As filed with the Securities and Exchange Commission on October 5, 2000
Registration No. 33-
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------------
__Pre-Effective Amendment No. ____ __Post-Effective Amendment No. ____
(Check appropriate box or boxes)
---------------------------
LIBERTY FUNDS TRUST IV *
(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 Agent 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 4, 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 Tax-Exempt 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 8, 2000
[Job Code]
<PAGE>
NOTICE OF SPECIAL MEETINGS OF SHAREHOLDERS TO BE HELD
DECEMBER 19, 2000
LIBERTY FUNDS TRUST V
LIBERTY FLORIDA TAX-EXEMPT FUND
LIBERTY MICHIGAN TAX-EXEMPT FUND
LIBERTY MINNESOTA TAX-EXEMPT FUND
LIBERTY NORTH CAROLINA TAX-EXEMPT FUND
LIBERTY FUNDS TRUST III
LIBERTY OREGON TAX-FREE FUND
NOTICE IS HEREBY GIVEN that Special Meetings of the shareholders of the
above listed Funds (collectively, the "Acquired Funds") will be held at 10:00
a.m. on Tuesday, December 19, 2000 at the offices of Colonial Management
Associates, Inc., One Financial Center, Boston, Massachusetts 02111 for these
purposes:
1. SHAREHOLDERS OF THE LIBERTY FLORIDA TAX-EXEMPT FUND VOTE: To
approve an Agreement and Plan of Reorganization providing for
the sale of all of the assets of the Liberty Florida
Tax-Exempt Fund to, and the assumption of all of the
liabilities of the Liberty Florida Tax-Exempt Fund by, the
Liberty Tax-Exempt Fund in exchange for shares of the Liberty
Tax-Exempt Fund and the distribution of such shares to the
shareholders of the Liberty Florida Tax-Exempt Fund in
complete liquidation of the Liberty Florida Tax-Exempt Fund.
2. SHAREHOLDERS OF THE LIBERTY MICHIGAN TAX-EXEMPT FUND VOTE: To
approve an Agreement and Plan of Reorganization providing for
the sale of all of the assets of the Liberty Michigan
Tax-Exempt Fund to, and the assumption of all of the
liabilities of the Liberty Michigan Tax-Exempt Fund by, the
Liberty Tax-Exempt Fund in exchange for shares of the Liberty
Tax-Exempt Fund and the distribution of such shares to the
shareholders of the Liberty Michigan Tax-Exempt Fund in
complete liquidation of the Liberty Michigan Tax-Exempt Fund.
3. SHAREHOLDERS OF THE LIBERTY MINNESOTA TAX-EXEMPT FUND VOTE: To
approve an Agreement and Plan of Reorganization providing for
the sale of all of the assets of the Liberty Minnesota
Tax-Exempt Fund to, and the assumption of all of the
liabilities of the Liberty Minnesota Tax-Exempt Fund by, the
Liberty Tax-Exempt Fund in exchange for shares of the Liberty
Tax-Exempt Fund and the distribution of such shares to the
shareholders of the Liberty Minnesota Tax-Exempt Fund in
complete liquidation of the Liberty Minnesota Tax-Exempt Fund.
4. SHAREHOLDERS OF THE LIBERTY NORTH CAROLINA TAX-EXEMPT FUND
VOTE: To approve an Agreement and Plan of Reorganization
providing for the
<PAGE>
sale of all of the assets of the Liberty North Carolina
Tax-Exempt Fund to, and the assumption of all of the
liabilities of the Liberty North Carolina Tax-Exempt Fund by,
the Liberty Tax-Exempt Fund in exchange for shares of the
Liberty Tax-Exempt Fund and the distribution of such shares to
the shareholders of the Liberty North Carolina Tax-Exempt Fund
in complete liquidation of the Liberty North Carolina
Tax-Exempt Fund.
5. SHAREHOLDERS OF THE OREGON TAX-FREE FUND VOTE: To approve an
Agreement and Plan of Reorganization providing for the sale of
all of the assets of the Oregon Tax-Free Fund to the Liberty
Tax-Exempt Fund in exchange for shares of the Liberty
Tax-Exempt Fund and the assumption of all of the liabilities
of the Oregon Tax-Free Fund and the distribution of such
shares to the shareholders of the Oregon Tax-Free Fund in
complete liquidation of the Oregon Tax-Free Fund.
6. SHAREHOLDERS OF EACH ACQUIRED FUND VOTE: To elect eleven
Trustees.
7. 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!
-2-
<PAGE>
COMBINED PROSPECTUS AND PROXY STATEMENT
NOVEMBER 8, 2000
ACQUISITION OF THE ASSETS AND LIABILITIES OF EACH OF
LIBERTY FLORIDA TAX-EXEMPT FUND
LIBERTY MICHIGAN TAX-EXEMPT FUND
LIBERTY MINNESOTA TAX-EXEMPT FUND
LIBERTY NORTH CAROLINA TAX-EXEMPT FUND
c/o Liberty Funds Trust V
One Financial Center
Boston, Massachusetts 02111
1-800-426-3750
AND
LIBERTY OREGON TAX-FREE 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 TAX-EXEMPT FUND
c/o Liberty Funds Trust IV
One Financial Center
Boston, Massachusetts 02111
1-800-426-3750
TABLE OF CONTENTS
Synopsis........................................................................
Proposal 1 - Acquisition of the Liberty Florida Tax-Exempt Fund by
the Liberty Tax-Exempt Fund.........................................
Principal Investment Risks...................................................
Information about the Acquisition............................................
Proposal 2 - Acquisition of the Liberty Michigan Tax-Exempt Fund by
the Liberty Tax-Exempt Fund.........................................
Principal Investment Risks...................................................
Information about the Acquisition............................................
Proposal 3 - Acquisition of the Liberty Minnesota Tax-Exempt Fund by
the Liberty Tax-Exempt Fund..........................................
Principal Investment Risks...................................................
Information about the Acquisition............................................
Proposal 4 - Acquisition of the Liberty North Carolina Tax-Exempt Fund by
<PAGE>
the Liberty Tax-Exempt Fund..........................................
Principal Investment Risks...................................................
Information about the Acquisition............................................
Proposal 5 - Acquisition of the Liberty Oregon Tax-Free Fund by
the Liberty Tax-Exempt Fund..........................................
Principal Investment Risks...................................................
Information about the Acquisition............................................
Information Applicable to Proposals 1 through 5.................................
Proposal 6 - Election of Trustees...............................................
General.........................................................................
Voting Information...........................................................
Appendix A - Form of Agreement and Plan of Reorganization.......................
Appendix B - Fund Information...................................................
Appendix C - Capitalization.....................................................
Appendix D - Management's Discussion of Fund Performance for the Liberty
Tax-Exempt Fund..............................................
This combined Prospectus/Proxy Statement contains information you should know
before voting on the proposed acquisition of the Liberty Florida Tax-Exempt Fund
(the "Florida Fund"), the Liberty Michigan Tax-Exempt Fund (the "Michigan
Fund"), the Liberty Minnesota Tax-Exempt Fund (the "Minnesota Fund"), the
Liberty North Carolina Tax-Exempt Fund (the "North Carolina Fund") and the
Liberty Oregon Tax-Free Fund (the "Oregon Fund") (each, an "Acquired Fund," and
together, the "Acquired Funds") by the Liberty Tax-Exempt Fund (the "National
Fund") (each, an "Acquisition," and together, the "Acquisitions") or voting on
the other proposals to be considered at a Special Meeting of Shareholders of
each Acquired Fund (the "Meetings"), which will be held at 10:00 a.m. Eastern
Time on December 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 Florida Fund by the National Fund. Proposal 2 in this
Prospectus/Proxy Statement relates to the proposed acquisition of the Michigan
Fund by the National Fund. Proposal 3 in this Prospectus/Proxy Statement relates
to the proposed acquisition of the Minnesota Fund by the National Fund. Proposal
4 in this Prospectus/Proxy Statement relates to the proposed acquisition of the
North Carolina Fund by the National Fund. Proposal 5 in this Prospectus/Proxy
Statement relates to the proposed acquisition of the Oregon Fund by the National
Fund. If the Acquisition of your fund occurs, you will become a shareholder of
the National Fund. The National Fund seeks as high a level of after-tax total
return as is consistent with prudent risk, by pursuing current income exempt
from federal income tax and opportunities for long-term appreciation. If the
Agreement and Plan of Reorganization is approved by the shareholders of your
Fund and the Acquisitions occur, your Fund will transfer all of the assets and
liabilities attributable to each class of its shares to the National 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 each Acquired Fund will be distributed pro rata to its
shareholders of the same class.
-2-
<PAGE>
Proposal 6 in this Prospectus/Proxy Statement relates to the election of
Trustees of each of Liberty Funds Trust V ("Trust V"), of which the Florida
Fund, the Michigan Fund, the Minnesota Fund and the North Carolina Fund are
series, and of Liberty Funds Trust III ("Trust III") (together, the "Liberty
Trusts"), of which the Oregon Fund is a series.
If you are a shareholder of the Florida Fund, you are being asked to vote on
Proposals 1 and 6 in this Prospectus/Proxy Statement. If you are a shareholder
of the Michigan Fund, you are being asked to vote on Proposals 2 and 6 in this
Prospectus/Proxy Statement. If you are a shareholder of the Minnesota Fund, you
are being asked to vote on Proposals 3 and 6 in this Prospectus/Proxy Statement.
If you are a shareholder of the North Carolina Fund, you are being asked to vote
on Proposals 4 and 6 in this Prospectus/Proxy Statement. If you are a
shareholder of the Oregon Fund, you are being asked to vote on Proposals 5 and 6
in this Prospectus/Proxy Statement. All shareholders should review these
Proposals carefully, as well as the section "Information Applicable to Proposals
1 through 5."
Please review the enclosed Prospectus of the National 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 each of the Florida Fund, the Michigan Fund, the
Minnesota Fund and the North Carolina Fund dated June 1, 2000, as
supplemented on June 23, 2000 and September 12, 2000.
- The Prospectus of the Oregon Fund dated March 1, 2000, as
supplemented on June 23, 2000 and August 1, 2000.
- The Statement of Additional Information of each of the Florida Fund,
the Michigan Fund, the Minnesota Fund and the North Carolina Fund
dated June 1, 2000, as supplemented on June 23, 2000 and August 21,
2000.
- The Statement of Additional Information of the Oregon Fund dated
March 1, 2000, as supplemented on June 23, 2000 and August 21, 2000.
- The Statement of Additional Information of the National Fund dated
April 1, 2000, as supplemented on June 23, 2000 and August 18, 2000.
- The Report of Independent Accountants and financial statements
included in the Annual Report to Shareholders of each of the Florida
Fund, the Michigan Fund, the Minnesota Fund and the North Carolina
Fund dated January 31, 2000.
- The financial statements included in the Florida, Michigan,
Minnesota and North Carolina Funds' Semi-Annual Report to
Shareholders dated July 31, 2000.
- The Report of Independent Accountants and financial statements
included in the Annual Report to Shareholders of the Oregon Fund
dated October 31, 1999.
-3-
<PAGE>
- The financial statements included in the Oregon Fund's Semi-Annual
Report to Shareholders dated April 30, 2000.
- The Statement of Additional Information of the National Fund dated
November 8, 2000 relating to the Acquisitions.
Each Acquired Fund has previously sent its Annual Report and, as
applicable, Semi-Annual Report to its shareholders. For a free copy of these
Reports or any of the documents listed above, please call 1-800-426-3750 or
write to your Fund at One Financial Center, Boston, Massachusetts 02111-2621.
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., your Fund's transfer agent, at 1-800-528-6979 if you have
special TTD equipment. Text-only versions of all the Acquired Fund and National
Fund documents can be viewed online or downloaded from the Edgar database on the
SEC's internet site at www.sec.gov. You can review and copy information about
the Funds by visiting the following location, and you can obtain copies, upon
payment of a duplicating fee, by 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 NATIONAL FUND OR
DETERMINED WHETHER THIS PROSPECTUS/PROXY STATEMENT IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-4-
<PAGE>
SYNOPSIS
THE FOLLOWING QUESTIONS AND RESPONSES PROVIDE AN OVERVIEW OF KEY FEATURES
OF THE ACQUISITIONS AND OF THE OTHER MATTERS TO BE CONSIDERED AT THE
MEETINGS AND OF THE INFORMATION CONTAINED IN THIS COMBINED
PROSPECTUS/PROXY STATEMENT. PLEASE REVIEW THE FULL PROSPECTUS/PROXY
STATEMENT PRIOR TO CASTING YOUR VOTE, AS THIS SECTION IS ONLY A
SYNOPSIS OF THE COMPLETE DOCUMENT.
1. WHAT IS BEING PROPOSED?
First, the Trustees of Trust V are recommending in Proposal 1 that the
National Fund acquire the Florida Fund, in Proposal 2 that the National
Fund acquire the Michigan Fund, in Proposal 3 that the National Fund
acquire the Minnesota Fund, in Proposal 4 that the National Fund acquire
the North Carolina Fund, and in Proposal 5 that the National Fund acquire
the Oregon Fund. This means that the National Fund would acquire all of
the assets and liabilities of each of the Acquired Funds in exchange for
shares of the National Fund representing the aggregate net asset value of
each Acquired Fund's assets and liabilities. If a Proposal is approved,
you will receive shares of the National 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 Acquisitions. The Acquisitions are
currently scheduled to take place on or around January 22, 2001. Note that
the closing of each Acquisition is not conditioned on the closing of the
other Acquisitions proposed in this Prospectus/Proxy Statement.
Accordingly, in the event that the shareholders of one of the Acquired
Funds approves their Fund's Acquisition, it is expected that the approved
Acquisition will, subject to the terms of the Agreement and Plan of
Reorganization, take place as described in this Prospectus/Proxy, even if
the shareholders of another Acquired Fund have not approved their Fund's
Acquisition.
In addition, the Trustees of each Acquired Fund are recommending in
Proposal 6 that you vote in favor of eleven nominees for Trustees.
2. WHY ARE THE ACQUISITIONS BEING PROPOSED?
The Trustees of each Acquired Fund recommend approval of the Acquisitions
because they offer shareholders of each Acquired Fund an investment in a
larger, more diversified fund which earns and distributes tax-exempt
income. In reviewing the Acquisitions, the Trustees also considered:
- the expected reduction in the fees and expenses payable by the
Michigan Fund, the Minnesota Fund and the North Carolina Fund as a
result of the Acquisitions;
- the expected reduction in the fees and expenses payable by the Oregon
Fund as a result of the Acquisition, assuming the Oregon Fund's
investment advisor declined to continue the voluntary fee waiver or
expense reimbursement in effect with respect to the Fund;
- that it is unlikely the Acquired Funds will achieve scale through
sales growth; and
- the tax-free nature of the Acquisitions as opposed to other
alternatives for the Funds and for shareholders and other tax
considerations.
The Trustees also considered the Acquired Fund shareholders' potential
loss of all or a portion of the state tax exemption from income earned
from the Fund. Please review "Reasons for the Acquisition" in Proposals 1
through 5 of this Prospectus/Proxy Statement for a full description of the
factors considered by the Trustees.
-5-
<PAGE>
3. WHAT CLASS OF SHARES WILL YOU RECEIVE IN THE NATIONAL FUND IF THE
ACQUISITIONS OCCUR?
You will receive the same class of shares that you currently own in your
Acquired 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. HOW DO THE INVESTMENT GOALS, STRATEGIES AND POLICIES OF EACH ACQUIRED FUND
AND THE NATIONAL FUND COMPARE?
This table shows the investment goals and primary investment strategies of
each Fund:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
FLORIDA FUND MICHIGAN FUND
--------------------------------------------------------------------------------
<S> <C>
INVESTMENT GOALS: The INVESTMENT GOALS: The
Florida Fund seeks as high a Michigan Fund seeks as high a
level of after-tax total level of after-tax total
return as is consistent with return as is consistent with
prudent risk. prudent risk.
--------------------------------------------------------------------------------
PRIMARY INVESTMENT STRATEGIES: PRIMARY INVESTMENT STRATEGIES:
The Florida Fund seeks to The Michigan Fund seeks to
achieve its goals as follows: achieve its goals as follows:
- The Fund invests primarily - The Fund invests primarily
in investment grade in investment grade
municipal bonds, the municipal bonds, the
interest on which is interest on which is exempt
exempt from federal and from federal and Michigan
Florida income tax. income tax.
