Communications Corporation (SCC), a professional
proxy solicitation firm, to assist shareholders in the voting process. As the
date of the special meeting approaches, if we have not yet received your vote,
you may receive a telephone call from SCC reminding you to exercise your right
to vote.
Please take a few moments to review the details of each proposal. If you have
any questions regarding the proxy statement, please feel free to call SCC at
1-800-732-3683. Our hearing impaired shareholders may call Liberty Funds
Services, Inc., the Funds' transfer agent, at 1-800-528-6979 if you have special
TTD equipment.
We appreciate your participation and prompt response in these matters and thank
you for your continued support.
Sincerely,
[GRAPHIC OMITTED][GRAPHIC OMITTED]
Stephen E. Gibson, President
November 20, 2000
[Job Code]
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LIBERTY TAX-MANAGED GROWTH FUND
LIBERTY TAX-MANAGED GROWTH FUND II
Each a series of Liberty Funds Trust I
One Financial Center, Boston, Massachusetts 02111
NOTICE OF SPECIAL MEETINGS OF SHAREHOLDERS
TO BE HELD ON DECEMBER 27, 2000
NOTICE IS HEREBY GIVEN that Special Meetings of the Shareholders of Liberty
Tax-Managed Growth Fund and Liberty Tax-Managed Growth Fund II (each, a Fund,
and collectively, the Funds) will be held at 10:00 a.m., Eastern Time, on
Wednesday, December 27, 2000 at the offices of Colonial Management Associates,
Inc., One Financial Center, Boston, Massachusetts 02111 for these purposes:
1. To elect the Board of Trustees of Liberty Funds Trust I;
2. To approve a sub-advisory agreement with Stein Roe Investment Counsel
LLC; and
3. To consider and act upon any other matters that properly come before the
meeting and any adjourned session of the meeting.
Shareholders of record at the close of business on September 29, 2000, are
entitled to notice of and to vote at the meeting and any adjourned session.
By order of the Board of Trustees,
William J. Ballou, Secretary
November 20, 2000
NOTICE: YOUR VOTE IS IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU
OWN. YOU CAN VOTE EASILY AND QUICKLY AT OUR WEB SITE, BY PHONE,
BY MAIL, BY FAX (NOT AVAILABLE FOR ALL SHAREHOLDERS; REFER TO
ENCLOSED PROXY CARD OR INSERT) OR IN PERSON. TO VOTE THROUGH OUR WEB
SITE, JUST FOLLOW THE SIMPLE INSTRUCTIONS THAT APPEAR ON THE
ENCLOSED PROXY CARD OR INSERT. PLEASE HELP YOUR FUND AVOID THE
EXPENSE OF A FOLLOW-UP MAILING BY VOTING TODAY!
<PAGE>
SPECIAL MEETINGS OF SHAREHOLDERS
LIBERTY TAX-MANAGED GROWTH FUND
LIBERTY TAX-MANAGED GROWTH FUND II
Each a series of Liberty Funds Trust I
PROXY STATEMENT
General Information
November 20, 2000
This document gives you information you need in order to vote on the matters
coming before the Meetings. If you have any questions regarding the information
contained in the proxy statement, please call SCC at 1-800-732-3683. This proxy
statement was first mailed to shareholders on or about November 20, 2000.
The Trustees of Liberty Funds Trust I (Trust), on behalf of Liberty Tax-Managed
Growth Fund and Liberty Tax-Managed Growth Fund II (each, a Fund, and
collectively, the Funds) have called Special Meetings of Shareholders of the
Funds for 10:00 a.m., Eastern Time, on Wednesday, December 27, 2000, for the
purposes described in the accompanying Notice. The purpose of this proxy
statement is to provide you with additional information regarding the proposals
to be voted on at the Meetings and to request your proxy to vote in favor of the
proposals.
I. INFORMATION REGARDING VOTING AND SHAREHOLDER MEETINGS.
A. Proxy Solicitation Methods. Shareholders of the Funds entitled to vote
at the Meetings will receive proxy materials in the mail. The Funds have
engaged the services of SCC to assist in the solicitation of proxies. As the
date approaches, if your vote is not received, you may receive a call from SCC
reminding you to exercise your right to vote.
B. Voting Process. You can vote in any one of the following five ways:
a. By mail, by filling out and returning the enclosed proxy card;
b. By phone, by calling 1-800-732-3683 and following the instructions;
c. By internet, by visiting our Web site at www.libertyfunds.com and
clicking on "Proxy Voting;"
d. By fax (not available for all shareholders; refer to enclosed
proxy card or insert); or
e. In person at the Meeting.
Shareholders who owned shares on the record date, September 29, 2000, are
entitled to vote at the meeting. Shareholders are entitled to cast one vote for
each share owned on the record date. We encourage you to vote by internet, using
the 12-digit or 14 to 20-digit "control" number that appears on the enclosed
proxy card. Voting by internet will reduce expenses by saving postage costs. If
you choose to vote by mail or by fax, and you are an individual account owner,
please sign exactly as your name appears on the proxy card. Either owner of a
joint account may sign the proxy card, but the signer's name must exactly match
the name that appears on the card. Whichever method you choose, please carefully
read the proxy statement which outlines in more detail the proposals you are
asked to vote on.
C. Proxy Solicitation Costs. The Funds will bear the cost of the solicitation
(with a portion of certain Funds' expenses borne by Liberty Financial Companies,
Inc. (LFC), the indirect parent of the Stein Roe & Farnham Incorporated (SR&F),
the advisor to the Funds) which includes printing of proxy materials, mailing
and the tabulation of votes. By voting as soon as you receive your proxy
materials, you will help reduce the cost of additional mailings. The cost of
this assistance for each Fund is not expected to exceed the following:
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Fund Solicitation Cost
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Liberty Tax-Managed Growth Fund $60,233
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Liberty Tax-Managed Growth Fund II $ 3,503
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D. Record Date and Quorum. Each shareholder of record of each Fund at the close
of business on September 29, 2000 (Record Date) will have one vote for each
share held. Holders of 30% of the shares of each Fund outstanding on the Record
Date constitute a quorum and must be present in person or represented by proxy
for business to be transacted at the Meetings on Proposal 2. With respect to
Proposal 1, shareholders of each Fund vote together with the shareholders of the
other series of the Trust for the election of Trustees; 30% of the outstanding
shares of the Trust constitutes a quorum for voting on the election of Trustees.
Regardless of how you vote ("For", "Against" or "Abstain"), your shares will be
counted as present and entitled to vote for purposes of determining the presence
of a quorum. If a shareholder withholds authority or abstains, or the proxy
reflects a "broker non-vote" (i.e., shares held by brokers or nominees as to
which (i) instructions have not been received from the beneficial owners or
persons entitled to vote and (ii) the broker or nominee does not have
discretionary voting power on a particular matter), it will have the effect of
votes (a) present for purposes of determining a quorum for each proposal and (b)
against Proposal 2. With respect to the election of Trustees (Proposal 1),
withheld authority, abstentions and broker non-votes have no effect on the
outcome of the voting.
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E. Revoking Your Proxy. You may revoke your proxy at any time up until the
voting results are announced at the Meetings. You may revoke your proxy by
writing to the Secretary of the Funds, Attn: William J. Ballou, One Financial
Center, 11th Floor, Boston, Massachusetts 02111-2621. You may also revoke your
proxy by voting again by using one of the following four ways: (a) by accessing
our Web site; (b) by using your enclosed proxy card; (c) by fax (not available
for all shareholders; refer to the enclosed proxy insert) or (d) voting in
person at the Meetings. You may also revoke your vote telephonically by
calling SCC at 1-800-732-3683.
F. Shareholder Proposals. Proposals of shareholders which are intended to
be considered for inclusion in the Funds' proxy statement must be received
within a reasonable amount of time prior to any meetings. The Funds do not
currently intend to hold shareholder meetings in 2001.
G. Annual/Semiannual Reports. Further information concerning each Fund is
contained in its most recent Annual and/or Semiannual Report to Shareholders,
which is obtainable free of charge by writing Colonial Management Associates,
Inc. at One Financial Center, Boston, Massachusetts 02111 or by calling
1-800-426-3750.
H. Other Matters. As of the date of this proxy statement, only the
business mentioned in Proposals 1 and 2 of the Notice of the Special Meetings
of Shareholders is contemplated to be presented. If any procedural or other
matters come before the Meetings, your proxy shall be voted in accordance with
the best judgement of the proxy holder(s).
I. Adjournment. If sufficient votes in favor of any of the proposals set forth
in the Notice of Special Meetings of Shareholders are not received by the time
scheduled for the meeting, the persons named as proxies may propose adjournments
of the meeting for a period or periods of not more than 120 days in the
aggregate to permit further solicitation of proxies with respect to those
proposals. Any adjournment will require the affirmative vote of a majority of
the votes cast on the question in person or by proxy at the session of the
meeting to be adjourned. The persons named as proxies will vote in favor of
adjournment those proxies that are entitled to vote in favor of such proposals.
They will vote against adjournment those proxies required to be voted against
such proposals. Any proposals for which sufficient favorable votes have been
received by the time of the meeting may be acted upon and considered final
regardless of whether the meeting is adjourned to permit additional solicitation
with respect to any other proposal.
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PROPOSAL 1. ELECT A BOARD OF TRUSTEES.
The purpose of this proposal is to elect four new members as well as seven of
the currently serving members of the Board of Trustees of the Trust. All of the
nominees listed below, except for the proposed four new members (Ms. Kelly and
Messrs. Hacker, Nelson and Theobald), are currently members of the Board of
Trustees of the Trust, as well as nine Liberty closed-end funds and, in the case
of Messrs. Lowry, Mayer and Neuhauser, one other Liberty open-end trust
(collectively, the "Liberty Fund Complex"), and have served in that capacity
continuously since originally elected or appointed. All of the currently serving
members, other than Mr. Palombo, have been previously elected to those Boards by
the shareholders of the Liberty Fund Complex. The proposed four new members
currently serve on the Boards of Trustees of two Stein Roe closed-end funds and
seven Stein Roe open-end trusts (collectively, the "Stein Roe Funds"), and were
recommended for election as Trustees of the Trust by the Board of Trustees of
the Trust at meetings held on October 25-26, 2000. Each of the nominees elected
will serve as a Trustee of the Trust until the next meetings of shareholders of
the Funds called for the purpose of electing a Board of Trustees, and until a
successor is elected and qualified or until death, retirement, resignation or
removal.
Currently, two different boards of trustees are responsible for overseeing
substantially all of the Liberty Fund Complex and Stein Roe Funds. The Trustees
of the Liberty Fund Complex and the Stein Roe Funds and LFC, the indirect parent
of the investment advisors to the Liberty Fund Complex and Stein Roe Funds, have
agreed that shareholder interests can more effectively be represented by a
single board with responsibility for overseeing substantially all of the Liberty
Fund Complex and Stein Roe Funds. Creation of a single, consolidated board
should also provide certain administrative efficiencies and potential future
cost savings for the Liberty Fund Complex, the Stein Roe Funds and LFC. The
nominees listed below will be the members of the single, consolidated Board of
Trustees. The persons named in the enclosed proxy card intend to vote at the
Meetings in favor of the election of the nominees named below as Trustees (if so
instructed). If any nominee listed below becomes unavailable for election, the
enclosed proxy card may be voted for a substitute nominee in the discretion of
the proxy holder(s).
