As filed with the Securities and Exchange Commission on October 11, 2000
Registration No. 33-
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM N-14
- -
|_|Pre-Effective Amendment No.__ |_| Post-Effective Amendment No.__
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
-------------------------
LIBERTY FUNDS TRUST III*
(Exact Name of Registrant as Specified in Charter)
617-426-3750
(Area Code and Telephone Number)
ONE FINANCIAL CENTER, BOSTON, MASSACHUSETTS 02111
(Address of Principal Executive Offices)
-------------------------
WILLIAM J. BALLOU
Liberty Funds Group LLC
One Financial Center
Boston, Massachusetts 02111
(Name and Address of Agents for Service)
-------------------------
Approximate Date of Proposed Public Offering: As soon as practicable after this
Registration Statement becomes effective.
-------------------------
It is proposed that this filing will become effective on November 10, 2000
pursuant to Rule 488.
-------------------------
No filing fee is required because an indefinite number of shares have previously
been registered pursuant to Rule 24f-2 under the Investment Company Act of 1940,
as amended. Pursuant to Rule 429 under the Securities Act of 1933, this
Registration Statement relates to shares previously registered on the aforesaid
Registration Statement.
*On behalf of its Liberty Newport Global Utilities Fund series.
<PAGE>
LIBERTY MUTUAL FUNDS
STEIN ROE MUTUAL FUNDS
ONE FINANCIAL CENTER, BOSTON, MASSACHUSETTS 02111
Dear Shareholder:
Your Fund will hold a special meeting on December 19, 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 few
pages, 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 and rationalizing the product offerings of the
Liberty and Stein Roe Funds, reducing fund expense ratios by creating larger,
more efficient funds and permitting the Liberty organization to focus 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 AT OUR WEB SITE, BY MAIL, BY FAX (NOT AVAILABLE FOR ALL
SHAREHOLDERS; REFER TO ENCLOSED PROXY INSERT), BY PHONE OR IN PERSON. TO VOTE
THROUGH OUR WEB SITE, JUST FOLLOW THE SIMPLE INSTRUCTIONS THAT APPEAR ON THE
ENCLOSED PROXY INSERT. A SELF-ADDRESSED, POSTAGE-PAID ENVELOPE HAS BEEN ENCLOSED
FOR YOUR CONVENIENCE. PLEASE HELP YOUR FUND AVOID THE EXPENSE OF A FOLLOW-UP
MAILING BY VOTING TODAY!
Your Fund is using Shareholder Communications Corporation ("SCC"), a
professional proxy solicitation firm, to assist shareholders in the voting
process. As the date of the special meeting approaches, if we have not yet
received your vote, you may receive a telephone call from SCC reminding you to
exercise your right to vote.
Please take a few moments to review the details of each proposal. If you have
any questions regarding the 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
[Job Code]
<PAGE>
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD
DECEMBER 19, 2000
LIBERTY FUNDS TRUST III
ONE FINANCIAL CENTER, BOSTON, MASSACHUSETTS 02111
LIBERTY NEWPORT GLOBAL EQUITY FUND
NOTICE IS HEREBY GIVEN that a Special Meeting of the shareholders of
the Liberty Newport Global Equity Fund will be held at 10:00 a.m. on Tuesday,
December 19, 2000, at the offices of Colonial Management Associates, Inc., the
Liberty Newport Global Equity Fund's advisor, One Financial Center, Boston,
Massachusetts 02111 for these purposes:
1. To approve an Agreement and Plan of Reorganization
providing for the sale of all of the assets of the Liberty
Newport Global Equity Fund to, and the assumption of all
of the liabilities of the Liberty Newport Global Equity
Fund by, the Liberty Newport Global Utilities Fund in
exchange for shares of the Liberty Newport Global
Utilities Fund and the distribution of such shares to the
shareholders of the Liberty Newport Global Equity Fund in
complete liquidation of the Liberty Newport Global Equity
Fund.
2. To elect eleven Trustees.
3. To consider and act upon any other matters that properly
come before the meeting and any adjourned session of the
meeting.
Shareholders of record at the close of business on September 29,
2000, are entitled to notice of and to vote at the meeting and any adjourned
session.
By order of the Board of Trustees,
William J. Ballou, Assistant Secretary
November 8, 2000
NOTICE: YOUR VOTE IS IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
YOU CAN VOTE EASILY AND QUICKLY AT OUR WEB SITE, BY PHONE, BY MAIL,
BY FAX (NOT AVAILABLE FOR ALL SHAREHOLDERS; REFER TO ENCLOSED PROXY
INSERT) OR IN PERSON. TO VOTE THROUGH OUR WEB SITE, JUST FOLLOW THE
SIMPLE INSTRUCTIONS THAT APPEAR ON THE ENCLOSED PROXY INSERT. PLEASE
HELP YOUR FUND AVOID THE EXPENSE OF A FOLLOW-UP MAILING BY VOTING
TODAY!
<PAGE>
COMBINED PROSPECTUS AND PROXY STATEMENT
NOVEMBER 17, 2000
ACQUISITION OF THE ASSETS AND LIABILITIES OF
LIBERTY NEWPORT GLOBAL EQUITY FUND
c/o Liberty Funds Trust III
One Financial Center
Boston, Massachusetts 02111
1-800-426-3750
BY AND IN EXCHANGE FOR SHARES OF
LIBERTY NEWPORT GLOBAL UTILITIES FUND
c/o Liberty Funds Trust III
One Financial Center
Boston, Massachusetts 02111
1-800-426-3750
TABLE OF CONTENTS
Synopsis..................................................................
Proposal 1 - Acquisition of the Liberty Newport Global Equity Fund by
the Liberty Newport Global Utilities Fund....................
Principal Investment Risks.............................................
Information about the Acquisition......................................
Proposal 2 - Election of Trustees.........................................
General...................................................................
Voting Information.....................................................
Appendix A - Agreement and Plan of Reorganization.........................
Appendix B - Fund Information.............................................
Appendix C - Capitalization...............................................
Appendix D - Management's Discussion of Fund Performance for the Liberty
Newport Global Utilities Fund..........................
This combined Prospectus/Proxy Statement contains information you should
know before voting on the proposed acquisition of the Liberty Newport Global
Equity Fund (the "Global Equity Fund") by the Liberty Newport Global Utilities
Fund (the "Global Utilities Fund") or voting on the other proposals to be
considered at a Special Meeting of Shareholders of the Global Equity Fund (the
"Meeting"), which will be held at 10:00 a.m. Eastern Time on December 19, 2000,
at the offices of Colonial Management Associates, Inc. ("Colonial"), One
Financial Center, Boston, Massachusetts 02111. 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 Global Equity Fund by the Global Utilities Fund (the
"Acquisition"). If the
<PAGE>
Acquisition occurs, you will become a shareholder of the Global Utilities Fund.
The Global Utilities Fund seeks long-term growth of capital and income and
current income. If the Agreement and Plan of Reorganization is approved by the
shareholders of the Global Equity Fund and the Acquisition occurs, the Global
Equity Fund will transfer all of the assets and liabilities attributable to each
class of its shares to the Global Utilities Fund in exchange for shares of the
same class with the same aggregate net asset value as the assets and liabilities
transferred. After that exchange, shares of each class received by the Global
Equity Fund will be distributed pro rata to its shareholders of the same class.
After the Acquisition, the Global Utilities Fund expects to change its name to
"Liberty Newport Global Equity Fund."
Proposal 2 in this Prospectus/Proxy Statement relates to the election of
Trustees of Liberty Funds Trust III ("the Board of Trustees of Trust III"), of
which the Global Equity Fund is a series.
Please review the enclosed Prospectus of the Global Utilities Fund. 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 Global Equity Fund dated March 1, 2000, as
supplemented on June 5, 2000, June 23, 2000 and August 1, 2000.
- The Statement of Additional Information of the Global Equity Fund
dated March 1, 2000, as supplemented on June 5, 2000, June 23, 2000
and August 21, 2000.
- The Statement of Additional Information of the Global Utilities Fund
dated March 1, 2000, as supplemented on June 5, 2000, June 23, 2000
and August 21, 2000.
- The Report of Independent Accountants and financial statements
included in the Annual Report to Shareholders of the Global Equity
Fund dated October 31, 1999.
- The financial statements included in the Global Equity Fund's
Semi-Annual Report to Shareholders dated April 30, 2000.
- The Statement of Additional Information of the Global Utilities Fund
dated November 17, 2000 relating to the Acquisition.
The Global Equity Fund has previously sent its Annual and Semi-Annual
Reports to its shareholders. For a free copy of these Reports or any of the
documents listed above, please call 1-800-426-3750 or write to your Fund at One
Financial Center, Boston, Massachusetts 02111. You may also obtain many of these
documents by accessing our web site at www.libertyfunds.com. Our hearing
impaired shareholders may call Liberty Funds Services, Inc. at 1-800-528-6979 if
you have special TTD equipment. Text-only versions of all the Global Equity Fund
and Global Utilities Fund documents can be viewed online or downloaded from the
Edgar database on the SEC's
- 2 -
<PAGE>
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 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 SEC HAS NOT APPROVED OR DISAPPROVED THE SHARES OF THE GLOBAL UTILITIES
FUND OR DETERMINED WHETHER THIS PROSPECTUS/PROXY STATEMENT IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-3-
<PAGE>
SYNOPSIS
THE FOLLOWING QUESTIONS AND RESPONSES PROVIDE AN OVERVIEW OF KEY FEATURES
OF THE ACQUISITION AND OF THE OTHER MATTERS TO BE CONSIDERED AT THE
MEETING AND OF THE INFORMATION CONTAINED IN THIS COMBINED PROSPECTUS/PROXY
STATEMENT. PLEASE REVIEW THE FULL PROSPECTUS/PROXY STATEMENT PRIOR TO
CASTING YOUR VOTE, AS THIS SECTION IS ONLY A
SYNOPSIS OF THE COMPLETE DOCUMENT.
1. WHAT IS BEING PROPOSED?
First, the Trustees of the Funds are recommending in Proposal 1 that the
Global Utilities Fund acquire the Global Equity Fund. This means that the
Global Utilities Fund would acquire all of the assets and liabilities of
the Global Equity Fund in exchange for shares of the Global Utilities Fund
representing the aggregate net asset value of Global Equity Fund's assets
and liabilities. If Proposal 1 is approved, you will receive shares of the
Global Utilities Fund with an aggregate net asset value equal to the
aggregate net asset value of your Acquired Fund shares as of the day
before the closing of the Acquisition. The Acquisition is currently
scheduled to take place on or around January 29, 2001.
In addition, the Trustees of the Global Equity Fund are recommending in
Proposal 2 that you vote in favor of eleven nominees for Trustees.
2. WHY IS THE ACQUISITION BEING PROPOSED?
The Trustees of the Global Equity Fund recommend approval of the
Acquisition because it offers shareholders of the Fund an investment in a
fund with similar investment goals and the economies of scale of a larger
fund including a reduction in the fees and expenses of the Global Equity
Fund. Please review "Reasons for the Acquisition" in Proposal 1 of this
Prospectus/Proxy Statement for a full description of the factors
considered by the Trustees.
3. WHAT CLASS OF SHARES WILL YOU RECEIVE IN THE GLOBAL UTILITIES FUND IF THE
ACQUISITION OCCURS?
You will receive the same class of shares that you currently own in the
Global Equity 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.
-4-
<PAGE>
4. HOW DO THE INVESTMENT GOALS, STRATEGIES AND POLICIES OF THE GLOBAL EQUITY
FUND AND THE GLOBAL UTILITIES FUND COMPARE?
This table shows the current investment goals and primary investment
strategies of each Fund:
<TABLE>
<CAPTION>
-----------------------------------------------------------------
THE GLOBAL EQUITY FUND THE GLOBAL UTILITIES FUND
-----------------------------------------------------------------
<S> <C>
INVESTMENT GOAL: The Global INVESTMENT GOALS: The Global
Equity Fund seeks long-term Utilities Fund seeks long-term
growth by investing primarily growth of capital and income
in global equities. and current income.
-----------------------------------------------------------------
PRIMARY INVESTMENT STRATEGIES: PRIMARY INVESTMENT STRATEGIES:
The Global Equity Fund seeks The Global Utilities Fund
to achieve its goal as seeks to achieve its goals as
follows: follows:
- The Fund invests at - The Fund invests at
least 65% of total assets least 65% of its total
in U.S. and foreign equity assets in U.S. and foreign
securities. securities of utility
- The Fund generally will companies.
have exposure to at least - The Fund has exposure to
three countries, including at least three countries,
the U.S. including the U.S.
- The Fund will invest in - The Fund invests
other investment companies. primarily in stocks of
larger utility companies
with established records.
- Up to 35% of the Fund's total assets may
be invested in equity securities and
investment-grade debt securities that
are not issued by utility companies.
-----------------------------------------------------------------
</TABLE>
The current investment policies of the Global Equity Fund and the
Global Utilities Fund are similar, except as follows:
- The Global Equity Fund, unlike the Global Utilities Fund, is
permitted to have short securities positions when the Fund owns,
or owns rights (exercisable without payment) to acquire, an equal
amount of such securities.
