<PAGE> 1
LIBERTY MUTUAL FUNDS
STEIN ROE MUTUAL FUNDS
ONE FINANCIAL CENTER, BOSTON, MASSACHUSETTS 02111-2621
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. You will be
asked to vote on the acquisition of your Fund and on the election of eleven
Trustees. A formal Notice of Special Meeting of Shareholders appears on the next
page, followed by the combined Prospectus/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 Fund is part of one of several proposed acquisitions and liquidations
of funds in the Liberty and Stein Roe Fund groups proposed by Liberty Financial
Companies, Inc., the indirect parent of each of the investment advisors to the
Liberty and Stein Roe Funds. The overall purposes of these acquisitions and
liquidations include streamlining the product offerings of the Liberty and Stein
Roe Funds, potentially reducing fund expense ratios by creating larger funds and
permitting the Liberty Financial organization to concentrate its portfolio
management resources on a more focused group of portfolios. Please review the
enclosed Prospectus/Proxy Statement for a more detailed description of the
proposed acquisition of your Fund and the specific reasons it is being proposed.
YOUR VOTE IS IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. YOU CAN
VOTE EASILY AND QUICKLY BY MAIL, BY FAX (NOT AVAILABLE FOR ALL SHAREHOLDERS;
REFER TO ENCLOSED PROXY INSERT), BY PHONE OR IN PERSON. 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 combined Prospectus/Proxy Statement, please
feel free to call the contact number listed in the enclosed Prospectus/Proxy
Statement.
We appreciate your participation and prompt response in these matters and
thank you for your continued support.
Sincerely,
/s/ Stephen E. Gibson
Stephen E. Gibson, President
November 17, 2000
G-60/608D-1000
<PAGE> 2
NOTICE OF SPECIAL MEETINGS OF SHAREHOLDERS
TO BE HELD DECEMBER 27, 2000
LIBERTY-STEIN ROE FUNDS INVESTMENT TRUST
STEIN ROE DISCIPLINED STOCK FUND
LIBERTY FUNDS TRUST VI
LIBERTY SMALL-CAP VALUE FUND
NOTICE IS HEREBY GIVEN that Special Meetings of the shareholders of the
Stein Roe Disciplined Stock Fund and the Liberty Small-Cap Value Fund (together,
the "Acquired 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 02111-2621, for these purposes:
1. SHAREHOLDERS OF THE STEIN ROE DISCIPLINED STOCK FUND VOTE: To approve
an Agreement and Plan of Reorganization providing for the sale of all
of the assets of the Stein Roe Disciplined Stock Fund to, and the
assumption of all of the liabilities of the Stein Roe Disciplined Stock
Fund by, the Liberty Select Value Fund in exchange for shares of the
Liberty Select Value Fund and the distribution of such shares to the
shareholders of the Stein Roe Disciplined Stock Fund in complete
liquidation of the Stein Roe Disciplined Stock Fund.
2. SHAREHOLDERS OF THE LIBERTY SMALL-CAP VALUE FUND VOTE: To approve an
Agreement and Plan of Reorganization providing for the sale of all of
the assets of the Liberty Small-Cap Value Fund to, and the assumption
of all of the liabilities of the Liberty Small-Cap Value Fund by, the
Liberty Select Value Fund in exchange for shares of the Liberty Select
Value Fund and the distribution of such shares to the shareholders of
the Liberty Small-Cap Value Fund in complete liquidation of the Liberty
Small-Cap Value Fund.
3. SHAREHOLDERS OF THE STEIN ROE DISCIPLINED STOCK FUND VOTE: To elect
eleven Trustees of the Liberty-Stein Roe Funds Investment Trust and
SR&F Base Trust.
4. SHAREHOLDERS OF THE LIBERTY SMALL-CAP VALUE FUND VOTE: To elect eleven
Trustees of Liberty Funds Trust VI.
5. 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, Assistant Secretary
November 17, 2000
NOTICE: YOUR VOTE IS IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. YOU
CAN VOTE EASILY AND QUICKLY BY PHONE, BY MAIL, BY FAX (NOT AVAILABLE FOR
ALL SHAREHOLDERS; REFER TO ENCLOSED PROXY INSERT) OR IN PERSON. PLEASE
HELP YOUR FUND AVOID THE EXPENSE OF A FOLLOW-UP MAILING BY VOTING TODAY!
<PAGE> 3
COMBINED PROSPECTUS AND PROXY STATEMENT
NOVEMBER 17, 2000
ACQUISITION OF THE ASSETS AND LIABILITIES OF EACH OF
STEIN ROE DISCIPLINED STOCK FUND
c/o Liberty-Stein Roe Funds Investment Trust
One Financial Center
Boston, Massachusetts 02111-2621
1-800-338-2550
AND
LIBERTY SMALL-CAP VALUE FUND
c/o Liberty Funds Trust VI
One Financial Center
Boston, Massachusetts 02111-2621
1-800-426-3750
BY AND IN EXCHANGE FOR SHARES OF
LIBERTY SELECT VALUE FUND
c/o Liberty Funds Trust III
One Financial Center
Boston, Massachusetts 02111-2621
1-800-426-3750
TABLE OF CONTENTS
<TABLE>
<S> <C>
QUESTIONS AND ANSWERS...................................................... 4
PROPOSAL 1 -- Acquisition of the Stein Roe Disciplined Stock Fund by the
Liberty Select Value Fund.................................... 11
Principal Investment Risks............................................... 11
Information about the Acquisition........................................ 11
PROPOSAL 2 -- Acquisition of the Liberty Small-Cap Value Fund by the
Liberty Select Value Fund.................................... 15
Principal Investment Risks............................................... 15
Information about the Acquisition........................................ 15
INFORMATION APPLICABLE TO PROPOSALS 1 AND 2................................ 20
PROPOSAL 3 -- Election of Trustees by Stein Roe Disciplined Stock Fund
Shareholders................................................. 22
PROPOSAL 4 -- Election of Trustees by Liberty Small-Cap Value Fund
Shareholders................................................. 25
GENERAL.................................................................... 29
Voting Information....................................................... 29
Appendix A -- Form of Agreement and Plan of Reorganization................. A-1
Appendix B -- Fund Information............................................. B-1
Appendix C -- Capitalization............................................... C-1
Appendix D -- Management's Discussion of Fund Performance for the
Liberty Select Value Fund.................................. D-1
</TABLE>
This combined Prospectus/Proxy Statement contains information you should
know before voting on the proposed acquisition of the Stein Roe Disciplined
Stock Fund (the "Disciplined Stock Fund") and the Liberty Small-Cap Value Fund
(the "Small Cap Fund") (each, an "Acquired Fund," and together, the "Acquired
Funds") by the Liberty Select Value Fund (the "Select Value Fund") (each, an
"Acquisition," and together, the "Acquisitions") or voting on the other
proposals to be considered at a Special Meeting of Shareholders of each Acquired
Fund (the "Meetings"), which will be held at 10:00 a.m. Eastern Time on December
27, 2000 at the offices of Colonial Management Associates, Inc. ("Colonial"),
One Financial
1
<PAGE> 4
Center, Boston, Massachusetts 02111-2621. Please read this Prospectus/Proxy
Statement and keep it for future reference.
Proposal 1 in this Prospectus/Proxy Statement relates to the proposed
acquisition of the Disciplined Stock Fund by the Select Value Fund. Proposal 2
in this Prospectus/Proxy Statement relates to the proposed acquisition of the
Small Cap Fund by the Select Value Fund. If the Acquisition of your Fund occurs,
you will become a shareholder of the Select Value Fund. The Select Value Fund
seeks long-term growth. If the Agreement and Plan of Reorganization for your
Fund is approved by the shareholders of your Fund and the Acquisition occurs,
your Fund will transfer all of the assets and liabilities attributable to each
class of its shares to the Select Value Fund in exchange for shares of the same
class of the Select Value Fund with the same aggregate net asset value as the
assets and liabilities transferred. After that exchange, shares of each class
received by each Acquired Fund will be distributed pro rata to such Acquired
Fund's shareholders of the same class.
Proposal 3 in this Prospectus/Proxy Statement relates to the election of
Trustees of Liberty-Stein Roe Funds Investment Trust (the "Stein Roe Trust"), of
which the Disciplined Stock Fund is a series, and the election of trustees of
the SR&F Base Trust (the "Base Trust"), of which the master fund for the
Disciplined Stock Fund, the SR&F Disciplined Stock Portfolio (the "Master
Fund"), is a series. Proposal 4 in this Prospectus/Proxy Statement relates to
the election of Trustees of Liberty Funds Trust VI ("Trust VI"), of which the
Small Cap Fund is a series.
If you are a shareholder of the Disciplined Stock Fund, you are being asked
to vote on Proposals 1 and 3 in this Prospectus/Proxy Statement. Please review
these Proposals carefully, as well as the section "Information Applicable to
Proposals 1 and 2." If you are a shareholder of the Small Cap Fund, you are
being asked to vote on Proposals 2 and 4 in this Prospectus/Proxy Statement.
Please review these Proposals carefully, as well as the section "Information
Applicable to Proposals 1 and 2."
Please review the enclosed Prospectus of the Select Value Fund for your
class of shares. This document is incorporated in this Prospectus/Proxy
Statement by reference. The following documents have also been filed with the
Securities and Exchange Commission (the "SEC") and are incorporated in this
Prospectus/Proxy Statement by reference:
- The Prospectus of the Disciplined Stock Fund dated February 1, 2000, as
supplemented on February 11, 2000, April 20, 2000, June 5, 2000, June 23,
2000, July 14, 2000, August 2, 2000, August 11, 2000, August 28, 2000,
September 1, 2000 and November 1, 2000.
- The Prospectuses of the Small Cap Fund dated November 1, 1999, as
supplemented on December 28, 1999, August 2, 2000, August 15, 2000,
October 23, 2000 and October 26, 2000.
- The Statement of Additional Information of the Disciplined Stock Fund
dated February 1, 2000, as supplemented on June 23, 2000.
- The Statement of Additional Information of the Small Cap Fund dated
November 1, 1999, as supplemented on June 23, 2000 and August 21, 2000.
- The Statement of Additional Information of the Select Value Fund dated
March 1, 2000, as supplemented on June 23, 2000 and August 21, 2000.
- The Report of Independent Accountants and financial statements included
in the Annual Report to Shareholders of the Disciplined Stock Fund dated
September 30, 1999.
- The financial statements included in the Disciplined Stock Fund's
Semi-Annual Report to Shareholders dated March 31, 2000.
- The Report of Independent Accountants and financial statements included
in the Annual Report to Shareholders of the Small Cap Fund dated June 30,
2000.
- The Statement of Additional Information of the Select Value Fund dated
November 17, 2000 relating to the Acquisitions.
2
<PAGE> 5
Each Acquired Fund has previously sent its Annual Report and, as
applicable, Semi-Annual Report to its shareholders. For a free copy of these
Reports or any of the documents listed above, Small Cap Fund shareholders may
call 1-800-426-3750 and Disciplined Stock Fund shareholders may call
1-800-338-2550, or you may write to your Fund at the address listed on the cover
of this Prospectus/Proxy Statement. You may also obtain many of these documents
by accessing the web site of your Fund at www.libertyfunds.com or
www.steinroe.com. Our hearing impaired Small Cap Fund shareholders may call
Liberty Funds Services, Inc. at 1-800-528-6979 if you have special TTD
equipment. Text-only versions of all the Disciplined Stock Fund, Small Cap Fund
and Select Value Fund documents can be viewed online or downloaded from the
Edgar database on the SEC's internet site at www.sec.gov. You can review and
copy information about the Funds by visiting the following location, and you can
obtain copies, upon payment of a duplicating fee, by electronic request at the
following e-mail address: [email protected], or by writing the Public Reference
Room, U.S. Securities and Exchange Commission, Washington, DC 20549-0102.
Information on the operation of the Public Reference Room may be obtained by
calling 202-942-8090.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS/PROXY STATEMENT IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
3
<PAGE> 6
QUESTIONS AND ANSWERS
THE FOLLOWING QUESTIONS AND ANSWERS PROVIDE AN OVERVIEW OF KEY FEATURES OF THE
ACQUISITIONS AND OF THE OTHER MATTERS TO BE CONSIDERED AT THE MEETINGS AND OF
THE INFORMATION CONTAINED IN THIS COMBINED PROSPECTUS/ PROXY STATEMENT. PLEASE
REVIEW THE FULL PROSPECTUS/PROXY STATEMENT PRIOR TO CASTING YOUR VOTE.
1. WHAT IS BEING PROPOSED?
First, the Trustees of each of the Stein Roe Trust and Trust VI are recommending
in Proposal 1 that the Select Value Fund acquire the Disciplined Stock Fund and
in Proposal 2 that the Select Value Fund acquire the Small Cap Fund. This means
that the Select Value Fund would acquire all of the assets and liabilities of
the Disciplined Stock Fund and the Small Cap Fund in exchange for shares of the
Select Value Fund representing the aggregate net asset value of each Acquired
Fund's assets and liabilities. If Proposals 1 and 2 are approved, you will
receive shares of the Select Value Fund with an aggregate net asset value equal
to the aggregate net asset value of your Acquired Fund shares as of the business
day before the closing of the Acquisitions. The Acquisitions are currently
scheduled to take place on or around January 16, 2001. Note that the closing of
each Acquisition is not conditioned on the closing of the other Acquisition
proposed in this Prospectus/Proxy Statement. Accordingly, in the event that the
shareholders of one of the Acquired Funds approve their Fund's Acquisition, it
is expected that the approved Acquisition will, subject to the terms of the
Agreement and Plan of Reorganization, take place as described in this
Prospectus/Proxy Statement, even if the shareholders of the other Acquired Fund
have not approved their Fund's Acquisition.
In addition, the Trustees of the Stein Roe Trust and the Trustees of Trust VI
are recommending in Proposal 3 and Proposal 4, respectively, that you vote in
favor of eleven nominees for Trustees.
2. WHY ARE THE ACQUISITIONS BEING PROPOSED?
The Trustees of each of the Stein Roe Trust and Trust VI recommend approval of
the Acquisitions. In reviewing the Acquisitions, the Trustees considered:
- the expected addition of a management fee breakpoint for the combined
fund, which should decrease the overall fee payable by the combined fund;
- that the Acquisitions offer shareholders of each Acquired Fund an
investment in a larger fund with somewhat similar investment goals and
strategies and with a reduction in the fees and expenses payable by both
the Disciplined Stock Fund and the Small Cap Fund;
- that the Acquired Funds are not likely to achieve the scale necessary to
reduce Fund expenses through sales growth;
- the ability of the Funds' investment advisors to create a more focused
value-style investment management team;
- the expected tax-free nature of the Acquisitions as opposed to other
alternatives for the Funds and for shareholders and other tax
considerations; and
- that the Select Value Fund has a superior performance record to the Small
Cap Fund for each of the one, five and ten-year periods ending July 31,
2000.
Please review "Reasons for the Acquisition" in Proposal 1 and Proposal 2 of this
Prospectus/Proxy Statement for a full description of the factors considered by
the Trustees.
SHAREHOLDERS OF THE SMALL CAP FUND SHOULD NOTE THAT THE SELECT VALUE FUND IS
PRIMARILY A "MID CAP" FUND, NOT A "SMALL CAP" FUND.
4
<PAGE> 7
3. HOW DO THE MANAGEMENT FEES AND EXPENSES OF THE FUNDS COMPARE AND WHAT ARE
THEY ESTIMATED TO BE FOLLOWING THE ACQUISITIONS?
The following tables allow you to compare the sales charges and management fees
and expenses of the Disciplined Stock Fund, the Small Cap Fund and the Select
Value Fund and to analyze the estimated expenses that Liberty Financial
Companies, Inc. ("Liberty Financial"), the indirect parent of each Fund's
investment advisor, expects the combined fund to bear in the first year
following the Acquisitions. The shareholder fees presented below for the Select
Value Fund apply both before and after giving effect to the Acquisitions. Sales
charges, if applicable, are paid directly by shareholders to Liberty Funds
Distributor, Inc., each Fund's distributor. Annual Fund Operating Expenses are
deducted from the Fund's assets. They include management fees, 12b-1 fees (if
applicable) and administrative costs, including pricing and custody services.
The Annual Fund Operating Expenses shown in the table below represent expenses
incurred by the Disciplined Stock Fund for its fiscal year ended September 30,
1999, by the Small Cap Fund for its last fiscal year ended June 30, 2000, and by
the Select Value Fund for its fiscal year ended October 31, 1999.
Detailed pro forma combined expense information presented in the Annual Fund
Operating Expenses table below for the combined fund is provided based on the
assumption that the Select Value Fund acquires both Acquired Funds. In addition,
following the presentation of that detailed information, the total Annual Fund
Operating Expenses are presented on a pro forma combined basis for each possible
scenario in which the Select Value Fund acquires one, but not the other,
Acquired Fund.
SHAREHOLDER FEES
(paid directly from your investment)
<TABLE>
<CAPTION>
DISCIPLINED STOCK FUND SMALL CAP FUND(1)
---------------------- -----------------
CLASS S CLASS A CLASS B CLASS C CLASS Z
<S> <C> <C> <C> <C> <C>
Maximum sales charge (load) on
purchases (%) (as a percentage of
the offering price) 0.00 5.75 0.00 0.00 0.00
--------------------------------------------------------------------------------------------------------
Maximum deferred sales charge (load)
on redemptions (%) (as a percentage
of the lesser of purchase price or
redemption price) 0.00 1.00(2) 5.00 1.00 0.00
--------------------------------------------------------------------------------------------------------
Redemption fee (%) (as a percentage
of amount redeemed, if applicable) (3) (4) (4) (4) (4)
</TABLE>
<TABLE>
<CAPTION>
SELECT VALUE FUND(1)
--------------------
CLASS A CLASS B CLASS C CLASS S CLASS Z
<S> <C> <C> <C> <C> <C>
Maximum sales charge (load) on purchases (%)
(as a percentage of the offering price) 5.75 0.00 0.00 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 0.00 0.00
----------------------------------------------------------------------------------------------------
Redemption fee (%) (as a percentage of amount
redeemed, if applicable) (4) (4) (4) (3) (4)
</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 $7.00 charge for wiring sale proceeds to your bank. A fee of $5
per quarter may be charged to accounts that fall below the required minimum
balance.
(4) There is a $7.50 charge for wiring sale proceeds to your bank.
5
<PAGE> 8
ANNUAL FUND OPERATING EXPENSES
(deducted directly from Fund assets)
<TABLE>
<CAPTION>
DISCIPLINED STOCK FUND SMALL CAP FUND
---------------------- --------------
CLASS S CLASS A CLASS B CLASS C CLASS Z
<S> <C> <C> <C> <C> <C>
Management fee (%) 0.87(5) 0.80 0.80 0.80 0.80
------------------------------------------------------------------------------------------------------------
Distribution and service (12b-1) fees(%) 0.00 0.25 1.00 1.00 0.00
------------------------------------------------------------------------------------------------------------
Other expenses (%) 0.29 0.44 0.44 0.44 0.44
------------------------------------------------------------------------------------------------------------
Total annual fund operating expenses (%) 1.16 1.49 2.24 2.24 1.24
</TABLE>
<TABLE>
<CAPTION>
SELECT VALUE FUND
-----------------
CLASS A CLASS B CLASS C CLASS S CLASS Z
<S> <C> <C> <C> <C> <C>
Management fee (%) 0.70 0.70 0.70 0.70 0.70
----------------------------------------------------------------------------------------------------
Distribution and service (12b-1) fees(6) (%) 0.24 0.99 0.99 0.00 0.00
----------------------------------------------------------------------------------------------------
Other expenses (%) 0.38 0.38 0.38 0.38 0.38
----------------------------------------------------------------------------------------------------
Total annual fund operating expenses (%) 1.32 2.07 2.07 1.08 1.08
</TABLE>
<TABLE>
<CAPTION>
SELECT VALUE FUND (PRO FORMA COMBINED)*
CLASS A CLASS B CLASS C CLASS S CLASS Z
<S> <C> <C> <C> <C> <C>
Management fee (%) 0.68 0.68 0.68 0.68 0.68
----------------------------------------------------------------------------------------------------
Distribution and service (12b-1) fees(7) (%) 0.25 1.00 1.00 0.00 0.00
----------------------------------------------------------------------------------------------------
Other expenses (%) 0.29 0.29 0.29 0.29 0.29
----------------------------------------------------------------------------------------------------
Total annual fund operating expenses (%) 1.22 1.97 1.97 0.97 0.97
</TABLE>
---------------
(5) The Disciplined Stock Fund's management fee includes both the management fee
and the administration fee charged to the Fund.
(6) The Select Value Fund has adopted a plan under Rule 12b-1 that permits it to
pay the Fund's distributor marketing and other fees to support the sale and
distribution of Class A, B and C shares and certain services provided to you
by your financial advisor. The annual service fee is calculated by adding
(1) 0.15% on net assets attributable to shares issued prior to April 1, 1989
and (2) 0.25% on net assets attributable to shares issued thereafter. This
arrangement results in a rate of service fee payable by the Fund that is a
blend between the 0.15% and 0.25% rates. For the fiscal year ended October
31, 1999, the Select Value Fund's service fee was 0.24% of average net
assets. The annual distribution fee may equal up to 0.75% for each of Class
B and Class C shares. Distribution and service fees are paid out of the
assets of these classes.
(7) The Select Value Fund has adopted a plan under Rule 12b-1 that permits it to
pay the Fund's distributor marketing and other fees to support the sale and
distribution of Class A, B and C shares and certain services provided to you
by your financial advisor. The annual service fee is calculated by adding
(1) 0.15% on net assets attributable to shares issued prior to April 1, 1989
and (2) 0.25% on net assets attributable to shares issued thereafter. This
arrangement results in a rate of service fee payable by the Fund that is a
blend between the 0.15% and 0.25% rates. On a pro forma combined basis, the
Select Value Fund's service fee would have been 0.25% of average net assets.
The annual distribution fee may equal up to 0.75% for each of Class B and
Class C shares. Distribution and service fees are paid out of the assets of
these classes.
* The pro forma combined total Annual Fund Operating Expenses detailed above
and the Example Expenses detailed below assume that each Acquired Fund
approves the Acquisitions. Which Acquired Fund or Funds approve the
Acquisitions will affect the total Annual Fund Operating Expenses of the
Select Value Fund on a pro forma combined basis after the Acquisitions. The
tables below present the pro forma combined total Annual Fund Operating
Expenses and Example Expenses assuming in each case that only one Acquired
Fund approves the Acquisition.
6
<PAGE> 9
If only Disciplined Stock Fund shareholders were to approve the Acquisition,
the total Annual Fund Operating Expenses and Example Expenses would be as
follows:
ANNUAL FUND OPERATING EXPENSES
SELECT VALUE FUND (pro forma combined)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS S CLASS Z
<S> <C> <C> <C> <C> <C>
Management fee (%) 0.69 0.69 0.69 0.69 0.69
----------------------------------------------------------------------------------------------------------------
Distribution and service (12b-1) fees(7) (%) 0.25 1.00 1.00 0.00 0.00
----------------------------------------------------------------------------------------------------------------
Other expenses (%) 0.31 0.31 0.31 0.31 0.31
----------------------------------------------------------------------------------------------------------------
Total annual fund operating expenses (%) 1.25 2.00 2.00 1.00 1.00
</TABLE>
EXAMPLE EXPENSES
SELECT VALUE FUND (pro forma combined)
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $695 $949 $1,223 $2,002
--------------------------------------------------------------------------------------------------------
Class B: did not sell your shares $203 $628 $1,079 $2,136
sold all your shares at end of period $703 $928 $1,279 $2,136
--------------------------------------------------------------------------------------------------------
Class C: did not sell your shares $203 $628 $1,079 $2,329
sold all your shares at end of period $303 $628 $1,079 $2,329
--------------------------------------------------------------------------------------------------------
Class S $102 $319 $ 554 $1,227
--------------------------------------------------------------------------------------------------------
Class Z $102 $319 $ 554 $1,227
</TABLE>
If only Small Cap Fund shareholders were to approve the Acquisition, the
total Annual Fund Operating Expenses and Example Expenses would be as
follows:
ANNUAL FUND OPERATING EXPENSES
SELECT VALUE FUND (pro forma combined)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS S CLASS Z
<S> <C> <C> <C> <C> <C>
Management fee (%) 0.69 0.69 0.69 N/A 0.69
----------------------------------------------------------------------------------------------------------------
Distribution and service (12b-1) fees(7) (%) 0.25 1.00 1.00 N/A 0.00
----------------------------------------------------------------------------------------------------------------
Other expenses (%) 0.32 0.32 0.32 N/A 0.32
----------------------------------------------------------------------------------------------------------------
Total annual fund operating expenses (%) 1.26 2.01 2.01 N/A 1.01
</TABLE>
EXAMPLE EXPENSES
SELECT VALUE FUND (pro forma combined)
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $696 $951 $1,225 $2,006
--------------------------------------------------------------------------------------------------------
Class B: did not sell your shares $204 $629 $1,081 $2,140
sold all your shares at end of period $704 $929 $1,281 $2,140
--------------------------------------------------------------------------------------------------------
Class C: did not sell your shares $204 $629 $1,081 $2,334
sold all your shares at end of period $304 $629 $1,081 $2,334
--------------------------------------------------------------------------------------------------------
Class S N/A N/A N/A N/A
--------------------------------------------------------------------------------------------------------
Class Z $103 $320 $ 556 $1,232
</TABLE>
7
<PAGE> 10
EXAMPLE EXPENSES
Example Expenses help you compare the cost of investing in either the
Disciplined Stock Fund or the Small Cap Fund and the Select Value Fund currently
with the cost of investing in the combined fund on a pro forma basis and also
allows you to compare this with the cost of investing in other mutual funds. It
uses the following hypothetical conditions:
- $10,000 initial investment
- 5% total return for each year
- Each Fund's operating expenses remain the same
- Assumes reinvestment of all dividends and distributions
- Assumes Class B shares convert to Class A shares after eight years
EXAMPLE EXPENSES
(your actual costs may be higher or lower)
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
DISCIPLINED STOCK FUND
Class S $118 $ 368 $ 638 $1,409
--------------------------------------------------------------------------------------------------
SMALL CAP FUND
Class A $718 $1,019 $1,341 $2,252
--------------------------------------------------------------------------------------------------
Class B: did not sell your shares $227 $ 700 $1,200 $2,386
sold all your shares at end of period $727 $1,000 $1,400 $2,386
--------------------------------------------------------------------------------------------------
Class C: did not sell your shares $227 $ 700 $1,200 $2,575
sold all your shares at end of period $327 $ 700 $1,200 $2,575
--------------------------------------------------------------------------------------------------
Class Z $127 $ 393 $ 681 $1,500
--------------------------------------------------------------------------------------------------
SELECT VALUE FUND
Class A $702 $ 969 $1,257 $2,074
--------------------------------------------------------------------------------------------------
Class B: did not sell your shares $210 $ 649 $1,114 $2,208
sold all your shares at end of period $710 $ 949 $1,314 $2,208
--------------------------------------------------------------------------------------------------
Class C: did not sell your shares $210 $ 649 $1,114 $2,400
sold all your shares at end of period $310 $ 649 $1,114 $2,400
--------------------------------------------------------------------------------------------------
Class S $110 $ 343 $ 595 $1,317
--------------------------------------------------------------------------------------------------
Class Z $110 $ 343 $ 595 $1,317
--------------------------------------------------------------------------------------------------
SELECT VALUE FUND
(pro forma combined)
Class A $692 $ 939 $1,205 $1,963
--------------------------------------------------------------------------------------------------
Class B: did not sell your shares $200 $ 617 $1,060 $2,098
sold all your shares at end of period $700 $ 917 $1,260 $2,098
--------------------------------------------------------------------------------------------------
Class C: did not sell your shares $200 $ 617 $1,060 $2,292
sold all your shares at end of period $300 $ 617 $1,060 $2,292
--------------------------------------------------------------------------------------------------
Class S $ 99 $ 308 $ 534 $1,185
--------------------------------------------------------------------------------------------------
Class Z $ 99 $ 308 $ 534 $1,185
</TABLE>
Significant assumptions underlying the pro forma Annual Fund Operating Expenses
and Example Expenses are as follows: (1) the current contractual agreements will
remain in place; (2) any fee reductions proposed in this Prospectus/Proxy
Statement are approved; (3) certain duplicate costs involved in operating the
Acquired Funds are eliminated; and (4) expense ratios are based on pro forma
combined average net assets for the year ended June 30, 2000.
8
<PAGE> 11
4. HOW DO THE INVESTMENT GOALS, STRATEGIES AND POLICIES OF YOUR ACQUIRED FUND
AND THE SELECT VALUE FUND COMPARE?
This table shows the investment goal and primary investment strategies of each
Fund:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
DISCIPLINED STOCK FUND SMALL CAP FUND SELECT VALUE FUND
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT GOAL: The Disciplined INVESTMENT GOAL: The Small Cap Fund INVESTMENT GOAL: The Select Value
Stock Fund seeks long-term growth. seeks long-term growth by investing Fund seeks long-term growth.
primarily in smaller capitalization
equities.
------------------------------------------------------------------------------------------------------------------
PRIMARY INVESTMENT STRATEGIES: The PRIMARY INVESTMENT STRATEGIES: The PRIMARY INVESTMENT STRATEGIES: The
Disciplined Stock Fund seeks to Small Cap Fund seeks to achieve its Select Value Fund seeks to achieve
achieve its goal by investing all goal as follows: its goal as follows:
of its investable assets in the
Master Fund. The Master Fund - The Fund invests at least 65% of - The Fund invests primarily in
invests its assets as follows: its total assets in small middle capitalization stocks
capitalization stocks (defined as (defined as stocks with market
- The Master Fund invests primarily stocks with market caps between caps between $400 million and the
in common stocks of $20 million and the largest largest stock in the Russell
mid-capitalization companies market capitalization in the Midcap Index or any stock in the
(defined as stocks with market Russell 2000 Index or any stock S&P MidCap 400 index at the time
caps between $2.2 and $9.0 in the S&P Small Cap 600 Index at of purchase).
billion at the time of purchase). the time of purchase).
- The Master Fund may also invest
in companies having large market
capitalizations (defined as
stocks with market caps greater
than $9.0 billion at the time of
purchase) and up to 25% of its
total assets in foreign stocks.
- The Master Fund uses a "blend"
strategy by investing in "growth"
and/or "value" companies.
------------------------------------------------------------------------------------------------------------------
</TABLE>
The following compares the primary investment strategies that each of the
Disciplined Stock Fund and the Small Cap Fund, on the one hand, and the Select
Value Fund, on the other hand, uses to achieve its investment goal:
- The Disciplined Stock Fund (through the Master Fund) and the Select Value
Fund invest primarily in mid-capitalization stocks, although the
Disciplined Stock Fund may also invest in companies having large
capitalizations. The Small Cap Fund, on the other hand, invests primarily
(at least 65% of total assets) in small capitalization stocks.
- Unlike the other Funds, the Disciplined Stock Fund may invest up to 25%
of its total assets in foreign stocks as part of its primary investment
strategy.
9
<PAGE> 12
- The Disciplined Stock Fund uses a "blend" strategy by investing in
"growth" and/or "value" companies.
The fundamental and non-fundamental investment policies of each of the
Disciplined Stock Fund and the Small Cap Fund, on the one hand, and the Select
Value Fund, on the other hand, are similar, except as follows:
- Unlike the Select Value or Small Cap Funds, the Disciplined Stock Fund
may not invest more than 25% of its total assets (valued at time of
purchase) in securities of foreign issuers (with certain exceptions for
American Depositary Receipts ("ADRs"));
- Unlike the Select Value or Small Cap Funds, the Disciplined Stock Fund
may not invest more than 5% of its total assets in restricted securities,
other than so-called "Rule 144A securities";
- The Select Value Fund is not permitted to have more than 5% of its total
assets invested in real estate acquired as the result of owning
securities, while there is no such restriction on the Acquired Funds; and
- In addition to the foregoing significant considerations, the Disciplined
Stock Fund has a number of investment restrictions to which the Select
Value Fund is not subject. Many of these restrictions were imposed by
regulations of state securities laws which are no longer applicable to
mutual funds.
In addition, the Disciplined Stock Fund currently pursues its investment program
by investing all of its assets in another investment company, the Master Fund.
The Master Fund is advised by Stein Roe & Farnham Incorporated ("Stein Roe") and
invests in a diversified portfolio of securities. This arrangement is known as a
"master-feeder" structure. The Disciplined Stock Fund currently owns
substantially all of the shares of the Master Fund, although a small interest in
the Master Fund is also owned by Liberty Financial. If Proposal 1 is approved,
prior to the Acquisition, the Master Fund is expected to liquidate the interests
of Liberty Financial in the Master Fund and distribute all of its remaining
assets to the Disciplined Stock Fund in exchange for all of the shares of the
Master Fund owned by the Disciplined Stock Fund in complete liquidation of the
Master Fund. As a result, immediately before the Acquisition, the Disciplined
Stock Fund will cease to operate under a "master-feeder" structure.
For a complete list of the Funds' investment restrictions, see the Statement of
Additional Information of each Fund, each of which is incorporated by reference
into this Prospectus/Proxy Statement.
5. WHAT CLASS OF SHARES WILL YOU RECEIVE IN THE SELECT VALUE FUND IF THE
ACQUISITIONS OCCUR?
You will receive the same class of shares that you currently own in the
Disciplined Stock Fund or the Small Cap Fund. The shares will have the same
exchange rights and will bear the same contingent deferred sales charges
("CDSCs"), if applicable, as your current shares. The shares will also have the
same distribution, purchase and redemption procedures as your current shares.
6. WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE ACQUISITIONS?
Each Acquisition is expected to be tax free to you for federal income tax
purposes. This means that no gain or loss will be recognized by the Disciplined
Stock Fund or the Small Cap Fund or either Fund's shareholders as a result of
the Acquisitions.
The cost basis and holding period of your Disciplined Stock Fund or Small Cap
Fund shares are expected to carry over to your new shares in the Select Value
Fund.
10
<PAGE> 13
PROPOSAL 1 -- ACQUISITION OF THE STEIN ROE DISCIPLINED STOCK FUND
BY THE LIBERTY SELECT VALUE FUND
THE PROPOSAL
You are being asked to approve the Agreement and Plan of Reorganization
dated October 26, 2000. A form of Agreement and Plan of Reorganization is
attached as Appendix A to this Prospectus/Proxy Statement. By approving the
Agreement and Plan of Reorganization, you are also approving the Acquisition of
the Disciplined Stock Fund by the Select Value Fund under the Agreement and Plan
of Reorganization.
PRINCIPAL INVESTMENT RISKS
What are the principal investment risks of the Select Value Fund, and
how do they compare with the Disciplined Stock Fund?
Because the Funds have similar goals and strategies, the principal risks
associated with each Fund are similar. Each Fund is subject to market risk,
management risk and the risks associated with value stocks. Management risk
means that the advisor's stock and bond selections and other investment
decisions might produce losses or cause the Fund to underperform when compared
to other funds with a similar investment goal. Market risk means that security
prices in a market, sector or industry may move down. Downward movements will
reduce the value of your investment. Value stocks are securities of companies
that may have experienced adverse business or industry developments or may be
subject to special risks that have caused the stocks to be out of favor. If the
advisor's assessment of the company's prospects is wrong, the price of its stock
may not approach the value the advisor has placed on it. In addition, each Fund
is subject to the risks associated with investing in smaller companies. Smaller
companies are more likely than larger companies to have limited product lines,
operating histories, markets or financial resources and may depend heavily on a
small management team. Stocks of smaller companies may trade less frequently,
may trade in smaller volumes, may fluctuate more sharply in price than stocks of
larger companies and may not be widely followed by the investment community.
Because the Disciplined Stock Fund may invest up to 25% of its assets in foreign
securities, it is also subject to the risks related to such securities. For more
information about the principal investment risks of the Select Value Fund,
please see the enclosed Prospectus of the Select Value Fund. The actual risks of
investing in each Fund depend on the securities held in each Fund's portfolio
and on market conditions, both of which change over time.
INFORMATION ABOUT THE ACQUISITION
Please see the section "Information Applicable to Proposals 1 and 2" of
this combined Prospectus/Proxy Statement.
Shares You Will Receive
If the Acquisition occurs, you will receive shares in the Select Value Fund
of the same class as the shares that you currently own in the Disciplined Stock
Fund. In comparison to the shares you currently own, the shares you receive will
have the following characteristics:
- They will have an aggregate net asset value equal to the aggregate net
asset value of your current shares as of the business day before the
closing of the Acquisition.
- The procedures for purchasing and redeeming your shares will not change
as a result of the Acquisition.
- You will have the same exchange options as you currently have.
- You will have the same voting rights as you currently have, but as a
shareholder of the Select Value Fund and of Liberty Funds Trust III
("Trust III").
Information concerning the capitalization of each of the Funds is contained
in Appendix C.
11
<PAGE> 14
Reasons for the Acquisition
The Trustees of each Trust, including all Trustees who are not "interested
persons" of the Trust, have determined that the Acquisition would be in the best
interests of each Fund, on balance in light of all relevant factors, and that
the interests of existing shareholders of each Fund would not be diluted as a
result of the Acquisition. For these reasons, the Trustees have unanimously
approved the Acquisition and recommend that you vote in favor of the Acquisition
by approving the Agreement and Plan of Reorganization, a form of which is
attached as Appendix A to this Prospectus/Proxy Statement. Each shareholder
should carefully consider whether remaining a shareholder of the Select Value
Fund after the Acquisition is consistent with that shareholder's financial needs
and circumstances.
The Acquisition is one of several proposed acquisitions and liquidations of
funds in the Liberty and Stein Roe Fund groups proposed by Liberty Financial,
the indirect parent of each of the investment advisors to the Liberty and Stein
Roe Funds. The overall purposes of these acquisitions and liquidations include
streamlining the product offerings of the Liberty and Stein Roe Funds,
potentially reducing fund expense ratios by creating larger funds and permitting
the Liberty Financial organization to concentrate its portfolio management
resources on a more focused group of portfolios.
In proposing the Acquisition, Liberty Financial presented to the Trustees
the following reasons for the Disciplined Stock Fund to enter into the
Acquisition:
- The Acquisition is expected to create a larger fund with similar
investment goals and strategies to the Disciplined Stock Fund, but with
lower operating expenses as a percentage of fund assets. This expense
ratio reduction would benefit Disciplined Stock Fund shareholders, since
operating expenses are paid by the Fund and reduce the investment return
to Fund shareholders. Although, as explained below, it is not possible to
predict future expense ratios with certainty, information provided to the
Trustees by Liberty Financial indicated that, based on the assets of the
Disciplined Stock and Select Value Funds on July 31, 2000 and the Funds'
current expense structures, the Select Value Fund's annualized expense
ratio (exclusive of 12b-1 fees) immediately after the Acquisition would
be about 0.19% lower than the Disciplined Stock Fund's current expense
ratio (for example, a 1.03% expense ratio for Select Value Fund Class A
shares, as compared to 1.22% currently for Disciplined Stock Fund Class S
shares). Note that the 12b-1 fees on Class A, B and C shares of the
Select Value Fund are, on a pro forma combined basis, 0.25%, 1.00%, and
1.00%, respectively. There are no 12b-1 fees on Class S shares of the
Select Value Fund.
- The Acquisition is expected to reduce expenses for all shareholders in
the Select Value Fund after the Acquisitions because Liberty Financial
has agreed to a new breakpoint in the management fee of 0.65% of average
daily net assets in excess of $1 billion (as of July 31, 2000, the Select
Value Fund would have had $1,604,472,826 in net assets on a pro forma
combined basis, giving effect to the Acquisitions) to lower the overall
annual fee from 0.70% to 0.68% (on a pro forma combined basis).
- The Disciplined Stock Fund is not likely to achieve the scale necessary
to reduce Fund expenses through sales growth.
- The Acquisition will permit a more focused value-style investment
management team to concentrate its efforts on a single value equity
approach rather than manage multiple portfolios with somewhat different
investment approaches.
- The Acquisition is intended to permit the Disciplined Stock Fund's
shareholders to exchange their investment for an investment in the Select
Value Fund without recognizing gain or loss for federal income tax
purposes. By contrast, if a Disciplined Stock Fund shareholder redeemed
his or her shares to invest in another fund, like the Select Value Fund,
the transaction would likely be a taxable event for such shareholder.
Similarly, if the Disciplined Stock Fund were liquidated or reorganized
in a taxable transaction, the transaction would likely be a taxable event
for the Fund's shareholders. After the Acquisition, shareholders may
redeem any or all of their Select Value Fund shares at net asset value
(subject to any applicable CDSC) at any time, at which point they would
recognize a taxable gain or loss.
12
<PAGE> 15
The Trustees also considered the differences in the Funds' investment
objectives, policies and strategies and the related risks. In addition, the
Trustees considered the relative Fund performance results which are based on the
factors and assumptions set forth below under "Performance Information." No
assurance can be given that the Select Value Fund will achieve any particular
level of performance after the Acquisition.
The projected post-Acquisition expense reductions presented above are based
on the Select Value Fund's current expense structure and the projected
post-Acquisition assets of the combined Fund. The projected reductions are
further based upon numerous material assumptions, including that: (1) the
current contractual agreements of the Select Value Fund will remain in place;
(2) any fee reductions proposed in this combined Prospectus/Proxy Statement are
approved; (3) certain duplicate costs involved in operating the Acquired Funds
are eliminated; and (4) the Select Value Fund acquires both of the Acquired
Funds. See the table "Annual Fund Operating Expenses" under Question 3 in the
"Questions and Answers" section above for the expenses that would be applicable
if one of the Acquisitions did not take place. Although these projections
represent good faith estimates, there can be no assurance that any particular
level of expenses or expense savings will be achieved, because expenses depend
on a variety of factors (including the future level of Fund assets), many of
which factors are beyond the control of the Select Value Fund or Liberty
Financial.
Although the Trustees are proposing that the Select Value Fund acquire both
of the Acquired Funds, the acquisition of the Disciplined Stock Fund is not
conditioned upon the acquisition of the Small Cap Fund. Accordingly, if the
Disciplined Stock Fund's shareholders approve the acquisition of the Disciplined
Stock Fund, but the Small Cap Fund's shareholders do not approve the acquisition
of the Small Cap Fund, it is expected that, subject to the terms of the
Agreement and Plan of Reorganization, the Acquisition proposed in this Proposal
1 will take place as described in this Prospectus/Proxy Statement.