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Information about the Nominees
Set forth below is information concerning each of the nominees.
Nominee Name & Age Principal Occupation (1) and Directorships Trustee Since
Douglas A. Hacker Executive Vice President and Chief New nominee
(43) Financial Officer of UAL, Inc. (airline)
since July, 1999; Senior Vice President
and Chief Financial Officer of UAL, Inc.
prior thereto.
Janet Langford Kelly Executive Vice President-Corporate New nominee
(41) Development, General Counsel and
Secretary, Kellogg Company,
since September, 1999; Senior Vice
President, Secretary and General
Counsel of Sara Lee Corporation
(branded, packaged, consumer-products
manufacturer).
Richard W. Lowry Private Investor since 1987 (formerly 1995
(64) Chairman and Chief Executive Officer of
U.S. Plywood Corporation).
Salvatore Macera Private Investor since 1981 (formerly 1998
(69) Executive Vice President and Director of
Itek Corporation (electronics)).
William E. Mayer(2) Partner, Park Avenue Equity Partners 1994
(60) (venture capital) since November, 1996;
Dean, College of Business and Management,
University of Maryland, prior thereto;
Director, Johns Manville, Lee
Enterprises and WR Hambrecht + Co.
Charles R. Nelson Van Voorhis Professor, Department of New nominee
(57) Economics, University of Washington and
consultant on economic and statistical
matters.
John J. Neuhauser Academic Vice President and Dean of 1985
(57) Faculties, Boston College, since August,
1999; Dean, Boston College School of
Management prior thereto.
Joseph R. Palombo(3) Vice President of the Liberty Mutual 2000
(47) Funds from April, 1999 to October, 2000;
Executive Vice President and Director
of Colonial and Stein Roe & Farnham
Incorporated; Executive Vice President
and Chief Administrative Officer of Liberty
Funds Group LLC since April, 1999;
Chief Operating Officer, Putnam Mutual
Funds prior thereto.
<PAGE>
Nominee Name & Age Principal Occupation (1) and Directorships Trustee Since
Thomas E. Stitzel Business Consultant since 1999; Chartered 1998
(64) Financial Analyst; Professor of Finance
and Dean, College of Business, Boise
State University prior thereto.
Thomas C. Theobald Managing Director, William Blair Capital New nominee
(62) Partners (private equity investing) since
1994; (formerly Chief Executive Officer
and Chairman of the Board of Directors,
Continental Bank Corporation).
Anne-Lee Verville Consultant since 1997; General Manager, 1998
(54) Global Education Industry prior thereto;
formerly President, Applications Solutions
Division, IBM Corporation (global
education and global applications).
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<PAGE>
(1) Except as otherwise noted, each individual has held the office indicated
or other offices in the same company for the last five years.
(2) Mr. Mayer is not affiliated with LFC, but is an "interested person," as
defined in the Investment Company Act of 1940, as amended (1940 Act),
because of his affiliation with WR Hambrecht + Co. (a registered
broker-dealer).
(3) Mr. Palombo is an "interested person," as defined in the 1940 Act,
because of his affiliation with Liberty Financial.
Trustees' Compensation; Meetings and Committees
A. Trustees' Compensation.
The members of the Board of Trustees of the Trust will serve as Trustees of the
Liberty Fund Complex and Stein Roe Funds, for which service each Trustee, except
for Mr. Palombo, will receive an annual retainer of $45,000, and attendance fees
of $8,000 for each regular joint Board meeting and $1,000 for each special joint
Board meeting. The Board of Trustees is expected to hold six regular joint Board
meetings each year. Committee chairs will receive an additional annual retainer
of $5,000. Other Committee members will receive an additional annual retainer of
$1,000, and receive $1,000 for each special meeting attended on a day other than
a regular joint Board meeting day. Two-thirds of the Trustees' fees are
allocated among the Liberty Fund Complex and Stein Roe Funds based on their
relative net assets, and one-third of the fees is divided equally among the
Liberty Fund Complex and Stein Roe Funds.
The Funds do not currently provide pension or retirement plan benefits to the
Trustees. However, certain Trustees currently serving on the Board of Trustees
of the Funds who are not continuing on the combined Board of Trustees of the
Liberty Fund Complex and Stein Roe Funds will receive payments at an annual rate
equal to their 1999 Trustee compensation for the lesser of two years or until
the date they would otherwise have retired at age 72. These payments will be
made quarterly, beginning in 2001. LFC and the Liberty Fund Complex will each
bear one-half of the cost of the payments; the Liberty Fund Complex portion of
the payments will be allocated among the Liberty Fund Complex based on each
fund's share of the Trustee fees for 2000.
Further information concerning the Trustees' compensation is disclosed
under "III. Other Information Regarding the Funds" on page ___.
B. Meetings and Certain Committees.
Composition. The current Board of Trustees of the Trust consists of two
interested and nine non-interested Trustees. Mr. Mayer is not affiliated with
LFC or any of its investment advisor affiliates, but is considered interested
as a result of his affiliation with a broker-dealer.
Audit Committee. The Audit Committee of the Trust, consisting of Ms. Verville
(Chairperson) and Tom Bleasdale, James E. Grinnell, James L. Moody, Jr., and
Messrs. Lowry and Macera, all of whom are non-interested Trustees, recommends
to the Board of Trustees the independent accountants to serve as auditors,
reviews with the independent accountants the results of the auditing engagement
and internal accounting procedures and considers the independence of the
independent accountants the range of their audit services and their fees.
Compensation Committee. The Compensation Committee of the Trust, consisting of
Messrs. Neuhauser (Chairman), Grinnell and Stitzel and Ms. Collins, all of whom
are non-interested Trustees, reviews compensation of the Board of Trustees.
Governance Committee. The Governance Committee of the Trust, consisting of
Messrs. Bleasdale (Chairman), Lowry, Mayer and Moody and Ms. Verville, all of
whom are non-interested Trustees, except for Mr. Mayer (Mr. Mayer is interested
as a result of his affiliation with a broker-dealer, but is not affiliated with
LFC, recommends to the Board of Trustees, among other things, nominees for
trustee and for appointments to various committees. The Committee will consider
candidates for trustee recommended by shareholders. Written recommendations
with supporting information should be directed to the Committee in care of the
applicable Fund.
The Boards of Trustees and the Committees held the following number of meetings
during the following fiscal year ended October 31, 2000:
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Board of Trustees 6
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Audit Committee 4
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Compensation Committee 2
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Governance Committee 5
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During the most recently completed fiscal year, each of the current Trustees
attended more than 75% of the meetings of the Board of Trustees of the Trust and
the committees of which such Trustee is a member.
THE BOARD OF TRUSTEES RECOMMENDS THAT THE SHAREHOLDERS OF EACH FUND VOTE FOR
EACH NOMINEE IN PROPOSAL 1.
REQUIRED VOTE FOR PROPOSAL 1
Shareholders of each Fund vote together with the shareholders of the other
series of the Trust for the election of Trustees. A plurality of the votes cast
at the Meetings, if a quorum is represented, is required for the election of
each Trustee to the Board of Trustees of the Trust. Since the number of Trustees
has been fixed at eleven, this means that the eleven persons receiving the
highest number of votes will be elected.
PROPOSAL 2. APPROVE A SUB-ADVISORY AGREEMENT WITH STEIN ROE INVESTMENT
COUNSEL LLC.
A. Description of Proposal
Stein Roe & Farnham Incorporated (SRF) currently serves as the investment
advisor to each Fund. SRF's operations include separate strategic business
units, one of which is called Private Capital Management (PCM). A core portfolio
team of investment professionals within PCM runs the day-to-day business of each
Fund, including placing all orders for the purchase and sale of each Fund's
portfolio securities. In a transaction scheduled to close by December 31, 2000,
PCM will commence operations as an independent and unaffiliated
federally-registered investment advisor called Stein Roe Investment Counsel LLC
(SRIC) owned substantially by certain persons previously involved in the
business of PCM. The Board of Trustees which oversees the operations of the
Funds has approved the retention by SRF of SRIC as a sub-advisor to manage the
investment assets of each Fund. Under this arrangement, which is proposed to
begin on or about January 1, 2001, the same core portfolio team of investment
professionals that has been running the day-to-day business of each Fund under
SRF will continue to do so as part of SRIC.
At the Meetings, shareholders of Liberty Tax-Managed Growth Fund and Liberty
Tax-Managed Growth Fund II will be asked to approve Sub-Advisory Agreements,
substantially in the forms set forth in Appendix A and Appendix B, respectively,
between SRF and SRIC. Approval of the Sub-Advisory Agreements will not affect
the amount of management fees paid by the Funds to SRF under the existing
Management Agreements of the Funds. SRF, not the Funds, will pay sub-advisory
fees to SRIC under the Sub-Advisory Agreements.
Prior to the Meetings but before the closing of the transaction, it is expected
that SRIC will become a separate corporate entity but still under the control of
LFC. At a meeting of the Board of Trustees scheduled to take place on December
14, 2000, it is expected that the Board of Trustees will approve sub-advisory
agreements with SRIC for each of the Funds on substantially the same terms as
the forms of the Sub-Advisory Agreements in Appendix A and Appendix B. Also at
that meeting, the Board of Trustees is expected to approve interim sub-advisory
agreements with SRIC for each Fund pursuant to Rule 15a-4 under the Investment
Company Act of 1940 (1940 Act), which will become effective after the closing of
the transaction. The interim sub-advisory agreement will be in substantially the
forms set forth in Appendix A and Appendix B but also will include certain
provisions required by Rule 15a-4.
B. Current Management Agreement
Currently, SRF manages the investment of the assets of Liberty Tax-Managed
Growth Fund and Liberty Tax-Managed Growth Fund II pursuant to Management
Agreements dated December 23, 1996 and March 1, 2000, respectively, which were
most recently approved by the shareholders of each Fund on ________ and March 1,
2000, respectively. Under its Management Agreements with the Funds, SRF provides
the Funds with discretionary investment services. Specifically, SRF is
responsible for supervising and directing the investments of the Funds in
accordance with their respective investment objectives, programs and
restrictions. SRF also is responsible for effecting all security transactions on
behalf of the Funds, including the allocation of principal business and
portfolio brokerage and the negotiation of commissions.
SRF receives monthly fees at the annual rate of 0.60% and 0.80%, respectively,
of the average daily net assets of Liberty Tax-Managed Growth Fund and the
Liberty Tax-Managed Growth Fund II. For the fiscal year ended October 31, 2000,
the aggregate fees paid by Liberty Tax-Managed Growth Fund to SRF under the
Management Agreement for the Fund were approximately [$ ]. Liberty Tax-Managed
Growth Fund II commenced operations on March 1, 2000 and has yet to complete a
full fiscal year. For the period from March 1, 2000 through October 31, 2000,
the aggregate fees paid by Liberty Tax-Managed Growth Fund II to SRF under the
Management Agreement for the Fund were approximately [$ ].