- The Global Equity Fund is not permitted to invest more than 25% of
its total assets in any one industry, while the Global Utilities
Fund is permitted to invest without limit in the securities of
companies in the public utilities industry.
- The Global Utilities Fund, unlike the Global Equity Fund, is not
permitted to purchase or sell interests in oil, gas or mineral
leases, commodities or commodity contracts.
-5-
<PAGE>
After the Acquisition, the Global Utilities Fund expects to change its
investment program, strategies and policies to invest under normal market
conditions at least 50% of its total assets (rather than 65% of its total
assets currently) in U.S. and foreign securities of utility companies. The
Fund's investment advisor intends to diversify the Fund's investments
among a number of developed countries and market sectors and will have
exposure to at least three countries, including the U.S. After the
Acquisition, up to 50% of the Global Utilities Fund's total assets (rather
than 65% of its total assets currently) may be invested in equity
securities and investment-grade debt securities that are not issued by
utility companies.
In addition, as described in "Proposal 1 - Information about the New
Management Agreement," the shareholders of the Global Utilities Fund will
meet to vote on a new management agreement between the Fund and Newport
Fund Management, Inc. Please see that section for a description of the New
Management Agreement and the management of the Global Utilities Fund after
the Acquisition.
5. HOW DO THE MANAGEMENT FEES AND EXPENSES OF THE FUNDS COMPARE AND WHAT ARE
THEY ESTIMATED TO BE FOLLOWING THE ACQUISITION?
The following tables allow you to compare the sales charges and management
fees and expenses of the Global Equity Fund and the Global Utilities Fund
and to analyze the estimated expenses that Stein Roe & Farnham
Incorporated ("Stein Roe"), the Global Utilities Fund's investment
advisor, expects the combined fund to bear in the first year following the
Acquisition. Sales charges are paid directly by shareholders to Liberty
Funds Distributor, Inc., each Fund's distributor. Annual Fund Operating
Expenses are deducted from the Fund. They include management and
administration fees, 12b-1 fees and administrative costs, including
pricing and custody services. The Annual Fund Operating Expenses shown in
the table below represent expenses incurred by each Fund for its last
fiscal year ended October 31, 1999.
SHAREHOLDER FEES(1)
(paid directly from your investment)
<TABLE>
<CAPTION>
GLOBAL EQUITY FUND GLOBAL UTILITIES FUND
----------------------- ---------------------
CLASS CLASS CLASS CLASS CLASS CLASS
A B C A B C
<S> <C> <C> <C> <C> <C> <C>
Maximum sales charge
(load) on purchases
(%) (as a percentage
of the offering price) 5.75 0.00 0.00 5.75 0.00 0.00
--------------------------------------------------------------- --------
Maximum deferred
sales charge (load)
on redemptions (%)
(as a percentage of
the lesser of
purchase price or
redemption price) 1.00(2) 5.00 1.00 1.00(2) 5.00 1.00
--------------------------------------------------------------- --------
Redemption fee (%)
(as a percentage of
amount redeemed, if
applicable) (3) (3) (3) (3) (3) (3)
</TABLE>
--------
(1) A $10 annual fee is deducted from accounts of less than $1,000 and paid
to the transfer agent.
(2) This charge applies only to certain Class A shares bought without an
initial sales charge that are sold within 18 months of purchase.
(3) There is a $7.50 charge for wiring sale proceeds to your bank.
ANNUAL FUND OPERATING EXPENSES
(deducted directly from Fund assets)
<TABLE>
<CAPTION>
GLOBAL EQUITY FUND GLOBAL UTILITIES FUND
------------------- ---------------------
CLASS CLASS CLASS CLASS CLASS CLASS
A B C A B C
<S> <C> <C> <C> <C> <C> <C>
Management fee(4) (%) 0.95 0.95 0.95 0.65 0.65 0.65
-----------------------------------------------------------------
Distribution and
service (12b-1) fees
(%) 0.25 1.00 1.00 0.25 1.00 1.00
-----------------------------------------------------------------
Other expenses (%) 0.55 0.55 0.55 0.42 0.42 0.42
-----------------------------------------------------------------
Total annual fund
operating expenses(4)
(%) 1.75 2.50 2.50 1.32 2.07 2.07
</TABLE>
-6-
<PAGE>
<TABLE>
<CAPTION>
GLOBAL UTILITIES FUND
---------------------------
(PRO FORMA COMBINED)
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Management fee (%) 0.65 0.65 0.65
------------------------------------------------------
Distribution and
service (12b-1) fees 0.25 1.00 1.00
(%)
------------------------------------------------------
Other expenses (%) 0.42 0.42 0.42
------------------------------------------------------
Total annual fund
operating expenses (%) 1.32 2.07 2.07
</TABLE>
--------
(4) The Global Equity Fund's advisor has voluntarily agreed to waive advisory
fees and reimburse the Fund for certain expenses so that the total annual
fund operating expenses (exclusive of distribution and service fees,
brokerage commissions, interest, taxes and extraordinary expenses, if any)
will not exceed 1.40%. As a result, the actual management fee for each
share class would be 0.85% and total annual fund operating expenses for
Class A, B and C shares would be 1.65%, 2.40% and 2.40%, respectively. This
arrangement may be modified or terminated by the advisor at any time.
EXAMPLE EXPENSES
Example Expenses help you compare the cost of investing in the Global Equity
Fund and the Global Utilities 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. The table does not take into account
any expense reduction arrangements discussed in the footnotes to the Annual Fund
Operating Expenses table. It uses the following hypothetical conditions:
- $10,000 initial investment
- 5% total return for each year
- 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>
GLOBAL EQUITY FUND
Class A $743 $1,094 $1,469 $2,519
Class B: did not sell
your shares $253 $779 $1,331 $2,652
Sold all your
Shares at end of
period $753 $1,079 $1,531 $2,652
Class C: did not sell
your shares $253 $779 $1,331 $2,836
Sold all your
shares at end of
period $353 $779 $1,331 $2,836
GLOBAL UTILITIES 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
GLOBAL UTILITIES FUND
(pro forma combined)
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
</TABLE>
-7-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
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
</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) certain fixed costs involved in operating the Global Equity
Fund are eliminated; and (3) expense ratios are based on pro forma combined
average net assets for the twelve months ended April 30, 2000.
6. WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE ACQUISITION?
The 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 Global
Equity Fund or its shareholders as a result of the Acquisition.
The cost basis and holding period of your Global Equity Fund shares are
expected to carry over to your new shares in the Global Utilities Fund.
-8-
<PAGE>
PROPOSAL 1 - ACQUISITION OF THE LIBERTY NEWPORT GLOBAL EQUITY FUND BY THE
LIBERTY NEWPORT GLOBAL UTILITIES 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 the Prospectus/Proxy Statement. By approving the
Agreement and Plan of Reorganization, you are also approving the Acquisition of
the Global Equity Fund by the Global Utilities Fund under the Agreement and Plan
of Reorganization.
PRINCIPAL INVESTMENT RISKS
WHAT ARE THE PRINCIPAL INVESTMENT RISKS OF THE GLOBAL UTILITIES FUND, AND HOW DO
THEY COMPARE WITH THE GLOBAL EQUITY FUND?
Because the Funds have similar goals and strategies, the potential risks
associated with each Fund are similar. 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. Please see the enclosed Prospectus
of the Global Utilities Fund for a description of the current principal
investment risks of the Fund, and please review the risks relating to
investments in utilities, which are much more pronounced in the Global Utilities
Fund, as presently constituted, than in the Global Equity Fund. After the
Acquisition, the Global Utilities Fund plans to changes its name to "Liberty
Newport Global Equity Fund." The Global Utilities Fund also expects to change
its investment strategies to become a diversified fund rather than a
non-diversified fund and to change the requirement to invest more than 65% in
the utilities sector to investing at least 50% in the utilities sector.
INFORMATION ABOUT THE ACQUISITION
TERMS OF THE AGREEMENT AND PLAN OF REORGANIZATION
If approved by the shareholders of the Global Equity Fund, the Acquisition
is expected to occur on or around January 29, 2001, under the Agreement and Plan
of Reorganization 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:
- The Global Equity Fund will transfer all of the assets and
liabilities attributable to each class of shares of the Global
Equity Fund to the Global Utilities Fund in exchange for shares of
the same class of the Global Utilities Fund with an aggregate net
asset value equal to the net value of the transferred assets and
liabilities.
-9-
<PAGE>
- The Acquisition will occur on the next business day after the time
(currently scheduled to be 4:00 p.m. Eastern Time on January 26,
2001 or such other date and time as the parties may determine) when
the assets of each Fund are valued for purposes of the Acquisition
(the "Valuation Date").
- The shares of each class of the Global Utilities Fund received by
the Global Equity Fund will be distributed to the shareholders of
the same class of the Global Equity Fund pro rata in accordance with
their percentage ownership of each class of the Global Equity Fund
in full liquidation of the Global Equity Fund.
- After the Acquisition, the Global Equity Fund will be terminated,
and its affairs will be wound up in an orderly fashion.
- The Acquisition requires approval by the Global Equity Fund's
shareholders and satisfaction of a number of other conditions; the
Acquisition may be terminated at any time with the approval of the
Trustees of both Funds.
A shareholder who objects to the Acquisition will not be entitled under
Massachusetts law or the Declaration of Trust (the "Declaration") to demand
payment for, or an appraisal of, his or her shares. However, shareholders
should be aware that the Acquisition as proposed is not expected to result in
recognition of gain or loss to shareholders for federal income tax purposes and
that, if the Acquisition is consummated, shareholders will be free to redeem
the shares which they receive in the transaction at their then-current net
asset value. In addition, shares may be redeemed at any time prior to the
consummation of the Acquisition.
SHARES YOU WILL RECEIVE
If the Acquisition occurs, you will receive shares in the Global Utilities
Fund of the same class as the shares that you currently own in the Global Equity
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.
- If applicable, your Global Utilities 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,
the new shares will continue to age from the date you purchased your
Global Equity Fund shares.
-10-
<PAGE>
- 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 Global Utilities Fund.
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's shareholders. 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 attached as Appendix A to
this Prospectus/Proxy Statement.
The Acquisition is one of several proposed acquisitions and liquidations
of funds in the Liberty and Stein Roe Fund groups proposed by Liberty Financial
Companies, Inc. ("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 and rationalizing the
product offerings of the Liberty and Stein Roe Funds, reducing fund expense
ratios by creating larger, more efficient funds and permitting the Liberty
Financial organization to focus 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 Global Equity Fund to enter into the Acquisition:
- The Acquisition is expected to create a larger fund with similar
investment goals and strategies to the Global Equity Fund, but with
lower operating expenses as a percentage of fund assets. This
expense ratio reduction would benefit Global Equity 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 Global Equity
and Global Utilities Funds on July 31, 2000 and the Funds' current
expense structures, the Global Utilities Fund's annualized expense
ratio (excluding 12b-1 fees) immediately after the Acquisition would
be about 0.47% lower than the Global Equity Fund's current expense
ratio (for example, for Class A shares, a 1.09% expense ratio for
the Global Utilities Fund, as compared to 1.56% for the Global
Equity Fund if the limitation were discontinued and 1.40% if it
continued). Note that the 12b-1 fees on Classes A, B and C on each
Fund are 0.25%, 1.00% and 1.00%, respectively.
-11-
<PAGE>
- The Acquisition is intended to permit the Global Equity Fund's
shareholders to exchange their investment for an investment in the
Global Utilities Fund without recognizing gain or loss for federal
income tax purposes. By contrast, if a Global Equity Fund
shareholder redeemed his or her shares to invest in another fund,
like the Global Utilities Fund, the transaction would likely be a
taxable event for such shareholder. Similarly, if the Global Equity
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 Global Utilities 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 increase
for Global Equity Fund shareholders in the combined fund's utilities holdings
immediately after the Acquisition and the change in investment program for
Global Utilities Fund shareholders as a result of the Acquisition.
The projected post-Acquisition expense reductions presented above are based
upon numerous material assumptions, including that: (1) the current contractual
agreements will remain in place; and (2) certain fixed costs involved in
operating the Global Equity Fund are eliminated. 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 Global Utilities Fund or Liberty
Financial.
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 Global Utilities
Fund will achieve any particular level of performance after the Acquisition.
-12-
<PAGE>
If the Acquisition does not occur, Liberty Financial has indicated that it
may recommend to the Trustees that the Global Equity Fund be liquidated.
INFORMATION ABOUT THE PROPOSED NEW MANAGEMENT AGREEMENT
Subject to the approval of the existing shareholders of the Global
Utilities Fund, which will be sought in a separate proxy statement, the Global
Utilities Fund will enter into a new management agreement (the "New Management
Agreement") with Newport Fund Management, Inc. ("Newport"). The new management
agreement is expected to take effect on or about the date of the Acquisition.
Under the New Management Agreement, the current portfolio managers of the
Global Utilities Fund, each of whom is currently a dual employee of Stein Roe &
Farnham Incorporated ("Stein Roe") and Newport, will continue to manage the
Fund. The current management and administration fees payable by the Global
Utilities Fund will not change pursuant to the New Management Agreement, and the
terms of the New Management Agreement will be the same as the terms of the
current management agreement between the Fund and Stein Roe, except that the
effective and termination dates will change and Newport will serve as the
investment advisor instead of Stein Roe. If the New Management Agreement is not
approved, the current portfolio managers of the Global Utilities Fund will
continue to manage the Fund and will remain dual employees of Stein Roe and
Newport.