Performance Information
The charts below show the percentage gain or loss in each calendar year for
the 10-year period ending December 31, 1999 for the Class S shares of the
Disciplined Stock Fund and the Class A shares (the oldest existing fund class)
of the Select Value Fund. They should give you a general idea of how each Fund's
return has varied from year to year. The charts include the effects of Fund
expenses, but not sales charges (if applicable to the Fund's shares). Returns
would be lower if any applicable sales charges were included. The calculations
of total return assume the reinvestment of all dividends and capital gain
distributions on the reinvestment date. Past performance is not an indication of
future results. Performance results include the effect of expense reduction
arrangements, if any. If these arrangements were not in place, then the
performance results would have been lower.
Additional discussion of the manner of calculation of total return is
contained in each Fund's respective Prospectus and Statement of Additional
Information, which are incorporated by reference in this Prospectus/ Proxy
Statement.
DISCIPLINED STOCK FUND
[BAR CHART]
<TABLE>
<S> <C>
1990 -5.81%
1991 34.04%
1992 14.05%
1993 20.42%
1994 -3.35%
1995 18.73%
1996 18.81%
1997 25.94%
1998 -11.25%
1999 10.51%
</TABLE>
The Fund's year-to-date total return through
September 30, 2000 was 11.35%.
For period shown in bar chart:
Best quarter: Second quarter 1999, +20.87%
Worst quarter: Third quarter 1998, -18.13%
13
<PAGE> 16
SELECT VALUE FUND
[BAR CHART]
<TABLE>
<CAPTION>
SELECT VALUE FUND
-----------------
<S> <C>
1990 -10.55%
1991 34.09%
1992 11.00%
1993 9.99%
1994 -2.66%
1995 38.00%
1996 20.47%
1997 33.20%
1998 14.36%
1999 9.11%
</TABLE>
The Fund's year-to-date total return through
September 30, 2000 was 13.01%.
For period shown in bar chart:
Best quarter: First quarter 1991, +20.19%
Worst quarter: Third quarter 1990, -19.69%
The following tables list each Fund's average annual return for each class
of its shares for the one-year, five-year and ten-year periods ending December
31, 1999, including the applicable sales charge for Class A, B and C shares of
the Select Value Fund. These tables are intended to provide you with some
indication of the risks of investing in the Funds. At the bottom of each table,
you can compare the Funds' performance with one or more indices or averages.
DISCIPLINED STOCK FUND(1)
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
<S> <C> <C> <C>
Class S(%) 10.51 11.74 11.31
-------------------------------------------------------------------------------------------
S&P Index(%) 14.72 23.05 17.32
</TABLE>
SELECT VALUE FUND(1)(2)
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
<S> <C> <C> <C>
Class A(%) 2.84 21.10 14.00
-------------------------------------------------------------------------------------------
Class B(%) 3.46 21.42 14.03(3)
-------------------------------------------------------------------------------------------
Class C(%) 7.30 22.13(3) 14.48(3)
-------------------------------------------------------------------------------------------
Class Z(%) 9.29(3) 22.58(3) 14.70(3)
-------------------------------------------------------------------------------------------
S&P Index(%) 14.72 23.05 17.32
-------------------------------------------------------------------------------------------
Lipper Average(%) 39.35 23.31 16.04
</TABLE>
---------------
(1) Each Fund's return is compared to the Standard & Poor's Midcap 400 Index
("S&P Index"), an unmanaged index that tracks the performance of
middle-capitalization U.S. stocks. Unlike the Funds, 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 Select Value
Fund's return is also compared to the average return of the funds included
in the Lipper, Inc. Mid Cap Average Fund category average ("Lipper
Average"). This Lipper Average, which is calculated by Lipper, Inc., is
composed of funds with similar investment objectives to the Select Value
Fund. Sales charges are not reflected in the Lipper Average.
(2) Class S shares of the Select Value Fund, which were not in existence as of
December 31, 1999, are not included in the table.
(3) Class B, Class C and Class Z are newer classes of shares. Their performance
information includes returns of the Select Value Fund's Class A shares (the
oldest existing fund class) for periods prior to the inception of the newer
classes of shares. These Class A share returns are not restated to reflect
any differences in expenses (such as Rule 12b-1 fees) between Class A shares
and the newer classes of shares. If differences in expenses were reflected,
the returns for periods prior to the inception of Class B and Class C shares
would be lower and the returns for periods prior to the inception of Class Z
shares would be higher. Class A shares were initially offered on July 21,
1949, Class B shares were initially offered on June 8, 1992, Class C shares
were initially offered on August 1, 1997 and Class Z shares were initially
offered on January 11, 1999.
14
<PAGE> 17
THE TRUSTEES OF THE STEIN ROE TRUST UNANIMOUSLY RECOMMEND APPROVAL OF THE
AGREEMENT AND PLAN OF REORGANIZATION.
Required Vote for Proposal 1
Approval of the Agreement and Plan of Reorganization dated October 26, 2000
among the Stein Roe Trust on behalf of the Disciplined Stock Fund, Trust III on
behalf of the Select Value Fund, and Liberty Financial will require the
affirmative vote of a majority of the shares of the Disciplined Stock Fund
outstanding at the record date for the Meetings.
PROPOSAL 2 -- ACQUISITION OF THE LIBERTY SMALL-CAP VALUE FUND
BY THE LIBERTY SELECT VALUE FUND
THE PROPOSAL
You are being asked to approve the Agreement and Plan of Reorganization
dated October 26, 2000. A form of Agreement and Plan of Reorganization is
attached as Appendix A to this Prospectus/Proxy Statement. By approving the
Agreement and Plan of Reorganization, you are also approving the Acquisition of
the Small Cap Fund by the Select Value Fund under the Agreement and Plan of
Reorganization.
PRINCIPAL INVESTMENT RISKS
What are the principal investment risks of the Select Value Fund, and
how do they compare with the Small Cap Fund?
Because the Funds have somewhat similar goals and strategies, the principal
risks associated with each Fund are similar. Each Fund is subject to market
risk, management risk and the risks associated with value stocks. Management
risk means that the advisor's stock and bond selections and other investment
decisions might produce losses or cause the Fund to underperform when compared
to other funds with a similar investment goal. Market risk means that security
prices in a market, sector or industry may move down. Downward movements will
reduce the value of your investment. Value stocks are securities of companies
that may have experienced adverse business or industry developments or may be
subject to special risks that have caused the stocks to be out of favor. If the
advisor's assessment of the company's prospects is wrong, the price of its stock
may not approach the value the advisor has placed on it. In addition, although
each Fund is subject to the risks associated with investing in smaller
companies, the Small Cap Fund is particularly exposed to such risks due to its
concentration in small capitalization stocks. Smaller companies are more likely
than larger companies to have limited product lines, operating histories,
markets or financial resources and may depend heavily on a small management
team. Stocks of smaller companies may trade less frequently, may trade in
smaller volumes, may fluctuate more sharply in price than stocks of larger
companies and may not be widely followed by the investment community. For more
information about the principal investment risks of the Select Value Fund,
please see the enclosed Prospectus of the Select Value Fund. The actual risks of
investing in each Fund depend on the securities held in each Fund's portfolio
and on market conditions, both of which change over time.
SHAREHOLDERS OF THE SMALL CAP FUND SHOULD NOTE THAT THE SELECT VALUE FUND
IS PRIMARILY A "MID CAP" FUND, NOT A "SMALL CAP" FUND.
INFORMATION ABOUT THE ACQUISITION
Please see the section "Information Applicable to Proposals 1 and 2" of
this combined Prospectus/Proxy Statement.
15
<PAGE> 18
Shares You Will Receive
If the Acquisition occurs, you will receive shares in the Select Value Fund
of the same class as the shares that you currently own in the Small Cap Fund. In
comparison to the shares you currently own, the shares you receive will have the
following characteristics:
- They will have an aggregate net asset value equal to the aggregate net
asset value of your current shares as of the business day before the
closing of the Acquisition.
- Your Select Value Fund shares will bear the same sales charges,
redemption fees and CDSCs as your current shares, but for purposes of
determining the CDSC applicable to any redemption, if applicable, the new
shares will continue to age from the date you purchased your Small Cap
Fund shares.
- The procedures for purchasing and redeeming your shares will not change
as a result of the Acquisition.
- You will have the same exchange options as you currently have.
- You will have the same voting rights as you currently have, but as a
shareholder of the Select Value Fund and of Liberty Funds Trust III
("Trust III").
Information concerning the capitalization of each of the Funds is contained
in Appendix C.
Reasons for the Acquisition
The Trustees of each Trust, including all Trustees who are not "interested
persons" of the Trust, have determined that the Acquisition would be in the best
interests of each Fund, on balance in light of all relevant factors, and that
the interests of existing shareholders of each Fund would not be diluted as a
result of the Acquisition. For these reasons, the Trustees have unanimously
approved the Acquisition and recommend that you vote in favor of the Acquisition
by approving the Agreement and Plan of Reorganization, a form of which is
attached as Appendix A to this Prospectus/Proxy Statement. Each shareholder
should carefully consider whether remaining a shareholder of the Select Value
Fund after the Acquisition is consistent with that shareholder's financial needs
and circumstances.
The Acquisition is one of several proposed acquisitions and liquidations of
funds in the Liberty and Stein Roe Fund groups proposed by Liberty Financial,
the indirect parent of each of the investment advisors to the Liberty and Stein
Roe Funds. The overall purposes of these acquisitions and liquidations include
streamlining the product offerings of the Liberty and Stein Roe Funds,
potentially reducing fund expense ratios by creating larger funds and permitting
the Liberty Financial organization to concentrate its portfolio management
resources on a more focused group of portfolios.
In proposing the Acquisition, Liberty Financial presented to the Trustees
the following reasons for the Small Cap Fund to enter into the Acquisition:
- The Acquisition is expected to create a larger fund with somewhat similar
investment goals and strategies to the Small Cap Fund, but with lower
operating expenses as a percentage of fund assets. This expense ratio
reduction would benefit Small Cap Fund shareholders, since operating
expenses are paid by the Fund and reduce the investment return to Fund
shareholders. Although, as explained below, it is not possible to predict
future expense ratios with certainty, information provided to the
Trustees by Liberty Financial indicated that, based on the assets of the
Small Cap and Select Value Funds on July 31, 2000 and the Funds' current
expense structures, the Select Value Fund's annualized expense ratio
(exclusive of 12b-1 fees) immediately after the Acquisitions would be
about 0.21% lower than the Small Cap Fund's current expense ratio (for
example, for Class A shares, a 1.03% expense ratio for the Select Value
Fund, as compared to 1.24% currently for the Small Cap Fund). Note that
the 12b-1 fees on Class A, B and C shares of the Small Cap Fund and the
Select Value Fund on a pro forma combined basis are 0.25%, 1.00%, and
1.00%, respectively.
- The Acquisition is expected to reduce expenses for all shareholders in
the Select Value Fund after the Acquisitions because Liberty Financial
has agreed to a new breakpoint in the management fee of
16
<PAGE> 19
0.65% of average daily net assets in excess of $1 billion (as of July 31,
2000, the Select Value Fund would have had $1,604,472,826 in net assets
on a pro forma combined basis, giving effect to the Acquisitions) to
lower the overall annual fee from 0.70% to 0.68% (on a pro forma combined
basis).
- The Small Cap Fund is not likely to achieve the scale necessary to reduce
Fund expenses through sales growth.
- The Select Value Fund has a superior performance record to the Small Cap
Fund for each of the one, five and ten-year periods ending July 31, 2000,
with the Class A shares (without giving effect to applicable sales
charges) of the Select Value Fund achieving average annual total returns
for such periods of 13.56%, 18.09% and 15.24%, respectively, and the
Class A shares (without giving effect to applicable sales charges) of the
Small Cap Fund achieving average annual total returns of 8.53%, 8.91% and
11.36%, respectively. See "Proposal 2 -- Information about the
Acquisition -- Performance Information" for a discussion of how these
returns were calculated.
- The Acquisition will permit a more focused value-style investment
management team to concentrate its efforts on a single value equity
approach rather than manage multiple portfolios with somewhat different
investment approaches.
- The Acquisition is intended to permit the Small Cap Fund's shareholders
to exchange their investment for an investment in the Select Value Fund
without recognizing gain or loss for federal income tax purposes. By
contrast, if a Small Cap Fund shareholder redeemed his or her shares to
invest in another fund, like the Select Value Fund, the transaction would
likely be a taxable event for such shareholder. Similarly, if the Small
Cap Fund were liquidated or reorganized in a taxable transaction, the
transaction would likely be a taxable event for the Fund's shareholders.
After the Acquisition, shareholders may redeem any or all of their Select
Value Fund shares at net asset value (subject to any applicable CDSC) at
any time, at which point they would recognize a taxable gain or loss.
In reviewing the Acquisition, the Trustees also considered the fact that
the unrealized gain exposure in the Small Cap Fund's portfolio will potentially
increase as a result of the Acquisition. This may increase and accelerate a
Small Cap Fund shareholder's exposure to federal income taxes. This means that,
in the future, a Value Fund shareholder may be liable for a greater amount of
federal income taxes than he or she otherwise would pay as a shareholder of the
Value Fund. The Trustees also considered the fact that a shareholder of the
Small Cap Fund will become a shareholder of a fund that invests primarily in mid
cap securities, rather than primarily in small cap securities. The Trustees
determined, despite these considerations, that on balance the Acquisition is in
the best interests of the Small Cap Fund's shareholders.
The projected post-Acquisition expense reductions presented above are based
on the Select Value Fund's current expense structure and the projected
post-Acquisition assets of the combined Fund. The projected reductions are
further based upon numerous material assumptions, including that: (1) the
current contractual agreements will remain in place; (2) any fee reductions
proposed in this combined Prospectus/Proxy Statement are approved; (3) certain
duplicate costs involved in operating the Acquired Funds are eliminated; and (4)
the Select Value Fund acquires both of the Acquired Funds. See the table "Annual
Fund Operating Expenses" under Question 3 in the "Questions and Answers" section
above for the expenses that would be applicable if one of the Acquisitions did
not take place. Although these projections represent good faith estimates, there
can be no assurance that any particular level of expenses or expense savings
will be achieved, because expenses depend on a variety of factors (including the
future level of Fund assets), many of which factors are beyond the control of
the Select Value Fund or Liberty Financial. No assurance can be given that the
Select Value Fund will achieve any particular level of performance after the
Acquisition.
Although the Trustees are proposing that the Select Value Fund acquire both
of the Acquired Funds, the acquisition of the Small Cap Fund is not conditioned
upon the acquisition of the Disciplined Stock Fund. Accordingly, if the Small
Cap Fund's shareholders approve the acquisition of the Small Cap Fund, but the
Disciplined Stock Fund's shareholders do not approve the acquisition of the
Disciplined Stock Fund, it is expected that, subject to the terms of the
Agreement and Plan of Reorganization, the Acquisition proposed in this Proposal
2 will take place as described in this Prospectus/Proxy Statement.
17
<PAGE> 20
Performance Information
The charts below show the percentage gain or loss in each calendar year for
the 10-year period ending December 31, 1999 for the Class A shares of each of
the Small Cap Fund and the Select Value Fund. They should give you a general
idea of how each Fund's return has varied from year to year. The charts include
the effects of Fund expenses, but not sales charges. Returns would be lower if
applicable sales charges were included. The calculations of total return assume
the reinvestment of all dividends and capital gain distributions on the
reinvestment date. Past performance is not an indication of future results.
Performance results include the effect of expense reduction arrangements, if
any. If these arrangements were not in place, then the performance results would
have been lower.
Additional discussion of the manner of calculation of total return is
contained in each Fund's respective Prospectus and Statement of Additional
Information, which are incorporated by reference in this Prospectus/ Proxy
Statement.
SMALL CAP FUND
[BAR CHART]
<TABLE>
<CAPTION>
SMALL CAP FUND
--------------
<S> <C>
1990 -23.65%
1991 18.96%
1992 20.65%
1993 18.83%
1994 6.30%
1995 37.55%
1996 18.35%
1997 23.88%
1998 -6.16%
1999 4.13%
</TABLE>
The Fund's year-to-date total return through
September 30, 2000 was 14.44%.
For period shown in bar chart:
Best quarter: First quarter 1991, +19.88%
Worst quarter: Third quarter 1998, -26.10%
SELECT VALUE FUND
[BAR CHART]
<TABLE>
<CAPTION>
SELECT VALUE FUND
-----------------
<S> <C>
1990 -10.66%
1991 34.09%
1992 11.00%
1993 9.99%
1994 -2.56%
1995 38.00%
1996 20.47%
1997 33.20%
1998 14.35%
1999 9.11%
</TABLE>
The Fund's year-to-date total return through
September 30, 2000 was 13.01%.
For period shown in bar chart:
Best quarter: First quarter 1991, +20.19%
Worst quarter: Third quarter 1990, -19.69%
18
<PAGE> 21
The following tables list each Fund's average annual total return for each
class of its shares for the one-year, five-year and ten-year periods ending
December 31, 1999, including the applicable sales charge for Class A, B and C
shares of the Small Cap Fund and Select Value Fund. These tables are intended to
provide you with some indication of the risks of investing in the Funds. At the
bottom of each table, you can compare the Funds' performance with one or more
indices or averages.
SMALL CAP FUND(1)
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
<S> <C> <C> <C>
Class A (%) (1.85) 13.18 9.90
-------------------------------------------------------------------------------------------
Class B (%) (1.64) 13.45 9.98(2)
-------------------------------------------------------------------------------------------
Class C (%) 2.41 13.89(2) 10.24(2)
-------------------------------------------------------------------------------------------
Class Z (%) 4.42 14.78(2) 10.68(2)
-------------------------------------------------------------------------------------------
Russell Index (%) 21.26 16.69 13.40
</TABLE>
SELECT VALUE FUND(3)(4)
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
<S> <C> <C> <C>
Class A (%) 2.84 21.10 14.00
-------------------------------------------------------------------------------------------
Class B (%) 3.46 21.42 14.03(5)
-------------------------------------------------------------------------------------------
Class C (%) 7.30 22.13(5) 14.48(5)
-------------------------------------------------------------------------------------------
Class Z (%) 9.29(5) 22.58(5) 14.70(5)
-------------------------------------------------------------------------------------------
S&P Index (%) 14.72 23.05 17.32
-------------------------------------------------------------------------------------------
Lipper Average (%) 39.35 23.31 16.04
</TABLE>
---------------
(1) The Small Cap Fund's return is compared to the Russell 2000 Index ("Russell
Index"), an unmanaged index that tracks the performance of small
capitalization stocks. 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.
(2) Class B, Class C and Class Z are newer classes of shares. Their performance
information includes returns of the Small Cap Fund's Class A shares (the
oldest existing fund class) for periods prior to the inception of the newer
classes of shares. The Class A share returns are not restated to reflect any
differences in expenses (such as Rule 12b-1 fees) between Class A shares and
the newer classes of shares. If differences in expenses were reflected, the
returns for periods prior to the inception of Class B and C shares would be
lower and the returns for periods prior to the inception of Class Z shares
would be higher. Class A shares were initially offered on July 25, 1986,
Class B shares were initially offered on November 9, 1992, Class C shares
were initially offered on January 15, 1996 and Class Z shares were initially
offered on July 31, 1995.
(3) The Select Value Fund's return is compared to the Standard & Poor's Midcap
400 Index ("S&P Index"), an unmanaged index that tracks the performance of
middle-capitalization U.S. stocks. 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 Select Value
Fund's return is also compared to the average return of the funds included
in the Lipper, Inc. Mid Cap Average Fund category average ("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.
(4) Class S shares of the Select Value Fund, which were not in existence as of
December 31, 1999, are not included in the table.
(5) Class B, Class C and Class Z are newer classes of shares. Their performance
information includes returns of the Select Value Fund's Class A shares (the
oldest existing fund class) for periods prior to the inception of the newer
classes of shares. These Class A share returns are not restated to reflect
any differences in expenses (such as Rule 12b-1 fees) between Class A shares
and the newer classes of shares. If differences in expenses were reflected,
the returns for periods prior to the inception of Class B and Class C shares
would be lower and the returns for periods prior to the inception of Class Z
shares would be higher. Class A shares were initially offered on July 21,
1949, Class B shares were initially offered on June 8, 1992, Class C shares
were initially offered on August 1, 1997 and Class Z shares were initially
offered on January 11, 1999.
19
<PAGE> 22
THE TRUSTEES OF TRUST VI UNANIMOUSLY RECOMMEND APPROVAL OF THE
AGREEMENT AND PLAN OF REORGANIZATION.
The Declaration of Trust (the "Declaration") establishing Trust VI provides
that any series of Trust VI (such as the Small Cap Fund) may be terminated by a
two-thirds vote of the series' shares or by notice from the Trustees to the
shareholders. The Trust believes that, under this provision, no shareholder vote
is required to approve the Acquisition, although the provision could also be
interpreted to require a two-thirds vote, if the Acquisition is submitted for
shareholder approval. The Declaration also provides that it may be amended by
the Trustees, upon majority vote of the shareholders of the affected series. To
eliminate any uncertainty about whether any shareholder vote is required to
approve the Acquisition, the Trustees will consider any vote in favor of the
Acquisition to be a vote in favor of amending the Declaration to provide that
the Small Cap Fund may be terminated by majority vote of the Small Cap Fund's
shares entitled to vote (or by Trustee notice to shareholders), and will so
amend the Declaration if a majority of the Small Cap Fund's shareholders
entitled to vote on the proposal vote in favor of such proposal.
Required Vote for Proposal 2
Approval of the Agreement and Plan of Reorganization dated October 26, 2000
among Trust VI on behalf of the Small Cap Fund, Trust III on behalf of the
Select Value Fund, and Liberty Financial will require the affirmative vote of a
majority of the shares of the Small Cap Fund outstanding at the record date for
the Meetings.
INFORMATION APPLICABLE TO PROPOSALS 1 AND 2
Terms of the Agreement and Plan of Reorganization
If approved by the shareholders of each Acquired Fund, the Acquisitions are
expected to occur on or around January 16, 2001 under the Agreement and Plan of
Reorganization, a form of which is attached as Appendix A to this combined
Prospectus/Proxy Statement. Please review Appendix A. The following is a brief
summary of the principal terms of the Agreement and Plan of Reorganization:
- Each Acquired Fund will transfer all of the assets and liabilities
attributable to each class of its shares to the Select Value Fund in
exchange for shares of the same class of the Select Value Fund with an
aggregate net asset value equal to the net asset value of the transferred
assets and liabilities.
- The Acquisitions will occur on the next business day after the time
(currently scheduled to be 4:00 p.m. Eastern Time on January 12, 2001 or
such other date and time as the parties may determine) when the assets of
each Fund are valued for purposes of the Acquisitions.
- The shares of each class of the Select Value Fund received by each
Acquired Fund will be distributed to each Acquired Fund's respective
shareholders of the same class pro rata in accordance with their
percentage ownership of each class of such Acquired Fund in full
liquidation of such Acquired Fund.
- After the Acquisitions, each Acquired Fund will be terminated, and its
affairs will be wound up in an orderly fashion.
- Each Acquisition requires approval by the Acquired Fund's shareholders
and satisfaction of a number of other conditions; each Acquisition may be
terminated at any time with the approval of the Trustees of the Stein Roe
Trust or Trust VI, as the case may be, and Trust III.
Although the Trustees are proposing that the Select Value Fund acquire each
of the Acquired Funds, the Acquisition proposed in each Proposal is not
conditioned upon the approval of the Acquisition proposed in the other Proposal.
Accordingly, in the event that the shareholders of the respective Acquired Funds
approve one but not the other Acquisition, it is expected that the approved
Acquisition will, subject to the terms of the Agreement and Plan of
Reorganization, take place as described above.
Shareholders who object to the Acquisitions will not be entitled under
Massachusetts law or the Declaration of Trust of the Stein Roe Trust or Trust VI
to demand payment for, or an appraisal of, their
20
<PAGE> 23
shares. However, shareholders should be aware that the Acquisitions as proposed
are not expected to result in recognition of gain or loss to shareholders for
federal income tax purposes and that, if the Acquisitions are consummated,
shareholders will be free to redeem the shares which they receive in the
transaction at their current net asset value, plus any applicable CDSC. In
addition, shares may be redeemed (at net asset value plus any applicable CDSC)
at any time prior to the consummation of the Acquisitions.
The form of Agreement and Plan of Reorganization attached as Appendix A to
this combined Prospectus/Proxy Statement is a general form which will be used
for each of the Acquisitions. There will be a separate Agreement and Plan of
Reorganization with respect to each Acquisition, among the Stein Roe Trust or
Trust VI, as applicable, on behalf of the relevant Acquired Fund, Trust III on
behalf of the Select Value Fund, and Liberty Financial. The form of Agreement
and Plan of Reorganization for each Acquisition has been filed with the SEC as
part of the Registration Statement of which this Prospectus/Proxy Statement
forms a part. Please see page 3 of this Prospectus/Proxy Statement for
information on how to obtain a copy of the Registration Statement or the form of
Agreement and Plan of Reorganization for your Fund's Acquisition.
Federal Income Tax Consequences
Each Acquisition is intended to be a tax-free reorganization. Ropes & Gray
or Bell, Boyd & Lloyd LLC, as the case may be, has delivered to each Acquired
Fund and the Select Value Fund an opinion, and the closing of each Acquisition
will be conditioned on receipt of a letter from Ropes & Gray or Bell, Boyd &
Lloyd LLC, as applicable, confirming such opinion, to the effect that, on the
basis of existing law under specified sections of the Internal Revenue Code of
1986, as amended (the "Code"), for federal income tax purposes:
- under Section 361 or Section 354 of the Code, respectively, no gain or
loss will be recognized by either Acquired Fund or the shareholders of
either Acquired Fund as a result of each Acquisition;
- under Section 358 of the Code, the tax basis of the Select Value Fund
shares you receive will be the same, in the aggregate, as the aggregate
tax basis of your Disciplined Stock Fund or Small Cap Fund shares;
- under Section 1223(1) of the Code, your holding period for the Select
Value Fund shares you receive will include the holding period for your
Disciplined Stock Fund or Small Cap Fund shares if you hold your shares
as a capital asset;
- under Section 1032 of the Code, no gain or loss will be recognized by the
Select Value Fund as a result of each Acquisition;
- under Section 362(b) of the Code, the Select Value Fund's tax basis in
the assets that the Select Value Fund receives from each Acquired Fund
will be the same as such Acquired Fund's basis in such assets; and
- under Section 1223(2) of the Code, the Select Value Fund's holding period
in such assets will include the relevant Acquired Fund's holding period
in such assets.
The opinions are, and the confirmation letters will be, based on certain
factual certifications made by officers of each Trust. The opinions are not a
guarantee that the tax consequences of the Acquisitions will be as described
above. Prior to the closing of the Acquisitions, each Acquired Fund and the
Select Value Fund will distribute to their shareholders all of their respective
investment company taxable income and net realized capital gains that have not
previously been distributed to shareholders. Such distributions will be taxable
to the shareholders of the respective Funds.
This description of the federal income tax consequences of the Acquisitions
does not take into account your particular facts and circumstances. Consult your
own tax advisor about the effect of state, local, foreign, and other tax laws.
21
<PAGE> 24
PROPOSAL 3 -- ELECTION OF TRUSTEES BY
STEIN ROE DISCIPLINED STOCK FUND SHAREHOLDERS
THE PROPOSAL
The purpose of this proposal is to elect six new members as well as five of
the currently serving members of the Board of Trustees of both (1) the Stein Roe
Trust, of which the Disciplined Stock Fund is a series, and (2) the Base Trust,
of which the Master Fund is a series. You will be asked to vote both to elect
the nominees listed below to the Board of Trustees of the Stein Roe Trust and to
authorize the Disciplined Stock Fund to cast votes for election of the same
nominees to the Board of Trustees of the Base Trust. Your approval or
disapproval of each nominee for Trustee of the Stein Roe Trust in Proposal 3
will be voted in the same manner for or against each nominee for Trustee of the
Base Trust. All of the nominees listed below, except for the proposed six new
members (Ms. Verville and Messrs. Lowry, Macera, Mayer, Neuhauser and Stitzel),
are currently members of the Boards of Trustees of the Stein Roe Trust and the
Base Trust, as well as two Stein Roe closed-end funds and six other Stein Roe
open-end trusts (collectively, the "Stein Roe Mutual Funds"), and have served in
that capacity continuously since originally elected or appointed. All of the
currently serving members of the Board of Trustees of the Stein Roe Trust, other
than Mr. Palombo, have been previously elected by the shareholders of the Stein
Roe Trust. All of the currently serving members of the Board of Trustees of the
Base Trust, other than Ms. Kelly and Mr. Palombo, have been previously elected
by the shareholders of the Base Trust. The proposed six new members currently
serve on the Board of Trustees of nine Liberty closed-end funds and eight
Liberty open-end trusts (or, in the case of Messrs. Lowry, Mayer and Neuhauser,
eleven Liberty closed-end funds and nine Liberty open-end trusts (collectively,
the "Liberty Mutual Funds")), and were recommended for election as Trustees of
the Stein Roe Trust and the Base Trust by the Board of Trustees of the
respective Trusts at special meetings held on October 17, 2000. Each of the
nominees elected will serve as a Trustee until the next meeting of shareholders
of the Stein Roe Trust or the Base Trust, as the case may be, 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 and Stein Roe Mutual Funds. Liberty Financial
and the Stein Roe Trust's Trustees have agreed that shareholder interests can
more effectively be represented by a single board with responsibility for
overseeing substantially all of the Liberty and Stein Roe Mutual Funds. Creation
of a single, consolidated board should also provide certain administrative
efficiencies for Liberty Financial and potential future cost savings for both
the Liberty and Stein Roe Mutual Funds and Liberty Financial. 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 of the Stein Roe
Trust and the Base Trust (if so instructed). If any nominee listed below becomes
unavailable for election, the proxy may be voted for a substitute nominee in the
discretion of the proxy holder(s).
INFORMATION ABOUT THE NOMINEES
Set forth below is information concerning each of the nominees.
<TABLE>
<CAPTION>
NOMINEE NAME & AGE PRINCIPAL OCCUPATION(1) AND DIRECTORSHIPS TRUSTEE SINCE
------------------ ---------------------------------------------------- -------------
<S> <C> <C>
Douglas A. Hacker Executive Vice President and Chief Financial Officer 1996
(43) 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 Development, 1996
(41) General Counsel, and Secretary of Kellogg Company
(food, beverage and tobacco producer) since
September 1999; Senior Vice President, Secretary and
General Counsel of Sara Lee Corporation (branded,
packaged, consumer-products manufacturer) prior
thereto.
</TABLE>
22
<PAGE> 25
<TABLE>
<CAPTION>
NOMINEE NAME & AGE PRINCIPAL OCCUPATION(1) AND DIRECTORSHIPS TRUSTEE SINCE
------------------ ---------------------------------------------------- -------------
<S> <C> <C>
Richard W. Lowry Private Investor since 1987. (Formerly Chairman and New nominee
(64) Chief Executive Officer of U.S. Plywood Corporation
(building products producer) from August 1985 to
August 1987.)
Salvatore Macera Private Investor since 1981. (Formerly Executive New nominee
(69) Vice President and Director of Itek Corporation
(electronics) from 1975 to 1981.)
William E. Mayer(2) Partner, Park Avenue Equity Partners (venture New nominee
(60) capital), since November 1996; Dean, College of
Business and Management, University of Maryland,
prior thereto; Director, Johns Manville (building
products producer), Lee Enterprises (print and
on-line media) and WR Hambrecht + Co. (financial
services provider).
Charles R. Nelson Van Voorhis Professor, Department of Economics, 1981
(57) University of Washington; Consultant on economic and
statistical matters.
John J. Neuhauser Academic Vice President and Dean of Faculties, New nominee
(57) Boston College, since August 1999; Dean, Boston
College School of Management, prior thereto.
Joseph R. Palombo(3) Trustee of the Liberty Mutual Funds since August 2000
(47) 2000; Executive Vice President and Director of
Colonial and Stein Roe since April 1999; Executive
Vice President and Chief Administrative Officer of
Liberty Funds Group LLC since April 1999; Director
of AlphaTrade Inc. (broker-dealer), Colonial
Advisory Services, Inc., Liberty Funds Distributor,
Inc. and Liberty Funds Services, Inc. since April
1999. (Formerly Vice President of the Stein Roe
Mutual Funds from April 1999 to October 2000, Vice
President of the Liberty Mutual Funds from April
1999 to August 2000, and Chief Operating Officer of
Putnam Mutual Funds (investments) from 1994 to
1998.)
Thomas E. Stitzel Business Consultant since 1999; Professor of Finance New nominee
(64) and Dean, College of Business, Boise State
University, prior thereto; Chartered Financial
Analyst.
Thomas C. Theobald Managing Director, William Blair Capital Partners 1996
(62) (private equity investing), since 1994; Chief
Executive Officer and Chairman of the Board of
Directors of Continental Bank Corporation (banking
services) prior thereto.
Anne-Lee Verville Consultant since 1997; General Manager, Global New nominee
(55) Education Industry (global education applications),
prior thereto. (Formerly President, Applications
Solutions Division, IBM Corporation (global
education and global applications), from 1991 to
1994.)
</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.
(2) Mr. Mayer is an "interested person," as defined in the Investment Company
Act of 1940, as amended (the "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.
23
<PAGE> 26
The following persons who are currently serving on the Board of Trustees of
the Stein Roe Trust and the Base Trust are not standing for reelection:
<TABLE>
<CAPTION>
TRUSTEE
TRUSTEE NAME & AGE PRINCIPAL OCCUPATION(1) AND DIRECTORSHIPS SINCE
------------------ ------------------------------------------------------- -----------
<S> <C> <C>
John A. Bacon Jr. Private investor. 1998
(72)
William W. Boyd Chairman and Director of Sterling Plumbing 1994
(72) (manufacturer of plumbing products).
Lindsay Cook(2) Executive Vice President of Liberty Financial since 1994
(47) March 1997; Senior Vice President prior thereto.
</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.
(2) Mr. Cook is an "interested person," as defined in the 1940 Act, because he
is an officer of Liberty Financial.
TRUSTEES' COMPENSATION
The members of the Board of Trustees will serve as Trustees of the Liberty
and Stein Roe Mutual 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 meeting and $1,000 for each special joint meeting.
The Board of Trustees is expected to hold six regular joint meetings each year.
Committee chairs will receive an additional annual retainer of $5,000, and
receive $1,000 for each special meeting attended on a day other than a regular
joint meeting day. 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 meeting day. Two-thirds of the Trustees' fees are allocated
among the Liberty and Stein Roe Mutual Funds based on each Fund's relative net
assets, and one-third of the fees is divided equally among the Liberty and Stein
Roe Mutual Funds.
The Stein Roe Mutual Funds do not currently provide pension or retirement
plan benefits to the Trustees. However, Messrs. Boyd and Bacon, two of the
Trustees currently serving on the Board of Trustees of the Stein Roe Trust who
are not continuing on the combined Board of Trustees of the Liberty and Stein
Roe Mutual Funds, will receive certain payments after completing their service
on the Board. Mr. Boyd will receive a payment of $50,000 upon his departure. Mr.
Bacon will receive payments at an annual rate equal to the 1999 compensation of
the Trustees of the Liberty Mutual Funds until he would otherwise have retired
at age 74. The payments to Mr. Bacon will be made quarterly, beginning in 2001.
Liberty Financial and the Stein Roe Mutual Funds will each bear one-half of the
cost of the payments to Messrs. Boyd and Bacon; the Stein Roe Mutual Funds'
portion of the payments will be allocated among the Stein Roe Mutual Funds based
on each fund's share of the Trustee fees for 2000.
Further information concerning the Trustees' compensation is included in
Appendix B.
MEETINGS AND CERTAIN COMMITTEES
Composition. The current Board of Trustees of the Stein Roe Mutual Funds
consists of six non-interested Trustees and two interested Trustees.
Audit Committee. The Audit Committee of the Stein Roe Mutual Funds,
consisting of Messrs. Hacker (Chairman), Bacon, Boyd, Nelson and Theobald and
Ms. Kelly, 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 Stein Roe Mutual
Funds, consisting of Messrs. Boyd and Nelson, both of whom are non-interested
Trustees, reviews compensation of the Board of Trustees.
24
<PAGE> 27
Nominating Committee. The Nominating Committee of the Stein Roe Mutual
Funds, consisting of Messrs. Boyd and Nelson, both of whom are non-interested
Trustees, 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 Stein
Roe Trust, Attention: Secretary, One Financial Center, Boston, Massachusetts
02111-2621.
Executive Committee. The Executive Committee of the Stein Roe Mutual
Funds, consisting of Mr. Boyd, a non-interested Trustee, and Mr. Cook, an
interested Trustee, is authorized to take certain actions delegated to it by the
full Board of Trustees and to exercise the full powers of the Board of Trustees,
with some exceptions, between Board meetings.
Record of Board and Committee Meetings. During the fiscal year ended
September 30, 2000, the Board of Trustees of the Stein Roe Trust held five
meetings, the Audit Committee held four meetings, the Compensation Committee
held no meetings, the Nominating Committee held no meetings, and the Executive
Committee held one meeting.
During the most recently completed fiscal year, each of the current
Trustees attended more than 75% of the meetings of the Board of Trustees and the
committees of which such Trustee was a member.
THE BOARD OF TRUSTEES RECOMMENDS THAT THE SHAREHOLDERS OF THE
DISCIPLINED STOCK FUND VOTE FOR EACH NOMINEE IN PROPOSAL 3.
Required Vote for Proposal 3
A plurality of the votes cast at the Meetings for the Stein Roe Trust, if a
quorum is represented, is required for the election of each Trustee to the Board
of Trustees of the Stein Roe Trust. Since the number of Trustees for the Stein
Roe Trust has been fixed at eleven, this means that the eleven persons receiving
the highest number of votes will be elected as Trustees of the Stein Roe Trust.
Shareholders of the Disciplined Stock Fund vote together with the other
shareholders of the Master Fund and with the shareholders of the feeder funds of
the other master funds which are series of the Base Trust for the election of
Trustees of the Base Trust. A plurality of the votes cast at the Meetings for
the Base Trust, if a quorum is represented, is required for the election of each
Trustee to the Board of Trustees of the Base Trust. Since the number of Trustees
for the Base Trust has been fixed at eleven, this means that the eleven persons
receiving the highest number of votes will be elected as Trustees of the Base
Trust.
PROPOSAL 4 -- ELECTION OF TRUSTEES BY
LIBERTY SMALL-CAP VALUE FUND SHAREHOLDERS
THE PROPOSAL
You are being asked to approve the election of four new members as well as
seven of the currently serving members of the Board of Trustees of Trust VI. 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 Trust VI, as well as nine Liberty closed-end funds and
seven other Liberty open-end trusts (or, in the case of Messrs. Lowry, Mayer and
Neuhauser, eleven Liberty closed-end funds and eight other Liberty open-end
trusts (collectively, the "Liberty Mutual Funds")), 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
by the shareholders of Trust VI. The proposed four new members currently serve
on the Board of Trustees of two Stein Roe closed-end funds and seven Stein Roe
open-end trusts (collectively, the "Stein Roe Mutual Funds"), and were
recommended for election as Trustees of the Liberty Mutual Funds by the Board of
Trustees at meetings held on October 25 and 26, 2000. Each of the nominees
elected will serve as a Trustee of Trust VI until the next meetings of
shareholders of Trust VI 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.
25
<PAGE> 28
Currently, two different boards of trustees are responsible for overseeing
substantially all of the Liberty and Stein Roe Mutual Funds. Liberty Financial
and the Trustees of Trust VI have agreed that shareholder interests can more
effectively be represented by a single board with responsibility for overseeing
substantially all of the Liberty and Stein Roe Mutual Funds. Creation of a
single, consolidated board should also provide certain administrative
efficiencies for Liberty Financial and potential future cost savings for both
the Liberty and Stein Roe Mutual Funds and Liberty Financial. 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 of Trust VI (if so
instructed). If any nominee listed below becomes unavailable for election, the
proxy may be voted for a substitute nominee in the discretion of the proxy
holder(s).
INFORMATION ABOUT THE NOMINEES
Set forth below is information concerning each of the nominees.
<TABLE>
<CAPTION>
NOMINEE NAME & AGE PRINCIPAL OCCUPATION(1) AND DIRECTORSHIPS TRUSTEE SINCE
------------------ --------------------------------------------- -------------
<S> <C> <C>
Douglas A. Hacker Executive Vice President and Chief Financial
(43) Officer of UAL, Inc. (airline) since July New nominee
1999; Senior Vice President and Chief
Financial Officer of UAL, Inc. prior thereto.
Janet Langford Kelly Executive Vice President -- Corporate
(41) Development, General Counsel, and Secretary New nominee
of Kellogg Company (food, beverage and
tobacco producer) since September 1999;
Senior Vice President, Secretary and General
Counsel of Sara Lee Corporation (branded,
packaged, consumer-products manufacturer)
prior thereto.
Richard W. Lowry Private Investor since 1987. (Formerly
(64) Chairman and Chief Executive Officer of U.S. 1995
Plywood Corporation (building products
producer) from August 1985 to August 1987.)
Salvatore Macera Private Investor since 1981. (Formerly
(69) Executive Vice President and Director of Itek 1998
Corporation (electronics) from 1975 to 1981.)
William E. Mayer(2) Partner, Park Avenue Equity Partners (venture
(60) capital), since November 1996; Dean, College 1994
of Business and Management, University of
Maryland, prior thereto; Director, Johns
Manville (building products producer), Lee
Enterprises (print and on-line media) and WR
Hambrecht + Co. (financial services
provider).
Charles R. Nelson Van Voorhis Professor, Department of
(57) Economics, University of Washington; New nominee
Consultant on economic and statistical
matters.
John J. Neuhauser Academic Vice President and Dean of
(57) Faculties, Boston College, since August 1999; 1985
Dean, Boston College School of Management,
prior thereto.
</TABLE>
26
<PAGE> 29
<TABLE>
<CAPTION>
NOMINEE NAME & AGE PRINCIPAL OCCUPATION(1) AND DIRECTORSHIPS TRUSTEE SINCE
------------------ --------------------------------------------- -------------
<S> <C> <C>
Joseph R. Palombo(3) Trustee of the Stein Roe Mutual Funds since
(47) October 2000; Executive Vice President and 2000
Director of Colonial and Stein Roe since
April 1999; Executive Vice President and
Chief Administrative Officer of Liberty Funds
Group LLC since April 1999; Director of
AlphaTrade Inc. (broker-dealer), Colonial
Advisory Services, Inc., Liberty Funds
Distributor, Inc. and Liberty Funds Services,
Inc. since April 1999. (Formerly Vice
President of the Stein Roe Mutual Funds from
April 1999 to October 2000, Vice President of
the Liberty Mutual Funds from April 1999 to
August 2000, and Chief Operating Officer of
Putnam Mutual Funds (investments) from 1994
to 1998.)
