STEIN ROE ADVISOR TAX-MANAGED GROWTH FUND II PROSPECTUS, MARCH 1, 2000
CLASS A, B AND C SHARES
Advised by Stein Roe & Farnham Incorporated
Although these securities have been registered with the Securities and Exchange
Commission, the Commission has not approved or disapproved any shares offered in
this prospectus or determined whether this prospectus is accurate or complete.
Any representation to the contrary is a criminal offense.
Not FDIC May Lose Value
Insured No Bank Guarantee
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TABLE OF CONTENTS
<S> <C>
The Fund 2
- -----------------------------------------
Investment Goals.................. 2
Primary Investment Strategies..... 2
Primary Investment Risks.......... 2
Performance....................... 3
Your Expenses..................... 4
Your Account 5
- -----------------------------------------
How to Buy Shares................. 5
Sales Charges..................... 6
How to Exchange Shares............ 9
How to Sell Shares................ 9
Distribution and Service Fees..... 10
Other Information About Your Account 11
Managing the Fund 13
- -----------------------------------------
Investment Advisor................ 13
Portfolio Managers................ 13
Advisor Performance Information... 13
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THE FUND
UNDERSTANDING TAX-MANAGED INVESTING
In managing the Fund, the advisor uses investment strategies that are designed
to reduce (but not eliminate) the payment by the Fund of taxable distributions
to shareholders. These strategies include: buying stocks that pay low dividends
or no dividends at all; maintaining a low portfolio turnover rate which helps to
minimize the realization and distribution of taxable gains; deferring the sale
of a security until the realized gain would qualify as a long-term capital gain
rather than a short-term capital gain; selling securities to create a loss to
offset gains realized on other securities; and selling the higher cost basis
portion of a security holding before the lower cost basis portion.
From time to time, the Fund expects to distribute taxable income and capital
gains. Market conditions may limit the Fund's ability to generate tax losses or
to avoid dividend income. Additionally, the ability to use certain tax
management techniques may be curtailed or eliminated in the future by tax
legislation or regulation.
INVESTMENT GOALS
The Fund seeks long-term capital growth while reducing shareholder exposure to
taxes.
PRIMARY INVESTMENT STRATEGIES
The Fund invests primarily in large capitalization and middle capitalization
stocks that have at least $1 billion in equity market capitalization at the time
of purchase. The Fund may also invest in foreign securities. In selecting stocks
for the Fund, the Fund's investment advisor uses fundamental research analysis
and valuation techniques.
At times, the advisor may determine that adverse market conditions make it
desirable to temporarily suspend the Fund's normal investment activities. During
such times, the Fund may, but is not required to, invest in cash or
high-quality, short-term debt securities, without limit. Taking a temporary
defensive position may prevent the Fund from achieving its investment goals.
In seeking to achieve its goals, the Fund may invest in various types of
securities and engage in various investment techniques which are not the
principal focus of the Fund and therefore are not described in this prospectus.
These types of securities and investment practices are identified and discussed
in the Fund's Statement of Additional Information, which you may obtain free of
charge (see back cover). Approval by the Fund's shareholders is not required to
modify or change the Fund's investment goals or investment strategies.
PRIMARY INVESTMENT RISKS
The primary risks of investing in the Fund are described below. There are many
circumstances (including additional risks that are not described here) which
could prevent the Fund from achieving its goals. It is possible to lose money by
investing in the Fund.
Market risk is the risk that the price of a security held by the Fund will fall
due to changing market, economic or political conditions.
Foreign securities are subject to special risks. The Fund may invest in foreign
securities either indirectly (e.g., depositary receipts) or directly into
foreign stock markets. Foreign stock markets can be extremely volatile.
Fluctuations in currency exchange rates may impact the value of foreign
securities without a change in the intrinsic value of those securities. The
liquidity of foreign securities may be more limited than domestic securities,
which means that the Fund may, at times, be unable to sell foreign securities at
desirable prices. Brokerage commissions, custodial fees and other fees are
generally higher for foreign investments. In addition, foreign governments may
impose withholding taxes which would reduce the amount of income available to
distribute to shareholders. Other risks include the following: possible delays
in the settlement of transactions; less publicly available information about
companies; the impact of political, social or diplomatic events; and possible
seizure, expropriation or nationalization of the company or its assets.
2
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THE FUND
PERFORMANCE
Because the Fund is a new fund and has not completed one full year of investment
performance, information related to the Fund's performance has not been included
in this prospectus.