- The Fund invests at least - The Fund invests at least 80% of total
80% of total assets in assets in tax-exempt securities.
tax-exempt securities. - The Fund may invest up to
- The Fund may invest in 25% of total assets in
municipal bonds not issued lower rated debt.
by the State of Florida as
long as they are exempt
from Florida's intangibles
tax.
- The Fund may invest up to
25% of total assets in
lower rated debt
securities.
--------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
MINNESOTA FUND NORTH CAROLINA FUND
--------------------------------------------------------------------------------
<S> <C>
INVESTMENT GOALS: The INVESTMENT GOALS: The North
Minnesota Fund seeks as high Carolina Fund seeks as high a
a level of after-tax total level of after-tax total
return as is consistent with return as is consistent with
prudent risk. prudent risk.
--------------------------------------------------------------------------------
PRIMARY INVESTMENT STRATEGIES: PRIMARY INVESTMENT STRATEGIES:
The Minnesota Fund seeks to The North Carolina Fund seeks
</TABLE>
-6-
<PAGE>
<TABLE>
<S> <C>
achieve its goals as follows: to achieve its goals
- The Fund invests primarily as follows
in investment grade - The Fund invests primarily
municipal bonds, the in investment grade
interest on which is municipal bonds, the
exempt from federal and interest on which is exempt
Minnesota income tax. from federal and North
- The Fund invests at least Carolina income tax.
80% of total assets in - The Fund invests at least
tax-exempt securities. 80% of total assets in
- The Fund invests so that tax-exempt securities.
at least 95% of its - The Fund may invest up to
exempt-interest dividends 25% of total assets in
are derived from Minnesota lower rated debt securities.
sources.
- The Fund may invest up to
25% of total assets in
lower rated debt
securities.
--------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
OREGON FUND NATIONAL FUND
--------------------------------------------------------------------------------
<S> <C>
INVESTMENT GOALS: The Oregon INVESTMENT GOALS: The National
Fund seeks a high level of Fund seeks as high a level of
income exempt from federal and after-tax total return as is
Oregon income taxes as is consistent with prudent risk,
consistent with prudent by pursuing current income exempt from
investment management and federal income tax and opportunities for
the preservation of capital. long-term appreciation.
--------------------------------------------------------------------------------
PRIMARY INVESTMENT STRATEGIES: PRIMARY INVESTMENT STRATEGIES:
The Oregon Fund seeks to The National Fund seeks to
achieve its goals as follows: achieve its goals as follows:
- At least 80% of the - The Fund invests at least
Fund's total assets will 65% of total assets in
be invested in municipal investment grade tax-exempt
bonds, the interest on bonds.
which is exempt from - The Fund may purchase bonds
federal and Oregon income of any maturity.
taxes. - The Fund may invest up to
- At least 65% of the 35% of total assets in any
Fund's total assets will combination of the following
be invested in municipal (not including pre-refunded
bonds issued by the State bonds): (i) bonds rated
of Oregon. below investment grade and
- The Fund invests primarily (ii) bonds that are not
in investment grade rated, provided that total
securities. investment in unrated bonds
does not exceed 25%.
--------------------------------------------------------------------------------
</TABLE>
The investment policies of each of the Acquired Funds, on the one hand,
and the National Fund, on the other hand, are similar, except the National
Fund is a diversified fund, while the Acquired Funds are non-diversified
funds, and the Oregon Fund, unlike each of the other Acquired Funds and
the National Fund, is not subject to the restriction that each fund may
not invest more than 20% of its assets in bonds subject to the federal
alternative minimum tax. There are also certain other minor differences
among the non-fundamental policies of the
-7-
<PAGE>
Funds. In addition, each of the Acquired Funds utilizes investment
strategies designed to result in federal and state tax exemptions for some
or all of the interest income earned by the Fund and distributed to
shareholders, while the National Fund utilizes investment strategies
designed to result in federal tax exemptions for some or all of the
interest income earned by the Fund and distributed to shareholders.
Therefore, unlike the Acquired Funds, the National Fund is not required
to, and does not, seek specific state tax exemptions for the interest
income received by the Fund and distributed to shareholders.
5. HOW DO THE MANAGEMENT FEES AND EXPENSES OF THE FUNDS COMPARE AND WHAT ARE
THEY ESTIMATED TO BE FOLLOWING THE ACQUISITIONS?
The following tables allow you to compare the sales charges and management
fees and expenses of each Acquired Fund and the National Fund and to
analyze the estimated expenses that Colonial expects the combined fund to
bear in the first year following the Acquisitions. 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 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 the Oregon Fund
for its last fiscal year ended October 31, 1999; the Florida, Michigan,
Minnesota and North Carolina Funds for their last fiscal years ended
January 31, 2000; and the National Fund for its last fiscal year ended
November 30, 1999.
Detailed pro forma combined expense information presented in the Annual
Fund Operating Expenses table below for the combined fund is provided
based on the assumption that the National Fund acquires all the Acquired
Funds. In addition, following the presentation of that detailed
information, the total Annual Fund Operating Expenses are presented on a
pro forma combined basis for each possible scenario in which the National
Fund acquires one or more, but not all, of the Acquired Funds.
SHAREHOLDER FEES(1)
(paid directly from your investment)
<TABLE>
<CAPTION>
FLORIDA FUND MICHIGAN 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) 4.75 0.00 0.00 4.75 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>
-8-
<PAGE>
<TABLE>
<CAPTION>
MINNESOTA FUND NORTH CAROLINA 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) 4.75 0.00 0.00 4.75 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>
<TABLE>
<CAPTION>
OREGON FUND NATIONAL FUND
----------------- ----------------------------
CLASS A CLASS B CLASS A CLASS B CLASS C
<S> <C> <C> <C> <C> <C>
Maximum sales charge
(load) on purchases
(%) (as a percentage
of the offering price) 4.75 0.00 4.75 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(2) 5.00 1.00
--------------------------------------------------------------------------------
Redemption fee (%)
(as a percentage of
amount redeemed, if
applicable) (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>
FLORIDA FUND MICHIGAN FUND
------------------- -------------------
CLASS CLASS CLASS CLASS CLASS CLASS
A B C A B C
<S> <C> <C> <C> <C> <C> <C>
Management fee(4) (%) 0.50 0.50 0.50 0.50 0.50 0.50
-----------------------------------------------------------------
Distribution and
service (12b-1) fees
(5) (6) (%) 0.19 0.94 0.94 0.18 0.93 0.93
-----------------------------------------------------------------
Other expenses (4)(%) 0.34 0.34 0.34 0.36 0.36 0.36
-----------------------------------------------------------------
Total annual fund
operating expenses
(4) (6) (%) 1.03 1.78 1.78 1.04 1.79 1.79
</TABLE>
<TABLE>
<CAPTION>
MINNESOTA FUND NORTH CAROLINA FUND
------------------- -------------------
CLASS CLASS CLASS CLASS CLASS CLASS
A B C A B C
<S> <C> <C> <C> <C> <C> <C>
Management fee (%) 0.50 0.50 0.50 0.50 0.50 0.50
-----------------------------------------------------------------
Distribution and
service (12b-1) fees
(5)(6) (%) 0.19 0.94 0.94 0.19 0.94 0.94
-----------------------------------------------------------------
Other expenses (%) 0.37 0.37 0.37 0.43 0.43 0.43
-----------------------------------------------------------------
Total annual fund
operating expenses
(6) (%) 1.06 1.81 1.81 1.12 1.87 1.87
</TABLE>
-9-
<PAGE>
<TABLE>
<CAPTION>
OREGON FUND NATIONAL FUND
---------------- --------------------
CLASS CLASS CLASS CLASS CLASS
A B A B C
<S> <C> <C> <C> <C> <C>
Management fee(7) (%) 0.55 0.55 0.51 0.51 0.51
-----------------------------------------------------------------
Distribution and
service (12b-1) fees
(6) (%) 0.25 1.00 0.25 1.00 1.00
-----------------------------------------------------------------
Other expenses(7) (%) 0.50 0.50 0.22 0.22 0.22
-----------------------------------------------------------------
Total annual fund
operating expenses
(6)(7) (%) 1.30 2.05 0.98 1.73 1.73
</TABLE>
<TABLE>
<CAPTION>
NATIONAL FUND(9)
-------------------
(PRO FORMA
COMBINED)
CLASS CLASS CLASS
A B C
<S> <C> <C> <C>
Management fee (%) 0.52 0.52 0.52
--------------------------------------------
Distribution and
service(8)(10)(12b-1)
fees (%) 0.25 1.00 1.00
--------------------------------------------
Other expenses (%) 0.23 0.23 0.23
--------------------------------------------
Total annual fund
operating expenses (6)
(%) 1.00 1.75 1.75
</TABLE>
--------
(4) The Florida 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 0.75%. As a result, the actual management fee for each share class
would be 0.41% and total annual fund operating expenses for Class A, B and
C shares would be 0.94%, 1.69% and 1.39%, respectively. This arrangement
may be modified or terminated by the advisor at any time.
(5) With respect to the Florida Fund, the Michigan Fund, the Minnesota Fund and
the North Carolina Fund, the annual service fee portion of the 12b-1 fee
may equal up to 0.10% on net assets attributable to shares issued prior to
December 1, 1994 and 0.25% on net assets attributable to shares issued
thereafter. This arrangement results in a rate of service fee that is a
blend between the 0.10% and 0.25% rates.
(6) The distributor of the National Fund, the Florida Fund, the Michigan Fund,
the Minnesota Fund and the North Carolina Fund has voluntarily agreed to
waive a portion of the 12b-1 fee for Class C shares. As a result, the
actual 12b-1 fee would be 0.85% for National Fund Class C shares, 0.64% for
Florida Fund, Minnesota Fund and North Carolina Fund Class C shares, and
0.63% for Michigan Fund Class C shares; and the total annual fund operating
expenses would be 1.58% for National Fund Class C shares, 1.39% for Florida
Fund Class C shares, 1.49% for Michigan Fund Class C shares, 1.51% for
Minnesota Fund Class C shares, and 1.57% for North Carolina Fund Class C
shares. This arrangement may be modified or terminated by the distributor
at any time.
(7) The Oregon Fund's advisor and administrator have voluntarily agreed to
waive advisory and administration 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 0.73%. As a result, the
actual management and administration fees for each share class would be
0.23%, other expenses for each share class would be 0.50%, and total annual
fund operating expenses for Class A and Class B shares would be 0.98% and
1.73%, respectively. This arrangement may be modified or terminated by the
advisor or administrator at any time.
(8) The distributor of the National Fund has voluntarily agreed to waive a
portion of the 12b-1 fee for Class C shares. As a result, the actual 12b-1
fee would be 0.85% and the total annual fund operating expenses would be
1.60% for Class C shares. This arrangement may be modified or terminated by
the distributor at any time.
(9) The pro forma combined total annual fund operating expenses detailed above
and the Example Expenses detailed below assume that each Fund approves the
Acquisition. Which Funds approve the Acquisition will affect the total
annual fund operating expenses of the Acquiring Fund on a pro forma
combined basis after the Acquisition. The tables below present the pro
forma combined total annual operating expenses and Example Expenses
assuming in each case only one of the five Acquired Funds were to approve
the Acquisition. If more than one, but less than all, of the Acquired Funds
were to approve the Acquisition, the pro forma combined total annual
operating expenses and Example Expenses after the Acquisition would be
between the percentages or amounts presented in this footnote and those
presented in the respective tables.
(10) With respect to the National Fund, the annual service fee portion of the
12b-1 fee may equal up to 0.10% on net assets attributable to shares of the
National Fund issued in exchange for shares of the Florida Fund, the
Michigan Fund, the Minnesota Fund and the North Carolina Fund issued prior
to December 1, 1994 and 0.25% on net assets attributable to shares of the
National Fund issued in exchange for shares of the Florida Fund, the
Michigan Fund, the Minnesota Fund and the North Carolina Fund issued
thereafter as well as on net assets attributable to shares issued in
exchange for shares of the Oregon Fund and shares of the National Fund
issued prior to the merger date and subsequent to the completion of the
Acquisitions. This arrangement results in a service fee rate that is a
blend between the 0.10% and 0.25% rates.
If only the Oregon Fund were to approve the Acquisition, the total annual
fund operating expenses would be as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Management fee (&) 0.53 0.53 0.53
Distribution & Service (6) (12b-1) fees (%) 0.25 1.00 1.00
Other Expenses (%) 0.23 0.23 0.23
----------------------------------------
Total annual fund operating expenses (6) (%) 1.01 1.76 1.76
<CAPTION>
NATIONAL FUND (PRO FORMA COMBINED) 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $573 $781 $1,006 $1,653
Class B: did not sell your shares $179 $554 $ 954 $1,875
sold all your shares at end of period $679 $854 $1,154 $1,875
Class C: did not sell your shares $179 $554 $ 954 $2,073
sold all your shares at end of period $279 $554 $ 954 $2,073
</TABLE>
If only the Florida Fund were to approve the Acquisition, the total annual
fund operating expenses would be as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Management fee (&) 0.53 0.53 0.53
Distribution & Service (6) (12b-1) fees (%) 0.25 1.00 1.00
Other Expenses (%) 0.23 0.23 0.23
----------------------------------------
Total annual fund operating expenses (6) (%) 1.01 1.76 1.76
<CAPTION>
NATIONAL FUND (PRO FORMA COMBINED) 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $573 $781 $1,006 $1,653
Class B: did not sell your shares $179 $554 $ 954 $1,875
sold all your shares at end of period $679 $854 $1,154 $1,875
Class C: did not sell your shares $179 $554 $ 954 $2,073
sold all your shares at end of period $279 $554 $ 954 $2,073
</TABLE>
If only the Michigan Fund were to approve the Acquisition, the total
annual fund operating expenses would be as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Management fee (&) 0.53 0.53 0.53
Distribution & Service (6) (12b-1) fees (%) 0.25 1.00 1.00
Other Expenses (%) 0.23 0.23 0.23
----------------------------------------
Total annual fund operating expenses (6) (%) 1.01 1.76 1.76
<CAPTION>
NATIONAL FUND (PRO FORMA COMBINED) 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $573 $781 $1,006 $1,653
Class B: did not sell your shares $179 $554 $ 954 $1,875
sold all your shares at end of period $679 $854 $1,154 $1,875
Class C: did not sell your shares $179 $554 $ 954 $2,073
sold all your shares at end of period $279 $554 $ 954 $2,073
</TABLE>
If only the Minnesota Fund were to approve the Acquisition, the total
annual fund operating expenses would be as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Management fee (&) 0.53 0.53 0.53
Distribution & Service (6) (12b-1) fees (%) 0.25 1.00 1.00
Other Expenses (%) 0.23 0.23 0.23
----------------------------------------
Total annual fund operating expenses (6) (%) 1.01 1.76 1.76
<CAPTION>
NATIONAL FUND (PRO FORMA COMBINED) 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $573 $781 $1,006 $1,653
Class B: did not sell your shares $179 $554 $ 954 $1,875
sold all your shares at end of period $679 $854 $1,154 $1,875
Class C: did not sell your shares $179 $554 $ 954 $2,073
sold all your shares at end of period $279 $554 $ 954 $2,073
</TABLE>
If only the North Carolina Fund were to approve the Acquisition, the total
annual fund operating expenses would be as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Management fee (&) 0.53 0.53 0.53
Distribution & Service (6) (12b-1) fees (%) 0.25 1.00 1.00
Other Expenses (%) 0.23 0.23 0.23
----------------------------------------
Total annual fund operating expenses (6) (%) 1.01 1.76 1.76
<CAPTION>
NATIONAL FUND (PRO FORMA COMBINED) 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $573 $781 $1,006 $1,653
Class B: did not sell your shares $179 $554 $ 954 $1,875
sold all your shares at end of period $679 $854 $1,154 $1,875
Class C: did not sell your shares $179 $554 $ 954 $2,073
sold all your shares at end of period $279 $554 $ 954 $2,073
</TABLE>
-10-
<PAGE>
(10) With respect to the National Fund, the annual service fee portion of the
12b-1 fee may equal up to 0.10% on net assets attributable to shares of the
National Fund issued in exchange for shares of the Florida Fund, the Michigan
Fund, the Minnesota Fund and the North Carolina Fund issued prior to December 1,
1994 and 0.25% on net assets attributable to shares of the National Fund issued
in exchange for shares of the Florida Fund, the Michigan Fund, the Minnesota
Fund and the North Carolina Fund issued thereafter as well as on net assets
attributable to shares issued in exchange for shares of the Oregon Fund and
shares of the National Fund issued prior to the merger date. This arrangement
results in a service fee rate that is a blend between the 0.10% and 0.25% rates
and subsequent to completion of the Acquisition.
