COLONIAL SELECT VALUE FUND
One Financial Center, Boston, Massachusetts 02111
(617) 426-3750
Dear Shareholder:
Colonial Select Value Fund (Fund) will hold a Special Meeting of Shareholders
(Meeting) on October 13, 1999 at 11:00 a.m., Eastern time, at the offices of
Colonial Management Associates, Inc. the Fund's investment advisor. A Notice of
Special Meeting of Shareholders appears on the next page, followed by the proxy
statement which explains in more detail the proposal 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 THROUGH THE INTERNET, BY MAIL, BY FAX (NOT AVAILABLE FOR ALL
SHAREHOLDERS; REFER TO ENCLOSED PROXY INSERT) OR IN PERSON. TO VOTE THROUGH THE
INTERNET, JUST FOLLOW THE SIMPLE INSTRUCTIONS THAT APPEAR ON THE ENCLOSED PROXY
INSERT. PLEASE HELP YOUR FUND AVOID THE EXPENSE OF A FOLLOW-UP MAILING BY VOTING
TODAY!
The Fund is using Shareholder Communications Corporation (SCC), a professional
proxy solicitation firm, to assist shareholders in the voting process. If you
have any questions regarding the Proxy Statement, please feel free to call SCC
at 1-800-732-3683 or by fax at 1-800-733-1885. As the date of the 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 the proposal. We appreciate
your participation and prompt response in this matter, and thank you for your
continued support.
Sincerely,
[GRAPHIC OMITTED]
Stephen E. Gibson, President
August 30, 1999
SV-85/467H-0799
COLONIAL SELECT VALUE FUND
One Financial Center, Boston, Massachusetts 02111
(617) 426-3750
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 13, 1999
Dear Shareholder:
The Special Meeting of Shareholders (Meeting) of Colonial Select Value
Fund (Fund) will be held at the offices of Colonial Management Associates, Inc.
(Advisor), One Financial Center, Boston, Massachusetts, on Wednesday, October
13, 1999, at 11:00 a.m.
Eastern time, to:
1. Approve an Amended and Restated Management Agreement providing for
an increase in the management fee paid by the Fund; and
2. Transact such other business as may properly come before the Meeting
or any adjournment thereof.
By order of the Board of Trustees,
Nancy L. Conlin, Secretary
August 30, 1999
NOTICE: YOUR VOTE IS IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU
OWN. YOU CAN VOTE EASILY AND QUICKLY ON THE INTERNET, BY MAIL,
BY FAX (NOT AVAILABLE FOR ALL SHAREHOLDERS; REFER TO ENCLOSED
PROXY INSERT) OR IN PERSON. TO VOTE THROUGH THE INTERNET, JUST
FOLLOW THE SIMPLE INSTRUCTIONS THAT APPEAR ON THE ENCLOSED
PROXY INSERT. PLEASE HELP YOUR FUND AVOID THE EXPENSE OF A
FOLLOW-UP MAILING BY VOTING TODAY!
SPECIAL MEETING OF SHAREHOLDERS
PROXY STATEMENT
General Information
August 30, 1999
The enclosed proxy, which was first mailed on or about August 30, 1999,
is solicited by the Board of Trustees for use at the Meeting. All properly
executed proxies received in time for the Meeting will be voted as specified in
the proxy or, if no specification is made, in favor of the proposal referred to
in the Proxy Statement. The proxy may be revoked prior to its exercise by a
later dated proxy, by written revocation received by the Secretary or by voting
in person. Solicitation may be made by mail, fax, telephone, telegraph,
telecopy, Internet and personal interviews. Authorization to execute proxies may
be obtained by telephonically or electronically transmitted instructions.
Shareholder Communications Corporation (SCC) has been engaged to assist in the
solicitation of proxies. The cost of this assistance in not expected to exceed
$114,625. The Advisor will bear the cost of the printing and mailing of proxy
materials and the tabulation of votes. By voting as soon as you receive your
proxy materials, you will help to reduce the cost of any additional mailings.