C. Description of Sub-Advisory Agreements
General
Under the Sub-Advisory Agreements, SRIC, under the supervision of the Board of
Trustees and SRF, will: (a) manage the investment of the assets of the Funds in
accordance with the investment objectives, policies and limitations stated in
the Funds' then current Prospectuses and Statements of Additional Information;
(b) place purchase and sale orders for portfolio transactions for the Funds; (c)
evaluate such economic, statistical and financial information and undertake such
investment research as it shall believe advisable; (d) employ professional
portfolio managers to provide research services to the Funds; and (e) report
results to the Board of Trustees of the Funds.
Each of the Sub-Advisory Agreements provides that, in the absence of willful
misfeasance, bad faith or gross negligence in the performance of its duties and
obligations under the Sub-Advisory Agreement, SRIC shall not be liable for any
error of judgment or mistake of law or for any loss arising out of any
investment or for any act or omission in the execution and management of the
Fund.
Each of the Sub-Advisory Agreements will remain in effect pursuant to its terms
until January 1, 2002, and from year to year thereafter, but only so long as its
continuance is specifically approved at least annually by the Board of Trustees
or by vote of a majority of the outstanding voting securities of the Fund. Each
of the Sub-Advisory Agreements is terminable at any time without penalty on
sixty days' written notice to SRIC by vote of the Board of Trustees, by vote of
a majority of the outstanding voting securities of the Fund, or by SRF, and by
SRIC on ninety days' written notice to SRF and the Funds. Each of the
Sub-Advisory Agreements also will terminate automatically in the event of its
assignment as defined under the 1940 Act or in the event that the Management
Agreement for the applicable Fund shall have terminated for any reason. Each of
the Sub-Advisory Agreements may be amended only in accordance with the 1940 Act.
The above description of the proposed Sub-Advisory Agreements for Liberty
Tax-Managed Growth Fund and Liberty Tax-Managed Growth Fund II is qualified in
its entirety by reference to the forms of Sub-Advisory Agreements that are set
forth in Appendix A and Appendix B, respectively, to this proxy statement.
<PAGE>
Sub-Advisory Fees
For each Fund, SRF will pay SRIC a monthly fee composed of a basic fee and a
performance adjustment. The basic fee is at the annual rate of 0.20% of the
average daily net assets of the Fund. The performance adjustment is determined
by multiplying the basic fee by a performance adjustment rate that will be
readjusted quarterly depending on the Fund's performance over a specified period
of time as measured by Morningstar, Inc.'s Large Blend category for domestic
equity funds. The resulting calculation is the total monthly fee paid by SRF to
SRIC. The rates applicable to each Morningstar ranking are as follows:
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Morningstar Ranking Performance Adjustment Rate
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Quartile 1 1.25
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Quartile 2 1.00
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Below Median (i.e., Quartile 3 or 4) 0.75
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For Liberty Tax-Managed Growth Fund, the performance adjustment rate for each
calendar quarter beginning January 1, 2001 shall be the rate applicable to the
Fund's Morningstar ranking for the three-year period ending on the last day of
the most recent calendar quarter. Until the Liberty Tax-Managed Growth Fund II
has been in operation for three years, the performance adjustment rate for each
calendar quarter beginning January 1, 2001 shall be the rate applicable to the
Fund's Morningstar ranking for the period from March 1, 2000 (commencement of
operations) to the last day of the most recent calendar quarter. Once the
Liberty Tax-Managed Growth Fund II has been in operation for three years, the
performance adjustment for each calendar quarter shall be the rate applicable to
the Fund's Morningstar ranking for the three-year period ending on the last day
of the most recent calendar quarter.
Under the Sub-Advisory Agreements, the fee payable to SRIC may be adjusted to an
annual rate as high as 0.25% of the average daily net assets of a Fund, or to an
annual rate as low as 0.15% of the average daily net assets of a Fund, depending
on the Fund's performance. Notwithstanding the above, the Sub-Advisory
Agreements provide that SRIC shall not receive a fee less than $350,000 per
annum in the aggregate for managing the Funds. This performance fee may create
an incentive for SRIC to make investments that are riskier than would be the
case in the absence of this performance adjustment. However, SRIC's fee will be
reduced if the Funds perform poorly, but not below $350,000 per annum in the
aggregate. In addition, SRIC's fee will partially be based on the performance of
the Funds during a period when it did not act as sub-advisor to the Funds.
<PAGE>
Shareholders should note that the contractual level of management fees for Fund
shareholders will not increase as a result of this proposal. SRF will be
responsible for paying the sub-advisory fees to SRIC under the Sub-Advisory
Agreements.
D. Information Regarding SRIC, SRF and their Affiliates
SRIC
The following information regarding SRIC has been provided by SRIC.
SRIC, located at One South Wacker Drive, Suite 3500, Chicago, Illinois 60606, is
a Delaware limited liability company. It is registered as an investment advisor
and will be the successor to the business presently conducted by the PCM
division of SRF. Liberty Financial Services, Inc., a Massachusetts corporation
(Liberty Financial Services) and an affiliate of SRF, is currently the
beneficial owner of all of the membership interest in SRIC.
Liberty Financial Services has entered into a Membership Interest Purchase and
Sale Agreement, dated October 31, 2000 (Purchase and Sale Agreement), among
itself, Liberty Financial Companies, Inc. (LFC), a Massachusetts corporation and
an affiliate of SRF, SRIC Acquisition LLC (SRIC Acquisition), a Delaware limited
liability company, SRIC Holdings LLC, a Delaware limited liability company owned
by certain persons involved in the business presently being conducted by PCM,
and Putnam Lovell Equity Partners LP, a Delaware limited partnership (PLEP).
SRIC Acquisition is currently owned by SRIC Holdings LLC. The General Partner of
PLEP is Putnam Lovell Equity Advisors LLC, and the Managing Member is Putnam
Lovell Capital Partners, Inc.
Under the Purchase and Sale Agreement, SRIC Acquisition will purchase SRIC and
will then merge into SRIC. SRIC will be the survivor of the merger. For the sale
of SRIC under the Purchase and Sale Agreement, Liberty Financial Services will
receive a cash payment in the amount of $10 million and a promissory note
payable to Liberty Financial Services in the principal amount of $30,000,000 due
December 31, 2005 with the principal and interest paid in installments. As a
result, SRIC will be required to make ongoing payments to Liberty Financial
Services under the promissory note issued in connection with the transaction.
After the consummation of this transaction, SRIC will be owned 25% by PLEP and
75% by SRIC Holdings LLC. The effect of the transaction is that SRIC will be a
separate company that will be operated and substantially owned by former
executives of PCM. The address of SRIC Holdings LLC is One South Wacker Drive,
Suite 3500, Chicago, Illinois 60606, and the address of PLEP is 501 Deep Valley
Drive, Suite 300, Rolling Hills Estates, California 90274.
Each Fund will be managed by a team of investment professionals assigned to it
by SRIC as sub-advisor of the Fund. No single individual has primary management
responsibility over a Fund's portfolio securities. It is expected that
substantially the same team of investment professionals currently managing the
Funds under SRF will be assigned responsibility of managing the Funds under
SRIC.
SRIC will be a newly organized entity with no operating history. Although
substantially the same core team of investment professionals is expected to
manage the Funds under SRIC, the past performance of the Funds under this team
can provide no assurance of future results.
The following table sets forth certain information concerning the principal
executive officers and managers of SRIC. The address of Messrs. Kozanda, Rankin
and Stacke, and Ms. MacAyeal is One South Wacker Drive, Suite 3500, Chicago,
Illinois 60606. The address of Mr. Lovell is 501 Deep Valley Drive, Suite 300,
Rolling Hills Estates, California 90274. The address of Mr. Minnick is 7 Great
Valley Parkway, Suite 290, Malvern, Pennsylvania 19355. In addition to those
managers listed below, Liberty Financial Services has retained the right under
the Purchase and Sale Agreement to appoint a non-voting member of the Board of
Managers of SRIC.
-------------------------------- ----------------------------------------------
Name Principal Occupation
-------------------------------- ----------------------------------------------
-------------------------------- ----------------------------------------------
Kenneth J. Kozanda Chief Operating Officer, Treasurer and Member
of the Board of Managers of SRIC
-------------------------------- ----------------------------------------------
-------------------------------- ----------------------------------------------
Jeffrey D. Lovell Member of the Board of Managers of SRIC,
Managing Director of PLEP
-------------------------------- ----------------------------------------------
-------------------------------- ----------------------------------------------
Linda S. MacAyeal Vice President, General Counsel and Secretary
of SRIC
-------------------------------- ----------------------------------------------
-------------------------------- ----------------------------------------------
James E. Minnick Member of the Board of Managers of SRIC,
Managing Director of PLEP
-------------------------------- ----------------------------------------------
-------------------------------- ----------------------------------------------
James H. Stacke Executive Vice President and Member of the
Board of Managers of SRIC
-------------------------------- ----------------------------------------------
-------------------------------- ----------------------------------------------
William E. Rankin President, Chief Executive Officer and Member
of the Board of Managers of SRIC
-------------------------------- ----------------------------------------------
SRF and Other Affiliates
SRF, located at One South Wacker Drive, Chicago, Illinois 60606, is a
wholly-owned subsidiary of Liberty Funds Group, LLC (LFG), which in turn is an
indirect wholly-owned subsidiary of Liberty Financial Companies, Inc. (LFC). LFC
is a direct majority-owned subsidiary of LFC Management Corporation, which in
turn is a direct wholly-owned subsidiary of Liberty Corporate Holdings, Inc.,
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). As of September 30, 2000, LFC Management
Corporation owned 71.12% of LFC. LFC is a diversified and integrated asset
management organization which provides insurance and investment products to
individuals and institutions. The principal executive offices of Liberty
Financial Services, LFC, LFC Management Corporation, Liberty Corporate Holdings,
Inc. and LFC Holdings, Inc. are located at 600 Atlantic Avenue, 24th Floor,
Boston, Massachusetts 02210. Liberty Mutual is an underwriter of workers'
compensation insurance and a property and casualty insurer in the United States,
organized under the laws of Massachusetts in 1912. The principal business
activities of Liberty Mutual's subsidiaries other than LFC are property-casualty
insurance, insurance services and life insurance (including group life and
health insurance products) marketed through its own sales force. The principal
executive offices of Liberty Mutual and Liberty Mutual Equity Corporation are
located at 175 Berkeley Street, Boston, Massachusetts 02117.
SRF and its predecessor have been providing investment advisory services since
1932. SRF acts as investment advisor to wealthy individuals, trustees, pension
and profit sharing plans, charitable organizations and other institutional
investors. The sole director of SRF is C. Allen Merritt, Jr. Mr. Merritt is
Chief Operating Officer of Liberty Financial. Stephen E. Gibson is President of
SRF's Mutual Funds division and William E. Rankin is President of SRF's Private
Capital Management division. In addition, Mr. Gibson serves as an officer of
the Funds. The business address of Mr. Merritt is 600 Atlantic Avenue, Federal
Reserve Plaza, Boston, Massachusetts 02210; that of Mr. Gibson is One Financial
Center, Boston, Massachusetts 02111; and that of Mr. Rankin is One South Wacker
Drive, Chicago, Illinois 60606.