Newport is located at 580 California Street, Suite 1960, San Francisco,
California 94104. Newport is a direct majority-owned subsidiary of Newport
Pacific Management, Inc. ("Newport Pacific"), 580 California Street, San
Francisco, CA 94104. Newport Pacific is a direct wholly-owned subsidiary of
Liberty Newport Holdings, Limited ("Liberty Newport"), which in turn is a direct
wholly-owned subsidiary of Liberty Financial, which in turn is a direct majority
owned subsidiary of Liberty Corporate Holdings, Inc., ("LCH") which in turn is a
direct wholly-owned subsidiary of LFC Holdings, Inc., which in turn is a direct
wholly-owned subsidiary of Liberty Mutual Equity Corporation, which in turn is a
direct wholly-owned subsidiary of Liberty Mutual Insurance Company ("Liberty
Mutual"). Liberty Mutual is an underwriter of workers' compensation insurance
and a property and casualty insurer in the U.S. Liberty Financial's address is
600 Atlantic Avenue, Boston, MA 02210. Liberty Mutual's address is 175
Berkeley Street, Boston, MA 02117. As of August 31, 2000, Newport managed
$2.1 billion in assets.
PERFORMANCE INFORMATION
The charts below show the percentage gain or loss in each calendar year
for the period ending December 31, 1999 since inception, for the Class A shares
of the Global Utilities Fund and the Class A shares of the Global Equity Fund.
They should give you a general idea of how each Fund's return has varied from
year-to-year. The graphs 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. Any expense reduction arrangements may be discontinued at any
time.
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.
GLOBAL EQUITY FUND
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------
40%
------------------------------------------------------------------------------
35.20%
------------------------------------------------------------------------------
35%
------------------------------------------------------------------------------
------------------------------------------------------------------------------
30%
------------------------------------------------------------------------------
------------------------------------------------------------------------------
25%
------------------------------------------------------------------------------
------------------------------------------------------------------------------
20%
------------------------------------------------------------------------------
16.45% 19.03% 17.12% 15.84%
------------------------------------------------------------------------------
15%
------------------------------------------------------------------------------
14.55%
------------------------------------------------------------------------------
10%
------------------------------------------------------------------------------
------------------------------------------------------------------------------
5%
------------------------------------------------------------------------------
------------------------------------------------------------------------------
0%
------------------------------------------------------------------------------
-1.62%
------------------------------------------------------------------------------
-5%
------------------------------------------------------------------------------
</TABLE>
The Fund's year-to-date total For period shown in bar chart:
return through September 30, 2000 Best quarter: Fourth quarter
was -8.47%. 1998, +17.77%
Worst quarter: Third quarter
1998, -14.74%
GLOBAL UTILITIES FUND
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------
30%
---------------------------------------------------------------------------
26.87%
---------------------------------------------------------------------------
25%
---------------------------------------------------------------------------
</TABLE>
-13-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------
22.46%
---------------------------------------------------------------------------------------
20%
---------------------------------------------------------------------------------------
15.04% 18.05% 17.44%
---------------------------------------------------------------------------------------
15%
---------------------------------------------------------------------------------------
10.36% 12.69%
---------------------------------------------------------------------------------------
10%
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
5%
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
0%
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
-5%
---------------------------------------------------------------------------------------
-6.85%
---------------------------------------------------------------------------------------
-10%
---------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
The Fund's year-to-date total For period shown in bar chart:
return through September 30, 2000 Best quarter: Fourth quarter
was -5.00%. 1999, +25.44%
Worst quarter: Third quarter
1998, -7.41%
</TABLE>
The next table lists 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, or for the life of the Fund through December 31, 1999, if
shorter, as the case may be, including the applicable sales charges. This table
is 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.
GLOBAL EQUITY FUND*
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS LIFE OF FUND
<S> <C> <C> <C> <C>
Class A (%) 9.18 15.21 N/A 13.40
---------------------------------------------------------------------------
Class B (%) 9.98 15.45 N/A 13.38
---------------------------------------------------------------------------
Class C (%) 13.96 15.68(1) N/A 13.38(1)
---------------------------------------------------------------------------
MSCI Index (%) 27.26 19.01 N/A 15.55(2)
---------------------------------------------------------------------------
Lipper Global Average (%) 33.68 18.40 N/A 15.73(2)
</TABLE>
GLOBAL UTILITIES FUND +
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS LIFE OF FUND
<S> <C> <C> <C> <C>
Class A (%) 19.57 18.00 N/A 13.54
---------------------------------------------------------------------------
Class B (%) 20.85 20.54(3) N/A 13.86(3)
---------------------------------------------------------------------------
Class C (%) 24.84 18.54(3) N/A 13.86(3)
---------------------------------------------------------------------------
MSCI Index ND (%) 24.93 19.76 N/A 14.77(4)
---------------------------------------------------------------------------
S&P Index (%) (8.88) 13.66 N/A 10.72(4)
---------------------------------------------------------------------------
Lipper Average (%) 14.53 18.83 N/A 13.47(4)
</TABLE>
* The Global Equity Fund's return is compared to the Morgan Stanley Capital
International World (GDP) Index ("MSCI Index"), an unmanaged index that
tracks the performance of global 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 Global
Equity Fund's return is also compared to the average return of the funds
included in the Lipper Global Funds category average ("Lipper Global
Average"). This Lipper Global 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 Global Average.
-14-
<PAGE>
+ The Global Utilities Fund's return is compared to the Morgan Stanley
Capital International World Index ND ("MSCI Index ND"), an unmanaged index
that tracks the performance of global stocks. The Global Utilities Fund's
return is also compared to the Standard & Poor's Utilities Index ("S&P
Index"), an unmanaged index that tracks the performance of domestic utility
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 Global Utilities Fund's return is also compared to
the average return of the funds included in the Lipper Utility Fund
category average ("Lipper Average"). This Lipper Average, which is
calculated by Lipper, Inc., is composed of funds with similar investment
objectives to the Global Utilities Fund. Sales charges are not reflected in
the Lipper Average.
(1) Class C is a newer class of shares. Its performance information includes
returns of the Global Equity Fund's Class B shares (the oldest existing
fund class with similar cost structure) for periods prior to the inception
of the newer class of shares. The Class B share returns are not restated to
reflect any differences in expenses (such as Rule 12b-1 fees) between Class
B shares and the newer class of shares. Class A shares were initially
offered on June 8, 1992, Class B shares were initially offered on June 8,
1992, and Class C shares were initially offered on August 1, 1997.
(2) Performance information is from June 30, 1992.
(3) Class B and Class C are newer classes of shares. Their performance
information includes returns of the Global Utilities 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 the newer
classes of shares would be lower. Class A shares were initially offered on
October 15, 1991, Class B shares were initially offered on March 27, 1995
and Class C shares were initially offered on March 27, 1995.
(4) Performance information is from October 31, 1991.
FEDERAL INCOME TAX CONSEQUENCES
The Acquisition is intended to be a tax-free reorganization. The closing
of the Acquisition will be conditioned on receipt of an opinion from Ropes &
Gray 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 the Global Equity Fund or the
shareholders of the Global Equity Fund as a result of the
Acquisition;
- under Section 358 of the Code, the tax basis of the Global Utilities
Fund shares you receive will be the same, in the aggregate, as the
aggregate tax basis of your Global Equity Fund shares;
- under Section 1223(1) of the Code, your holding period for the
Global Utilities Fund shares you receive will include the holding
period for your
-15-
<PAGE>
Global Equity Fund shares if you hold Global Equity Fund shares as a
capital asset;
- under Section 1032 of the Code, no gain or loss will be recognized
by the Global Utilities Fund as a result of the Acquisition;
- under Section 362(b) of the Code, the Global Utilities Fund's tax
basis in the assets that the Global Utilities Fund receives from the
Global Equity Fund will be the same as the Global Equity Fund's
basis in such assets; and
- under Section 1223(2) of the Code, the Global Utilities Fund's
holding period in such assets will include the Global Equity Fund's
holding period in such assets.
The opinion will be based on certain factual certifications made by
officers of the Board of Trustees of Trust III. The opinion is not a guarantee
that the tax consequences of the Acquisition will be as described above. Prior
to the closing of the Acquisition, the Global Equity Fund and the Global
Utilities Fund will each distribute to their shareholders all of their
respective investment company taxable income and net realized capital gains,
which have not previously been distributed to shareholders. Such distributions
will be taxable to the Global Equity Fund's shareholders.
This description of the federal income tax consequences of the Acquisition
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.
THE TRUSTEES OF THE GLOBAL EQUITY FUND UNANIMOUSLY RECOMMEND APPROVAL OF THE
AGREEMENT AND PLAN OF REORGANIZATION.
The Declaration establishing the Board of Trustees of Trust III provides
that any series of the Board of Trustees of Trust III (such as the Global
Equity 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 Global Equity Fund may be terminated by
majority vote of the Global Equity Fund's shares entitled to vote (or by
Trustee notice to shareholders), and will so amend the Declaration if a
majority of the Global Equity Fund's shareholders entitled to vote on the
proposal vote in favor of such proposal.
-16-
<PAGE>
REQUIRED VOTE FOR PROPOSAL 1
Approval of the Agreement and Plan of Reorganization dated October 26,
2000 between Trust III on behalf of the Global Equity Fund, Trust III on behalf
of the Global Utilities Fund, and Liberty Financial Companies, Inc. will require
the affirmative vote of a majority of the shares of the Global Equity Fund
outstanding at the record date for the Meeting.
PROPOSAL 2 -- ELECTION OF TRUSTEES
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 III, of
which the Global Equity Fund is a series. 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 III, as
well as nine Liberty closed-end funds and seven (or, in the case of Messrs.
Lowry, Mayer and Neuhauser, 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 III.
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, and were
recommended for election as Trustees of the Liberty Mutual Funds by the Board of
Trustees at a meeting held on October 25, 2000. Each of the nominees elected
will serve as a Trustee of Trust III until the next meeting of shareholders of
Trust III 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 Funds. Liberty Financial and
Trust III'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 Funds. Creation of a single,
consolidated board should also provide certain administrative efficiencies and
potential future cost savings for both the Liberty and Stein Roe 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 Meeting in favor of the election of the nominees named
below as Trustees of Trust III (if so instructed). If any nominee listed below
becomes unavailable for election, the enclosed proxy card may be voted for a
substitute nominee in the discretion of the proxy holder(s).
-17-
<PAGE>
INFORMATION ABOUT THE NOMINEES
Set forth below is information concerning each of the nominees.
<TABLE>
<CAPTION>
NOMINEE NAME & PRINCIPAL OCCUPATION(1) AND
AGE DIRECTORSHIPS
TRUSTEE SINCE
-------------------- --------------------------- -------------
<S> <C> <C>
Douglas A. Hacker Executive Vice President and New nominee
(43) Chief Financial Officer of
UAL, Inc. (airline) since
July 1999; Senior Vice
President and Chief
Financial Officer of UAL,
Inc. prior thereto.
Janet Langford Kelly Executive Vice New nominee
(41) President--Corporate
Development, General
Counsel, and Secretary of
Kellogg Company since
September 1999; Senior Vice
President, Secretary and
General Counsel of Sara Lee
Corporation (branded,
packaged, consumer-products
manufacturer) from 1995 to
August 1999; partner at
Sidley & Austin (law firm)
prior thereto.
Richard W. Lowry Private Investor since 1995
(64) August 1987. (Formerly
Chairman and Chief Executive
Officer of U.S. Plywood
Corporation from August 1985
to August 1987.)
Salvatore Macera Private Investor. (Formerly 1998
(69) Executive Vice President and
Director of Itek Corporation
(electronics) from 1975 to
1981.)
William E. Mayer(2) Partner, Park Avenue Equity 1994
(60) Partners (venture capital);
Director, Johns Manville;
Director, Lee Enterprises;
Director, WR Hambrecht & Co.
(Formerly Dean, College of
Business and Management,
University of Maryland, from
October 1992 to November
1996.)
John J. Neuhauser Academic Vice President and 1985
(57) Dean of Faculties, Boston
College, since August 1999.
(Formerly Dean, Boston
College School of Management,
from September 1977 to
September 1999.)
Charles Nelson Van Voorhis Professor of New nominee
(57) Political Economy of the
University of Washington.
</TABLE>
-18-
<PAGE>
<TABLE>
<S> <C> <C>
Joseph R. Palombo(3) Vice President of the Stein 2000
(47) Roe Mutual Funds since April
1999; Executive Vice
President and Director of
Colonial Management
Associates, Inc. and Stein
Roe & Farnham Incorporated
since April 1999; Executive
Vice President and Chief
Administrative Officer of
Liberty Funds Group LLC
since April 1999. (Formerly
Chief Operating Officer,
Putnam Mutual Funds, from
1994 to 1998.)
Thomas E. Stitzel Business Consultant; 1998
(64) Chartered Financial Analyst.
