LIBERTY TAX-MANAGED GROWTH FUND
LIBERTY TAX-MANAGED GROWTH FUND II
(the Funds)
SUPPLEMENT TO PROSPECTUS AND STATEMENT OF
ADDITIONAL INFORMATION
(Replacing Supplements dated December
15, 2000, November 20, 2000, August 21, 2000, August 1, 2000)
The Prospectuses and Statements of Additional Information are revised as
follows:
1. On January 1, 2001, Stein Roe & Farnham Incorporated (SRF), the investment
advisor to the Funds, retained Stein Roe Investment Counsel LLC (SRIC) as a
sub-advisor to manage the assets of each Fund. Shareholders of the Funds
approved the sub-advisory agreements with SRIC at special meetings of the
Funds held on December 27, 2000. Previously, the Funds had been managed by
a core team of investment professionals within the Private Capital
Management (PCM) division of SRF.
Under each of the sub-advisory agreements, SRF pays SRIC a monthly base fee
at the annual rate of 0.20% of the average daily net assets of the Fund
(Base Fee), which may be adjusted to an annual rate as high as 0.25% or an
annual rate as low as 0.15% depending on the Fund's performance. The total
monthly fee payable to SRIC is determined by multiplying the Base Fee by a
performance adjustment rate (Performance Adjustment Rate), which is
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 Performance Adjustment Rates applicable to each
Morningstar ranking are as follows:
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Performance
Morningstar Ranking Adjustment Rate
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Quartile 1 1.25
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Quartile 2 1.00
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Below Median 0.75
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The sub-advisory agreements also provide that SRIC shall not receive a fee
less than $350,000 per annum in the aggregate for managing both Funds. SRF
pays the sub-advisory fees to SRIC under the sub-advisory agreements. The
Funds do not pay any fees to SRIC.
SRIC, located at One South Wacker Drive, Suite 3500, Chicago, Illinois
60606, is the successor to the business previously conducted by the PCM
division of SRF, which Liberty Financial Companies, Inc., SRF's parent
entity, sold to certain executives of PCM and an outside investor in a
transaction that closed on December 31, 2000. It is expected that
substantially the same core portfolio team of investment professionals that
managed the Funds as part of PCM will be assigned the responsibility of
managing the Funds at SRIC.
2. The Funds' Statements of Additional Information are amended as follows:
From time to time, Liberty Funds Distributor, Inc. (LFDI) or its affiliates
may elect to make payments to broker-dealers in addition to the commissions
described in the funds' statements of additional information. With respect
to the above listed funds, LFDI will reallow to participating
broker-dealers the entire sales charge for all sales of Class A shares for
orders placed for Individual Retirement Accounts (IRA's) from January 2,
2001 through April 16, 2001. With respect to each of the above listed
funds, LFDI has elected to pay participating dealers an amount equal to
0.50% of the net asset value of the funds' Class B shares sold to IRA's
from January 2, 2001 through April 16, 2001.
3. The following is added to the section "ORGANIZATION AND HISTORY" of each
Fund's Statement of Additional Information
On November 1, 2000, Liberty Financial Companies, Inc. (Liberty
Financial), the ultimate parent of the Funds' advisor, announced that
it had retained CS First Boston to help it explore strategic
alternatives, including the possible sale of Liberty Financial.
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4. Pursuant to the Board of Trustees' approval, the shareholders' servicing
and transfer agency fee arrangement between Liberty Funds Services, Inc.
(LFS) and each Fund has bee revised, effective January 1, 2000. Each Fund
pays LFS a monthly fee at the annual rate of 0.07% of the average daily
closing value of the total net assets of each Fund for such month. In
addition to this compensation, each Fund pays LFS the following fees:
1. A transaction fee of $1.18 per transaction occurring in Fund accounts
during any month; PLUS
2. An account fee for open accounts of $4.00 per annum, payable on a
monthly basis, in an amount equal to 1/12 the per annum charge; PLUS
3. An account fee for closed accounts of $1.50 per annum, payable on a
monthly basis, in an amount equal to 1/12 the per annum charge; PLUS
4. Each Fund's allocated share of LFS reimbursement out-of-pocket
expenses.
5. The footnote to the table "Class A Sales Charges" under the subcaption
SALES CHARGES under the section YOUR ACCOUNT in each Fund's Prospectus, is
revised as follows:
Class A shares bought without an initial sales charge in accounts
aggregating $1 million to $25 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 purchases that bring your account value above
$1 million are subject to a CDSC if redeemed within 18 months of the date
of purchase. The 18 month period begins on the first day of the month
following each purchase. The contingent deferred sales charge does not
apply to retirement plans purchased through a fee-based program.
6. The following replaces the table called "Purchases Over $1 Million" under
the subcaption SALES CHARGES under the section YOUR ACCOUNT in each Fund's
Prospectus:
Amount purchased Commission %
First $3 million 1.00
$3 Million to less than $5 million 0.80
$5 million to less than $25 million 0.50
$25 million or more 0.25*
* Paid over 12 months but only to the extent the shares remain outstanding.
For Class A share purchases by participants in certain group retirement
plans offered through a fee-based program, financial advisors receive a 1%
commission from the distributor on all purchases of less than $3 million.
January 12, 2001