Colonial Management Associates, Inc. (Colonial), an affiliate of SRF located at
One Financial Center, Boston, Massachusetts 02111, provides administrative
services to Liberty Tax-Managed Growth Fund and Liberty Tax-Managed Growth Fund
II under separate Administration Agreements for an annual fee of 0.25% and
0.20%, respectively, of each Fund's average daily net assets. For the fiscal
year ended October 31, 2000, the aggregate fees paid by Liberty Tax-Managed
Growth Fund to Colonial under the Administration Agreement for the Fund were
approximately [$ ]. For the period from March 1, 2000 through October 31, 2000,
the aggregate fees paid by Liberty Tax-Managed Growth Fund II to Colonial under
the Administration Agreement for the Fund were approximately [$ ]. These
Administration Agreements with Colonial will remain in effect.
Colonial provides, and after shareholder approval of the Sub-Advisory Agreements
will continue to provide, pricing and bookkeeping services to each of the Funds
pursuant to a Pricing and Bookkeeping Agreement. For each Fund, Colonial is paid
a monthly fee of $2,250 plus the following percentages of the Fund's average
daily net assets over $50 million:
0.035% annually on the next $950 million;
0.025% annually on the next $1 billion;
0.015% annually on the next $1 billion;
and 0.001% annually on the excess over $3 billion
For the fiscal year ended October 31, 2000, the pricing and bookkeeping fees
paid by Liberty Tax-Managed Growth Fund to Colonial under the Pricing and
Bookkeeping Agreement were approximately [$ ]. For the period from March 1, 2000
through October 31, 2000, the pricing and bookkeeping fees paid by Liberty
Tax-Managed Growth Fund II to Colonial under the Pricing and Bookkeeping
Agreement were approximately [$ ].
Liberty Funds Services, Inc. (LFSI), a subsidiary of LFG located at One
Financial Center, Boston, Massachusetts 02111, is the Funds' investor servicing
agent (transfer, plan and dividend disbursing agent, and shareholder services
provider), for which it receives monthly fees paid by the Funds. The fee paid to
LFSI is based on the average daily net assets of each Fund, charges based on the
number of shareholder accounts and transactions, and reimbursement for certain
out-of-pocket expenses. For the fiscal year ended October 31, 2000, the
aggregate fees paid by to LFSI on behalf of Liberty Tax-Managed Growth Fund were
approximately [$ ]. For the period from March 1, 2000 through October 31, 2000,
the aggregate fees paid by to LFSI on behalf of Liberty Tax-Managed Growth Fund
II were approximately [$ ].
<PAGE>
Liberty Funds Distributor, Inc. (LFDI), a subsidiary of Colonial located at One
Financial Center, Boston, MA 02111, acts as distributor for each of the Funds
under a distribution agreement. The Trustees have approved a 12b-1 plan (Plan)
for each Fund pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, each
Fund pays LFDI a service fee at an annual rate of 0.25% of the Fund's net assets
attributed to Classes A, B and C. Each Fund also pays a monthly distribution fee
at an annual rate of 0.75% of the average daily net assets attributed to Class B
and Class C Shares. Liberty Tax-Managed Growth Fund also pays a monthly (i)
service fee at an annual rate of 0.25% of the Fund's net assets attributed to
Classes E and F, and (ii) distribution fee at an annual rate of 0.10% of the
Fund's net assets attributed to Class E and 0.75% of the Fund's net assets
attributed to Class F. For the periods below, the aggregate fees paid by the
Funds to LFDI were as follows:
12b-1 fees paid to LFDI
-------------------------- ------------------------ --------------------------
Fees (Approximate) Liberty Tax-Managed Liberty Tax-Managed Growth
Growth Fund Fund II
(Fiscal Year Ended (For the period from March
October 31, 2000) 1, 2000 to October 31, 2000)
-------------------------- ----------------------- --------------------------
-------------------------- ----------------------- --------------------------
Service Fees (a)
-------------------------- ----------------------- --------------------------
-------------------------- ----------------------- --------------------------
Distribution Fees (b) (c)
-------------------------- ----------------------- --------------------------
(a) Classes A, B, C, E, F, G and H. Effective February 28, 2000, Class E
shares merged into Class G shares, Class G shares were redesignated
Class E shares, Class F shares merged into Class H shares and Class H
shares were redesignated Class F shares.
<TABLE>
<CAPTION>
<S> <C>
(b) [$ ] were attributable to Class B Shares; [$ ] were attributable to Class C Shares;
[$ ] were attributable to Class B Shares; [$ ] were attributable to Class C Shares;
[$ ] were attributable to Class E Shares; [$ ] were attributable to Class F Shares;
[$ ] were attributable to Class G Shares; and [$ ] were attributable to Class H Shares.
(c) [ ] were attributable to Class B Shares and [$ ] were attributable to Class C Shares.
</TABLE>
Colonial and SRF may use the services of AlphaTrade Inc. (AlphaTrade), a
registered broker-dealer subsidiary of Colonial, when buying or selling certain
equity securities for a Fund's portfolio pursuant to procedures adopted by the
Trustees and Rule 17e-1 under the 1940 Act. For the fiscal year ended October
31, 2000, SRF did not pay any commissions to AlphaTrade on behalf of Liberty
Tax-Managed Growth Fund. For the period from March 1, 2000 through October 31,
2000, SRF did not pay any commissions to AlphaTrade on behalf of Liberty
Tax-Managed Growth Fund II.
These services provided to the Funds will continue to be provided if the
Sub-Advisory Agreements are approved by shareholders of the Funds.
E. The Evaluation by the Board of Trustees
At meetings held on October 25-26, 2000, the Trustees of the Trust considered
information with respect to whether the proposed Sub-Advisory Agreements are in
the best interests of the Funds and their shareholders. The Board of Trustees
considered, among other factors, representations by SRIC regarding the nature
and quality of services to be provided to the Funds and information regarding
fees. The Board of Trustees considered that the Sub-Advisory Agreements with
SRIC will not affect the fees paid by the Funds under the Management Agreements
with SRF, and that the same core portfolio team of investment professionals that
has been running the day-to-day business of each Fund will continue to do so
under the Sub-Advisory Agreements with SRIC. The Board of Trustees also
considered the conflicts of interest inherent in SRF's recommendation that SRIC
be hired as the sub-advisor of the Funds because SRF's affiliates will receive
monetary consideration in connection with the reorganization of PCM as SRIC.
The Board of Trustees also considered that under circumstances in which 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 Funds, SRIC may select 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. It was considered that
research products or services furnished by brokers and dealers may be used in
servicing any or all of the clients of SRIC and not all such research products
or services are used in connection with the management of the Funds.
Based upon their review, the Board of Trustees of the Trust concluded that each
of the Sub-Advisory Agreements is reasonable, fair and in the best interests of
each of the Funds and its shareholders, and that the fees provided in each of
the Sub-Advisory Agreements are fair and reasonable in light of the usual and
customary charges made by others for services of the same nature and quality.
The Board of Trustees considered that the fees payable under each of the
Sub-Advisory Agreements would contain a performance component and concluded that
this arrangement would be in the best interest of each of the Funds and its
shareholders. Accordingly, after consideration of the above factors, and such
other factors and information as they deemed relevant, the Board of Trustees of
the Trust, including a majority of the Trustees who are not "interested
persons," as defined in the 1940 Act, of any party to the Sub-Advisory
Agreements, unanimously approved each of the Sub-Advisory Agreements and voted
to recommend their approval by shareholders of the Funds.
F. Interests of Certain Persons
No officer or Trustee of the Trust is an officer, employee or director of SRIC.
Since November 1, 1998, no Trustee or officer of the Trust engaged in
transactions of 1% or more of the outstanding securities of any class of SRIC,
any of its parent companies or subsidiaries of SRIC or SRIC's parent companies.
No Trustee of the Trust has had any direct or indirect material interest in any
material transaction since November 1, 1998, or in any material proposed
transaction, to which SRIC, its parent companies, or subsidiaries of SRIC or its
parent companies was or is to be a party. There is no arrangement or
understanding in connection with the Sub-Advisory Agreements with respect to the
composition of the Trust's Board of Trustees or SRIC's management or with
respect to the selection or appointment of any person to any office of such
company.
G. Vote Required
Approval of each Sub-Advisory Agreement will require the approval of "a majority
of the outstanding voting securities" of each Fund, present in person or
represented by proxy at a meeting of the shareholders of that Fund. A "majority
of the outstanding voting securities" requires approval by the holders of 67% or
more of the Fund's voting securities which are present at the Meeting if the
holders of more than 50% of such securities are present in person or by proxy,
or more than 50% of the Fund's voting securities, whichever is less.
In the event that the Sub-Advisory Agreements do not receive the requisite
approval, SRF and SRIC will enter into interim sub-advisory agreements for each
Fund pursuant to Rule 15a-4 under the 1940 Act, which will be in substantially
the forms set forth in Appendix A and Appendix B. Each of these interim
sub-advisory agreements will terminate if it is not approved by the holders of
the requisite number of shares in the applicable Fund within 150 days following
the closing of the transaction. Again, the contractual level of management fees
for Fund shareholders will not increase as a result of this proposal because SRF
will be responsible for paying the sub-advisory fees to SRIC under the
Sub-Advisory Agreements or any interim sub-advisory agreements.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF EACH FUND
VOTE FOR PROPOSAL 2.
<PAGE>
III. OTHER INFORMATION REGARDING THE FUNDS
A. Outstanding Shares
On September 29, 2000, the Funds had shares of beneficial interest outstanding
as follows:
----------------------------- --------------------------- ---------------------
Liberty Tax-Managed Liberty Tax-Managed
Growth Fund Growth Fund II
----------------------------- --------------------------- ---------------------
----------------------------- --------------------------- ---------------------
Class A 8,683,133.528 466,935.419
----------------------------- --------------------------- ---------------------
----------------------------- --------------------------- ---------------------
Class B 29,401,008.779 3,689,774.917
----------------------------- --------------------------- ---------------------
----------------------------- --------------------------- ---------------------
Class C 4,424,400.752 399,039.966
----------------------------- --------------------------- ---------------------
----------------------------- --------------------------- ---------------------
Class E 494,143.783 N/A
----------------------------- --------------------------- ---------------------
----------------------------- --------------------------- ---------------------
Class F 740,379.827 N/A
----------------------------- --------------------------- ---------------------
----------------------------- --------------------------- ---------------------
Class Z 101,713.496 450,302.294
----------------------------- --------------------------- ---------------------
On September 29, 2000, all series of the Trust, including the Funds,
collectively had 559,435,280.400 shares of beneficial interest outstanding.