The Fund's return will be compared to the Standard & Poor's 500 Index (S&P
Index), an unmanaged index that tracks the performance of U.S. stock market
securities. Unlike the Fund, indices are not investments, do not incur fees or
expenses and are not professionally managed. It is not possible to invest
directly in indices. The Fund's return is also compared to the average return of
the funds included in the Lipper Growth Fund category (Lipper Average). This
Lipper Average, which is calculated by Lipper, Inc., is composed of funds with
similar investment objectives to the Fund. Sales charges are not reflected in
the Lipper Average.
3
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THE FUND
UNDERSTANDING EXPENSES
SALES CHARGES are paid directly by shareholders to Liberty Funds Distributor,
Inc., the Fund's distributor.
ANNUAL FUND OPERATING EXPENSES are deducted from the Fund. They include
management and administration fees, 12b-1 fees, brokerage costs, and
administrative costs including pricing and custody services.
EXAMPLE EXPENSES help you compare the cost of investing in the Fund to the cost
of investing in other mutual funds. The table does not take into account any
expense reduction arrangements discussed in the footnotes to the Annual Fund
Operating Expenses table. It uses the following hypothetical conditions:
- - $10,000 initial investment
- - 5% total return for each year
- - Fund operating expenses remain
the same
- - Assumes reinvestment of all dividends and distributions
YOUR EXPENSES
Expenses are one of several factors to consider before you invest in a mutual
fund. The tables below describe the fees and expenses you may pay when you buy,
hold and sell shares of the Fund.
SHAREHOLDER FEES (1) (PAID DIRECTLY FROM YOUR INVESTMENT)
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CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Maximum sales charge (load) on purchases (%)
(as a percentage of the offering price) 5.75 0.00 0.00
- --------------------------------------------------- ----------- ----------- -----------
Maximum deferred sales charge (load) on
redemptions (%) (as a percentage of the
lesser of purchase price or redemption price) 1.00(2) 5.00 1.00
- --------------------------------------------------- ----------- ----------- -----------
Redemption fee (%) (as a percentage of
amount redeemed, if applicable) (3) (3) (3)
</TABLE>
ANNUAL FUND OPERATING EXPENSES (DEDUCTED DIRECTLY FROM FUND ASSETS)
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<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Management and administration fees (%) 1.00 1.00 1.00
- --------------------------------------------------- ----------- ----------- -----------
Distribution and service (12b-1) fees (%) 0.25 1.00 1.00
- --------------------------------------------------- ----------- ----------- -----------
Other expenses (4)(5) (%) 0.43 0.43 0.43
- --------------------------------------------------- ----------- ----------- -----------
Total annual fund operating expenses (4) (%) 1.68 2.43 2.43
</TABLE>
EXAMPLE EXPENSES (YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER)
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CLASS 1 YEAR 3 YEARS
<S> <C> <C>
Class A $736 $1,074
- --------------------------------------------------- ---------------- -----------------
Class B: did not sell your shares $246 $ 758
sold all your shares at
the end of the period $746 $1,058
- --------------------------------------------------- ---------------- -----------------
Class C: did not sell your shares $246 $ 758
sold all your shares at
the end of the period $346 $ 758
</TABLE>
(1) A $10 annual fee is deducted from accounts of less than $1,000 and paid
to the transfer agent.
(2) This charge applies only to certain Class A shares bought without an
initial sales charge that are sold within 18 months of purchase.
(3) There is a $7.50 charge for wiring sale proceeds to your bank.
(4) The Fund's advisor has agreed to bear the Fund's expenses such that
"Other expenses" do not exceed 0.25% of the first $100 million of
average net assets and 0.50% of average net assets over $100 million
annually. These payments made by the advisor on behalf of the Fund are
subject to reimbursement by the Fund to the advisor. This will be
accomplished by the payment of an expense reimbursement fee by the Fund
to the advisor computed and paid monthly, with a limitation that
immediately after such payment the Fund's "Other expenses" will not
exceed 0.25% of the first $100 million of average net assets and 0.50%
of average net assets over $100 million annually. This arrangement
terminates on the earlier of (i) the date on which expense
reimbursement payments by the Fund equal the prior payment of such
reimbursable expenses by the advisor, or (ii) three years from the date
the Fund's shares are offered for sale. This arrangement may be
terminated at an earlier date by the advisor.
(5) "Other expenses" are based on estimated amounts for the current fiscal
year.
4
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YOUR ACCOUNT
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INVESTMENT MINIMUMS(6)
<S> <C>
Initial Investment.............$2,500
Subsequent Investments...........$250
Automatic Investment Plan.........$50
Retirement Plans..................$25
</TABLE>
HOW TO BUY SHARES
Your financial advisor can help you establish an appropriate investment
portfolio, buy shares and monitor your investments. When the Fund receives your
purchase request in "good form," your shares will be bought at the next
calculated public offering price. "Good form" means that you placed your order
with your brokerage firm or your payment has been received and your application
is complete, including all necessary signatures.