(Formerly Professor of
Finance, from 1975 to 1999,
and Dean, from 1977 to 1991,
College of Business, Boise
State University.)
Thomas C. Theobald Managing Director, William New nominee
(62) Blair Capital Partners
(private equity investing)
since 1994; Chief Executive
Officer and Chairman of the
Board of Directors of
Continental Bank Corporation
from 1987 to 1994.
Anne-Lee Verville Consultant. (Formerly 1998
(54) General Manager, Global
Education Industry, from
1994 to 1997, and 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.
TRUSTEES' COMPENSATION
The members of the Board of Trustees will serve as Trustees of the Liberty
and Stein Roe Funds, for which service each Trustee, except for Mr. Palombo,
will receive an annual retainer of $45,000, and attendance fees of $8,000 for
each regular joint 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 Funds based on each Fund's relative net assets, and
one-third of the fees is divided equally among the Liberty and Stein Roe Funds.
-19-
<PAGE>
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 Trusts who are not continuing on the
combined Board of Trustees of the Liberty and Stein Roe Funds will receive
payments at an annual rate equal to their 1999 Trustee compensation for the
lesser of two years or until the date they would otherwise have retired at age
72. These payments will be made quarterly, beginning in 2001. 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 affiliates, but is considered
interested as a result of his affiliation with a broker-dealer.
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 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 the Global Equity
Fund.
Record of Board and Committee Meetings. During the fiscal year ended
October 31, 2000, the Board of Trustees of Trust III (excluding Liberty Federal
Securities Fund which has a different fiscal year end) held six meetings, the
Audit Committee held four meetings, the Compensation Committee held one meeting,
and the Governance Committee held five meetings.
-20-
<PAGE>
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 is a member.
THE BOARD OF TRUSTEES RECOMMENDS THAT THE SHAREHOLDERS OF THE BOARD OF TRUSTEES
OF TRUST III VOTE FOR PROPOSAL 2.
REQUIRED VOTE FOR PROPOSAL 2
A plurality of the votes cast at the Meeting, if a quorum is represented,
is required for the election of each Trustee to the Board of Trustees of the
Board of Trustees of Trust III. 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 Trust III are soliciting proxies from the shareholders of
the Global Equity Fund in connection with the Meeting, which has been called to
be held at 10:00 a.m. Eastern Time on December 19, 2000 at Colonial's offices,
One Financial Center, Boston, Massachusetts 02111. The meeting notice, this
combined Prospectus/Proxy Statement and proxy cards are being mailed to
shareholders beginning on or about November 17, 2000.
INFORMATION ABOUT PROXIES AND THE CONDUCT OF THE MEETING
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 Global Equity Fund or by employees or agents of
Stein Roe & Farnham Incorporated or Colonial and their affiliated companies. In
addition, SCC has been engaged to assist in the solicitation of proxies, at an
estimated cost of $700,000 total for all of the proposed acquisitions of funds
in the Liberty and Stein Roe Fund groups scheduled to take place in January
2001.
VOTING PROCESS
You can vote in any one of the following five ways:
a. By mail, by filling out and returning the enclosed proxy
card;
b. By phone, by calling 1-800-732-3683 and following the instructions;
c. By internet, by visiting our Web site at
www.libertyfunds.com and clicking on "Proxy Voting;"
d. By fax (not available for all shareholders; refer to
enclosed proxy insert); or
e. In person at the Meeting.
Shareholders who owned shares on the record date, September 29, 2000, are
entitled to vote at the Meeting. Shareholders are entitled to cast one vote for
each share
-21-
<PAGE>
owned on the record date. We encourage you to vote by internet, using the
12-digit or 14-digit "control" number that appears on the enclosed proxy card.
Voting by internet will reduce expenses by saving postage costs. If you choose
to vote by mail or by fax, and you are an individual account owner, please sign
exactly as your name appears on the proxy card. Either owner of a joint account
may sign the proxy card, but the signer's name must exactly match the name that
appears on the card.
Costs of Solicitation. The costs of the Meeting, including the costs of
soliciting proxies, and the costs of the Acquisition will be borne by the
following parties in the following percentages: the Global Utilities Fund __%,
the Global Equity Fund __%, Liberty Financial __%.
Voting and Tabulation of Proxies. Shares represented by duly executed
proxies will be voted as instructed on the proxy. 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 Assistant Secretary of the
Global Equity Fund, by properly executing and submitting a later-dated proxy or
by attending the Meeting and voting in person.
Votes cast in person or by proxy at the Meeting will be counted by persons
appointed by the Global Equity Fund as tellers for the Meeting (the "Tellers").
Thirty percent (30%) of the shares of Global Equity Fund outstanding on the
record date, present in person or represented by proxy, constitutes a quorum for
the transaction of business by the shareholders of the Global Equity Fund at the
Meeting. Shareholders of the Global Equity Fund vote together with the
shareholders of the other series of the Board of Trustees of Trust III for the
election of Trustees; thirty percent (30%) of the outstanding shares of the
Board of Trustees of Trust III 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 Proposal 1 and will have no effect
on the outcome of Proposal 2. "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.
Advisor's, Distributor's and Administrator's Addresses. The address of the
Global Equity Fund's investment advisor and the Global Utility Fund's
administrator, Colonial Management Associates, Inc., is One Financial Center,
Boston, Massachusetts 02111. The address of the Global Utilities Fund's
investment advisor, Stein Roe & Farnham Incorporated, is One South Wacker Drive,
Chicago, Illinois 60606. The address of each Fund's principal underwriter,
Liberty Funds Distributor, Inc., is One Financial Center, Boston, Massachusetts
02111.
Outstanding Shares and Significant Shareholders. Appendix B to this
Prospectus/Proxy Statement lists for the Global Equity Fund and the Board of
Trustees of Trust III the total number of shares outstanding as of September 29,
2000, for each
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class of the shares of the Fund and the Trust entitled to vote at the Meeting.
It also lists for the Global Utilities Fund the total number of shares
outstanding as of September 29, 2000, for each class of the Fund's shares. 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
Funds and their shareholdings in the Funds.
Adjournments; Other Business. If the Global Equity Fund has not received
enough votes by the time of the Meeting to approve any Proposal the persons
named as proxies may propose that the Meeting 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 the Global Equity Fund that
are present in person or by proxy on the question 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 Proposal 2). 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 Proposal 2). They will not
vote any proxy that directs them to abstain from voting on the Proposal in
question.
The Meeting has been called to transact any business that properly comes
before it. The only business that management of the Global Equity Fund intends
to present or knows that others will present is Proposals 1 and 2. If any other
matters properly come before the Meeting, and on all matters incidental to the
conduct of the Meeting, the persons named as proxies intend to vote the proxies
in accordance with their judgment, unless the Assistant Secretary of the Global
Equity Fund has previously received written contrary instructions from the
shareholder entitled to vote the shares.
Shareholder Proposals at Future Meetings. The Board of Trustees of Trust
III, of which the Global Equity Fund is a series, does not hold annual or other
regular meetings of shareholders. Shareholder proposals to be presented at any
future meeting of shareholders of the Fund or Trust III must be received by the
Global Equity Fund or Trust III 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.
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APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION dated as of October 26, 2000
by and among Liberty Funds Trust III (the "Trust"), a Massachusetts business
trust established under a Declaration of Trust dated May 30, 1986, as amended,
on behalf of Liberty Newport Global Equity 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 Newport Global Utilities 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 and C shares
of beneficial interest of the Acquiring Fund ("Acquiring Shares") and the
assumption by 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").
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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 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 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 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.
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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 of
additional information 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 29, 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 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
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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 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
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ended October 31, 1999 of the Acquired 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 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 April 30, 2000;
(g) Since April 30, 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 of additional
information or statements of additional information
(collectively, as
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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, 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; and
(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
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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
April 30, 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.
(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
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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 Pricewaterhouse-
Coopers 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;
(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 and Class C 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
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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 and Class C 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; and
(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.
(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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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
A-10
<PAGE>
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.
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 and
Class C 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
A-11
<PAGE>
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 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, 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
A-12
<PAGE>
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 October 31, 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 October 31, 2000 and
on or prior to the Closing Date.
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.
A-13
<PAGE>
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 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 to 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;
A-14
<PAGE>
(c) No gain or loss will be recognized to 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 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.
(h) 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. The other expenses of the
transactions contemplated by this Agreement shall be borne by the
following parties in the percentages indicated: (a) the Trust, on
behalf of the Acquired Fund, __%, (b) the Acquiring Trust, on
behalf of the Acquiring Fund, __%, and (c) Liberty Financial
Companies, Inc. __%.
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
A-15
<PAGE>
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.
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; or
(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.
(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, MA 02111 attention Secretary.
14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT NON-RECOURSE.
A-16
<PAGE>
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-17
<PAGE>
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.
LIBERTY FUNDS TRUST III,
on behalf of Liberty Newport Global
Equity Fund
By:_____________________________________
Name:___________________________________
Title:__________________________________
ATTEST:
_______________________________________
Name:__________________________________
Title:_________________________________
LIBERTY FUNDS TRUST III,
on behalf of Liberty Newport Global
Utilities Fund
By:_____________________________________
Name:___________________________________
Title:__________________________________
ATTEST:
________________________________________
Name:___________________________________
Title:__________________________________
Solely for purposes of Section 9.2
of the Agreement:
LIBERTY FINANCIAL COMPANIES, INC.
By:_____________________________________
Name:___________________________________
Title:__________________________________
ATTEST:
________________________________________
Name:___________________________________
Title:__________________________________
A-18
<PAGE>
APPENDIX B
FUND INFORMATION
SHARES OUTSTANDING AND ENTITLED TO VOTE OF THE GLOBAL EQUITY FUND AND TRUST III
AND SHARES OUTSTANDING OF THE GLOBAL UTILITIES FUND
For each class of the Global Equity Fund's shares and Trust III's
shares entitled to vote at the Meeting, and for each class of the Global
Utilities Fund's shares, the number of shares outstanding as of September 29,
2000 was as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
NUMBER OF SHARES OUTSTANDING
FUND OR TRUST CLASS AND ENTITLED TO VOTE
-------------------------------------------------------------------------------
<S> <C>
Global Equity Fund A 3,272,019
-------------------------------------------------------------------------------
B 4,574,701
-------------------------------------------------------------------------------
C 142,980
-------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Trust III 297,008,531
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Global Utilities Fund A 10,348,066
-------------------------------------------------------------------------------
B 930,888
-------------------------------------------------------------------------------
C 62,595
-------------------------------------------------------------------------------
</TABLE>
OWNERSHIP OF SHARES
As of September 29, 2000, Trust III believes that the Trustees and
officers of the Trust, as a group, owned less than one percent of each class of
shares of each Fund and of the 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>
--------------------------------------------------------------------------------------------------------------
NUMBER OF
OUTSTANDING
SHARES OF PERCENTAGE OF OUTSTANDING
FUND AND CLASS NAME AND ADDRESS OF SHAREHOLDER CLASS OWNED SHARES OF CLASS OWNED
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GLOBAL EQUITY FUND
CLASS B
Merrill Lynch Pierce Fenner & Smith 579,003.766 12.66%
For the Sole Benefit of its Customers
Attn: Fund Administration #973D2
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
CLASS C
Raymond James & Assoc., Inc. Custodian 10,370.748 7.27%
8248 Sumner Rd.
Chardon, OH 44024
</TABLE>
B-1
<PAGE>
<TABLE>
<S> <C> <C> <C>
GLOBAL UTILITIES FUND
CLASS C
Merrill Lynch Pierce Fenner & Smith 62,594.830 17.83%
For the Sole Benefit of its Customers
Attn: Fund Administration #97F85
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
</TABLE>
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 above noted class of shares of the above noted
Fund would own the following percentages of the Acquiring Fund upon consummation
of the Acquisition:
<TABLE>
<CAPTION>
PERCENTAGE OF OUTSTANDING
SHARES OF CLASS OWNED
NAME AND ADDRESS OF UPON CONSUMMATION OF
FUND AND CLASS SHAREHOLDER ACQUISITION
-------------- ------------------- -------------------------
<S> <C> <C>
GLOBAL EQUITY FUND
CLASS B
Merrill Lynch Pierce Fenner & Smith 9.79%
For the Sole Benefit of its Customers
Attn: Fund Administration #973D2
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
CLASS C
Raymond James & Assoc., Inc. Custodian 4.96%
8248 Sumner Rd.
Chardon, OH 44024
GLOBAL UTILITIES FUND
CLASS C
Merrill Lynch Pierce Fenner & Smith 6.10%
For the Sole Benefit of its Customers
Attn: Fund Administration #97F85
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
</TABLE>
INFORMATION CONCERNING EXECUTIVE OFFICERS
The following table sets forth certain information about the executive officers
of each Fund:
<TABLE>
<CAPTION>
EXECUTIVE OFFICER YEAR OF ELECTION AS
NAME & AGE OFFICE AND PRINCIPAL OCCUPATION (1) EXECUTIVE OFFICER
---------- ----------------------------------- -----------------
<S> <C> <C>
Stephen E. Gibson President of the Liberty Funds since June, 1998; Chairman of 1998
(46) the Board since July, 1998, Chief Executive Officer and
President since December, 1996 and Director, since July,
1996 of CMA (formerly Executive Vice President 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.