<PAGE>
As of September 29, 2000, the following shareholders of record owned 5% or more
of the applicable outstanding Class(es) of shares of Liberty Tax-Managed Growth
Fund (LTMGF) and Liberty Tax-Managed Growth Fund II (LTMGII):
----------- --------- -------------------------- -------------- -----------
Number of Percentage of
Class Outstanding Outstanding
of Name and Address of Shares of Class Shares of Class
Fund Shares Shareholder Owned Owned
----------- --------- -------------------------- ---------------- -------------
----------- --------- -------------------------- ---------------- -------------
LTMGF B & C Merrill Lynch, Pierce, 2,210,197.589 7.52%
Fenner & Smith, Inc. (B) 8.65%
For the Sole Benefit of 382,707.118 (C)
its Customers
4800 Deer Lake Drive E.
2nd Floor
Jacksonville, FL 32246
----------- --------- --------------------------- ---------------- ------------
----------- --------- --------------------------- ---------------- ------------
LTMGF Z Investors Bank & Trust 10,965.698 10.78%
Company Custodian
Leon Jonas Jr. IRA
611 Foxcroft Road
Elkins Park, PA 19207
----------- --------- --------------------------- --------------- --------------
----------- --------- --------------------------- --------------- --------------
LTMGF Z Investors Bank and Trust 10,865.715 10.68%
Company Custodian
Patrick J. Banfield IRA
22 Meeting House Square
Middleton, MA 01949
----------- --------- --------------------------- --------------- --------------
----------- --------- --------------------------- --------------- --------------
LTMGF Z Investors Bank and Trust 10,865.718 10.68%
Company Custodian
Robert G. Banfield IRA
109 Island Beach Road
Wells, ME 04090
----------- --------- --------------------------- ------------- --------------
<PAGE>
-------------- -------- ------------------------ -------------- -------------
Number of Percentage of
Liberty Class Outstanding Outstanding
Mutual Fund of Name and Address of Shares of Shares of Class
Shares Shareholder Class Owned Owned
-------------- -------- ------------------------ -------------- ---------------
-------------- -------- ------------------------ -------------- ---------------
LTMGF Z Paul Rothman 9,319.659 9.16%
Industries LTD Pension
Plan
169 E. 69th Street
Apt. 12A
New York, NY 10021
-------------- -------- ------------------------ -------------- ----------------
-------------- -------- ------------------------ -------------- ----------------
LTMGF Z Investors Bank & Trust 5,790.438 5.69%
Company Custodian
Virginia Sorrells
Trustee
Edward Jones Family
Trust E Ben of Edward
Jones IRA
3159 Ferncreek Lane
Escondido, CA 92027
-------------- -------- ------------------------ -------------- ---------------
-------------- -------- ------------------------ -------------- ---------------
LTMGF Z Investors Bank & Trust 5,243.214 5.15%
Company Custodian
Barbara Witteborg
Trustee
Edward Jones Family
Trust C Ben of Edward
Jones IRA
7334 Northeast 85th
Ter.
Kansas City, MO 64157
-------------- -------- ------------------------ -------------- ----------------
-------------- -------- ------------------------ -------------- ----------------
LTMGF Z The Primary Day School 34,699.567 34.12%
Inc.
7300 River Road
Bethesda, MD 20817
-------------- -------- ------------------------ -------------- ----------------
-------------- -------- ------------------------ -------------- ----------------
LTMGFII A Helen F. Lewis Trustee 24,096.386 5.16%
Helen F. Lewis Trust
200 Glenwood Cir. F-1
Monterey, CA 93940
-------------- -------- ------------------------ -------------- ---------------
-------------- -------- ------------------------ -------------- ---------------
LTMGFII Z Johanna C. Plaut Trust 25,115.596 5.58%
FBO Edward Plaut Jr.
c/o Joann Santoro
Patterson Belknap Webb
& Tyler
1133 Ave. of the
Americas,
New York, NY 10036
-------------- -------- ------------------------ -------------- ----------------
-------------- -------- ------------------------ -------------- ----------------
LTMGFII Z Colonial Management 225,000.000 49.97%
Associates, Inc.
One Financial Center
Boston, MA 02111
-------------- -------- ------------------------ -------------- ----------------
As of the Record Date, the executive officers and the current Board of Trustees
as a group were known to beneficially own less than 1% of each of the
outstanding Class(es) of shares of each of the Funds.
<PAGE>
B. Executive Officers
The following table sets forth certain information about the executive officers
of each Fund:
<TABLE>
<CAPTION>
<S> <C> <C>
Executive Officer Office with the Funds; Principal Year of Election as
Name & Age Occupation (1) Executive Officer
---------- -------------- -----------------
Stephen E. Gibson President of the Liberty Funds Complex 1998
(46) 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
Colonial (formerly Executive Vice President from July, 1996
to December, 1996); Director, Chief Executive Officer and
President of Liberty Funds Group LLC (LFG) since December,
1998 (formerly Director, Chief Executive Officer and
President of The Colonial Group, Inc. (TCG) from December,
1996 to December, 1998); President and Vice Chairman of Stein
Roe & Farnham Incorporated (SR&F) since January, 2000
(formerly Assistant Chairman from August, 1998 to January,
2000) (formerly Managing Director of Marketing of Putnam
Investments, June, 1992 to July, 1996.)
Pamela A. McGrath Treasurer and Chief Financial Officer 1999
(46) of the Liberty Funds Complex and
Liberty All-Star Funds since April, 2000; Treasurer, Chief
Financial Officer and Vice President of LFG since December,
1999; Chief Financial Officer, Treasurer and Senior Vice
President of Colonial since December, 1999; Director of
Offshore Accounting for Putnam Investments from May, 1998 to
October, 1999; Managing Director of Scudder Kemper
Investments from October, 1984 to December, 1997.
Glenn M. Wolfset Controller and Chief Accounting 2000
(37) Officer of the Liberty Funds Complex
since October, 2000; Senior Vice President since March, 2000;
Senior Vice President from 1999 to 2000 and Vice President
from 1994 to 1999 of Scudder Kemper Investments.
<PAGE>
Executive Officer Office with the Funds; Principal Year of Election as
Name & Age Occupation (1) Executive Officer
Kevin M. Carome Executive Vice President of Liberty 2000
(44) Funds Complex and Liberty All-Star
Funds since October, 2000; Executive Vice President and
Assistant Secretary, Liberty Funds Group - Chicago; Senior
Vice President, Legal since January, 1999 of LFG; General
Counsel and Secretary of Stein Roe & Farnham, Inc. since
1998; Associate General Counsel and Vice President of Liberty
Financial Companies, Inc. through January, 1999.
William J. Ballou Secretary of the Liberty Funds Complex 2000
(35) and Liberty All-Star Funds since
October, 2000 (formerly Assistant Secretary from October,
1997 to October, 2000); Vice President, Assistant Secretary
and Counsel of Colonial since October, 1997; Vice President
and Counsel since April, 2000 and Assistant Secretary since
December, 1998 of LFG; (formerly Associate Counsel from May,
1995 to September, 1997; Associate, Ropes & Gray from
September, 1991 to May, 1995) .
</TABLE>
(1) Except as otherwise noted, each individual has held the office
indicated or other offices in the same company for the last five
years.
<PAGE>
C. Trustee Compensation
The current Board of Trustees received the following compensation from each Fund
as of each Fund's fiscal year end (1):
-------------------------- ----------------------- -----------------------
FUND LTMGF LTMGFII
-------------------------- ----------------------- -----------------------
-------------------------- ----------------------- -----------------------
Fiscal Year End 10/31/99 10/31/99(2)
-------------------------- ----------------------- -----------------------
-------------------------- ----------------------- -----------------------
Trustee:
-------------------------- ----------------------- -----------------------
-------------------------- ----------------------- -----------------------
Mr. Bleasdale $1,779(3) $511(4)
-------------------------- ----------------------- -----------------------
-------------------------- ----------------------- -----------------------
Ms. Collins 1,564 491
-------------------------- ----------------------- -----------------------
-------------------------- ----------------------- -----------------------
Mr. Grinnell 1,629 511
-------------------------- ----------------------- -----------------------
-------------------------- ----------------------- -----------------------
Mr. Lowry 1,581 491
-------------------------- ----------------------- -----------------------
-------------------------- ----------------------- -----------------------
Mr. Macera 1,687 491
-------------------------- ----------------------- -----------------------
-------------------------- ----------------------- -----------------------
Mr. Mayer 1,593 511
-------------------------- ----------------------- -----------------------
-------------------------- ----------------------- -----------------------
Mr. Moody 1,473(5) 511(6)
-------------------------- ----------------------- -----------------------
-------------------------- ----------------------- -----------------------
Mr. Neuhauser 1,650 515
-------------------------- ----------------------- -----------------------
-------------------------- ----------------------- -----------------------
Mr. Stitzel 1,687 491
-------------------------- ----------------------- -----------------------
-------------------------- ----------------------- -----------------------
Ms. Verville 1,708(7) 491(8)
-------------------------- ----------------------- -----------------------
1 The Funds do not currently provide pension or retirement plan benefits to the
Trustees.
2 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.
3 Includes $850 payable in later years as deferred compensation.
4 Includes $260 payable in later years as deferred compensation.
5 Total compensation of $1,473 for the fiscal year ended October 31, 1999,
will be payable in later years as deferred compensation.
6 Total compensation of $511 for the fiscal year ended October 31, 1999, will be
payable in later years as deferred compensation.
7 Total compensation of $1,708 for the fiscal year ended October 31, 1999, will
be payable in later years as deferred compensation.
8 Total compensation of $491 for the fiscal year ended October 31, 1999, will
be payable in later years as deferred compensation.
<PAGE>
-------------------------- -----------------------------------------------
TOTAL COMPENSATION PAID FROM LIBERTY FUND
COMPLEX TO THE BOARD OF TRUSTEES FOR THE
CALENDAR YEAR ENDED
-------------------------- -----------------------------------------------
-------------------------- -----------------------------------------------
12/31/99
-------------------------- -----------------------------------------------
-------------------------- -----------------------------------------------
Trustee:
-------------------------- -----------------------------------------------
-------------------------- -----------------------------------------------
Mr. Bleasdale $103,000(9)
-------------------------- -----------------------------------------------
-------------------------- -----------------------------------------------
Ms. Collins 96,000
-------------------------- -----------------------------------------------
-------------------------- -----------------------------------------------
Mr. Grinnell 100,000
-------------------------- -----------------------------------------------
-------------------------- -----------------------------------------------
Mr. Lowry 97,000
-------------------------- -----------------------------------------------
-------------------------- -----------------------------------------------
Mr. Macera 95,000
-------------------------- -----------------------------------------------
-------------------------- -----------------------------------------------
Mr. Mayer 101,000
-------------------------- -----------------------------------------------
-------------------------- -----------------------------------------------
Mr. Moody 91,000(10)
-------------------------- -----------------------------------------------
-------------------------- -----------------------------------------------
Mr. Neuhauser 101,252
-------------------------- -----------------------------------------------
-------------------------- -----------------------------------------------
Mr. Stitzel 95,000
-------------------------- -----------------------------------------------
-------------------------- -----------------------------------------------
Ms. Verville 96,000(11)
-------------------------- -----------------------------------------------
9 Includes $52,000 payable in later years as deferred compensation.
10 Total compensation of $91,000 for the calendar year ended December 31, 1999,
will be payable in later years as deferred compensation.
11 Total compensation of $96,000 for the calendar year ended December 31, 1999,
will be payable in later years as deferred compensation.