Shareholders who owned shares as of the close of business on the Record
Date, August 6, 1999, 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 through the Internet, using the "control" number that appears on the
enclosed proxy card. Voting by Internet will reduce Fund 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 proposal you are asked to vote on.
Holders of thirty percent of the shares outstanding and entitled to
vote constitute a quorum and must be present in person or represented by proxy
for business to be transacted at the Meeting. On August 6, 1999, the Fund had
the following outstanding shares of beneficial interest: 18,610,991 Class A
shares, 15,312,862 Class B shares, 1,001,062 Class C shares and 46 Class Z
shares. Shareholders of record at the close of business on August 6, 1999 will
have one vote for each share held. As of August 6, 1999, the following
shareholders owned more than 5% of the Fund's outstanding shares:
Number of Percentage of
Name and Address Shares Owned Shares Owned
Class B Shares
Merrill Lynch, Pierce, Fenner & Smith, Icn. 797,086.451 5.2%
For the sole benefit of its customers
Attn: Fund Administration #973D4
4800 Deer Lake Dr. E 2nd Fl
Jacksonville, FL 32246-6484
Class C Shares
Banc One Securities Corp 273,768.479 27.3%
FBO The One Select Portfolio
733 Greencrest Drive
Westerville, OH 43081
Merrill Lynch, Pierce, Fenner & Smith Inc. 199,540.094 19.9%
For the sole benefit of its customers
Attn: Fund Administration #97RD5
4800 Deer Lake Dr. E 2nd Fl
Jacksonville, FL 32246-6484
Class Z Shares
Colonial Management Associates 45.517 100.0%
Attn: Finance Dept
One Financial Center
Boston, MA 02111
Votes cast by proxy or in person will be counted by persons appointed
by the Fund to act as election tellers for the Meeting. The tellers will count
the total number of votes cast "for" approval of the proposal for purposes of
determining whether sufficient affirmative votes have been cast. Where 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), the shares will be counted as present and entitled to vote
for purposes of determining the presence of a quorum. With respect to approval
of the Amended and Restated Management Agreement, withheld authority,
abstentions and broker non-votes have the effect of a vote against the proposal.
Further information concerning the Fund is contained in its most recent
Annual and Semiannual Reports to shareholders, which are obtainable free of
charge by writing the Advisor at One Financial Center, Boston, Massachusetts
02111 or by calling 1-800-426-3750.
1. APPROVAL OF AN AMENDED AND RESTATED MANAGEMENT AGREEMENT.
A. Description of Proposal.
The Advisor serves as the Fund's investment advisor under an amended
and restated management agreement dated September 30, 1997 (Current Management
Agreement). Shareholders of the Fund last approved the Current Management
Agreement on September 30, 1997. At the September 30, 1997 meeting, shareholders
approved an increase in the management fee paid to the Advisor, changing the
monthly fee then paid at the annual rate of 0.60% of the Fund's average daily
net assets, adjusted upward or downward on the basis of the Fund's performance
relative to the performance of the S & P 500 to 0.70% of the Fund's average
daily net assets. At the October 13, 1999 Meeting, shareholders of the Fund will
again be asked to approve an amended and restated management agreement (New
Management Agreement) to increase the Advisor's management fee. There are no
other changes being made to the Current Management Agreement.
The Proposed New Management Agreement. The Fund's Board of Trustees
approved the New Management Agreement at a meeting held on June 18, 1999. The
form of the New Management Agreement, which is attached as Exhibit A, is
substantially identical to the Current Management Agreement, except for the
increase in the management fee.
Under the terms of the Current Management Agreement, the Advisor is
paid a management fee of 0.70% on the average daily net assets of the Fund. In
comparison, under the terms of the New Management Agreement, the Advisor would
be paid a management fee of 0.75% on the average daily net assets of the Fund.
For the fiscal year ended October 31, 1998, the management fee payable to the
Advisor by the Fund under the Current Management Agreement was $4,409,715. If
the New Management Agreement had been in effect during such fiscal year, the
management fee payable by the Fund would have been $4,734,329 (or 7.36% more
than the fee under the Current Management Agreement).