EXAMPLE EXPENSES
Example Expenses help you compare the cost of investing in your Acquired Fund
and the National 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>
FLORIDA FUND
Class A $575 $787 $1,017 $1,675
Class B: did not sell
your shares $181 $560 $ 964 $1,897
sold all your
shares at end
of period $681 $860 $1,164 $1,897
Class C: did not sell
your shares $181 $560 $ 964 $2,095
sold all your
shares at end
of period $281 $560 $ 964 $2,095
MICHIGAN FUND
Class A $576 $790 $1,022 $1,686
Class B: did not sell
your shares $182 $563 $ 970 $1,908
sold all your
shares at end
of period $682 $863 $1,170 $1,908
Class C: did not sell
your shares $182 $563 $ 970 $2,105
sold all your
shares at end
of period $282 $563 $ 970 $2,105
MINNESOTA FUND
Class A $578 $796 $1,032 $1,708
Class B: did not sell
your shares $184 $569 $ 980 $1,930
sold all your
shares at end
of period $684 $869 $1,180 $1,930
Class C: did not sell
your shares $184 $569 $ 980 $2,127
</TABLE>
-11-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
sold all your
shares at end
of period $284 $569 $ 980 $2,127
NORTH CAROLINA FUND
Class A $584 $814 $1,063 $1,773
Class B: did not sell
your shares $190 $588 $1,011 $1,995
sold all your
shares at end
of period $690 $888 $1,211 $1,995
Class C: did not sell
your shares $190 $588 $1,011 $2,190
sold all your
shares at end
of period $290 $588 $1,011 $2,190
OREGON FUND
Class A $601 $868 $1,154 $1,968
Class B: did not sell
your shares $208 $643 $1,103 $2,187
sold all your
shares at end
of period $708 $943 $1,303 $2,187
NATIONAL FUND
Class A $570 $772 $ 991 $1,619
Class B: did not sell
your shares $176 $545 $ 939 $1,842
sold all your
shares at end
of period $676 $845 $1,139 $1,842
Class C: did not sell
your shares $176 $545 $ 939 $2,041
sold all your
shares at end
of period $276 $545 $ 939 $2,041
NATIONAL FUND(9)
(pro forma combined)
Class A $572 $778 $1,001 $1,641
Class B: did not sell
your shares $178 $551 $ 949 $1,864
sold all your
shares at end
of period $678 $851 $1,149 $1,864
Class C: did not sell
your shares $178 $551 $ 949 $2,062
sold all your
shares at end
of period $278 $551 $ 949 $2,062
</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 Acquired
Funds are eliminated; and (3) expense ratios are based on pro forma combined
average net assets for the twelve months ended July 31, 2000.
6. WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE ACQUISITIONS?
-12-
<PAGE>
Each Acquisition is expected to be tax free to you for federal income tax
purposes. This means that no gain or loss will be recognized by any
Acquired Fund or any such Fund's shareholders as a result of the
Acquisitions.
The cost basis and holding period of your Acquired Fund shares are
expected to carry over to your new shares in the National Fund.
-13-
<PAGE>
PROPOSAL 1 - ACQUISITION OF THE LIBERTY FLORIDA TAX-EXEMPT FUND BY THE
LIBERTY TAX-EXEMPT 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 which 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 Florida Fund by the National Fund under the
Agreement and Plan of Reorganization.
PRINCIPAL INVESTMENT RISKS
WHAT ARE THE PRINCIPAL INVESTMENT RISKS OF THE NATIONAL FUND, AND HOW DO THEY
COMPARE WITH THE FLORIDA FUND?
Because the Funds have similar goals and strategies, the potential risks
associated with each Fund are similar, except that the Florida Fund is more
subject to specific risks associated with concentration in issuers located in
the State of Florida than the National Fund which does not concentrate its
investments in any particular state or states. 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 National Fund for a description of the principal investment risks of the
Fund.
INFORMATION ABOUT THE ACQUISITION
Please see the section "Information Applicable to Proposals 1 through 5"
of this combined Prospectus/Proxy Statement.
SHARES YOU WILL RECEIVE
If the Acquisition occurs, you will receive shares in the National Fund of
the same class as the shares that you currently own in the Florida Fund. In
comparison to the shares you currently own, the shares you receive will have the
following characteristics:
- The shares you receive 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 National 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
Florida Fund shares.
-14-
<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 National Fund and Trust IV.
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 form of 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 Florida Fund to enter into the Acquisition:
- The Acquisition provides shareholders an interest in a larger, more
diversified fund which earns and distributes tax-exempt income.
- The Florida Fund is not likely to achieve the scale necessary to
reduce Fund expenses through sales growth, and, in fact, the Fund
has recently been experiencing net shareholder redemptions. In this
connection, Liberty Financial indicated to the Trustees that it was
not willing to continue subsidizing the Fund's operations (through
fee waiver or expense assumptions) over the long term. 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 Florida and
National Funds on July 31, 2000 and the Funds' current expense
structures, the National Fund's annualized expense ratio (excluding
12b-1 fees) immediately
-15-
<PAGE>
after the Acquisition would be approximately 0.15% lower than the
Florida Fund's current expense ratio if the current voluntary
expense limitation were discontinued (for example, for Class A
shares after the Acquisition, a 0.75% expense ratio for the National
Fund, as compared to 0.90% for the Florida Fund if the limitation
were discontinued and 0.75% if it continued). The service fee
portion of the 12b-1 fee of the Florida Fund may equal up to 0.10%
on net assets attributable to shares issued prior to December 1,
1994 and 0.25% on net assets attributable to shares issued
thereafter. This arrangement (the "grandfather arangement") results
in a service fee rate that is a blend between the 0.10% and 0.25%
rates which is currently 0.19%. Therefore the 12b-1 fees for
Classes A, B and C of the Florida Fund are 0.19%, 0.94% and 0.94%,
respectively. The 12b-1 fees for Classes A, B and C of the National
Fund are 0.25%, 1.00% and 1.00%, respectively. On a pro forma
basis, the 12b-1 fees on Class A, B and C of the National Fund
(while giving effect to the grandfather arrangement) are 0.25%,
1.00% and 1.00%, respectively.
- The Acquisition is intended to permit the Florida Fund's
shareholders to exchange their investment for an investment in the
National Fund without recognizing gain or loss for federal income
tax purposes. By contrast, if a Florida Fund shareholder redeemed
his or her shares to invest in another fund, like the National Fund,
the transaction would likely be a taxable event for such
shareholder. Similarly, if the Florida 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 National
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 a Florida Fund
shareholder's potential loss of all or a portion of the state tax exemption from
income earned from the Fund.
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; (2) certain fixed costs involved in
operating the Florida Fund are eliminated; and (3) the National Fund acquires
all of the Acquired Funds. See the table "Annual Fund Operating Expenses" under
Question 5 in the Synopsis above for the expenses that would be applicable if
one or more of the Acquisitions did not take place. Although these projections
represent good faith estimates, there can be no assurance that any particular
level of expenses or expense savings will be achieved, because expenses depend
on a variety of factors, including the future level of fund assets, many of
which factors are beyond the control of the National 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 National Fund will achieve any
particular level of performance after the Acquisition.
Although the Funds' Trustees are proposing that the National Fund acquire
all of the Acquired Funds, the acquisition of the Florida Fund is not
conditioned upon the acquisition of the other Acquired Funds. Accordingly, if
the Florida Fund's shareholders approve the acquisition of the Florida Fund, but
the other Acquired Funds' shareholders do not approve the acquisition of one or
more of the other Acquired Funds, it is expected that, subject to the terms of
the Agreement and Plan of Reorganization, the Acquisition proposed in this
Proposal 1 will take place as described in this Prospectus/Proxy Statement.
-16-
<PAGE>
If the Acquisition does not occur, Liberty Financial has indicated that
it may recommend to the Trustees that the Florida Fund be liquidated.
PERFORMANCE INFORMATION
The charts below show the percentage gain or loss in each calendar year
for the 10-year period ending December 31, 1999 or, if shorter, since inception,
for the Class A shares of the National Fund and the Class A shares of the
Florida 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.
FLORIDA FUND
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------
20%
---------------------------------------------------------------------------
16.59%
---------------------------------------------------------------------------
15%
---------------------------------------------------------------------------
---------------------------------------------------------------------------
10%
---------------------------------------------------------------------------
9.11% 5.93%
---------------------------------------------------------------------------
5%
---------------------------------------------------------------------------
3.62%
---------------------------------------------------------------------------
0%
---------------------------------------------------------------------------
-4.39%
---------------------------------------------------------------------------
-5%
---------------------------------------------------------------------------
-7.27%
---------------------------------------------------------------------------
-10%
---------------------------------------------------------------------------
</TABLE>
The Fund's year-to-date total For period shown in bar chart:
return through September 30, 2000 Best quarter: First quarter
was 6.55%. 1995, +7.66%
Worst quarter: First quarter
1994, -7.65%
NATIONAL FUND
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------
20%
----------------------------------------------------------------------------------
17.64%
----------------------------------------------------------------------------------
15%
----------------------------------------------------------------------------------
11.74% 10.73%
----------------------------------------------------------------------------------
10%
----------------------------------------------------------------------------------
6.44% 8.27% 9.61% 6.67%
----------------------------------------------------------------------------------
5%
----------------------------------------------------------------------------------
</TABLE>
-17-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2.68%
----------------------------------------------------------------------------------
0%
----------------------------------------------------------------------------------
-4.91%
----------------------------------------------------------------------------------
-5%
----------------------------------------------------------------------------------
-6.27%
----------------------------------------------------------------------------------
-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: First quarter
was _______. 1995, +7.75%
Worst quarter: First quarter
1994, -5.38%
</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.
FLORIDA FUND*
<TABLE>
<CAPTION>
INCEPTION
DATE 1 YEAR 5 YEARS 10 YEARS LIFE OF FUND
<S> <C> <C> <C> <C> <C>
Class A (%) 2/1/93 (8.93) 4.92 3.92
---------------------------------------------------------------------------
Class B (%) 2/1/93 (9.68) 4.83 3.88
---------------------------------------------------------------------------
Class C (%) 8/1/97 (5.74) 5.31(1) 3.98(1)
---------------------------------------------------------------------------
Lehman Index (%) (2.06) 6.91 5.73
---------------------------------------------------------------------------
Lipper Average (%) (4.34) 5.90 4.85
</TABLE>
NATIONAL FUND+
<TABLE>
<CAPTION>
INCEPTION
DATE 1 YEAR 5 YEARS 10 YEARS LIFE OF FUND
<S> <C> <C> <C> <C> <C>
Class A (%) 11/21/78 (9.43) 5.05 5.51
-----------------------------------------------------------------------------
Class B (%) 5/5/92 (10.14) 4.96 5.42(2)
-----------------------------------------------------------------------------
Class C (%) 8/1/97 (6.39) 5.77(2) 5.87(2)
-----------------------------------------------------------------------------
Lehman Index (%) (2.06) 6.91 6.89
-----------------------------------------------------------------------------
Lipper Average (%) (4.63) 5.76 6.18
</TABLE>
* The Florida Fund's return is compared to the Lehman Municipal Bond Index
("Lehman Index"), an unmanaged index that tracks the performance of the
municipal bond market. 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 Florida Fund's return is also
compared to the average return of the funds included in the Lipper, Inc.
Florida Tax-Exempt Municipal Funds category average ("Lipper Average").
This Lipper Average, which is calculated by Lipper, Inc., is composed of
funds with similar investment objectives to the Florida Fund. Sales
charges are not reflected in the Lipper Average.
+ The National Fund's return is compared to the Lehman Index. 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 National Fund's return is also compared to the average
return of the funds included in the Lipper General Municipal Debt Funds
category average ("Lipper Average"). This Lipper Average, which is
calculated by Lipper, Inc., is composed of funds with similar investment
objectives to the National Fund. Sales charges are not reflected in the
Lipper Average.
-18-
<PAGE>
(1) Class C share performance information includes returns of the Fund's Class
B shares (the oldest existing Fund class with a similar cost structure) for
periods prior to its inception date. These Class B share returns are not
restated to reflect any expense differential (e.g., Rule 12b-1 fees)
between Class B and Class C shares. Class A and B shares were initially
offered on February 1, 1993, and Class C shares were initially offered on
August 1, 1997.
(2) Class B and Class C are newer classes of shares. Their performance
information includes returns of the National 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 4, 1978, Class B shares were initially offered on May 5, 1992, and
Class C shares were initially offered on August 1, 1997.
THE TRUSTEES OF THE FLORIDA FUND UNANIMOUSLY RECOMMEND APPROVAL OF THE AGREEMENT
AND PLAN OF REORGANIZATION.
The Declaration of Trust (the "Declaration") establishing Trust V provides
that any series of Trust V (such as the Florida 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 Florida Fund may be terminated by majority vote of the Florida Fund's shares
entitled to vote (or by Trustee notice to shareholders), and will so amend the
Declaration if a majority of the Florida Fund's shareholders entitled to vote on
the proposal vote in favor of such proposal.
REQUIRED VOTE FOR PROPOSAL 1
Approval of the form of Agreement and Plan of Reorganization dated October 26,
2000 between Trust V on behalf of the Florida Fund and Trust IV on behalf of the
National Fund will require the affirmative vote of a majority of the shares of
the Florida Fund outstanding at the record date for the Meetings.
PROPOSAL 2 - ACQUISITION OF THE LIBERTY MICHIGAN TAX-EXEMPT FUND BY THE
LIBERTY TAX EXEMPT 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
-19-
<PAGE>
approving the Agreement and Plan of Reorganization, you are also approving the
Acquisition of the Michigan Fund by the National Fund under the Agreement and
Plan of Reorganization.
PRINCIPAL INVESTMENT RISKS
WHAT ARE THE PRINCIPAL INVESTMENT RISKS OF THE NATIONAL FUND, AND HOW DO THEY
COMPARE WITH THE MICHIGAN FUND?
Because the Funds have similar goals and strategies, the potential risks
associated with each Fund are similar, except that the Michigan Fund is more
subject to specific risks associated with concentration in issuers located in
the State of Michigan than the National Fund which does not concentrate its
investments in any particular state or states. 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 National Fund for a description of the principal investment risks of the
Fund.
INFORMATION ABOUT THE ACQUISITION
Please see the section "Information Applicable to Proposals 1 through 5"
of this combined Prospectus/Proxy Statement.
SHARES YOU WILL RECEIVE
If the Acquisition occurs, you will receive shares in the National Fund of
the same class as the shares that you currently own in the Michigan Fund. In
comparison to the shares you currently own, the shares you receive will have the
following characteristics:
- The shares you receive 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 National 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
Michigan Fund shares.
- The procedures for purchasing and redeeming your shares will not
change as a result of the Acquisition.
- You will have the same exchange options as you currently have.
- You will have the same voting rights as you currently have, but as a
shareholder of the National Fund and Trust IV.
-20-
<PAGE>
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 form of 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
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 Michigan Fund to enter into the Acquisition:
- The Acquisition provides shareholders an interest in a larger, more
diversified fund which earns and distributes tax-exempt income, but
with lower operating expenses as a percentage of fund assets. This
expense ratio reduction would benefit Michigan 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 Michigan and National
Funds on July 31, 2000 and the Funds' current expense structures,
the National Fund's annualized expense ratio (excluding 12b-1 fees)
immediately after the Acquisition would be about 0.19% lower than
the Michigan Fund's current expense ratio (for example, for Class A
shares, a 0.75% expense ratio for the National Fund, as compared to
0.94% currently for the Michigan Fund). The service fee portion of
the 12b-1 fee of the Michigan Fund may equal up to 0.10% on net
assets attributable to shares issued prior to December 1, 1994 and
0.25% on net assets attributable to shares issued thereafter. This
arrangement (the "grandfather arrangement") results in a service
fee rate that is a blend between the 0.10% and 0.25% rates which is
currently 0.19%. Therefore the 12b-1 fees for Classes A, B and C of
the Michigan Fund are 0.18%, 0.93% and 0.93%, respectively. The
12b-1 fees for Classes A, B an C of the National Fund are 0.25%,
1.00% and 1.00%, respectively. On a pro forma basis, the 12b-1 fees
on Class A, B and C of the National Fund (while giving effect to
the grandfather arrangement) are 0.25%, 1.00% and 1.00%,
respectively.