Thomas E. Stitzel Business Consultant since 1999; Professor of
(64) Finance and Dean, College of Business, Boise 1998
State University, prior thereto; Chartered
Financial Analyst.
Thomas C. Theobald Managing Director, William Blair Capital
(62) Partners (private equity investing), since New nominee
1994; Chief Executive Officer and Chairman of
the Board of Directors of Continental Bank
Corporation (banking services) prior thereto.
Anne-Lee Verville Consultant since 1997; General Manager,
(55) Global Education Industry (global education 1998
applications), prior thereto. (Formerly
President, Applications Solutions Division,
IBM Corporation (global education and global
applications), from 1991 to 1994.)
</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.
(2) Mr. Mayer is not affiliated with Liberty Financial, but is an "interested
person," as defined in the Investment Company Act of 1940, as amended (the
"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.
The following persons who are currently serving on the Board of Trustees of
Trust VI are not standing for reelection:
<TABLE>
<CAPTION>
TRUSTEE NAME & AGE PRINCIPAL OCCUPATION(1) AND DIRECTORSHIPS TRUSTEE SINCE
------------------ ----------------------------------------- -------------
<S> <C> <C>
Tom Bleasdale Retired (formerly Chairman of the Board and Chief 1987
(70) Executive Officer, Shore Bank & Trust Company
(banking services) from 1992 to 1993); Director,
Empire Co. (food distributor).
Lora S. Collins Attorney (formerly Attorney, Kramer Levin Naftalis & 1991
(65) Frankel LLP (law firm) from 1986 to 1996).
James E. Grinnell Private investor since November 1988. 1995
(72)
</TABLE>
27
<PAGE> 30
<TABLE>
<CAPTION>
TRUSTEE NAME & AGE PRINCIPAL OCCUPATION(1) AND DIRECTORSHIPS TRUSTEE SINCE
------------------ ----------------------------------------- -------------
<S> <C> <C>
James L. Moody, Jr. Retired (formerly Chairman of the Board, Hannaford 1986
(70) Bros. Co. (food retailer) from 1984 to 1997 and
Chief Executive Officer prior thereto).
</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.
TRUSTEES' COMPENSATION
The members of the Board of Trustees will serve as Trustees of the Liberty
and Stein Roe Mutual 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 meeting and $1,000 for each special joint meeting.
The Board of Trustees is expected to hold six regular joint meetings each year.
Committee chairs will receive an additional annual retainer of $5,000, and
receive $1,000 for each special meeting attended on a day other than a regular
joint meeting day. 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 meeting day. Two-thirds of the Trustees' fees are allocated
among the Liberty and Stein Roe Mutual Funds based on each Fund's relative net
assets, and one-third of the fees is divided equally among the Liberty and Stein
Roe Mutual Funds.
The Liberty Mutual 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 Liberty Mutual Funds who are not continuing on the
combined Board of Trustees of the Liberty and Stein Roe Mutual 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. Liberty
Financial and the Liberty Mutual Funds will each bear one-half of the cost of
the payments; the Liberty Mutual Funds' portion of the payments will be
allocated among the Liberty Mutual Funds based on each fund's share of the
Trustee fees for 2000.
Further information concerning the Trustees' compensation is included in
Appendix B.
MEETINGS AND CERTAIN COMMITTEES
Composition. The current Board of Trustees of the Liberty Mutual Funds
consists of two interested and nine non-interested Trustees. Mr. Mayer is not
affiliated with Liberty Financial or any of its investment advisor affiliates,
but is considered interested as a result of his affiliation with a
broker-dealer. Mr. Palombo is an interested person because of his affiliation
with Liberty Financial.
Audit Committee. The Audit Committee of the Liberty Mutual Funds,
consisting of Ms. Verville (Chairperson) and Messrs. Bleasdale, Grinnell, Lowry,
Macera and Moody, 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 Liberty Mutual
Funds, 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 Liberty Mutual
Funds, 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 Liberty Financial or any of its investment advisor
affiliates), 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 Trust VI, Attention: Secretary, One Financial Center, Boston,
Massachusetts 02111-2621
28
<PAGE> 31
Record of Board and Committee Meetings. During the fiscal year ended June
30, 2000, the Board of Trustees of Trust VI held six meetings, the Audit
Committee held four meetings, the Compensation Committee held two meetings, and
the Governance Committee held six meetings.
During the most recently completed fiscal year, each of the current
Trustees attended more than 75% of the meetings of the Board of Trustees and the
committees of which such Trustee was a member.
THE BOARD OF TRUSTEES RECOMMENDS THAT THE SHAREHOLDERS OF THE SMALL CAP FUND
VOTE FOR EACH NOMINEE IN PROPOSAL 4.
Required Vote for Proposal 4
A plurality of the votes cast at the Meetings for Trust VI, if a quorum is
represented, is required for the election of each Trustee to the Board of
Trustees of Trust VI. 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.
GENERAL
VOTING INFORMATION
The Trustees of the Stein Roe Trust and Trust VI are soliciting proxies
from the shareholders of each Acquired Fund in connection with the Meetings,
which have been called to be held at 10:00 a.m. Eastern Time on December 27,
2000 at Colonial's offices, One Financial Center, Boston, Massachusetts
02111-2621. The meeting notice, this combined Prospectus/Proxy Statement and
proxy cards and inserts are being mailed to shareholders beginning on or about
November 17, 2000.
Information About Proxies and the Conduct of the Meetings
Solicitation of Proxies. Proxies will be solicited primarily by mailing
this combined Prospectus/Proxy Statement and its enclosures, but proxies may
also be solicited through further mailings, telephone calls, personal interviews
or e-mail by officers of the Disciplined Stock Fund or the Small Cap Fund or by
employees or agents of Stein Roe or Colonial and their affiliated companies. In
addition, Shareholder Communications Corporation ("SCC") has been engaged to
assist in the solicitation of proxies, at an estimated total cost of $700,000
for all of the proposed acquisitions of funds in the Liberty and Stein Roe
Mutual Fund groups scheduled to take place in January 2001.
Voting Process
You can vote in any one of the following four ways:
a. By mail, by filling out and returning the enclosed proxy card;
b. By phone, by calling toll-free 1-877-518-9416 between the hours of 9:00
a.m. and 11:00 p.m. Eastern Time and following the instructions;
c. By fax (not available for all shareholders; refer to enclosed proxy
insert); or
d. In person at the Meetings.
Shareholders who owned shares on the record date, September 29, 2000, are
entitled to vote at the Meetings. Shareholders of the Small Cap Fund are
entitled to cast one vote for each share owned on the record date. Shareholders
of the Disciplined Stock Fund are entitled to cast a number of votes equal to
the dollar net asset value of shares owned as of record date. The net asset
value of a Class S share of the Disciplined Stock Fund on the record date was
$20.11. 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.
29
<PAGE> 32
Costs. The estimated costs of the Meetings, including the costs of
soliciting proxies, and the costs of the Acquisitions to be borne by the
Disciplined Stock Fund, the Small Cap Fund and the Select Value Fund are
approximately $121,000, $327,000 and $68,000, respectively. Liberty Financial is
also bearing a portion of such costs. This portion to be borne by Liberty
Financial is in addition to the amounts to be borne by the Funds.
Voting and Tabulation of Proxies. Shares represented by duly executed
proxies will be voted as instructed on the proxy card. If no instructions are
given, the proxy will be voted in favor of each Proposal. You can revoke your
proxy by sending a signed, written letter of revocation to the Secretary of your
Acquired Fund, by properly executing and submitting a later-dated proxy or by
attending the Meetings and voting in person.
Votes cast in person or by proxy at the Meetings will be counted by persons
appointed by each Acquired Fund as tellers for the Meetings (the "Tellers").
Thirty percent (30%) of the shares of each of the Disciplined Stock Fund and the
Small Cap Fund outstanding on the record date, present in person or represented
by proxy, constitute a quorum for the transaction of business by the
shareholders of the respective Funds at the Meetings. Shareholders of the
Disciplined Stock Fund vote together with the shareholders of the other series
of the Stein Roe Trust for the election of Trustees of the Stein Roe Trust;
thirty percent (30%) of the outstanding shares of the Stein Roe Trust
constitutes a quorum for voting on the election of Trustees. Shareholders of the
Disciplined Stock Fund vote together with the other shareholders of the Master
Fund and with the shareholders of the feeder funds of the other master funds
which are series of the Base Trust for the election of Trustees of the Base
Trust; thirty percent (30%) of the outstanding shares of the Base Trust
constitutes a quorum for voting on the election of Trustees. Shareholders of the
Small Cap Fund vote together with the shareholders of the other series of Trust
VI for the election of Trustees of Trust VI; thirty percent (30%) of the
outstanding shares of Trust VI constitutes a quorum for voting on the election
of Trustees. In determining whether a quorum is present, the Tellers will count
shares represented by proxies that reflect abstentions and "broker non-votes" as
shares that are present and entitled to vote. Since these shares will be counted
as present, but not as voting in favor of any proposal, these shares will have
the same effect as if they cast votes against Proposals 1 and 2 and will have no
effect on the outcome of Proposals 3 and 4. "Broker non-votes" are shares held
by brokers or nominees as to which (i) the broker or nominee does not have
discretionary voting power and (ii) the broker or nominee has not received
instructions from the beneficial owner or other person who is entitled to
instruct how the shares will be voted.
Advisors' and Underwriter's Addresses. The address of the Disciplined
Stock Fund's investment advisor, Stein Roe & Farnham Incorporated, is One South
Wacker Drive, Chicago, Illinois 60606. The address of the Small Cap Fund's and
the Select Value Fund's investment advisor, Colonial Management Associates,
Inc., is One Financial Center, Boston, Massachusetts 02111-2621. The address of
each Fund's principal underwriter, Liberty Funds Distributor, Inc., is One
Financial Center, Boston, Massachusetts 02111-2621.
Information About Liberty Financial. On November 1, 2000, Liberty
Financial announced that it had retained CS First Boston to help it explore
strategic alternatives, including the possible sale of Liberty Financial.
Outstanding Shares and Significant Shareholders. Appendix B to this
Prospectus/Proxy Statement lists for the Disciplined Stock Fund and the Stein
Roe Trust and the Base Trust and for the Small Cap Fund and Trust VI the total
number of shares outstanding as of September 29, 2000 for each class of the
shares of each such Fund and Trust entitled to vote at the Meetings. It also
lists for the Select Value Fund and Trust III the total number of shares
outstanding as of September 29, 2000. It also identifies holders of more than 5%
or 25% of any class of shares of each Fund, and contains information about the
executive officers and Trustees of the Trusts and their shareholdings in the
Funds and Trusts.
Adjournments; Other Business. If either Acquired Fund or the Trust of
which it is a series, as applicable, has not received enough votes by the time
of the Meetings to approve any Proposal, the persons named as proxies may
propose that such Meetings be adjourned one or more times to permit further
solicitation of proxies. Any adjournment requires the affirmative vote of a
majority of the total number of shares of such Acquired Fund or Trust, as
applicable, that are present in person or by proxy on the question
30
<PAGE> 33
when the adjournment is being voted on. The persons named as proxies will vote
in favor of any such adjournment all proxies that they are entitled to vote in
favor of the relevant Proposal (or in favor of any nominee, in the case of
Proposals 3 and 4). They will vote against any such adjournment any proxy that
directs them to vote against the Proposal (or against all nominees, in the case
of Proposals 3 and 4). They will not vote any proxy that directs them to abstain
from voting on the Proposal in question.
The Meetings have been called to transact any business that properly comes
before them. The only business that management of each Acquired Fund intends to
present or knows that others will present is Proposals 1 through 4. If any other
matters properly come before the Meetings, and on all matters incidental to the
conduct of the Meetings, the persons named as proxies intend to vote the proxies
in accordance with their judgment, unless the Secretary of the relevant Acquired
Fund has previously received written contrary instructions from the shareholder
entitled to vote the shares.
Shareholder Proposals at Future Meetings. The Stein Roe Trust and Trust VI
do not hold annual or other regular meetings of shareholders. Shareholder
proposals to be presented at any future meeting of shareholders of the Funds or
the Trusts must be received by the relevant Fund in writing a reasonable amount
of time before the Trust solicits proxies for that meeting in order to be
considered for inclusion in the proxy materials for that meeting. Shareholder
proposals should be sent to your Fund, care of the Stein Roe Trust or Trust VI,
as applicable, Attention: Secretary, One Financial Center, Boston, Massachusetts
02111-2621.
31
<PAGE> 34
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION dated as of October 26, 2000 is
by and among [Name of Acquired Fund Trust] (the "Trust"), a Massachusetts
business trust established under a Declaration of Trust dated __________, as
amended, on behalf of [Name of Acquired Fund] (the "Acquired Fund"), a series of
the Trust, Liberty Funds Trust III (the "Acquiring Trust"), a Massachusetts
business trust established under a Declaration of Trust dated May 30, 1986, as
amended, on behalf of Liberty Select Value Fund (the "Acquiring Fund"), a series
of the Acquiring Trust, and Liberty Financial Companies, Inc.
This Agreement is intended to be and is adopted as a plan of reorganization
and liquidation within the meaning of Section 368(a) of the United States
Internal Revenue Code of 1986, as amended (the "Code"), and any successor
provision. The reorganization will consist of the transfer of all of the assets
of the Acquired Fund in exchange solely for [Class A, B, C, Z and S] shares of
beneficial interest of the Acquiring Fund ("Acquiring Shares") and the
assumption by the Acquiring Fund of the liabilities of the Acquired Fund (other
than certain expenses of the reorganization contemplated hereby) and the
distribution of such Acquiring Shares to the shareholders of the Acquired Fund
in liquidation of the Acquired Fund, all upon the terms and conditions set forth
in this Agreement.
In consideration of the premises and of the covenants and agreements
hereinafter set forth, the parties hereto covenant and agree as follows:
1. TRANSFER OF ASSETS OF ACQUIRED FUND IN EXCHANGE FOR ASSUMPTION OF LIABILITIES
AND ACQUIRING SHARES AND LIQUIDATION OF ACQUIRED FUND.
1.1 Subject to the terms and conditions herein set forth and on the basis
of the representations and warranties contained herein,
(a) The Trust, on behalf of the Acquired Fund, will transfer and deliver
to the Acquiring Fund, and the Acquiring Fund will acquire, all the
assets of the Acquired Fund as set forth in paragraph 1.2;
(b) The Acquiring Fund will assume all of the Acquired Fund's
liabilities and obligations of any kind whatsoever, whether
absolute, accrued, contingent or otherwise in existence on the
Closing Date (as defined in paragraph 1.2 hereof) (the
"Obligations"), except that expenses of reorganization contemplated
hereby to be paid by the Acquired Fund pursuant to paragraphs 1.5
and 9.2 shall not be assumed or paid by the Acquiring Fund; and
(c) The Acquiring Fund will issue and deliver to the Acquired Fund in
exchange for such assets the number of Acquiring Shares (including
fractional shares, if any) determined by dividing the net asset
value of the Acquired Fund, computed in the manner and as of the
time and date set forth in paragraph 2.1, by the net asset value of
one Acquiring Share, computed in the manner and as of the time and
date set forth in paragraph 2.2. Such transactions shall take place
at the closing provided for in paragraph 3.1 (the "Closing").
1.2 The assets of the Acquired Fund to be acquired by the Acquiring Fund
shall consist of all cash, securities, dividends and interest
receivable, receivables for shares sold and all other assets which are
owned by the Acquired Fund on the closing date provided in paragraph
3.1 (the "Closing Date") and any deferred expenses, other than
unamortized organizational expenses, shown as an asset on the books of
the Acquired Fund on the Closing Date.
1.3 As provided in paragraph 3.4, as soon after the Closing Date as is
conveniently practicable (the "Liquidation Date"), the Acquired Fund
will liquidate and distribute pro rata to its shareholders of record
("Acquired Fund Shareholders"), determined as of the close of business
on the Valuation Date (as defined in paragraph 2.1), the Acquiring
Shares received by the Acquired Fund pursuant to paragraph 1.1. Such
liquidation and distribution will be accomplished by the transfer of
the
A-1
<PAGE> 35
Acquiring Shares then credited to the account of the Acquired Fund on
the books of the Acquiring Fund to open accounts on the share records
of the Acquiring Fund in the names of the Acquired Fund Shareholders
and representing the respective pro rata number of Acquiring Shares due
such shareholders. The Acquiring Fund shall not be obligated to issue
certificates representing Acquiring Shares in connection with such
exchange.
1.4 With respect to Acquiring Shares distributable pursuant to paragraph
1.3 to an Acquired Fund Shareholder holding a certificate or
certificates for shares of the Acquired Fund, if any, on the Valuation
Date, the Acquiring Trust will not permit such shareholder to receive
Acquiring Share certificates therefor, exchange such Acquiring Shares
for shares of other investment companies, effect an account transfer of
such Acquiring Shares, or pledge or redeem such Acquiring Shares until
the Acquiring Trust has been notified by the Acquired Fund or its agent
that such Acquired Fund Shareholder has surrendered all his or her
outstanding certificates for Acquired Fund shares or, in the event of
lost certificates, posted adequate bond.
1.5 [RESERVED]
1.6 As promptly as possible after the Closing Date, the Acquired Fund shall
be terminated pursuant to the provisions of the laws of the
Commonwealth of Massachusetts, and, after the Closing Date, the
Acquired Fund shall not conduct any business except in connection with
its liquidation.
2. VALUATION.
2.1 For the purpose of paragraph 1, the value of the Acquired Fund's assets
to be acquired by the Acquiring Fund hereunder shall be the net asset
value computed as of the close of regular trading on the New York Stock
Exchange on the business day next preceding the Closing (such time and
date being herein called the "Valuation Date") using the valuation
procedures set forth in the Declaration of Trust of the Acquiring Trust
and the then current prospectus or statement of additional information
of the Acquiring Fund, after deduction for the expenses of the
reorganization contemplated hereby to be paid by the Acquired Fund
pursuant to paragraphs 1.5, and shall be certified by the Acquired
Fund.
2.2 For the purpose of paragraph 2.1, the net asset value of an Acquiring
Share shall be the net asset value per share computed as of the close
of regular trading on the New York Stock Exchange on the Valuation
Date, using the valuation procedures set forth in the Declaration of
Trust of the Acquiring Trust and the then current prospectus or
prospectuses and the statement or statements of additional information
of the Acquiring Fund (collectively, as from time to time amended and
supplemented, the "Acquiring Fund Prospectus").
3. CLOSING AND CLOSING DATE.
3.1 The Closing Date shall be on January 16, 2001, or on such other date as
the parties may agree in writing. The Closing shall be held at 9:00
a.m. at the offices of Colonial Management Associates, Inc., One
Financial Center, Boston, Massachusetts 02111, or at such other time
and/or place as the parties may agree.
3.2 The portfolio securities of the Acquired Fund shall be made available
by the Acquired Fund to The Chase Manhattan Bank, as custodian for the
Acquiring Fund (the "Custodian"), for examination no later than five
business days preceding the Valuation Date. On the Closing Date, such
portfolio securities and all the Acquired Fund's cash shall be
delivered by the Acquired Fund to the Custodian for the account of the
Acquiring Fund, such portfolio securities to be duly endorsed in proper
form for transfer in such manner and condition as to constitute good
delivery thereof in accordance with the custom of brokers or, in the
case of portfolio securities held in the U.S. Treasury Department's
book-entry system or by the Depository Trust Company, Participants
Trust Company or other third party depositories, by transfer to the
account of the Custodian in accordance with Rule 17f-4 or Rule 17f-5,
as the case may be, under the Investment Company Act of 1940 (the "1940
Act") and accompanied by all necessary federal and state stock transfer
stamps or a check for the appropriate
A-2
<PAGE> 36
purchase price thereof. The cash delivered shall be in the form of
currency or certified or official bank checks, payable to the order of
"The Chase Manhattan Bank, custodian for Acquiring Fund."
3.3 In the event that on the Valuation Date (a) the New York Stock Exchange
shall be closed to trading or trading thereon shall be restricted, or
(b) trading or the reporting of trading on said Exchange or elsewhere
shall be disrupted so that accurate appraisal of the value of the net
assets of the Acquired Fund or the Acquiring Fund is impracticable, the
Closing Date shall be postponed until the first business day after the
day when trading shall have been fully resumed and reporting shall have
been restored; provided that if trading shall not be fully resumed and
reporting restored within three business days of the Valuation Date,
this Agreement may be terminated by either of the Trust or the
Acquiring Trust upon the giving of written notice to the other party.
3.4 At the Closing, the Acquired Fund or its transfer agent shall deliver
to the Acquiring Fund or its designated agent a list of the names and
addresses of the Acquired Fund Shareholders and the number of
outstanding shares of beneficial interest of the Acquired Fund owned by
each Acquired Fund Shareholder, all as of the close of business on the
Valuation Date, certified by the Secretary or Assistant Secretary of
the Trust. The Acquiring Trust will provide to the Acquired Fund
evidence satisfactory to the Acquired Fund that the Acquiring Shares
issuable pursuant to paragraph 1.1 have been credited to the Acquired
Fund's account on the books of the Acquiring Fund. On the Liquidation
Date, the Acquiring Trust will provide to the Acquired Fund evidence
satisfactory to the Acquired Fund that such Acquiring Shares have been
credited pro rata to open accounts in the names of the Acquired Fund
shareholders as provided in paragraph 1.3.
3.5 At the Closing each party shall deliver to the other such bills of
sale, instruments of assumption of liabilities, checks, assignments,
stock certificates, receipts or other documents as such other party or
its counsel may reasonably request in connection with the transfer of
assets, assumption of liabilities and liquidation contemplated by
paragraph 1.
4. REPRESENTATIONS AND WARRANTIES.
4.1 The Trust, on behalf of the Acquired Fund, represents and warrants the
following to the Acquiring Trust and to the Acquiring Fund as of the
date hereof and agrees to confirm the continuing accuracy and
completeness in all material respects of the following on the Closing
Date:
(a) The Trust is a business trust duly organized, validly existing and
in good standing under the laws of the Commonwealth of
Massachusetts;
(b) The Trust is a duly registered investment company classified as a
management company of the open-end type and its registration with
the Securities and Exchange Commission as an investment company
under the 1940 Act is in full force and effect, and the Acquired
Fund is a separate series thereof duly designated in accordance
with the applicable provisions of the Declaration of Trust of the
Trust and the 1940 Act;
(c) The Trust is not in violation in any material respect of any
provision of its Declaration of Trust or By-laws or of any
agreement, indenture, instrument, contract, lease or other
undertaking to which the Trust is a party or by which the Acquired
Fund is bound, and the execution, delivery and performance of this
Agreement will not result in any such violation;
(d) The Trust has no material contracts or other commitments (other
than this Agreement and such other contracts as may be entered into
in the ordinary course of its business) which if terminated may
result in material liability to the Acquired Fund or under which
(whether or not terminated) any material payments for periods
subsequent to the Closing Date will be due from the Acquired Fund;
(e) No litigation or administrative proceeding or investigation of or
before any court or governmental body is presently pending or
threatened against the Acquired Fund, any of its properties or
assets, or any person whom the Acquired Fund may be obligated to
indemnify in
A-3
<PAGE> 37
connection with such litigation, proceeding or investigation. The
Acquired Fund knows of no facts which might form the basis for the
institution of such proceedings, and is not a party to or subject
to the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects its
business or its ability to consummate the transactions contemplated
hereby;
(f) The statement of assets and liabilities, the statement of
operations, the statement of changes in net assets, and the
schedule of investments as at and for the two years ended
[ , ____________ ] of the Acquired Fund, audited by
[PricewaterhouseCoopers LLP/Arthur Andersen] [and the statement of
assets, the statement of changes in net assets and the schedule of
investments for the six months ended __________, 2000,], copies of
which have been furnished to the Acquiring Fund, fairly reflect the
financial condition and results of operations of the Acquired Fund
as of such dates and for the periods then ended in accordance with
generally accepted accounting principles consistently applied, and
the Acquired Fund has no known liabilities of a material amount,
contingent or otherwise, other than those shown on the statements
of assets referred to above or those incurred in the ordinary
course of its business since __________, 2000;
(g) Since __________, 2000, there has not been any material adverse
change in the Acquired Fund's financial condition, assets,
liabilities or business (other than changes occurring in the
ordinary course of business), or any incurrence by the Acquired
Fund of indebtedness, except as disclosed in writing to the
Acquiring Fund. For the purposes of this subparagraph (g),
distributions of net investment income and net realized capital
gains, changes in portfolio securities, changes in the market value
of portfolio securities or net redemptions shall be deemed to be in
the ordinary course of business;
(h) By the Closing Date, all federal and other tax returns and reports
of the Acquired Fund required by law to have been filed by such
date (giving effect to extensions) shall have been filed, and all
federal and other taxes shown to be due on said returns and reports
shall have been paid so far as due, or provision shall have been
made for the payment thereof, and to the best of the Acquired
Fund's knowledge no such return is currently under audit and no
assessment has been asserted with respect to such returns;
(i) For all taxable years and all applicable quarters of such years
from the date of its inception, the Acquired Fund has met the
requirements of subchapter M of the Code, for treatment as a
"regulated investment company" within the meaning of Section 851
of the Code. Neither the Trust nor the Acquired Fund has at any
time since its inception been liable for nor is now liable for any
material excise tax pursuant to Section 852 or 4982 of the Code.
The Acquired Fund has duly filed all federal, state, local and
foreign tax returns which are required to have been filed, and all
taxes of the Acquired Fund which are due and payable have been
paid except for amounts that alone or in the aggregate would not
reasonably be expected to have a material adverse effect. The
Acquired Fund is in compliance in all material respects with
applicable regulations of the Internal Revenue Service pertaining
to the reporting of dividends and other distributions on and
redemptions of its capital stock and to withholding in respect of
dividends and other distributions to shareholders, and is not
liable for any material penalties which could be imposed
thereunder;
(j) The authorized capital of the Trust consists of an unlimited
number of shares of beneficial interest with no par value, of
multiple series and classes. All issued and outstanding shares of
the Acquired Fund are, and at the Closing Date will be, duly and
validly issued and outstanding, fully paid and (except as set
forth in the Acquired Fund's then current prospectus or
prospectuses and statement or statements of additional information
(collectively, as amended or supplemented from time to time, the
"Acquired Fund Prospectus")), non-assessable by the Acquired Fund
and will have been issued in compliance with all applicable
registration or qualification requirements of federal and state
securities laws. No options,
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warrants or other rights to subscribe for or purchase, or
securities convertible into, any shares of beneficial interest of
the Acquired Fund are outstanding and none will be outstanding on
the Closing Date [(except that Class B shares of the Acquired Fund
convert automatically into Class A shares, as set forth in the
Acquired Fund Prospectus)];
(k) The Acquired Fund's investment operations from inception to the
date hereof have been in compliance in all material respects with
the investment policies and investment restrictions set forth in
its prospectus and statement of additional information as in effect
from time to time, except as previously disclosed in writing to the
Acquiring Fund;
(l) The execution, delivery and performance of this Agreement has been
duly authorized by the Trustees of the Trust, and, upon approval
thereof by the required majority of the shareholders of the
Acquired Fund, this Agreement will constitute the valid and binding
obligation of the Acquired Fund enforceable in accordance with its
terms except as the same may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of
creditors' rights generally and other equitable principles;
(m) The Acquiring Shares to be issued to the Acquired Fund pursuant to
paragraph 1 will not be acquired for the purpose of making any
distribution thereof other than to the Acquired Fund Shareholders
as provided in paragraph 1.3;
(n) The information provided by the Acquired Fund for use in the
Registration Statement and Proxy Statement referred to in paragraph
5.3 shall be accurate and complete in all material respects and
shall comply with federal securities and other laws and regulations
applicable thereto;
(o) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the
Acquired Fund of the transactions contemplated by this Agreement,
except such as may be required under the Securities Act of 1933, as
amended (the "1933 Act"), the Securities Exchange Act of 1934, as
amended (the "1934 Act"), the 1940 Act and state insurance,
securities or "Blue Sky" laws (which term as used herein shall
include the laws of the District of Columbia and of Puerto Rico);
(p) At the Closing Date, the Trust, on behalf of the Acquired Fund,
will have good and marketable title to its assets to be transferred
to the Acquiring Fund pursuant to paragraph 1.1 and will have full
right, power and authority to sell, assign, transfer and deliver
the Investments (as defined below) and any other assets and
liabilities of the Acquired Fund to be transferred to the Acquiring
Fund pursuant to this Agreement. At the Closing Date, subject only
to the delivery of the Investments and any such other assets and
liabilities and payment therefor as contemplated by this Agreement,
the Acquiring Fund will acquire good and marketable title thereto
and will acquire the Investments and any such other assets and
liabilities subject to no encumbrances, liens or security interests
whatsoever and without any restrictions upon the transfer thereof,
except as previously disclosed to the Acquiring Fund. As used in
this Agreement, the term "Investments" shall mean the Acquired
Fund's investments shown on the schedule of its investments as of
__________, 2000 referred to in Section 4.1(f) hereof, as
supplemented with such changes in the portfolio as the Acquired
Fund shall make, and changes resulting from stock dividends, stock
split-ups, mergers and similar corporate actions through the
Closing Date;
(q) At the Closing Date, the Acquired Fund will have sold such of its
assets, if any, as are necessary to assure that, after giving
effect to the acquisition of the assets of the Acquired Fund
pursuant to this Agreement, the Acquiring Fund will remain a
"diversified company" within the meaning of Section 5(b)(1) of the
1940 Act and in compliance with such other mandatory investment
restrictions as are set forth in the Acquiring Fund Prospectus, as
amended through the Closing Date; and
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(r) No registration of any of the Investments would be required if they
were, as of the time of such transfer, the subject of a public
distribution by either of the Acquiring Fund or the Acquired Fund,
except as previously disclosed by the Acquired Fund to the
Acquiring Fund.
4.2 The Acquiring Trust, on behalf of the Acquiring Fund, represents and
warrants the following to the Trust and to the Acquired Fund as of the
date hereof and agrees to confirm the continuing accuracy and
completeness in all material respects of the following on the Closing
Date:
(a) The Acquiring Trust is a business trust duly organized, validly
existing and in good standing under the laws of The Commonwealth of
Massachusetts;
(b) The Acquiring Trust is a duly registered investment company
classified as a management company of the open-end type and its
registration with the Securities and Exchange Commission as an
investment company under the 1940 Act is in full force and effect,
and the Acquiring Fund is a separate series thereof duly designated
in accordance with the applicable provisions of the Declaration of
Trust of the Acquiring Trust and the 1940 Act;
(c) The Acquiring Fund Prospectus conforms in all material respects to
the applicable requirements of the 1933 Act and the rules and
regulations of the Securities and Exchange Commission thereunder
and does not include any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and there
are no material contracts to which the Acquiring Fund is a party
that are not referred to in such Prospectus or in the registration
statement of which it is a part;
(d) At the Closing Date, the Acquiring Fund will have good and
marketable title to its assets;
(e) The Acquiring Trust is not in violation in any material respect of
any provisions of its Declaration of Trust or By-laws or of any
agreement, indenture, instrument, contract, lease or other
undertaking to which the Acquiring Trust is a party or by which the
Acquiring Fund is bound, and the execution, delivery and
performance of this Agreement will not result in any such
violation;
(f) No litigation or administrative proceeding or investigation of or
before any court or governmental body is presently pending or
threatened against the Acquiring Fund or any of its properties or
assets. The Acquiring Fund knows of no facts which might form the
basis for the institution of such proceedings, and is not a party
to or subject to the provisions of any order, decree or judgment of
any court or governmental body which materially and adversely
affects its business or its ability to consummate the transactions
contemplated hereby;
(g) The statement of assets, the statement of operations, the statement
of changes in assets and the schedule of investments as at and for
the two years ended October 31, 1999 of the Acquiring Fund, audited
by PricewaterhouseCoopers LLP, and the statement of assets, the
statement of changes in net assets and the schedule of investments
for the six months ended April 30, 2000, copies of which have been
furnished to the Acquired Fund, fairly reflect the financial
condition and results of operations of the Acquiring Fund as of
such dates and the results of its operations for the periods then
ended in accordance with generally accepted accounting principles
consistently applied, and the Acquiring Fund has no known
liabilities of a material amount, contingent or otherwise, other
than those shown on the statements of assets referred to above or
those incurred in the ordinary course of its business since April
30, 2000;
(h) Since April 30, 2000, there has not been any material adverse
change in the Acquiring Fund's financial condition, assets,
liabilities or business (other than changes occurring in the
ordinary course of business), or any incurrence by the Acquiring
Fund of indebtedness. For the purposes of this subparagraph (h),
changes in portfolio securities, changes in the market value of
portfolio securities or net redemptions shall be deemed to be in
the ordinary course of business;
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<PAGE> 40
(i) By the Closing Date, all federal and other tax returns and reports
of the Acquiring Fund required by law to have been filed by such
date (giving effect to extensions) shall have been filed, and all
federal and other taxes shown to be due on said returns and reports
shall have been paid so far as due, or provision shall have been
made for the payment thereof, and to the best of the Acquiring
Fund's knowledge no such return is currently under audit and no
assessment has been asserted with respect to such returns;
(j) For each fiscal year of its operation, the Acquiring Fund has met
the requirements of Subchapter M of the Code for qualification as a
regulated investment company;
(k) The authorized capital of the Acquiring Trust consists of an
unlimited number of shares of beneficial interest, no par value, of
such number of different series as the Board of Trustees may
authorize from time to time. The outstanding shares of beneficial
interest in the Acquiring Fund are, and at the Closing Date will
be, divided into Class A shares, Class B shares, Class C shares,
Class Z shares and Class S shares each having the characteristics
described in the Acquiring Fund Prospectus. All issued and
outstanding shares of the Acquiring Fund are, and at the Closing
Date will be, duly and validly issued and outstanding, fully paid
and non-assessable (except as set forth in the Acquiring Fund
Prospectus) by the Acquiring Trust, and will have been issued in
compliance with all applicable registration or qualification
requirements of federal and state securities laws. Except for Class
B shares which convert to Class A shares after the expiration of a
period of time, no options, warrants or other rights to subscribe
for or purchase, or securities convertible into, any shares of
beneficial interest in the Acquiring Fund of any class are
outstanding and none will be outstanding on the Closing Date;
(l) The Acquiring Fund's investment operations from inception to the
date hereof have been in compliance in all material respects with
the investment policies and investment restrictions set forth in
its prospectus and statement of additional information as in effect
from time to time;
(m) The execution, delivery and performance of this Agreement have been
duly authorized by all necessary action on the part of the
Acquiring Trust, and this Agreement constitutes the valid and
binding obligation of the Acquiring Trust and the Acquiring Fund
enforceable in accordance with its terms, except as the same may be
limited by bankruptcy, insolvency, reorganization or other similar
laws affecting the enforcement of creditors' rights generally and
other equitable principles;
(n) The Acquiring Shares to be issued and delivered to the Acquired
Fund pursuant to the terms of this Agreement will at the Closing
Date have been duly authorized and, when so issued and delivered,
will be duly and validly issued [Class A shares, Class B shares,
Class C shares, Class Z shares and Class S shares] of beneficial
interest in the Acquiring Fund, and will be fully paid and
non-assessable (except as set forth in the Acquiring Fund
Prospectus) by the Acquiring Trust, and no shareholder of the
Acquiring Trust will have any preemptive right of subscription or
purchase in respect thereof;
(o) The information to be furnished by the Acquiring Fund for use in
the Registration Statement and Proxy Statement referred to in
paragraph 5.3 shall be accurate and complete in all material
respects and shall comply with federal securities and other laws
and regulations applicable thereto; and
(p) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the
Acquiring Fund of the transactions contemplated by this Agreement,
except such as may be required under 1933 Act, the 1934 Act, the
1940 Act and state insurance, securities or "Blue Sky" laws (which
term as used herein shall include the laws of the District of
Columbia and of Puerto Rico).
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<PAGE> 41
5. COVENANTS OF THE ACQUIRED FUND AND THE ACQUIRING FUND.
The Acquiring Trust, on behalf of the Acquiring Fund, and the Trust, on
behalf of the Acquired Fund, each hereby covenants and agrees with the other as
follows:
5.1 The Acquiring Fund and the Acquired Fund each will operate its business
in the ordinary course between the date hereof and the Closing Date, it
being understood that such ordinary course of business will include
regular and customary periodic dividends and distributions.
5.2 The Acquired Fund will call a meeting of its shareholders to be held
prior to the Closing Date to consider and act upon this Agreement and
take all other reasonable action necessary to obtain the required
shareholder approval of the transactions contemplated hereby.
5.3 In connection with the Acquired Fund shareholders' meeting referred to
in paragraph 5.2, the Acquired Fund will prepare a Proxy Statement for
such meeting, to be included in a Registration Statement on Form N-14
(the "Registration Statement") which the Acquiring Trust will prepare
and file for the registration under the 1933 Act of the Acquiring
Shares to be distributed to the Acquired Fund shareholders pursuant
hereto, all in compliance with the applicable requirements of the 1933
Act, the 1934 Act, and the 1940 Act.
5.4 The information to be furnished by the Acquired Fund for use in the
Registration Statement and the information to be furnished by the
Acquiring Fund for use in the Proxy Statement, each as referred to in
paragraph 5.3, shall be accurate and complete in all material respects
and shall comply with federal securities and other laws and regulations
thereunder applicable thereto.
5.5 The Acquiring Fund will advise the Acquired Fund promptly if at any
time prior to the Closing Date the assets of the Acquired Fund include
any securities which the Acquiring Fund is not permitted to acquire.
5.6 Subject to the provisions of this Agreement, the Acquired Fund and the
Acquiring Fund will each take, or cause to be taken, all action, and do
or cause to be done, all things reasonably necessary, proper or
advisable to cause the conditions to the other party's obligations to
consummate the transactions contemplated hereby to be met or fulfilled
and otherwise to consummate and make effective such transactions.
5.7 The Acquiring Fund will use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act and
such of the state securities or "Blue Sky" laws as it may deem
appropriate in order to continue its operations after the Closing Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND.
The obligations of the Acquired Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by the
Acquiring Trust and the Acquiring Fund of all the obligations to be performed by
them hereunder on or before the Closing Date and, in addition thereto, to the
following further conditions:
6.1 The Acquiring Trust, on behalf of the Acquiring Fund, shall have
delivered to the Trust a certificate executed in its name by its
President or Vice President and its Treasurer or Assistant Treasurer,
in form satisfactory to the Trust and dated as of the Closing Date, to
the effect that the representations and warranties of the Acquiring
Trust on behalf of the Acquiring Fund made in this Agreement are true
and correct at and as of the Closing Date, except as they may be
affected by the transactions contemplated by this Agreement, and that
the Acquiring Trust and the Acquiring Fund have complied with all the
covenants and agreements and satisfied all of the conditions on their
parts to be performed or satisfied under this Agreement at or prior to
the Closing Date.
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6.2 The Trust shall have received a favorable opinion from Ropes & Gray,
counsel to the Acquiring Trust for the transactions contemplated
hereby, dated the Closing Date and, in a form satisfactory to the
Trust, to the following effect:
(a) The Acquiring Trust is a business trust duly organized and validly
existing under the laws of The Commonwealth of Massachusetts and has
power to own all of its properties and assets and to carry on its
business as presently conducted, and the Acquiring Fund is a
separate series thereof duly constituted in accordance with the
applicable provisions of the 1940 Act and the Declaration of Trust
and By-laws of the Acquiring Trust; (b) this Agreement has been duly
authorized, executed and delivered on behalf of the Acquiring Fund
and, assuming the Prospectus and Registration Statement referred to
in paragraph 5.3 complies with applicable federal securities laws
and assuming the due authorization, execution and delivery of this
Agreement by the Trust on behalf of the Acquired Fund, is the valid
and binding obligation of the Acquiring Fund enforceable against the
Acquiring Fund in accordance with its terms, except as the same may
be limited by bankruptcy, insolvency, reorganization or other
similar laws affecting the enforcement of creditors' rights
generally and other equitable principles; (c) the Acquiring Fund has
the power to assume the liabilities to be assumed by it hereunder
and upon consummation of the transactions contemplated hereby the
Acquiring Fund will have duly assumed such liabilities; (d) the
Acquiring Shares to be issued for transfer to the shareholders of
the Acquired Fund as provided by this Agreement are duly authorized
and upon such transfer and delivery will be validly issued and
outstanding and fully paid and nonassessable [Class A shares, Class
B shares, Class C shares, Class Z shares and Class S shares] of
beneficial interest in the Acquiring Fund, and no shareholder of the
Acquiring Fund has any preemptive right of subscription or purchase
in respect thereof; (e) the execution and delivery of this Agreement
did not, and the performance by the Acquiring Trust and the
Acquiring Fund of their respective obligations hereunder will not,
violate the Acquiring Trust's Declaration of Trust or By-laws, or
any provision of any agreement known to such counsel to which the
Acquiring Trust or the Acquiring Fund is a party or by which either
of them is bound or, to the knowledge of such counsel, result in the
acceleration of any obligation or the imposition of any penalty
under any agreement, judgment, or decree to which the Acquiring
Trust or the Acquiring Fund is a party or by which either of them is
bound; (f) to the knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental authority is
required for the consummation by the Acquiring Trust or the
Acquiring Fund of the transactions contemplated by this Agreement
except such as may be required under state securities or "Blue Sky"
laws or such as have been obtained; (g) except as previously
disclosed, pursuant to section 4.2(f) above, such counsel does not
know of any legal or governmental proceedings relating to the
Acquiring Trust or the Acquiring Fund existing on or before the date
of mailing of the Prospectus referred to in paragraph 5.3 or the
Closing Date required to be described in the Registration Statement
referred to in paragraph 5.3 which are not described as required;
(h) the Acquiring Trust is registered with the Securities and
Exchange Commission as an investment company under the 1940 Act; and
(i) to the best knowledge of such counsel, no litigation or
administrative proceeding or investigation of or before any court or
governmental body is presently pending or threatened as to the
Acquiring Trust or the Acquiring Fund or any of their properties or
assets and neither the Acquiring Trust nor the Acquiring Fund is a
party to or subject to the provisions of any order, decree or
judgment of any court or governmental body, which materially and
adversely affects its business.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND.
The obligations of the Acquiring Fund to complete the transactions provided
for herein shall be subject, at its election, to the performance by the Acquired
Fund of all the obligations to be performed by it hereunder on or before the
Closing Date and, in addition thereto, to the following further conditions:
7.1 The Trust, on behalf of the Acquired Fund, shall have delivered to the
Acquiring Trust a certificate executed in its name by its President or
Vice President and its Treasurer or Assistant Treasurer, in
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<PAGE> 43
form and substance satisfactory to the Acquiring Trust and dated the
Closing Date, to the effect that the representations and warranties of
the Acquired Fund made in this Agreement are true and correct at and as
of the Closing Date, except as they may be affected by the transactions
contemplated by this Agreement, and that the Trust and the Acquired
Fund have complied with all the covenants and agreements and satisfied
all of the conditions on its part to be performed or satisfied under
this Agreement at or prior to the Closing Date.