Shareholder Fees (paid directly from your investment)
The following table summarizes the Fund's current transaction expenses
and annual operating expenses for each class of the Fund's shares, based, except
where otherwise indicated, on expenses incurred in the most recent fiscal year:
Class A Class B Class C Class Z
Maximum sales charge (load)
on purchases (%) (as a
percentage of offering price) 5.75 0.00 0.00 0.00
Maximum deferred sales charge
(load) on redemptions (%) (as
a 1.00(2) 5.00 1.00 0.00
percentage of offering price)
Redemption fee(1)
(as a percentage of amount
redeemed if applicable) None None None None
(1) There is a $7.50 charge for wiring sales proceeds to your bank.
(2) This charge applies only to purchases of $1 million to $5 million if
shares obtained through these purchases are redeemed within 18 months
after purchase.
Annual Fund Operating Expenses
Class A Class B Class C Class Z
Management fee (%) 0.70 0.70 0.70 0.70
Distribution and
service (12b-1) fees (%) 0.24 0.99 0.99 0.00
Other expenses (%) 0.38 0.38 0.38 0.38
---- ---- ---- ----
Total operating expenses (%) 1.32 2.07 2.07 1.08
==== ==== ==== ====
Example Expenses (your actual cost may by higher or lower)
The following table shows the cumulative current expenses attributable
to a hypothetical $10,000 investment in each class of shares of the Fund for the
periods specified, assuming a 5% annual return, Fund expenses remain the same
throughout the period and all distributions are reinvested:
<TABLE>
<S> <C> <C> <C> <C>
Class 1 Year 3 Years 5 Years 10 Years
Class A $702 $969 $1,257 $2,075
- ---------------------------------- ---------- ------------ ------------ ------------
Class B: did not sell your shares $210 $649 $1,114 $2,209
Sold all your shares at
the end of the period $710 $949 $1,314 $2,209
- ---------------------------------- ---------- ------------ ------------ ------------
Class C: did not sell your shares $210 $649 $1,114 $2,401
Sold all your shares at
the end of the period $310 $649 $1,114 $2,401
- ---------------------------------- ---------- ------------ ------------ ------------
Class Z $110 $344 $596 $1,318
</TABLE>
Had the New Management Agreement been in effect, the Annual Operating
Expenses for each class of shares would have been the following:
Annual Fund Operating Expenses under the New Management Agreement
Class A Class B Class C Class Z
Management fee (%) 0.75 0.75 0.75 0.75
Distribution and service
(12b-1) fees (%) 0.24 0.99 0.99 0.00
Other expenses (%) 0.38 0.38 0.38 0.38
---- ---- ---- ----
Total operating expenses (%) 1.37 2.12 2.12 1.13
==== ==== ==== ====
Had the New Management Agreement been in effect, the estimated costs of
investing in the Fund, as presented in the example above, would have been the
following:
Example Expenses under the New Management Agreement
<TABLE>
<S> <C> <C> <C> <C>
Class 1 Year 3 Years 5 Years 10 Years
Class A $707 $984 $1,282 $2,127
- ---------------------------------- ---------- ------------ ------------ ------------
Class B: did not sell your shares $215 $664 $1,139 $2,262
Sold all your shares at
the end of the period $715 $964 $1,339 $2,262
- ---------------------------------- ---------- ------------ ------------ ------------
Class C: did not sell your shares $215 $664 $1,139 $2,453
Sold all your shares at
the end of the period $315 $664 $1,139 $2,453
- ---------------------------------- ---------- ------------ ------------ ------------
Class Z $115 $359 $623 $1,376
</TABLE>
B. Considerations by the Board of Trustees.
The Advisory Fees and Expenses Committee (Committee) of the Board of
Trustees met on May 21, 1999, to consider, among other things, the new
management fee proposed by the Advisor. The Advisor stated that in light of the
Fund's investment objective and policies, in the Advisor's view an increase in
compensation paid to the Advisor would be appropriate to meet the increased cost
of technology used to manage the Fund and to retain quality investment
management personnel.
The Advisor stated that the Fund performed well relative to other funds
in the Lipper Mid-Cap Universe category. For the three years ended December 31,
1998, the Fund's average annual return was 22.43%, placing the Fund at the top
15% of its peer group.