- The Michigan Fund is not likely to achieve the scale necessary to
reduce Fund expenses through sales growth, and, in fact, the Fund
has recently been experiencing net shareholder redemptions.
- The Acquisition is intended to permit the Michigan Fund's
shareholders to exchange their investment for an investment in the
National Fund without recognizing gain or loss for federal income
tax purposes. By contrast, if a
-21-
<PAGE>
Michigan Fund shareholder redeemed his or her shares to invest in
another fund, like the National Fund, the transaction would likely
be a taxable event for such shareholder. Similarly, if the Michigan
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 National 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 a Michigan Fund
shareholder's potential loss of all or a portion of the state tax exemption from
income earned from the Fund.
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; (2) certain fixed costs involved in
operating the Michigan Fund are eliminated; and (3) the National Fund acquires
all of the Acquired Funds. See the table "Annual Fund Operating Expenses" under
Question 5 in the Synopsis above for the expenses that would be applicable if
one or more of the Acquisitions did not take place. Although these projections
represent good faith estimates, there can be no assurance that any particular
level of expenses or expense savings will be achieved, because expenses depend
on a variety of factors, including the future level of fund assets, many of
which factors are beyond the control of the National 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 National Fund will achieve any
particular level of performance after the Acquisition.
Although the Funds' Trustees are proposing that the National Fund acquire
all of the Acquired Funds, the acquisition of the Michigan Fund is not
conditioned upon the acquisition of the other Acquired Funds. Accordingly, if
the Michigan Fund's shareholders approve the acquisition of the Michigan Fund,
but the other Acquired Funds' shareholders do not approve the acquisition of one
or more of the other Acquired Funds, it is expected that, subject to the terms
of the Agreement and Plan of Reorganization, the Acquisition proposed in this
Proposal 2 will take place as described in this Prospectus/Proxy Statement.
If the Acquisition does not occur, Liberty Financial has indicated that
it may recommend to the Trustees that the Michigan Fund be liquidated.
PERFORMANCE INFORMATION
The charts below show the percentage gain or loss in each calendar year
for the 10-year period ending December 31, 1999 or, if shorter, since inception,
for the Class A shares of the National Fund and the Class A shares of the
Michigan Fund. They
-22-
<PAGE>
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.
MICHIGAN FUND
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------
20%
------------------------------------------------------------------------------
16.54%
------------------------------------------------------------------------------
15%
------------------------------------------------------------------------------
11.83% 11.07% 9.71%
------------------------------------------------------------------------------
10%
------------------------------------------------------------------------------
8.82% 5.96%
------------------------------------------------------------------------------
5%
------------------------------------------------------------------------------
4.75% 3.24%
------------------------------------------------------------------------------
0%
------------------------------------------------------------------------------
-3.85%
------------------------------------------------------------------------------
-5%
------------------------------------------------------------------------------
-5.95%
------------------------------------------------------------------------------
-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: First quarter
was 5.82%. 1995, +7.41%
Worst quarter: First quarter
1994, -5.97%
</TABLE>
NATIONAL FUND
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------
20%
--------------------------------------------------------------------------------
17.64%
--------------------------------------------------------------------------------
15%
--------------------------------------------------------------------------------
11.74% 10.73%
--------------------------------------------------------------------------------
10%
--------------------------------------------------------------------------------
6.44% 8.27% 9.61% 6.67%
--------------------------------------------------------------------------------
5%
--------------------------------------------------------------------------------
2.68%
--------------------------------------------------------------------------------
0%
--------------------------------------------------------------------------------
-4.91%
--------------------------------------------------------------------------------
-5%
--------------------------------------------------------------------------------
-6.27%
--------------------------------------------------------------------------------
-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: First quarter
was 5.40%. 1995, +7.75%
Worst quarter: First quarter
1994, -5.38%
</TABLE>
-23-
<PAGE>
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 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.
MICHIGAN FUND*
<TABLE>
<CAPTION>
INCEPTION
DATE 1 YEAR 5 YEARS 10 YEARS LIFE OF FUND
<S> <C> <C> <C> <C> <C>
Class A (%) 9/2/86 (8.42) 5.08 5.48
---------------------------------------------------------------------------
Class B (%) 8/4/92 (9.16) 4.99 5.42(1)
---------------------------------------------------------------------------
Class C (%) 8/1/97 (5.20) 5.87(1) 5.88(1)
---------------------------------------------------------------------------
Lehman Index (%) (2.06) 6.91 6.89
---------------------------------------------------------------------------
Lipper Average (%) (4.05) 5.74 6.24
</TABLE>
NATIONAL FUND+
<TABLE>
<CAPTION>
INCEPTION
DATE 1 YEAR 5 YEARS 10 YEARS LIFE OF FUND
<S> <C> <C> <C> <C> <C>
Class A (%) 11/21/78 (9.43) 5.05 5.51
---------------------------------------------------------------------------
Class B (%) 5/5/92 (10.14) 4.96 5.42(2)
---------------------------------------------------------------------------
Class C (%) 8/1/97 (6.39) 5.77(2) 5.87(2)
---------------------------------------------------------------------------
Lehman Index (%) (2.06) 6.91 6.89
---------------------------------------------------------------------------
Lipper Average (%) (4.63) 5.76 6.18
</TABLE>
* The Michigan Fund's return is compared to the Lehman Index. 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 Michigan Fund's return is also compared to the average return
of the funds included in the Lipper, Inc. Michigan Tax-Exempt Municipal
Funds category average ("Lipper Average"). This Lipper Average, which is
calculated by Lipper, Inc., is composed of funds with similar investment
objectives to the Michigan Fund. Sales charges are not reflected in the
Lipper Average.
+ The National Fund's return is compared to the Lehman Index. 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 National Fund's return is also compared to the average return
of the funds included in the Lipper General Municipal Debt Funds category
average ("Lipper Average"). This Lipper Average, which is calculated by
Lipper, Inc., is composed of funds with similar investment objectives to
the National Fund. Sales charges are not reflected in the Lipper Average.
(1) Class B and Class C are newer classes of shares. Their performance
information includes returns of the Michigan 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
September 26, 1986, Class B shares were initially offered on August 4,
1992, and Class C shares were initially offered on August 1, 1997.
-24-
<PAGE>
(2) Class B and Class C are newer classes of shares. Their performance
information includes returns of the National 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 4, 1978, Class B shares were initially offered on May 5, 1992, and
Class C shares were initially offered on August 1, 1997.
THE TRUSTEES OF THE MICHIGAN FUND UNANIMOUSLY RECOMMEND APPROVAL OF THE
AGREEMENT AND PLAN OF REORGANIZATION.
The Declaration of Trust (the "Declaration") establishing Trust V
provides that any series of Trust V (such as the Michigan 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 Michigan Fund may be terminated by majority vote of the
Michigan Fund's shares entitled to vote (or by Trustee notice to shareholders),
and will so amend the Declaration if a majority of the Michigan Fund's
shareholders entitled to vote on the proposal vote in favor of such proposal.
REQUIRED VOTE FOR PROPOSAL 2
Approval of the form of Agreement and Plan of Reorganization dated
October 26, 2000 between Trust V on behalf of the Michigan Fund and Trust IV on
behalf of the National Fund will require the affirmative vote of a majority of
the shares of the Michigan Fund outstanding at the record date for the Meetings.
PROPOSAL 3 - ACQUISITION OF LIBERTY MINNESOTA TAX-EXEMPT FUND BY LIBERTY
TAX-EXEMPT 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 Minnesota Fund by the National Fund under the Agreement and
Plan of Reorganization.
PRINCIPAL INVESTMENT RISKS
-25-
<PAGE>
WHAT ARE THE PRINCIPAL INVESTMENT RISKS OF THE NATIONAL FUND, AND HOW DO THEY
COMPARE WITH THE MINNESOTA FUND?
Because the Funds have similar goals and strategies, the potential
risks associated with each Fund are similar, except that the Minnesota Fund is
more subject to specific risks associated with concentration in issuers located
in the State of Minnesota than the National Fund which does not concentrate its
investments in any particular state or states. 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 National Fund for a description of the principal investment risks of the
Fund.
INFORMATION ABOUT THE ACQUISITION
Please see the section "Information Applicable to Proposals 1 through
5" of this combined Prospectus/Proxy Statement.
SHARES YOU WILL RECEIVE
If the Acquisition occurs, you will receive shares in the National Fund of
the same class as the shares that you currently own in the Minnesota Fund. In
comparison to the shares you currently own, the shares you receive will have the
following characteristics:
- The shares you receive will have an aggregate net asset value
equal to the aggregate net asset value of your current shares
as of the day business before the closing of the Acquisition.
- If applicable, your National 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 Minnesota Fund shares.
- The procedures for purchasing and redeeming your shares will
not change as a result of the Acquisition.
- You will have the same exchange options as you currently have.
- You will have the same voting rights as you currently have,
but as a shareholder of the National Fund and Trust IV.
-26-
<PAGE>
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 form of 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 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 Minnesota Fund to enter into the
Acquisition:
- The Acquisition provides shareholders an interest in a larger, more
diversified fund which earns and distributes tax-exempt income, but
with lower operating expenses as a percentage of fund assets. This
expense ratio reduction would benefit Minnesota 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 Minnesota and National Funds on July 31, 2000 and the
Funds' current expense structures, the National Fund's annualized
expense ratio (excluding 12b-1 fees) immediately after the Acquisition
would be about 0.26% lower than the Minnesota Fund's current expense
ratio (for example, for Class A shares, a 0.75% expense ratio for the
National Fund, as compared to 1.01% currently for the Minnesota Fund).
The service fee portion of the 12b-1 fee of the Minnesota Fund may
equal up to 0.10% on net assets attributable to shares issued prior to
December 1, 1994 and 0.25% on net assets attributable to shares issued
thereafter. This arrangement (the "grandfather arrangement") results
in a service fee rate that is a blend between the 0.10% and 0.25%
rates which is currently 0.19%. Therefore the 12b-1 fees for Classes
A, B and C of the Minnesota Fund are 0.19%, 0.94% and 0.94%,
respectively. The 12b-1 fees for Classes A, B an C of the National
Fund are 0.25%, 1.00% and 1.00%, respectively. On a pro forma basis,
the 12b-1 fees on Class A, B and C of the National Fund (while giving
effect to the grandfather arrangement) are 0.25%, 1.00% and 1.00%,
respectively.
- The Minnesota Fund is not likely to achieve the scale necessary to
reduce Fund expenses through sales growth, and, in fact, the Fund
has recently been experiencing net shareholder redemptions.
- The Acquisition is intended to permit the Minnesota Fund's shareholders
to exchange their investment for an investment in the National Fund
without recognizing gain or loss for federal income tax purposes. By
contrast, if a
-27-
<PAGE>
Minnesota Fund shareholder redeemed his or her shares to invest in
another fund, like the National Fund, the transaction would likely be a
taxable event for such shareholder. Similarly, if the Minnesota 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 National 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 a Minnesota
Fund shareholder's potential loss of all or a portion of the state tax exemption
from income earned from the Fund.
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; (2) certain fixed costs involved in
operating the Minnesota Fund are eliminated; and (3) the National Fund acquires
all of the Acquired Funds. See the table "Annual Fund Operating Expenses" under
Question 5 in the Synopsis above for the expenses that would be applicable if
one or more of the Acquisitions did not take place. Although these projections
represent good faith estimates, there can be no assurance that any particular
level of expenses or expense savings will be achieved, because expenses depend
on a variety of factors, including the future level of fund assets, many of
which factors are beyond the control of the National 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 National Fund will
achieve any particular level of performance after the Acquisition.
Although the Funds' Trustees are proposing that the National Fund
acquire all of the Acquired Funds, the acquisition of the Minnesota Fund is not
conditioned upon the acquisition of the other Acquired Funds. Accordingly, if
the Minnesota Fund's shareholders approve the acquisition of the Minnesota Fund,
but the other Acquired Funds' shareholders do not approve the acquisition of one
or more of the other Acquired Funds, it is expected that, subject to the terms
of the Agreement and Plan of Reorganization, the Acquisition proposed in this
Proposal 3 will take place as described in this Prospectus/Proxy Statement.
If the Acquisition does not occur, Liberty Financial has indicated
that it may recommend to the Trustees that the Minnesota Fund be liquidated.
PERFORMANCE INFORMATION
The charts below show the percentage gain or loss in each calendar year
for the 10-year period ending December 31, 1999 or, if shorter, since inception,
for the Class A shares of the National Fund and the Class A shares of the
Minnesota Fund. They
-28-
<PAGE>
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.
MINNESOTA FUND
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
20%
16.14%
15%
10.70%
10%
7.31% 9.30% 7.35% 9.71% 6.42%
5%
3.16%
0%
-4.84%
-5%
-5.70%
-10%
</TABLE>
The Fund's year-to-date total return through September 30, 2000 was 5.68%.
For period shown in bar chart:
Best quarter: First quarter 1995, +7.06%
Worst quarter: First quarter 1994, -4.54%
NATIONAL FUND
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
20%
17.64%
15%
11.74% 10.73%
10%
6.44% 8.27% 9.61% 6.67%
5%
2.68%
0%
-4.91%
-5%
-6.27%
-10%
</TABLE>
The Fund's year-to-date total return through September 30, 2000 was 5.40%.
For period shown in bar chart:
Best quarter: First quarter 1995, +7.75%
Worst quarter: First quarter 1994, -5.38%
-29-
<PAGE>
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.
MINNESOTA FUND*
<TABLE>
<CAPTION>
INCEPTION
DATE 1 YEAR 5 YEARS 10 YEARS LIFE OF FUND
<S> <C> <C> <C> <C> <C>
Class A (%) 9/2/86 (10.18) 4.67 5.24
Class B (%) 8/4/92 (10.91) 4.58 5.17(1)
Class C (%) 8/1/97 (7.02) 5.46(1) 5.64(1)
Lehman Index (%) (2.06) 6.91 6.89
Lipper Average (%) (4.26) 5.47 5.95
</TABLE>
NATIONAL FUND+
<TABLE>
<CAPTION>
INCEPTION
DATE 1 YEAR 5 YEARS 10 YEARS LIFE OF FUND
<S> <C> <C> <C> <C> <C>
Class A (%) 11/21/78 (9.43) 5.05 5.51
Class B (%) 5/5/92 (10.14) 4.96 5.42(2)
Class C (%) 8/1/97 (6.39) 5.77(2) 5.87(2)
Lehman Index (%) (2.06) 6.91 6.89
Lipper Average (%) (4.63) 5.76 6.18
</TABLE>
* The Minnesota Fund's return is compared to the Lehman Index. 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 Minnesota Fund's return is also compared to the average return
of the funds included in the Lipper, Inc. Minnesota Tax-Exempt Municipal
Funds category average ("Lipper Average"). This Lipper Average, which is
calculated by Lipper, Inc., is composed of funds with similar investment
objectives to the Minnesota Fund. Sales charges are not reflected in the
Lipper Average.
+ The National Fund's return is compared to the Lehman Index. 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 National Fund's return is also compared to the average return
of the funds included in the Lipper General Municipal Debt Funds category
average ("Lipper Average"). This Lipper Average, which is calculated by
Lipper, Inc., is composed of funds with similar investment objectives to
the National Fund. Sales charges are not reflected in the Lipper Average.
(1) Class B and Class C are newer classes of shares. Their performance
information includes returns of the Minnesota 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
September 26, 1986, Class B shares were initially offered on August 4,
1992, and Class C shares were initially offered on August 1, 1997.
-30-
<PAGE>
(2) Class B and Class C are newer classes of shares. Their performance
information includes returns of the National 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 4, 1978, Class B shares were initially offered on May 5, 1992, and
Class C shares were initially offered on August 1, 1997.
THE TRUSTEES OF THE MINNESOTA FUND UNANIMOUSLY RECOMMEND APPROVAL OF THE
AGREEMENT AND PLAN OF REORGANIZATION.