OUTLINED BELOW ARE THE VARIOUS OPTIONS FOR BUYING SHARES:
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METHOD INSTRUCTIONS
<S> <C>
Through your Your financial advisor can help you establish your account and
financial advisor buy Fund shares on your behalf.
-------------------- -----------------------------------------------------------------
By check For new accounts, send a completed application and check made
(new account) payable to the Fund to the transfer agent, Liberty Funds
Services, Inc., P.O. Box 1722, Boston, MA 02105-1722.
-------------------- -----------------------------------------------------------------
By check For existing accounts, fill out and return the additional
(existing account) investment stub included in your quarterly statement, or send a
letter of instruction including your Fund name and account
number with a check made payable to the Fund to Liberty
Funds Services, Inc., P.O. Box 1722, Boston, MA
02105-1722.
-------------------- -----------------------------------------------------------------
By exchange You or your financial advisor may acquire shares by exchanging
shares you own in one fund for shares of the same class of the
Fund at no additional cost. There may be an additional charge
if exchanging from a money market fund. To exchange by
telephone, call 1-800-422-3737.
-------------------- -----------------------------------------------------------------
By wire You may purchase shares by wiring money from your bank account
to your fund account. To wire funds to your fund account, call
1-800-422-3737 to obtain a control number and the wiring
instructions.
-------------------- -----------------------------------------------------------------
By electronic You may purchase shares by electronically transferring money
funds transfer from your bank account to your fund account by calling
1-800-422-3737. Electronic funds transfers may take up to
two business days to settle and be considered in "good
form." You must set up this feature prior to your
telephone request. Be sure to complete the appropriate
section of the application.
-------------------- -----------------------------------------------------------------
Automatic You can make monthly or quarterly investments automatically
investment plan from your bank account to your fund account. You can select a
pre-authorized amount to be sent via electronic funds
transfer. Be sure to complete the appropriate section of the
application for this feature.
-------------------- -----------------------------------------------------------------
By dividend You may automatically invest dividends distributed by one fund
diversification into the same class of shares of the Fund at no additional
sales charge. To invest your dividends in another fund, call
1-800-345-6611.
</TABLE>
(6) The Fund reserves the right to change the investment minimums. The Fund
also reserves the right to refuse a purchase order for any reason,
including if it believes that doing so would be in the best interest of
the Fund and its shareholders.
5
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YOUR ACCOUNT
CHOOSING A SHARE CLASS
The Fund offers three classes of shares in this prospectus - CLASS A, B and C.
Each share class has its own sales charge and expense structure. Determining
which share class is best for you depends on the dollar amount you are investing
and the number of years for which you are willing to invest. If your financial
advisor firm participates in the Class B discount program, purchases of over $1
million can be made in Class A or Class C shares. If your financial advisor firm
does not participate in the Class B discount program, then purchases of $1
million or more are automatically invested in Class A shares only and purchases
in excess of $250,000 but less than $1 million must be for Class A or Class C
shares only. Based on your personal situation, your investment advisor can help
you decide which class of shares makes the most sense for you.
The Fund also offers an additional class of shares, Class Z shares, exclusively
to certain institutional and other investors. Class Z shares are made available
through a separate prospectus provided to eligible institutional and other
investors.
SALES CHARGES
You may be subject to an initial sales charge when you purchase, or a contingent
deferred sales charge (CDSC) when you sell, shares of the Fund. These sales
charges are described below. In certain circumstances, these sales charges are
waived, as described below and in the Statement of Additional Information.
CLASS A SHARES Your purchases of Class A shares generally are at the public
offering price. This price includes a sales charge that is based on the amount
of your initial investment when you open your account. A portion of the sales
charge is the commission paid to the financial advisor firm on the sale of Class
A shares. The sales charge you pay on additional investments is based on the
total amount of your purchase and the current value of your account. The amount
of the sales charge differs depending on the amount you invest as shown in the
table below.