<PAGE>
The following table sets forth the compensation paid to Messrs. Birnbaum,
Grinnell, Lowry, Mayer and Neuhauser 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) for service
during the calendar year ended December 31, 1999:
---------------------------- -----------------------------------------------
Total Compensation Paid To The Trustees From
the Liberty All-Star Funds For The Calendar
Trustee Year Ended December 31, 1999(12)
---------------------------- -----------------------------------------------
---------------------------- -----------------------------------------------
Robert J. Birnbaum $25,000
---------------------------- -----------------------------------------------
---------------------------- -----------------------------------------------
James E. Grinnell 25,000
---------------------------- -----------------------------------------------
---------------------------- -----------------------------------------------
Richard W. Lowry 25,000
---------------------------- -----------------------------------------------
---------------------------- -----------------------------------------------
William E. Mayer 25,000
---------------------------- -----------------------------------------------
---------------------------- -----------------------------------------------
John J. Neuhauser 25,000
---------------------------- ----------------------------------------------
12 The Liberty All-Star Funds are advised by Liberty Asset Management Company
(LAMCO). LAMCO is an indirect wholly-owned subsidiary of Liberty Financial
Companies, Inc. (an intermediate parent of the Colonial).
<PAGE>
Appendix A
SUB-ADVISORY AGREEMENT
SUB-ADVISORY AGREEMENT, dated this 1st day of January, 2001, by and
between STEIN ROE & FARNHAM INCORPORATED, a Delaware corporation (the "Adviser")
and STEIN ROE INVESTMENT COUNSEL LLC, a Delaware limited liability company (the
"Sub-Adviser").
WITNESSETH:
WHEREAS, the Adviser provides Liberty Tax-Managed Growth Fund (the
"Fund"), a series of Liberty Funds Trust I (the "Trust"), an open-end investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), business services pursuant to the terms and conditions of an
investment advisory agreement dated December 23, 1996 (the "Advisory Agreement")
between the Adviser and the Trust, on behalf of the Fund; and
WHEREAS, the Sub-Adviser is willing to provide services to the Adviser on
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. Duties of the Sub-Adviser. Subject to the supervision of the Trustees
of the Trust and the Adviser, the Sub-Adviser will: (a) manage the investment of
the assets of the Fund in accordance with the Fund's investment objectives,
policies and limitations as stated in the Fund's then current Prospectus (the
"Prospectus") and Statement of Additional Information (the "Statement") as
provided by the Adviser to the Sub-Adviser and in compliance with the 1940 Act
and the rules, regulations and orders thereunder; (b) place purchase and sale
orders for portfolio transactions for the Fund; (c) evaluate such economic,
statistical and financial information and undertake such investment research as
it shall believe advisable; (d) employ professional portfolio managers to
provide research services to the Fund; and (e) report results to the Board of
Trustees of the Trust. The Adviser agrees to provide the Sub-Adviser with such
assistance as may be reasonably requested by the Sub-Adviser in connection with
its activities under this Agreement, including, without limitation, information
concerning the Fund, its funds available, or to become available, for investment
and generally as to the conditions of the Fund's affairs.
<PAGE>
Should the Trustees of the Trust or the Adviser at any time make any
determination as to investment policy and notify the Sub-Adviser thereof in
writing, the Sub-Adviser shall be bound by such determination for the period, if
any, specified in such notice or until notified that such determination has been
revoked. Further, the Adviser or the Trustees of the Trust may at any time, upon
written notice to the Sub-Adviser, suspend or restrict the right of the
Sub-Adviser to determine what assets of the Fund shall be purchased or sold and
what portion, if any, of the Fund's assets shall be held uninvested. It is
understood that the Adviser undertakes to discuss with the Sub-Adviser any such
determinations of investment policy and any such suspension or restrictions on
the right of the Sub-Adviser to determine what assets of the Fund shall be
purchased or sold or held uninvested, prior to the implementation thereof.
2. Certain Information to the Sub-Adviser. Copies of the Prospectus, the
Statement, and the Trust's Declaration of Trust have been or will be delivered
to the Sub-Adviser. The Adviser agrees to notify the Sub-Adviser of each change
in the investment policies of the Fund and to provide to the Sub-Adviser as
promptly as practicable copies of all amendments and supplements to the
Prospectus, the Statement, and the Trust's Declaration of Trust. In addition,
the Adviser will promptly provide the Sub-Adviser with any procedures applicable
to the Sub-Adviser adopted from time to time by the Trustees of the Trust and
agrees to provide promptly to the Sub-Adviser copies of all amendments thereto.
The Sub-Adviser will be entitled to rely on all documents furnished to it by the
Adviser.
3. Execution of Certain Documents. Subject to any other written
instructions of the Adviser and the Trustees of the Trust, the Sub-Adviser is
hereby appointed the Adviser's and the Trust's agent and attorney-in-fact to
execute account documentation, agreements, contracts and other documents as the
Sub-Adviser shall be requested to execute by brokers, dealers, counterparties
and other persons in connection with its management of the assets of the Fund.
4. Reports. The Sub-Adviser shall furnish to the Trustees of the Trust or
the Adviser, or both, as may be appropriate, quarterly reports of its activities
on behalf of the Fund, as required by applicable law or as otherwise reasonably
requested from time to time by the Trustees of the Trust or the Adviser, and
such additional information, reports, evaluations, analyses and opinions as the
Trustees of the Trust or the Adviser, as appropriate, may reasonably request
from time to time.
<PAGE>
5. Compensation of the Sub-Adviser. For the services to be rendered by
the Sub-Adviser under this Agreement, the Adviser shall pay to the Sub-Adviser a
monthly fee, payable within 10 business days after the last day of each month,
composed of a basic fee and a performance adjustment. The basic fee shall be
calculated at the end of each month by applying one-twelfth of the basic fee
rate (0.20%) to the average of the net assets of the Fund (computed in the
manner set forth in the Prospectus or Statement) determined as of the close of
business on each business day throughout the month. The performance adjustment
shall be determined by multiplying the basic fee by the performance adjustment
rates set forth below. The resulting calculation is the total monthly fee paid
by the Adviser to the Sub-Adviser. The performance adjustment rate shall be
readjusted at the end of each calendar quarter based on the Fund's ranking in
Morningstar, Inc.'s Large Blend category for domestic equity funds. The rates
applicable to each ranking are as follows:
--------------------------------------- ---------------------------------------
Morningstar Ranking Performance Adjustment Rate
--------------------------------------- ---------------------------------------
--------------------------------------- ---------------------------------------
Quartile 1 1.25
--------------------------------------- ---------------------------------------
--------------------------------------- ---------------------------------------
Quartile 2 1.00
--------------------------------------- ---------------------------------------
--------------------------------------- ---------------------------------------
Below Median 0.75
--------------------------------------- ---------------------------------------
For the calendar quarter beginning January 1, 2001, and for each calendar
quarter thereafter, the performance adjustment rate shall be the rate applicable
to the Fund's Morningstar ranking for the three-year period ending on the last
day of the prior calendar quarter. In the event this Agreement is terminated
during any month, the basic fee rate and performance adjustment rate shall be
applied to net assets averaged over that month ending on the last business day
on which this Agreement is in effect. Notwithstanding the above, the annual
compensation payable to the Sub-Adviser under this Agreement and the
Sub-Advisory Agreement between the parties, dated on or about January 1, 2001,
with respect to Liberty Tax-Managed Growth Fund II (collectively, the
"Sub-Advisory Agreements") shall not be less than $350,000 in the aggregate. If
the compensation paid to the Sub-Adviser under the Sub-Advisory Agreements for
any calendar year is less than $350,000 in the aggregate, the Adviser, as soon
as practicable after the end of the year, shall pay the Sub-Adviser the
difference between $350,000 and the amount the Adviser has paid the Sub-Adviser
under the Sub-Advisory Agreements for that year. The Sub-Adviser will pay its
expenses incurred in performing its duties under this Agreement. Neither the
Trust nor the Fund shall be liable to the Sub-Adviser for the compensation of
the Sub-Adviser.
<PAGE>
6. Limitation of Liability of the Sub-Adviser. The Sub-Adviser shall not
be liable for any error of judgment or mistake of law or for any loss arising
out of any investment or for any act or omission in the execution and management
of the Fund, except for willful misfeasance, bad faith or gross negligence in
the performance of its duties and obligations hereunder. The Trust, on behalf of
the Fund, may enforce any obligations of the Sub-Adviser under this Agreement
and may recover directly from the Sub-Adviser for any liability it may have to
the Fund.
7. Covenants of the Sub-Adviser. The Sub-Adviser agrees that it (a) will
not deal with itself, "affiliated persons" of the Sub-Adviser, the Trustees of
the Trust or the Fund's distributor, as principals, agents, brokers or dealers
in making purchases or sales of securities or other property for the account of
the Fund, except as permitted by the 1940 Act and the rules, regulations and
orders thereunder and subject to the prior written approval of the Adviser, and
except in accordance with Rule 17e-1 procedures as approved by the Trustees from
time to time and (b) will comply with all other provisions of the then-current
Prospectus and Statement as provided by the Adviser to the Sub-Adviser relative
to the Sub-Adviser and its trustees, officers, employees and affiliates.
8. Representations, Warranties and Additional Agreements of the
Sub-Adviser. The Sub-Adviser represents, warrants and agrees that:
(a) It: (i) is registered as an investment adviser under the U.S.
Investment Advisers Act of 1940, as amended (the "Advisers Act") and is
registered under the laws of any jurisdiction in which the Sub-Adviser is
required to be registered as an investment adviser in order to perform its
obligations under this Agreement, and will continue to be so registered for so
long as this Agreement remains in effect; (ii) is not prohibited by the 1940 Act
or the Advisers Act from performing the services contemplated by this Agreement;
(iii) has met, and will continue to meet for so long as this Agreement remains
in effect, any other applicable Federal or State requirements, or the applicable
requirements of any regulatory or industry self-regulatory agency, necessary to
be met in order to perform the services contemplated by this Agreement; (iv) has
the authority to enter into and perform the services contemplated by this
Agreement; (v) will immediately notify the Adviser in writing of the occurrence
of any event that would disqualify the Sub-Adviser from serving as an investment
adviser of an investment company pursuant to Section 9(a) of the 1940 Act or
otherwise; and (vi) will immediately notify the Adviser in writing of any change
of control of the Sub-Adviser or any parent of the Sub-Adviser resulting in an
"assignment" of this Agreement.
<PAGE>
(b) It will maintain, keep current and preserve on behalf of the Fund, in
the manner and for the periods of time required or permitted by the 1940 Act and
the rules, regulations and orders thereunder and the Advisers Act and the rules,
regulations and orders thereunder, records relating to investment transactions
made by the Sub-Adviser for the Fund as may be reasonably requested by the
Adviser or the Fund from time to time. The Sub-Adviser agrees that such records
are the property of the Trust, and will be surrendered to the Trust promptly
upon request.
(c) The Sub-Adviser has adopted a written code of ethics complying with
the requirements of Rule 17j-1 under the 1940 Act and, if it has not already
done so, will provide the Adviser and the Trust with a copy of such code of
ethics, and upon any amendment to such code of ethics, promptly provide such
amendment. At least annually the Sub-Adviser will provide the Trust and the
Adviser with a certificate signed by the chief compliance officer (or the person
performing such function) of the Sub-Adviser certifying, to the best of his or
her knowledge, compliance with the code of ethics during the immediately
preceding twelve (12) month period, including any material violations of or
amendments to the code of ethics or the administration thereof.