The Declaration of Trust (the "Declaration") establishing Trust V
provides that any series of Trust V (such as the Minnesota 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 Minnesota Fund may be terminated by majority vote of the
Minnesota Fund's shares entitled to vote (or by Trustee notice to shareholders),
and will so amend the Declaration if a majority of the Minnesota Fund's
shareholders entitled to vote on the proposal vote in favor of such proposal.
REQUIRED VOTE FOR PROPOSAL 3
Approval of the form of Agreement and Plan of Reorganization dated
October 26, 2000 between Trust V on behalf of the Minnesota Fund and Trust IV on
behalf of the National Fund will require the affirmative vote of a majority of
the shares of the Minnesota Fund outstanding at the record date for the
Meetings.
PROPOSAL 4 - ACQUISITION OF THE LIBERTY NORTH CAROLINA TAX-EXEMPT FUND BY THE
LIBERTY TAX-EXEMPT 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 North Carolina Fund by the National Fund under the Agreement
and Plan of Reorganization.
-31-
<PAGE>
PRINCIPAL INVESTMENT RISKS
WHAT ARE THE PRINCIPAL INVESTMENT RISKS OF THE NATIONAL FUND, AND HOW DO THEY
COMPARE WITH THE NORTH CAROLINA FUND?
Because the Funds have similar goals and strategies, the potential
risks associated with each Fund are similar, except that the North Carolina Fund
is more subject to specific risks associated with concentration in issuers
located in the State of North Carolina than the National Fund which does not
concentrate its investments in any particular state or states. 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 National Fund for a description of the principal
investment risks of the Fund.
INFORMATION ABOUT THE ACQUISITION
Please see the section "Information Applicable to Proposals 1 through
5" of this combined Prospectus/Proxy Statement.
SHARES YOU WILL RECEIVE
If the Acquisition occurs, you will receive shares in the National Fund of
the same class as the shares that you currently own in the North Carolina Fund.
In comparison to the shares you currently own, the shares you receive will have
the following characteristics:
- The shares you receive 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 National 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 North Carolina Fund shares.
- The procedures for purchasing and redeeming your shares will
not change as a result of the Acquisition.
- You will have the same exchange options as you currently have.
- You will have the same voting rights as you currently have,
but as a shareholder of the National Fund and Trust IV.
-32-
<PAGE>
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 form of 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 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 North Carolina Fund to enter into the
Acquisition:
- The Acquisition provides shareholders an interest in a larger, more
diversified fund which earns and distributes tax-exempt income, but
with lower operating expenses as a percentage of fund assets. This
expense ratio reduction would benefit North Carolina 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 North Carolina and National Funds on July 31, 2000
and the Funds' current expense structures, the National Fund's
annualized expense ratio (excluding 12b-1 fees) immediately after the
Acquisition would be about 0.31% lower than the North Carolina Fund's
current expense ratio (for example, for Class A shares, a 0.75% expense
ratio for the National Fund, as compared to 1.06% currently for the
North Carolina Fund). The service fee portion of the 12b-1 fee of the
North Carolina Fund may equal up to 0.10% on net assets attributable
to shares issued prior to December 1, 1994 and 0.25% on net assets
attributable to shares issued thereafter. This arrangement (the
"grandfather arrangement") results in a service fee rate that is a
blend between the 0.10% and 0.25% rates which is currently 0.19%.
Therefore the 12b-1 fees for Classes A, B and C of the North Carolina
Fund are 0.19%, 0.94% and 0.94%, respectively. The 12b-1 fees for
Classes A, B an C of the National Fund are 0.25%, 1.00% and 1.00%,
respectively. On a pro forma basis, the 12b-1 fees on Class A, B and C
of the National Fund (while giving effect to the grandfather
arrangement) are 0.25%, 1.00% and 1.00%, respectively.
- The North Carolina Fund is not likely to achieve the scale necessary to
reduce Fund expenses through sales growth, and, in fact, the Fund has
recently been experiencing net shareholder redemptions.
- The Acquisition is intended to permit the North Carolina Fund's
shareholders to exchange their investment for an investment in the
National Fund without recognizing gain or loss for federal income tax
purposes. By contrast, if a North Carolina Fund shareholder redeemed
his or her shares to invest in another fund,
-33-
<PAGE>
like the National Fund, the transaction would likely be a taxable event
for such shareholder. Similarly, if the North Carolina 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 National 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 a North
Carolina Fund shareholder's potential loss of all or a portion of the state tax
exemption from income earned from the Fund.
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; (2) certain fixed costs involved in
operating the North Carolina Fund are eliminated; and (3) the National Fund
acquires all of the Acquired Funds. See the table "Annual Fund Operating
Expenses" under Question 5 in the Synopsis above for the expenses that would be
applicable if one or more of the Acquisitions did not take place. Although these
projections represent good faith estimates, there can be no assurance that any
particular level of expenses or expense savings will be achieved, because
expenses depend on a variety of factors, including the future level of fund
assets, many of which factors are beyond the control of the National 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 National Fund will
achieve any particular level of performance after the Acquisition.
Although the Funds' Trustees are proposing that the National Fund
acquire all of the Acquired Funds, the acquisition of the North Carolina Fund is
not conditioned upon the acquisition of the other Acquired Funds. Accordingly,
if the North Carolina Fund's shareholders approve the acquisition of the North
Carolina Fund, but the other Acquired Funds' shareholders do not approve the
acquisition of one or more of the other Acquired Funds, it is expected that,
subject to the terms of the Agreement and Plan of Reorganization, the
Acquisition proposed in this Proposal 4 will take place as described in this
Prospectus/Proxy Statement.
If the Acquisition does not occur, Liberty Financial has indicated
that it may recommend to the Trustees that the North Carolina Fund be
liquidated.
PERFORMANCE INFORMATION
The charts below show the percentage gain or loss in each calendar year
for the 10-year period ending December 31, 1999 or, if shorter, since inception,
for the Class A shares of the National Fund and the Class A shares of the North
Carolina Fund. They should give you a general idea of how each Fund's return has
varied from year-
-34-
<PAGE>
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.
NORTH CAROLINA FUND
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
20%
18.54%
15%
10%
9.54% 6.59%
5%
3.71%
0%
(4.63%
-5%
-8.45%
-10%
</TABLE>
The Fund's year-to-date total return through September 30, 2000 was 6.40%.
For period shown in bar chart:
Best quarter: First quarter 1995, +8.66%
Worst quarter: First quarter 1994, -8.35%
NATIONAL FUND
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
20%
17.64%
15%
11.74% 10.73%
10%
6.44% 8.27% 9.61% 6.67%
5%
2.68%
0%
-4.91%
-5%
-6.27%
-10%
</TABLE>
The Fund's year-to-date total return through September 30, 2000 was 5.40%.
For period shown in bar chart:
Best quarter: First quarter 1995, +7.75%
Worst quarter: First quarter 1994, -5.38%
-35-
<PAGE>
The next table lists each Fund's average year-by-year 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.
NORTH CAROLINA FUND*
<TABLE>
<CAPTION>
INCEPTION
DATE 1 YEAR 5 YEARS 10 YEARS LIFE OF FUND
<S> <C> <C> <C> <C> <C>
Class A (%) 9/1/93 (9.16) 5.45 N/A 3.10
Class B (%) 9/1/93 (9.91) 5.37 N/A 3.12(1)
Class C (%) 8/1/97 (5.98) 5.82(1) N/A 3.22(1)
Lehman Index (%) (2.06) 6.91 N/A 4.96
Lipper Average (%) (4.55) 5.77 N/A 3.71
</TABLE>
NATIONAL FUND+
<TABLE>
<CAPTION>
INCEPTION
DATE 1 YEAR 5 YEARS 10 YEARS LIFE OF FUND
<S> <C> <C> <C> <C> <C>
Class A (%) 11/21/78 (9.43) 5.05 5.51
Class B (%) 5/5/92 (10.14) 4.96 5.42(2)
Class C (%) 8/1/97 (6.39) 5.77(2) 5.87(2)
Lehman Index (%) (2.06) 6.91 6.89
Lipper Average (%) (4.63) 5.76 6.18
</TABLE>
* The North Carolina Fund's return is compared to the Lehman Index. 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 North Carolina Fund's return is also compared to the average
return of the funds included in the Lipper, Inc. North Carolina Tax-Exempt
Municipal Funds category average ("Lipper Average"). This Lipper Average,
which is calculated by Lipper, Inc., is composed of funds with similar
investment objectives to the North Carolina Fund. Sales charges are not
reflected in the Lipper Average.
+ The National Fund's return is compared to the Lehman Index. 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 National Fund's return is also compared to the average return
of the funds included in the Lipper General Municipal Debt Funds category
average ("Lipper Average"). This Lipper Average, which is calculated by
Lipper, Inc., is composed of funds with similar investment objectives to
the National Fund. Sales charges are not reflected in the Lipper Average.
(1) Class C is a newer classes of shares. Its performance information includes
returns of the North Carolina Fund's Class A shares (the oldest existing
fund class) for periods prior to the inception of the newer class 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 class of shares. If differences in expenses were reflected,
the returns for periods prior to the inception of the newer class of shares
would be lower. Class A and Class B shares were initially offered on
September 1, 1993, and Class C shares were initially offered on August 1,
1997.
(2) Class B and Class C are newer classes of shares. Their performance
information includes returns of the National Fund's Class A shares (the
oldest existing fund class) for periods prior to the inception
-36-
<PAGE>
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 4, 1978, Class B shares were initially offered on May 5,
1992, and Class C shares were initially offered on August 1, 1997.
THE TRUSTEES OF THE NORTH CAROLINA FUND UNANIMOUSLY RECOMMEND APPROVAL OF THE
AGREEMENT AND PLAN OF REORGANIZATION.
The Declaration of Trust (the "Declaration") establishing Trust V
provides that any series of Trust V (such as the North Carolina 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 North Carolina Fund may be terminated by majority vote of the
North Carolina Fund's shares entitled to vote (or by Trustee notice to
shareholders), and will so amend the Declaration if a majority of the North
Carolina Fund's shareholders entitled to vote on the proposal vote in favor of
such proposal.
REQUIRED VOTE FOR PROPOSAL 4
Approval of the form of Agreement and Plan of Reorganization dated
October 26, 2000 between Trust V on behalf of the North Carolina Fund and
Trust IV on behalf of the National Fund will require the affirmative vote of a
majority of the shares of the North Carolina Fund outstanding at the record date
for the Meetings.
PROPOSAL 5 - ACQUISITION OF THE LIBERTY OREGON TAX-FREE FUND BY THE LIBERTY
TAX-EXEMPT FUND
THE PROPOSAL
You are being asked to approve the form of Agreement and Plan of
Reorganization, a copy of which is attached as Appendix A to the
Prospectus/Proxy Statement. By approving this form of Agreement and Plan of
Reorganization, you are also approving the Acquisition of the Oregon Fund by the
National Fund under the Agreement and Plan of Reorganization.
PRINCIPAL INVESTMENT RISKS
WHAT ARE THE PRINCIPAL INVESTMENT RISKS OF THE NATIONAL FUND, AND HOW DO THEY
COMPARE WITH THE OREGON FUND?
-37-
<PAGE>
Because the Funds have similar goals and strategies, the potential
risks associated with each Fund are similar, except that the Oregon Fund is more
subject to specific risks associated with concentration in issuers located in
the State of Oregon than the National Fund which does not concentrate its
investments in any particular state or states. 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 National Fund for a description of the principal investment risks of the
Fund.
INFORMATION ABOUT THE ACQUISITION
Please see the section "Information Applicable to Proposals 1 through
5" of this combined Prospectus/Proxy Statement.
SHARES YOU WILL RECEIVE
If the Acquisition occurs, you will receive shares in the National Fund of
the same class as the shares that you currently own in the Oregon Fund. In
comparison to the shares you currently own, the shares you receive will have the
following characteristics:
- The shares you receive 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 National 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 Oregon Fund shares.
- The procedures for purchasing and redeeming your shares will
not change as a result of the Acquisition.
- You will have the same exchange options as you currently have.
- You will have the same voting rights as you currently have,
but as a shareholder of the National Fund and Trust IV.
-38-
<PAGE>
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 form of 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 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 Oregon Fund to enter into the
Acquisition:
- The Acquisition provides shareholders an interest in a larger, more
diversified fund which earns and distributes tax-exempt income.
- The Oregon Fund is not likely to achieve the scale necessary to reduce
Fund expenses through sales growth, and, in fact, the Fund has
recently been experiencing net shareholder redemptions. In this
connection, Liberty Financial indicated to the Trustees that it was not
willing to continue subsidizing the Fund's operations (through fee
waiver or expense assumptions) over the long term. Thus, even though
the National Fund has a higher expense ratio than the subsidized
expense ratio of Oregon Fund, the National Fund's expense ratio after
the Acquisition is expected to be materially lower than the Oregon
Fund's expense ratio would be if the advisor discontinued its subsidy.
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 Oregon and
National Funds on July 31, 2000 and the Funds' current expense
structures, the National Fund's annualized expense ratio (excluding
12b-1 fees) immediately after the Acquisitions would be about 0.30%
lower than the Oregon Fund's current expense ratio would be if the
current voluntary expense limitation were discontinued (for example,
for Class A shares, a 0.75% expense ratio for the National Fund, as
compared to 1.05% for the Oregon Fund if the limitation were
discontinued and 0.73% if it continued). Note that the 12b-1 fees for
Classes A, B and C shares of each fund are 0.25%, 1.00% and 1.00%,
respectively.
- The Acquisition is intended to permit the Oregon Fund's shareholders to
exchange their investment for an investment in the National Fund
without
-39-
<PAGE>
recognizing gain or loss for federal income tax purposes. By contrast,
if a Oregon Fund shareholder redeemed his or her shares to invest in
another fund, like the National Fund, the transaction would likely be a
taxable event for such shareholder. Similarly, if the Oregon 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 National 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 an Oregon
Fund shareholder's potential loss of all or a portion of the state tax exemption
from income earned from the Fund.
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; (2) certain fixed costs involved in
operating the Oregon Fund are eliminated; and (3) the National Fund acquires all
of the Acquired Funds. See the table "Annual Fund Operating Expenses" under
Question 5 in the Synopsis above for the expenses that would be applicable if
one or more of the Acquisitions did not take place. Although these projections
represent good faith estimates, there can be no assurance that any particular
level of expenses or expense savings will be achieved, because expenses depend
on a variety of factors, including the future level of fund assets, many of
which factors are beyond the control of the National 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 National Fund will
achieve any particular level of performance after the Acquisition.
Although the Funds' Trustees are proposing that the National Fund
acquire all of the Acquired Funds, the acquisition of the Oregon Fund is not
conditioned upon the acquisition of the other Acquired Funds. Accordingly, if
the Oregon Fund's shareholders approve the acquisition of the Oregon Fund, but
the other Acquired Funds' shareholders do not approve the acquisition of one or
more of the other Acquired Funds, it is expected that, subject to the terms of
the Agreement and Plan of Reorganization, the Acquisition proposed in this
Proposal 5 will take place as described in this Prospectus/Proxy Statement.
If the Acquisition does not occur, Liberty Financial has indicated
that it may recommend to the Trustees that the Oregon Fund be liquidated.
PERFORMANCE INFORMATION
The charts below show the percentage gain or loss in each calendar year
for the 10-year period ending December 31, 1999 or, if shorter, since inception,
for the Class A shares of the National Fund and the Class A shares of the Oregon
Fund. They should give you a general idea of how each Fund's return has varied
from year-to-year.
-40-
<PAGE>
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.
OREGON FUND
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
14%
12.15%
12%
10%
9.85% 8.94%
8% 7.33%
7.02%
7%
6.37%
6%
5.40%
4%
2.69% 2.94%
2%
0%
-2%
-4%
-4.76%
-(6%
</TABLE>
The Fund's year-to-date total return through September 30, 2000 was 7.10%.
For period shown in bar chart:
Best quarter: First quarter 1995, +4.71%
Worst quarter: First quarter 1994, -3.68%
NATIONAL FUND
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
20%
17.64%
15%
11.74% 10.73%
10%
6.44% 8.27% 9.61% 6.67%
5%
2.68%
0%
</TABLE>
-41-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-4.91%
-5%
-6.27%
-10%
</TABLE>
The Fund's year-to-date total return through September 30, 2000 was 5.40%.