CLASS A SALES CHARGES
<TABLE>
<CAPTION>
% OF
OFFERING
AS A % OF PRICE
THE PUBLIC AS A % RETAINED BY
OFFERING OF YOUR FINANCIAL
AMOUNT OF PURCHASE PRICE INVESTMENT ADVISOR FIRM
<S> <C> <C> <C>
Less than $50,000 5.75 6.10 5.00
- ------------------------------------------- -------------- ------------- --------------
$50,000 to less than $100,000 4.50 4.71 3.75
- ------------------------------------------- -------------- ------------- --------------
$100,000 to less than $250,000 3.50 3.63 2.75
- ------------------------------------------- -------------- ------------- --------------
$250,000 to less than $500,000 2.50 2.56 2.00
- ------------------------------------------- -------------- ------------- --------------
$500,000 to less than $1,000,000 2.00 2.04 1.75
- ------------------------------------------- -------------- ------------- --------------
$1,000,000 or more(7) 0.00 0.00 0.00
</TABLE>
For Class A share purchases of $1 million or more, financial advisors receive a
commission from the distributor as follows:
PURCHASES OVER $1 MILLION
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<CAPTION>
AMOUNT PURCHASED COMMISSION %
<S> <C>
First $3 million 1.00
- -------------------------------------------- ------------------------------------------
Next $2 million 0.50
- -------------------------------------------- ------------------------------------------
Over $5 million 0.25(8)
</TABLE>
(7) Class A shares bought without an initial sales charge in accounts
aggregating $1 million to $5 million at the time of purchase are
subject to a 1% CDSC if the shares are sold within 18 months of the
time of purchase. Subsequent Class A share purchases that bring your
account value above $1 million are subject to a 1% CDSC if redeemed
within 18 months of their purchase date. Purchases in accounts
aggregating over $5 million are subject to a 1.00% CDSC only to the
extent that the sale of shares within 18 months of purchase cause the
value of the accounts to fall below the $5 million level. The 18-month
period begins on the first day of the month following each purchase.
(8) Paid over 12 months but only to the extent the shares remain
outstanding.
6
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YOUR ACCOUNT
UNDERSTANDING CONTINGENT DEFERRED SALES CHARGES (CDSC)
Certain investments in Class A, B and C shares are subject to a CDSC, a sales
charge applied at the time you sell your shares. You will pay the CDSC only on
shares you sell within a certain amount of time after purchase. The CDSC
generally declines each year until there is no charge for selling shares. The
CDSC is applied to the net asset value at the time of purchase or sale,
whichever is lower. For purposes of calculating the CDSC, the start of the
holding period is the month-end of the month in which the purchase is made.
Shares you purchase with reinvested dividends or capital gains are not subject
to a CDSC. When you place an order to sell shares, the Fund will automatically
sell first those shares not subject to a CDSC and then those you have held the
longest. This policy helps reduce and possibly eliminate the potential impact of
the CDSC.
REDUCED SALES CHARGES FOR LARGER INVESTMENTS There are two ways for you to pay a
lower sales charge when purchasing Class A shares. The first is through Rights
of Accumulation. If the combined value of the Fund accounts maintained by you,
your spouse or your minor children reaches a discount level (according to the
chart on the previous page), your next purchase will receive the lower sales
charge. The second is by signing a Statement of Intent within 90 days of your
purchase. By doing so, you would be able to pay the lower sales charge on all
purchases by agreeing to invest a total of at least $50,000 within 13 months. If
your Statement of Intent purchases are not completed within 13 months, you will
be charged the applicable sales charge on the amount you had invested to that
date. In addition, certain investors may purchase shares at a reduced sales
charge or net asset value (NAV), which is the value of a fund share excluding
any sales charges. See the Statement of Additional Information for a description
of these situations.
CLASS B SHARES Your purchases of Class B shares are at the Fund's NAV. Class B
shares have no front-end sales charge, but they do carry a CDSC that is imposed
only on shares sold prior to the completion of the periods shown in the charts
below. The CDSC generally declines each year and eventually disappears over
time. The distributor pays the financial advisor firm an up-front commission on
sales of Class B shares as depicted in the charts below.
PURCHASES OF LESS THAN $250,000:
CLASS B SALES CHARGES
<TABLE>
<CAPTION>
% DEDUCTED WHEN
HOLDING PERIOD AFTER PURCHASE SHARES ARE SOLD
<S> <C>
Through first year 5.00
-------------------------------------------- -----------------------------------------
Through second year 4.00
-------------------------------------------- -----------------------------------------
Through third year 3.00
-------------------------------------------- -----------------------------------------
Through fourth year 3.00
-------------------------------------------- -----------------------------------------
Through fifth year 2.00
-------------------------------------------- -----------------------------------------
Through sixth year 1.00
-------------------------------------------- -----------------------------------------
Longer than six years 0.00
</TABLE>
Commission to financial advisors is 5.00%.
Automatic conversion to Class A shares is eight years after purchase.
You can pay a lower CDSC and reduce the holding period when making purchases of
Class B shares through a financial advisor firm which participates in the Class
B share discount program for larger purchases as described in the charts below.
Some financial advisor firms are not able to participate because their record
keeping or transaction processing systems are not designed to accommodate these
reductions. For non-participating firms, purchases of B shares must be less than
$250,000. Consult your financial advisor to see whether it participates in the
discount program for larger purchases. For participating firms, Rights of
Accumulation apply, so that if the combined
7
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YOUR ACCOUNT
value of the Fund accounts maintained by you, your spouse or your minor children
is at or above a discount level, your next purchase will receive the lower CDSC
and the applicable reduced holding period.