7.2 The Acquiring Trust shall have received a favorable opinion from [Ropes
& Gray/Bell, Boyd & Lloyd LLC], counsel to the Trust, dated the Closing
Date and in a form satisfactory to the Acquiring Trust, to the
following effect:
(a) The Trust is a business trust duly organized and validly existing
under the laws of the Commonwealth of Massachusetts and has
corporate power to own all of its properties and assets and to carry
on its business as presently conducted, and the Acquired Fund is a
separate series thereof duly constituted in accordance with the
applicable provisions of the 1940 Act and the Declaration of Trust
of the Trust; (b) this Agreement has been duly authorized, executed
and delivered on behalf of the Acquired Fund and, assuming the Proxy
Statement referred to in paragraph 5.3 complies with applicable
federal securities laws and assuming the due authorization,
execution and delivery of this Agreement by the Acquiring Trust on
behalf of the Acquiring Fund, is the valid and binding obligation of
the Acquired Fund enforceable against the Acquired Fund in
accordance with its terms, except as the same may be limited by
bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and other
equitable principles; (c) the Acquired Fund has the power to sell,
assign, transfer and deliver the assets to be transferred by it
hereunder, and, upon consummation of the transactions contemplated
hereby, the Acquired Fund will have duly transferred such assets to
the Acquiring Fund; (d) the execution and delivery of this Agreement
did not, and the performance by the Trust and the Acquired Fund of
their respective obligations hereunder will not, violate the Trust's
Declaration of Trust or By-laws, or any provision of any agreement
known to such counsel to which the Trust or the Acquired Fund is a
party or by which either of them is bound or, to the knowledge of
such counsel, result in the acceleration of any obligation or the
imposition of any penalty under any agreement, judgment, or decree
to which the Trust or the Acquired Fund is a party or by which
either of them is bound; (e) to the knowledge of such counsel, no
consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the Trust
or the Acquired Fund of the transactions contemplated by this
Agreement, except such as may be required under state securities or
"Blue Sky" laws or such as have been obtained; (f) such counsel does
not know of any legal or governmental proceedings relating to the
Trust or the Acquired Fund existing on or before the date of mailing
of the Prospectus referred to in paragraph 5.3 or the Closing Date
required to be described in the Registration Statement referred to
in paragraph 5.3 which are not described as required; (g) the Trust
is registered with the Securities and Exchange Commission as an
investment company under the 1940 Act; and (h) to the best knowledge
of such counsel, no litigation or administrative proceeding or
investigation of or before any court or governmental body is
presently pending or threatened as to the Trust or the Acquired Fund
or any of its properties or assets and neither the Trust nor the
Acquired Fund is a party to or subject to the provisions of any
order, decree or judgment of any court or governmental body, which
materially and adversely affects its business.
7.3 [RESERVED]
7.4 Prior to the Closing Date, the Acquired Fund shall have declared a
dividend or dividends which, together with all previous dividends,
shall have the effect of distributing all of the Acquired Fund's
investment company taxable income for its taxable years ending on or
after __________, 2000 and on or prior to the Closing Date (computed
without regard to any deduction for dividends paid), and all of its net
capital gains realized in each of its taxable years ending on or after
__________, 2000 and on or prior to the Closing Date.
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7.5 The Acquired Fund shall have furnished to the Acquiring Fund a
certificate, signed by the President (or any Vice President) and the
Treasurer of the Trust, as to the adjusted tax basis in the hands of
the Acquired Fund of the securities delivered to the Acquiring Fund
pursuant to this Agreement.
7.6 The custodian of the Acquired Fund shall have delivered to the
Acquiring Fund a certificate identifying all of the assets of the
Acquired Fund held by such custodian as of the Valuation Date.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH OF THE ACQUIRING FUND AND
THE ACQUIRED FUND.
The respective obligations of the Trust and the Acquiring Trust hereunder
are each subject to the further conditions that on or before the Closing Date:
8.1 This Agreement and the transactions contemplated herein shall have been
approved by the vote of the required majority of the holders of the
outstanding shares of the Acquired Fund of record on the record date
for the meeting of its shareholders referred to in paragraph 5.2.
8.2 On the Closing Date no action, suit or other preceding shall be pending
before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection
with, this Agreement or the transactions contemplated hereby.
8.3 All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities (including
those of the Securities and Exchange Commission and of state Blue Sky
and securities authorities) deemed necessary by the Trust or the
Acquiring Trust to permit consummation, in all material respects, of
the transactions contemplated hereby shall have been obtained, except
where failure to obtain any such consent, order or permit would not
involve a risk of a material adverse effect on the assets or properties
of the Acquiring Fund or the Acquired Fund.
8.4 The Registration Statement referred to in paragraph 5.3 shall have
become effective under the 1933 Act and no stop order suspending the
effectiveness thereof shall have been issued and, to the best knowledge
of the parties hereto, no investigation or proceeding for that purpose
shall have been instituted or be pending, threatened or contemplated
under the 1933 Act.
8.5 The Trust shall have received a favorable opinion of Ropes & Gray
satisfactory to the Trust and the Acquiring Trust shall have received a
favorable opinion of [Ropes & Gray/Bell, Boyd & Lloyd LLC] satisfactory
to the Acquiring Trust, each substantially to the effect that, for
federal income tax purposes:
(a) The acquisition by the Acquiring Fund of the assets of the Acquired
Fund in exchange for the Acquiring Fund's assumption of the
Obligations of the Acquired Fund and issuance of the Acquiring
Shares, followed by the distribution by the Acquired Fund of such
the Acquiring Shares to the shareholders of the Acquired Fund in
exchange for their shares of the Acquired Fund, all as provided in
paragraph 1 hereof, will constitute a reorganization within the
meaning of Section 368(a) of the Code, and the Acquired Fund and the
Acquiring Fund will each be "a party to a reorganization" within the
meaning of Section 368(b) of the Code;
(b) No gain or loss will be recognized by the Acquired Fund (i) upon the
transfer of its assets to the Acquiring Fund in exchange for the
Acquiring Shares or (ii) upon the distribution of the Acquiring
Shares to the shareholders of the Acquired Fund as contemplated in
paragraph 1 hereof;
(c) No gain or loss will be recognized by the Acquiring Fund upon the
receipt of the assets of the Acquired Fund in exchange for the
assumption of the Obligations and issuance of the Acquiring Shares
as contemplated in paragraph 1 hereof;
(d) The tax basis of the assets of the Acquired Fund acquired by the
Acquiring Fund will be the same as the basis of those assets in the
hands of the Acquired Fund immediately prior to the transfer, and
the holding period of the assets of the Acquired Fund in the hands
of the
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<PAGE> 45
Acquiring Fund will include the period during which those assets
were held by the Acquired Fund;
(e) The shareholders of the Acquired Fund will recognize no gain or loss
upon the exchange of their shares of the Acquired Fund for the
Acquiring Shares;
(f) The tax basis of the Acquiring Shares to be received by each
shareholder of the Acquired Fund will be the same in the aggregate
as the aggregate tax basis of the shares of the Acquired Fund
surrendered in exchange therefor;
(g) The holding period of the Acquiring Shares to be received by each
shareholder of the Acquired Fund will include the period during
which the shares of the Acquired Fund surrendered in exchange
therefor were held by such shareholder, provided such shares of the
Acquired Fund were held as a capital asset on the date of the
exchange; and
(h) The Acquiring Fund will succeed to and take into account the items
of Acquired Fund described in Section 381(c) of the Code, subject to
the conditions and limitations specified in Sections 381, 382, 383
and 384 of the Code and the regulations thereunder.
8.6 At any time prior to the Closing, any of the foregoing conditions of
this Agreement may be waived jointly by the Board of Trustees of the
Trust and the Board of Trustees of the Acquiring Trust if, in their
judgment, such waiver will not have a material adverse effect on the
interests of the shareholders of the Acquired Fund and the Acquiring
Fund.
9. BROKERAGE FEES AND EXPENSES.
9.1 The Trust, on behalf of the Acquired Fund, and the Acquiring Trust, on
behalf of the Acquiring Fund, each represents and warrants to the other
that there are no brokers or finders entitled to receive any payments
in connection with the transactions provided for herein.
9.2 The Acquiring Trust, on behalf of the Acquiring Fund, shall pay all
fees paid to governmental authorities for the registration or
qualification of the Acquiring Shares. All of the other out-of-pocket
expenses (other than tabulation costs which will be borne in their
entirety by Liberty Financial) of the transactions contemplated by this
Agreement shall be borne as follows: (a) as to expenses allocable to
the Trust, on behalf of the Acquired Fund, seventy-five percent (75%)
of such expenses shall be borne by the Trust, on behalf of the Acquired
Fund, and twenty-five percent (25%) of such expenses shall be borne by
Liberty Financial; and (b) as to expenses allocable to the Acquiring
Trust, on behalf of the Acquiring Fund, fifty percent (50%) of such
expenses shall be borne by the Acquiring Trust, on behalf of the
Acquiring Fund, and fifty percent (50%) of such expenses shall be borne
by Liberty Financial. The foregoing sentence shall be subject, however,
to any undertaking by Liberty Financial to Liberty Funds Trust I, II,
III, IV, V, VI, VII and IX (or any of their series) (collectively, the
"Liberty Trusts") to limit the aggregate expenses (other than fees paid
to governmental authorities for the registration or qualification of
shares of the Liberty Trusts) of the transactions contemplated by this
Agreement and other transactions involving the Liberty Trusts.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES.
10.1 The Trust on behalf of the Acquired Fund and the Acquiring Trust on
behalf of the Acquiring Fund agree that neither party has made any
representation, warranty or covenant not set forth herein and that
this Agreement constitutes the entire agreement between the parties.
10.2 The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in
connection herewith shall not survive the consummation of the
transactions contemplated hereunder except paragraphs 1.1, 1.3, 1.5,
1.6, 5.4, 9, 10, 13 and 14.
A-12
<PAGE> 46
11. TERMINATION.
11.1 This Agreement may be terminated by the mutual agreement of the
Acquiring Trust and the Trust. In addition, either the Acquiring Trust
or the Trust may at its option terminate this Agreement at or prior to
the Closing Date because:
(a) Of a material breach by the other of any representation, warranty,
covenant or agreement contained herein to be performed by the other
party at or prior to the Closing Date;
(b) A condition herein expressed to be precedent to the obligations of
the terminating party has not been met and it reasonably appears
that it will not or cannot be met; or
(c) If the transactions contemplated by this Agreement have not been
substantially completed by May 31, 2001 this Agreement shall
automatically terminate on that date unless a later date is agreed
to by both the Trust and the Acquiring Trust.
11.2 If for any reason the transactions contemplated by this Agreement are
not consummated, no party shall be liable to any other party for any
damages resulting therefrom, including without limitation
consequential damages.
12. AMENDMENTS.
This Agreement may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by the authorized officers of the Trust
on behalf of the Acquired Fund and the Acquiring Trust on behalf of the
Acquiring Fund; provided, however, that following the shareholders' meeting
called by the Acquired Fund pursuant to paragraph 5.2 no such amendment may have
the effect of changing the provisions for determining the number of the
Acquiring Shares to be issued to shareholders of the Acquired Fund under this
Agreement to the detriment of such shareholders without their further approval.
13. NOTICES.
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by prepaid
telegraph, telecopy or certified mail addressed to: Liberty Funds Trust III, One
Financial Center, Boston, Massachusetts 02111, Attention: Secretary or to [Name
and Address of Trust], Attention: Secretary.
14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT NON-RECOURSE.
14.1 The article and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.2 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
14.3 This Agreement shall be governed by and construed in accordance with
the domestic substantive laws of The Commonwealth of Massachusetts,
without giving effect to any choice or conflicts of law rule or
provision that would result in the application of the domestic
substantive laws of any other jurisdiction.
14.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment
or transfer hereof or of any rights or obligations hereunder shall be
made by any party without the written consent of the other party.
Nothing herein expressed or implied is intended or shall be construed
to confer upon or give any person, firm or corporation, other than the
parties hereto and their respective successors and assigns, any rights
or remedies under or by reason of this Agreement.
14.5 A copy of the Declaration of Trust of the Trust and the Declaration of
Trust of the Acquiring Trust are each on file with the Secretary of
State of the Commonwealth of Massachusetts, and notice is hereby given
that no trustee, officer, agent or employee of either the Trust or the
Acquiring Trust shall have any personal liability under this
Agreement, and that this Agreement is binding only upon the assets and
properties of the Acquired Fund and the Acquiring Fund.
A-13
<PAGE> 47
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed as a sealed instrument by its President or Vice President and its
corporate seal to be affixed thereto and attested by its Secretary or Assistant
Secretary.
[NAME OF TRUST],
on behalf of [Name of Acquired Fund]
By:
------------------------------------
Name:
----------------------------------
Title:
-----------------------------------
ATTEST:
---------------------------------------------------------
Name:
-------------------------------------------------------
Title:
-------------------------------------------------------
LIBERTY FUNDS TRUST III,
on behalf of Liberty Select Value Fund
By:
------------------------------------
Name:
----------------------------------
Title:
-----------------------------------
ATTEST:
---------------------------------------------------------
Name:
-------------------------------------------------------
Title:
-------------------------------------------------------
A-14
<PAGE> 48
Solely for purposes of Section 9.2
of the Agreement:
LIBERTY FINANCIAL COMPANIES, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
-----------------------------------
ATTEST:
---------------------------------------------------------
Name:
-------------------------------------------------------
Title:
-------------------------------------------------------
A-15
<PAGE> 49
APPENDIX B
FUND INFORMATION
SHARES OUTSTANDING AND ENTITLED TO VOTE OF THE DISCIPLINED STOCK FUND AND THE
STEIN ROE TRUST AND THE BASE TRUST AND THE SMALL CAP FUND AND TRUST VI AND
SHARES OUTSTANDING OF THE SELECT VALUE FUND AND TRUST III
For each class of each Acquired Fund's shares and each Trust's shares
entitled to vote at the Meetings, and for each class of the Select Value Fund's
shares and Trust III's shares, the number of shares outstanding as of September
29, 2000 was as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES OUTSTANDING AND
FUND OR TRUST CLASS ENTITLED TO VOTE
------------- ----- --------------------------------
<S> <C> <C>
DISCIPLINED STOCK FUND........... S 24,316,487
STEIN ROE TRUST.................. 130,357,064
BASE TRUST....................... 1,248,501,499
SMALL CAP FUND................... A 3,800,194
B 7,399,295
C 805,606
Z 323,230
TRUST VI......................... 72,651,978
SELECT VALUE FUND................ A 17,344,994
B 13,474,790
C 1,043,774
S 0
Z 47,567
TRUST III........................ 297,008,531
</TABLE>
OWNERSHIP OF SHARES
As of September 29, 2000, each Trust believes that the Trustees and
officers of the respective Trusts, as a group, owned less than one percent of
each class of shares of each Fund and of each Trust as a whole. As of September
29, 2000, the following shareholders of record owned 5% or more of the
outstanding shares of the noted class of shares of the noted Fund:
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF OUTSTANDING
OUTSTANDING SHARES SHARES OF
FUND AND CLASS NAME AND ADDRESS OF SHAREHOLDER OF CLASS OWNED CLASS OWNED
-------------- ------------------------------- ------------------ -------------
<S> <C> <C> <C>
DISCIPLINED STOCK FUND
CLASS S................... Charles Schwab & Co., Inc. 4,740,438,926 19.50%
FBO American Express Conversion
Attn. Mutual Fund Operations
101 Montgomery Street
San Francisco, CA 94104
SMALL CAP FUND
CLASS A................... Merrill Lynch Pierce Fenner & Smith 554,418,589 14.59%
For the Sole Benefit of its
Customers
Attn: Fund Administration #97B42
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
</TABLE>
B-1
<PAGE> 50
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF OUTSTANDING
OUTSTANDING SHARES SHARES OF
FUND AND CLASS NAME AND ADDRESS OF SHAREHOLDER OF CLASS OWNED CLASS OWNED
-------------- ------------------------------- ------------------ -------------
<S> <C> <C> <C>
CLASS B................... Merrill Lynch Pierce Fenner & Smith 856,570,477 11.58%
For the Sole Benefit of its
Customers
Attn: Fund Administration #97B42
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
CLASS C................... Merrill Lynch Pierce Fenner & Smith 225,647,473 28.01%
For the Sole Benefit of its
Customers
Attn: Fund Administration #97B42
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
CLASS Z................... Colonial Counselor Growth Portfolio 87,555,097 27.09%
c/o Christie McCullough
245 Summer Street
Boston, MA 02111
Colonial Counselor Balanced 36,547,480 11.31%
Portfolio
c/o Christie McCullough
245 Summer Street
Boston, MA 02111
SELECT VALUE FUND
CLASS B................... Merrill Lynch Pierce Fenner & Smith 716,672,622 5.32%
For the Sole Benefit of its
Customers
Attn: Fund Administration #97B42
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
CLASS C................... Merrill Lynch Pierce Fenner & Smith 145,989,764 13.99%
For the Sole Benefit of its
Customers
Attn: Fund Administration #97B42
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
Banc One Securities Corp. 240,769,130 23.07%
FBO The one Select Portfolio
733 Greencrest Drive
Westerville, OH 43081
AG Edwards & Sons Cust 88,068,956 11.85%
1209 Wayne Road
Haddonfield, NJ 08033
</TABLE>
B-2
<PAGE> 51
OWNERSHIP OF SHARES UPON CONSUMMATION OF ACQUISITION
As of September 29, 2000, the shareholders of record that owned 5% or more
of the outstanding shares of the noted class of shares of the noted Fund would
own the following percentage of the Select Value Fund upon consummation of the
Acquisition:
<TABLE>
<CAPTION>
PERCENTAGE OF
OUTSTANDING SHARES OF
CLASS OWNED UPON
CONSUMMATION OF
FUND AND CLASS NAME AND ADDRESS OF SHAREHOLDER ACQUISITION
-------------- ------------------------------- ---------------------
<S> <C> <C>
DISCIPLINED STOCK FUND
CLASS S.............................. Charles Schwab & Co., Inc. 19.41%
FBO American Express Conversion
Attn. Mutual Fund Operations
101 Montgomery Street
San Francisco, CA 94104
SMALL CAP FUND
CLASS A.............................. Merrill Lynch Pierce Fenner & Smith 3.49%
For the Sole Benefit of its
Customers
Attn: Fund Administration #97B42
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
CLASS B.............................. Merrill Lynch Pierce Fenner & Smith 5.13%
For the Sole Benefit of its
Customers Attn: Fund Administration
#97B42 4800 Deer Lake Drive E. 2nd
Floor Jacksonville, FL 32246-6484
CLASS C.............................. Merrill Lynch Pierce Fenner & Smith 14.77%
For the Sole Benefit of its
Customers Attn: Fund Administration
#97B42 4800 Deer Lake Drive E. 2nd
Floor Jacksonville, FL 32246-6484
CLASS Z.............................. Colonial Counselor Growth Portfolio 24.66%
c/o Christie McCullough
245 Summer Street
Boston, MA 02111
Colonial Counselor Balanced 10.29%
Portfolio
c/o Christie McCullough
245 Summer Street
Boston, MA 02111
SELECT VALUE FUND
CLASS B.............................. Merrill Lynch Pierce Fenner & Smith 2.96%
For the Sole Benefit of its
Customers Attn: Fund Administration
#97B42 4800 Deer Lake Drive E. 2nd
Floor Jacksonville, FL 32246-6484
</TABLE>
B-3
<PAGE> 52
<TABLE>
<CAPTION>
PERCENTAGE OF
OUTSTANDING SHARES OF
CLASS OWNED UPON
CONSUMMATION OF
FUND AND CLASS NAME AND ADDRESS OF SHAREHOLDER ACQUISITION
-------------- ------------------------------- ---------------------
<S> <C> <C>
CLASS C.............................. Merrill Lynch Pierce Fenner & Smith 6.57%
For the Sole Benefit of its
Customers Attn: Fund Administration
#97B42 4800 Deer Lake Drive E. 2nd
Floor Jacksonville, FL 32246-6484
Banc One Securities Corp. 10.84%
FBO The one Select Portfolio
733 Greencrest Drive
Westerville, OH 43081
AG Edwards & Sons Cust 3.96%
1209 Wayne Road
Haddonfield, NJ 08033
</TABLE>
INFORMATION CONCERNING EXECUTIVE OFFICERS
The following table sets forth certain information about the executive
officers of each Fund:
<TABLE>
<CAPTION>
YEAR OF
ELECTION AS
EXECUTIVE OFFICER EXECUTIVE
NAME & AGE OFFICE AND PRINCIPAL OCCUPATION* OFFICER
----------------- -------------------------------- ------------
<S> <C> <C>
Stephen E. Gibson.................... President of the Stein Roe Mutual 1998
(46) Funds since November 1999; President
of the Liberty Mutual Funds since
June 1998; Chairman of the Board
since July 1998, Chief Executive
Officer and President since December
1996, and Director since July 1996 of
Colonial (formerly Executive Vice
President of Colonial from July 1996
to December 1996); Chairman of the
Board, 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. from
December 1996 to December 1998);
Director since September 2000,
President since January 2000, and
Vice Chairman since August 1998 of
Stein Roe (formerly Assistant
Chairman and Executive Vice President
of Stein Roe from August 1998 to
January 2000). (Formerly Managing
Director of Marketing of Putnam
Investments (investment advisor) from
June 1992 to July 1996.)
</TABLE>
B-4
<PAGE> 53
<TABLE>
<CAPTION>
YEAR OF
ELECTION AS
EXECUTIVE OFFICER EXECUTIVE
NAME & AGE OFFICE AND PRINCIPAL OCCUPATION* OFFICER
----------------- -------------------------------- ------------
<S> <C> <C>
William J. Ballou.................... Assistant Secretary of the Stein Roe 2000
(35) Mutual Funds since May 2000;
Secretary of the Liberty Mutual Funds
since October 2000 (formerly
Assistant Secretary of the Liberty
Mutual Funds 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; Associate
Counsel, Massachusetts Financial
Services Company (financial services
provider) prior thereto.
Kevin M. Carome...................... Executive Vice President of the 1999
(44) Liberty Mutual Funds since October
2000; Executive Vice President of the
Stein Roe Mutual Funds since May 1999
(formerly Vice President from April
1998 to May 1999, Secretary from
February 2000 to May 2000 and
Assistant Secretary from April 1998
to February 2000 of the Stein Roe
Mutual Funds); Chief Legal Officer of
Liberty Financial since August, 2000;
Senior Vice President, Legal, of LFG
since January 1999; General Counsel
and Secretary of Stein Roe since
January 1998; Associate General
Counsel and Vice President of Liberty
Financial prior thereto.
</TABLE>
B-5
<PAGE> 54
The following individuals are Executive Officers of the Stein Roe Mutual
Funds only:
<TABLE>
<S> <C> <C>
Loren A. Hansen...................... Executive Vice President of the Stein 1997
(52) Roe Mutual Funds since November 1997;
Executive Vice President, Stein Roe
since December 1995; Senior Vice
President, Colonial, since October
1997; Senior Vice President, Northern
Trust Company (banking) prior
thereto.
William D. Andrews................... Executive Vice President of the Stein 1997
(53) Roe Mutual Funds since November 1997;
Executive Vice President, Stein Roe
since December 1995; Senior Vice
President, Stein Roe prior thereto.
</TABLE>
---------------
* Except as otherwise noted, each individual has held the office indicated or
other offices in the same company for the last five years.
ADDITIONAL INFORMATION CONCERNING TRUSTEE COMPENSATION
The current Board of Trustees of the Liberty Mutual Funds received the
following compensation from each Fund as of each Fund's fiscal year end(1):
<TABLE>
<CAPTION>
SMALL CAP FUND SELECT VALUE FUND
TRUSTEE 6/30/00 10/31/99
------- -------------- -----------------
<S> <C> <C>
Mr. Bleasdale................................. $2,581(2) $3,590(3)
Ms. Collins................................... 2,347 3,093
Mr. Grinnell.................................. 2,449 3,224
Mr. Lowry..................................... 2,414 3,126
Mr. Macera.................................... 2,333 3,376
Mr. Mayer..................................... 2,445 3,133
Mr. Moody..................................... 2,459(4) 2,906(5)
Mr. Neuhauser................................. 2,472 3,260
Mr. Stitzel................................... 2,354 3,376
Ms. Verville.................................. 2,327(6) 3,429(7)
</TABLE>
The following table sets forth the total compensation paid to each Trustee
by the Liberty Mutual Funds for the calendar year ended December 31, 1999.
<TABLE>
<CAPTION>
TRUSTEE TOTAL COMPENSATION
------- ------------------
<S> <C>
Mr. Bleasdale............................................. $103,000(8)
Ms. Collins............................................... 96,000
Mr. Grinnell.............................................. 100,000
Mr. Lowry................................................. 97,000
Mr. Macera................................................ 95,000
Mr. Mayer................................................. 101,000
Mr. Moody................................................. 91,000(9)
Mr. Neuhauser............................................. 101,252
Mr. Stitzel............................................... 95,000
Ms. Verville.............................................. 96,000(10)
</TABLE>
B-6
<PAGE> 55
For the calendar year ended December 31, 1999, certain of the Trustees
received the following compensation 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, the "Liberty All-Star Funds"):
<TABLE>
<CAPTION>
TRUSTEE TOTAL COMPENSATION(11)
------- ----------------------
<S> <C>
Mr. Grinnell............................................. $25,000
Mr. Lowry................................................ 25,000
Mr. Mayer................................................ 25,000
Mr. Neuhauser............................................ 25,000
</TABLE>
The current Board of Trustees of the Stein Roe Trust received the following
compensation from the Disciplined Stock Fund as of the Fund's fiscal year end:
<TABLE>
<CAPTION>
DISCIPLINED STOCK FUND
TRUSTEE 9/30/00
------- ----------------------
<S> <C>
Mr. Bacon................................................ $1,300
Mr. Boyd................................................. 1,400
Mr. Hacker............................................... 1,300
Ms. Kelly................................................ 1,300
Mr. Nelson............................................... 1,300
Mr. Theobald............................................. 1,300
</TABLE>
The following table sets forth the total compensation paid to each Trustee
by the Stein Roe Mutual Funds for the calendar year ended December 31, 1999.
<TABLE>
<CAPTION>
TRUSTEE TOTAL COMPENSATION(12)
------- ----------------------
<S> <C>
Mr. Bacon................................................ $117,850
Mr. Boyd................................................. 104,100
Mr. Hacker............................................... 93,900
Ms. Kelly................................................ 103,400
Mr. Nelson............................................... 103,900
Mr. Theobald............................................. 103,400
</TABLE>
---------------
(1) The Liberty Mutual Funds do not currently provide pension or retirement
plan benefits to the Trustees.
(2) Includes $1,322 payable in later years as deferred compensation.
(3) Includes $1,697 payable in later years as deferred compensation.
(4) Total compensation of $2,459 for the fiscal year ended June 30, 2000 will
be payable in later years as deferred compensation.
(5) Total compensation of $2,906 for the fiscal year ended October 31, 1999
will be payable in later years as deferred compensation.
(6) Total compensation of $2,327 for the fiscal year ended June 30, 2000 will
be payable in later years as deferred compensation.
(7) Total compensation of $3,429 for the fiscal year ended October 31, 1999
will be payable in later years as deferred compensation.
(8) Includes $52,000 payable in later years as deferred compensation.
(9) Total compensation of $91,000 for the calendar year ended December 31, 1999
will be payable in later years as deferred compensation.
(10) Total compensation of $96,000 for the calendar year ended December 31, 1999
will be payable in later years as deferred compensation.
(11) The Liberty All-Star Funds are advised by Liberty Asset Management Company
("LAMCO"). LAMCO is an indirect wholly-owned subsidiary of Liberty
Financial.
(12) At December 31, 1999, the Stein Roe Fund Complex consisted of 12 series of
the Trust, one series of Liberty-Stein Roe Funds Trust, four series of
Liberty-Stein Roe Funds Municipal Trust, four series of Liberty-Stein Roe
Funds Income Trust, five series of Liberty-Stein Roe Advisor Trust, five
series of Stein Roe Variable Investment Trust, 12 portfolios of SR&F Base
Trust, Liberty-Stein Roe Advisor Floating Rate Fund, Liberty-Stein Roe
Institutional Floating Rate Income Fund, and Stein Roe Floating Rate
Limited Liability Company.
B-7
<PAGE> 56
APPENDIX C
CAPITALIZATION
The following table shows on an unaudited basis the capitalization of the
Disciplined Stock Fund, the Small Cap Fund and the Select Value Fund as of June
30, 2000, and on a pro forma combined basis, giving effect to the acquisition of
the assets and liabilities of both Acquired Funds by the Select Value Fund at
net asset value as of that date.
<TABLE>
<CAPTION>
SELECT VALUE
SELECT VALUE FUND
DISCIPLINED STOCK SMALL CAP FUND PRO FORMA PRO FORMA
FUND FUND (ACQUIRING FUND) ADJUSTMENTS(1) COMBINED(2)
----------------- ------------ ---------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Class A
Net asset value........... $138,969,129 $388,214,593 $ (146,126) $527,037,596
Shares outstanding........ 4,268,643 17,372,786 1,943,752 23,585,181
Net asset value per
share................... $ 32.56 $ 22.35 $ 22.35
Class B
Net asset value........... $238,607,222 $298,824,770 $ (215,846) $537,216,146
Shares outstanding........ 7,786,282 14,029,006 3,405,541 25,220,829
Net asset value per
share................... $ 30.64 $ 21.30 $ 21.30
Class C
Net asset value........... $ 27,400,025 $ 21,661,061 $ (23,580) $ 49,037,506
Shares outstanding........ 869,870 991,551 383,307 2,244,728
Net asset value per
share................... $ 31.50 $ 21.85 $ 21.85
Class Z
Net asset value........... $ 11,431,011 $ 1,043,631 $ (9,076) $ 12,465,566
Shares outstanding........ 346,276 46,541 163,088 555,905
Net asset value per
share................... $ 33.01 $ 22.42 $ 22.42
Class S(3)
Net asset value........... $484,253,043 $ (120,510) $484,132,533
Shares outstanding........ 25,325,082 (3,735,064) 21,590,018
Net asset value per
share................... $ 19.12 $ 22.42
</TABLE>
---------------
(1) Adjustments reflect estimated one time proxy, accounting, legal and other
costs of the reorganization of $120,510, $326,983 and $67,645 to be borne by
the Disciplined Stock Fund, the Small Cap Fund and the Select Value Fund,
respectively.
(2) Assumes the Acquisitions were consummated on June 30, 2000 and is for
information purposes only. No assurance can be given as to how many shares
of the Select Value Fund will be received by the shareholders of each
Acquired Fund on the date the Acquisitions take place, and the foregoing
should not be relied upon to reflect the number of shares of the Select
Value Fund that actually will be received on or after such date.
(3) As of June 30, 2000, there were no Class S shares of the Select Value Fund
outstanding. Disciplined Stock Fund shares are to be exchanged for new Class
S shares of the Select Value Fund upon consummation of the Acquisition.
Initial per share value of Class S shares is presumed to be equal to that of
current Class Z shares.
C-1
<PAGE> 57
CAPITALIZATION
The following table shows on an unaudited basis the capitalization of the
Small Cap Fund and the Select Value Fund as of June 30, 2000, and on a pro forma
combined basis, giving effect to the acquisition of the assets and liabilities
of the Small Cap Fund by the Select Value Fund at net asset value as of that
date.
<TABLE>
<CAPTION>
SELECT VALUE
SELECT VALUE FUND
SMALL CAP FUND PRO FORMA PRO FORMA
FUND (ACQUIRING FUND) ADJUSTMENTS(1) COMBINED(2)
------------ ---------------- -------------- ------------
<S> <C> <C> <C> <C>
Class A
Net asset value................. $138,969,129 $388,214,593 $(146,126) $527,037,596
Shares outstanding.............. 4,268,643 17,372,786 1,943,752 23,585,181
Net asset value per share....... $ 32.56 $ 22.35 $ 22.35
Class B
Net asset value................. $238,607,222 $298,824,770 $(215,846) $537,216,146
Shares outstanding.............. 7,786,282 14,029,006 3,405,541 25,220,829
Net asset value per share....... $ 30.64 $ 21.30 $ 21.30
Class C
Net asset value................. $ 27,400,025 $ 21,661,061 $ (23,580) $ 49,037,506
Shares outstanding.............. 869,870 991,551 383,307 2,244,728
Net asset value per share....... $ 31.50 $ 21.85 $ 21.85
Class Z
Net asset value................. $ 11,431,011 $ 1,043,631 $ (9,076) $ 12,465,566
Shares outstanding.............. 346,276 46,541 163,088 555,905
Net asset value per share....... $ 33.01 $ 22.42 $ 22.42
</TABLE>
---------------
(1) Adjustments reflect estimated one time proxy, accounting, legal and other
costs of the reorganization of $326,983 and $67,645 to be borne by the Small
Cap Fund and the Select Value Fund, respectively.
(2) Assumes the Acquisition was consummated on June 30, 2000 and is for
information purposes only. No assurance can be given as to how many shares
of the Select Value Fund will be received by the shareholders of the Small
Cap Fund on the date the Acquisition takes place, and the foregoing should
not be relied upon to reflect the number of shares of the Select Value Fund
that actually will be received on or after such date.
C-2
<PAGE> 58
CAPITALIZATION
The following table shows on an unaudited basis the capitalization of the
Disciplined Stock Fund and the Select Value Fund as of June 30, 2000, and on a
pro forma combined basis, giving effect to the acquisition of the assets and
liabilities of the Disciplined Stock Fund by the Select Value Fund at net asset
value as of that date.
<TABLE>
<CAPTION>
SELECT VALUE
SELECT VALUE FUND
DISCIPLINED STOCK FUND PRO FORMA PRO FORMA
FUND (ACQUIRING FUND) ADJUSTMENTS(1) COMBINED(2)
----------------- ---------------- -------------- ------------
<S> <C> <C> <C> <C>
Class A
Net asset value................ $388,214,593 $ (37,000) $388,177,593
Shares outstanding............. 17,372,786 (1,656) 17,371,130
Net asset value per share...... $ 22.35 $ 22.35
Class B
Net asset value................ $298,824,770 $ (28,481) $298,796,289
Shares outstanding............. 14,029,006 (1,337) 14,027,669
Net asset value per share...... $ 21.30 $ 21.30
Class C
Net asset value................ $ 21,661,061 $ (2,064) $ 21,658,997
Shares outstanding............. 991,551 (95) 991,456
Net asset value per share...... $ 21.85 $ 21.85
Class Z
Net asset value................ $ 1,043,631 $ (99) $ 1,043,532
Shares outstanding............. 46,541 (4) 46,537
Net asset value per share...... $ 22.42 $ 22.42
Class S(3)
Net asset value................ $484,253,043 $ (120,510) $484,132,533
Shares outstanding............. 25,325,082 (3,735,064) 21,590,018
Net asset value per share...... $ 19.12 $ 22.42
</TABLE>
---------------
(1) Adjustments reflect estimated one time proxy, accounting, legal and other
costs of the reorganization of $120,510 and $67,645 to be borne by the
Disciplined Stock Fund and the Select Value Fund, respectively.
(2) Assumes the Acquisition was consummated on June 30, 2000 and is for
information purposes only. No assurance can be given as to how many shares
of the Select Value Fund will be received by the shareholders of the
Disciplined Stock Fund on the date the Acquisition takes place, and the
foregoing should not be relied upon to reflect the number of shares of the
Select Value Fund that actually will be received on or after such date.
(3) As of June 30, 2000, there were no Class S shares of the Select Value Fund
outstanding. Disciplined Stock Fund shares are to be exchanged for new Class
S shares of the Select Value Fund upon consummation of the Acquisition.
Initial per share value of Class S shares is presumed to be equal to that of
current Class Z shares.
C-3
<PAGE> 59
APPENDIX D
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE AS OF OCTOBER 31, 1999
LIBERTY SELECT VALUE FUND
HIGHLIGHTS
- LONG-RUNNING STOCK MARKET PERFORMANCE CONTINUED.
The U.S. stock market continued to show strong returns during the Fund's fiscal
year. The S&P 500 Index increased 25.7% during the 12-month period, while the
S&P MidCap 400 Index increased 21.1%.
- SECOND QUARTER BROADENING -- A HIGHLIGHT FOR MID-CAP STOCKS.
After several years in which the stock market was led by a handful of large-cap
growth stocks and select technology companies, the market broadened in the
second quarter of 1999 to include small and mid-cap stocks. This broader
participation included companies in the basic materials, energy, chemicals and
manufacturing sectors.
- MARKET NARROWED AGAIN IN THE FINAL THREE MONTHS AMID INCREASING VOLATILITY.
During the summer, the Federal Reserve Board (the "Fed") became concerned about
the potential effects on inflation of stock prices, a robust economy and low
unemployment. The Fed raised short-term interest rates twice during the summer,
causing investors to seek the stability of large-cap growth stocks. This
increased volatility for the mid-cap market.
- FUND MIRRORED MID-CAP VOLATILITY DURING PERIOD.
The Fund's performance reflected the overall volatility of the stock market,
which was especially pronounced among mid-cap stocks.
PORTFOLIO MANAGERS' REPORT
Mixed environment for mid-cap stocks
While the market's leadership was concentrated in a relatively small group
of stocks in the first few months -- following the pattern set over the past few
years -- this leadership broadened in the second quarter of 1998 to include a
much larger group of stocks.
The Fed's rate increases during the summer hurt stock prices because higher
borrowing rates can reduce corporate profits. Mid-cap stocks were hit
particularly hard, with the S&P MidCap 400 Index dropping over 15% between its
mid-summer high and its low in mid-October. Much of the volatility that the
market experienced in the second half resulted from investors either reacting
to -- or trying to anticipate -- Federal Reserve actions on interest rates.
Dominance of Internet stocks overshadows Fund performance
During the 12-month period, the Fund had a total return of 12.48%, based on
Class A shares without a sales charge. By comparison, the S&P 400 Index had a
total return of 21.08% during the same period. The Fund's underperformance of
the S&P 400 can be partially explained by the fact that two stocks not held by
the Fund -- America Online and Qualcomm -- accounted for nearly one-third of the
index's return for the period. The S&P MidCap 400 Index continued to be
dominated by high-flying Internet stocks. While we see the obvious growth in the
Internet-related and electronic commerce businesses, we still believe that there
will be a shakeout among the many "dot-com" companies. We remain convinced that
a more prudent way to reap the benefits of the Internet's rapid growth is to
invest in companies that support its infrastructure.
Because economic and market conditions change frequently, there can be no
assurance that the trends described in this report will
continue or come to pass.
The Standard & Poor's MidCap 400 Index is an unmanaged index that tracks the
performance of mid-capitalization U.S. stocks. Unlike
mutual funds, an index does not incur fees or charges. It is not possible to
invest in an index.
D-1
<PAGE> 60
Fund benefited from technology, energy and consumer cyclical stocks
During the period, we emphasized holdings in the technology, energy and
consumer cyclical sectors as positive developments occurred. In the technology
sector, we acquired several holdings in the semiconductor industry, as demand
for these products has been rapidly increasing due to the phenomenal growth of
the Internet. Stocks in the energy sector have benefited from the economic
recovery in Asia and a significant increase in energy prices. Our energy
holdings include BJ Services, Inc. (0.4% of net assets), which provides pressure
pumping and other oilfield services serving the petroleum industry worldwide.
In the consumer cyclical sector, we purchased Best Buy Company (0.8% of net
assets), an electronics retail store that has developed a very successful
strategy. For lower-priced products such as VCR's, customers make their own
choices and the inventory is made readily available for purchase. This results
in low overhead costs associated with these products, allowing Best Buy to be a
price leader. For the higher-end products that are much more profitable -- such
as digital entertainment centers -- the company provides trained salespeople.
Positioning the Fund to benefit without taking on excessive risk
During the past year, we increased the Fund's technology and energy
holdings to take advantage of the positive trends in these sectors and position
the Fund for future potential growth. Technology, in particular, has become
increasingly important to the U.S. economy, accounting for significant increases
in productivity. In recognition of the impact of technology companies on
economic growth, the Dow Jones Industrial Average recently added Intel and
Microsoft to its index of 30 stocks -- the first time in history that stocks
from the Nasdaq exchange were included in the Dow.
Despite our increased weightings in certain sectors, we continue to
maintain our long-held strategy of not making major "sector bets" or having too
much invested in any one company. As the market's volatility has continued to
increase, we have further diversified, increasing our total number of holdings.
By spreading the Fund's assets over a larger base of stocks, we believe it will
be better positioned to weather market volatility.
Outlook positive, but dependent on economy
We continue to have a positive outlook for mid-cap stocks. Many of the
largest capitalization stocks have become overpriced, and investors are
beginning to find value and growth potential in the mid-cap arena. Our economic
outlook is for continued stable growth in the U.S. economy with low inflation.
In such an environment, we believe that mid-cap stocks can be attractive
investments for long-term investors.
/s/ JAMES P. HAYNIE
/s/ MICHAEL E. REGA
JAMES HAYNIE is a senior vice president of Colonial and senior portfolio
manager. MICHAEL REGA, a vice president of Colonial, co-manages the Fund.
Investing in medium-sized companies involves certain risks, including price
fluctuations caused by economic and business developments.
D-2
<PAGE> 61
PERFORMANCE INFORMATION
THE SELECT VALUE FUND'S INVESTMENT PERFORMANCE VS. STANDARD & POOR'S MIDCAP 400
INDEX
PERFORMANCE OF A $10,000 INVESTMENT IN CLASS A SHARES 10/31/89 - 10/31/99
[LINE CHART]
<TABLE>
<CAPTION>
WITHOUT SALES CHARGE WITH SALES CHARGE S&P MIDCAP 400 INDEX
-------------------- ----------------- --------------------
<S> <C> <C> <C>
1989 10000 9425 10000
1990 8190 7719 8660
1991 11622 10954 14155
1992 12584 11859 15460
1993 14821 13969 18788
1994 15233 14357 19236
1995 19565 18440 23315
1996 23729 22364 27361
1997 30441 28691 36299
1998 32861 30972 38735
1999 36960 34835 46897
</TABLE>
The Standard & Poor's MidCap 400 Index is an unmanaged index that tracks the
performance of mid-capitalization U.S. stocks. Unlike mutual funds, an index
does not incur fees or charges. It is not possible to invest in an index.