The Advisor provided the Committee with information about the
management fee rates, total expense ratios and investment performance of a group
of comparable U.S. equity growth funds similar in size to the Fund. The Advisor
provided the Committee with other information including, but not limited to,
information concerning the Advisor's investment, sales, marketing and
administrative support personnel, the benefits, including revenue and net
income, derived by the Advisor from managing the Fund under the current fee, and
other information requested by the Committee.
The Committee considered all of the information provided by the
Advisor, along with the nature, quality and scope of the services provided to
the Fund by the Advisor, and at a meeting held on June 18, 1999, determined to
recommend to the full Board of Trustees that the proposed change in the
management fee be approved.
The full Board of Trustees met on June 18, 1999, to consider, among
other things, the proposed management fee change. The Advisor reviewed the
proposal with the full Board of Trustees at the meeting and provided the Board
of Trustees with information supplied to the Committee along with additional
information. The Board of Trustees also was provided with the Committee's
recommendation and the reasons therefor. Based on the information provided to
the Board of Trustees, particularly information concerning the general level of
fees and expenses among comparable funds and the Fund's performance relative to
other funds in its category, the Board of Trustees unanimously approved the new
management fee subject to approval by shareholders.
C. Trustees, Officers and Other Information.
The Fund is a series of Liberty Funds Trust III (Trust). On August 6,
1999, the Trustees and officers of the Trust owned less than 1% of the
outstanding shares of the Fund. John V. Carberry is a Trustee of the Trust and a
Senior Vice President of Liberty Financial Companies, Inc. (Liberty Financial),
the indirect parent company of the Advisor. Mr. Carberry is the owner of common
shares and other securities of Liberty Financial, none of which represent a
substantial interest in Liberty Financial.
D. Information Concerning the Advisor and its Affiliates.
The Advisor is a wholly-owned subsidiary of Liberty Funds Group LLC
(LFG), which in turn is a direct wholly-owned subsidiary of Liberty Financial
Services, Inc. which in turn is a direct wholly-owned subsidiary of Liberty
Financial. Liberty Financial 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 July 31, 1999, LFC Management Corporation owned 71.4% in common stock of
Liberty Financial. Liberty Financial is a diversified and integrated asset
management organization which provides insurance and investment products to
individuals and institutions. The principal executive offices for Liberty
Financial, 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 Massachusetts-chartered mutual property and casualty insurance
company. The principal business activities of Liberty Mutual's subsidiaries
other than Liberty Financial 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 for Liberty Mutual
and Liberty Mutual Equity Corporation are located at 175 Berkeley Street,
Boston, Massachusetts 02117.
The directors of the Advisor are Nancy L. Conlin, Stephen E. Gibson and
Joseph R. Palombo. Mr. Gibson is the principal executive officer of the Advisor.
The principal occupations of the Advisor's directors are as officers and
directors of the Advisor and certain of its affiliates. The address of the
directors and officers of the Advisor is One Financial Center, Boston,
Massachusetts 02111.
The following officers of the Trust are officers, employees or
directors of the Advisor: Stephen E. Gibson is President of the Trust and
Chairman of the Board, President, Chief Executive Officer and Director of the
Advisor; Joseph R. Palombo is Vice President of the Trust and Executive Vice
President and Director of the Advisor; Timothy J. Jacoby is Treasurer and Chief
Financial Officer of the Trust and Senior Vice President, Chief Financial
Officer and Treasurer of the Advisor; J. Kevin Connaughton is Controller and
Chief Accounting Officer of the Trust and Vice President of the Advisor; Nancy
L. Conlin is Secretary of the Trust and Senior Vice President, General Counsel,
Director, Clerk and Secretary of the Advisor.
The Current and New Management Agreements provide that, subject to the
Board of Trustees' supervision, the Advisor will manage the assets of the Fund
in accordance with its Prospectus and Statement of Additional Information,
purchase and sell securities and other investments on behalf of the Fund and
report results to the Board of Trustees periodically. The Current and New
Management Agreements also require the Advisor to furnish, at its expense: (a)
office space, supplies, facilities and equipment; (b) executive and other
personnel for managing the affairs of the Fund (excluding custodial, transfer
agency, pricing and certain record keeping services); and (c) compensation to
Trustees who are directors, officers or employees of the Advisor or its
affiliates.