PURCHASES OF $250,000 TO LESS THAN $500,000:
CLASS B SALES CHARGES
<TABLE>
<CAPTION>
% DEDUCTED WHEN
HOLDING PERIOD AFTER PURCHASE SHARES ARE SOLD
<S> <C>
Through first year 3.00
-------------------------------------------- -----------------------------------------
Through second year 2.00
-------------------------------------------- -----------------------------------------
Through third year 1.00
-------------------------------------------- -----------------------------------------
Longer than three years 0.00
</TABLE>
Commission to financial advisors is 2.50%.
Automatic conversion to Class A shares is four years after purchase.
PURCHASES OF $500,000 TO LESS THAN $1 MILLION:
CLASS B SALES CHARGES
<TABLE>
<CAPTION>
% DEDUCTED WHEN
HOLDING PERIOD AFTER PURCHASE SHARES ARE SOLD
<S> <C>
Through first year 3.00
-------------------------------------------- -----------------------------------------
Through second year 2.00
-------------------------------------------- -----------------------------------------
Through third year 1.00
</TABLE>
Commission to financial advisors is 1.75%.
Automatic conversion to Class A shares is three years after purchase.
If you exchange into a fund participating in the Class B share discount program
or transfer your fund account from a financial advisor which does not
participate in the program to one who does, the exchanged or transferred shares
will retain the pre-existing CDSC but any additional purchases of Class B shares
which cause the exchanged or transferred account to exceed the applicable
discount level will receive the lower CDSC and the reduced holding period for
amounts in excess of the discount level. Your financial advisor will receive the
lower commission for purchases in excess of the applicable discount level. If
you exchange from a participating fund or transfer your account from a financial
advisor that does participate in the program into a fund or financial advisor
which does not, the exchanged or transferred shares will retain the pre-existing
CDSC but all additional purchases of Class B shares will be in accordance with
the higher CDSC and longer holding period of the non-participating fund or
financial advisor.
CLASS C SHARES Similar to Class B shares, your purchases of Class C shares are
at the Fund's NAV. Although Class C shares have no front-end sales charge, they
carry a CDSC of 1.00% that is applied to shares sold within the first year after
they are
8
<PAGE>
YOUR ACCOUNT
purchased. After holding shares for one year, you may sell them at any time
without paying a CDSC. The distributor pays the financial advisor firm an
up-front commission of 1.00% on sales of Class C shares.
CLASS C SALES CHARGES
<TABLE>
<CAPTION>
YEARS AFTER PURCHASE % DEDUCTED WHEN SHARES ARE SOLD
<S> <C>
Through first year 1.00
- -------------------------------------------- ------------------------------------------
Longer than one year 0.00
</TABLE>
HOW TO EXCHANGE SHARES
You may exchange your shares for shares of the same share class of another fund
distributed by Liberty Funds Distributor, Inc. at net asset value. If your
shares are subject to a CDSC, you will not be charged a CDSC upon the exchange.
However, when you sell the shares acquired through the exchange, the shares sold
may be subject to a CDSC, depending upon when you originally purchased the
shares you exchanged. For purposes of computing the CDSC, the length of time you
have owned your shares will be computed from the date of your original purchase
and the applicable CDSC will be the CDSC of the original fund. Unless your
account is part of a tax-deferred retirement plan, an exchange is a taxable
event. Therefore, you may realize a gain or a loss for tax purposes. The Fund
may terminate your exchange privilege if the advisor determines that your
exchange activity is likely to adversely impact its ability to manage the Fund.
To exchange by telephone, call 1-800-422-3737.
HOW TO SELL SHARES
Your financial advisor can help you determine if and when you should sell your
shares. You may sell shares of the Fund on any regular business day that the New
York Stock Exchange (NYSE) is open.
When the Fund receives your sales request in "good form," shares will be sold at
the next calculated price. In "good form" means that money used to purchase your
shares is fully collected. When selling shares by letter of instruction, "good
form" also means (i) your letter has complete instructions, the proper
signatures and signature guarantees, (ii) you have included any certificates for
shares to be sold, and (iii) any other required documents are attached. For
additional documents required for sales by corporations, agents, fiduciaries and
surviving joint owners, please call 1-800-345-6611. Retirement plan accounts
have special requirements; please call 1-800-799-7526 for more information.
The Fund will generally send proceeds from the sale to you within seven days
(usually on the next business day after your request is received in "good
form"). However, if you purchased your shares by check, the Fund may delay
sending the proceeds from the sale of your shares for up to 15 days after your
purchase to protect against checks that are returned. No interest will be paid
on uncashed redemption checks.