For period shown in bar chart:
Best quarter: First quarter 1995, +7.75%
Worst quarter: First quarter 1994, -5.38%
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 to December 31, 1999 if shorter,
as the case may be, including the applicable sales charge for Class A and B
shares of the Oregon Fund, and Class A, B and C shares of the National Fund.
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.
OREGON FUND*
<TABLE>
<CAPTION>
INCEPTION
DATE 1 YEAR 5 YEARS 10 YEARS LIFE OF FUND
<S> <C> <C> <C> <C> <C>
Class A (%) 10/4/84 (9.29) 3.39 4.62
Class B (%) 1/27/99 (10.13) 3.98 5.09(1)
Lehman Municipal Bond Index (0.14) 6.35 3.00
(%)
Lipper Average (%) (2.01) 5.20 5.32
</TABLE>
NATIONAL FUND+
<TABLE>
<CAPTION>
INCEPTION
DATE 1 YEAR 5 YEARS 10 YEARS LIFE OF FUND
<S> <C> <C> <C> <C> <C>
Class A (%) 11/21/78 (9.43) 5.05 5.51
Class B (%) 5/5/92 (10.14) 4.96 5.42(2)
Class C (%) 8/1/97 (6.39) 5.77(2) 5.87(2)
Lehman Index (%) (2.06) 6.91 6.89
Lipper Average (%) (4.63) 5.76 6.18
</TABLE>
* The Oregon Fund's return is compared to the Lehman Index. 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 Oregon Fund's return is also compared to the average return of the
funds included in the Lipper States Intermediate Municipal Fund category
average ("Lipper Average"). This Lipper Average, which is calculated by
Lipper, Inc., is composed of funds with similar investment objectives to
the Oregon Fund. Sales charges are not reflected in the Lipper Average.
+ The National Fund's return is compared to the Lehman Index. 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 National Fund's return is also compared to the average return
of the funds included in the Lipper General Municipal Debt Funds category
average ("Lipper Average"). This Lipper Average, which is calculated by
Lipper, Inc., is composed of funds with similar investment objectives to
the National Fund. Sales charges are not reflected in the Lipper Average.
(1) Class B is a newer class of shares. Its performance information includes
returns of the Oregon Fund's Class A shares (the oldest existing fund
class) for periods prior to the inception of the newer class 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
class of shares. If differences in
-42-
<PAGE>
expenses were reflected, the returns for periods prior to the inception of
the newer class of shares would be lower. Class A shares were initially
offered on October 4, 1984 and Class B shares were initially offered on
January 27, 1999.
(2) Class B and Class C are newer classes of shares. Their performance
information includes returns of the National 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 4, 1978, Class B shares were initially offered on May 5, 1992, and
Class C shares were initially offered on August 1, 1997.
THE TRUSTEES OF THE OREGON FUND UNANIMOUSLY RECOMMEND APPROVAL OF THE AGREEMENT
AND PLAN OF REORGANIZATION.
The Declaration of Trust (the "Declaration") establishing Trust III
provides that any series of Trust III (such as the Oregon 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 Oregon Fund may be terminated by majority vote of the Oregon
Fund's shares entitled to vote (or by Trustee notice to shareholders), and will
so amend the Declaration if a majority of the Oregon Fund's shareholders
entitled to vote on the proposal vote in favor of such proposal.
REQUIRED VOTE FOR PROPOSAL 5
Approval of the form of Agreement and Plan of Reorganization dated
October 26, 2000 between Trust III on behalf of the Oregon Fund and Trust IV on
behalf of the National Fund will require the affirmative vote of a majority of
the shares of the Oregon Fund outstanding at the record date for the Meetings.
INFORMATION APPLICABLE TO PROPOSALS 1 THROUGH 5
TERMS OF THE AGREEMENT AND PLAN OF REORGANIZATION
If approved by the shareholders of each Acquired Fund, the Acquisitions
are expected to occur on or around January 22, 2001, under the Agreement and
Plan of Reorganization, a form of which is attached as Appendix A to this
combined Prospectus/Proxy Statement. Please review Appendix A. The following is
a brief summary of the principal terms of the Agreement and Plan of
Reorganization:
-43-
<PAGE>
- Each Acquired Fund will transfer all of the assets and
liabilities attributable to each class of its shares to the
National Fund in exchange for shares of the same class of the
National Fund with an aggregate net asset value equal to the
net value of the transferred assets and liabilities.
- The Acquisitions will occur on the next business day after the
time (currently scheduled to be 4:00 p.m. Eastern Time on
January 19, 2001 or such other date and time as the parties
may determine) when the assets of each Fund are valued for
purposes of the Acquisitions.
- The shares of each class of the National Fund received by each
Acquired Fund will be distributed to the respective Acquired
Fund's shareholders of the same class pro rata in accordance
with their percentage ownership of each class of such Acquired
Fund in full liquidation of such Acquired Fund.
- After the Acquisitions, each Acquired Fund will be terminated,
and its affairs will be wound up in an orderly fashion.
- Each Acquisition requires approval by the Acquired Fund's
shareholders and satisfaction of a number of other conditions;
the Acquisitions may be terminated at any time with the
approval of the Trustees of all the Funds.
Although the Funds' Trustees are proposing that the National Fund
acquire each of the Acquired Funds, the Acquisition proposed in each Proposal is
not conditioned upon the approval of the Acquisitions proposed in the other
Proposals. Accordingly, in the event that the shareholders of the respective
Acquired Funds approve one or more but not all of the Acquisitions, it is
expected that the approved Acquisition or Acquisitions will, subject to the
terms of the Agreement and Plan of Reorganization, take place as described
above.
Shareholders who object to the Acquisitions will not be entitled under
Massachusetts law or the Declaration to demand payment for, or an appraisal of,
their shares. However, shareholders should be aware that the Acquisitions as
proposed are not expected to result in recognition of gain or loss to
shareholders for federal income tax purposes and that, if the Acquisitions are
consummated, shareholders will be free to redeem the shares which they receive
in the transaction at their then-current net asset value. In addition, shares
may be redeemed at any time prior to the consummation of the Acquisitions.
The form of Agreement and Plan of Reorganization attached as Appendix A
to this combined Prospectus/Proxy Statement is a general form which will be used
for each of the Acquisitions. There will be a separate Agreement and Plan of
Reorganization with respect to each Acquisition, between the relevant Acquired
Fund and the National Fund. The form of Agreement and Plan of Reorganization for
each Acquisition has been filed with the SEC as part of the Registration
Statement of which this Prospectus/Proxy Statement forms a part. Please see page
4 of this Prospectus/Proxy Statement for information on how to obtain a copy of
the Registration Statement or the form of Agreement and Plan of Reorganization
for your Fund's Acquisition.
FEDERAL INCOME TAX CONSEQUENCES
Each Acquisition is intended to be a tax-free reorganization. The
closing of each Acquisition will be conditioned on receipt of opinions 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:
-44-
<PAGE>
- under Section 361 or Section 354 of the Code, respectively, no
gain or loss will be recognized by the Acquired Funds or the
shareholders of the Acquired Funds as a result of each
Acquisition;
- under Section 358 of the Code, the tax basis of the National
Fund shares you receive will be the same, in the aggregate, as
the aggregate tax basis of your shares in an Acquired Fund;
- under Section 1223(1) of the Code, your holding period for the
National Fund shares you receive will include the holding
period for your shares in an Acquired Fund if you hold your
shares as a capital asset;
- under Section 1032 of the Code, no gain or loss will be
recognized by the National Fund as a result of each
Acquisition;
- under Section 362(b) of the Code, the National Fund's tax
basis in the assets that the National Fund receives from each
Acquired Fund will be the same as such Acquired Fund's basis
in such assets; and
- under Section 1223(2) of the Code, the National Fund's holding
period in such assets will include the relevant Acquired
Fund's holding period in such assets.
The opinions will be based on certain factual certifications made by
officers of each Fund's Trust. The opinions are not a guarantee that the tax
consequences of the Acquisitions will be as described above. Prior to the
closing of the Acquisitions, each Acquired Fund and the National 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 each Acquired
Fund's shareholders.
This description of the federal income tax consequences of the Acquisitions
does not take into account your particular facts and circumstances. Consult your
own tax advisor about the effect of state, local, foreign, and other tax laws.
PROPOSAL 6 - ELECTION OF TRUSTEES
THE PROPOSAL
-45-
<PAGE>
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 the
Liberty Trusts, of which the Acquired Funds are 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
the Liberty Trusts, 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 the Liberty Trusts. 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 the
Liberty Trusts until the next meetings of shareholders of the Liberty Trusts
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 the Trustees of Trusts III and V 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 Meetings in favor of the
election of the nominees named below as Trustees of the Liberty Trusts (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).
INFORMATION ABOUT THE NOMINEES
Set forth below is information concerning each of the nominees.
<TABLE>
<CAPTION>
NOMINEE NAME & AGE PRINCIPAL OCCUPATION(1) AND DIRECTORSHIPS TRUSTEE SINCE
------------------ ----------------------------------------- -------------
<S> <C> <C>
Douglas A. Hacker Executive Vice President and Chief Financial New nominee
(43) Officer of UAL, Inc. (airline) since July 1999;
Senior Vice President and Chief Financial
Officer of UAL, Inc. prior thereto.
</TABLE>
-46-
<PAGE>
<TABLE>
<S> <C> <C>
Janet Langford Kelly Executive Vice President--Corporate Development, New nominee
(41) 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 August 1987. (Formerly 1995
(64) Chairman and Chief Executive Officer of U.S.
Plywood Corporation from August 1985 to August
1987.)
Salvatore Macera Private Investor. (Formerly Executive Vice 1998
(69) President and Director of Itek Corporation
(electronics) from 1975 to 1981.)
William E. Mayer(2) Partner, Park Avenue Equity Partners (venture 1994
(60) 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 Dean of Faculties, 1985
(57) Boston College, since August 1999. (Formerly
Dean, Boston College School of Management, from
September 1977 to September 1999.)
Charles Nelson Van Voorhis Professor of Political Economy of New nominee
(57) the University of Washington.
Joseph R. Palombo(3) Vice President of the Stein Roe Mutual Funds 2000
(47) 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; Chartered Financial 1998
(64) Analyst. (Formerly Professor of Finance, from
1975 to 1999, and Dean, from 1977 to 1991,
College of Business, Boise State University.)
</TABLE>
-47-
<PAGE>
<TABLE>
<S> <C> <C>
Thomas C. Theobald Managing Director, William Blair Capital New nominee
(62) 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 General Manager, Global 1998
(54) 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.
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.
-48-
<PAGE>
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 your Fund.
Record of Board and Committee Meetings. During fiscal year January 31,
2000, Trust V held six meetings, the Audit Committee held three meetings, the
Compensation Committee held one meeting, and the Governance Committee held four
meetings. During the fiscal year ended October 31, 2000, Trust III (excluding
the 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 four meetings.
During the most recently completed fiscal years, 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 LIBERTY TRUSTS
VOTE FOR PROPOSAL 6.
REQUIRED VOTE FOR PROPOSAL 6
A plurality of the votes cast at the Meetings, if a quorum is
represented, is required for the election of each Trustee to the Board of
Trustees of the Liberty Trusts. 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.
-49-
<PAGE>
GENERAL
VOTING INFORMATION
The Trustees of Trust III and Trust V are soliciting proxies from the
shareholders of each Fund in connection with the Meetings, which have 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. The meeting notice, this
combined Prospectus/Proxy Statement and proxy cards are being mailed to
shareholders beginning on or about November 8, 2000.
INFORMATION ABOUT PROXIES AND THE CONDUCT OF THE MEETINGS
Solicitation of Proxies. Proxies will be solicited primarily by mailing
this combined Prospectus/Proxy Statement and its enclosures, but proxies may
also be solicited through further mailings, telephone calls, personal interviews
or e-mail by officers of your Acquired Fund or by employees or agents of
Colonial and its 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 Meetings.
Shareholders who owned shares on the record date, September 29, 2000,
are entitled to vote at the Meetings. Shareholders are entitled to cast one vote
for each share 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 Meetings, including the costs
of soliciting proxies, and the costs of the Acquisitions will be borne by the
following parties in the following percentages: the Florida Fund __%, the
Michigan Fund __%, the Minnesota Fund __%, the North Carolina Fund __%, the
Oregon Fund __%, the National 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
-50-
<PAGE>
voted in favor of each Proposal. You can revoke your proxy by sending a signed,
written letter of revocation to the Assistant Secretary of your Acquired Fund,
by properly executing and submitting a later-dated proxy or by attending the
Meetings and voting in person.
Votes cast in person or by proxy at the Meetings will be counted by
persons appointed by each Acquired Fund as tellers for the Meetings (the
"Tellers"). Thirty percent (30%) of the shares of any 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 any such Fund at the
Meetings. Shareholders of the Florida Fund, the Michigan Fund, the Minnesota
Fund and the North Carolina Fund vote together with the shareholders of the
other series of Trust V for the election of Trustees; thirty percent (30%) of
the outstanding shares of Trust V constitutes a quorum for voting on the
election of Trustees. Shareholders of the Oregon Fund vote together with the
shareholders of the other series of Trust III for the election of Trustees;
thirty percent (30%) of the outstanding shares 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 Proposals 1 through 5 and will have no effect on the outcome of Proposal
6. "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 and Distributor's Address. The address of each Acquired
Fund's (other than the Oregon Fund, for which Colonial acts as administrator)
investment advisor, Colonial Management Associates, Inc., is One Financial
Center, Boston, Massachusetts 02111-2621. The address of the Oregon Fund's
investment advisor, Crabbe Huson Group, Inc., is 121 S.W. Morrison, Suite 1400,
Portland, Oregon 97204. The address of each Fund' principal underwriter, Liberty
Funds Distributor, Inc., is One Financial Center, Boston, Massachusetts
02111-2621.
Outstanding Shares and Significant Shareholders. Appendix B to this
Prospectus/Proxy Statement lists for each Acquired Fund and the Liberty Trusts
the total number of shares outstanding as of September 29, 2000 for each class
of the shares of each such Fund and Trust entitled to vote at the Meetings. It
also lists for the National 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% on 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 either Acquired Fund or the Trust of
which it is a series has not received enough votes by the time of the Meetings
to approve any Proposal the persons named as proxies may propose that such
Meetings be adjourned one or more times to permit further solicitation of
proxies. Any adjournment requires the affirmative vote of a majority of the
total number of shares of such Acquired Fund
-51-
<PAGE>
or Trust 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 6).
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 6). They
will not vote any proxy that directs them to abstain from voting on the Proposal
in question.
The Meetings have been called to transact any business that properly
comes before them. The only business that management of each Acquired Fund
intends to present or knows that others will present is Proposals 1 through 6.
If any other matters properly come before the Meetings, and on all matters
incidental to the conduct of the Meetings, the persons named as proxies intend
to vote the proxies in accordance with their judgment, unless the Assistant
Secretary of the relevant Acquired Fund has previously received written contrary
instructions from the shareholder entitled to vote the shares.
Shareholder Proposals at Future Meetings. The Liberty Trusts do not
hold annual or other regular meetings of shareholders. Shareholder proposals to
be presented at any future meeting of shareholders of the Funds or the Trusts
must be received by the relevant Fund or Trust in writing a reasonable amount of
time before the Liberty Trusts solicit proxies for that meeting, in order to be
considered for inclusion in the proxy materials for that meeting.
-52-
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION dated as of October 26, 2000 by
and among [Name of Acquired Fund Trust] (the "Trust"), a Massachusetts business
trust established under a Declaration of Trust dated _______________, as
amended, on behalf of [Name of Acquired Fund] (the "Acquired Fund"), a series of
the Trust, Liberty Funds Trust IV (the "Acquiring Trust"), a Massachusetts
business trust established under a Declaration of Trust dated August 29, 1978,
as amended, on behalf of Liberty Tax-Exempt 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.
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
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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 22, 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 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.