(TCG) from December, 1996 to December, 1998); Director of
Stein Roe & Farnham Incorporated (SR&F) since September 2000,
President since January, 2000 and Vice Chairman since August
1998 (formerly Assistant Chairman and Executive Vice President
from August, 1998 to January, 2000) (formerly Managing
Director of Marketing of Putnam Investments, June, 1992 to
July, 1996.)
Pamela A. McGrath Treasurer and Chief Financial Officer of the Liberty Funds and 1999
(46) Liberty All-Star Funds since April, 2000; Treasurer, Chief
Financial Officer and Vice President of LFG since
December, 1999; Chief Financial Officer, Treasurer and
Senior Vice President of CMA since December, 1999;
Director of Offshore Accounting for Putnam Investments
from May, 1998 to October, 1999; Managing Director of
Scudder Kemper Investments from October, 1984 to December,
1997.
</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.
B-2
<PAGE>
ADDITIONAL INFORMATION CONCERNING TRUSTEE COMPENSATION
The current Board of Trustees received the following compensation from each Fund
as of each Fund's fiscal year end and for the calendar year ended December 31,
1999(1):
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
GLOBAL EQUITY GLOBAL UTILITIES
FUND FUND
10/31/99 10/31/99
----------------------------------------------------------------------------
<S> <C> <C>
Mr. Bleasdale $1,188(2) $1,387(3)
----------------------------------------------------------------------------
Ms. Collins 1,001 1,164
----------------------------------------------------------------------------
Mr. Grinnell 1,043 1,213
----------------------------------------------------------------------------
Mr. Lowry 1,011 1,176
----------------------------------------------------------------------------
Mr. Macera 1,115 1,294
----------------------------------------------------------------------------
Mr. Mayer 1,010 1,176
----------------------------------------------------------------------------
Mr. Moody 940(4) 1,094(5)
----------------------------------------------------------------------------
Mr. Neuhauser 1,057 1,230
----------------------------------------------------------------------------
Mr. Stitzel 1,115 1,294
----------------------------------------------------------------------------
Ms. Verville 1,134(6) 1,316(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>
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>
Total Compensation From Liberty
All-Star Funds For The Calendar
Trustee Year Ended December 31, 1999 (11)
------- ---------------------------------
<S> <C>
Robert J. Birnbaum $25,000
James E. Grinnell 25,000
Richard W. Lowry 25,000
William E. Mayer 25,000
John J. Neuhauser 25,000
</TABLE>
--------
(1) The Funds do not currently provide pension or retirement plan benefits to
the Trustees.
(2) Includes $546 payable in later years as deferred compensation.
(3) Includes $636 payable in later years as deferred compensation.
(4) Total compensation of $940 for the fiscal year ended October 31, 1999, will
be payable in later years as deferred compensation.
(5) Total compensation of $1,094 for the fiscal year ended October 31, 1999,
will be payable in later years as deferred compensation.
(6) Total compensation of $1,134 for the fiscal year ended October 31, 1999,
will be payable in later years as deferred compensation.
(7) Total compensation of $1,316 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 Companies, Inc. (an intermediate parent of the Advisor of each
Fund).
B-3
<PAGE>
APPENDIX C
Capitalization
The following table shows on an unaudited basis the capitalization of each of
the Global Equity Fund and the Global Utilities Fund as of April 30, 2000, and
on a pro forma combined basis, giving effect to the acquisition of the assets
and liabilities of the Global Equity Fund by the Global Utilities Fund at net
asset value as of that date:
<TABLE>
<CAPTION>
GLOBAL EQUITY GLOBAL UTILITIES PRO FORMA PRO FORMA
FUND FUND ADJUSTMENTS COMBINED (1)
<S> <C> <C> <C> <C>
Class A
Net asset value $ 56,569,280.00 $189,922,088.00 (102,190)(2) $246,389,178
Shares outstanding 3,655,620 10,800,794 (437,800) 14,018,614
Net asset value per share $ 15.47 $ 17.58 $ 17.58
Class B
Net asset value $ 76,304,439.00 $ 13,860,623.00 (43,545)(2) $ 90,121,517
Shares outstanding 5,007,133 790,986 (654,196) 5,143,923
Net asset value per share $ 15.24 $ 17.52 $ 17.52
Class C
Net asset value $ 2,284,816.00 $ 923,119.00 (1,501)(2) $ 3,206,434
Shares outstanding 149,054 52,643 (18,786) 182,911
Net asset value per share $ 15.33 $ 17.54 $ 17.53
</TABLE>
(1) Assumes the Acquisition was consummated on April 30, 2000, and is for
information purposes only. No assurance can be given as to how many shares of
the Global Utilities Fund will be received by the shareholders of the Global
Equity Fund on the date the Acquisition takes place, and the foregoing should
not be relied upon to reflect the number of shares of the Global Utilities Fund
that actually will be received on or after such date.
(2) Adjustments reflect one time proxy, accounting, legal and other costs of the
reorganization of $67,577 and $79,659 to be borne by the Global Equity Fund and
the Global Utilities Fund, respectively.
C-1
<PAGE>
APPENDIX D
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE AS OF OCTOBER 31, 1999
LIBERTY NEWPORT GLOBAL UTILITIES FUND
HIGHLIGHTS
- RISE IN OIL PRICES BENEFITED GAS STOCKS.
In the spring of 1999, economically-sensitive cyclical stocks began to
rebound in response to stronger-than-expected economic growth in the U.S.
and signs of improving global economic conditions. This shift helped
natural gas stocks, whose prices rose along with oil prices, but hurt
electric stocks, as investors moved away from defensive sectors.
- GAINS IN TELECOMMUNICATIONS CONTRIBUTED TO THE FUND'S PERFORMANCE.
Telecommunication stocks benefited from improving economies worldwide and
continued domestic growth. Telephone stocks also offered attractive
opportunities due to increased merger and acquisition activity.
- THE FUND REMAINED COMPETITIVE WITH ITS LIPPER PEERS FOR THE PERIOD.
Despite challenges in some utility sectors due to pending merger approval
and deregulation, the Fund's overweighting in areas such as
telecommunications helped the Fund's Class A shares return 18.31% without
sales charge, performing in line with its Lipper peer group average.(1)
(1) Lipper, Inc., a widely respected data provider in the industry, calculates
an average total return for mutual funds with similar investment objectives
as the Fund. The total return calculated for the Lipper Utility Fund
Category was 18.62% for the 12 months ended October 31, 1999. The Fund's
Class A shares were ranked in the second quartile for the one year (43 out
of 100 funds) and in the third quartile for the five years (47 out of 64
funds). Performance for different share classes will vary with fees
associated with each class.
PORTFOLIO MANAGEMENT REPORT
STRONG 12-MONTH PERFORMANCE DRIVEN BY TELECOMMUNICATIONS
The Fund's Class A shares returned 18.31% for the 12-month period, based on
net asset value. This performance placed the Fund in the top half of the Lipper
Utility Funds Average. The Fund significantly outperformed the Standard & Poor's
Utilities Index which returned 2.1%, but underperformed the Morgan Stanley
Capital International World Index's return of 24.9% since this index includes
some non-utility stocks.
We emphasized investments in the telecommunications sector, which continued
to outperform other sectors of the utility industry. Attractive performance came
from
D-1
<PAGE>
both domestic and European telecommunications companies. Our holdings included
telephone services and cellular companies as well as telephone equipment
companies such as Ericsson, Nokia and Tellabs (3.3%, 4.0% and 3.1% of net
assets, respectively).
CHANGING ENVIRONMENT FOR ELECTRIC UTILITIES
In the United States, the electric industry has made progress toward a
competitive marketplace, but issues of deregulation and consolidation also
created a mixed investment environment in this sector. Although many companies
have restructured to meet the challenges presented by a deregulated environment,
performance of this sector was hampered because the regulatory approval process,
which can take more than one year, delays the beneficial effects to the
companies.
We own high-quality companies with attractive growth prospects and
strong management. However, the sector sold at a 25-year low. Although electric
stocks generally underperformed other utility market sectors during the period,
there is still dividend income being paid, with possible capital appreciation,
and the Fund is sharing in these returns. Power generation companies are also
becoming an emerging business. These companies own the existing fossil fuel and
the newer combined gas-cycle turbine generating plants, as well as some nuclear
power plants. This business is commodity-like, and pricing is dependent on the
competitive market for energy.
While electric utility stocks faced challenges, the portfolio benefited
from diversified holdings such as Edison International (3.4% of net assets),
which increased its growth potential through its domestic and international
independent power business.
GAS STOCKS IMPROVED DUE TO PRICE INCREASES IN OIL
We increased our holdings in the gas sector, which has improved over
the period due to rising oil prices. In the spring, oil prices rose after the
Organization of Petroleum Exporting Countries (OPEC) and non-OPEC oil producers
agreed to cut oil production. Oil prices surged again after OPEC reinforced the
cutback on output at the beginning of October. Some of the rebound in prices can
also be attributed to expectations of tighter oil supplies over the winter.
Like other sectors of the utilities market, deregulation has also been
increasing competition among gas utilities, forcing companies to streamline
their operations. Over the period, we have seen gas companies consolidate and
enter other areas of the utilities market in order to diversify and become more
dynamic. Williams Companies (2.3% of net assets) entered into a
telecommunications venture, and Columbia Energy (2.6% of net assets) was
involved in a hostile takeover toward the end of the period. Although Columbia's
stock is trading under the last price offer, it is up year to date.
LONG-TERM OUTLOOK REMAINS POSITIVE
D-2
<PAGE>
Rising long-term interest rates in the United States and Europe have
weighed heavily on utilities, and the cyclical upturn in Europe has hurt
defensive stocks like utilities. Even with the interest rate increases that have
occurred, the economy should remain strong and encouraging to our markets. The
Fund's holdings are solid companies with strong network partners and good
management, and we will continue to emphasize these types of globally
diversified, high-quality utilities as we look for nice buying opportunities in
the remainder of 1999 and into 2000.
s/Ophelia Barsketis
s/Deborah Jansen
OPHELIA BARSKETIS and DEBORAH JANSEN are portfolio co-managers of the Global
Utilities Fund. Ms. Barsketis and Ms. Jansen are also senior vice presidents of
Stein Roe & Farnham Incorporated, the portfolio's advisor.
International investing offers long-term growth potential, but also certain
risks. The Fund may be affected by political, business and economic conditions
in the countries in which it invests. Additionally, because the Fund focuses
solely on utility securities, it may involve special risks due to limited
diversification.
The Standard & Poor's Utilities Index is an unmanaged index that tracks the
performance off domestic utility stocks. The Morgan Stanley Capital
International World Index ND is an unmanaged index that tracks the performance
of global stocks. Unlike mutual funds, indexes are not investments, do not incur
fees or expenses, and it is not possible to invest in an index.
PERFORMANCE INFORMATION
GLOBAL UTILITIES FUND INVESTMENT PERFORMANCE VS. MSCI WORLD INDEX AND S&P
UTILITIES INDEX
[LINE CHART: Initial and subsequent account values at
end of each year 10/31/91 - 10/31/99]
Performance of a $10,000 Investment in Class A shares 10/31/91 - 10/31/99
<TABLE>
<CAPTION>
CGUF WITHOUT CGUF WITH S&P UTILITIES MSCI WORLD
SALES CHARGE SALES CHARGE INDEX INDEX
<S> <C> <C> <C> <C>
10/91 $10,000 $10,000 $10,000 $10,000
10/92 11,083 10,445 11,113 9,477
10/93 13,660 12,873 13,927 12,037
10/94 12,648 11,920 12,219 12,960
10/95 13,953 13,150 15,797 14,186
10/96 15,626 14,726 17,345 16,498
10/97 18,345 17,289 19,063 19,265
</TABLE>
D-3
<PAGE>
10/98 21,663 20,416 24,143 22,205
10/99 25,644 24,169 24,646 27,736
The Morgan Stanley Capital International (MSCI)World Index ND is an unmanaged
index that tracks the performance of global stocks. The Standard & Poor's
Utilities Index is an unmanaged index that tracks the performance of domestic
utility stocks. Unlike mutual funds, indexes are not investments and do not
incur fees or expenses. It is not possible to invest in an index.
AVERAGE ANNUAL TOTAL RETURNS AS OF 10/31/99
<TABLE>
<CAPTION>
Share Class A B C
Inception Date 10/15/91 3/27/95 3/27/95
-------------- ----------------- ----------------- -----------------
Without With Without With Without With
sales sales sales sales sales sales
charge charge charge charge charge charge
<S> <C> <C> <C> <C> <C> <C>
1 year 18.31% 11.50% 17.50% 12.50% 17.42% 16.42%
5 years 15.17% 13.82% 14.38% 14.15% 14.38% 14.38%
10 years 12.38% 11.56% 11.91% 11.91% 11.91% 11.91%
</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 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.
Performance for different share classes will vary based on differences in share
charges and fees associated with each class.
The Fund initially commenced operations as the Liberty Financial Utilities Fund
on 10/15/1991. Performance shown is based, in part, on the performance of the
Liberty Financial Utilities Fund, which had a different expense structure than
the Fund.