9
<PAGE>
YOUR ACCOUNT
OUTLINED BELOW ARE THE VARIOUS OPTIONS FOR SELLING SHARES:
<TABLE>
<CAPTION>
METHOD INSTRUCTIONS
<S> <C>
Through your You may call your financial advisor to place your sell order.
financial advisor To receive the current trading day's price, your financial
advisor firm must receive your request prior to the close
of the NYSE, usually 4:00 p.m. Eastern time.
-------------------- -----------------------------------------------------------------
By exchange You or your financial advisor may sell shares by exchanging
from the Fund into the same share class of another fund at
no additional cost. To exchange by telephone, call
1-800-422-3737.
-------------------- -----------------------------------------------------------------
By telephone You or your financial advisor may sell shares by telephone and
request that a check be sent to your address of record by
calling 1-800-422-3737, unless you have notified the Fund of an
address change within the previous 30 days. The dollar limit
for telephone sales is $100,000 in a 30-day period. You do not
need to set up this feature in advance of your call. Certain
restrictions apply to retirement accounts. For details, call
1-800-345-6611.
-------------------- -----------------------------------------------------------------
By mail You may send a signed letter of instruction or stock power form
along with any certificates to be sold to the address below.
In your letter of instruction, note the Fund's name, share
class, account number, and the dollar value or number of shares
you wish to sell. All account owners must sign the letter, and
signatures must be guaranteed by either a bank, a member firm
of a national stock exchange or another eligible guarantor
institution. Additional documentation is required for sales by
corporations, agents, fiduciaries, surviving joint owners and
individual retirement account owners. For details, call
1-800-345-6611.
Mail your letter of instruction to Liberty Funds Services,
Inc., P.O. Box 1722, Boston, MA 02105-1722.
-------------------- -----------------------------------------------------------------
By wire You may sell shares and request that the proceeds be
wired to your bank. You must set up this feature prior to
your telephone request. Be sure to complete the
appropriate section of the account application for this
feature.
-------------------- -----------------------------------------------------------------
By electronic You may sell shares and request that the proceeds be
funds transfer electronically transferred to your bank. Proceeds may take up
to two business days to be received by your bank. You must set
up this feature prior to your request. Be sure to complete the
appropriate section of the account application for this feature.
</TABLE>
DISTRIBUTION AND SERVICE FEES
The Fund has adopted a plan under Rule 12b-1 that permits it to pay marketing
and other fees to support the sale and distribution of Class A, B and C shares
and the services provided to you by your financial advisor. The annual
distribution fee and service fee may equal up to 0.00% and 0.25%, respectively,
for Class A shares and 0.75% and 0.25%, respectively, for each of Class B and
Class C shares and are paid out of the assets of these classes. Over time, these
fees will increase the cost of your shares and may cost you more than paying
other types of sales charges.(9)
(9) Class B shares automatically convert to Class A shares after a certain
number of years, depending on the program you purchased your shares
under, eliminating the distribution fee upon conversion.
10
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YOUR ACCOUNT
OTHER INFORMATION ABOUT YOUR ACCOUNT
HOW THE FUND'S SHARE PRICE IS DETERMINED The price of each class of the Fund's
shares is based on its net asset value (NAV). The NAV is determined at the close
of regular trading on the NYSE, usually 4:00 p.m. Eastern time, on each business
day that the NYSE is open (typically Monday through Friday).
When you request a transaction, it will be processed at the NAV (plus any
applicable sales charges) next determined after your request is received in
"good form" by the distributor. In most cases, in order to receive that day's
price, the distributor must receive your order before that day's transactions
are processed. If you request a transaction through your financial advisor's
firm, the firm must receive your order by the close of trading on the NYSE to
receive that day's price.
The Fund determines its NAV for each share class by dividing each class's total
net assets by the number of that class's shares outstanding. In determining the
NAV, the Fund must determine the price of each security in its portfolio at the
close of each trading day. Securities for which market quotations are available
are valued each day at the current market value. However, where market
quotations are unavailable, or when the advisor believes that subsequent events
have made them unreliable, the Fund may use other data to determine the fair
value of the securities.
You can find the daily prices of some share classes for the Fund in most major
daily newspapers under the caption "Liberty." You can find daily prices for all
share classes by visiting the Fund's web site at www.libertyfunds.com.
ACCOUNT FEES If your account value falls below $1,000 (other than as a result of
depreciation in share value) you may be subject to an annual account fee of $10.
This fee is deducted from the account in June each year. Approximately 60 days
prior to the fee date, the Fund's transfer agent will send you written
notification of the upcoming fee. If you add money to your account and bring the
value above $1,000 prior to the fee date, the fee will not be deducted.