The Current and New Management Agreements may be terminated at any time
by the Advisor, by the Board of Trustees or by vote of a majority of the
outstanding voting securities of the Fund without penalty on 60 days' written
notice; shall automatically terminate upon any assignment; and otherwise shall
continue in effect from year to year if approved annually (1) by the Board of
Trustees or by vote of a majority of the outstanding voting securities of the
Fund and (2) by a majority of the Trustees who are not "interested persons" as
defined under the Investment Company Act of 1940 (1940 Act).
The Advisor provides bookkeeping and pricing services to the Fund
pursuant to a separate Pricing and Bookkeeping Agreement under which the Advisor
is paid a monthly fee of $2,250 for the first $50 million of the Fund's net
assets, plus a monthly percentage fee at the following annual rates: 0.035% on
the next $950 million; 0.025% on the next $1 billion; 0.015% on the next $1
billion; and 0.001% on the excess over $3 billion of the average daily net
assets of the Fund for such month. For these services, the Fund paid the Advisor
approximately $230,000 for the fiscal year ended October 31, 1998.
Liberty Funds Services, Inc. (Transfer Agent), an affiliate of the
Advisor, serves as the Fund's shareholder servicing and transfer agent. The
Transfer Agent is paid a monthly fee based on an annual rate of 0.236% of the
Fund's average daily net assets, plus certain out-of-pocket expenses. For these
services, the Fund paid the Transfer Agent approximately $1,816,000 for the
fiscal year ended October 31, 1998.
Liberty Funds Distributor, Inc. (Distributor), a subsidiary of the
Advisor, serves as the distributor for the Fund's shares. For the fiscal year
ended October 31, 1998, the Distributor retained net underwriting discounts of
$882,631 on sales of the Fund's Class A shares and received contingent deferred
sales charges of $6,687 on Class A share redemptions, $376,630 on Class B share
redemptions and $3,805 on Class C share redemptions, respectively. The
Distributor is also paid a monthly service fee at an annual rate of 0.15% of the
Fund's net assets attributed to shares outstanding prior to April 1, 1989 and
0.25% of the Fund's net assets attributed to shares issued thereafter. The Fund
also pays the Distributor a monthly fee of 0.75% of the average daily net assets
attributed to the Fund's Class B and Class C shares. The Fund paid the
Distributor service fees of approximately $1,544,000 and distribution fees
applicable to Class B shares and Class C shares of approximately $1,837,000 and
approximately $41,000 respectively, for the fiscal year ended October 31, 1998.
The Advisor paid an aggregate amount of $58,000 in brokerage
commissions to AlphaTrade, an affiliated broker-dealer of the Advisor used for
buying and selling equity securities for the Fund, for the fiscal year ended
October 31, 1998. The aggregate amount of $58,000 consisted of 16.7% of the
aggregate brokerage commissions paid by the Fund for fiscal year ended October
31, 1999.
In addition to the fees described above, the Fund pays all of its
expenses not assumed by the Advisor, including, without limitation, fees and
expenses of the Independent Trustees, interest charges, taxes, brokerage
commissions, expenses of issuance or redemption of shares, fees and expenses of
registering and qualifying shares of the Fund for distribution under federal and
state laws and regulations, custodial, auditing and legal expenses, expenses of
providing reports to shareholders, expenses of meetings of shareholders,
expenses of printing and mailing prospectuses, proxy statements and proxies to
existing shareholders, and its proportionate share of insurance premiums and
professional association dues or assessments. With respect to the Trust, all
general Trust expenses are allocated among and charged to the assets of each
fund in the Trust, including the Fund, on a basis that the Board of Trustees
deems fair and equitable, which may be based on the relative net assets of such
funds or the nature of the services performed and relative applicability of the
services to each fund. Each fund also is responsible for such non-recurring
expenses as may arise, including litigation in which the fund may be a party and
other expenses as determined by the Board of Trustees. Each fund may have an
obligation to indemnify its officers and Trustees with respect to litigation.