PERFORMANCE OF A $10,000 INVESTMENT IN ALL SHARE CLASSES FROM
10/31/89 - 10/31/99
<TABLE>
<CAPTION>
WITHOUT WITH SALES
SALES CHARGE CHARGE
------------ ----------
<S> <C> <C>
Class A.............................. $36,960 $34,835
Class B.............................. 34,983 34,983
Class C.............................. 36,405 36,405
Class Z.............................. 37,011 N/A
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS AS OF 10/31/99
<TABLE>
<CAPTION>
SHARE CLASS A B C Z
INCEPTION DATE 1949 6/8/92 8/1/97 1/11/99
-------------- ----------------- ----------------- ----------------- -------
WITHOUT WITH WITHOUT WITH WITHOUT WITH WITHOUT
SALES SALES SALES SALES SALES SALES SALES
CHARGE CHARGE CHARGE CHARGE CHARGE CHARGE CHARGE
<S> <C> <C> <C> <C> <C> <C> <C>
1 year...................... 12.48% 6.01% 11.66% 6.66% 11.71% 10.71% 12.63%
5 years..................... 19.40 17.99 18.49 18.29 19.04 19.04 19.43
10 years.................... 13.97 13.29 13.34 13.34 13.79 13.79 13.98
</TABLE>
D-3
<PAGE> 62
AVERAGE ANNUAL TOTAL RETURNS AS OF 9/30/99
<TABLE>
<CAPTION>
SHARE CLASS A B C Z
----------- ----------------- ----------------- ----------------- -------
WITHOUT WITH WITHOUT WITH WITHOUT WITH WITHOUT
SALES SALES SALES SALES SALES SALES SALES
CHARGE CHARGE CHARGE CHARGE CHARGE CHARGE CHARGE
<S> <C> <C> <C> <C> <C> <C> <C>
1 year...................... 15.36% 8.73% 14.49% 9.49% 14.50% 13.50% 15.47%
5 years..................... 18.90 17.50 18.01 17.80 18.55 18.55 18.92
10 years.................... 13.16 12.49 12.55 12.55 12.99 12.99 13.17
</TABLE>
Past performance cannot predict future investment results. Returns and value of
an investment will vary, resulting in a gain or loss on sale. All results shown
assume reinvestment of distributions. The "with sales charge" returns include
the maximum 5.75% charge for Class A shares and the contingent deferred sales
charge (CDSC) maximum charge of 5% for one year and 2% for five years for Class
B shares and 1% for one year for Class C shares. Performance for different share
classes will vary based on differences in sales charges and fees associated with
each class.
Class B, C and Z share (newer class shares) performance information includes
returns of the Fund's Class A shares (the oldest existing fund class) for
periods prior to the inception of the newer class shares. These Class A share
returns were not restated to reflect any expense differential (e.g., Rule 12b-1
fees) between Class A shares and the newer class shares. Had the expense
differential been reflected, the returns for the periods prior to the inception
of Class B and Class C shares would have been lower.
Performance results reflect any voluntary waivers or reimbursement of Fund
expenses by the Advisor or its affiliates. Absent these waivers or reimbursement
arrangements, performance results would have been lower.
NET ASSET VALUE AS OF 10/31/99
<TABLE>
<S> <C>
Class A............................................. $21.93
Class B............................................. $21.10
Class C............................................. $21.59
Class Z............................................. $21.96
</TABLE>
DISTRIBUTIONS DECLARED PER SHARE FROM 11/1/98 - 10/31/99
<TABLE>
<S> <C>
Class A.............................................. $0.72
Class B.............................................. $0.72
Class C.............................................. $0.72
Class Z (1/11/99 - 10/31/99)......................... $0.00
</TABLE>
HOLDINGS
TOP 10 HOLDINGS AS OF 10/31/99
<TABLE>
<S> <C>
1. Xilinx, Inc. ...................................... 2.0%
2. Maxim Integrated Products.......................... 1.9%
3. Altera Corp. ...................................... 1.6%
4. Linear Technology Corp. ........................... 1.6%
5. Citrix Systems, Inc. .............................. 1.4%
6. Vitesse Semiconductor Corp. ....................... 1.3%
7. Biogen, Inc. ...................................... 1.3%
8. CNF Transportation, Inc. .......................... 1.3%
9. Teradyne, Inc. .................................... 1.2%
10. Lehman Brothers Holdings, Inc. .................... 1.2%
</TABLE>
D-4
<PAGE> 63
Holdings are calculated as a percentage of net assets. Because the Fund is
actively managed, there can be no guarantee the Fund will continue to maintain
these holdings in the future.
SECTOR BREAKDOWNS
<TABLE>
<CAPTION>
FUND AS OF FUND AS OF
10/31/99 10/31/98
---------- VS. ----------
<S> <C> <C> <C>
Financial....................... 16.2% 17.2%
Consumer cyclical............... 15.2% 16.5%
Technology...................... 24.8% 14.9%
Health care..................... 8.6% 11.6%
Utilities....................... 8.9% 9.8%
</TABLE>
Sector breakdowns are calculated as a percentage of total equity investments.
Because the Fund is actively managed, there is no guarantee the Fund will
maintain these sector breakdowns in the future.
D-5
<PAGE> 64
LIBERTY FUNDS TRUST III
LIBERTY SELECT VALUE FUND
FORM N-14
PART B
STATEMENT OF ADDITIONAL INFORMATION
November 17, 2000
This Statement of Additional Information (the "SAI") relates to the
proposed Acquisition (the "Acquisition") of the Stein Roe Disciplined Stock Fund
(the "Disciplined Stock Fund"), a series of Liberty-Stein Roe Funds Investment
Trust, and the Liberty Small Cap Value Fund (the "Small Cap Fund"), a series of
Liberty Funds Trust VI (together, the "Acquired Funds"), by the Liberty Select
Value Fund (the "Acquiring Fund"), a series of Liberty Funds Trust III.
This SAI contains information which may be of interest to shareholders
but which is not included in the Prospectus/Proxy Statement dated November 17,
2000 (the "Prospectus/Proxy Statement") of the Acquiring Fund which relates to
the Acquisition. As described in the Prospectus/Proxy Statement, the Acquisition
would involve the transfer of all the assets of the Acquired Funds in exchange
for shares of the Acquiring Fund and the assumption of all the liabilities of
the Acquired Funds. Each of the Acquired Funds would distribute the Acquiring
Fund shares it receives to its shareholders in complete liquidation of the
Acquired Fund.
This SAI is not a prospectus and should be read in conjunction with the
Prospectus/Proxy Statement. The Prospectus/Proxy Statement has been filed with
the Securities and Exchange Commission and is available upon request and without
charge by writing to your Fund at One Financial Center, Boston, Massachusetts
02111-2621, or by calling 1-800-426-3750.
Table of Contents
<TABLE>
<S> <C> <C>
I. Additional Information about the Acquiring Fund.................. 2
II. Additional Information about the Acquired Funds.................. 2
III. Financial Statements............................................. 2
</TABLE>
<PAGE> 65
I. Additional Information about the Acquiring Fund.
Incorporated by reference to Post-Effective Amendment No. 114 to the
Registration Statement on Form N-1A (filed on February 28, 2000) of Liberty
Funds Trust III (Registration Statement Nos. 2-15184 and 811-881).
II. Additional Information about the Acquired Funds.
With respect to the Disciplined Stock Fund, incorporated by reference
to Post-Effective Amendment No. 65 to the Registration Statement on Form N-1A
(filed on January 28, 2000) of Liberty-Stein Roe Funds Investment Trust
(Registration Statement Nos. 33-11351 and 811-4978).
With respect to the Small Cap Fund, incorporated by reference to
Post-Effective Amendment No. 19 to the Registration Statement on Form N-1A
(filed on October 18, 1999) of Liberty Funds Trust VI (Registration Statement
Nos. 33-45117 and 811-6529).
III. Financial Statements.
This SAI is accompanied by (i) the Semi-Annual Report for the six-month
period ended April 30, 2000 and the Annual Report for the year ended October 31,
1999 of the Acquiring Fund; (ii) the Semi-Annual Report for the six months ended
March 31, 2000 and the Annual Report for the year ended September 30, 1999 of
the Disciplined Stock Fund; and (iii) the Annual Report for the year ended June
30, 2000 of the Small Cap Fund, all of which contain historical financial
information regarding such Funds. Such reports have been filed with the
Securities and Exchange Commission and are incorporated herein by reference.
Pro forma financial statements of the Acquiring Fund for the
Acquisition are provided on the following pages.
-2-
<PAGE> 66
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
PRO FORMA COMBINED PORTFOLIO OF INVESTMENTS
AS OF JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
STEIN ROE
DISCIPLINED STEIN ROE
STOCK LIBERTY PRO FORMA DISCIPLINED LIBERTY SELECT PRO FORMA
PORTFOLIO SELECT VALUE COMBINED STOCK PORT. VALUE FUND COMBINED
SHARES FUND SHARES SHARES MARKET VALUE MARKET VALUE MARKET VALUE
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCKS
Agriculture, Forestry & Fishing
NABISCO GROUP HOLDINGS 172,400 172,400 $ 4,471,625 $ 4,471,625
-------------- --------------
Construction
FLUOR CORP 53,100 53,100 1,679,288 1,679,288
-------------- --------------
Finance, Insurance & Real Estate
ALLMERICA FINANCIAL CORP 62,400 62,400 3,268,200 3,268,200
AMBAC FINANCIAL GROUP INC 113,100 113,100 6,199,294 6,199,294
BANCWEST CORPORATION 202,800 202,800 3,333,525 3,333,525
BANKNORTH GROUP INC 215,500 215,500 3,299,844 3,299,844
BEAR STEARNS COMPANIES INC 90,600 90,600 3,771,225 3,771,225
CAPITAL ONE FINANCIAL CORP 57,000 57,000 2,543,625 2,543,625
CHASE MANHATTAN CORP (NEW) 150,000 150,000 $ 6,909,375 6,909,375
CINCINNATI FINANCIAL CORP 71,900 71,900 2,260,356 2,260,356
CITY NATIONAL CORP 146,800 146,800 5,211,400 5,211,400
COMPASS BANCSHARES INC 90,000 90,000 1,535,625 1,535,625
CULLEN/FROST BANKERS INC 130,500 130,500 3,433,781 3,433,781
DOW JONES & CO INC 19,200 19,200 1,406,400 1,406,400
EDWARDS (A.G.), INC 79,100 79,100 3,084,900 3,084,900
FINL SECURITY ASSURANCE HLDG 40,000 40,000 3,035,000 3,035,000
FIRSTAR CORP 50,000 50,000 1,053,125 1,053,125
GOLDEN STATE BANCORP 263,200 263,200 4,737,600 4,737,600
GOLDEN STATE BANCORP-LITIG WT 155,000 155,000 174,375 174,375
GOLDEN WEST FINANCIAL CORP 351,700 88,200 439,900 14,353,756 3,599,663 17,953,419
GREENPOINT FINANCIAL CORP 236,400 236,400 4,432,500 4,432,500
HCA-THE HEALTHCARE CORP 334,900 334,900 10,172,588 10,172,588
KNIGHT TRADING GROUP INC 40,700 40,700 1,213,369 1,213,369
LEHMAN BROTHERS HLDG INC 71,700 71,700 6,780,131 6,780,131
LOEWS CORP 69,500 69,500 4,170,000 4,170,000
MGIC INV CORP 69,600 69,600 3,166,800 3,166,800
MONY GROUP INC 61,800 61,800 2,089,613 2,089,613
NATIONWIDE FINANCIAL SERV A 154,800 154,800 5,089,050 5,089,050
NORTH FORK BANCORPORATION 282,400 282,400 4,271,300 4,271,300
PACIFIC CENTURY FINL CORP 196,300 196,300 2,870,888 2,870,888
PAINE WEBBER GROUP INC 49,000 49,000 2,229,500 2,229,500
PMI GROUP INC 75,000 100,200 175,200 3,562,500 4,759,500 8,322,000
RADIAN GROUP INC 94,500 94,500 4,890,375 4,890,375
SOVEREIGN BANCORP INC 506,600 506,600 3,562,031 3,562,031
ST PAUL COMPANIES INC 121,800 121,800 4,156,425 4,156,425
TORCHMARK INSURANCE 57,900 57,900 1,429,406 1,429,406
UNIONBANCAL CORPORATION 143,200 143,200 2,658,150 2,658,150
UNITED HEALTHCARE CORP 98,000 98,000 8,403,500 8,403,500
WASHINGTON MUTUAL INC 382,600 382,600 11,047,575 11,047,575
WEBSTER FINANCIAL CORP 114,600 114,600 2,542,688 2,542,688
WELLPOINT HEALTH NETWORKS 62,200 62,200 4,505,613 4,505,613
------------ -------------- --------------
47,098,919 124,115,650 171,214,569
------------ -------------- --------------
</TABLE>
<PAGE> 67
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
PRO FORMA COMBINED PORTFOLIO OF INVESTMENTS
AS OF JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
STEIN ROE
DISCIPLINED STEIN ROE
STOCK LIBERTY PRO FORMA DISCIPLINED LIBERTY SELECT PRO FORMA
PORTFOLIO SELECT VALUE COMBINED STOCK PORT. VALUE FUND COMBINED
SHARES FUND SHARES SHARES MARKET VALUE MARKET VALUE MARKET VALUE
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCKS
Manufacturing
ACUSON CORP 515,700 515,700 6,961,950 6,961,950
ADC TELECOMMUNICATIONS INC 91,100 91,100 7,641,013 7,641,013
ADVANCED DIGITIAL INFO CORP 21,900 21,900 349,031 349,031
ADVANCED MICRO DEVICES INC 48,600 48,600 3,754,350 3,754,350
AIR PRODUCTS & CHEMICALS INC 200,000 200,000 6,162,500 6,162,500
ALTERA CORPORATION 62,800 62,800 6,401,675 6,401,675
AMERADA HESS CORP 60,000 47,000 107,000 3,705,000 2,902,250 6,607,250
ANALOG DEVICES INC. 40,100 40,100 3,047,600 3,047,600
ANDREW CORP 603,900 603,900 20,268,394 20,268,394
APPLE COMPUTER INC 124,800 124,800 6,536,400 6,536,400
APPLIED MICRO CIRCUITS CORP 46,300 46,300 4,572,125 4,572,125
ATMEL CORP 73,700 73,700 2,717,688 2,717,688
AVX CORP 430,600 430,600 9,876,888 9,876,888
B F GOODRICH CO 102,700 102,700 3,498,219 3,498,219
BAUSCH & LOMB INC 19,400 19,400 1,501,075 1,501,075
BIOGEN INC 21,400 21,400 1,380,300 1,380,300
BIOMET INC 270,000 270,000 10,378,125 10,378,125
BOISE CASCADE CORP 95,200 95,200 2,463,300 2,463,300
BRISTOL-MYERS SQUIBB CO 50,000 50,000 2,912,500 2,912,500
BRUNSWICK CORP 122,200 122,200 2,023,938 2,023,938
C R BARD INC 40,000 40,000 1,925,000 1,925,000
CARLISLE COS INC 242,000 242,000 10,890,000 10,890,000
CARPENTER TECHNOLOGY CORP 130,000 130,000 2,746,250 2,746,250
CHIRON CORP 77,800 77,800 3,695,500 3,695,500
COMPAQ COMPUTER CORP 250,000 250,000 6,390,625 6,390,625
COMVERSE TECH 64,400 64,400 5,989,200 5,989,200
COOPER TIRE & RUBBER CO 280,000 280,000 3,115,000 3,115,000
CROWN CORK AND SEAL CO. INC. 141,100 141,100 2,116,500 2,116,500
CYPRESS SEMICONDUCTOR CORP 45,800 45,800 1,935,050 1,935,050
DALLAS SEMICONDUCTOR CORP 68,200 68,200 2,779,150 2,779,150
DELPHI AUTOMOTIVE SYSTEMS 158,800 158,800 2,312,525 2,312,525
DEXTER CORP 235,000 235,000 11,280,000 11,280,000
DOVER CORP 120,900 120,900 4,904,006 4,904,006
EATON CORP 45,500 45,500 3,048,500 3,048,500
ECOLAB INC 256,800 21,100 277,900 10,031,250 824,219 10,855,469
EI DUPONT DE NEMOURS & CO INC 100,000 100,000 4,375,000 4,375,000
ENGELHARD CORPORATION 175,300 175,300 2,991,056 2,991,056
EXFO ELECTRO-OPTICAL ENGINEE 6,200 6,200 272,025 272,025
FLOWSERVE CORP 215,000 215,000 3,238,438 3,238,438
FMC CORP 66,000 66,000 3,828,000 3,828,000
FURNITURE BRANDS INTL INC 119,300 119,300 1,804,413 1,804,413
GENTEX CORP 74,000 74,000 1,859,250 1,859,250
GEORGIA PACIFIC CORP 130,000 91,200 221,200 3,412,500 2,394,000 5,806,500
GRANT PRIDECO INC 103,800 103,800 2,595,000 2,595,000
HARLEY DAVIDSON 118,000 118,000 4,543,000 4,543,000
HARRIS CORPORATION DEL 49,300 49,300 1,614,575 1,614,575
HORMEL FOODS CORP 137,400 137,400 2,310,038 2,310,038
IMMUNEX CORP 14,500 14,500 716,844 716,844
IMPERIAL CHEM IND INC ADR 375,400 375,400 11,567,013 11,567,013
INGERSOLL RAND CO 157,100 157,100 6,323,275 6,323,275
INTEGRATED DEVICES TECH INC 36,100 36,100 2,161,488 2,161,488
INTERSTATE BAKERIES 181,700 181,700 2,543,800 2,543,800
INTL BUSINESS MACHINES CORP 60,000 60,000 6,573,750 6,573,750
INTUIT INC 84,300 84,300 3,487,913 3,487,913
IVAX CORP 158,850 158,850 6,592,275 6,592,275
JDS UNIPHASE CORP 22,000 22,000 2,637,250 2,637,250
JOHNSON CONTROLS INC 92,500 92,500 4,746,406 4,746,406
</TABLE>
<PAGE> 68
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
PRO FORMA COMBINED PORTFOLIO OF INVESTMENTS
AS OF JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
STEIN ROE
DISCIPLINED STEIN ROE
STOCK LIBERTY PRO FORMA DISCIPLINED LIBERTY SELECT PRO FORMA
PORTFOLIO SELECT VALUE COMBINED STOCK PORT. VALUE FUND COMBINED
SHARES FUND SHARES SHARES MARKET VALUE MARKET VALUE MARKET VALUE
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCKS
KNIGHT RIDDER INC 88,100 88,100 4,685,819 4,685,819
LAFARGE CORP 78,000 78,000 1,638,000 1,638,000
LEAR CORP 157,000 119,200 276,200 3,140,000 2,384,000 5,524,000
LINEAR TECHNOLOGY CORP 97,100 97,100 6,208,331 6,208,331
LITTLEFUSE INC 495,000 495,000 24,255,000 24,255,000
LOCKHEED MARTIN CORP 153,200 153,200 3,801,275 3,801,275
LSI LOGIC CORP 51,400 51,400 2,782,025 2,782,025
LUBRIZOL CORP 170,800 170,800 3,586,800 3,586,800
LYONDELL PETRO 321,500 321,500 5,385,125 5,385,125
MALLINCKRODT INC 130,000 130,000 5,646,875 5,646,875
MAXIM INTEGRATED PRODUCTS INC 64,300 64,300 4,368,381 4,368,381
MCCORMICK & CO 96,800 96,800 3,146,000 3,146,000
MERITOR AUTOMOTIVE INC 281,900 281,900 3,100,900 3,100,900
MICROCHIP TECHNOLOGY 45,000 45,000 2,621,953 2,621,953
MICRON TECHNOLOGY INCORPORATED 26,000 26,000 2,289,625 2,289,625
MILLENIUM CHEMICALS INC 234,100 234,100 3,979,700 3,979,700
MUELLER INDUSTRIES INC 148,000 148,000 4,144,000 4,144,000
MYLAN LABORATORIES, INC 125,000 125,000 2,281,250 2,281,250
NATIONAL SEMICONDUCTOR CORP 46,900 46,900 2,661,575 2,661,575
NAVISTAR INTERNATIONAL 129,600 129,600 4,025,700 4,025,700
NEW YORK TIMES CO CLASS A 115,000 115,000 4,542,500 4,542,500
NORTHROP GRUMMAN CORP 35,400 35,400 2,345,250 2,345,250
NOVELLUS SYSTEMS INC 98,400 98,400 5,565,750 5,565,750
NUCOR CORP 70,200 70,200 2,329,763 2,329,763
OM GROUP INC 369,500 369,500 16,258,000 16,258,000
PACCAR INC 50,900 50,900 2,020,094 2,020,094
PARKER HANNIFIN CORP 39,800 39,800 1,363,150 1,363,150
PE CORP-PE BIOSYSTEMS GROUP 28,800 28,800 1,897,200 1,897,200
PEPSI BOTTLING GROUP 193,200 193,200 5,639,025 5,639,025
PHELPS DODGE CORP 65,908 65,908 2,450,954 2,450,954
PPG INDUSTRIES INC 102,100 102,100 4,524,306 4,524,306
PRAXAIR INC 130,000 130,000 4,866,875 4,866,875
REYNOLDS & REYNOLDS CO 280,000 280,000 5,110,000 5,110,000
SABRE HOLDINGS CORP 72,265 72,265 2,059,553 2,059,553
SANMINA CORPX 77,400 77,400 6,617,700 6,617,700
SEAGATE TECHNOLOGY INC 145,800 145,800 8,019,000 8,019,000
SUPERIOR INDUSTRIES INTL 250,200 250,200 6,442,650 6,442,650
TEMPLE INLAND INC 34,500 34,500 1,449,000 1,449,000
TERADYNE INC 84,598 84,598 6,217,953 6,217,953
TIME WARNER TELECOM-CL A 9,400 9,400 605,125 605,125
TOSCO CORP 159,600 159,600 4,518,675 4,518,675
TUPPERWARE CORPORATION 166,100 166,100 3,654,200 3,654,200
ULTRAMAR DIAMOND SHAMROCK CORP 65,600 65,600 1,627,700 1,627,700
UNIFI INC 145,475 145,475 1,800,253 1,800,253
UNISYS CORP 181,500 181,500 2,643,094 2,643,094
US INDUSTRIES INC 252,500 252,500 3,061,563 3,061,563
USG CORP NEW 123,200 123,200 3,742,200 3,742,200
USX-US STEEL GROUP 44,400 44,400 824,175 824,175
VALASSIS COMM. INC 129,700 129,700 4,944,813 4,944,813
VISHAY INTERTECHNOLOGY 158,400 158,400 6,009,300 6,009,300
VITESSE SEMICONDUCTOR CORP 72,100 72,100 5,303,856 5,303,856
W R GRACE & CO 189,000 189,000 2,291,625 2,291,625
WATERS CORPORATION 48,900 48,900 6,103,331 6,103,331
WATSON PHARMACEUTICALS 67,900 67,900 3,649,625 3,649,625
WEATHERFORD INTERNATIONAL 103,800 103,800 4,132,538 4,132,538
WESTVACO CORP 169,800 169,800 4,213,163 4,213,163
WHIRLPOOL CORP 51,700 51,700 2,410,513 2,410,513
WILLAMETTE IND INC 90,600 90,600 2,468,850 2,468,850
WOLVERINE WORLD WIDE INC 546,000 546,000 5,391,750 5,391,750
XILINIX INC 63,000 63,000 5,201,438 5,201,438
------------ -------------- --------------
228,498,628 297,574,612 526,073,241
------------ -------------- --------------
</TABLE>
<PAGE> 69
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
PRO FORMA COMBINED PORTFOLIO OF INVESTMENTS
AS OF JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
STEIN ROE
DISCIPLINED STEIN ROE
STOCK LIBERTY PRO FORMA DISCIPLINED LIBERTY SELECT PRO FORMA
PORTFOLIO SELECT VALUE COMBINED STOCK PORT. VALUE FUND COMBINED
SHARES FUND SHARES SHARES MARKET VALUE MARKET VALUE MARKET VALUE
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCKS
Mining & Energy
BJ SERVICES CO 81,700 81,700 5,106,250 5,106,250
CROSS TIMBER OIL CO 768,725 768,725 17,008,041 17,008,041
DIAMOND OFFSHORE DRILLING 130,000 130,000 4,566,250 4,566,250
FALCON DRILLING COMPANY INC 244,000 244,000 5,749,250 5,749,250
F-PORT MCMORAN COP & GOLD 200,000 200,000 1,850,000 1,850,000
NOBLE DRILLING CORP 143,600 143,600 5,914,525 5,914,525
OCCIDENTAL PETROLEUM 122,200 122,200 2,573,838 2,573,838
PETROLEUM GEO SERVICES ADR 322,400 231,900 554,300 5,500,950 3,956,794 9,457,744
REALNETWORKS INC 20,400 20,400 1,031,475 1,031,475
TRANSOCEAN SEDCO FOREX INC 87,700 87,700 4,686,469 4,686,469
------------ -------------- --------------
24,358,991 33,584,850 57,943,841
------------ -------------- --------------
Retail Trade
ABERCROMBIE & FITCH CO-CL A 140,500 140,500 1,712,344 1,712,344
BEST BUY INC 79,200 79,200 5,009,400 5,009,400
BJ'S WHOLESALE CLUB INC 122,500 122,500 4,042,500 4,042,500
BORDERS GROUP INC 290,000 290,000 4,513,125 4,513,125
BRINKER INTERNATIONAL INC 78,500 78,500 2,296,125 2,296,125
CIRCUIT CITY STORES INC 70,100 70,100 2,326,444 2,326,444
FEDERATED DEPT STORES INC NEW 180,000 61,100 241,100 6,075,000 2,062,125 8,137,125
ROSS STORES 209,800 209,800 3,579,713 3,579,713
TJX COMPANIES, INC 400,000 400,000 7,500,000 7,500,000
TRICON GLOBAL RESTAURANTS 114,200 114,200 3,226,150 3,226,150
ZALE CORP 26,100 26,100 952,650 952,650
------------ -------------- --------------
18,088,125 25,207,450 43,295,575
------------ -------------- --------------
Services
ADOBE SYSTEMS INC 32,300 32,300 4,199,000 4,199,000
AFFILIATED COMPUTER SVCS INC-A 201,800 201,800 6,672,013 6,672,013
CINTAS CORP 117,500 117,500 4,310,781 4,310,781
COMDISCO INC 127,000 127,000 2,833,688 2,833,688
CONVERGYS CORP 119,300 119,300 6,188,688 6,188,688
DEVRY INC 470,000 470,000 12,425,625 12,425,625
DST SYSTEMS INC 53,400 53,400 4,065,075 4,065,075
DUN & BRADSTREET CORP 91,800 91,800 2,627,775 2,627,775
FIRST HEALTH GROUP CORP 445,200 26,200 471,400 14,608,125 859,688 15,467,813
HARRAH'S ENTERTAINMENT INC 169,000 169,000 3,538,438 3,538,438
HERTZ CORP-CL A 90,000 87,000 177,000 2,525,625 2,441,438 4,967,063
IMS HEALTH INC 91,400 91,400 1,645,200 1,645,200
INTERIM SERVICES INC 550,000 550,000 9,762,500 9,762,500
INTERPUBLIC GROUP COS INC 69,400 69,400 2,984,200 2,984,200
LINCARE HOLDINGS INC 121,300 121,300 2,987,013 2,987,013
OMNICOM GROUP 45,000 45,000 4,007,813 4,007,813
PACIFICARE HEALTH SYSTEMS-A 18,400 18,400 1,107,450 1,107,450
PARK PLACE ENTERTAINMENT 230,000 230,000 2,803,125 2,803,125
PAYCHEX INC 175,968 175,968 7,390,656 7,390,656
PITTSTON BRINKS GROUP 540,200 540,200 7,393,988 7,393,988
PORTAL SOFTWARE 29,700 29,700 1,897,088 1,897,088
ROBERT HALF INTL INC 50,200 50,200 1,430,700 1,430,700
SIEBEL SYSTEMS INC 29,900 29,900 4,890,519 4,890,519
SYMANTEC CORP 69,500 69,500 3,748,656 3,748,656
USA NETWORKS INC 62,100 62,100 1,342,913 1,342,913
VERITAS SOFTWRE 49,600 49,600 5,605,575 5,605,575
WESTWOOD ONE INC 58,900 58,900 2,009,963 2,009,963
------------ -------------- --------------
57,698,656 70,604,656 128,303,312
------------ -------------- --------------
</TABLE>
<PAGE> 70
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
PRO FORMA COMBINED PORTFOLIO OF INVESTMENTS
AS OF JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
STEIN ROE
DISCIPLINED STEIN ROE
STOCK LIBERTY PRO FORMA DISCIPLINED LIBERTY SELECT PRO FORMA
PORTFOLIO SELECT VALUE COMBINED STOCK PORT. VALUE FUND COMBINED
SHARES FUND SHARES SHARES MARKET VALUE MARKET VALUE MARKET VALUE
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCKS
Transportation, Communications,
Electric, Gas and Sanitary Services
ALLEGHENY ENERGY IN COM 158,500 158,500 4,338,938 4,338,938
AMR CORP 120,000 120,000 3,172,500 3,172,500
BELL ATLANTIC CORP 125,000 125,000 6,351,563 6,351,563
CALPINE CORPORATION 92,000 92,000 6,049,000 6,049,000
CANADIAN PACIFIC LTD 104,500 104,500 2,736,594 2,736,594
CENTURYTEL INC 83,950 83,950 2,413,563 2,413,563
CHRIS-CRAFT INDUSTIRES INC 29,497 29,497 1,948,646 1,948,646
CITIZENS COMMUNICATIONS CO 45,800 45,800 790,050 790,050
CLEAR CHANNEL COMMUNICATIONS 20,000 20,000 1,500,000 1,500,000
CNF TRANSPORTATION INC 155,700 155,700 3,542,175 3,542,175
COLUMBIA ENERGY GROUP 63,000 63,000 4,134,375 4,134,375
CONECTIV INC 276,200 276,200 4,298,363 4,298,363
CONTINENTAL AIRLINES CL B 100,000 100,000 4,700,000 4,700,000
COVAD COMMUNICATIONS GROUP 105,000 105,000 1,693,125 1,693,125
DELTA AIR LINES INC 92,900 92,900 4,697,256 4,697,256
DOMINION RESOURCES INC 31,531 31,531 1,351,892 1,351,892
EL PASO ENERGY CORP 150,000 84,500 234,500 7,640,625 4,304,219 11,944,844
ENERGY EAST CORPORATION 224,600 224,600 4,281,438 4,281,438
ENTERGY CORP 147,100 147,100 3,999,281 3,999,281
FLORIDA PROGRESS CORP 96,900 96,900 4,542,188 4,542,188
GPU INC 122,600 122,600 3,317,863 3,317,863
INCO LTD 216,000 216,000 3,321,000 3,321,000
KANSAS CITY SOUTHN INDS INC 155,000 155,000 13,746,563 13,746,563
MINNESOTA POWER INC 284,800 284,800 4,930,600 4,930,600
MIPS TECHNOLOGIES INC CL-B 3 3 116 116
NEXTLINK COMMUNICATIONS-A 87,000 87,000 3,300,563 3,300,563
NORTHEAST UTILITIES 97,000 97,000 2,109,750 2,109,750
NTL INC 23,375 23,375 1,399,578 1,399,578
P G & E CORP 173,200 173,200 4,265,050 4,265,050
P P & L RESOURCES INC 142,400 142,400 3,123,900 3,123,900
PECO ENERGY CO 98,900 98,900 3,986,906 3,986,906
PEOPLES ENERGY CORP 75,000 75,000 2,428,125 2,428,125
PINNACLE WEST CAPITAL CORP 41,600 41,600 1,409,200 1,409,200
PMC-SIERRA INC 11,100 11,100 1,972,331 1,972,331
POTOMAC ELECTRIC POWER CO 87,100 87,100 2,177,500 2,177,500
POWERWAVE TECHNOLOGIES INC 26,400 26,400 1,161,600 1,161,600
PUBLIC SERVICE ENTER GROUP INC 80,600 80,600 2,790,775 2,790,775
PUGET SOUND ENERGY INC 103,700 103,700 2,210,106 2,210,106
RELIANT ENERGY INC 99,700 99,700 2,947,381 2,947,381
SEMPRA ENERGY 79,500 79,500 1,351,500 1,351,500
TELEPHONE & DATA 143,000 48,000 191,000 14,335,750 4,812,000 19,147,750
TXU CORP 89,800 89,800 2,649,100 2,649,100
UAL INC 39,400 39,400 2,292,588 2,292,588
UNICOM CORPORATION 142,000 142,000 5,493,625 5,493,625
UNIVISION COMMUNICATIONS CL A 52,000 52,000 5,382,000 5,382,000
USFREIGHTWAYS CORPORATION 63,100 63,100 1,549,894 1,549,894
UTILICORP UNITED INC 129,100 129,100 2,565,863 2,565,863
------------ -------------- --------------
51,447,116 128,069,897 179,517,012
------------ -------------- --------------
Wholesale Trade
ARROW ELECTRONICS INC 238,800 43,300 282,100 7,402,800 1,342,300 8,745,100
PATTERSON DENTAL CO 86,350 86,350 4,403,850 4,403,850
ULTRAMED 450,000 450,000 0 0
7,402,800 5,746,150 13,148,950
------------ -------------- --------------
Total Common Stocks 434,593,234 691,054,177 1,125,647,412
------------ -------------- --------------
SHORT-TERM OBLIGATIONS
ASSOCIATES FIRST CAPITAL 0.00% 7/3/2000 $ 23,665,000 23,665,000 23,655,863 23,655,863
RELIANT ENERGY-CP 0.00% 7/5/2000 23,600,000 23,600,000 23,580,989 23,580,989
WARBURG REPURCHASE AGREEMENT $ 19,027,000 19,027,000 19,027,000 23,655,863
------------ -------------- --------------
Total Short-Term Obligations 47,236,852 19,027,000 70,892,714
------------ -------------- --------------
TOTAL INVESTMENTS
(COST OF $381,825,159, $606,431,283
AND $988,256,442, RESPECTIVELY) $481,830,086 $ 710,081,177 $1,191,911,263
============ ============== ==============
</TABLE>
No adjustments are shown to the unaudited pro forma combined portfolio of
investments due to the fact that upon consummation of the Acquisitions, no
securities would need to be sold in order for the Acquiring Fund to comply with
its Prospectus and SEC and IRS guidelines and restrictions. However, the
foregoing sentence shall not be deemed to restrict in any way the ability of the
investment advisor of any of the funds from buying or selling securities in the
normal course of such Fund's business and operations.
<PAGE> 71
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
PRO FORMA COMBINING CONDENSED STATEMENT OF ASSETS AND LIABILITIES
AS OF JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
Stein Roe Stein Roe Liberty
Disciplined Stock Disciplined Stock Select Value Pro Forma Pro Forma
Portfolio Fund Fund Adjustments Combined
<S> <C> <C> <C> <C> <C>
Investments, at value $ 481,830,086 $ 484,399,223 $ 710,081,177 $(484,399,223)(a) $1,191,911,263
Cash - - - - -
Receivable for investments sold - - - - -
Payable for investments purchased - - - - -
Other assets less other liabilities 2,731,499 (146,180) (337,122) (350,517)(b) 1,897,680
Net assets $ 484,561,585 $ 484,253,043 $ 709,744,055 $(484,749,740) $1,193,808,943
Shares outstanding 25,325,082 (25,325,082)(c) -
Net asset value $ 19.12
Class A:
Net assets $ 388,214,593 (37,000) $ 388,177,593
Shares outstanding 17,372,786 (1,656) 17,371,130
Net asset value $ 22.35 $ 22.35
Class B:
Net assets $ 298,824,770 (28,481) $ 298,796,289
Shares outstanding 14,029,006 (1,337) 14,027,669
Net asset value $ 21.30 $ 21.30
Class C:
Net assets $ 21,661,061 (2,064) $ 21,658,997
Shares outstanding 991,551 (95) 991,456
Net asset value $ 21.85 $ 21.85
Class Z:
Net assets $ 1,043,631 (99) $ 1,043,532
Shares outstanding 46,541 (4) 46,537
Net asset value $ 22.42 $ 22.42
Class S:
Net assets $ (120,510) $ 484,132,533
Shares outstanding 21,590,018 (c) 21,590,018
Net asset value $ 22.42
</TABLE>
Footnotes to pro forma statement of assets and liabilities
(a) - Adjustment represents the elimination of Stein Roe Disciplined Stock
Fund's investment in the Portfolio, as the master/feeder structure will be
dissolved, with the securities held by the Portfolio withdrawn from the
Portfolio by Stein Roe Disciplined Stock Fund prior to the merger.
(b) - Adjustment reflects a payable to the general partner of the Portfolio
for its remaining net assets after withdrawal of Stein Roe Disciplined
Stock Fund's investment in the Portfolio of $162,362 in addition to one
time proxy, accounting, legal and other costs of the reorganization of
$120,510 and $67,645 to be borne by the Disciplined Stock Fund and the
Select Value Fund respectively. These costs reflect each fund's share of
the total costs of the reorganization that will be shared between Liberty
Financial and the Funds, subject to the terms of each Agreement and Plan
of Reorganization, as follows:
<TABLE>
<CAPTION>
Liberty Financial Fund
----------------- ----
<S> <C> <C>
Stein Roe Disciplined Stock Fund 25% 75%
Liberty Select Value Fund 50% 50%
</TABLE>
The Funds will bear their full portion of the one time costs of the
reorganization only if the expense reduction experienced as a result of the
Acquisition in the first year after Acquisition Date exceeds the one time costs.
If the one time costs exceed the expense reduction, the Fund will only bear the
share of its portion up to the amount of the expense reduction.
(c) - Stein Roe Disciplined Stock Fund shares are exchanged for new Class S
shares of Liberty Select Value Fund, to be established upon consummation
of the merger. Initial per share value of Class S shares is presumed to
equal that of current Class Z shares.
<PAGE> 72
PRO FORMA COMBINING CONDENSED STATEMENT OF OPERATIONS FOR THE TWELVE MONTH
PERIOD ENDED JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
STEIN ROE STEIN ROE
DISCIPLINED STOCK DISCIPLINED LIBERTY SELECT PRO FORMA PRO FORMA
PORTFOLIO STOCK FUND VALUE ADJUSTMENTS COMBINED
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment Income
Dividends 5,893,642 5,821,792 8,174,225 (5,893,642)(c) 13,996,017
Interest 3,064,826 3,133,889 1,184,633 (3,064,826)(c) 4,318,522
----------------- ----------- --------------
Total investment income 8,958,468 8,955,680 9,358,859 (8,958,468)(c) 18,314,539
EXPENSES
Management fee 4,167,035 - 5,223,265 (440,572)(a) 8,949,728
Administration fee - 830,666 - (830,666)(a) -
Service fee - Class A, B, C - - 1,861,867 - (a) 1,861,867
Distribution fee - Class B - - 2,384,795 - (a) 2,384,795
Distribution fee - Class C - - 164,376 - (a) 164,376
Transfer agent fee 6,000 1,218,310 1,620,653 (375,043)(e) 2,469,920
Bookkeeping fee 37,640 37,594 270,663 88,592 (a) 434,489
Trustees fee 12,900 8,100 28,901 (2,829)(b) 47,072
Expenses allocated 4,249,412 - (4,249,412)(c) -
from SRF Disciplined Stock Portfolio - -
All other expenses 25,837 407,666 884,431 (212,395)(d) 1,105,539
----------------- ----------- --------------
Total operating expenses 4,249,412 6,751,748 12,438,951 (6,022,325) 17,417,786
----------------- ----------- -------------- ----------- -----------
Expense reimbursement - - - - -
----------------- ----------- -------------- ----------- -----------
Net Expenses 4,249,412 6,751,748 12,438,951 (6,022,325) 17,417,786
NET INVESTMENT INCOME (LOSS) 4,709,056 2,203,932 (3,080,092) (2,936,143) 896,753
-
NET REALIZED & UNREALIZED GAIN (LOSS)
Net realized gain on:
Investments 26,447,704 27,136,826 113,063,056 (26,447,704)(c) 140,199,882
Closed futures contracts - - - - -
Foreign currency transactions (0) 0 (1) - (1)
----------------- ----------- -------------- -----------
Net Realized Gain 26,447,704 27,136,826 113,063,055 (26,447,704) 140,199,881
Change in net unrealized appreciation/
depreciation during the period on:
Investments (35,970,362) (36,662,338) (57,406,602) 35,970,362 (c) (94,068,940)
Open futures contracts - - - - -
Foreign currency transactions (2,334) - - 2,334 (c) -
----------------- ----------- -------------- -----------
Net Change in Unrealized
Appreciation/Depreciation (35,972,696) (36,662,338) (57,406,602) 35,972,696 (94,068,940)
----------------- ----------- -------------- ----------- ------------
Net Gain (9,524,993) (9,525,512) 55,656,453 9,524,993 46,130,941
----------------- ----------- -------------- ----------- ------------
Increase (Decrease) in Net Assets
from Operations (4,815,937) (7,321,580) 52,576,361 6,588,849 47,027,694
</TABLE>
(a) Based on the contract in effect for the surviving fund.
(b) Based on trustee compensation plan for the surviving fund.
(c) Due to elimination of master/feeder structure.
(d) Decrease due to the elimination of duplicative expenses achieved by merging
the funds.
(e) Based on the contract in effect for the surviving Fund. Note that a new
transfer agent fee structure was implemented for Liberty Select Value Fund
effective January 1, 2000. The pro forma combined transfer agent fee shown
assumes this new arrangement was in effect for the entire twelve-month
period ended June 30, 2000.
NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 2000
1. These financial statements set forth the unaudited pro forma condensed
statement of assets and liabilities, including the portfolio of investments, as
of June 30, 2000, and the unaudited pro forma condensed statement of operations
for the twelve month period ended June 30, 2000 for SR&F Disciplined Stock
Portfolio, Stein Roe Disciplined Stock Fund and Liberty Select Value Fund as
adjusted giving effect to the Acquisition as if it had occurred as of the
beginning of the period. These statements have been derived from the books and
records utilized in calculating daily net asset value for each fund.