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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 ended
[___________________, ____] of the Acquired Fund, audited by
[Name of Firm] [and the statement of assets, the statement
of changes in net assets and the
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<PAGE>
schedule of investments for the six months ended
___________________, 2000,], copies of which have been
furnished to the Acquiring Fund, fairly reflect the financial
condition and results of operations of the Acquired Fund as of
such dates and for the periods then ended in accordance with
generally accepted accounting principles consistently applied,
and the Acquired Fund has no known liabilities of a material
amount, contingent or otherwise, other than those shown on the
statements of assets referred to above or those incurred in the
ordinary course of its business since __________________, 2000;
(g) Since __________________, 2000, there has not been any
material adverse change in the Acquired Fund's financial
condition, assets, liabilities or business (other than
changes occurring in the ordinary course of business), or
any incurrence by the Acquired Fund of indebtedness, except
as disclosed in writing to the Acquiring Fund. For the
purposes of this subparagraph (g), distributions of net
investment income and net realized capital gains, changes in
portfolio securities, changes in the market value of
portfolio securities or net redemptions shall be deemed to
be in the ordinary course of business;
(h) By the Closing Date, all federal and other tax returns and
reports of the Acquired Fund required by law to have been
filed by such date (giving effect to extensions) shall have
been filed, and all federal and other taxes shown to be due
on said returns and reports shall have been paid so far as
due, or provision shall have been made for the payment
thereof, and to the best of the Acquired Fund's knowledge no
such return is currently under audit and no assessment has
been asserted with respect to such returns;
(i) For all taxable years and all applicable quarters of such
years from the date of its inception, the Acquired Fund has
met the requirements of subchapter M of the Code, for
treatment as a "regulated investment company" within the
meaning of Section 851 of the Code. Neither the Trust nor
the Acquired Fund has at any time since its inception been
liable for nor is now liable for any material excise tax
pursuant to Section 852 or 4982 of the Code. The Acquired
Fund has duly filed all federal, state, local and foreign
tax returns which are required to have been filed, and all
taxes of the Acquired Fund which are due and payable have
been paid except for amounts that alone or in the aggregate
would not reasonably be expected to have a material adverse
effect. The Acquired Fund is in compliance in all material
respects with applicable regulations of the Internal Revenue
Service pertaining to the reporting of dividends and other
distributions on and redemptions of its capital stock and to
withholding in respect of dividends and other distributions
to shareholders, and is not liable for any material
penalties which could be imposed thereunder;
(j) The authorized capital of the Trust consists of an unlimited
number of shares of beneficial interest with no par value,
of multiple series and classes. All issued and outstanding
shares of the Acquired Fund are, and at the Closing Date
will be, duly and validly issued and outstanding, fully paid
and (except as set forth in the Acquired Fund's then current
prospectus or prospectuses and statement of additional
information or statements of additional information
(collectively, as amended or supplemented from time to time,
the "Acquired Fund Prospectus")),non-assessable by the
Acquired Fund and will have been issued in
A-5
<PAGE>
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 restrictions upon the
transfer thereof, except as previously disclosed to the
Acquiring Fund. As used in this Agreement, the term
"Investments" shall mean
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<PAGE>
the Acquired Fund's investments shown on the schedule of its
investments as of _______, 2000 referred to in Section 4.1(f)
hereof, as supplemented with such changes in the portfolio as
the Acquired Fund shall make, and changes resulting from stock
dividends, stock split-ups, mergers and similar corporate
actions through the Closing Date.
(q) At the Closing Date, the Acquired Fund will have sold such of
its assets, if any, as are necessary to assure that, after
giving effect to the acquisition of the assets of the Acquired
Fund pursuant to this Agreement, the Acquiring Fund will remain
in compliance with such 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 which
the Acquiring Fund is bound, and the execution, delivery and
performance of this Agreement will not result in any such
violation;
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<PAGE>
(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 November 30,
1999 of the Acquiring Fund, audited by [Name of Firm], and
the statement of assets, the statement of changes in net
assets and the schedule of investments for the six months
ended May 31, 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 May 31, 2000;
(h) Since May 31, 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
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
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<PAGE>
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
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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/Bell, Boyd & Lloyd LLC], counsel to the Trust, dated
the Closing Date and in a form satisfactory to the Acquiring Trust,
to the following effect:
(a) The Trust is a business trust duly organized and validly
existing under the laws of the Commonwealth of Massachusetts
and has corporate power to own all of its properties and
assets and to carry on its business as presently conducted,
and the Acquired Fund is a separate series thereof duly
constituted in accordance with the applicable provisions of
the 1940 Act and the Declaration of Trust of the Trust; (b)
this Agreement has been duly authorized, executed and
delivered on behalf of the Acquired Fund and, assuming the
Proxy Statement referred to in paragraph 5.3 complies with
applicable federal securities laws and assuming the due
authorization, execution and delivery of this Agreement by
the Acquiring Trust on behalf of the Acquiring Fund, is the
valid and binding obligation of the Acquired Fund
enforceable against the Acquired Fund in accordance with its
terms, except as the same may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting
the enforcement of creditors' rights generally and other
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 The Acquired Fund shall have furnished to the Acquiring Fund tax
returns, signed by a partner of [Name of Firm] for the fiscal year
ended _______________, 2000 and signed pro forma tax returns for the
period from _______ 1, 2000 to the Closing Date (which pro forma tax
returns shall be furnished promptly after the Closing Date).
7.4 Prior to the Closing Date, the Acquired Fund shall have declared a
dividend or dividends which, together with all previous dividends,
shall have the effect of distributing all of the Acquired Fund's
investment company taxable income for its taxable years ending on or
after ________, 2000 and on or prior to the Closing Date (computed
without regard to any deduction for dividends paid), and all of its
net capital gains realized in each of its taxable years ending on or
after _________, 2000 and on or prior to the Closing Date.
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/Bell, Boyd & Lloyd
LLC] satisfactory to the Acquiring Trust, each substantially to the
effect that, for federal income tax purposes:
(a) The acquisition by the Acquiring Fund of the assets of the
Acquired Fund in exchange for the Acquiring Fund's
assumption of the Obligations of the Acquired Fund and
issuance of the Acquiring Shares, followed by the
distribution by the Acquired Fund of such the Acquiring
Shares to the shareholders of the Acquired Fund in exchange
for their shares of the Acquired Fund, all as provided in
paragraph 1 hereof, will constitute a reorganization within
the meaning of Section 368(a) of the Code, and the Acquired
Fund and the Acquiring Fund will each be "a party to a
reorganization" within the meaning of Section 368(b) of the
Code;
(b) No gain or loss will be recognized 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 IV, One
Financial Center, Boston, MA 02111, attention Secretary, or to [Name and Address
of Acquired Fund Trust] 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.
[ACQUIRED FUND TRUST],
on behalf of __________________ Fund
By:__________________________________
Name:________________________________
Title:_______________________________
ATTEST:
______________________________
Name:_________________________
Title:________________________
LIBERTY FUNDS TRUST IV,
on behalf of Liberty Tax-Exempt 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 OREGON FUND AND TRUST III, THE
FLORIDA FUND, MICHIGAN FUND, MINNESOTA FUND AND NORTH CAROLINA FUND AND TRUST V
AND SHARES OUTSTANDING OF THE NATIONAL FUND AND TRUST IV
For each class of each Acquired Fund's shares and each Trust's shares
entitled to vote at the Meetings, and for each class of the National Fund's
shares and Trust IV's shares, the number of shares outstanding as of
September 29, 2000 was as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
FUND OR TRUST CLASS NUMBER OF SHARES OUTSTANDING AND
ENTITLED TO VOTE
------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Oregon Fund A 1,311,987
------------------------------------------------------------------------------------------------------------
B 4,686
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
Trust III 297,008,531
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
Florida Fund A 3,187,588
------------------------------------------------------------------------------------------------------------
B 2,715,487
------------------------------------------------------------------------------------------------------------
C 51,250
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
Michigan Fund A 4,409,032
------------------------------------------------------------------------------------------------------------
B 1,194,938
------------------------------------------------------------------------------------------------------------
C 66,651
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
Minnesota Fund A 3,491,467
------------------------------------------------------------------------------------------------------------
B 2,310,938
------------------------------------------------------------------------------------------------------------
C 56,254
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
North Carolina Fund A 2,208,694
------------------------------------------------------------------------------------------------------------
B 1,850,320
------------------------------------------------------------------------------------------------------------
C 77,344
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
Trust V 125,847,396
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
National Fund A 144,371,138
------------------------------------------------------------------------------------------------------------
B 15,870,163
------------------------------------------------------------------------------------------------------------
C 389,500
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
Trust IV 256,523,247
------------------------------------------------------------------------------------------------------------
</TABLE>
OWNERSHIP OF SHARES
As of September 29, 2000, each Trust believes that the Trustees and
officers of the respective Trusts, as a group, owned less than one percent of
each class of shares of each Fund and of each Trust as a whole. As of September
29, 2000, the following shareholders of record owned 5% or more of the
outstanding shares of the noted class of shares of the noted Fund:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
NUMBER OF
OUTSTANDING
SHARES OF
NAME AND ADDRESS OF CLASS OWNED PERCENTAGE OF OUTSTANDING
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
</TABLE>
B-1
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
NUMBER OF
OUTSTANDING
SHARES OF
FUND AND CLASS SHAREHOLDER CLASS OWNED SHARES OF CLASS OWNED
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OREGON FUND
N/A N/A N/A
FLORIDA FUND
CLASS A
Merrill Lynch Pierce Fenner & Smith 515,088.530 16.16%
For the Sole Benefit of its Customers
Attn: Fund Administration #97AX5
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
CLASS B
Merrill Lynch Pierce Fenner & Smith 576,797.408 21.24%
For the Sole Benefit of its Customers
Attn: Fund Administration #97AX5
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
CLASS C
Richard J. Miele 28,089.888 54.81%
Carmel L. Miele
6 E. Highpoint Road
Sewalls Point, FL 34996-7002
Jean McCaughey Trustee 2,787.322 5.44%
McCaughey Family Revocable Trust
U/A 1/5/1994
4315 Rum Cay Circle
Sarasota, FL 34233
Marjorie E. Worstall 12,787.724 24.95%
PMB #197
3206 S. Hopkins Avenue
Titusville, FL 32780-5698
Dorothy C. Fisher 6,618.670 12.91%
Harry F. Fisher Jr. Trustee
Dorothy Fisher Rev Trust
U/A Dtd 11/11/1997
1048 Main Street
Sebastian, FL 32958-4170
MICHIGAN FUND
CLASS A
Raymond James & Assoc. Inc. 262,700.467 5.96%
For Elite Acct #50008225
FAO James & Mary Workman
1530 Winterwood Drive NE
Grand Rapids, MI 49546
CLASS B
Merrill Lynch Pierce Fenner & Smith 244,756.046 20.48%
For the Sole Benefit of its Customers
Attn. Fund Administration #97057
4800 Deer Lake Dr. E. 2nd Floor
Jacksonville, FL 32246-6484
</TABLE>
B-2
<PAGE>
<TABLE>
<S> <C> <C> <C>
MINNESOTA FUND
CLASS B
Merrill Lynch Pierce Fenner & Smith 144,026.019 6.23%
For the Sole Benefit of its Customers
Attn: Fund Administration #97056
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
CLASS C
Merrill Lynch Pierce Fenner & Smith 13,003.408 23.12%
For the Sole Benefit of its Customers
Attn: Fund Administration #97056
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
Luella C. Bellomo 8,545.511 15.19%
1857 Eagle Ridge Drive
St. Paul, MN 55118
Richard G. Lykke 11,227.366 19.96%
Dorothy M. Lykke
2722 Lake Court Drive
Mounds View, MN 55112
Mark J. Ritter TOD 6,265.916 11.14%
Robert M. Ritter
Subject to Sta TOD Rules
1626 Laurel Avenue
St. Paul, MN 55104
NORTH CAROLINA FUND
CLASS B
Merrill Lynch Pierce Fenner & Smith 149,657.130 8.09%
For the Sole Benefit of its Customers
Attn: Fund Administration #97B52
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
</TABLE>
B-3
<PAGE>
<TABLE>
CLASS C
<S> <C> <C> <C>
Merrill Lynch Pierce Fenner & Smith 34,656.658 44.81%
For the Sole Benefit of its Customers
Attn: Fund Administration #97AX5
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
Patricia R. Holstein 7,117.493 9.20%
403 Elm Street
Raleigh, NC 27604
NATIONAL FUND
CLASS B Merrill Lynch Pierce Fenner & Smith 1,048,557.256 6.61%
For the Sole Benefit of its Customers
Attn: Fund Administration #97B52
4800 Deer lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
CLASS C
Terry Collins 203,886.537 52.35%
Rosemary Collins
306 Jester Ct.
Petaluma, CA 94954
</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 percentage 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>
OREGON FUND N/A N/A
FLORIDA FUND
CLASS A Merrill Lynch Pierce Fenner & Smith 0.19%
For the Sole Benefit of its Customers
Attn: Fund Administration #97AX5
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
CLASS B Merrill Lynch Pierce Fenner & Smith 1.50%
For the Sole Benefit of its Customers
Attn: Fund Administration #97AX5
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
CLASS C
Richard J. Miele 3.02%
Carmel L. Miele
6 E. Highpoint Road
Sewalls Point, FL 34996-7002
Jean McCaughey Trustee 0.30%
McCaughey Family Revocable Trust
U/A 1/5/1994
4315 Rum Cay Circle
Sarasota, FL 34233
Marjorie E. Worstall 1.38%
PMB #197
3206 S. Hopkins Avenue
Titusville, FL 32780-5698
Dorothy C. Fisher 0.71%
Harry F. Fisher Jr. Trustee
Dorothy Fisher Rev Trust
U/A Dtd 11/11/1997
1048 Main Street
Sebastian, FL 32958-4170
MICHIGAN FUND
CLASS A
Raymond James & Assoc., Inc. 0.09%
For Elite Acct #50008225
FAO James & Mary Workman
1530 Winterwood Drive NE
Grand Rapids, MI 49546
CLASS B Merrill Lynch Pierce Fenner & Smith 0.59%
For the Sole Benefit of its Customers
Attn: Fund Administration #97057
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
MINNESOTA FUND
CLASS B Merrill Lynch Pierce Fenner & Smith 0.34%
For the Sole Benefit of its Customers
Attn: Fund Administration #97056
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
CLASS C Merrill Lynch Pierce Fenner & Smith 1.28%
For the Sole Benefit of its Customers
Attn: Fund Administration #97056
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
Luella C. Bellomo 0.84%
1857 Eagle Ridge Drive
St. Paul, MN 55118
Richard G. Lykke 1.11%
Dorothy M. Lykke
2722 Lake Court Drive
Mounds View, MN 55112
Mark J. Ritter TOD 0.62%
Robert M. Ritter
Subject to Sta TOD Rules
1626 Laurel Avenue
St. Paul, MN 55104
NORTH CAROLINA FUND
CLASS B Merrill Lynch Pierce Fenner & Smith 0.38%
For the Sole Benefit of its Customers
Attn: Fund Administration #97B52
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
CLASS C Merrill Lynch Pierce Fenner & Smith 3.61%
For the Sole Benefit of its Customers
Attn: Fund Administration #97AX5
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
Patricia R. Holstein 0.74%
403 Elm Street
Raleigh, NC 27604
NATIONAL FUND
CLASS B Merrill Lynch Pierce Fenner & Smith 4.72%
For the Sole Benefit of its Customers
Attn: Fund Administration #97B52
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
CLASS C
Terry Collins 37.97%
Rosemary Collins
306 Jester Ct.
Pataluma, CA 94954
</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.)
</TABLE>
B-4
<PAGE>
<TABLE>
<S> <C> <C>
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.
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>
-------------------------------------------------------------------------------------------------
MINNESOTA NORTH CAROLINA
FLORIDA FUND MICHIGAN FUND FUND FUND
-------------------------------------------------------------------------------------------------
1/31/00 1/31/00 1/31/00 1/31/00
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mr. Bleasdale $882(2) $744(3) $752(4) $686(5)
-------------------------------------------------------------------------------------------------
Ms. Collins 821 694 701 639
-------------------------------------------------------------------------------------------------
Mr. Grinnell 860 723 730 666
-------------------------------------------------------------------------------------------------
Mr. Lowry 828 701 708 646
-------------------------------------------------------------------------------------------------
Mr. Macera 815 688 695 634
-------------------------------------------------------------------------------------------------
Mr. Mayer 867 730 738 673
-------------------------------------------------------------------------------------------------
Mr. Moody 791(6) 656(7) 663(8) 605(9)
-------------------------------------------------------------------------------------------------
Mr. Neuhauser 872 734 742 677
-------------------------------------------------------------------------------------------------
Mr. Stitzel 815 688 695 634
-------------------------------------------------------------------------------------------------
Ms. Verville 822(10) 695(11) 702(12) 640(13)
-------------------------------------------------------------------------------------------------
</TABLE>
---------------------------------------
(1) The Funds do not currently provide pension or retirement plan benefits to
the Trustees.