E. Other Funds Managed by the Advisor.
In addition to the services provided by the Advisor to the Fund, the
Advisor also provides management and other services and facilities to other
investment companies. Information with respect to the assets of and management
fees payable to the Advisor by those funds having investment objectives similar
to those of the Fund is set forth below:
<PAGE>
Annual Management/
Total Net Assets Administration Fee as a %
at July 31, 1999 of Average
Fund (in millions) Daily Net Assets
Colonial Small Cap Value Fund $247 0.80%
Colonial U.S.
Growth & $343 0.80% (1)
Income Fund
Colonial U.S. Growth & Income
Fund, Variable Series $188 0.60% (2)
(1) Under the fund's management agreement, the fund pays the Advisor a
monthly fee at the annual rate of 0.80% of the first $1 billion of the
average daily net assets of the fund and 0.70% in excess of $1 billion,
subject to any voluntary reduction that the Advisor may agree to from
time to time. Effective November 1, 1998, the Advisor has voluntarily
agreed, until further notice, to reduce the fee from 0.70% to 0.60% on
assets in excess of $1 billion.
(2) The Advisor acts as the sub-advisor and receives a sub-advisory fee of
0.60% of the fund's average daily net assets from Liberty Advisory
Services Corp. (LASC), the Fund's manager. The fee is for investment
management services only. The management fee rate payable by the fund
to LASC, is 0.80% of the Fund's average daily net assets. LASC the
fund's manager, has voluntarily agreed to waive its fee so that the
fund's total expenses will not exceed 1.00%.
F. Required Vote.
Approval of the New Management Agreement will require the affirmative vote
of a "majority of the outstanding voting securities" of the Fund (as defined in
the 1940 Act), which means the affirmative vote of the lesser of (1) more than
50% of the outstanding shares of the Fund or (2) 67% or more of the shares of
the Fund present at the Meeting if more than 50% of the outstanding shares of
the Fund are represented at the Meeting in person or by proxy.
The Trustees unanimously recommend that shareholders of the Fund vote to
approve the New Management Agreement.
2. Other Matters and Discretion of Attorneys Named in the Proxy.
As of the date of this Proxy Statement, only the business mentioned in
Item 1 of the Notice of the Meeting is contemplated to be presented. If any
procedural or other matters properly come before the Meeting, the enclosed proxy
shall be voted in accordance with the best judgment of the proxy holder(s).
If a quorum of shareholders (thirty percent of the shares entitled to vote
at the Meeting) is not represented at the Meeting or at any adjournment thereof,
or, even though a quorum is so represented, if sufficient votes in favor of the
Items set forth in the Notice of the Meeting are not received by October 13,
1999, the persons named as proxies may propose one or more adjournments of the
Meeting, and further solicitation of proxies may be made. Any such adjournment
may be effected by a majority of the votes properly cast in person or by proxy
on the question at the session of the Meeting to be adjourned. The persons named
as proxies will vote in favor of such adjournment those proxies which they are
entitled to vote in favor of the Items set forth in the Notice of the Meeting.
They will vote against any such adjournment those proxies required to be voted
against any of such Items.
The Trust's Agreement and Declaration of Trust does not provide for an
annual meeting of shareholders. Shareholder proposals for inclusion in the proxy
statement for any subsequent meeting must be received by the Fund within a
reasonable period of time prior to such meeting.
Shareholders are urged to vote, sign and mail
their proxies immediately.
<PAGE>
A-3
APPENDIX a
MANAGEMENT AGREEMENT
AGREEMENT dated as of October 13, 1999 between LIBERTY FUNDS TRUST III, a
Massachusetts business trust (Trust), with respect to COLONIAL SELECT VALUE Fund
(Fund), and COLONIAL MANAGEMENT ASSOCIATES, INC., a Massachusetts corporation
(Advisor).
In consideration of the promises and covenants herein, the parties agree as
follows:
1. The Advisor will manage the investment of the assets of the Fund in
accordance with its prospectus and statement of additional information
and will perform the other services herein set forth, subject to the
supervision of the Board of Trustees of the Trust. The Advisor may
delegate its investment responsibilities to a sub-advisor.