SHARE CERTIFICATES Share certificates are not available for Class B and C
shares. Certificates will be issued for Class A shares only if requested. If you
decide to hold share certificates, you will not be able to sell your shares
until you have endorsed your certificates and returned them to the distributor.
11
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YOUR ACCOUNT
UNDERSTANDING FUND DISTRIBUTIONS
The Fund earns income from the securities it holds. The Fund also may realize
capital gains and losses on sales of its securities. The Fund distributes
substantially all of its net investment income and capital gains to
shareholders. As a shareholder, you are entitled to a portion of the Fund's
income and capital gains based on the number of shares you own at the time these
distributions are declared.
DIVIDENDS, DISTRIBUTIONS, AND TAXES The Fund has the potential to make the
following distributions:
TYPES OF DISTRIBUTIONS
<TABLE>
<CAPTION>
<S> <C>
Dividend Represents interest and dividends earned from securities
held by the Fund.
-------------------- ----------------------------------------------------------
Capital gains Represents net long-term capital gains on sales of
securities held for more than 12 months and net short-term
capital gains, which are gains on sales of securities held
for a 12-month period or less.
</TABLE>
DISTRIBUTION OPTIONS The Fund distributes dividends and any capital gains
(including short-term capital gains) at least annually. You can choose one of
the options listed in the table below for these distributions when you open your
account.(10) To change your distribution option call 1-800-345-6611.
DISTRIBUTION OPTIONS
Reinvest all distributions in additional shares of your current fund
-------------------------------------------------------------------------------
Reinvest all distributions in shares of another fund
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Receive dividends in cash (see options below) and reinvest capital gains(11)
-------------------------------------------------------------------------------
Receive all distributions in cash (with one of the following options) (11):
o send the check to your address of record
o send the check to a third party address
o transfer the money to your bank via electronic funds transfer
TAX CONSEQUENCES Regardless of whether you receive your distributions in cash or
reinvest them in additional Fund shares, all Fund distributions are subject to
federal income tax. Depending on the state where you live, distributions may
also be subject to state and local income taxes.
In general, any distributions of dividends, interest and short-term capital
gains are taxable as ordinary income. Distributions of long-term capital gains
are generally taxable as such, regardless of how long you have held your Fund
shares. You will be provided with information each year regarding the amount of
ordinary income and capital gains distributed to you for the previous year and
any portion of your distribution which is exempt from state and local taxes.
Your investment in the Fund may have additional personal tax implications.
Please consult your tax advisor on foreign, federal, state, local or other
applicable tax laws.
In addition to the dividends and capital gains distributions made by the Fund,
you may realize a capital gain or loss when selling and exchanging shares of the
Fund. Such transactions may be subject to federal, state and local income tax.
(10) If you do not indicate on your application your preference for handling
distributions, the Fund will automatically reinvest all distributions
in additional shares of the Fund.
(11) Distributions of $10 or less will automatically be reinvested in
additional Fund shares. If you elect to receive distributions by check
and the check is returned as undeliverable, or if you do not cash a
distribution check within six months of the check date, the
distribution will be reinvested in additional shares of the Fund.
12
<PAGE>
MANAGING THE FUND
INVESTMENT ADVISOR
Stein Roe & Farnham Incorporated (Stein Roe), located at One South Wacker Drive,
Chicago, Illinois 60606, is the Fund's investment advisor. In its duties as
investment advisor, Stein Roe runs the Fund's day-to-day business, including
placing all orders for the purchase and sale of the Fund's portfolio securities.
Stein Roe has been an investment advisor since 1932. As of January 31, 2000,
Stein Roe managed over $24 billion in assets.
Stein Roe's mutual funds and institutional investment advisory businesses are
part of a larger business unit that includes several separate legal entities
known as Liberty Funds Group LLC (LFG). LFG includes certain affiliates of Stein
Roe, principally Colonial Management Associates, Inc. (Colonial). Stein Roe and
the LFG business unit are managed by a single management team. Stein Roe,
Colonial and the other LFG entities also share personnel, facilities and systems
that may be used in providing administrative or operational services to the
Fund. Colonial is a registered investment advisor. Stein Roe, Colonial and the
other entities that make up LFG are subsidiaries of Liberty Financial Companies,
Inc.
Stein Roe can use the services of AlphaTrade Inc., an affiliated broker-dealer,
when buying or selling equity securities for the Fund's portfolio, pursuant to
procedures adopted by the Board of Trustees.
PORTFOLIO MANAGERS
The Fund is managed by a team of investment professionals assigned to it by
Stein Roe. No single individual has primary management responsibility over the
Fund's portfolio securities.