<PAGE> 73
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
PRO FORMA COMBINED PORTFOLIO OF INVESTMENTS
AS OF JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
LIBERTY LIBERTY
LIBERTY LIBERTY SMALL CAP SELECT PRO FORMA
SMALL CAP SELECT VALUE PRO FORMA VALUE FUND VALUE FUND COMBINED
VALUE FUND FUND COMBINED MARKET MARKET MARKET
SHARES SHARES SHARES VALUE VALUE VALUE
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCKS
Agriculture, Forestry & Fishing
NABISCO GROUP HOLDINGS 172,400 172,400 $4,471,625 $4,471,625
RAYONIER INC 53,300 53,300 $1,912,138 1,912,138
---------- ----------- -----------
1,912,138 4,471,625 6,383,763
---------- ----------- -----------
Construction
FLUOR CORP 53,100 53,100 1,679,288 1,679,288
GRANITE CONSTRUCTION INC 77,600 77,600 1,901,200 1,901,200
NVR INC 37,500 37,500 2,137,500 2,137,500
TOLL BROTHERS INC 39,200 39,200 803,600 803,600
---------- ----------- -----------
4,842,300 1,679,288 6,521,588
---------- ----------- -----------
Finance, Insurance & Real Estate
AFFILIATED MANAGERS GROUP 44,000 44,000 2,002,000 2,002,000
ALLMERICA FINANCIAL CORP 62,400 62,400 3,268,200 3,268,200
AMBAC FINANCIAL GROUP INC 113,100 113,100 6,199,294 6,199,294
AMERICREDIT CORP 105,600 105,600 1,795,200 1,795,200
AMERUS LIFE HOLDINGS INC-A 82,500 82,500 1,701,563 1,701,563
ARGOSY GAMING COMPANY 97,800 97,800 1,405,875 1,405,875
BANCWEST CORPORATION 52,000 202,800 254,800 854,750 3,333,525 4,188,275
BANK UNITED CORP CL A 80,700 80,700 2,839,631 2,839,631
BANKATLANTIC BANCORP INC-B 102,900 102,900 604,538 604,538
BANKNORTH GROUP INC 97,450 215,500 312,950 1,492,203 3,299,844 4,792,047
BEAR STEARNS COMPANIES INC 90,600 90,600 3,771,225 3,771,225
CAPITAL ONE FINANCIAL CORP 57,000 57,000 2,543,625 2,543,625
CAPITOL FEDERAL FINANCIAL 177,000 177,000 1,958,063 1,958,063
CINCINNATI FINANCIAL CORP 71,900 71,900 2,260,356 2,260,356
CITY NATIONAL CORP 146,800 146,800 5,211,400 5,211,400
COMMERCE BANCORP INC 52,185 52,185 2,400,510 2,400,510
COMMUNITY BANK SYSTEM INC 74,500 74,500 1,652,969 1,652,969
COMPASS BANCSHARES INC 90,000 90,000 1,535,625 1,535,625
CULLEN/FROST BANKERS INC 60,700 130,500 191,200 1,597,169 3,433,781 5,030,950
DELPHI FINANCIAL GROUP CLASS A 67,668 67,668 2,296,488 2,296,488
DOW JONES & CO INC 19,200 19,200 1,406,400 1,406,400
DOWNEY FINL CP 91,400 91,400 2,650,600 2,650,600
EDWARDS (A.G.), INC 79,100 79,100 3,084,900 3,084,900
ENHANCE FINANCIAL SVCS GROUP 103,600 103,600 1,489,250 1,489,250
FIDELITY NATIONAL FINL INC 135,560 135,560 2,482,443 2,482,443
FINL SECURITY ASSURANCE HLDG 40,000 40,000 3,035,000 3,035,000
FIRST FEDERAL CAPITAL CORP 155,100 155,100 1,715,794 1,715,794
FIRSTFED FINANCIAL CORP 144,400 144,400 2,039,650 2,039,650
GALLAGHER (ARTHUR J.) & CO. 55,080 55,080 2,313,360 2,313,360
GOLDEN STATE BANCORP 263,200 263,200 4,737,600 4,737,600
GOLDEN STATE BANCORP-LITIG WT 155,000 155,000 174,375 174,375
GOLDEN WEST FINANCIAL CORP 88,200 88,200 3,599,663 3,599,663
GREATER BAY BANCORP 46,000 46,000 2,150,500 2,150,500
GREENPOINT FINANCIAL CORP 236,400 236,400 4,432,500 4,432,500
HUDSON UNITED BANCORP 87,844 87,844 1,971,000 1,971,000
INDEPENDENCE COMMUNITY BANK 153,400 153,400 2,032,550 2,032,550
KNIGHT TRADING GROUP INC 40,700 40,700 1,213,369 1,213,369
LEHMAN BROTHERS HLDG INC 71,700 71,700 6,780,131 6,780,131
LOEWS CORP 69,500 69,500 4,170,000 4,170,000
MAF BANCORP INC 109,500 109,500 1,991,531 1,991,531
MARCHFIRST INC 36,700 36,700 669,775 669,775
MGIC INV CORP 69,600 69,600 3,166,800 3,166,800
MIDLAND CO 45,400 45,400 1,112,300 1,112,300
MONY GROUP INC 61,800 61,800 2,089,613 2,089,613
NATIONWIDE FINANCIAL SERV A 154,800 154,800 5,089,050 5,089,050
NORTH FORK BANCORPORATION 95,200 282,400 377,600 1,439,900 4,271,300 5,711,200
PACIFIC CENTURY FINL CORP 196,300 196,300 2,870,888 2,870,888
PAINE WEBBER GROUP INC 49,000 49,000 2,229,500 2,229,500
PMI GROUP INC 43,100 100,200 143,300 2,047,250 4,759,500 6,806,750
PROVIDENT BANKSHARES CORP 127,680 127,680 1,723,680 1,723,680
RADIAN GROUP INC 90,300 94,500 184,800 4,673,025 4,890,375 9,563,400
</TABLE>
<PAGE> 74
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
PRO FORMA COMBINED PORTFOLIO OF INVESTMENTS
AS OF JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
LIBERTY LIBERTY
LIBERTY LIBERTY SMALL CAP SELECT PRO FORMA
SMALL CAP SELECT VALUE PRO FORMA VALUE FUND VALUE FUND COMBINED
VALUE FUND FUND COMBINED MARKET MARKET MARKET
SHARES SHARES SHARES VALUE VALUE VALUE
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCKS
RAYMOND JAMES FINANCIAL INC 52,300 52,300 1,176,750 1,176,750
RENAISSANCERE HOLDINGS LTD 42,200 42,200 1,838,338 1,838,338
SOVEREIGN BANCORP INC 506,600 506,600 3,562,031 3,562,031
ST PAUL COMPANIES INC 121,800 121,800 4,156,425 4,156,425
STATE AUTO FINANCIAL CORP 86,000 86,000 1,021,250 1,021,250
STATEN ISLAND BANCORP INC 68,000 68,000 1,198,500 1,198,500
SUSQUEHANNA BANCSHARES INC 100,000 100,000 1,425,000 1,425,000
TORCHMARK INSURANCE 57,900 57,900 1,429,406 1,429,406
UMB FINANCIAL CORP 62,500 62,500 2,050,781 2,050,781
UNIONBANCAL CORPORATION 143,200 143,200 2,658,150 2,658,150
UNITED HEALTHCARE CORP 98,000 98,000 8,403,500 8,403,500
WALTER INDUSTRIES INC 113,500 113,500 1,298,156 1,298,156
WEBSTER FINANCIAL CORP 104,300 114,600 218,900 2,314,156 2,542,688 4,856,844
WELLPOINT HEALTH NETWORKS 62,200 62,200 4,505,613 4,505,613
WHITNEY HOLDING CORP 71,500 71,500 2,444,406 2,444,406
---------- ----------- -----------
69,870,902 124,115,650 193,986,552
---------- ----------- -----------
Manufacturing
ACTEL CORP 50,500 50,500 2,304,063 2,304,063
ADAC LABORATORIES 99,400 99,400 2,385,600 2,385,600
ADC TELECOMMUNICATIONS INC 91,100 91,100 7,641,013 7,641,013
ADVANCED DIGITIAL INFO CORP 21,600 21,900 43,500 344,250 349,031 693,281
ADVANCED MICRO DEVICES INC 48,600 48,600 3,754,350 3,754,350
AGRIBRANDS INTERNATIONAL INC 30,700 30,700 1,287,481 1,287,481
ALBEMARLE CORP 54,800 54,800 1,082,300 1,082,300
ALLIANT TECHSYSTEMS INC 20,400 20,400 1,375,725 1,375,725
ALPHARMA INC 44,000 44,000 2,739,000 2,739,000
ALTERA CORPORATION 62,800 62,800 6,401,675 6,401,675
AMERADA HESS CORP 47,000 47,000 2,902,250 2,902,250
ANALOG DEVICES INC. 40,100 40,100 3,047,600 3,047,600
APPLE COMPUTER INC 124,800 124,800 6,536,400 6,536,400
APPLIED MICRO CIRCUITS CORP 46,300 46,300 4,572,125 4,572,125
ARVIN INDUSTRIES INC 48,400 48,400 840,950 840,950
ATMEL CORP 73,700 73,700 2,717,688 2,717,688
AUDIOVOX CORP-CL A 32,000 32,000 706,000 706,000
AURORA BIOSCIENCES CORP 13,200 13,200 900,075 900,075
B F GOODRICH CO 102,700 102,700 3,498,219 3,498,219
BALDOR ELECTRIC 43,300 43,300 806,463 806,463
BARNES GROUP INC 100,000 100,000 1,631,250 1,631,250
BARR LABORATORIES INC 24,000 24,000 1,075,500 1,075,500
BAUSCH & LOMB INC 19,400 19,400 1,501,075 1,501,075
BELL AND HOWELL COMPANY 38,500 38,500 933,625 933,625
BETHLEHEM STEEL CORP 173,800 173,800 619,163 619,163
BIOGEN INC 21,400 21,400 1,380,300 1,380,300
BOISE CASCADE CORP 48,000 95,200 143,200 1,242,000 2,463,300 3,705,300
BRUNSWICK CORP 122,200 122,200 2,023,938 2,023,938
BURR-BROWN CORP 12,600 12,600 1,092,263 1,092,263
C R BARD INC 40,000 40,000 1,925,000 1,925,000
CACI INTERNATIONAL INC-CL A 64,000 64,000 1,248,000 1,248,000
CANANDAIGUA BRANDS INC 83,100 83,100 4,191,356 4,191,356
CARLISLE COS INC 41,300 41,300 1,858,500 1,858,500
CENTEX CONSTRUCTION PRODUCTS 41,900 41,900 950,606 950,606
CHIRON CORP 77,800 77,800 3,695,500 3,695,500
CHURCH & DWIGHT CO 74,000 74,000 1,332,000 1,332,000
CLECO CORP 30,000 30,000 1,005,000 1,005,000
COMMSCOPE INC 46,700 46,700 1,914,700 1,914,700
COMVERSE TECH 64,400 64,400 5,989,200 5,989,200
CORN PRODUCTS INTL INC 45,300 45,300 1,200,450 1,200,450
CREE INC 6,300 6,300 841,050 841,050
CROWN CORK AND SEAL CO. INC. 141,100 141,100 2,116,500 2,116,500
CYMER INC 34,300 34,300 1,637,825 1,637,825
CYPRESS SEMICONDUCTOR CORP 30,400 45,800 76,200 1,284,400 1,935,050 3,219,450
CYTEC INDUSTRIES INC 129,300 129,300 3,192,094 3,192,094
DALLAS SEMICONDUCTOR CORP 68,200 68,200 2,779,150 2,779,150
DELPHI AUTOMOTIVE SYSTEMS 158,800 158,800 2,312,525 2,312,525
DOVER CORP 120,900 120,900 4,904,006 4,904,006
EATON CORP 45,500 45,500 3,048,500 3,048,500
ECOLAB INC 21,100 21,100 824,219 824,219
</TABLE>
<PAGE> 75
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
PRO FORMA COMBINED PORTFOLIO OF INVESTMENTS
AS OF JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
LIBERTY LIBERTY
LIBERTY LIBERTY SMALL CAP SELECT PRO FORMA
SMALL CAP SELECT VALUE PRO FORMA VALUE FUND VALUE FUND COMBINED
VALUE FUND FUND COMBINED MARKET MARKET MARKET
COMMON STOCKS SHARES SHARES SHARES VALUE VALUE VALUE
<S> <C> <C> <C> <C> <C> <C>
ELANTEC SEMICONDUCTOR INC 14,200 14,200 988,675 988,675
EMULEX CORP 6,400 6,400 420,400 420,400
ENGELHARD CORPORATION 175,300 175,300 2,991,056 2,991,056
ESTERLINE TECHNOLOGIES CORP 87,700 87,700 1,304,538 1,304,538
ETHAN ALLEN INTERIORS INC 56,400 56,400 1,353,600 1,353,600
FMC CORP 66,000 66,000 3,828,000 3,828,000
FOSSIL INC 69,925 69,925 1,359,167 1,359,167
FULLER (H.B.) CO 20,000 20,000 911,250 911,250
FURNITURE BRANDS INTL INC 91,600 119,300 210,900 1,385,450 1,804,413 3,189,863
GEHL CO 90,600 90,600 1,291,050 1,291,050
GENERAL SEMICONDUCTOR INC 89,600 89,600 1,321,600 1,321,600
GEON COMPANY 53,000 53,000 980,500 980,500
GEORGIA PACIFIC CORP 91,200 91,200 2,394,000 2,394,000
GLATFELTER (P.H.) CO 110,600 110,600 1,126,738 1,126,738
GLENAYRE TECHNOLOGIES INC 127,000 127,000 1,341,438 1,341,438
GRANT PRIDECO INC 103,800 103,800 2,595,000 2,595,000
HAIN CELESTIAL GROUP INC 59,000 59,000 2,164,563 2,164,563
HANNA CO 169,800 169,800 1,528,200 1,528,200
HARLEY DAVIDSON 118,000 118,000 4,543,000 4,543,000
HARMAN INTERNATIONAL INC NEW 43,000 43,000 2,623,000 2,623,000
HARRIS CORPORATION DEL 49,300 49,300 1,614,575 1,614,575
HARSCO CORP 41,700 41,700 1,063,350 1,063,350
HAVERTY FURNITURE 10,000 10,000 85,000 85,000
HELIX TECHNOLOGY CORP 6,800 6,800 265,200 265,200
HORMEL FOODS CORP 137,400 137,400 2,310,038 2,310,038
IDEC PHARMACEUTICALS CORP 17,000 17,000 1,994,313 1,994,313
IMATION CORP 55,600 55,600 1,633,250 1,633,250
IMMUNEX CORP 14,500 14,500 716,844 716,844
INFOCUS CORP 70,200 70,200 2,259,563 2,259,563
INGERSOLL RAND CO 157,100 157,100 6,323,275 6,323,275
INTEGRATED DEVICES TECH INC 46,800 36,100 82,900 2,802,150 2,161,488 4,963,638
INTERNATIONAL HOME FOODS INC 115,100 115,100 2,409,906 2,409,906
INTERNATIONAL RECTIFIER CORP 73,000 73,000 4,088,000 4,088,000
INTERSTATE BAKERIES 181,700 181,700 2,543,800 2,543,800
INTUIT INC 84,300 84,300 3,487,913 3,487,913
IVAX CORP 158,850 158,850 6,592,275 6,592,275
JDS UNIPHASE CORP 22,000 22,000 2,637,250 2,637,250
JOHNSON CONTROLS INC 92,500 92,500 4,746,406 4,746,406
JONES PHARMA INC 51,150 51,150 2,042,803 2,042,803
KELLWOOD CO 37,700 37,700 796,413 796,413
KEMET CORP 20,400 20,400 511,275 511,275
KENNAMETAL INC 43,800 43,800 938,963 938,963
KNIGHT RIDDER INC 30,300 88,100 118,400 1,611,581 4,685,819 6,297,400
LAFARGE CORP 78,000 78,000 1,638,000 1,638,000
LAM RESEARCH CORP 35,400 35,400 1,327,500 1,327,500
LATTICE SEMICONDUCTOR CORP 6,300 6,300 435,488 435,488
LEAR CORP 119,200 119,200 2,384,000 2,384,000
LINEAR TECHNOLOGY CORP 97,100 97,100 6,208,331 6,208,331
LOCKHEED MARTIN CORP 153,200 153,200 3,801,275 3,801,275
LONGVIEW FIBRE CO 152,500 152,500 1,687,031 1,687,031
LSI LOGIC CORP 51,400 51,400 2,782,025 2,782,025
LUBRIZOL CORP 69,800 170,800 240,600 1,465,800 3,586,800 5,052,600
LUXOTTICA GROU SPA-SPON ADR 50,200 50,200 611,813 611,813
LYONDELL PETRO 321,500 321,500 5,385,125 5,385,125
MANITOWOC INC 66,100 66,100 1,768,175 1,768,175
MATTSON TECHNOLOGY INC 16,100 16,100 523,250 523,250
MAXIM INTEGRATED PRODUCTS INC 64,300 64,300 4,368,381 4,368,381
MCCORMICK & CO 96,800 96,800 3,146,000 3,146,000
MERITOR AUTOMOTIVE INC 281,900 281,900 3,100,900 3,100,900
MICHAEL FOODS INC 59,700 59,700 1,462,650 1,462,650
MICROCHIP TECHNOLOGY 45,000 45,000 2,621,953 2,621,953
MICRON TECHNOLOGY INCORPORATED 26,000 26,000 2,289,625 2,289,625
MILACRON INC 86,400 86,400 1,252,800 1,252,800
MKS INSTRUMENTS INC 34,000 34,000 1,330,250 1,330,250
MRV COMMUNICATIONS INC 20,600 20,600 1,385,350 1,385,350
MUELLER INDUSTRIES INC 85,100 148,000 233,100 2,382,800 4,144,000 6,526,800
MYLAN LABORATORIES, INC 125,000 125,000 2,281,250 2,281,250
NACCO INDUSTRIES INC CL A 31,200 31,200 1,095,900 1,095,900
NATIONAL SEMICONDUCTOR CORP 46,900 46,900 2,661,575 2,661,575
NAVISTAR INTERNATIONAL 129,600 129,600 4,025,700 4,025,700
</TABLE>
<PAGE> 76
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
PRO FORMA COMBINED PORTFOLIO OF INVESTMENTS
AS OF JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
LIBERTY LIBERTY
LIBERTY LIBERTY SMALL CAP SELECT PRO FORMA
SMALL CAP SELECT VALUE PRO FORMA VALUE FUND VALUE FUND COMBINED
VALUE FUND FUND COMBINED MARKET MARKET MARKET
COMMON STOCKS SHARES SHARES SHARES VALUE VALUE VALUE
<S> <C> <C> <C> <C> <C> <C>
NEW YORK TIMES CO CLASS A 115,000 115,000 4,542,500 4,542,500
NORTEK INC. 63,800 63,800 1,260,050 1,260,050
NORTHROP GRUMMAN CORP 35,400 35,400 2,345,250 2,345,250
NOVELLUS SYSTEMS INC 98,400 98,400 5,565,750 5,565,750
NUCOR CORP 70,200 70,200 2,329,763 2,329,763
OCEANEERING INTL INC 44,000 44,000 836,000 836,000
OSHKOSH TRUCK CORP 32,850 32,850 1,174,388 1,174,388
PACCAR INC 50,900 50,900 2,020,094 2,020,094
PARK ELECTROCHEMICAL CORP 77,900 77,900 2,809,269 2,809,269
PARKER HANNIFIN CORP 39,800 39,800 1,363,150 1,363,150
PE CORP-CELERA GENOMICS GRP 26,400 26,400 2,468,400 2,468,400
PE CORP-PE BIOSYSTEMS GROUP 28,800 28,800 1,897,200 1,897,200
PENNZOIL-QUAKER STATE CO 91,800 91,800 1,107,338 1,107,338
PENTAIR INC 40,400 40,400 1,434,200 1,434,200
PEPSI BOTTLING GROUP 193,200 193,200 5,639,025 5,639,025
PHILLIPS VAN HEUSEN CORP 97,500 97,500 926,250 926,250
PHOTON DYNAMICS INC 8,600 8,600 642,313 642,313
PLEXUS CORP 21,500 21,500 2,429,500 2,429,500
PPG INDUSTRIES INC 102,100 102,100 4,524,306 4,524,306
PRECISION CASTPARTS CORP 22,500 22,500 1,018,125 1,018,125
PROTEIN DESIGN LABS INC 10,500 10,500 1,732,008 1,732,008
QUANEX CORP 72,700 72,700 1,081,413 1,081,413
RUSS BERRIE & CO INC 61,600 61,600 1,185,800 1,185,800
RYERSON TULL INC 93,598 93,598 971,079 971,079
SANMINA CORPX 77,400 77,400 6,617,700 6,617,700
SEMTECH CORP 25,800 25,800 1,973,297 1,973,297
SHIRE PHARMACEUTICALS-ADR 32,184 32,184 1,669,546 1,669,546
SILICON VALLEY GROUP INC 95,100 95,100 2,460,713 2,460,713
SPRINGS INDUSTRIES INC 22,100 22,100 711,344 711,344
SPS TECHNOLOGIES, IN 26,300 26,300 1,079,944 1,079,944
STORAGENETWORKS INC 11,700 11,700 1,055,925 1,055,925
STURM RUGER & CO INC 181,300 181,300 1,609,038 1,609,038
SUPERIOR INDUSTRIES INTL 72,100 72,100 1,856,575 1,856,575
TEKTRONIX INC 19,700 19,700 1,457,800 1,457,800
TELCOM SEMICONDUCTOR INC 19,300 19,300 779,238 779,238
TEMPLE INLAND INC 34,500 34,500 1,449,000 1,449,000
TERADYNE INC 84,598 84,598 6,217,953 6,217,953
TEREX CORP 84,900 84,900 1,199,213 1,199,213
TESORO PETROLEUM CORP 141,500 141,500 1,432,688 1,432,688
TEXAS INDUSTRIES INC 60,500 60,500 1,746,938 1,746,938
TIME WARNER TELECOM-CL A 9,400 9,400 605,125 605,125
TIMKEN CO 97,100 97,100 1,808,488 1,808,488
TOPPS COMPANY 133,100 133,100 1,530,650 1,530,650
TORO CO 44,700 44,700 1,472,306 1,472,306
TOSCO CORP 159,600 159,600 4,518,675 4,518,675
TOWER AUTOMOTIVE INC 76,100 76,100 951,250 951,250
TRIQUINT SEMICONDUCTOR INC 9,900 9,900 947,306 947,306
TUPPERWARE CORPORATION 86,800 166,100 252,900 1,909,600 3,654,200 5,563,800
ULTRAMAR DIAMOND SHAMROCK CORP 65,600 65,600 1,627,700 1,627,700
UNISYS CORP 181,500 181,500 2,643,094 2,643,094
USG CORP NEW 123,200 123,200 3,742,200 3,742,200
USX-US STEEL GROUP 44,400 44,400 824,175 824,175
VALASSIS COMM. INC 105,250 129,700 234,950 4,012,656 4,944,813 8,957,469
VARIAN INC 16,700 16,700 770,288 770,288
VERTEX PHARMACEUTICALS INC 12,500 12,500 1,317,188 1,317,188
VICAL INC 43,800 43,800 843,150 843,150
VISHAY INTERTECHNOLOGY 158,400 158,400 6,009,300 6,009,300
VITESSE SEMICONDUCTOR CORP 72,100 72,100 5,303,856 5,303,856
W R GRACE & CO 132,900 189,000 321,900 1,611,413 2,291,625 3,903,038
WATERS CORPORATION 48,900 48,900 6,103,331 6,103,331
WATSON PHARMACEUTICALS 67,900 67,900 3,649,625 3,649,625
WEATHERFORD INTERNATIONAL 103,800 103,800 4,132,538 4,132,538
WESTVACO CORP 169,800 169,800 4,213,163 4,213,163
WHIRLPOOL CORP 51,700 51,700 2,410,513 2,410,513
WILLAMETTE IND INC 90,600 90,600 2,468,850 2,468,850
WINNEBAGO INDUSTRIES 40,900 40,900 534,256 534,256
WORTHINGTON INDUSTRIES 205,200 205,200 2,154,600 2,154,600
XILINIX INC 63,000 63,000 5,201,438 5,201,438
ZEBRA TECHNOLOGIES CORP-CL A 24,100 24,100 1,067,931 1,067,931
---------- ----------- -----------
</TABLE>
<PAGE> 77
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
PRO FORMA COMBINED PORTFOLIO OF INVESTMENTS
AS OF JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
LIBERTY LIBERTY
LIBERTY LIBERTY SMALL CAP SELECT PRO FORMA
SMALL CAP SELECT VALUE PRO FORMA VALUE FUND VALUE FUND COMBINED
VALUE FUND FUND COMBINED MARKET MARKET MARKET
SHARES SHARES SHARES VALUE VALUE VALUE
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCKS
162,391,894 297,574,612 459,966,506
---------- ----------- -----------
Mining & Energy
BJ SERVICES CO 81,700 81,700 5,106,250 5,106,250
DIAMOND OFFSHORE DRILLING 130,000 130,000 4,566,250 4,566,250
FALCON DRILLING COMPANY INC 43,700 244,000 287,700 1,029,681 5,749,250 6,778,931
HS RESOURCES INC 100,100 100,100 3,003,000 3,003,000
NOBLE DRILLING CORP 143,600 143,600 5,914,525 5,914,525
OCCIDENTAL PETROLEUM 122,200 122,200 2,573,838 2,573,838
PARKER DRILLING CO 356,200 356,200 2,203,988 2,203,988
PATTERSON ENERGY INC 140,000 140,000 3,990,000 3,990,000
PETROLEUM GEO SERVICES ADR 231,900 231,900 3,956,794 3,956,794
PRIDE PETROLEUM INTERNATIONAL 219,200 219,200 5,425,200 5,425,200
REALNETWORKS INC 20,400 20,400 1,031,475 1,031,475
RGS ENERGY GROUP INC 103,000 103,000 2,291,750 2,291,750
SOUTHWESTERN ENERGY COMPANY 140,000 140,000 875,000 875,000
TRANSOCEAN SEDCO FOREX INC 87,700 87,700 4,686,469 4,686,469
VECTREN CORPORATION 54,000 54,000 931,500 931,500
VERITAS DGC INC 131,900 131,900 3,429,400 3,429,400
VINTAGE PETROLEUM INC 176,800 176,800 3,989,050 3,989,050
---------- ----------- -----------
27,168,569 33,584,850 60,753,419
---------- ----------- -----------
</TABLE>
<PAGE> 78
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
PRO FORMA COMBINED PORTFOLIO OF INVESTMENTS
AS OF JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
LIBERTY LIBERTY
LIBERTY LIBERTY SMALL CAP SELECT PRO FORMA
SMALL CAP SELECT VALUE PRO FORMA VALUE FUND VALUE FUND COMBINED
VALUE FUND FUND COMBINED MARKET MARKET MARKET
SHARES SHARES SHARES VALUE VALUE VALUE
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCKS
Retail Trade
ABERCROMBIE & FITCH CO-CL A 140,500 140,500 1,712,344 1,712,344
BEST BUY INC 79,200 79,200 5,009,400 5,009,400
BJ'S WHOLESALE CLUB INC 122,500 122,500 4,042,500 4,042,500
BRINKER INTERNATIONAL INC 78,500 78,500 2,296,125 2,296,125
CEC ENTERTAINMENT INC 150,870 150,870 3,866,044 3,866,044
CIRCUIT CITY STORES INC 70,100 70,100 2,326,444 2,326,444
DOLLAR THRIFTY AUTOMOTIVE GP 41,100 41,100 757,781 757,781
FEDERATED DEPT STORES INC NEW 61,100 61,100 2,062,125 2,062,125
JACK IN THE BOX INC 64,800 64,800 1,595,700 1,595,700
MUSICLAND STORES CORP 92,300 92,300 686,481 686,481
ROSS STORES 75,400 209,800 285,200 1,286,513 3,579,713 4,866,225
SONIC CORP 42,000 42,000 1,233,750 1,233,750
TIMBERLAND COMPANY-CL A 12,000 12,000 849,750 849,750
TRICON GLOBAL RESTAURANTS 114,200 114,200 3,226,150 3,226,150
WPS RESOURCES 34,100 34,100 1,025,131 1,025,131
ZALE CORP 36,100 26,100 62,200 1,317,650 952,650 2,270,300
---------- ----------- -----------
12,618,800 25,207,450 37,826,250
---------- ----------- -----------
Services
ADOBE SYSTEMS INC 32,300 32,300 4,199,000 4,199,000
ADVO INC 59,100 59,100 2,482,200 2,482,200
ANCHOR GAMING 38,800 38,800 1,859,975 1,859,975
BARRA INC 25,900 25,900 1,283,669 1,283,669
COMDISCO INC 127,000 127,000 2,833,688 2,833,688
CONVERGYS CORP 119,300 119,300 6,188,688 6,188,688
COVENTRY HEALTH CARE INC 107,800 107,800 1,436,772 1,436,772
CURATIVE HEALTH SERVICES INC 151,500 151,500 913,734 913,734
DENDRITE INTERNATIONAL INC 66,550 66,550 2,216,947 2,216,947
DST SYSTEMS INC 53,400 53,400 4,065,075 4,065,075
DUN & BRADSTREET CORP 91,800 91,800 2,627,775 2,627,775
ECCS INC 53,200 53,200 264,338 264,338
ESS TECHNOLOGY 35,800 35,800 519,100 519,100
FIRST HEALTH GROUP CORP 35,700 26,200 61,900 1,171,406 859,688 2,031,094
HALL KINION & ASSOCIATES INC 59,600 59,600 1,985,425 1,985,425
HARRAH'S ENTERTAINMENT INC 169,000 169,000 3,538,438 3,538,438
HEALTH MGMT SYSTEMS INC 175,000 175,000 546,875 546,875
HERTZ CORP-CL A 87,000 87,000 2,441,438 2,441,438
HOOPER HOLMES INC 98,200 98,200 785,600 785,600
IDEXX LABS INC 54,000 54,000 1,235,250 1,235,250
IMS HEALTH INC 91,400 91,400 1,645,200 1,645,200
INPRISE CORPORATION 94,100 94,100 576,363 576,363
INTERIM SERVICES INC 103,270 103,270 1,833,043 1,833,043
INTERPUBLIC GROUP COS INC 69,400 69,400 2,984,200 2,984,200
ISLE OF CAPRI CASINOS 118,200 118,200 1,603,088 1,603,088
JACOBS ENGINEERING GROUP INC 56,600 56,600 1,850,113 1,850,113
KRONOS INC 31,300 31,300 813,800 813,800
LINCARE HOLDINGS INC 121,300 121,300 2,987,013 2,987,013
MERCURY INTERACTIVE CORP 11,600 11,600 1,122,300 1,122,300
MICROS SYSTEMS INC 28,900 28,900 536,456 536,456
NATIONAL COMPUTER SYS INC 40,200 40,200 1,979,850 1,979,850
NATURAL MICROSYSTEMS CORP 9,500 9,500 1,068,156 1,068,156
NEOPHARM INC 40,000 40,000 784,375 784,375
OMNICOM GROUP 45,000 45,000 4,007,813 4,007,813
PACIFICARE HEALTH SYSTEMS - A 18,400 18,400 1,107,450 1,107,450
PARK PLACE ENTERTAINMENT 230,000 230,000 2,803,125 2,803,125
PAYCHEX INC 175,968 175,968 7,390,656 7,390,656
PORTAL SOFTWARE 29,700 29,700 1,897,088 1,897,088
PROGRESS SOFTWARE CORP 71,800 71,800 1,287,913 1,287,913
QUEST DIAGNOSTICS 53,300 53,300 3,814,281 3,814,281
REHABCARE GROUP INC 139,600 139,600 3,804,100 3,804,100
REMEDY CORP 12,900 12,900 719,175 719,175
RENT-A-CENTER INC 73,300 73,300 1,649,250 1,649,250
ROBERT HALF INTL INC 50,200 50,200 1,430,700 1,430,700
RSA SECURITY INC 12,600 12,600 872,550 872,550
SALTON INC 13,700 13,700 505,188 505,188
SENSORMATIC ELECTRONICS CORP 36,300 36,300 573,994 573,994
</TABLE>
<PAGE> 79
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
PRO FORMA COMBINED PORTFOLIO OF INVESTMENTS
AS OF JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
LIBERTY LIBERTY
LIBERTY LIBERTY SMALL CAP SELECT PRO FORMA
SMALL CAP SELECT VALUE PRO FORMA VALUE FUND VALUE FUND COMBINED
VALUE FUND FUND COMBINED MARKET MARKET MARKET
SHARES SHARES SHARES VALUE VALUE VALUE
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCKS
SERENA SOFTWARE INC 29,700 29,700 1,348,566 1,348,566
SIEBEL SYSTEMS INC 29,900 29,900 4,890,519 4,890,519
SYBASE INC 107,500 107,500 2,472,500 2,472,500
SYMANTEC CORP 69,500 69,500 3,748,656 3,748,656
UNIVERSAL HEALTH SERVICES - B 28,600 28,600 1,887,600 1,887,600
USA NETWORKS INC 57,240 62,100 119,340 1,237,815 1,342,913 2,580,728
VERITAS SOFTWRE 49,600 49,600 5,605,575 5,605,575
WESTWOOD ONE INC 58,900 58,900 2,009,963 2,009,963
XTRA CORP 40,000 40,000 1,577,500 1,577,500
---------- ----------- -----------
50,619,264 70,604,656 121,223,920
---------- ----------- -----------
Transportation, Communications, Electric,
Gas and Sanitary Services
ADVANCED FIBRE COMMUNICATION 34,500 34,500 1,563,281 1,563,281
ALLEGHENY ENERGY IN COM 158,500 158,500 4,338,938 4,338,938
ALPHA INDUSTRIES INC 26,400 26,400 1,163,250 1,163,250
ARCH COMMUNICATIONS GROUP 120,000 120,000 780,000 780,000
ARKANSAS BEST CORP 135,900 135,900 1,350,506 1,350,506
AVIS GROUP HOLDINGS INC 92,900 92,900 1,741,875 1,741,875
BOSTON COMMUNICATIONS GROUP 84,200 84,200 1,178,800 1,178,800
CALPINE CORPORATION 92,000 92,000 6,049,000 6,049,000
CANADIAN PACIFIC LTD 104,500 104,500 2,736,594 2,736,594
CENTURYTEL INC 83,950 83,950 2,413,563 2,413,563
CHRIS-CRAFT INDUSTIRES INC 29,497 29,497 1,948,646 1,948,646
CIRCLE INTERNATIONAL 65,400 65,400 1,643,175 1,643,175
CITIZENS COMMUNICATIONS CO 45,800 45,800 790,050 790,050
CMP GROUP INC 211,900 211,900 6,211,319 6,211,319
CNF TRANSPORTATION INC 24,000 155,700 179,700 546,000 3,542,175 4,088,175
COLUMBIA ENERGY GROUP 63,000 63,000 4,134,375 4,134,375
CONECTIV INC 276,200 276,200 4,298,363 4,298,363
COVAD COMMUNICATIONS GROUP 105,000 105,000 1,693,125 1,693,125
DELTA AIR LINES INC 92,900 92,900 4,697,256 4,697,256
DOMINION RESOURCES INC 31,531 31,531 1,351,892 1,351,892
EL PASO ENERGY CORP 84,500 84,500 4,304,219 4,304,219
ENERGEN CORP 117,900 117,900 2,571,694 2,571,694
ENERGY EAST CORPORATION 224,600 224,600 4,281,438 4,281,438
ENTERGY CORP 147,100 147,100 3,999,281 3,999,281
EXAR CORP 7,400 7,400 645,188 645,188
FLORIDA PROGRESS CORP 96,900 96,900 4,542,188 4,542,188
GETTHERE.COM INC 71,200 71,200 752,050 752,050
GPU INC 122,600 122,600 3,317,863 3,317,863
IDACORP INC 77,100 77,100 2,486,475 2,486,475
INCO LTD 216,000 216,000 3,321,000 3,321,000
LIGHTBRIDGE INC 51,500 51,500 1,229,563 1,229,563
METROCALL INC 75,800 75,800 682,200 682,200
MINNESOTA POWER INC 85,520 284,800 370,320 1,480,565 4,930,600 6,411,165
NEXTLINK COMMUNICATIONS-A 87,000 87,000 3,300,563 3,300,563
NORTHEAST UTILITIES 97,000 97,000 2,109,750 2,109,750
NORTHWEST NATURAL GAS CO 112,000 112,000 2,506,000 2,506,000
NTL INC 23,375 23,375 1,399,578 1,399,578
NUI CORP 48,200 48,200 1,301,400 1,301,400
ODETICS INC-CL A 53,700 53,700 778,650 778,650
ONEOK INC 89,300 89,300 2,316,219 2,316,219
P G & E CORP 173,200 173,200 4,265,050 4,265,050
P P & L RESOURCES INC 142,400 142,400 3,123,900 3,123,900
PECO ENERGY CO 98,900 98,900 3,986,906 3,986,906
PEOPLES ENERGY CORP 75,000 75,000 2,428,125 2,428,125
PINNACLE HOLDINGS INC 9,500 9,500 513,000 513,000
PINNACLE WEST CAPITAL CORP 41,600 41,600 1,409,200 1,409,200
PMC-SIERRA INC 11,100 11,100 1,972,331 1,972,331
POTOMAC ELECTRIC POWER CO 87,100 87,100 2,177,500 2,177,500
POWERWAVE TECHNOLOGIES INC 29,400 26,400 55,800 1,293,600 1,161,600 2,455,200
PRICE COMMUNICATIONS CORP 56,500 56,500 1,331,281 1,331,281
PUBLIC SERVICE CO NEW MEX 125,800 125,800 1,942,038 1,942,038
PUBLIC SERVICE ENTER GROUP INC 80,600 80,600 2,790,775 2,790,775
PUGET SOUND ENERGY INC 103,700 103,700 2,210,106 2,210,106
RELIANT ENERGY INC 99,700 99,700 2,947,381 2,947,381
SEMPRA ENERGY 79,500 79,500 1,351,500 1,351,500
SIERRA PACIFIC RESOURCES 137,800 137,800 1,731,113 1,731,113
</TABLE>
<PAGE> 80
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
PRO FORMA COMBINED PORTFOLIO OF INVESTMENTS
AS OF JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
LIBERTY LIBERTY
LIBERTY LIBERTY SMALL CAP SELECT PRO FORMA
SMALL CAP SELECT VALUE PRO FORMA VALUE FUND VALUE FUND COMBINED
VALUE FUND FUND COMBINED MARKET MARKET MARKET
SHARES SHARES SHARES VALUE VALUE VALUE
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCKS
SKYWEST INC 47,800 47,800 1,771,588 1,771,588
TELEPHONE & DATA 48,000 48,000 4,812,000 4,812,000
TOLLGRADE COMMUNICATIONS INC 8,400 8,400 1,113,000 1,113,000
TRUE NORTH COMMUNICATIONS 37,900 37,900 1,667,600 1,667,600
TXU CORP 89,800 89,800 2,649,100 2,649,100
U G I CORP 127,600 127,600 2,615,800 2,615,800
UAL INC 39,400 39,400 2,292,588 2,292,588
UNICOM CORPORATION 142,000 142,000 5,493,625 5,493,625
UNITED ILLUMINATING CO 32,800 32,800 1,435,000 1,435,000
UNIVISION COMMUNICATIONS CL A 52,000 52,000 5,382,000 5,382,000
USFREIGHTWAYS CORPORATION 68,500 63,100 131,600 1,682,531 1,549,894 3,232,425
UTILICORP UNITED INC 129,100 129,100 2,565,863 2,565,863
---------- ----------- -----------
50,024,759 128,069,897 178,094,655
---------- ----------- -----------
Wholesale Trade
ANIXTER INTERNATIONAL INC 80,700 80,700 2,138,550 2,138,550
ARROW ELECTRONICS INC 43,300 43,300 1,342,300 1,342,300
BINDLEY WESTERN INDUSTRIES INC 74,800 74,800 1,977,525 1,977,525
BRIGHTPOINT INC 142,900 142,900 1,236,978 1,236,978
HANDLEMAN CO 72,000 72,000 900,000 900,000
OWENS & MINOR INC HLDG CO 130,100 130,100 2,236,094 2,236,094
PATTERSON DENTAL CO 30,210 86,350 116,560 1,540,710 4,403,850 5,944,560
RICHARDS ELEC LTD 83,300 83,300 1,338,006 1,338,006
SUIZA FOODS CORP 38,500 38,500 1,881,688 1,881,688
U.S. CAN CORPORATION 71,000 71,000 1,233,625 1,233,625
ULTRAMED 450,000 450,000 0 0
UNITED STATIONERS INC 91,900 91,900 2,975,263 2,975,263
---------- ----------- -----------
17,458,438 5,746,150 23,204,588
---------- ----------- -----------
Total Common Stocks 396,907,063 691,054,177 1,087,961,240
----------- ----------- -------------
CORPORATE FIXED INCOME BONDS & NOTES
Finance, Insurance & Real Estate Par Par
IMPAC MORTGAGE HOLDINGS 11%, 2/15/04 $2,426,500 2,426,500 1,941,200 1,941,200
---------- -----------
SHORT-TERM OBLIGATIONS
WARBURG REPURCHASE AGREEMENT 7,628,000 $19,027,000 26,655,000 7,628,000 19,027,000 26,655,000
---------- ----------- -----------
TOTAL INVESTMENTS (COST OF $379,406,041,
$606,431,283 AND $986,837,324, RESPECTIVELY) $406,476,263 $710,081,177 $1,116,557,440
============ ============ ==============
</TABLE>
No adjustments are shown to the unaudited pro forma combined portfolio of
investments due to the fact that upon consummation of the Acquisitions, no
securities would need to be sold in order for the Acquiring Fund to comply with
its Prospectus and SEC and IRS guidelines and restrictions. However, the
foregoing sentence shall not be deemed to restrict in any way the ability of the
investment advisor of any of the funds from buying or selling securities in the
normal course of such Fund's business and operations.