(d) It has provided the Adviser and the Trust with a copy of its Form ADV
as most recently filed with the Securities and Exchange Commission (the "SEC")
and will, promptly after filing any amendment to its Form ADV with the SEC,
furnish a copy of such amendment to the Adviser and the Trust.
9. Representation of the Adviser. The Adviser represents that (i) it is
authorized to perform the services herein, (ii) the appointment of the
Sub-Adviser has been duly authorized; and (iii) it will act in conformity with
the Advisers Act.
10. Non-Exclusivity. The Adviser understands that the Sub-Adviser now
acts, will continue to act, or may act in the future, as investment adviser or
investment sub-adviser to fiduciary and other managed accounts, and the Adviser
has no objection to the Sub-Adviser so acting, provided that the Sub-Adviser
duly performs all obligations under this Agreement. The Adviser also understands
the Sub-Adviser may give advice and take action with respect to any of its other
clients for its own account which may differ from the timing or nature of action
taken by the Sub-Adviser, with respect to the Fund. Nothing in this Agreement
shall impose upon the Sub-Adviser any obligation to purchase or sell or to
recommend for purchase or sale, with respect to the Fund, any security which the
Sub-Adviser or its shareholders, directors, officers, employees or affiliates
may purchase or sell for its or their own account(s) or for the account of any
other client.
11. Further Assurances. Each party agrees to perform such further acts
and execute such further documents as are necessary to effectuate the purposes
hereof.
12. Duration and Termination of this Agreement. This Agreement shall
become effective on the date first above written and shall govern the relations
between the parties hereto thereafter, and shall remain in force until January
1, 2002 and from year to year thereafter but only so long as its continuance is
"specifically approved at least annually" by the Board of Trustees of the Trust
or by "vote of a majority of the outstanding voting securities" of the Fund.
This Agreement may be terminated at any time without penalty on sixty days'
written notice to the Sub-Adviser by vote of the Board of Trustees of the Trust,
by "vote of a majority of the outstanding voting securities" of the Fund, or by
the Adviser. This Agreement also may be terminated at any time without penalty
by the Sub-Adviser on ninety days' written notice to the Adviser and Trust. This
Agreement shall automatically terminate in the event of its "assignment" or in
the event that the Advisory Agreement shall have terminated for any reason.
13. Amendments to this Agreement. This Agreement may be amended in
accordance with the 1940 Act.
14. Certain Definitions. The terms "specifically approved at least
annually", "vote of a majority of the outstanding voting securities,"
"assignment," "control," "affiliated persons" and "interested person," when used
in this Agreement, shall have the respective meanings specified, and shall be
construed in a manner consistent with, the 1940 Act and the rules, regulations
and orders thereunder, subject, however, to such exemptions as may be granted by
the SEC under the 1940 Act.
15. Survival of Representations and Warranties; Duty to Update
Information. All representations and warranties made by the Adviser or
Sub-Adviser pursuant to Sections 8 and 9 hereof shall survive for the duration
of this Agreement and the representing party shall immediately notify, but in no
event later than five (5) business days, the other party in writing upon
becoming aware that any of the foregoing representations and warranties are no
longer true.
<PAGE>
16. Miscellaneous. This Agreement shall be governed by and construed in
accordance with the internal laws of The Commonwealth of Massachusetts. All
notices provided for by this Agreement shall be in writing and shall be deemed
given when received, against appropriate receipt, by the Sub-Adviser's Secretary
in the case of the Sub-Adviser, the Adviser's General Counsel in the case of the
Adviser, and the Trust's Secretary in the case of the Fund, or such other person
as a party shall designate by notice to the other parties. This Agreement
constitutes the entire agreement among the parties hereto and supersedes any
prior agreement among the parties relating to the subject matter hereof. The
section headings of this Agreement are for convenience of reference and do not
constitute a part hereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered in their names and on their behalf by the undersigned, thereunto
duly authorized, and their respective seals to be hereto affixed, all as of the
day and year first written above.
STEIN ROE & FARNHAM INCORPORATED
By: __________________________________________
Name:
Title:
STEIN ROE INVESTMENT COUNSEL LLC
By: __________________________________________
Name:
Title:
<PAGE>
Appendix B
SUB-ADVISORY AGREEMENT
SUB-ADVISORY AGREEMENT, dated this 1st day of January, 2001, by and
between STEIN ROE & FARNHAM INCORPORATED, a Delaware corporation (the "Adviser")
and STEIN ROE INVESTMENT COUNSEL LLC, a Delaware limited liability company (the
"Sub-Adviser").
WITNESSETH:
WHEREAS, the Adviser provides Liberty Tax-Managed Growth Fund II (the
"Fund"), a series of Liberty Funds Trust I (the "Trust"), an open-end investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), business services pursuant to the terms and conditions of an
investment advisory agreement dated March 1, 2000 (the "Advisory Agreement")
between the Adviser and the Trust, on behalf of the Fund; and
WHEREAS, the Sub-Adviser is willing to provide services to the Adviser on
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. Duties of the Sub-Adviser. Subject to the supervision of the Trustees
of the Trust and the Adviser, the Sub-Adviser will: (a) manage the investment of
the assets of the Fund in accordance with the Fund's investment objectives,
policies and limitations as stated in the Fund's then current Prospectus (the
"Prospectus") and Statement of Additional Information (the "Statement") as
provided by the Adviser to the Sub-Adviser and in compliance with the 1940 Act
and the rules, regulations and orders thereunder; (b) place purchase and sale
orders for portfolio transactions for the Fund; (c) evaluate such economic,
statistical and financial information and undertake such investment research as
it shall believe advisable; (d) employ professional portfolio managers to
provide research services to the Fund; and (e) report results to the Board of
Trustees of the Trust. The Adviser agrees to provide the Sub-Adviser with such
assistance as may be reasonably requested by the Sub-Adviser in connection with
its activities under this Agreement, including, without limitation, information
concerning the Fund, its funds available, or to become available, for investment
and generally as to the conditions of the Fund's affairs.
<PAGE>
Should the Trustees of the Trust or the Adviser at any time make any
determination as to investment policy and notify the Sub-Adviser thereof in
writing, the Sub-Adviser shall be bound by such determination for the period, if
any, specified in such notice or until notified that such determination has been
revoked. Further, the Adviser or the Trustees of the Trust may at any time, upon
written notice to the Sub-Adviser, suspend or restrict the right of the
Sub-Adviser to determine what assets of the Fund shall be purchased or sold and
what portion, if any, of the Fund's assets shall be held uninvested. It is
understood that the Adviser undertakes to discuss with the Sub-Adviser any such
determinations of investment policy and any such suspension or restrictions on
the right of the Sub-Adviser to determine what assets of the Fund shall be
purchased or sold or held uninvested, prior to the implementation thereof.
2. Certain Information to the Sub-Adviser. Copies of the Prospectus, the
Statement, and the Trust's Declaration of Trust have been or will be delivered
to the Sub-Adviser. The Adviser agrees to notify the Sub-Adviser of each change
in the investment policies of the Fund and to provide to the Sub-Adviser as
promptly as practicable copies of all amendments and supplements to the
Prospectus, the Statement, and the Trust's Declaration of Trust. In addition,
the Adviser will promptly provide the Sub-Adviser with any procedures applicable
to the Sub-Adviser adopted from time to time by the Trustees of the Trust and
agrees to provide promptly to the Sub-Adviser copies of all amendments thereto.
The Sub-Adviser will be entitled to rely on all documents furnished to it by the
Adviser.
3. Execution of Certain Documents. Subject to any other written
instructions of the Adviser and the Trustees of the Trust, the Sub-Adviser is
hereby appointed the Adviser's and the Trust's agent and attorney-in-fact to
execute account documentation, agreements, contracts and other documents as the
Sub-Adviser shall be requested by brokers, dealers, counterparties and other
persons in connection with its management of the assets of the Fund.
4. Reports. The Sub-Adviser shall furnish to the Trustees of the Trust or
the Adviser, or both, as may be appropriate, quarterly reports of its activities
on behalf of the Fund, as required by applicable law or as otherwise reasonably
requested from time to time by the Trustees of the Trust or the Adviser, and
such additional information, reports, evaluations, analyses and opinions as the
Trustees of the Trust or the Adviser, as appropriate, may reasonably request
from time to time.
<PAGE>
5. Compensation of the Sub-Adviser. For the services to be rendered by
the Sub-Adviser under this Agreement, the Adviser shall pay to the Sub-Adviser a
monthly fee, payable within 10 business days after the last day of each month,
composed of a basic fee and a performance adjustment. The basic fee shall be
calculated at the end of each month by applying one-twelfth of the basic fee
rate (0.20%) to the average of the net assets of the Fund (computed in the
manner set forth in the Prospectus or Statement) determined as of the close of
business on each business day throughout the month. The performance adjustment
shall be determined by multiplying the basic fee by the performance adjustment
rates set forth below. The resulting calculation is the total monthly fee paid
by the Adviser to the Sub-Adviser. The performance adjustment rate shall be
readjusted at the end of each calendar quarter based on the Fund's ranking in
Morningstar, Inc.'s Large Blend category for domestic equity funds. The rates
applicable to each ranking are as follows:
----------------------------------------- ------------------------------------
Morningstar Ranking Performance Adjustment Rate
----------------------------------------- ------------------------------------
----------------------------------------- ------------------------------------
Quartile 1 1.25
----------------------------------------- ------------------------------------
----------------------------------------- ------------------------------------
Quartile 2 1.00
----------------------------------------- ------------------------------------
----------------------------------------- ------------------------------------
Below Median 0.75
----------------------------------------- ------------------------------------
For the calendar quarter beginning January 1, 2001, and for each calendar
quarter thereafter until April 1, 2003, the performance adjustment rate shall be
the rate applicable to the Fund's Morningstar ranking for the period beginning
with the commencement of the Fund's operations and ending on the last day of the
prior calendar quarter. For the calendar quarter beginning April 1, 2003, and
for each calendar quarter thereafter, the performance adjustment rate shall be
the rate applicable to the Fund's Morningstar ranking for the three-year period
ending on the last day of the most recent calendar quarter. In the event this
Agreement is terminated during any month, the basic fee rate and performance
adjustment rate shall be applied to net assets averaged over that month ending
on the last business day on which this Agreement is in effect. Notwithstanding
the above, the annual compensation payable to the Sub-Adviser under this
Agreement and the Sub-Advisory Agreement between the parties, dated on or about
January 1, 2001, with respect to Liberty Tax-Managed Growth Fund (collectively,
the "Sub-Advisory Agreements") shall not be less than $350,000 in the aggregate.
If the compensation paid to the Sub-Adviser under the Sub-Advisory Agreements
for any calendar year is less than $350,000 in the aggregate, the Adviser, as
soon as practicable after the end of the year, shall pay the Sub-Adviser the
difference between $350,000 and the amount the Adviser has paid the Sub-Adviser
under the Sub-Advisory Agreements for that year. The Sub-Adviser will pay its
expenses incurred in performing its duties under this Agreement. Neither the
Trust nor the Fund shall be liable to the Sub-Adviser for the compensation of
the Sub-Adviser.