Class B and C 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 the newer class shares would have been lower.
PERFORMANCE OF A $10,000 INVESTMENT IN ALL SHARE CLASSES
FROM 10/31/91 - 10/31/99
<TABLE>
<CAPTION>
WITHOUT WITH SALES
SALES CHARGE CHARGE
------------ ----------
<S> <C> <C>
Class A $25,644 $24,169
Class B $24,764 $24,764
Class C $24,778 $24,778
</TABLE>
NET ASSET VALUE PER SHARE AS OF 10/31/99
D-4
<PAGE>
Class A $16.85
Class B $16.84
Class C $16.84
DISTRIBUTIONS DECLARED PER SHARE FROM 11/1/98 - 10/31/99
Class A $0.735
Class B $0.624
Class C $0.624
HOLDINGS
TOP 5 HOLDINGS AS OF 10/31/99
1. Colt Telecom 4.5%
2. Nokia 4.0%
3. Sprint Corp. 3.9%
4. Edison International 3.4%
5. Vodafone Airtouch 3.3%
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.
TOP 5 COUNTRIES AS OF 10/31/99
1. United States 56.3%
2. Great Britain 13.2%
3. Finland 7.5%
4. Spain 5.9%
5. Sweden 3.4%
TOP FIVE SECTOR BREAKDOWNS 10/31/99 VS. 10/31/98
FUND AS OF FUND AS OF
10/31/99 10/31/98
Telecom/Telephone 50% 38%
Electric 22% 36%
Gas 12% 9%
Real Estate 4% 0%
Broadcasting 3% 0%
D-5
<PAGE>
Sector and portfolio holding breakdowns are calculated as a percentage of net
assets. Country breakdowns are calculated as a percentage of total investments.
Because the Fund is actively managed, there can be no guarantee the Fund will
continue to hold these securities or invest in these sectors or countries in the
future.
D-6
<PAGE>
LIBERTY FUNDS TRUST III
LIBERTY NEWPORT GLOBAL UTILITIES 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 Liberty Newport Global Equity
Fund (the "Acquired Fund"), a series of Liberty Funds Trust III, by the Liberty
Newport Global Utilities 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 Fund in
exchange for shares of the Acquiring Fund and the assumption of all the
liabilities of the Acquired Fund. The Acquired Fund 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 or by calling 1-800-426-3750.
Table of Contents
I. Additional Information about the Acquiring Fund and the Acquired Fund......
II. Financial Statements.......................................................
<PAGE>
I. Additional Information about the Acquiring Fund and the Acquired
Fund.
Incorporated by reference to Post-Effective Amendment No. 114 to the
Registrant's Registration Statement Form N-1A (filed on February 28, 2000)
(Registration Nos. 2-15184 and 811-881).
II. Financial Statements.
This SAI is accompanied by the Semi-Annual Report for the six months
ended April 30, 2000 and the Annual Report for the year ended October 31, 1999
of the Acquiring Fund and the Acquired Fund, 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>
PRO FORMA COMBINING CONDENSED STATEMENT OF OPERATIONS FOR THE TWELVE MONTH
PERIOD ENDED APRIL 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
LIBERTY NEWPORT LIBERTY NEWPORT
GLOBAL EQUITY GLOBAL UTILITIES PRO FORMA PRO FORMA
FUND FUND ADJUSTMENTS COMBINED
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends 2,233,384 4,216,702 -- 6,450,087
Interest 328,139 389,112 -- 717,251
----------- ----------- ----------- -----------
Total investment income 2,561,524 4,605,814 -- 7,167,338
EXPENSES
Management fee 1,298,504 777,818 (751,765)(a) 1,324,557
Administration fee -- 486,137 341,711 (a) 827,848
Service fee - Class A, B, C 341,711 486,137 - (a) 827,848
Distribution fee - Class B 606,762 66,081 - (a) 672,843
Distribution fee - Class C 17,232 8,598 - (a) 25,830
Transfer agent fee 382,672 409,902 34,372 (d) 826,946
Bookkeeping fee 57,340 77,559 (9,500)(a) 125,399
Trustees fee 11,781 17,907 (14,366)(b) 15,322
All other expenses 284,105 344,037 (219,642)(c) 408,500
----------- ------------ ----------- -----------
Total operating expenses 3,000,107 2,674,176 (619,190) 5,055,093
----------- ------------ ----------- -----------
Expense reimbursement (120,818) -- 120,818(a) --
----------- ------------ ----------- -----------
Net Expenses 2,879,289 2,674,176 (498,372) 5,055,093
NET INVESTMENT INCOME (LOSS) (317,765) 1,931,638 498,372 2,112,245
NET REALIZED & UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments 1,126,540 45,806,628 -- 46,933,168
Foreign currency transactions (49,798) (211,115) -- (260,913)
----------- ------------ ----------- -----------
Net Realized Gain 1,076,742 45,595,513 -- 46,672,254
Change in net unrealized appreciation
during the period on:
Investments 8,666,980 6,949,998 -- 15,616,977
Foreign currency transactions 62,603 4,004 -- 66,607
----------- ----------- ----------- -----------
Net Change in Unrealized Appreciation 8,729,583 6,954,001 -- 15,683,584
----------- ----------- ----------- -----------
Net Gain 9,806,325 52,549,514 -- 62,355,839
----------- ----------- ----------- -----------
Increase in Net Assets from Operations 9,488,559 54,481,152 498,372 64,468,084
</TABLE>
(a) Based on the contract in effect for the surviving fund.
(b) Based on trustee compensation plan for the surviving fund.
(c) Decrease due to the elimination of duplicative expenses achieved by merging
the funds.
(d) Based on the contract in effect for the surviving fund. Note that a new
transfer agent fee structure was implemented for Liberty Newport Global
Utilities Fund effective January 1, 2000. The pro forma combined transfer
agent fee shown assumes this new agreement was in effect for the entire
twelve-month period ended April 30, 2000.
<PAGE>
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
PRO FORMA COMBINING CONDENSED STATEMENT OF ASSETS AND LIABILITIES
AS OF APRIL 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
Global Equity Global Utilities Pro Forma Pro Forma
Fund Fund Adjustments Combined
<S> <C> <C> <C> <C>
Investments, at value $ 138,558,350 $ 209,715,257 0 $ 348,273,607
Cash 2,146,881 -- 0 2,146,881
Receivable for investments sold 21,843,442 10,738,000 0 32,581,442
Payable for investments purchased (28,492,181) (16,037,088) 0 (44,529,269)
Other assets less other liabilities 1,102,043 289,661 (147,236) 1,244,468
Net assets $ 135,158,535 $ 204,705,830 (147,236)(a) $ 339,717,129
Class A:
Net assets $ 56,569,280 $ 189,922,088 (102,190) $ 246,491,368
Shares outstanding 3,655,620 10,800,794 (437,800) 14,018,614
Net asset value $ 15.47 $ 17.58 $ $ 17.58
Class B:
Net assets $ 76,304,439 $ 13,860,623 (43,545) $ 90,165,062
Shares outstanding 5,007,133 790,986 (654,196) 5,146,262
Net asset value $ 15.24 $ 17.52 $ $ 17.52
Class C:
Net assets $ 2,284,816 $ 923,119 (1,501) $ 3,207,935
Shares outstanding 149,054 52,643 (18,786) 182,911
Net asset value $ 15.33 $ 17.54 $ $ 17.53
</TABLE>
(a) Adjustments reflect one time proxy, accounting, legal and other costs of the
reorganization of $67,577 and $79,659 to be borne by the Global Equity Fund and
the Global Utilities Fund, respectively.
<PAGE>
Pro Forma Financial Statements (Unaudited)
Pro forma combined portfolio of investments
As of April 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
LIBERTY LIBERTY PRO FORMA LIBERTY LIBERTY PRO FORMA
NEWPORT NEWPORT COMBINED NEWPORT NEWPORT COMBINED
GLOBAL GLOBAL SHARES GLOBAL GLOBAL MARKET
EQUITY UTILITIES EQUITY UTILITIES VALUE
FUND FUND FUND FUND
SHARES SHARES MARKET MARKET
VALUE VALUE
<S> <C> <C> <C> <C> <C> <C>
Common Stocks
Construction
DAIWA HOUSE INDUSTRY CO LTD. 101,000 101,000 $ 672,337 $ 672,337
----------- -----------
Finance, Insurance & Real Estate
AMER INTERNATIONAL GROUP INC 14,375 14,375 1,576,758 1,576,758
AMSOUTH BANCORPORATION 62,865 62,865 915,472 915,472
AXA 7,400 7,400 1,098,496 1,098,496
BANCO BILBAO VIZCAYA ARGENTA 45,333 45,333 618,897 618,897
BANK OF AMERICA CORP 20,000 20,000 980,000 980,000
BANQUE NATIONALE DE PARIS 8,845 8,845 715,670 715,670
BANQUE NATIONALE DE PARIS-CVG 3,965 3,965 22,555 22,555
CHASE MANHATTAN CORP (NEW) 16,800 16,800 1,210,650 1,210,650
CHEUNG KONG HLDG 64,000 64,000 764,169 764,169
CITIGROUP INC 70,100 70,100 4,166,569 4,166,569
DEUTSCHE BANK AG 17,500 17,500 1,177,051 1,177,051
GRUPO FINANCIERO BANAMEX-O 223,200 223,200 807,921 807,921
HENDERSON JAPANESE 1,331,000 1,331,000 1,261,546 1,261,546
HSBC HOLDINGS 59,400 59,400 656,223 656,223
ING GROEP N.V. 18,002 18,002 983,399 983,399
IRISH INVESTMENT FUND 46,400 46,400 675,700 675,700
LLOYDS TSB GROUP 46,000 46,000 457,393 457,393
PROMISE CO LTD 10,000 10,000 808,987 808,987
TAIWAN FUND INC 44,400 44,400 901,875 901,875
THAI FUND 65,900 65,900 387,163 387,163
THE BANK OF TOKYO MITSUBISHI 95,000 95,000 1,224,390 1,224,390
UBS AG-REGISTERED 2,000 2,000 490,965 490,965
----------- -----------
21,901,847 21,901,847
----------- -----------
Manufacturing
ACERINOX 31,600 31,600 1,259,720 1,259,720
ALCATEL 3,590 3,590 833,197 833,197
ALCATEL SA- ADR 82,700 82,700 $ 3,757,681 3,757,681
AVENTIS 14,300 14,300 787,416 787,416
BASF AG 8,050 8,050 348,385 348,385
BP AMOCO PLC-ADR 14,000 14,000 714,000 714,000
CANON INC 39,000 39,000 1,781,250 1,781,250
CEMEX S.A.-CPO 126,700 126,700 549,667 549,667
CISCO SYSTEMS INC 36,200 36,200 2,509,678 2,509,678
DAIMLERCHRYSLER AG 9,500 9,500 553,371 553,371
DIAGEO PLC 25,000 25,000 207,359 207,359
EI DUPONT DE NEMOURS & CO INC 12,898 12,898 611,849 611,849
EMC CORP 26,800 26,800 3,723,525 3,723,525
ENI SPA 94,500 94,500 468,578 468,578
EQUANT N.V. 13,400 13,400 1,038,490 1,038,490
ERICSSON (LM) TEL ADR 19,500 19,500 1,724,531 1,724,531
FORD MOTOR CO 27,900 27,900 1,525,781 1,525,781
FUJI PHOTO FILM CO LTD 17,000 17,000 680,566 680,566
GENERAL ELECTRIC CO 12,100 12,100 1,902,725 1,902,725
GLAXO HOLDINGS PLC DRIP 29,000 29,000 889,533 889,533
GRUPO CARSO 'A1' 491,700 491,700 1,675,120 1,675,120
HEWLETT-PACKARD CO 12,100 12,100 1,633,500 1,633,500
HITACHI LTD 83,000 83,000 989,922 989,922
HONDA MOTOR CO LTD 15,000 15,000 669,841 669,841
INTEL CORP 17,600 17,600 2,231,900 2,231,900
INTL BUSINESS MACHINES CORP 14,200 14,200 1,585,075 1,585,075
KAO CORP 60,000 60,000 1,825,074 1,825,074
KONINKLIJKE KPN NV 7,200 7,200 726,409 726,409
LUCENT TECHNOLOGIES INC 23,700 23,700 1,473,844 1,473,844
MERCK & CO INC 19,600 19,600 1,362,200 1,362,200
MURATA MANUFACTURING CO., LTD 10,000 10,000 1,941,568 1,941,568
NOKIA CORP ADR 134,000 134,000 7,621,250 7,621,250
NOVARTIS (REG) 401 401 561,274 561,274
</TABLE>
<PAGE>
Pro Forma Financial Statements (Unaudited)
Pro forma combined portfolio of investments
As of April 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
LIBERTY LIBERTY PRO FORMA LIBERTY LIBERTY PRO FORMA
NEWPORT NEWPORT COMBINED NEWPORT NEWPORT COMBINED
GLOBAL GLOBAL SHARES GLOBAL GLOBAL MARKET
EQUITY UTILITIES EQUITY UTILITIES VALUE
FUND FUND FUND FUND
SHARES SHARES MARKET MARKET
VALUE VALUE