2. In carrying out its investment management obligations, the Advisor shall:
(a) evaluate such economic, statistical and financial information and
undertake such investment research as it shall believe advisable; (b)
purchase and sell securities and other investments for the Fund in
accordance with the procedures described in its prospectus and statement
of additional information; and (c) report results to the Board of Trustees
of the Trust.
3. The Advisor shall furnish at its expense the following:
(a) office space, supplies, facilities and equipment; (b) executive and
other personnel for managing the affairs of the Fund (including preparing
financial information of the Fund and reports and tax returns required to
be filed with public authorities, but exclusive of those related to
custodial, transfer, dividend and plan agency services, determination of
net asset value and maintenance of records required by Section 31(a) of
the Investment Company Act of 1940, as amended, and the rules thereunder
(1940 Act); and (c) compensation of Trustees who are directors, officers,
partners or employees of the Advisor or its affiliated persons (other than
a registered investment company).
4. The Advisor shall be free to render similar services to others so long
as its services hereunder are not impaired thereby.
5. The Fund shall pay the Advisor monthly a fee at the annual rate of 0.75%
of the average daily net assets of the Fund.
6. If the operating expenses of the Fund for any fiscal year exceed the most
restrictive applicable expense limitation for any state in which shares
are sold, the Advisor's fee shall be reduced by the excess but not to
less than zero. Operating expenses shall not include brokerage,
interest, taxes, deferred organization expenses, Rule 12b-1 distribution
fees, service fees and extraordinary expenses, if any. The Advisor may
waive its compensation (and bear expenses of the Fund) to the extent that
expenses of the Fund exceed any expense limitation the Advisor declares
to be effective.
7. This Agreement shall become effective as of the date of its execution, and
(a) unless otherwise terminated, shall continue until two years from its
date of execution and from year to year thereafter so long as approved
annually in accordance with the 1940 Act; (b) may be terminated without
penalty on sixty days' written notice to the Advisor either by vote of the
Board of Trustees of the Trust or by vote of a majority of the outstanding
shares of the Fund; (c) shall automatically terminate in the event of its
assignment; and (d) may be terminated without penalty by the Advisor on
sixty days' written notice to the Trust.
8. This Agreement may be amended in accordance with the 1940 Act.
9. For the purpose of the Agreement, the terms "vote of a majority of the
outstanding shares", "affiliated person" and "assignment" shall have
their respective meanings defined in the 1940 Act and exemptions and
interpretations issued by the Securities and Exchange Commission under
the 1940 Act.
10. In the absence of willful misfeasance, bad faith or gross negligence on
the part of the Advisor, or reckless disregard of its obligations and
duties hereunder, the Advisor shall not be subject to any liability to
the Trust or the Fund, to any shareholder of the Trust or the Fund or to
any other person, firm or organization for any act or omission in the
course of, or connected with, rendering services hereunder.
LIBERTY FUNDS TRUST III on behalf of Colonial Management
Colonial Select Value Fund Associates, Inc.
By: __________________________ By: __________________________
Title: Title:
A copy of the document establishing the Trust is filed with the Secretary of The
Commonwealth of Massachusetts. This Agreement is executed by officers not as
individuals and is not binding upon any of the Trustees, officers or
shareholders of the Trust individually but only upon the assets of the Fund.
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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, Nancy L. Conlin,
Stephen E. Gibson and Timothy J. Jacoby 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, October 13, 1999, and at
any adjournments, as specified herein, and in accordance with their best
judgment, 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.
COLONIAL SELECT VALUE FUND
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 discretion upon such other matters that may
properly come before the meeting. The Board of Trustees recommends a vote FOR
the following Item:
1. Approve an Amended and Restated Management Agreement providing for an
increase in the management fee paid by the Fund.
For Against Abstain
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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 title as such. If a corporation,
please sign in full corporate name by President or other authorized officer.
If a partnership, please sign in partnership name by authorized person.
Date_________________
Shareholder sign here Co-owner sign here