6. Limitation of Liability of the Sub-Adviser. The Sub-Adviser shall not
be liable for any error of judgment or mistake of law or for any loss arising
out of any investment or for any act or omission in the execution and management
of the Fund, except for willful misfeasance, bad faith or gross negligence in
the performance of its duties and obligations hereunder. The Trust, on behalf of
the Fund, may enforce any obligations of the Sub-Adviser under this Agreement
and may recover directly from the Sub-Adviser for any liability it may have to
the Fund.
7. Covenants of the Sub-Adviser. The Sub-Adviser agrees that it (a) will
not deal with itself, "affiliated persons" of the Sub-Adviser, the Trustees of
the Trust or the Fund's distributor, as principals, agents, brokers or dealers
in making purchases or sales of securities or other property for the account of
the Fund, except as permitted by the 1940 Act and the rules, regulations and
orders thereunder and subject to the prior written approval of the Adviser, and
except in accordance with Rule 17e-1 procedures as approved by the Trustees from
time to time and (b) will comply with all other provisions of the then-current
Prospectus and Statement as provided by the Adviser to the Sub-Adviser relative
to the Sub-Adviser and its trustees, officers, employees and affiliates.
8. Representations, Warranties and Additional Agreements of the
Sub-Adviser. The Sub-Adviser represents, warrants and agrees that:
(a) It: (i) is registered as an investment adviser under the U.S.
Investment Advisers Act of 1940, as amended (the "Advisers Act") and is
registered under the laws of any jurisdiction in which the Sub-Adviser is
required to be registered as an investment adviser in order to perform its
obligations under this Agreement, and will continue to be so registered for so
long as this Agreement remains in effect; (ii) is not prohibited by the 1940 Act
or the Advisers Act from performing the services contemplated by this Agreement;
(iii) has met, and will continue to meet for so long as this Agreement remains
in effect, any other applicable Federal or State requirements, or the applicable
requirements of any regulatory or industry self-regulatory agency, necessary to
be met in order to perform the services contemplated by this Agreement; (iv) has
the authority to enter into and perform the services contemplated by this
Agreement; (v) will immediately notify the Adviser in writing of the occurrence
of any event that would disqualify the Sub-Adviser from serving as an investment
adviser of an investment company pursuant to Section 9(a) of the 1940 Act or
otherwise; and (vi) will immediately notify the Adviser in writing of any change
of control of the Sub-Adviser or any parent of the Sub-Adviser resulting in an
"assignment" of this Agreement.
<PAGE>
(b) It will maintain, keep current and preserve on behalf of the Fund, in
the manner and for the periods of time required or permitted by the 1940 Act and
the rules, regulations and orders thereunder and the Advisers Act and the rules,
regulations and orders thereunder, records relating to investment transactions
made by the Sub-Adviser for the Fund as may be reasonably requested by the
Adviser or the Fund from time to time. The Sub-Adviser agrees that such records
are the property of the Trust, and will be surrendered to the Trust promptly
upon request.
(c) The Sub-Adviser has adopted a written code of ethics complying with
the requirements of Rule 17j-1 under the 1940 Act and, if it has not already
done so, will provide the Adviser and the Trust with a copy of such code of
ethics, and upon any amendment to such code of ethics, promptly provide such
amendment. At least annually the Sub-Adviser will provide the Trust and the
Adviser with a certificate signed by the chief compliance officer (or the person
performing such function) of the Sub-Adviser certifying, to the best of his or
her knowledge, compliance with the code of ethics during the immediately
preceding twelve (12) month period, including any material violations of or
amendments to the code of ethics or the administration thereof.
(d) It has provided the Adviser and the Trust with a copy of its Form ADV
as most recently filed with the Securities and Exchange Commission (the "SEC")
and will, promptly after filing any amendment to its Form ADV with the SEC,
furnish a copy of such amendment to the Adviser and the Trust.
9. Representation of the Adviser. The Adviser represents that (i) it is
authorized to perform the services herein, (ii) the appointment of the
Sub-Adviser has been duly authorized; and (iii) it will act in conformity with
the Advisers Act.
10. Non-Exclusivity. The Adviser understands that the Sub-Adviser now
acts, will continue to act, or may act in the future, as investment adviser or
investment sub-adviser to fiduciary and other managed accounts, and the Adviser
has no objection to the Sub-Adviser so acting, provided that the Sub-Adviser
duly performs all obligations under this Agreement. The Adviser also understands
the Sub-Adviser may give advice and take action with respect to any of its other
clients for its own account which may differ from the timing or nature of action
taken by the Sub-Adviser, with respect to the Fund. Nothing in this Agreement
shall impose upon the Sub-Adviser any obligation to purchase or sell or to
recommend for purchase or sale, with respect to the Fund, any security which the
Sub-Adviser or its shareholders, directors, officers, employees or affiliates
may purchase or sell for its or their own account(s) or for the account of any
other client.
11. Further Assurances. Each party agrees to perform such further acts
and execute such further documents as are necessary to effectuate the
purposes hereof.
12. Duration and Termination of this Agreement. This Agreement shall
become effective on the date first above written and shall govern the relations
between the parties hereto thereafter, and shall remain in force until January
1, 2002 and from year to year thereafter but only so long as its continuance is
"specifically approved at least annually" by the Board of Trustees of the Trust
or by "vote of a majority of the outstanding voting securities" of the Fund.
This Agreement may be terminated at any time without penalty on sixty days'
written notice to the Sub-Adviser by vote of the Board of Trustees of the Trust,
by "vote of a majority of the outstanding voting securities" of the Fund, or by
the Adviser. This Agreement also may be terminated at any time without penalty
by the Sub-Adviser on ninety days' written notice to the Adviser and Trust. This
Agreement shall automatically terminate in the event of its "assignment" or in
the event that the Advisory Agreement shall have terminated for any reason.
13. Amendments to this Agreement. This Agreement may be amended in
accordance with the 1940 Act.
14. Certain Definitions. The terms "specifically approved at least
annually", "vote of a majority of the outstanding voting securities,"
"assignment," "control," "affiliated persons" and "interested person," when used
in this Agreement, shall have the respective meanings specified, and shall be
construed in a manner consistent with, the 1940 Act and the rules, regulations
and orders thereunder, subject, however, to such exemptions as may be granted by
the SEC under the 1940 Act.
15. Survival of Representations and Warranties; Duty to Update
Information. All representations and warranties made by the Adviser or
Sub-Adviser pursuant to Sections 8 and 9 hereof shall survive for the duration
of this Agreement and the representing party shall immediately notify, but in no
event later than five (5) business days, the other party in writing upon
becoming aware that any of the foregoing representations and warranties are no
longer true.
<PAGE>
16. Miscellaneous. This Agreement shall be governed by and construed in
accordance with the internal laws of The Commonwealth of Massachusetts. All
notices provided for by this Agreement shall be in writing and shall be deemed
given when received, against appropriate receipt, by the Sub-Adviser's Secretary
in the case of the Sub-Adviser, the Adviser's General Counsel in the case of the
Adviser, and the Trust's Secretary in the case of the Fund, or such other person
as a party shall designate by notice to the other parties. This Agreement
constitutes the entire agreement among the parties hereto and supersedes any
prior agreement among the parties relating to the subject matter hereof. The
section headings of this Agreement are for convenience of reference and do not
constitute a part hereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered in their names and on their behalf by the undersigned, thereunto
duly authorized, and their respective seals to be hereto affixed, all as of the
day and year first written above.
STEIN ROE & FARNHAM INCORPORATED
By: ____________________________________________
Name:
Title:
STEIN ROE INVESTMENT COUNSEL LLC
By: ____________________________________________
Name:
Title:
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TWO CONVENIENT WAYS TO VOTE YOUR PROXY
PROXY VOTING--QUICK AND CONVENIENT
The enclosed proxy statement provides details on important issues affecting your
Liberty Funds. The Board of Trustees recommends that you vote for
all proposals.
We are offering two ways to vote: by internet or fax. These methods may be
quicker and more convenient than the traditional method of mailing back your
proxy card. Please follow the simple instructions on this proxy insert.
If you are voting by internet or fax, you SHOULD NOT mail your proxy card.
YOUR PROXY VOTE IS IMPORTANT!
Vote by Internet: Vote by Fax:
| Read the proxy statement and have your proxy card | Read the proxy
available. statement.
| Visit our Web site (www.libertyfunds.com) | Fax your proxy
and go to "Proxy Voting." card to 1-800-733-1885.
| When you are ready to vote, click on the [blue]
"Vote My Proxy" link.
| Enter the 14 to 20 digit Control Number from your proxy card.
| Follow the instructions provided on the site.
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PLEASE VOTE PROMPTLY
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Your vote is important, no matter how many shares you own. Please vote on the
reverse side of this proxy card and sign in the space(s) provided. Return your
completed proxy card in the enclosed envelope today.
You may receive additional proxies for other accounts. These are not duplicates;
you should sign and return each proxy card in order for your votes to be
counted.
This proxy is solicited on behalf of the Board of Trustees. The signers of this
proxy hereby appoint William J. Ballou, Suzan M. Barron, Stephen E. Gibson,
Russell L. Kane, Pamela A. McGrath, and Vincent P. Pietropaolo each of them
proxies of the signers, with power of substitution to vote at the Special
Meeting of Shareholders to be held at Boston, Massachusetts, on Wednesday,
December 27, 2000, and at any adjournments, as specified herein, and in
accordance with their best judgement, on any other business that may properly
come before this meeting.
After careful review, the Board of Trustees unanimously has recommended a vote
"FOR" all matters.
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[Liberty Logo] LIBERTY
Liberty Funds Services, Inc.
[INSERT FUND NAME]
This proxy, when properly executed, will be voted in the manner directed herein
and, absent direction, will be voted FOR Item 1 below. This proxy will be voted
in accordance with the holder's best judgement as to any other matter.
The Board of Trustees recommends a vote FOR the following Item:
1. Proposal to elect eleven Trustees (Item 1 of the Notice).
(01) Douglas A. Hacker
(02) Janet Langford Kelly
(03) Richard W. Lowry
(04) Salvatore Macera
(05) William E. Mayer
(06) Charles Nelson
(07) John J. Neuhauser
(08) Joseph R. Palombo
(09) Thomas E. Stitzel
(10) Thomas C. Theobald
(11) Anne-Lee Verville
For Withheld For All
All From All Nominees
Nominees Nominees Except as Noted
|--| |--| |--|
2. To approve or disapprove a sub-advisory agreement with Stein Roe Investment
Counsel LLC (Item 2 of the Notice).
For Against Abstain
|--| |--| |--|
MARK BOX AT RIGHT FOR ADDRESS CHANGE
AND NOTE BELOW |__|
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PLEASE MARK, SIGN DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
Please sign exactly as name or names appear hereon. Joint owners should each
sign personally. When signing as attorney, executor, administrator, trustee or
guardian, please give full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
Date_________________
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Shareholder sign here Co-owner sign here
Liberty Tax-Managed Growth Fund
Liberty Tax-Managed Growth Fund II