<PAGE> 81
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
PRO FORMA COMBINING CONDENSED STATEMENT OF ASSETS AND LIABILITIES
AS OF JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
Liberty Liberty
Small Cap Select Pro Forma Pro Forma
Value Fund Value Fund Adjustments Combined
<S> <C> <C> <C> <C>
Investments, at value $ 406,476,263 $ 710,081,177 $ -- $1,116,557,440
Cash -- -- -- --
Receivable for investments sold -- -- -- --
Payable for investments purchased -- -- -- --
Other assets less other
liabilities 9,931,124 (337,122) (394,628)(a) 9,199,374
Net assets $ 416,407,387 $ 709,744,055 $ (394,628) $1,125,756,814
Class A:
Net assets $ 138,969,129 $ 388,214,593 (146,126) $ 527,037,596
Shares outstanding 4,268,643 17,372,786 1,943,752 23,585,181
Net asset value $ 32.56 $ 22.35 $ 22.35
Class B:
Net assets $ 238,607,222 $ 298,824,770 (215,846) $ 537,216,146
Shares outstanding 7,786,282 14,029,006 3,405,541 25,220,829
Net asset value $ 30.64 $ 21.30 $ 21.30
Class C:
Net assets $ 27,400,025 $ 21,661,061 (23,580) $ 49,037,506
Shares outstanding 869,870 991,551 383,307 2,244,728
Net asset value $ 31.50 $ 21.85 $ 21.85
Class Z:
Net assets $ 11,431,011 $ 1,043,631 (9,076) $ 12,465,566
Shares outstanding 346,276 46,541 163,088 555,905
Net asset value $ 33.01 $ 22.42 $ 22.42
</TABLE>
(a) Adjustments reflect one time proxy, accounting, legal and other costs of
the reorganization of $326,983 and $67,645 to be borne by the Small Cap
Fund and the Select Value Fund respectively. These costs reflect each
fund's share These costs reflect each fund's share of the total costs of
the reorganization that will be shared between Liberty Financial and the
Funds, subject to the terms of each Agreement and Plan of Reorganization,
as follows:
<TABLE>
<CAPTION>
Liberty Financial Fund
----------------- ----
<S> <C> <C>
Liberty Small-Cap Value Fund 25% 75%
Liberty Select Value Fund 50% 50%
</TABLE>
The Funds will bear their full portion of the one time costs of the
reorganization only if the expense reduction experienced as a result of the
Acquisition in the first year after Acquisition Date exceeds the one time costs.
If the one time costs exceed the expense reduction, the Fund will only bear the
share of its portion up to the amount of the expense reduction.
<PAGE> 82
PRO FORMA COMBINING CONDENSED STATEMENT OF OPERATIONS FOR THE TWELVE
MONTH PERIOD ENDED JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
LIBERTY SMALL LIBERTY SELECT PRO FORMA PRO FORMA
CAP FUND VALUE ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends 4,583,067 8,174,225 -- 12,757,292
Interest 1,187,526 1,184,633 -- 2,372,159
------------ ------------ ------------ ------------
Total investment income 5,770,592 9,358,859 -- 15,129,451
EXPENSES
Management fee 3,988,196 5,223,265 (620,877)(a) 8,590,584
Administration fee -- -- -- (a) --
Service fee - Class A, B, C 1,214,205 1,861,867 -- (a) 3,076,072
Distribution fee - Class B 1,974,223 2,384,795 -- (a) 4,359,018
Distribution fee - Class C 229,724 164,376 -- (a) 394,100
Transfer agent fee 1,323,581 1,620,653 (579,294)(b) 2,364,940
Bookkeeping fee 183,984 270,663 (33,971)(a) 420,676
Trustees fee 20,766 28,901 (4,432)(c) 45,235
All other expenses 669,140 884,431 (448,032)(d) 1,105,539
------------ ------------ ------------ ------------
Total operating expenses 9,603,819 12,438,951 (1,539,782) 20,356,164
------------ ------------ ------------ ------------
Expense reimbursement -- -- -- --
------------ ------------ ------------ ------------
Net Expenses 9,603,819 12,438,951 (1,539,782) 20,356,164
NET INVESTMENT LOSS (3,833,227) (3,080,092) 1,539,782 (5,226,713)
NET REALIZED & UNREALIZED GAIN
Net realized gain on:
Investments 83,353,135 113,063,056 -- 196,416,191
Closed futures contracts -- -- -- --
Foreign currency transactions 0 (1) -- (1)
------------ ------------ ------------ ------------
Net Realized Gain 83,353,135 113,063,055 -- 196,416,190
Change in net unrealized
appreciation/depreciation
during the period on:
Investments (55,231,387) (57,406,602) -- (112,637,989)
Open futures contracts -- -- -- --
Foreign currency transactions -- 424 -- 424
------------ ------------ ------------ ------------
Net Change in Unrealized
Appreciation/Depreciation (55,231,387) (57,406,178) -- (112,637,565)
------------ ------------ ------------ ------------
Net Gain 28,121,748 55,656,877 -- 83,778,625
------------ ------------ ------------ ------------
Increase in Net Assets from Operations 24,288,521 52,576,785 1,539,782 78,551,912
</TABLE>
(a) Based on contract in effect for the surviving fund.
(b) Based on the contract in effect for the surviving Fund. Note that a new
transfer agent fee structure was implemented for Liberty Select Value Fund
effective January 1, 2000. The pro forma combined transfer agent fee shown
assumes this new arrangement was in effect for the entire twelve-month
period ended June 30, 2000.
(c) Based on trustee compensation plan for the surviving fund.
(d) Decrease due to the elimination of duplicative expenses achieved by merging
the funds.
NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 2000
1. These financial statements set forth the unaudited pro forma condensed
statement of assets and liabilities, including the portfolio of investments, as
of June 30, 2000, and the unaudited pro forma condensed statement of operations
for the twelve month period ended June 30, 2000 for Liberty Small-Cap Value Fund
and Liberty Select Value Fund as adjusted giving effect to the Acquisition as if
it had occurred as of the beginning of the period. These statements have been
derived from the books and records utilized in calculating daily net asset value
for each fund.
<PAGE> 83
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
PRO FORMA COMBINED PORTFOLIO OF INVESTMENTS
AS OF JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
STEIN ROE
DISCIPLINED LIBERTY LIBERTY
STOCK SMALL CAP SELECT PRO FORMA
PORTFOLIO VALUE FUND VALUE FUND COMBINED
SHARES SHARES SHARES SHARES
<S> <C> <C> <C> <C>
COMMON STOCKS
Agriculture, Forestry & Fishing
NABISCO GROUP HOLDINGS 172,400 172,400
RAYONIER INC 53,300 53,300
Construction
FLUOR CORP 53,100 53,100
GRANITE CONSTRUCTION INC 77,600 77,600
NVR INC 37,500 37,500
TOLL BROTHERS INC 39,200 39,200
Finance, Insurance & Real Estate
AFFILIATED MANAGERS GROUP 44,000 44,000
ALLMERICA FINANCIAL CORP 62,400 62,400
AMBAC FINANCIAL GROUP INC 113,100 113,100
AMERICREDIT CORP 105,600 105,600
AMERUS LIFE HOLDINGS INC-A 82,500 82,500
ARGOSY GAMING COMPANY 97,800 97,800
BANCWEST CORPORATION 52,000 202,800 254,800
BANK UNITED CORP CL A 80,700 80,700
BANKATLANTIC BANCORP INC-B 102,900 102,900
BANKNORTH GROUP INC 97,450 215,500 312,950
BEAR STEARNS COMPANIES INC 90,600 90,600
CAPITAL ONE FINANCIAL CORP 57,000 57,000
CAPITOL FEDERAL FINANCIAL 177,000 177,000
CHASE MANHATTAN CORP (NEW) 150,000 150,000
CINCINNATI FINANCIAL CORP 71,900 71,900
CITY NATIONAL CORP 146,800 146,800
COMMERCE BANCORP INC 52,185 52,185
COMMUNITY BANK SYSTEM INC 74,500 74,500
COMPASS BANCSHARES INC 90,000 90,000
CULLEN/FROST BANKERS INC 60,700 130,500 191,200
DELPHI FINANCIAL GROUP CLASS A 67,668 67,668
DOW JONES & CO INC 19,200 19,200
DOWNEY FINL CP 91,400 91,400
EDWARDS (A.G.), INC 79,100 79,100
ENHANCE FINANCIAL SVCS GROUP 103,600 103,600
FIDELITY NATIONAL FINL INC 135,560 135,560
FINL SECURITY ASSURANCE HLDG 40,000 40,000
FIRST FEDERAL CAPITAL CORP 155,100 155,100
FIRSTAR CORP 50,000 50,000
FIRSTFED FINANCIAL CORP 144,400 144,400
GALLAGHER (ARTHUR J.) & CO. 55,080 55,080
GOLDEN STATE BANCORP 263,200 263,200
GOLDEN STATE BANCORP-LITIG WT 155,000 155,000
GOLDEN WEST FINANCIAL CORP 351,700 88,200 439,900
GREATER BAY BANCORP 46,000 46,000
GREENPOINT FINANCIAL CORP 236,400 236,400
HCA-THE HEALTHCARE CORP 334,900 334,900
HUDSON UNITED BANCORP 87,844 87,844
INDEPENDENCE COMMUNITY BANK 153,400 153,400
KNIGHT TRADING GROUP INC 40,700 40,700
LEHMAN BROTHERS HLDG INC 71,700 71,700
LOEWS CORP 69,500 69,500
MAF BANCORP INC 109,500 109,500
MARCHFIRST INC 36,700 36,700
MGIC INV CORP 69,600 69,600
MIDLAND CO 45,400 45,400
MONY GROUP INC 61,800 61,800
NATIONWIDE FINANCIAL SERV A 154,800 154,800
NORTH FORK BANCORPORATION 95,200 282,400 377,600
PACIFIC CENTURY FINL CORP 196,300 196,300
PAINE WEBBER GROUP INC 49,000 49,000
PMI GROUP INC 75,000 43,100 100,200 218,300
PROVIDENT BANKSHARES CORP 127,680 127,680
RADIAN GROUP INC 90,300 94,500 184,800
RAYMOND JAMES FINANCIAL INC 52,300 52,300
</TABLE>
<TABLE>
<CAPTION>
STEIN ROE LIBERTY LIBERTY
DISCIPLINED SMALL CAP SELECT PRO FORMA
STOCK PORT. VALUE FUND VALUE FUND COMBINED
MARKET VALUE MARKET VALUE MARKET VALUE MARKET VALUE
<S> <C> <C> <C> <C>
COMMON STOCKS
Agriculture, Forestry & Fishing
NABISCO GROUP HOLDINGS $ 4,471,625 $ 4,471,625
RAYONIER INC $ 1,912,138 1,912,138
------------ ------------ --------------
1,912,138 4,471,625 6,383,763
------------ ------------ --------------
Construction
FLUOR CORP 1,679,288 1,679,288
GRANITE CONSTRUCTION INC 1,901,200 1,901,200
NVR INC 2,137,500 2,137,500
TOLL BROTHERS INC 803,600 803,600
------------ ------------ --------------
4,842,300 1,679,288 6,521,588
------------ ------------ --------------
Finance, Insurance & Real Estate
AFFILIATED MANAGERS GROUP 2,002,000 2,002,000
ALLMERICA FINANCIAL CORP 3,268,200 3,268,200
AMBAC FINANCIAL GROUP INC 6,199,294 6,199,294
AMERICREDIT CORP 1,795,200 1,795,200
AMERUS LIFE HOLDINGS INC-A 1,701,563 1,701,563
ARGOSY GAMING COMPANY 1,405,875 1,405,875
BANCWEST CORPORATION 854,750 3,333,525 4,188,275
BANK UNITED CORP CL A 2,839,631 2,839,631
BANKATLANTIC BANCORP INC-B 604,538 604,538
BANKNORTH GROUP INC 1,492,203 3,299,844 4,792,047
BEAR STEARNS COMPANIES INC 3,771,225 3,771,225
CAPITAL ONE FINANCIAL CORP 2,543,625 2,543,625
CAPITOL FEDERAL FINANCIAL 1,958,063 1,958,063
CHASE MANHATTAN CORP (NEW) $ 6,909,375 6,909,375
CINCINNATI FINANCIAL CORP 2,260,356 2,260,356
CITY NATIONAL CORP 5,211,400 5,211,400
COMMERCE BANCORP INC 2,400,510 2,400,510
COMMUNITY BANK SYSTEM INC 1,652,969 1,652,969
COMPASS BANCSHARES INC 1,535,625 1,535,625
CULLEN/FROST BANKERS INC 1,597,169 3,433,781 5,030,950
DELPHI FINANCIAL GROUP CLASS A 2,296,488 2,296,488
DOW JONES & CO INC 1,406,400 1,406,400
DOWNEY FINL CP 2,650,600 2,650,600
EDWARDS (A.G.), INC 3,084,900 3,084,900
ENHANCE FINANCIAL SVCS GROUP 1,489,250 1,489,250
FIDELITY NATIONAL FINL INC 2,482,443 2,482,443
FINL SECURITY ASSURANCE HLDG 3,035,000 3,035,000
FIRST FEDERAL CAPITAL CORP 1,715,794 1,715,794
FIRSTAR CORP 1,053,125 1,053,125
FIRSTFED FINANCIAL CORP 2,039,650 2,039,650
GALLAGHER (ARTHUR J.) & CO. 2,313,360 2,313,360
GOLDEN STATE BANCORP 4,737,600 4,737,600
GOLDEN STATE BANCORP-LITIG WT 174,375 174,375
GOLDEN WEST FINANCIAL CORP 14,353,756 3,599,663 17,953,419
GREATER BAY BANCORP 2,150,500 2,150,500
GREENPOINT FINANCIAL CORP 4,432,500 4,432,500
HCA-THE HEALTHCARE CORP 10,172,588 10,172,588
HUDSON UNITED BANCORP 1,971,000 1,971,000
INDEPENDENCE COMMUNITY BANK 2,032,550 2,032,550
KNIGHT TRADING GROUP INC 1,213,369 1,213,369
LEHMAN BROTHERS HLDG INC 6,780,131 6,780,131
LOEWS CORP 4,170,000 4,170,000
MAF BANCORP INC 1,991,531 1,991,531
MARCHFIRST INC 669,775 669,775
MGIC INV CORP 3,166,800 3,166,800
MIDLAND CO 1,112,300 1,112,300
MONY GROUP INC 2,089,613 2,089,613
NATIONWIDE FINANCIAL SERV A 5,089,050 5,089,050
NORTH FORK BANCORPORATION 1,439,900 4,271,300 5,711,200
PACIFIC CENTURY FINL CORP 2,870,888 2,870,888
PAINE WEBBER GROUP INC 2,229,500 2,229,500
PMI GROUP INC 3,562,500 2,047,250 4,759,500 10,369,250
PROVIDENT BANKSHARES CORP 1,723,680 1,723,680
RADIAN GROUP INC 4,673,025 4,890,375 9,563,400
RAYMOND JAMES FINANCIAL INC 1,176,750 1,176,750
</TABLE>
<PAGE> 84
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
PRO FORMA COMBINED PORTFOLIO OF INVESTMENTS
AS OF JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
STEIN ROE
DISCIPLINED LIBERTY LIBERTY
STOCK SMALL CAP SELECT PRO FORMA
PORTFOLIO VALUE FUND VALUE FUND COMBINED
SHARES SHARES SHARES SHARES
<S> <C> <C> <C> <C>
COMMON STOCKS
RENAISSANCERE HOLDINGS LTD 42,200 42,200
SOVEREIGN BANCORP INC 506,600 506,600
ST PAUL COMPANIES INC 121,800 121,800
STATE AUTO FINANCIAL CORP 86,000 86,000
STATEN ISLAND BANCORP INC 68,000 68,000
SUSQUEHANNA BANCSHARES INC 100,000 100,000
TORCHMARK INSURANCE 57,900 57,900
UMB FINANCIAL CORP 62,500 62,500
UNIONBANCAL CORPORATION 143,200 143,200
UNITED HEALTHCARE CORP 98,000 98,000
WALTER INDUSTRIES INC 113,500 113,500
WASHINGTON MUTUAL INC 382,600 382,600
WEBSTER FINANCIAL CORP 104,300 114,600 218,900
WELLPOINT HEALTH NETWORKS 62,200 62,200
WHITNEY HOLDING CORP 71,500 71,500
Manufacturing
ACTEL CORP 50,500 50,500
ACUSON CORP 515,700 515,700
ADAC LABORATORIES 99,400 99,400
ADC TELECOMMUNICATIONS INC 91,100 91,100
ADVANCED DIGITAL INFO CORP 21,600 21,900 43,500
ADVANCED MICRO DEVICES INC 48,600 48,600
AGRIBRANDS INTERNATIONAL INC 30,700 30,700
AIR PRODUCTS & CHEMICALS INC 200,000 200,000
ALBEMARLE CORP 54,800 54,800
ALLIANT TECHSYSTEMS INC 20,400 20,400
ALPHARMA INC 44,000 44,000
ALTERA CORPORATION 62,800 62,800
AMERADA HESS CORP 60,000 47,000 107,000
ANALOG DEVICES INC. 40,100 40,100
ANDREW CORP 603,900 603,900
APPLE COMPUTER INC 124,800 124,800
APPLIED MICRO CIRCUITS CORP 46,300 46,300
ARVIN INDUSTRIES INC 48,400 48,400
ATMEL CORP 73,700 73,700
AUDIOVOX CORP-CL A 32,000 32,000
AURORA BIOSCIENCES CORP 13,200 13,200
AVX CORP 430,600 430,600
B F GOODRICH CO 102,700 102,700
BALDOR ELECTRIC 43,300 43,300
BARNES GROUP INC 100,000 100,000
BARR LABORATORIES INC 24,000 24,000
BAUSCH & LOMB INC 19,400 19,400
BELL AND HOWELL COMPANY 38,500 38,500
BETHLEHEM STEEL CORP 173,800 173,800
BIOGEN INC 21,400 21,400
BIOMET INC 270,000 270,000
BOISE CASCADE CORP 48,000 95,200 143,200
BRISTOL-MYERS SQUIBB CO 50,000 50,000
BRUNSWICK CORP 122,200 122,200
BURR-BROWN CORP 12,600 12,600
C R BARD INC 40,000 40,000
CACI INTERNATIONAL INC-CL A 64,000 64,000
CANANDAIGUA BRANDS INC 83,100 83,100
CARLISLE COS INC 242,000 41,300 283,300
CARPENTER TECHNOLOGY CORP 130,000 130,000
CENTEX CONSTRUCTION PRODUCTS 41,900 41,900
CHIRON CORP 77,800 77,800
CHURCH & DWIGHT CO 74,000 74,000
CLECO CORP 30,000 30,000
COMMSCOPE INC 46,700 46,700
COMPAQ COMPUTER CORP 250,000 250,000
COMVERSE TECH 64,400 64,400
COOPER TIRE & RUBBER CO 280,000 280,000
CORN PRODUCTS INTL INC 45,300 45,300
CREE INC 6,300 6,300
CROWN CORK AND SEAL CO. INC. 141,100 141,100
CYMER INC 34,300 34,300
CYPRESS SEMICONDUCTOR CORP 30,400 45,800 76,200
CYTEC INDUSTRIES INC 129,300 129,300
</TABLE>
<TABLE>
<CAPTION>
STEIN ROE LIBERTY LIBERTY
DISCIPLINED SMALL CAP SELECT PRO FORMA
STOCK PORT. VALUE FUND VALUE FUND COMBINED
MARKET VALUE MARKET VALUE MARKET VALUE MARKET VALUE
<S> <C> <C> <C> <C>
COMMON STOCKS
RENAISSANCERE HOLDINGS LTD 1,838,338 1,838,338
SOVEREIGN BANCORP INC 3,562,031 3,562,031
ST PAUL COMPANIES INC 4,156,425 4,156,425
STATE AUTO FINANCIAL CORP 1,021,250 1,021,250
STATEN ISLAND BANCORP INC 1,198,500 1,198,500
SUSQUEHANNA BANCSHARES INC 1,425,000 1,425,000
TORCHMARK INSURANCE 1,429,406 1,429,406
UMB FINANCIAL CORP 2,050,781 2,050,781
UNIONBANCAL CORPORATION 2,658,150 2,658,150
UNITED HEALTHCARE CORP 8,403,500 8,403,500
WALTER INDUSTRIES INC 1,298,156 1,298,156
WASHINGTON MUTUAL INC 11,047,575 11,047,575
WEBSTER FINANCIAL CORP 2,314,156 2,542,688 4,856,844
WELLPOINT HEALTH NETWORKS 4,505,613 4,505,613
WHITNEY HOLDING CORP 2,444,406 2,444,406
------------- ------------ ------------ --------------
47,098,919 69,870,902 124,115,650 241,085,470
------------- ------------ ------------ --------------
Manufacturing
ACTEL CORP 2,304,063 2,304,063
ACUSON CORP 6,961,950 6,961,950
ADAC LABORATORIES 2,385,600 2,385,600
ADC TELECOMMUNICATIONS INC 7,641,013 7,641,013
ADVANCED DIGITIAL INFO CORP 344,250 349,031 693,281
ADVANCED MICRO DEVICES INC 3,754,350 3,754,350
AGRIBRANDS INTERNATIONAL INC 1,287,481 1,287,481
AIR PRODUCTS & CHEMICALS INC 6,162,500 6,162,500
ALBEMARLE CORP 1,082,300 1,082,300
ALLIANT TECHSYSTEMS INC 1,375,725 1,375,725
ALPHARMA INC 2,739,000 2,739,000
ALTERA CORPORATION 6,401,675 6,401,675
AMERADA HESS CORP 3,705,000 2,902,250 6,607,250
ANALOG DEVICES INC. 3,047,600 3,047,600
ANDREW CORP 20,268,394 20,268,394
APPLE COMPUTER INC 6,536,400 6,536,400
APPLIED MICRO CIRCUITS CORP 4,572,125 4,572,125
ARVIN INDUSTRIES INC 840,950 840,950
ATMEL CORP 2,717,688 2,717,688
AUDIOVOX CORP-CL A 706,000 706,000
AURORA BIOSCIENCES CORP 900,075 900,075
AVX CORP 9,876,888 9,876,888
B F GOODRICH CO 3,498,219 3,498,219
BALDOR ELECTRIC 806,463 806,463
BARNES GROUP INC 1,631,250 1,631,250
BARR LABORATORIES INC 1,075,500 1,075,500
BAUSCH & LOMB INC 1,501,075 1,501,075
BELL AND HOWELL COMPANY 933,625 933,625
BETHLEHEM STEEL CORP 619,163 619,163
BIOGEN INC 1,380,300 1,380,300
BIOMET INC 10,378,125 10,378,125
BOISE CASCADE CORP 1,242,000 2,463,300 3,705,300
BRISTOL-MYERS SQUIBB CO 2,912,500 2,912,500
BRUNSWICK CORP 2,023,938 2,023,938
BURR-BROWN CORP 1,092,263 1,092,263
C R BARD INC 1,925,000 1,925,000
CACI INTERNATIONAL INC-CL A 1,248,000 1,248,000
CANANDAIGUA BRANDS INC 4,191,356 4,191,356
CARLISLE COS INC 10,890,000 1,858,500 12,748,500
CARPENTER TECHNOLOGY CORP 2,746,250 2,746,250
CENTEX CONSTRUCTION PRODUCTS 950,606 950,606
CHIRON CORP 3,695,500 3,695,500
CHURCH & DWIGHT CO 1,332,000 1,332,000
CLECO CORP 1,005,000 1,005,000
COMMSCOPE INC 1,914,700 1,914,700
COMPAQ COMPUTER CORP 6,390,625 6,390,625
COMVERSE TECH 5,989,200 5,989,200
COOPER TIRE & RUBBER CO 3,115,000 3,115,000
CORN PRODUCTS INTL INC 1,200,450 1,200,450
CREE INC 841,050 841,050
CROWN CORK AND SEAL CO. INC. 2,116,500 2,116,500
CYMER INC 1,637,825 1,637,825
CYPRESS SEMICONDUCTOR CORP 1,284,400 1,935,050 3,219,450
CYTEC INDUSTRIES INC 3,192,094 3,192,094
</TABLE>
<PAGE> 85
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
PRO FORMA COMBINED PORTFOLIO OF INVESTMENTS
AS OF JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
STEIN ROE
DISCIPLINED LIBERTY LIBERTY
STOCK SMALL CAP SELECT PRO FORMA
PORTFOLIO VALUE FUND VALUE FUND COMBINED
SHARES SHARES SHARES SHARES
<S> <C> <C> <C> <C>
COMMON STOCKS
DALLAS SEMICONDUCTOR CORP 68,200 68,200
DELPHI AUTOMOTIVE SYSTEMS 158,800 158,800
DEXTER CORP 235,000 235,000
DOVER CORP 120,900 120,900
EATON CORP 45,500 45,500
ECOLAB INC 256,800 21,100 277,900
EI DUPONT DE NEMOURS & CO INC 100,000 100,000
ELANTEC SEMICONDUCTOR INC 14,200 14,200
EMULEX CORP 6,400 6,400
ENGELHARD CORPORATION 175,300 175,300
ESTERLINE TECHNOLOGIES CORP 87,700 87,700
ETHAN ALLEN INTERIORS INC 56,400 56,400
EXFO ELECTRO-OPTICAL ENGINEE 6,200 6,200
FLOWSERVE CORP 215,000 215,000
FMC CORP 66,000 66,000
FOSSIL INC 69,925 69,925
FULLER (H.B.) CO 20,000 20,000
FURNITURE BRANDS INTL INC 91,600 119,300 210,900
GEHL CO 90,600 90,600
GENERAL SEMICONDUCTOR INC 89,600 89,600
GENTEX CORP 74,000 74,000
GEON COMPANY 53,000 53,000
GEORGIA PACIFIC CORP 130,000 91,200 221,200
GLATFELTER (P.H.) CO 110,600 110,600
GLENAYRE TECHNOLOGIES INC 127,000 127,000
GRANT PRIDECO INC 103,800 103,800
HAIN CELESTIAL GROUP INC 59,000 59,000
HANNA CO 169,800 169,800
HARLEY DAVIDSON 118,000 118,000
HARMAN INTERNATIONAL INC NEW 43,000 43,000
HARRIS CORPORATION DEL 49,300 49,300
HARSCO CORP 41,700 41,700
HAVERTY FURNITURE 10,000 10,000
HELIX TECHNOLOGY CORP 6,800 6,800
HORMEL FOODS CORP 137,400 137,400
IDEC PHARMACEUTICALS CORP 17,000 17,000
IMATION CORP 55,600 55,600
IMMUNEX CORP 14,500 14,500
IMPERIAL CHEM IND INC ADR 375,400 375,400
INFOCUS CORP 70,200 70,200
INGERSOLL RAND CO 157,100 157,100
INTEGRATED DEVICES TECH INC 46,800 36,100 82,900
INTERNATIONAL HOME FOODS INC 115,100 115,100
INTERNATIONAL RECTIFIER CORP 73,000 73,000
INTERSTATE BAKERIES 181,700 181,700
INTL BUSINESS MACHINES CORP 60,000 60,000
INTUIT INC 84,300 84,300
IVAX CORP 158,850 158,850
JDS UNIPHASE CORP 22,000 22,000
JOHNSON CONTROLS INC 92,500 92,500
JONES PHARMA INC 51,150 51,150
KELLWOOD CO 37,700 37,700
KEMET CORP 20,400 20,400
KENNAMETAL INC 43,800 43,800
KNIGHT RIDDER INC 30,300 88,100 118,400
LAFARGE CORP 78,000 78,000
LAM RESEARCH CORP 35,400 35,400
LATTICE SEMICONDUCTOR CORP 6,300 6,300
LEAR CORP 157,000 119,200 276,200
LINEAR TECHNOLOGY CORP 97,100 97,100
LITTLEFUSE INC 495,000 495,000
LOCKHEED MARTIN CORP 153,200 153,200
LONGVIEW FIBRE CO 152,500 152,500
LSI LOGIC CORP 51,400 51,400
LUBRIZOL CORP 69,800 170,800 240,600
LUXOTTICA GROU SPA-SPON ADR 50,200 50,200
LYONDELL PETRO 321,500 321,500
MALLINCKRODT INC 130,000 130,000
MANITOWOC INC 66,100 66,100
MATTSON TECHNOLOGY INC 16,100 16,100
MAXIM INTEGRATED PRODUCTS INC 64,300 64,300
MCCORMICK & CO 96,800 96,800
MERITOR AUTOMOTIVE INC 281,900 281,900
MICHAEL FOODS INC 59,700 59,700
</TABLE>
<TABLE>
<CAPTION>
STEIN ROE LIBERTY LIBERTY
DISCIPLINED SMALL CAP SELECT PRO FORMA
STOCK PORT. VALUE FUND VALUE FUND COMBINED
MARKET VALUE MARKET VALUE MARKET VALUE MARKET VALUE
<S> <C> <C> <C> <C>
COMMON STOCKS
DALLAS SEMICONDUCTOR CORP 2,779,150 2,779,150
DELPHI AUTOMOTIVE SYSTEMS 2,312,525 2,312,525
DEXTER CORP 11,280,000 11,280,000
DOVER CORP 4,904,006 4,904,006
EATON CORP 3,048,500 3,048,500
ECOLAB INC 10,031,250 824,219 10,855,469
EI DUPONT DE NEMOURS & CO INC 4,375,000 4,375,000
ELANTEC SEMICONDUCTOR INC 988,675 988,675
EMULEX CORP 420,400 420,400
ENGELHARD CORPORATION 2,991,056 2,991,056
ESTERLINE TECHNOLOGIES CORP 1,304,538 1,304,538
ETHAN ALLEN INTERIORS INC 1,353,600 1,353,600
EXFO ELECTRO-OPTICAL ENGINEE 272,025 272,025
FLOWSERVE CORP 3,238,438 3,238,438
FMC CORP 3,828,000 3,828,000
FOSSIL INC 1,359,167 1,359,167
FULLER (H.B.) CO 911,250 911,250
FURNITURE BRANDS INTL INC 1,385,450 1,804,413 3,189,863
GEHL CO 1,291,050 1,291,050
GENERAL SEMICONDUCTOR INC 1,321,600 1,321,600
GENTEX CORP 1,859,250 1,859,250
GEON COMPANY 980,500 980,500
GEORGIA PACIFIC CORP 3,412,500 2,394,000 5,806,500
GLATFELTER (P.H.) CO 1,126,738 1,126,738
GLENAYRE TECHNOLOGIES INC 1,341,438 1,341,438
GRANT PRIDECO INC 2,595,000 2,595,000
HAIN CELESTIAL GROUP INC 2,164,563 2,164,563
HANNA CO 1,528,200 1,528,200
HARLEY DAVIDSON 4,543,000 4,543,000
HARMAN INTERNATIONAL INC NEW 2,623,000 2,623,000
HARRIS CORPORATION DEL 1,614,575 1,614,575
HARSCO CORP 1,063,350 1,063,350
HAVERTY FURNITURE 85,000 85,000
HELIX TECHNOLOGY CORP 265,200 265,200
HORMEL FOODS CORP 2,310,038 2,310,038
IDEC PHARMACEUTICALS CORP 1,994,313 1,994,313
IMATION CORP 1,633,250 1,633,250
IMMUNEX CORP 716,844 716,844
IMPERIAL CHEM IND INC ADR 11,567,013 11,567,013
INFOCUS CORP 2,259,563 2,259,563
INGERSOLL RAND CO 6,323,275 6,323,275
INTEGRATED DEVICES TECH INC 2,802,150 2,161,488 4,963,638
INTERNATIONAL HOME FOODS INC 2,409,906 2,409,906
INTERNATIONAL RECTIFIER CORP 4,088,000 4,088,000
INTERSTATE BAKERIES 2,543,800 2,543,800
INTL BUSINESS MACHINES CORP 6,573,750 6,573,750
INTUIT INC 3,487,913 3,487,913
IVAX CORP 6,592,275 6,592,275
JDS UNIPHASE CORP 2,637,250 2,637,250
JOHNSON CONTROLS INC 4,746,406 4,746,406
JONES PHARMA INC 2,042,803 2,042,803
KELLWOOD CO 796,413 796,413
KEMET CORP 511,275 511,275
KENNAMETAL INC 938,963 938,963
KNIGHT RIDDER INC 1,611,581 4,685,819 6,297,400
LAFARGE CORP 1,638,000 1,638,000
LAM RESEARCH CORP 1,327,500 1,327,500
LATTICE SEMICONDUCTOR CORP 435,488 435,488
LEAR CORP 3,140,000 2,384,000 5,524,000
LINEAR TECHNOLOGY CORP 6,208,331 6,208,331
LITTLEFUSE INC 24,255,000 24,255,000
LOCKHEED MARTIN CORP 3,801,275 3,801,275
LONGVIEW FIBRE CO 1,687,031 1,687,031
LSI LOGIC CORP 2,782,025 2,782,025
LUBRIZOL CORP 1,465,800 3,586,800 5,052,600
LUXOTTICA GROU SPA-SPON ADR 611,813 611,813
LYONDELL PETRO 5,385,125 5,385,125
MALLINCKRODT INC 5,646,875 5,646,875
MANITOWOC INC 1,768,175 1,768,175
MATTSON TECHNOLOGY INC 523,250 523,250
MAXIM INTEGRATED PRODUCTS INC 4,368,381 4,368,381
MCCORMICK & CO 3,146,000 3,146,000
MERITOR AUTOMOTIVE INC 3,100,900 3,100,900
MICHAEL FOODS INC 1,462,650 1,462,650
</TABLE>
<PAGE> 86
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
PRO FORMA COMBINED PORTFOLIO OF INVESTMENTS
AS OF JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
STEIN ROE
DISCIPLINED LIBERTY LIBERTY
STOCK SMALL CAP SELECT PRO FORMA
PORTFOLIO VALUE FUND VALUE FUND COMBINED
SHARES SHARES SHARES SHARES
<S> <C> <C> <C> <C>
COMMON STOCKS
MICROCHIP TECHNOLOGY 45,000 45,000
MICRON TECHNOLOGY INCORPORATED 26,000 26,000
MILACRON INC 86,400 86,400
MILLENIUM CHEMICALS INC 234,100 234,100
MKS INSTRUMENTS INC 34,000 34,000
MRV COMMUNICTIONS INC 20,600 20,600
MUELLER INDUSTRIES INC 85,100 148,000 233,100
MYLAN LABORATORIES, INC 125,000 125,000
NACCO INDUSTRIES INC CL A 31,200 31,200
NATIONAL SEMICONDUCTOR CORP 46,900 46,900
NAVISTAR INTERNATIONAL 129,600 129,600
NEW YORK TIMES CO CLASS A 115,000 115,000
NORTEK INC. 63,800 63,800
NORTHROP GRUMMAN CORP 35,400 35,400
NOVELLUS SYSTEMS INC 98,400 98,400
NUCOR CORP 70,200 70,200
OCEANEERING INTL INC 44,000 44,000
OM GROUP INC 369,500 369,500
OSHKOSH TRUCK CORP 32,850 32,850
PACCAR INC 50,900 50,900
PARK ELECTROCHEMICAL CORP 77,900 77,900
PARKER HANNIFIN CORP 39,800 39,800
PE CORP-CELERA GENOMICS GRP 26,400 26,400
PE CORP-PE BIOSYSTEMS GROUP 28,800 28,800
PENNZOIL-QUAKER STATE CO 91,800 91,800
PENTAIR INC 40,400 40,400
PEPSI BOTTLING GROUP 193,200 193,200
PHELPS DODGE CORP 65,908 65,908
PHILLIPS VAN HEUSEN CORP 97,500 97,500
PHOTON DYNAMICS INC 8,600 8,600
PLEXUS CORP 21,500 21,500
PPG INDUSTRIES INC 102,100 102,100
PRAXAIR INC 130,000 130,000
PRECISION CASTPARTS CORP 22,500 22,500
PROTEIN DESIGN LABS INC 10,500 10,500
QUANEX CORP 72,700 72,700
REYNOLDS & REYNOLDS CO 280,000 280,000
RUSS BERRIE & CO INC 61,600 61,600
RYERSON TULL INC 93,598 93,598
SABRE HOLDINGS CORP 72,265 72,265
SANMINA CORPX 77,400 77,400
SEAGATE TECHNOLOGY INC 145,800 145,800
SEMTECH CORP 25,800 25,800
SHIRE PHARMACEUTICALS-ADR 32,184 32,184
SILICON VALLEY GROUP INC 95,100 95,100
SPRINGS INDUSTRIES INC 22,100 22,100
SPS TECHNOLOGIES, IN 26,300 26,300
STORAGENETWORKS INC 11,700 11,700
STURM RUGER & CO INC 181,300 181,300
SUPERIOR INDUSTRIES INTL 250,200 72,100 322,300
TEKTRONIX INC 19,700 19,700
TELCOM SEMICONDUCTOR INC 19,300 19,300
TEMPLE INLAND INC 34,500 34,500
TERADYNE INC 84,598 84,598
TEREX CORP 84,900 84,900
TESORO PETROLEUM CORP 141,500 141,500
TEXAS INDUSTRIES INC 60,500 60,500
TIME WARNER TELECOM-CL A 9,400 9,400
TIMKEN CO 97,100 97,100
TOPPS COMPANY 133,100 133,100
TORO CO 44,700 44,700
TOSCO CORP 159,600 159,600
TOWER AUTOMOTIVE INC 76,100 76,100
TRIQUINT SEMICONDUCTOR INC 9,900 9,900
TUPPERWARE CORPORATION 86,800 166,100 252,900
ULTRAMAR DIAMOND SHAMROCK CORP 65,600 65,600
UNIFI INC 145,475 145,475
UNISYS CORP 181,500 181,500
US INDUSTRIES INC 252,500 252,500
USG CORP NEW 123,200 123,200
USX-US STEEL GROUP 44,400 44,400
VALASSIS COMM. INC 105,250 129,700 234,950
VARIAN INC 16,700 16,700
VERTEX PHARMACEUTICALS INC 12,500 12,500
</TABLE>
<TABLE>
<CAPTION>
STEIN ROE LIBERTY LIBERTY
DISCIPLINED SMALL CAP SELECT PRO FORMA
STOCK PORT. VALUE FUND VALUE FUND COMBINED
MARKET VALUE MARKET VALUE MARKET VALUE MARKET VALUE
<S> <C> <C> <C> <C>
COMMON STOCKS
MICROCHIP TECHNOLOGY 2,621,953 2,621,953
MICRON TECHNOLOGY INCORPORATED 2,289,625 2,289,625
MILACRON INC 1,252,800 1,252,800
MILLENIUM CHEMICALS INC 3,979,700 3,979,700
MKS INSTRUMENTS INC 1,330,250 1,330,250
MRV COMMUNICTIONS INC 1,385,350 1,385,350
MUELLER INDUSTRIES INC 2,382,800 4,144,000 6,526,800
MYLAN LABORATORIES, INC 2,281,250 2,281,250
NACCO INDUSTRIES INC CL A 1,095,900 1,095,900
NATIONAL SEMICONDUCTOR CORP 2,661,575 2,661,575
NAVISTAR INTERNATIONAL 4,025,700 4,025,700
NEW YORK TIMES CO CLASS A 4,542,500 4,542,500
NORTEK INC. 1,260,050 1,260,050
NORTHROP GRUMMAN CORP 2,345,250 2,345,250
NOVELLUS SYSTEMS INC 5,565,750 5,565,750
NUCOR CORP 2,329,763 2,329,763
OCEANEERING INTL INC 836,000 836,000
OM GROUP INC 16,258,000 16,258,000
OSHKOSH TRUCK CORP 1,174,388 1,174,388
PACCAR INC 2,020,094 2,020,094
PARK ELECTROCHEMICAL CORP 2,809,269 2,809,269
PARKER HANNIFIN CORP 1,363,150 1,363,150
PE CORP-CELERA GENOMICS GRP 2,468,400 2,468,400
PE CORP-PE BIOSYSTEMS GROUP 1,897,200 1,897,200
PENNZOIL-QUAKER STATE CO 1,107,338 1,107,338
PENTAIR INC 1,434,200 1,434,200
PEPSI BOTTLING GROUP 5,639,025 5,639,025
PHELPS DODGE CORP 2,450,954 2,450,954
PHILLIPS VAN HEUSEN CORP 926,250 926,250
PHOTON DYNAMICS INC 642,313 642,313
PLEXUS CORP 2,429,500 2,429,500
PPG INDUSTRIES INC 4,524,306 4,524,306
PRAXAIR INC 4,866,875 4,866,875
PRECISION CASTPARTS CORP 1,018,125 1,018,125
PROTEIN DESIGN LABS INC 1,732,008 1,732,008
QUANEX CORP 1,081,413 1,081,413
REYNOLDS & REYNOLDS CO 5,110,000 5,110,000
RUSS BERRIE & CO INC 1,185,800 1,185,800
RYERSON TULL INC 971,079 971,079
SABRE HOLDINGS CORP 2,059,553 2,059,553
SANMINA CORPX 6,617,700 6,617,700
SEAGATE TECHNOLOGY INC 8,019,000 8,019,000
SEMTECH CORP 1,973,297 1,973,297
SHIRE PHARMACEUTICALS-ADR 1,669,546 1,669,546
SILICON VALLEY GROUP INC 2,460,713 2,460,713
SPRINGS INDUSTRIES INC 711,344 711,344
SPS TECHNOLOGIES, IN 1,079,944 1,079,944
STORAGENETWORKS INC 1,055,925 1,055,925
STURM RUGER & CO INC 1,609,038 1,609,038
SUPERIOR INDUSTRIES INTL 6,442,650 1,856,575 8,299,225
TEKTRONIX INC 1,457,800 1,457,800
TELCOM SEMICONDUCTOR INC 779,238 779,238
TEMPLE INLAND INC 1,449,000 1,449,000
TERADYNE INC 6,217,953 6,217,953
TEREX CORP 1,199,213 1,199,213
TESORO PETROLEUM CORP 1,432,688 1,432,688
TEXAS INDUSTRIES INC 1,746,938 1,746,938
TIME WARNER TELECOM-CL A 605,125 605,125
TIMKEN CO 1,808,488 1,808,488
TOPPS COMPANY 1,530,650 1,530,650
TORO CO 1,472,306 1,472,306
TOSCO CORP 4,518,675 4,518,675
TOWER AUTOMOTIVE INC 951,250 951,250
TRIQUINT SEMICONDUCTOR INC 947,306 947,306
TUPPERWARE CORPORATION 1,909,600 3,654,200 5,563,800
ULTRAMAR DIAMOND SHAMROCK CORP 1,627,700 1,627,700
UNIFI INC 1,800,253 1,800,253
UNISYS CORP 2,643,094 2,643,094
US INDUSTRIES INC 3,061,563 3,061,563
USG CORP NEW 3,742,200 3,742,200
USX-US STEEL GROUP 824,175 824,175
VALASSIS COMM. INC 4,012,656 4,944,813 8,957,469
VARIAN INC 770,288 770,288
VERTEX PHARMACEUTICALS INC 1,317,188 1,317,188
</TABLE>
<PAGE> 87
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
PRO FORMA COMBINED PORTFOLIO OF INVESTMENTS
AS OF JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
STEIN ROE
DISCIPLINED LIBERTY LIBERTY
STOCK SMALL CAP SELECT PRO FORMA
PORTFOLIO VALUE FUND VALUE FUND COMBINED
SHARES SHARES SHARES SHARES
<S> <C> <C> <C> <C>
COMMON STOCKS
VICAL INC 43,800 43,800
VISHAY INTERTECHNOLOGY 158,400 158,400
VITESSE SEMICONDUCTOR CORP 72,100 72,100
W R GRACE & CO 132,900 189,000 321,900
WATERS CORPORATION 48,900 48,900
WATSON PHARMACEUTICALS 67,900 67,900
WEATHERFORD INTERNATIONAL 103,800 103,800
WESTVACO CORP 169,800 169,800
WHIRLPOOL CORP 51,700 51,700
WILLAMETTE IND INC 90,600 90,600
WINNEBAGO INDUSTRIES 40,900 40,900
WOLVERINE WORLD WIDE INC 546,000 546,000
WORTHINGTON INDUSTRIES 205,200 205,200
XILINIX INC 63,000 63,000
ZEBRA TECHNOLOGIES CORP-CL A 24,100 24,100
Mining & Energy
BJ SERVICES CO 81,700 81,700
CROSS TIMBER OIL CO 768,725 768,725
DIAMOND OFFSHORE DRILLING 130,000 130,000
FALCON DRILLING COMPANY INC 43,700 244,000 287,700
F-PORT MCMORAN COP & GOLD 200,000 200,000
HS RESOURCES INC 100,100 100,100
NOBLE DRILLING CORP 143,600 143,600
OCCIDENTAL PETROLEUM 122,200 122,200
PARKER DRILLING CO 356,200 356,200
PATTERSON ENERGY INC 140,000 140,000
PETROLEUM GEO SERVICES ADR 322,400 231,900 554,300
PRIDE PETROLEUM INTERNATIONAL 219,200 219,200
REALNETWORKS INC 20,400 20,400
RGS ENERGY GROUP INC 103,000 103,000
SOUTHWESTERN ENERGY COMPANY 140,000 140,000