ADVISOR PERFORMANCE INFORMATION
The Fund is managed by the same team of investment professionals that currently
manage Stein Roe Advisor Tax-Managed Growth Fund (Fund I). Fund I's investment
goals of long-term capital growth while reducing shareholder exposure to taxes
are identical to the Fund's investment goals.
The following table includes the average annual total returns for Fund I and the
Standard & Poor's 500 Index (S&P Index) and the Lipper Growth Funds category
average (Lipper Average) from December 30, 1996 (Fund I's inception date)
through December 31, 1999. The performance figures for Fund I take into account
the estimated fees and expenses of the Fund's Class A shares, including any fee
waiver or reimbursement and including the sales charges on Class A shares.
13
<PAGE>
MANAGING THE FUND
<TABLE>
<CAPTION>
Periods ended December 31, 1999
LIFE OF THE
1 YEAR 2 YEARS 3 YEARS FUND(12)
<S> <C> <C> <C> <C>
Fund I (%) 20.72 21.09 22.18 21.98
- --------------------------------- ------------- ------------ ------------ -------------
S&P Index (%)(13) 21.03 24.76 27.56 27.56(14)
- --------------------------------- ------------- ------------ ------------ -------------
Lipper Average (%)(13) 27.24 20.63 20.74 20.74(14)
</TABLE>
Fund I's investment performance (i) represents total return, assuming
reinvestment of all dividends and proceeds from capital transactions; and (ii)
has been adjusted for fees and expenses that would be imposed on Class A shares
of Fund I. Performance calculations reflect the deduction of the sales charge
applicable to Class A shares of Fund I. Performance information was calculated
using the Securities and Exchange Commission's method of calculating total
return of a mutual fund. The returns would have been different if expenses and
sales loads applicable to classes other than Class A had been applied.
FUND I'S PERFORMANCE FIGURES DO NOT REPRESENT PAST PERFORMANCE OF THE FUND AND
SHOULD NOT BE VIEWED AS INDICATIVE OF FUTURE PERFORMANCE RESULTS FOR THE FUND.
Among other things, the fees, expenses and sales charges applicable to an
investment in the Fund may be higher than those assumed in calculating Fund I's
returns, which would negatively impact the Fund's performance relative to Fund
I's performance. Cash flows into and out of the Fund may also negatively impact
the Fund's performance relative to Fund I's performance.
(12) Performance information is from the effective date of registration
(December 30, 1996) with the Securities and Exchange Commission.
(13) The S&P Index is an unmanaged index that tracks the performance of U.S.
stock market securities. Unlike the Fund, indices are not investments,
do not incur fees or expenses and are not professionally managed. It is
not possible to invest directly in indices. The Lipper Average, which
is calculated by Lipper, Inc., is the average return and is composed of
funds with similar investment objectives to the Fund. Sales charges are
not reflected in the Lipper Average.
(14) Performance information is from December 31, 1996.
14
<PAGE>
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15
<PAGE>
FOR MORE INFORMATION
More information about the Fund's investments will be published in the Fund's
semi-annual and annual reports to shareholders. The annual report will contain a
discussion of the market conditions and investment strategies that significantly
affected the Fund's performance over its last fiscal year.
You may wish to read the Statement of Additional Information for more
information on the Fund and the securities in which it invests. The Statement of
Additional Information is incorporated into this prospectus by reference, which
means that it is considered to be part of this prospectus.
You can get free copies of reports and the Statement of Additional Information,
request other information and discuss your questions about the Fund by writing
or calling the Fund's distributor at:
Liberty Funds Distributor, Inc.
One Financial Center
Boston, MA 02111-2621
1-800-426-3750
www.libertyfunds.com
Text-only versions of all Fund documents can be viewed online or downloaded from
the Edgar database on the Securities and Exchange Commission internet site at
www.sec.gov.
You can review and copy information about the Fund by visiting the following
location, and you can obtain copies, upon payment of a duplicating fee by
electronic request at the E-mail address [email protected] or by writing the:
Public Reference Room
Securities and Exchange Commission
Washington, DC 20549-0102
Information on the operation of the Public Reference Room may be obtained by
calling 1-202-942-8090.
INVESTMENT COMPANY ACT FILE NUMBER:
Liberty Funds Trust I: 811-2214
- - Stein Roe Advisor Tax-Managed Growth Fund II
[STATUE LOGO] LIBERTY FUNDS
ALL-STAR - COLONIAL - CRABBE HUSON - NEWPORT - STEIN ROE ADVISOR
Liberty Funds Distributor, Inc. (C) 2000
One Financial Center, Boston, MA 02111-2621, 1-800-426-3750
www.libertyfunds.com