<S> <C> <C> <C> <C> <C> <C>
Common Stocks
PHARMACIA CORPORATION 31,535 31,535 1,574,779 1,574,779
PHILIPS ELECTRONIC NV 70,304 70,304 3,139,851 3,139,851
POHANG IRON AND STEEL ADR 17,200 17,200 361,200 361,200
ROYAL DUTCH PETROLEUM 7,900 7,900 455,858 455,858
SONY CORP 10,000 10,000 1,147,374 1,147,374
SONY CORP (NEW) 10,000 10,000 1,155,695 1,155,695
TELLABS INC 83,400 83,400 4,571,363 4,571,363
TEXACO INC 16,400 16,400 811,800 811,800
TEXAS INSTRUMENTS INC 14,800 14,800 2,410,550 2,410,550
TOTAL B 4,620 4,620 701,797 701,797
TYCO INT'L LTD 87,400 87,400 4,014,938 4,014,938
WARNER-LAMBERT CO 19,000 19,000 2,162,438 2,162,438
----------- ----------- -----------
51,031,569 21,640,351 72,671,920
----------- ----------- -----------
Mining & Energy
CONOCO INC -CL B 27,145 27,145 675,232 675,232
ENRON CORP 127,800 127,800 8,906,063 8,906,063
PETROCHINA CO LTD 8,414,000 8,414,000 1,307,117 1,307,117
SCHLUMBERGER LTD 11,300 11,300 865,156 865,156
----------- ----------- -----------
2,847,505 8,906,063 11,753,568
----------- ----------- -----------
Retail Trade
HENNES & MAURITZ AB-B SHS 39,600 39,600 1,055,491 1,055,491
WAL-MART STORES INC 32,000 32,000 1,772,000 1,772,000
----------- -----------
2,827,491 2,827,491
----------- -----------
Services
CAP GEMINI 7,840 7,840 1,541,284 1,541,284
COMPUWARE CORP 40,200 40,200 505,013 505,013
MICROSOFT CORP 17,200 17,200 1,199,700 1,199,700
SUN MICROSYSTEMS INC 25,000 25,000 2,298,438 2,298,438
SUNGARD DATA SYSTEMS INC 40,600 40,600 1,403,238 1,403,238
----------- -----------
6,947,672 6,947,672
----------- -----------
Transportation, Communications,
Electric, Gas and
Sanitary Services
A T & T CORP 89,450 89,450 4,176,197 4,176,197
AES CORP 75,800 75,800 6,817,263 6,817,263
AT & T WIRELESS CORP 119,900 180,100 300,000 3,761,863 5,650,638 9,412,500
BELL ATLANTIC CORP 23,400 23,400 1,386,450 1,386,450
BG GROUP PLC 0 0 1 1
BRITISH TELECOMMUNICATIONS PLC 39,000 39,000 697,485 697,485
BROADWING INC 129,300 129,300 3,660,806 3,660,806
CABLE AND WIRELESS HKT LIMITED 244,000 244,000 567,300 567,300
CALPINE CORPORATION 56,300 56,300 5,151,450 5,151,450
CHINA TELECOM HK LTD-SP ADR 13,600 13,600 1,994,950 1,994,950
COASTAL CORP 93,900 93,900 4,712,606 4,712,606
COLT TELECOM GROUP PLC 48,000 48,000 1,968,111 1,968,111
COLT TELECOM GROUP-SPONS ADR 28,900 28,900 4,934,675 4,934,675
CONSTELLATION ENERGY GROUP 120,400 120,400 3,980,725 3,980,725
COX COMMUNICATIONS INC-CL A 82,700 82,700 3,540,594 3,540,594
DYNEGY INC 36,700 36,700 2,401,556 2,401,556
EL PASO ENERGY CORP 93,500 93,500 3,973,750 3,973,750
EMBRATEL PARTICIPACOES ADR 86,200 86,200 1,939,500 1,939,500
FRANCE TELECOM 6,029 6,029 933,937 933,937
GRUPO TELEVISA SA-SPONS GDR 109,500 109,500 6,946,406 6,946,406
KINDER MORGAN ENERGY PRTNRS 157,300 157,300 6,134,700 6,134,700
KINDER MORGAN INC 64,600 64,600 1,958,188 1,958,188
KOREA ELECTRIC POWER ADR 35,600 35,600 582,950 582,950
</TABLE>
<PAGE>
Pro Forma Financial Statements (Unaudited)
Pro forma combined portfolio of investments
As of April 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
LIBERTY LIBERTY PRO FORMA LIBERTY LIBERTY PRO FORMA
NEWPORT NEWPORT COMBINED NEWPORT NEWPORT COMBINED
GLOBAL GLOBAL SHARES GLOBAL GLOBAL MARKET
EQUITY UTILITIES EQUITY UTILITIES VALUE
FUND FUND FUND FUND
SHARES SHARES MARKET MARKET
VALUE VALUE
<S> <C> <C> <C> <C> <C> <C>
Common Stocks
KOREA TELECOM CORP-SP ADR 81,000 81,000 2,794,500 2,794,500
LEVEL 3 COMMUNICATIONS 38,100 38,100 3,390,900 3,390,900
MCI WORLDCOM INC 25,050 86,550 111,600 1,138,209 3,932,616 5,070,825
METROMEDIA FIBER NETWORK-A 162,400 162,400 5,014,100 5,014,100
MONTANA POWER CO 104,900 104,900 4,622,156 4,622,156
NATIONAL GRID GROUP PLC 553,900 553,900 4,487,680 4,487,680
NIPPON TELEGRAPH & TELE CORP 110 150 260 1,362,796 1,858,358 3,221,153
NOKIA OYJ 56,000 56,000 3,216,106 3,216,106
NTL INC 49,000 49,000 3,748,500 3,748,500
NTT DATA COMM SYSTEMS CORP 100 100 1,331,361 1,331,361
PECO ENERGY CO 105,500 105,500 4,398,031 4,398,031
PINNACLE WEST CAPITAL CORP 128,000 128,000 4,496,000 4,496,000
SBC COMMUNICATIONS INC 93,600 93,600 4,100,850 4,100,850
SCOTTISH POWER PLC 659,500 659,500 5,266,351 5,266,351
SONERA GROUP 121,800 121,800 6,706,804 6,706,804
SPRINT CORP (FON GROUP) 100,800 100,800 6,199,200 6,199,200
SPRINT CORP PCS 70,900 70,900 3,899,500 3,899,500
TELE DANMARK A/S-ADR 53,700 53,700 2,033,888 2,033,888
TELECEL-COMUNICACOES PESSOAI 28,000 28,000 443,425 443,425
TELECOM ITALIA 52,165 52,165 730,591 730,591
TELECOM NEW ZEALAND-SP ADR 131,300 131,300 4,455,994 4,455,994
TELECOMUN BRASILEIRAS SA-ADR 8,000 8,000 945,500 945,500
TELECOMUN BRASILEIRAS SA-PRF 6,000,000 6,000,000 166 166
TELEFONICA SA-SPON ADR 26,520 70,465 96,985 1,756,950 4,668,294 6,425,244
TELEFONOS DE MEXICO-CL L ADR 33,200 33,200 1,952,575 1,952,575
TELEFONOS DE MEXICO SA ADR 395,800 395,800 1,148,254 1,148,254
TELENORTE LESTE PATICIP-ADR 256,800 256,800 4,574,250 4,574,250
US WEST INC 58,500 58,500 4,164,469 4,164,469
VIACOM INC CL B 28,000 28,000 1,522,500 1,522,500
VODAFONE AIRTOUCH PLC 722,872 722,872 3,301,874 3,301,874
VODAFONE AIRTOUCH PLC-ADR 121,750 121,750 5,722,250 5,722,250
WILLIAMS COMPANIES INC 103,300 103,300 3,854,381 3,854,381
----------- ----------- -----------
31,155,573 159,955,906 191,111,479
----------- ------------ -----------
Total Common Stock 117,383,995 190,502,320 307,886,315
----------- ------------ ------------
Convertible Preferred Stock
Manufacturing
ERICSSON L M TEL - 4.25 PRF 352,900 352,900 8,601,938 8,601,938
----------- -----------
Corporate Fixed Income Bonds
Mining & Energy Par Par
BG TRANSCO HOLDINGS PLC 4.1875%
12/14/22 $ 14,000 $ 14,000 21,212 21,212
BG TRANSCO HOLDINGS PLC 7.00%
12/16/24 $ 14,000 $ 14,000 21,520 21,520
BG TRANSCO HOLDINGS PLC 7.0573%
12/14/09 $ 14,000 $ 14,000 21,897 21,897
-------- ---------
64,629 64,629
-------- ---------
Total Corporate Fixed Income
Bonds 64,629 64,629
-------- ---------
Warrants
Construction Shares Shares
CEMEX S.A. WARRANTS 7,000 7,000 3,726 3,726
--------- ---------
Short-Term Obligations Par Par Par
Repurchase agreement with SBC
Warburg Ltd., dated
4/28/00, due 5/1/00
at 5.71%,
collateralized by US Treasury
Notes $21,106,000 $10,611,000 $31,717,000 21,106,000 10,611,000 31,717,000
------------ ------------ ----------
</TABLE>
<PAGE>
Pro Forma Financial Statements (Unaudited)
Pro forma combined portfolio of investments
As of April 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
LIBERTY LIBERTY PRO FORMA LIBERTY LIBERTY PRO FORMA
NEWPORT NEWPORT COMBINED NEWPORT NEWPORT COMBINED
GLOBAL GLOBAL SHARES GLOBAL GLOBAL MARKET
EQUITY UTILITIES EQUITY UTILITIES VALUE
FUND FUND FUND FUND
SHARES SHARES MARKET MARKET
VALUE VALUE
<S> <C> <C> <C> <C> <C> <C>
Common Stocks
Total Investments (cost of
$104,391,936, $153,942,971
and $258,334,907, respectively) $138,558,350 $209,715,257 $348,273,607
============================================
</TABLE>
<PAGE>
Part C. OTHER INFORMATION
Item 15.
Indemnification Article VIII of the Registrant's Agreement and Declaration of
Trust, as amended, provides for indemnification of the Registrant's Trustees and
officers. The effect of the relevant section of Article VIII of the Registrant's
Agreement and Declaration of Trust, as amended, is to provide indemnification
for each of the Registrant's Trustees and officers against liabilities and
counsel fees reasonably incurred in connection with the defense of any legal
proceeding in which such Trustee or officer may be involved by reason of being
or having been a Trustee or officer, except with respect to any matter as to
which such Trustee or officer shall have been adjudicated not to have acted in
good faith in the reasonable belief that such Trustee's or officer's action was
in the best interest of the Registrant, and except that no Trustee or officer
shall be indemnified against any liability to the Registrant or its shareholders
to which such Trustee or officer shall otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of such Trustee's or officer's office.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to Trustees, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a Trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such Trustee, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
Item 16. Exhibits
(1)(a) Amendment No. 3 to the Agreement and Declaration of Trust (1)
(b) Amendment No. 4 to the Agreement and Declaration of Trust (2)
(c) Amendment No. 5 to the Agreement and Declaration of Trust (3)
(2) By-Laws, as amended (3)
(3) Not Applicable
(4) Form of Agreement and Plan of Reorganization between Liberty
Newport Global Equity Fund and Liberty Newport Global
Utilities Fund
(5) Article III, Section 4, Article V, Section 1, Article VIII
Section 4 and Article IX Sections 1 and 7 of the Agreement
and Declaration of Trust, as amended, and Sections 2.1, 2.3
and 2.5 of the By-Laws, as amended, each define the rights
of shareholders
(6) Form of Management Agreement (Liberty Newport Global Utilities
Fund)(4)
(7)(a) Distribution Agreement (incorporated herein by reference to
Exhibit (e)(1) to Post-Effective Amendment No. 17 to the
Registration Statement of Liberty Funds Trust VI (formerly
Colonial Trust VI), Registration Nos. 33-45117 and 811-6529
filed with the Commission on May 24, 1999)
(b) Appendix I to the Distribution Agreement between the Registrant
and Liberty Funds Distributor, Inc. - filed as Exhibit (e)(2)
in Part C, Item 23 of Post-Effective Amendment No. 63 to the
Registration Statement on Form N-1A of Liberty Funds Trust I
(File Nos. 2-41251 & 811-2214), filed with the Commission on or
about July 19, 2000, and is hereby incorporated by reference
and made a part of this Registration Statement
(c) Form of Selling Agreement with Liberty Funds Distributor, Inc.
(incorporated herein by reference to Exhibit 6.(b) to Post-
Effective Amendment No. 49 to the Registration Statement
of Liberty Funds Trust VI (formerly Colonial Trust VI),
Registration Nos. 33-45117 and 811-6529 filed with the
Commission on November 10, 1998)
(d) Form of Asset Retention Agreement (incorporated herein by
reference to Exhibit 6(d) to Post-Effective Amendment No. 10
to the Registration Statement of Liberty Funds Trust VI
(formerly Colonial Trust VI), Registration Nos. 33-45117 and
811-6529, filed with the Commission on September 27, 1996)
(8) Discussion of trustee compensation is incorporated by reference
from the second paragraph under the sub-caption "Trustee
Compensation" in the Proxy/Prospectus filed herewith.