TRANSOCEAN SEDCO FOREX INC 87,700 87,700
VECTREN CORPORATION 54,000 54,000
VERITAS DGC INC 131,900 131,900
VINTAGE PETROLEUM INC 176,800 176,800
Retail Trade
ABERCROMBIE & FITCH CO-CL A 140,500 140,500
BEST BUY INC 79,200 79,200
BJ'S WHOLESALE CLUB INC 122,500 122,500
BORDERS GROUP INC 290,000 290,000
BRINKER INTERNATIONAL INC 78,500 78,500
CEC ENTERTAINMENT INC 150,870 150,870
CIRCUIT CITY STORES INC 70,100 70,100
DOLLAR THRIFTY AUTOMOTIVE GP 41,100 41,100
FEDERATED DEPT STORES INC NEW 180,000 61,100 241,100
JACK IN THE BOX INC 64,800 64,800
MUSICLAND STORES CORP 92,300 92,300
ROSS STORES 75,400 209,800 285,200
SONIC CORP 42,000 42,000
TIMBERLAND COMPANY-CL A 12,000 12,000
TJX COMPANIES, INC 400,000 400,000
TRICON GLOBAL RESTAURANTS 114,200 114,200
WPS RESOURCES 34,100 34,100
ZALE CORP 36,100 26,100 62,200
Services
ADOBE SYSTEMS INC 32,300 32,300
ADVO INC 59,100 59,100
AFFILIATED COMPUTER SVCS INC-A 201,800 201,800
ANCHOR GAMING 38,800 38,800
BARRA INC 25,900 25,900
CINTAS CORP 117,500 117,500
COMDISCO INC 127,000 127,000
</TABLE>
<TABLE>
<CAPTION>
STEIN ROE LIBERTY LIBERTY
DISCIPLINED SMALL CAP SELECT PRO FORMA
STOCK PORT. VALUE FUND VALUE FUND COMBINED
MARKET VALUE MARKET VALUE MARKET VALUE MARKET VALUE
<S> <C> <C> <C> <C>
COMMON STOCKS
VICAL INC 843,150 843,150
VISHAY INTERTECHNOLOGY 6,009,300 6,009,300
VITESSE SEMICONDUCTOR CORP 5,303,856 5,303,856
W R GRACE & CO 1,611,413 2,291,625 3,903,038
WATERS CORPORATION 6,103,331 6,103,331
WATSON PHARMACEUTICALS 3,649,625 3,649,625
WEATHERFORD INTERNATIONAL 4,132,538 4,132,538
WESTVACO CORP 4,213,163 4,213,163
WHIRLPOOL CORP 2,410,513 2,410,513
WILLAMETTE IND INC 2,468,850 2,468,850
WINNEBAGO INDUSTRIES 534,256 534,256
WOLVERINE WORLD WIDE INC 5,391,750 5,391,750
WORTHINGTON INDUSTRIES 2,154,600 2,154,600
XILINIX INC 5,201,438 5,201,438
ZEBRA TECHNOLOGIES CORP-CL A 1,067,931 1,067,931
------------- ------------ ------------ --------------
228,498,628 162,391,894 297,574,612 688,465,135
------------- ------------ ------------ --------------
Mining & Energy
BJ SERVICES CO 5,106,250 5,106,250
CROSS TIMBER OIL CO 17,008,041 17,008,041
DIAMOND OFFSHORE DRILLING 4,566,250 4,566,250
FALCON DRILLING COMPANY INC 1,029,681 5,749,250 6,778,931
F-PORT MCMORAN COP & GOLD 1,850,000 1,850,000
HS RESOURCES INC 3,003,000 3,003,000
NOBLE DRILLING CORP 5,914,525 5,914,525
OCCIDENTAL PETROLEUM 2,573,838 2,573,838
PARKER DRILLING CO 2,203,988 2,203,988
PATTERSON ENERGY INC 3,990,000 3,990,000
PETROLEUM GEO SERVICES ADR 5,500,950 3,956,794 9,457,744
PRIDE PETROLEUM INTERNATIONAL 5,425,200 5,425,200
REALNETWORKS INC 1,031,475 1,031,475
RGS ENERGY GROUP INC 2,291,750 2,291,750
SOUTHWESTERN ENERGY COMPANY 875,000 875,000
TRANSOCEAN SEDCO FOREX INC 4,686,469 4,686,469
VECTREN CORPORATION 931,500 931,500
VERITAS DGC INC 3,429,400 3,429,400
VINTAGE PETROLEUM INC 3,989,050 3,989,050
------------- ------------ ------------ --------------
24,358,991 27,168,569 33,584,850 85,112,409
------------- ------------ ------------ --------------
Retail Trade
ABERCROMBIE & FITCH CO-CL A 1,712,344 1,712,344
BEST BUY INC 5,009,400 5,009,400
BJ'S WHOLESALE CLUB INC 4,042,500 4,042,500
BORDERS GROUP INC 4,513,125 4,513,125
BRINKER INTERNATIONAL INC 2,296,125 2,296,125
CEC ENTERTAINMENT INC 3,866,044 3,866,044
CIRCUIT CITY STORES INC 2,326,444 2,326,444
DOLLAR THRIFTY AUTOMOTIVE GP 757,781 757,781
FEDERATED DEPT STORES INC NEW 6,075,000 2,062,125 8,137,125
JACK IN THE BOX INC 1,595,700 1,595,700
MUSICLAND STORES CORP 686,481 686,481
ROSS STORES 1,286,513 3,579,713 4,866,225
SONIC CORP 1,233,750 1,233,750
TIMBERLAND COMPANY-CL A 849,750 849,750
TJX COMPANIES, INC 7,500,000 7,500,000
TRICON GLOBAL RESTAURANTS 3,226,150 3,226,150
WPS RESOURCES 1,025,131 1,025,131
ZALE CORP 1,317,650 952,650 2,270,300
------------- ------------ ------------ --------------
18,088,125 12,618,800 25,207,450 55,914,375
------------- ------------ ------------ --------------
Services
ADOBE SYSTEMS INC 4,199,000 4,199,000
ADVO INC 2,482,200 2,482,200
AFFILIATED COMPUTER SVCS INC-A 6,672,013 6,672,013
ANCHOR GAMING 1,859,975 1,859,975
BARRA INC 1,283,669 1,283,669
CINTAS CORP 4,310,781 4,310,781
COMDISCO INC 2,833,688 2,833,688
</TABLE>
<PAGE> 88
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
PRO FORMA COMBINED PORTFOLIO OF INVESTMENTS
AS OF JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
STEIN ROE
DISCIPLINED LIBERTY LIBERTY
STOCK SMALL CAP SELECT PRO FORMA
PORTFOLIO VALUE FUND VALUE FUND COMBINED
SHARES SHARES SHARES SHARES
<S> <C> <C> <C> <C>
COMMON STOCKS
CONVERGYS CORP 119,300 119,300
COVENTRY HEALTH CARE INC 107,800 107,800
CURATIVE HEALTH SERVICES INC 151,500 151,500
DENDRITE INTERNATIONAL INC 66,550 66,550
DEVRY INC 470,000 470,000
DST SYSTEMS INC 53,400 53,400
DUN & BRADSTREET CORP 91,800 91,800
ECCS INC 53,200 53,200
ESS TECHNOLOGY 35,800 35,800
FIRST HEALTH GROUP CORP 445,200 35,700 26,200 507,100
HALL KINION & ASSOCIATES INC 59,600 59,600
HARRAH'S ENTERTAINMENT INC 169,000 169,000
HEALTH MGMT SYSTEMS INC 175,000 175,000
HERTZ CORP-CL A 90,000 87,000 177,000
HOOPER HOLMES INC 98,200 98,200
IDEXX LABS INC 54,000 54,000
IMS HEALTH INC 91,400 91,400
INPRISE CORPORATION 94,100 94,100
INTERIM SERVICES INC 550,000 103,270 653,270
INTERPUBLIC GROUP COS INC 69,400 69,400
ISLE OF CAPRI CASINOS 118,200 118,200
JACOBS ENGINEERING GROUP INC 56,600 56,600
KRONOS INC 31,300 31,300
LINCARE HOLDINGS INC 121,300 121,300
MERCURY INTERACTIVE CORP 11,600 11,600
MICROS SYSTEMS INC 28,900 28,900
NATIONAL COMPUTER SYS INC 40,200 40,200
NATURAL MICROSYSTEMS CORP 9,500 9,500
NEOPHARM INC 40,000 40,000
OMNICOM GROUP 45,000 45,000
PACIFICARE HEALTH SYSTEMS - A 18,400 18,400
PARK PLACE ENTERTAINMENT 230,000 230,000
PAYCHEX INC 175,968 175,968
PITTSTON BRINKS GROUP 540,200 540,200
PORTAL SOFTWARE 29,700 29,700
PROGRESS SOFTWARE CORP 71,800 71,800
QUEST DIAGNOSTICS 53,300 53,300
REHABCARE GROUP INC 139,600 139,600
REMEDY CORP 12,900 12,900
RENT-A-CENTER INC 73,300 73,300
ROBERT HALF INTL INC 50,200 50,200
RSA SECURITY INC 12,600 12,600
SALTON INC 13,700 13,700
SENSORMATIC ELECTRONICS CORP 36,300 36,300
SERENA SOFTWARE INC 29,700 29,700
SIEBEL SYSTEMS INC 29,900 29,900
SYBASE INC 107,500 107,500
SYMANTEC CORP 69,500 69,500
UNIVERSAL HEALTH SERVICES - B 28,600 28,600
USA NETWORKS INC 57,240 62,100 119,340
VERITAS SOFTWRE 49,600 49,600
WESTWOOD ONE INC 58,900 58,900
XTRA CORP 40,000 40,000
Transportation, Communications,
Electric, Gas and Sanitary Services
ADVANCED FIBRE COMMUNICATION 34,500 34,500
ALLEGHENY ENERGY IN COM 158,500 158,500
ALPHA INDUSTRIES INC 26,400 26,400
AMR CORP 120,000 120,000
ARCH COMMUNICATIONS GROUP 120,000 120,000
ARKANSAS BEST CORP 135,900 135,900
AVIS GROUP HOLDINGS INC 92,900 92,900
BELL ATLANTIC CORP 125,000 125,000
BOSTON COMMUNICATIONS GROUP 84,200 84,200
CALPINE CORPORATION 92,000 92,000
CANADIAN PACIFIC LTD 104,500 104,500
CENTURYTEL INC 83,950 83,950
CHRIS-CRAFT INDUSTIRES INC 29,497 29,497
CIRCLE INTERNATIONAL 65,400 65,400
CITIZENS COMMUNICATIONS CO 45,800 45,800
CLEAR CHANNEL COMMUNICATIONS 20,000 20,000
</TABLE>
<TABLE>
<CAPTION>
STEIN ROE LIBERTY LIBERTY
DISCIPLINED SMALL CAP SELECT PRO FORMA
STOCK PORT. VALUE FUND VALUE FUND COMBINED
MARKET VALUE MARKET VALUE MARKET VALUE MARKET VALUE
<S> <C> <C> <C> <C>
COMMON STOCKS
CONVERGYS CORP 6,188,688 6,188,688
COVENTRY HEALTH CARE INC 1,436,772 1,436,772
CURATIVE HEALTH SERVICES INC 913,734 913,734
DENDRITE INTERNATIONAL INC 2,216,947 2,216,947
DEVRY INC 12,425,625 12,425,625
DST SYSTEMS INC 4,065,075 4,065,075
DUN & BRADSTREET CORP 2,627,775 2,627,775
ECCS INC 264,338 264,338
ESS TECHNOLOGY 519,100 519,100
FIRST HEALTH GROUP CORP 14,608,125 1,171,406 859,688 16,639,219
HALL KINION & ASSOCIATES INC 1,985,425 1,985,425
HARRAH'S ENTERTAINMENT INC 3,538,438 3,538,438
HEALTH MGMT SYSTEMS INC 546,875 546,875
HERTZ CORP-CL A 2,525,625 2,441,438 4,967,063
HOOPER HOLMES INC 785,600 785,600
IDEXX LABS INC 1,235,250 1,235,250
IMS HEALTH INC 1,645,200 1,645,200
INPRISE CORPORATION 576,363 576,363
INTERIM SERVICES INC 9,762,500 1,833,043 11,595,543
INTERPUBLIC GROUP COS INC 2,984,200 2,984,200
ISLE OF CAPRI CASINOS 1,603,088 1,603,088
JACOBS ENGINEERING GROUP INC 1,850,113 1,850,113
KRONOS INC 813,800 813,800
LINCARE HOLDINGS INC 2,987,013 2,987,013
MERCURY INTERACTIVE CORP 1,122,300 1,122,300
MICROS SYSTEMS INC 536,456 536,456
NATIONAL COMPUTER SYS INC 1,979,850 1,979,850
NATURAL MICROSYSTEMS CORP 1,068,156 1,068,156
NEOPHARM INC 784,375 784,375
OMNICOM GROUP 4,007,813 4,007,813
PACIFICARE HEALTH SYSTEMS - A 1,107,450 1,107,450
PARK PLACE ENTERTAINMENT 2,803,125 2,803,125
PAYCHEX INC 7,390,656 7,390,656
PITTSTON BRINKS GROUP 7,393,988 7,393,988
PORTAL SOFTWARE 1,897,088 1,897,088
PROGRESS SOFTWARE CORP 1,287,913 1,287,913
QUEST DIAGNOSTICS 3,814,281 3,814,281
REHABCARE GROUP INC 3,804,100 3,804,100
REMEDY CORP 719,175 719,175
RENT-A-CENTER INC 1,649,250 1,649,250
ROBERT HALF INTL INC 1,430,700 1,430,700
RSA SECURITY INC 872,550 872,550
SALTON INC 505,188 505,188
SENSORMATIC ELECTRONICS CORP 573,994 573,994
SERENA SOFTWARE INC 1,348,566 1,348,566
SIEBEL SYSTEMS INC 4,890,519 4,890,519
SYBASE INC 2,472,500 2,472,500
SYMANTEC CORP 3,748,656 3,748,656
UNIVERSAL HEALTH SERVICES - B 1,887,600 1,887,600
USA NETWORKS INC 1,237,815 1,342,913 2,580,728
VERITAS SOFTWRE 5,605,575 5,605,575
WESTWOOD ONE INC 2,009,963 2,009,963
XTRA CORP 1,577,500 1,577,500
------------- ------------ ------------ --------------
57,698,656 50,619,264 70,604,656 178,922,576
------------- ------------ ------------ --------------
Transportation, Communications,
Electric, Gas and Sanitary Services
ADVANCED FIBRE COMMUNICATION 1,563,281 1,563,281
ALLEGHENY ENERGY IN COM 4,338,938 4,338,938
ALPHA INDUSTRIES INC 1,163,250 1,163,250
AMR CORP 3,172,500 3,172,500
ARCH COMMUNICATIONS GROUP 780,000 780,000
ARKANSAS BEST CORP 1,350,506 1,350,506
AVIS GROUP HOLDINGS INC 1,741,875 1,741,875
BELL ATLANTIC CORP 6,351,563 6,351,563
BOSTON COMMUNICATIONS GROUP 1,178,800 1,178,800
CALPINE CORPORATION 6,049,000 6,049,000
CANADIAN PACIFIC LTD 2,736,594 2,736,594
CENTURYTEL INC 2,413,563 2,413,563
CHRIS-CRAFT INDUSTIRES INC 1,948,646 1,948,646
CIRCLE INTERNATIONAL 1,643,175 1,643,175
CITIZENS COMMUNICATIONS CO 790,050 790,050
CLEAR CHANNEL COMMUNICATIONS 1,500,000 1,500,000
</TABLE>
<PAGE> 89
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
PRO FORMA COMBINED PORTFOLIO OF INVESTMENTS
AS OF JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
STEIN ROE
DISCIPLINED LIBERTY LIBERTY
STOCK SMALL CAP SELECT PRO FORMA
PORTFOLIO VALUE FUND VALUE FUND COMBINED
SHARES SHARES SHARES SHARES
<S> <C> <C> <C> <C>
COMMON STOCKS
CMP GROUP INC 211,900 211,900
CNF TRANSPORTATION INC 24,000 155,700 179,700
COLUMBIA ENERGY GROUP 63,000 63,000
CONECTIV INC 276,200 276,200
CONTINENTAL AIRLINES CL B 100,000 100,000
COVAD COMMUNICATIONS GROUP 105,000 105,000
DELTA AIR LINES INC 92,900 92,900
DOMINION RESOURCES INC 31,531 31,531
EL PASO ENERGY CORP 150,000 84,500 234,500
ENERGEN CORP 117,900 117,900
ENERGY EAST CORPORATION 224,600 224,600
ENTERGY CORP 147,100 147,100
EXAR CORP 7,400 7,400
FLORIDA PROGRESS CORP 96,900 96,900
GETTHERE.COM INC 71,200 71,200
GPU INC 122,600 122,600
IDACORP INC 77,100 77,100
INCO LTD 216,000 216,000
KANSAS CITY SOUTHN INDS INC 155,000 155,000
LIGHTBRIDGE INC 51,500 51,500
METROCALL INC 75,800 75,800
MINNESOTA POWER INC 85,520 284,800 370,320
MIPS TECHNOLOGIES INC CL-B 3 3
NEXTLINK COMMUNICATIONS-A 87,000 87,000
NORTHEAST UTILITIES 97,000 97,000
</TABLE>
<TABLE>
<CAPTION>
STEIN ROE LIBERTY LIBERTY
DISCIPLINED SMALL CAP SELECT PRO FORMA
STOCK PORT. VALUE FUND VALUE FUND COMBINED
MARKET VALUE MARKET VALUE MARKET VALUE MARKET VALUE
<S> <C> <C> <C> <C>
COMMON STOCKS
CMP GROUP INC 6,211,319 6,211,319
CNF TRANSPORTATION INC 546,000 3,542,175 4,088,175
COLUMBIA ENERGY GROUP 4,134,375 4,134,375
CONECTIV INC 4,298,363 4,298,363
CONTINENTAL AIRLINES CL B 4,700,000 4,700,000
COVAD COMMUNICATIONS GROUP 1,693,125 1,693,125
DELTA AIR LINES INC 4,697,256 4,697,256
DOMINION RESOURCES INC 1,351,892 1,351,892
EL PASO ENERGY CORP 7,640,625 4,304,219 11,944,844
ENERGEN CORP 2,571,694 2,571,694
ENERGY EAST CORPORATION 4,281,438 4,281,438
ENTERGY CORP 3,999,281 3,999,281
EXAR CORP 645,188 645,188
FLORIDA PROGRESS CORP 4,542,188 4,542,188
GETTHERE.COM INC 752,050 752,050
GPU INC 3,317,863 3,317,863
IDACORP INC 2,486,475 2,486,475
INCO LTD 3,321,000 3,321,000
KANSAS CITY SOUTHN INDS INC 13,746,563 13,746,563
LIGHTBRIDGE INC 1,229,563 1,229,563
METROCALL INC 682,200 682,200
MINNESOTA POWER INC 1,480,565 4,930,600 6,411,165
MIPS TECHNOLOGIES INC CL-B 116 116
NEXTLINK COMMUNICATIONS-A 3,300,563 3,300,563
NORTHEAST UTILITIES 2,109,750 2,109,750
</TABLE>
<PAGE> 90
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
PRO FORMA COMBINED PORTFOLIO OF INVESTMENTS
AS OF JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
STEIN ROE
DISCIPLINED LIBERTY LIBERTY
STOCK SMALL CAP SELECT PRO FORMA
PORTFOLIO VALUE FUND VALUE FUND COMBINED
SHARES SHARES SHARES SHARES
<S> <C> <C> <C> <C>
COMMON STOCKS
NORTHWEST NATURAL GAS CO 112,000 112,000
NTL INC 23,375 23,375
NUI CORP 48,200 48,200
ODETICS INC-CL A 53,700 53,700
ONEOK INC 89,300 89,300
P G & E CORP 173,200 173,200
P P & L RESOURCES INC 142,400 142,400
PECO ENERGY CO 98,900 98,900
PEOPLES ENERGY CORP 75,000 75,000
PINNACLE HOLDINGS INC 9,500 9,500
PINNACLE WEST CAPITAL CORP 41,600 41,600
PMC-SIERRA INC 11,100 11,100
POTOMAC ELECTRIC POWER CO 87,100 87,100
POWERWAVE TECHNOLOGIES INC 29,400 26,400 55,800
PRICE COMMUNICATIONS CORP 56,500 56,500
PUBLIC SERVICE CO NEW MEX 125,800 125,800
PUBLIC SERVICE ENTER GROUP INC 80,600 80,600
PUGET SOUND ENERGY INC 103,700 103,700
RELIANT ENERGY INC 99,700 99,700
SEMPRA ENERGY 79,500 79,500
SIERRA PACIFIC RESOURCES 137,800 137,800
SKYWEST INC 47,800 47,800
TELEPHONE & DATA 143,000 48,000 191,000
TOLLGRADE COMMUNICATIONS INC 8,400 8,400
TRUE NORTH COMMUNICATIONS 37,900 37,900
TXU CORP 89,800 89,800
U G I CORP 127,600 127,600
UAL INC 39,400 39,400
UNICOM CORPORATION 142,000 142,000
UNITED ILLUMINATING CO 32,800 32,800
UNIVISION COMMUNICATIONS CL A 52,000 52,000
USFREIGHTWAYS CORPORATION 68,500 63,100 131,600
UTILICORP UNITED INC 129,100 129,100
Wholesale Trade
ANIXTER INTERNATIONAL INC 80,700 80,700
ARROW ELECTRONICS INC 238,800 43,300 282,100
BINDLEY WESTERN INDUSTRIES INC 74,800 74,800
BRIGHTPOINT INC 142,900 142,900
HANDLEMAN CO 72,000 72,000
OWENS & MINOR INC HLDG CO 130,100 130,100
PATTERSON DENTAL CO 30,210 86,350 116,560
RICHARDS ELEC LTD 83,300 83,300
SUIZA FOODS CORP 38,500 38,500
U.S. CAN CORPORATION 71,000 71,000
ULTRAMED 450,000 450,000
UNITED STATIONERS INC 91,900 91,900
Total Common Stocks
CORPORATE FIXED INCOME BONDS & NOTES
Finance, Insurance & Real Estate Par Par Par
IMPAC MORTGAGE HOLDINGS 11%, 2/15/04 $2,426,500 $ 2,426,500
SHORT-TERM OBLIGATIONS
ASSOCIATES FIRST CAPITAL 0.00% 7/3/2000 $23,665,000 23,665,000
RELIANT ENERGY-CP 0.00% 7/5/2000 23,600,000 23,600,000
WARBURG REPURCHASE AGREEMENT 7,628,000 $19,027,000 26,655,000
Total Short-Term Obligations
TOTAL INVESTMENTS
(COST OF $381,825,159, $379,406,041,
$606,431,283 AND $1,367,662,483,
RESPECTIVELY)
</TABLE>
<TABLE>
<CAPTION>
STEIN ROE LIBERTY LIBERTY
DISCIPLINED SMALL CAP SELECT PRO FORMA
STOCK PORT. VALUE FUND VALUE FUND COMBINED
MARKET VALUE MARKET VALUE MARKET VALUE MARKET VALUE
<S> <C> <C> <C> <C>
COMMON STOCKS
NORTHWEST NATURAL GAS CO 2,506,000 2,506,000
NTL INC 1,399,578 1,399,578
NUI CORP 1,301,400 1,301,400
ODETICS INC-CL A 778,650 778,650
ONEOK INC 2,316,219 2,316,219
P G & E CORP 4,265,050 4,265,050
P P & L RESOURCES INC 3,123,900 3,123,900
PECO ENERGY CO 3,986,906 3,986,906
PEOPLES ENERGY CORP 2,428,125 2,428,125
PINNACLE HOLDINGS INC 513,000 513,000
PINNACLE WEST CAPITAL CORP 1,409,200 1,409,200
PMC-SIERRA INC 1,972,331 1,972,331
POTOMAC ELECTRIC POWER CO 2,177,500 2,177,500
POWERWAVE TECHNOLOGIES INC 1,293,600 1,161,600 2,455,200
PRICE COMMUNICATIONS CORP 1,331,281 1,331,281
PUBLIC SERVICE CO NEW MEX 1,942,038 1,942,038
PUBLIC SERVICE ENTER GROUP INC 2,790,775 2,790,775
PUGET SOUND ENERGY INC 2,210,106 2,210,106
RELIANT ENERGY INC 2,947,381 2,947,381
SEMPRA ENERGY 1,351,500 1,351,500
SIERRA PACIFIC RESOURCES 1,731,113 1,731,113
SKYWEST INC 1,771,588 1,771,588
TELEPHONE & DATA 14,335,750 4,812,000 19,147,750
TOLLGRADE COMMUNICATIONS INC 1,113,000 1,113,000
TRUE NORTH COMMUNICATIONS 1,667,600 1,667,600
TXU CORP 2,649,100 2,649,100
U G I CORP 2,615,800 2,615,800
UAL INC 2,292,588 2,292,588
UNICOM CORPORATION 5,493,625 5,493,625
UNITED ILLUMINATING CO 1,435,000 1,435,000
UNIVISION COMMUNICATIONS CL A 5,382,000 5,382,000
USFREIGHTWAYS CORPORATION 1,682,531 1,549,894 3,232,425
UTILICORP UNITED INC 2,565,863 2,565,863
------------- ------------ ------------ --------------
51,447,116 50,024,759 128,069,897 229,541,771
------------- ------------ ------------ --------------
Wholesale Trade
ANIXTER INTERNATIONAL INC 2,138,550 2,138,550
ARROW ELECTRONICS INC 7,402,800 1,342,300 8,745,100
BINDLEY WESTERN INDUSTRIES INC 1,977,525 1,977,525
BRIGHTPOINT INC 1,236,978 1,236,978
HANDLEMAN CO 900,000 900,000
OWENS & MINOR INC HLDG CO 2,236,094 2,236,094
PATTERSON DENTAL CO 1,540,710 4,403,850 5,944,560
RICHARDS ELEC LTD 1,338,006 1,338,006
SUIZA FOODS CORP 1,881,688 1,881,688
U.S. CAN CORPORATION 1,233,625 1,233,625
ULTRAMED 0 0
UNITED STATIONERS INC 2,975,263 2,975,263
------------- ------------ ------------ --------------
7,402,800 17,458,438 5,746,150 30,607,388
------------- ------------ ------------ --------------
Total Common Stocks 434,593,234 396,907,063 691,054,177 1,522,554,474
------------- ------------ ------------ --------------
CORPORATE FIXED INCOME BONDS & NOTES
Finance, Insurance & Real Estate
IMPAC MORTGAGE HOLDINGS 11%, 2/15/04 1,941,200 1,941,200
------------ --------------
SHORT-TERM OBLIGATIONS
ASSOCIATES FIRST CAPITAL 0.00% 7/3/2000 23,655,863 23,655,863
RELIANT ENERGY-CP 0.00% 7/5/2000 23,580,989 23,580,989
WARBURG REPURCHASE AGREEMENT 7,628,000 19,027,000 26,655,000
------------- ------------ ------------ --------------
Total Short-Term Obligations 47,236,852 7,628,000 19,027,000 73,891,852
------------- ------------ ------------ --------------
TOTAL INVESTMENTS
(COST OF $381,825,159, $379,406,041,
$606,431,283 AND $1,367,662,483,
RESPECTIVELY) $ 481,830,086 $406,476,263 $710,081,177 $1,598,387,526
============= ============ ============ ==============
</TABLE>
No adjustments are shown to the unaudited pro forma combined portfolio of
investments due to the fact that upon consummation of the Acquisitions, no
securities would need to be sold in order for the Acquiring Fund to comply with
its Prospectus and SEC and IRS guidelines and restrictions. However, the
foregoing sentence shall not be deemed to restrict in any way the ability of the
investment advisor of any of the funds from buying or selling securities in the
normal course of such Fund's business and operations.
<PAGE> 91
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
PRO FORMA COMBINING CONDENSED STATEMENT OF ASSETS AND LIABILITIES
AS OF JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
Stein Roe Stein Roe
Disciplined Disciplined Liberty Liberty
Stock Stock Small Cap Select Value Pro Forma Pro Forma
Portfolio Fund Value Fund Fund Adjustments Combined
<S> <C> <C> <C> <C> <C> <C>
Investments, at value $481,830,086 $484,399,223 $406,476,263 $710,081,177 $(484,399,223)(a) $1,598,387,526
Cash - - - - - -
Receivable for investments sold - - - - - -
Payable for investments purchased - - - - - -
Other assets less other liabilities 2,731,499 (146,180) 9,931,124 (337,122) (677,500)(b) 11,501,821
Net assets $484,561,585 $484,253,043 $416,407,387 $709,744,055 $(485,076,723) $1,609,889,347
Shares outstanding 25,325,082 (25,325,082)(c) -
Net asset value $ 19.12
Class A:
Net assets $138,969,129 $388,214,593 (146,126) $ 527,037,596
Shares outstanding 4,268,643 17,372,786 1,943,752 23,585,181
Net asset value $ 32.56 $ 22.35 $ 22.35
Class B:
Net assets $238,607,222 $298,824,770 (215,846) $ 537,216,146
Shares outstanding 7,786,282 14,029,006 3,405,541 25,220,829
Net asset value $ 30.64 $ 21.30 $ 21.30
Class C:
Net assets $ 27,400,025 $ 21,661,061 (23,580) $ 49,037,506
Shares outstanding 869,870 991,551 383,307 2,244,728
Net asset value $ 31.50 $ 21.85 $ 21.85
Class Z:
Net assets $ 11,431,011 $ 1,043,631 (9,076) $ 12,465,566
Shares outstanding 346,276 46,541 163,088 555,905
Net asset value $ 33.01 $ 22.42 $ 22.42
Class S:
Net assets (120,510) $ 484,132,533
Shares outstanding 21,590,018 (c) 21,590,018
Net asset value $ 22.42
</TABLE>
Footnotes to pro forma statement of assets and liabilities
(a) - Adjustment represents the elimination of Stein Roe Disciplined Stock
Fund's investment in the Portfolio, as the master/feeder structure will be
dissolved, with the securities held by the Portfolio withdrawn from the
Portfolio by Stein Roe Disciplined Stock Fund prior to the merger.
(b) - Adjustment reflects a payable to the general partner of the Portfolio
for its remaining net assets after withdrawal of Stein Roe Disciplined
Stock Fund's investment in the Portfolio of $162,362 in addition to one
time proxy, accounting, legal and other costs of the reorganization of
$120,510, $326,983 and $67,645 to be borne by the Disciplined Stock Fund,
the Small Cap Fund and the Select Value Fund respectively. These costs
reflect each fund's share of the total costs of the reorganization that
will be shared between Liberty Financial and the Funds, subject to the
terms of each Agreement and Plan of Reorganization, as follows:
<TABLE>
<CAPTION>
Liberty Financial Fund
----------------- ----
<S> <C> <C>
Stein Roe Disciplined Stock Fund 25% 75%
Liberty Small-Cap Value Fund 25% 75%
Liberty Select Value Fund 50% 50%
</TABLE>
The Funds will bear their full portion of the one time costs of the
reorganization only if the expense reduction experienced as a result of the
Acquisition in the first year after Acquisition Date exceeds the one time costs.
If the one time costs exceed the expense reduction, the Fund will only bear the
share of its portion up to the amount of the expense reduction.
(c) - Stein Roe Disciplined Stock Fund shares are exchanged for new Class S
shares of Liberty Select Value Fund, to be established upon consummation
of the merger. Initial per share value of Class S shares is presumed to
equal that of current Class Z shares.
<PAGE> 92
PRO FORMA COMBINING CONDENSED STATEMENT OF OPERATIONS FOR THE TWELVE
MONTH PERIOD ENDED JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
STEIN ROE STEIN ROE LIBERTY LIBERTY
DISCIPLINED DISCIPLINED SMALL CAP SELECT PRO FORMA PRO FORMA
STOCK PORTFOLIO STOCK FUND FUND VALUE ADJUSTMENTS COMBINED
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends 5,893,642 5,821,792 4,583,067 8,174,225 (5,893,642)(c) 18,579,083
Interest 3,064,826 3,133,889 1,187,526 1,184,633 (3,064,826)(c) 5,506,048
--------------- ----------- ----------- ----------- ----------- ------------
Total investment income 8,958,468 8,955,680 5,770,592 9,358,859 (8,958,468) 24,085,131
EXPENSES
Management fee 4,167,035 - 3,988,196 5,223,265 (1,188,359)(a) 12,190,137
Administration fee - 830,666 - - (830,666)(a) -
Service fee - Class A, B, C - - 1,214,205 1,861,867 - (a) 3,076,072
Distribution fee - Class B - - 1,974,223 2,384,795 - (a) 4,359,018
Distribution fee - Class C - - 229,724 164,376 - (a) 394,100
Transfer agent fee 6,000 1,218,310 1,323,581 1,620,653 (751,427)(d) 3,417,117
Bookkeeping fee 37,640 37,594 183,984 270,663 29,240 (a) 559,121
Trustees fee 12,900 8,100 20,766 28,901 (7,261)(b) 63,406
Expenses allocated from
Stein Roe Disciplined Stock
Portfolio 4,249,412 - (4,249,412)(c) -
All other expenses 25,837 407,666 669,140 884,431 (881,535)(e) 1,105,539
--------------- ----------- ----------- ----------- ----------- ------------
Total operating expenses 4,249,412 6,751,748 9,603,819 12,438,951 (7,879,420) 25,164,510
--------------- ----------- ----------- ----------- ----------- ------------
Expense reimbursement - - - - - -
--------------- ----------- ----------- ----------- ----------- ------------
Net Expenses 4,249,412 6,751,748 9,603,819 12,438,951 (7,879,420) 25,164,510
NET INVESTMENT INCOME (LOSS) 4,709,056 2,203,932 (3,833,227) (3,080,092) (1,079,048) (1,079,379)
NET REALIZED & UNREALIZED GAIN (LOSS)
Net realized gain on:
Investments 26,447,704 27,136,826 83,353,135 113,063,056 (26,447,704)(c) 223,553,017
Closed futures contracts - - - - - -
Foreign currency transactions (0) 0 - (1) - (1)
--------------- ----------- ----------- ----------- ----------- ------------
Net Realized Gain 26,447,704 27,136,827 83,353,135 113,063,055 (26,447,704) 223,553,016
Change in net unrealized
appreciation/depreciation
during the period on:
Investments (35,970,362) (36,662,338) (55,231,387) (57,406,602) 35,970,362 (c) (149,300,327)
Open futures contracts - - - - - -
Foreign currency transactions (2,334) - - 424 2,334 (c) 424
--------------- ----------- ----------- ----------- ----------- ------------
Net Change in Unrealized
Appreciation/Depreciation (35,972,696) (36,662,338) (55,231,387) (57,406,178) 35,972,696 (149,299,903)
--------------- ----------- ----------- ----------- ----------- ------------
Net Gain(Loss) (9,524,993) (9,525,512) 28,121,748 55,656,877 9,524,992 74,253,113
--------------- ----------- ----------- ----------- ----------- ------------
Increase (Decrease) in Net Assets
from Operations (4,815,937) (7,321,580) 24,288,521 52,576,785 8,445,945 73,173,735
</TABLE>
(a) Based on contract in effect for the surviving fund.
(b) Based on trustee compensation plan for the surviving fund.
(c) Decrease due to elimination of master/feeder structure.
(d) Based on the contract in effect for the surviving Fund. Note that a new
transfer agent fee structure was implemented for Liberty Select Value Fund
effective January 1, 2000. The pro forma combined transfer agent fee shown
assumes this new arrangement was in effect for the entire twelve-month
period ended June 30, 2000.
(e) Decrease due to the elimination of duplicative expenses achieved by merging
the funds.
NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 2000
(1.) These financial statements set forth the unaudited pro forma condensed
statement of assets and liabilities, including the portfolio of investments, as
of June 30, 2000, and the unaudited pro forma condensed statement of operations
for the twelve month period ended June 30, 2000 for SR&F Disciplined Stock
Portfolio, Stein Roe Disciplined Stock Fund, Liberty Small-Cap Value Fund and
Liberty Select Value Fund as adjusted giving effect to the Acquisition as if it
had occurred as of the beginning of the period. These statements have been
derived from the books and records utilized in calculating daily net asset value
for each fund.
<PAGE> 93
[Liberty Logo] LIBERTY
LIBERTY FUNDS SERVICES, INC.
LIBERTY SMALL-CAP VALUE FUND
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN AND, ABSENT DIRECTION, WILL BE VOTED FOR EACH ITEM
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 ITEMS:
1. To approve or disapprove the Agreement and Plan of Reorganization
with respect to the acquisition of Liberty Small-Cap Value Fund by
Liberty Select Value Fund Fund (Item 2 of the Notice).
For Against Abstain
[ ] [ ] [ ]
2. To elect eleven Trustees (Item 4 of the Notice).
(01) Douglas A. Hacker
(02) Janet Langford Kelly
(03) Richard W. Lowry
(04) Salvatore Macera
(05) William E. Mayer
(06) Charles R. Nelson
(07) John J. Neuhauser
(08) Joseph R. Palombo
(09) Thomas E. Stitzel
(10) Thomas C. Theobald
(11) Anne-Lee Verville
For
All For All
Nominees Withheld Except
[ ] [ ] [ ]
Instruction: To withhold authority to vote for any individual
nominee(s), mark the "For All Except" box and strike a line through the
name(s) of the nominee(s). Your shares will be voted for the remaining
nominee(s).
MARK BOX AT RIGHT FOR ADDRESS CHANGE
AND NOTE AT LEFT [ ]
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
Detach Card
<PAGE> 94
[Liberty Logo] LIBERTY
LIBERTY FUNDS SERVICES, INC.
STEIN ROE DISCIPLINED STOCK FUND
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN AND, ABSENT DIRECTION, WILL BE VOTED FOR EACH ITEM 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 ITEMS:
1. To approve or disapprove the Agreement and Plan of Reorganization
with respect to the acquisition of Stein Roe Disciplined Stock Fund by
Liberty Select Value Fund Fund (Item 1 of the Notice).
For Against Abstain
[ ] [ ] [ ]
2. To elect eleven Trustees (Item 3 of the Notice).
(01) Douglas A. Hacker
(02) Janet Langford Kelly
(03) Richard W. Lowry
(04) Salvatore Macera
(05) William E. Mayer
(06) Charles R. Nelson
(07) John J. Neuhauser
(08) Joseph R. Palombo
(09) Thomas E. Stitzel
(10) Thomas C. Theobald
(11) Anne-Lee Verville
For
All For All
Nominees Withheld Except
[ ] [ ] [ ]
Instruction: To withhold authority to vote for any individual
nominee(s), mark the "For All Except" box and strike a line through the
name(s) of the nominee(s). Your shares will be voted for the remaining
nominee(s).
3. To authorize the Fund to cast votes for the same nominees for whom
you voted above for the election of a Board of Trustees of SR&F Base
Trust (Item 3 of the Notice).
For Against Abstain
[ ] [ ] [ ]
MARK BOX AT RIGHT FOR ADDRESS CHANGE
AND NOTE AT LEFT [ ]
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
Detach Card
<PAGE> 95
PLEASE VOTE PROMPTLY
*********************************
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.
<PAGE> 96
Two Convenient Ways to Vote Your Proxy
The enclosed proxy statement provides details on important issues affecting
your Stein Roe Funds. The Board of Trustees recommends that you vote for all
proposals. We are offering two additional ways to vote: by telephone or fax.
These methods may be faster and more convenient than the traditional method of
mailing back your proxy card.
If you are voting by telephone or fax, you SHOULD NOT mail your proxy card.
Vote by Telephone:
- Read the proxy statement and have your proxy card available.
- When you are ready to vote, call toll free 1-877-518-9416 between
9:00 a.m. and 11:00 p.m. EST.
- Follow the instructions provided to cast your vote. A representative
will be available to answer questions.
Vote by Fax:
- Read the proxy statement.
- Complete the enclosed proxy card.
- Fax your proxy card to 1-800-733-1885.
YOUR PROXY VOTE IS IMPORTANT!
SHM-43/622D-1000 (11/00) 00/2024
<PAGE> 97
Two Convenient Ways to Vote Your Proxy
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 additional ways to vote: by telephone or fax.
These methods may be faster and more convenient than the traditional method of
mailing back your proxy card.
If you are voting by telephone or fax, you SHOULD NOT mail your proxy card.
Vote by Telephone:
* Read the proxy statement and have your proxy card available.
* When you are ready to vote, call toll free 1-877-518-9416
between 9:00 a.m. and 11:00 p.m. EST.
* Follow the instructions provided to cast your vote. A
representative will be available to answer questions.
Vote by Fax:
* Read the proxy statement.
* Complete the enclosed proxy card.
* Fax your proxy card to 1-800-733-1885.
YOUR PROXY VOTE IS IMPORTANT!
SHM-43/623D-1000 (11/00) 00/2027