(9)(a) Global Custody Agreement with The Chase Manhattan Bank
(incorporated herein by reference to Exhibit 8. to Post-
Effective Amendment No. 13 to the Registration Statement of
Liberty Funds Trust VI (formerly Colonial Trust VI),
Registration Nos. 33-45117 and 811-6529, filed with the
Commission on or about October 24, 1997)
(b) Amendment No. 13 to Appendix A of Global Custody Agreement with
The Chase Manhattan Bank - filed as Exhibit (g)(2) in Part C,
Item 23 of Post-Effective Amendment No. 63 to the Registration
Statement on Form N-1A of Liberty Funds Trust I (File Nos.
2-41251 & 811-2214), filed with the Commission on or about July
19, 2000, and is hereby incorporated by reference and made a
part of this Registration Statement
(10)(a) Rule 12b-1 Distribution Plan - filed as Exhibit (m) in Part C,
Item 23 of Post-Effective Amendment No. 63 to the Registration
Statement on Form N-1A of Liberty Funds Trust I (File Nos.
2-41251 & 811-2214), filed with the Commission on or about July
19, 2000, and is hereby incorporated by reference and made a part
of this Registration Statement
(b) 12b-1 Plan Implementing Agreement between the Registrant and
Liberty Funds Distributor, Inc. - filed as Exhibit 6.(b) in Part
C, Item 24(b) of Post-Effective Amendment No. 17 to the
Registration Statement on Form N-1A of Liberty Funds Trust VI
(File Nos. 33-45117 and 811-6529), filed with the Commission on
or about May 24, 1999, and is hereby incorporated by reference
and made a part of this Registration Statement
(c) Appendix I to the 12b-1 Plan Implementing Agreement between
the Registrant and Liberty Funds Distributor, Inc. - filed as
Exhibit (e)(4) in Part C, Item 23 of Post-Effective Amendment No.
63 to the Registration Statement on Form N-1A of Liberty Funds
Trust I (File Nos. 2-41251 & 811-2214), filed with the Commission
on or about July 19, 2000, and is hereby incorporated by
reference and made a part of this Registration Statement
(d) Plan pursuant to Rule 18f-3(d) under the Investment Company Act
of 1940 - filed as Exhibit (o) in Part C, Item 23 of
Post-Effective Amendment No. 63 to the Registration Statement on
Form N-1A of Liberty Funds Trust I (File Nos. 2-41251 &
811-2214), filed with the Commission on or about July 19, 2000,
and is hereby incorporated by reference and made a part of this
Registration Statement
(11) Opinion and Consent of Counsel of Ropes & Gray with respect to
the Acquisition of Liberty Newport Global Equity Fund
(12) Opinion and Consent of Counsel on Tax Matters and
Consequences to Shareholders of Ropes & Gray with respect to the
Acquisition of Liberty Newport Global Equity Fund
(13) Not Applicable
(14) Consent of Independent Accountants (PWC)
(15) Not Applicable
(16)(a) Power of Attorney for: Tom Bleasdale, Lora S. Collins, James E.
Grinnell, Richard W. Lowry, Salvatore Macera, William E. Mayer,
James L. Moody, Jr., John J. Neuhauser, Thomas E. Stitzel and
Anne-Lee Verville - filed with Part C, Item 23 of Post-Effective
Amendment No. 62 to the Registration Statement on Form N-1A of
Liberty Funds Trust I (File Nos. 2-41251 and 811-2214), filed
with the Commission on or about May 17, 2000 and is hereby
incorporated by reference and made a part of this Registration
Statement
(b) Power of Attorney for Joseph R. Palombo - filed with Part C,
Item 23 of Post-Effective Amendment No. 27 to the Registration
Statement on Form N-1A of Liberty Funds Trust V (File Nos.
33-12109 and 811-5030), filed with the Commission on or about
August 31, 2000 and is hereby incorporated by reference and made
a part of this Registration Statement
(17)(a) Amended and Restated Shareholders' Servicing and Transfer Agent
Agreement as amended - filed as Exhibit 9(b) to Part C, Item
24(b) of Post-Effective Amendment No. 10 to the Registration
Statement on Form N-1A of Liberty Funds Trust VI (File Nos.
33-45117 and 811-6529), filed with the Commission on or about
September 27, 1996, and is hereby incorporated by reference and
made a part of this Registration Statement
(b) Amendment No. 18 to Schedule A of Amended and Restated
Shareholders' Servicing and Transfer Agent Agreement as amended
- filed as Exhibit (h)(2) in Part C, Item 23 of Post-Effective
Amendment No. 62 to the Registration Statement on Form N-1A of
Liberty Funds Trust I (File Nos. 2-41251 and 811-2214), filed
with the Commission on or about May 17, 2000, and is hereby
incorporated by reference and made a part of this Registration
Statement
(c) Amendment No. 23 to Appendix I of Amended and Restated
Shareholders' Servicing and Transfer Agent Agreement as amended
- filed as Exhibit (h)(3) in Part C, Item 23 of Post-Effective
Amendment No. 63 to the Registration Statement on Form N-1A of
Liberty Funds Trust I (File Nos. 2-41251 & 811-2214), filed with
the Commission on or about July 19, 2000, and is hereby
incorporated by reference and made a part of this Registration
Statement
(d) Pricing and Bookkeeping Agreement - filed as Exhibit 9(b) in
Part C, Item 24(b) of Post-Effective Amendment No. 10 to the
Registration Statement of Form N-1A of Liberty Funds Trust VI
(File Nos. 33-45117 and 811-6529) Filed with the Commission on or
about September 27, 1996, and is hereby incorporated by reference
and made a part of this Registration Statement
(e) Amendment to Appendix I of Pricing and Bookkeeping Agreement -
filed as Exhibit (h)(5) in Part C, Item 23 of Post-Effective
Amendment No. 63 to the Registration Statement on Form N-1A of
Liberty Funds Trust I (File Nos. 2-41251 & 811-2214), filed with
the Commission on or about July 19, 2000, and is hereby
incorporated by reference and made a part of this Registration
Statement
(f) Amended and Restated Credit Agreement with Bank of America -
filed as Exhibit (h)(8) in Part C, Item 23 of Post-Effective
Amendment No. 110 to the Registration Statement on Form N-1A of
Liberty Funds Trust III (File Nos. 2-15184 and 811-881), filed
with the Commission on or about August 12, 1999, and is hereby
incorporated by reference and made part of this Registration
Statement
(g) Amendment dated June 30, 2000 to the Amended and Restated Credit
Agreement with Bank of America filed as Exhibit (h)(8) in Part C,
Item 23 of Post-Effective Amendment No. 115 to the Registration
Statement on Form N-1A of Liberty Funds Trust III (File Nos.
2-15184 and 811-881), filed with the Commission on or about
October 4, 2000, and is hereby incorporated by reference and
made a part of this Registration Statement
(h) Code of Ethics of The Liberty Funds, Colonial Management
Associates, Inc., Stein Roe & Farnham Incorporated, Newport Fund
Management, Inc., Liberty Funds Distributor, Inc. - filed in
Part C, Item 23 of Post-Effective Amendment No. 27 to the
Registration Statement of Liberty Funds Trust V, (File Nos.
33-12109 and 811-5030), filed with the Commission on or about
August 31, 2000, and is hereby incorporated and made a part of
this Registration Statement
(i) Form of Proxy Card and Proxy Insert (Liberty Newport Global
Equity Fund)
(j) The following documents, each filed via EDGAR and listed with
their filing accession number, are incorporated by reference
into the Proxy/Prospectus and the Statement of Additional
Information for the funds referenced below:
o The Prospectus of the Global Equity Fund dated March 1, 2000 -
0000276716-00-000013
o As supplemented on June 5, 2000 - 0000021832-00-000097
o As supplemented on June 23, 2000 - 0000021832-00-000114
o As supplemented on and August 1, 2000 - 0000883163-00-000069
o The Statement of Additional Information of the Global Equity Fund dated
March 1, 2000 - 0000276716-00-000013
o As supplemented on June 5, 2000 - 0000021832-00-000097
o As supplemented on June 23, 2000 - 0000021832-00-000114
o As supplemented on August 21, 2000 - 0000021832-00-000188
o The Statement of Additional Information of the Global Utilities Fund dated
March 1, 2000 - 0000276716-00-000013
o As supplemented on June 5, 2000 - 0000021832-00-000099
o As supplemented on June 23, 2000 - 0000021832-00-000114
o As supplemented on August 21, 2000 - 0000021832-00-000188
o The Report of Independent Accountants and financial statements included in
the Annual Report to Shareholders of the Global Equity Fund dated October
31, 1999 - 0000950156-99-000770
o The financial statements included in the Global Equity Fund's Semi-Annual
Report to Shareholders dated April 30, 2000 - 0000950156-00-000339
o The Report of Independent Accountants and financial statements included in
the Annual Report to Shareholders of the Global Utilities Fund dated
October 31, 1999 - 0000950156-00-000022
o The financial statements included in the Global Utilities Fund's
Semi-Annual Report to Shareholders dated April 30, 2000 -
0000950156-00-000330
o The Statement of Additional Information of the Global Utilities Fund dated
November 17, 2000 relating to the Acquisition.
-----------------
(1) Incorporated by reference to Post-Effective Amendment No. 97 to Form N-1A
filed on or about February 13, 1997.
(2) Incorporated by reference to Post-Effective Amendment No. 104 to Form N-1A
filed on or about October 30, 1998.
(3) Incorporated by reference to Post-Effective Amendment No. 110 to Form N-1A
filed on or about August 12, 1999.
(4) Incorporated by reference to Post-Effective Amendment No. 109 to Form N-1A
filed on or about March 1, 1999.
Item 17. Undertakings
(1) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a
prospectus which is a part of this Registration Statement by any
person or party who is deemed to be an underwriter within the
meaning of Rule 145(c) of the Securities Act, the reoffering
prospectus will contain the information called for by the
applicable registration form for reofferings by persons who may be
deemed underwriters, in addition to the information called for by
the other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as a part of an
amendment to this Registration Statement and will not be used until
the amendment is effective, and that, in determining any liability
under the 1933 Act, each post-effective amendment shall be deemed
to be a new registration statement for the securities offered
therein, and the offering of the securities at that time shall be
deemed to be the initial bona fide offering of them.
<PAGE>
NOTICE
A copy of the Agreement and Declaration of Trust of Liberty Funds Trust III
(Trust), as amended, is on file with the Secretary of The Commonwealth of
Massachusetts and notice is hereby given that this Registration Statement has
been executed on behalf of the Trust by officers of the Trust as officers and by
its Trustees as trustees and not individually, and the obligations of or arising
out of this Registration Statement are not binding upon any of the Trustees,
officers or shareholders of the Trust individually but are binding only upon the
assets and property of Liberty Funds Trust III.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, this Registration Statement has been
signed on behalf of the Registrant, in the City of Boston and Commonwealth of
Massachusetts, on the 11th day of October, 2000.
LIBERTY FUNDS TRUST III
By:/s/STEPHEN E. GIBSON
---------------------------------
Stephen E. Gibson
President
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/STEPHEN E. GIBSON President (chief October 11, 2000
-----------------
Stephen E. Gibson executive officer)
/s/PAMELA A. MCGRATH Treasurer and Chief Financial Officer October 11, 2000
-----------------
Pamela A. McGrath (principal financial and accounting
officer)
<PAGE>
/s/TOM BLEASDALE* Trustee
-------------------
Tom Bleasdale
/s/LORA S. COLLINS* Trustee
-------------------
Lora S. Collins
/s/JAMES E. GRINNELL* Trustee
---------------------
James E. Grinnell
/s/RICHARD W. LOWRY* Trustee
--------------------
Richard W. Lowry
/s/SALVATORE MACERA* Trustee
--------------------
Salvatore Macera
*/s/ WILLIAM J. BALLOU
----------------------
William J. Ballou
/s/WILLIAM E. MAYER* Trustee Attorney-in-fact
-------------------- For each Trustee
William E. Mayer October 11, 2000
/s/JAMES L. MOODY, JR. * Trustee
------------------------
James L. Moody, Jr.
/s/JOHN J. NEUHAUSER* Trustee
---------------------
John J. Neuhauser
/s/JOSEPH R. PALOMBO* Trustee
---------------------
Joseph R. Palombo
/s/THOMAS E. STITZEL* Trustee
---------------------
Thomas E. Stitzel
/s/ANNE-LEE VERVILLE* Trustee
---------------------
Anne-Lee Verville
EXHIBIT INDEX
Exhibit Item
(4) Form of Agreement and Plan of Reorganization between Liberty
Newport Global Equity Fund and Liberty Newport Global
Utilities Fund
(11) Opinion and Consent of Counsel of Ropes & Gray with respect to
the Acquisition of Liberty Newport Global Equity Fund
(12) Opinion and Consent of Counsel on Tax Matters and
Consequences to Shareholders of Ropes & Gray with respect to the
Acquisition of Liberty Newport Global Equity Fund
(14) Consent of Independent Accountants (PWC)
(17)(i) Form of Proxy Card and Proxy Insert (Liberty Newport Global
Equity Fund)