(2) Includes $503 payable in later years as deferred compensation.
(3) Includes $338 payable in later years as deferred compensation.
(4) Includes $379 payable in later years as deferred compensation.
(5) Includes $346 payable in later years as deferred compensation.
(6) Total compensation of $791 for the fiscal year ended January 31, 1999, will
be payable in later years as deferred compensation.
(7) Total compensation of $656 for the fiscal year ended January 31, 1999, will
be payable in later years as deferred compensation.
(8) Total compensation of $663 for the fiscal year ended January 31, 1999, will
be payable in later years as deferred compensation.
(9) Total compensation of $605 for the fiscal year ended January 31, 1999, will
be payable in later years as deferred compensation.
(10) Total compensation of $822 for the fiscal year ended January 31, 1999, will
be payable in later years as deferred compensation.
(11) Total compensation of $695 for the fiscal year ended January 31, 1999, will
be payable in later years as deferred compensation.
(12) Total compensation of $702 for the fiscal year ended January 31, 1999, will
be payable in later years as deferred compensation.
B-5
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------
OREGON FUND NATIONAL FUND
-------------------------------------------------------
10/31/99 11/30/99
-------------------------------------------------------
<S> <C> <C>
Mr. Bleasdale $601(14) $10,598(15)
-------------------------------------------------------
Ms. Collins 566 9,974
-------------------------------------------------------
Mr. Grinnell 590 10,396
-------------------------------------------------------
Mr. Lowry 573 10,109
-------------------------------------------------------
Mr. Macera 568 9,985
-------------------------------------------------------
Mr. Mayer 583 10,048
-------------------------------------------------------
Mr. Moody 526(16) 9,384(17)
-------------------------------------------------------
Mr. Neuhauser 600 10,504
-------------------------------------------------------
Mr. Stitzel 568 9,985
-------------------------------------------------------
Ms. Verville 533(18) 9,869(19)
-------------------------------------------------------
</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(20)
----------------------------------------------------------
Ms. Collins 96,000
----------------------------------------------------------
Mr. Grinnell 100,000
----------------------------------------------------------
Mr. Lowry 97,000
----------------------------------------------------------
Mr. Macera 95,000
----------------------------------------------------------
Mr. Mayer 101,000
----------------------------------------------------------
Mr. Moody 91,000(21)
----------------------------------------------------------
Mr. Neuhauser 101,252
----------------------------------------------------------
Mr. Stitzel 95,000
----------------------------------------------------------
Ms. Verville 96,000(22)
----------------------------------------------------------
</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 (23)
------- ---------------------------------
<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>
------------------------
(13) Total compensation of $640 for the fiscal year ended January 31, 1999,
will be payable in later years as deferred compensation.
(14) Includes $308 payable in later years as deferred compensation.
(15) Includes $5,487 payable in later years as deferred compensation.
(16) Total compensation of $526 for the fiscal year ended October 31, 1999,
will be payable in later years as deferred compensation.
(17) Total compensation of $9,384 for the fiscal year ended November 30, 1999,
will be payable in later years as deferred compensation.
(18) Total compensation of $533 for the fiscal year ended October 31, 1999,
will be payable in later years as deferred compensation.
(19) Total compensation of $9,869 for the fiscal year ended November 30, 1999,
will be payable in later years as deferred compensation.
(20) Includes $52,000 payable in later years as deferred compensation.
(21) Total compensation of $91,000 for the calendar year ended December 31,
1999, will be payable in later years as deferred compensation.
(22) Total compensation of $96,000 for the calendar year ended December 31,
1999, will be payable in later years as deferred compensation.
(23) 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-6
<PAGE>
APPENDIX C
CAPITALIZATION
(In Thousands)
The following table shows on an unaudited basis the capitalization of each of
the Oregon Fund, the Florida Fund, the Michigan Fund, the Minnesota Fund, the
North Carolina Fund and the National Fund as of July 31, 2000, and on a pro
forma combined basis, giving effect to the acquisition of the assets and
liabilities of the Acquired Funds by the National Fund at net asset value as of
that date:
<TABLE>
<CAPTION>
NORTH
OREGON FLORIDA MICHIGAN MINNESOTA CAROLINA NATIONAL PRO FORMA PRO FORMA
FUND FUND FUND FUND FUND FUND ADJUSTMENTS (1) COMBINED (2)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A
Net asset value $ 16,484 $ 23,369 $ 30,388 $ 23,358 $ 15,687 $1,855,378 (121) $1,964,543
Shares outstanding 1,385 3,191 4,453 3,488 2,216 146,475 (6,144) 155,064
Net asset value per share $ 11.90 $ 7.32 $ 6.82 $ 6.70 $ 7.08 $ 12.67 $ 12.67
Class B
Net asset value $ 55 $ 20,855 $ 8,750 $ 16,424 $ 13,526 $ 221,809 (31) $ 281,388
Shares outstanding 5 2,849 1,282 2,451 1,910 17,511 (3,797) 22,211
Net asset value per share $ 11.90 $ 7.32 $ 6.82 $ 6.70 $ 7.08 $ 12.67 $ 12.67
Class C
Net asset value $ 396 $ 521 $ 447 $ 552 $ 4,889 (1) $ 6,804
Shares outstanding 54 76 67 78 386 (124) 537
Net asset value per share $ 7.32 $ 6.82 $ 6.70 $ 7.08 $ 12.67 $ 12.67
</TABLE>
(1) Adjustments reflect one time proxy, accounting, legal and other costs of the
reorganization of $27,624, $29,057, $29,590, $30,151, $28,442 and $160,239 to be
borne by the Oregon Fund, the Florida Fund, the Michigan Fund, the Minnesota
Fund, the North Carolina Fund and the National Fund, respectively.
(2) Assumes the Acquisitions were consummated on July 31, 2000, and is for
information purposes only. No assurance can be given as to how many shares of
the National Fund will be received by the shareholders of each Acquired Fund on
the date the Acquisitions take place, and the foregoing should not be relied
upon to reflect the number of shares of the National Fund that actually will be
received on or after such date.
C-1
<PAGE>
CAPITALIZATION
(In Thousands)
The following table shows on an unaudited basis the capitalization of each of
the Oregon Fund, the Florida Fund, the Michigan Fund, the Minnesota Fund and the
National Fund as of July 31, 2000, and on a pro forma combined basis, giving
effect to the acquisition of the assets and liabilities of the Oregon, Florida,
Michigan and Minnesota Funds by the National Fund at net asset value as of that
date:
<TABLE>
<CAPTION>
OREGON FLORIDA MICHIGAN MINNESOTA NATIONAL PRO FORMA PRO FORMA
FUND FUND FUND FUND FUND ADJUSTMENTS (1) COMBINED (2)
<S> <C> <C> <C> <C> <C> <C> <C>
Class A
Net asset value $ 16,484 $ 23,369 $ 30,388 $ 23,358 $ 1,855,378 (114) $ 1,948,863
Shares outstanding 1,385 3,191 4,453 3,488 146,475 (5,175) 153,817
Net asset value per share $ 11.90 $ 7.32 $ 6.82 $ 6.70 $ 12.67 $ 12.67
Class B
Net asset value $ 55 $ 20,855 $ 8,750 $ 16,424 $ 221,809 (25) $ 267,868
Shares outstanding 5 2,849 1,282 2,451 17,511 (2,957) 21,141
Net asset value per share $ 11.90 $ 7.32 $ 6.82 $ 6.70 $ 12.67 $ 12.67
Class C
Net asset value $ 396 $ 521 $ 447 $ 4,889 (1) $ 6,252
Shares outstanding 54 76 67 386 (90) 494
Net asset value per share $ 7.32 $ 6.82 $ 6.70 $ 12.67 $ 12.67
</TABLE>
(1) Adjustments reflect one time proxy, accounting, legal and other costs of the
reorganization of $27,624, $29,057, $29,590, $30,151 and $160,239 to be borne by
the Oregon Fund, the Florida Fund, the Michigan Fund, the Minnesota Fund and the
National Fund, respectively.
(2) Assumes the Acquisitions were consummated on July 31, 2000, and is for
information purposes only. No assurance can be given as to how many shares of
the National Fund will be received by the shareholders of each Acquired Fund on
the date the Acquisitions take place, and the foregoing should not be relied
upon to reflect the number of shares of the National Fund that actually will be
received on or after such date.
C-2
<PAGE>
CAPITALIZATION
(In Thousands)
The following table shows on an unaudited basis the capitalization of each of
the Oregon Fund, the Florida Fund, the Michigan Fund and the National Fund as of
July 31, 2000, and on a pro forma combined basis, giving effect to the
acquisition of the assets and liabilities of the Oregon, Florida and Michigan
Funds by the National Fund at net asset value as of that date:
<TABLE>
<CAPTION>
OREGON FLORIDA MICHIGAN NATIONAL PRO FORMA PRO FORMA
FUND FUND FUND FUND ADJUSTMENTS (1) COMBINED (2)
<S> <C> <C> <C> <C> <C> <C>
Class A
Net asset value $ 16,484 $ 23,369 $ 30,388 $1,855,378 (105) $1,925,514
Shares outstanding 1,385 3,191 4,453 146,475 (3,521) 151,983
Net asset value per share $ 11.90 $ 7.32 $ 6.82 $ 12.67 $ 12.67
Class B
Net asset value $ 55 $ 20,855 $ 8,750 $ 221,809 (19) $ 251,450
Shares outstanding 5 2,849 1,282 17,511 (1,800) 19,847
Net asset value per share $ 11.90 $ 7.32 $ 6.82 $ 12.67 $ 12.67
Class C
Net asset value $ 396 $ 521 $ 4,889 (1) $ 5,805
Shares outstanding 54 76 386 (58) 458
Net asset value per share $ 7.32 $ 6.82 $ 12.67 $ 12.67
</TABLE>
(1) Adjustments reflect one time proxy, accounting, legal and other costs of the
reorganization of $27,624, $29,057, $29,590 and $160,239 to be borne by the
Oregon Fund, the Florida Fund, the Michigan Fund and the National Fund,
respectively.
(2) Assumes the Acquisitions were consummated on July 31, 2000, and is for
information purposes only. No assurance can be given as to how many shares of
the National Fund will be received by the shareholders of each Acquired Fund on
the date the Acquisitions take place, and the foregoing should not be relied
upon to reflect the number of shares of the National Fund that actually will be
received on or after such date.
C-3
<PAGE>
CAPITALIZATION
(In Thousands)
The following table shows on an unaudited basis the capitalization of each of
the Oregon Fund, the Florida Fund and the National Fund as of July 31, 2000, and
on a pro forma combined basis, giving effect to the acquisition of the assets
and liabilities of the Oregon Fund and the Florida Fund by the National Fund at
net asset value as of that date:
<TABLE>
<CAPTION>
OREGON FLORIDA NATIONAL PRO FORMA PRO FORMA
FUND FUND FUND ADJUSTMENTS (1) COMBINED (2)
<S> <C> <C> <C> <C> <C>
Class A
Net asset value $ 16,484 $ 23,369 $1,855,378 (93) $1,895,138
Shares outstanding 1,385 3,191 146,475 (1,467) 149,584
Net asset value per share $ 11.90 $ 7.32 $ 12.67 $ 12.67
Class B
Net asset value $ 55 $ 20,855 $ 221,809 (16) $ 242,703
Shares outstanding 5 2,849 17,511 (1,208) 19,157
Net asset value per share $ 11.90 $ 7.32 $ 12.67 $ 12.67
Class C
Net asset value $ 396 $ 4,889 (1) $ 5,284
Shares outstanding 54 386 (23) 417
Net asset value per share $ 7.32 $ 12.67 $ 12.67
</TABLE>
(1) Adjustments reflect one time proxy, accounting, legal and other costs of the
reorganization of $27,624, $29,057 and $160,239 to be borne by the Oregon Fund,
the Florida Fund and the National Fund, respectively.
(2) Assumes the Acquisitions were consummated on July 31, 2000, and is for
information purposes only. No assurance can be given as to how many shares of
the National Fund will be received by the shareholders of each Acquired Fund on
the date the Acquisitions take place, and the foregoing should not be relied
upon to reflect the number of shares of the National Fund that actually will be
received on or after such date.
C-4
<PAGE>
CAPITALIZATION
(In Thousands)
The following table shows on an unaudited basis the capitalization of each of
the Florida Fund, the Michigan Fund, the Minnesota Fund, the North Carolina Fund
and the National Fund as of July 31, 2000, and on a pro forma combined basis,
giving effect to the acquisition of the assets and liabilities of the Florida,
Michigan, Minnesota and North Carolina Funds by the National Fund at net asset
value as of that date:
<TABLE>
<CAPTION>
NORTH
FLORIDA MICHIGAN MINNESOTA CAROLINA NATIONAL PRO FORMA PRO FORMA
FUND FUND FUND FUND FUND ADJUSTMENTS (1) COMBINED (2)
<S> <C> <C> <C> <C> <C> <C> <C>
Class A
Net asset value $ 23,369 $ 30,388 $ 23,358 $ 15,687 $1,855,378 (107) $1,948,073
Shares outstanding 3,191 4,453 3,488 2,216 146,475 (6,060) 153,763
Net asset value per share $ 7.32 $ 6.82 $ 6.70 $ 7.08 $ 12.67 $ 12.67
Class B
Net asset value $ 20,855 $ 8,750 $ 16,424 $ 13,526 $ 221,809 (31) $ 281,333
Shares outstanding 2,849 1,282 2,451 1,910 17,511 (3,796) 22,207
Net asset value per share $ 7.32 $ 6.82 $ 6.70 $ 7.08 $ 12.67 $ 12.67
Class C
Net asset value $ 396 $ 521 $ 447 $ 552 $ 4,889 (1) $ 6,804
Shares outstanding 54 76 67 78 386 (124) 537
Net asset value per share $ 7.32 $ 6.82 $ 6.70 $ 7.08 $ 12.67 $ 12.67
</TABLE>
(1) Adjustments reflect one time proxy, accounting, legal and other costs of the
reorganization of $29,057, $29,590, $30,151, $28,442 and $160,239 to be borne by
the Florida Fund, the Michigan Fund, the Minnesota Fund, the North Carolina Fund
and the National Fund, respectively.
(2) Assumes the Acquisitions were consummated on July 31, 2000, and is for
information purposes only. No assurance can be given as to how many shares of
the National Fund will be received by the shareholders of each Acquired Fund on
the date the Acquisitions take place, and the foregoing should not be relied
upon to reflect the number of shares of the National Fund that actually will be
received on or after such date.
C-5
<PAGE>
CAPITALIZATION
(In Thousands)
The following table shows on an unaudited basis the capitalization of each of
the Florida Fund, the Michigan Fund, the Minnesota Fund and the National Fund as
of July 31, 2000, and on a pro forma combined basis, giving effect to the
acquisition of the assets and liabilities of the Florida, Michigan and Minnesota
Funds by the National Fund at net asset value as of that date:
<TABLE>
<CAPTION>
FLORIDA MICHIGAN MINNESOTA NATIONAL PRO FORMA PRO FORMA
FUND FUND FUND FUND ADJUSTMENTS (1) COMBINED (2)
<S> <C> <C> <C> <C> <C> <C>
Class A
Net asset value $ 23,369 $ 30,388 $ 23,358 $1,855,378 (100) $1,932,393
Shares outstanding 3,191 4,453 3,488 146,475 (5,082) 152,525
Net asset value per share $ 7.32 $ 6.82 $ 6.70 $ 12.67 $ 12.67
Class B
Net asset value $ 20,855 $ 8,750 $ 16,424 $ 221,809 (25) $ 267,813
Shares outstanding 2,849 1,282 2,451 17,511 (2,953) 21,140
Net asset value per share $ 7.32 $ 6.82 $ 6.70 $ 12.67 $ 12.67
Class C
Net asset value $ 396 $ 521 $ 447 $ 4,889 (1) $ 6,252
Shares outstanding 54 76 67 386 (90) 493
Net asset value per share $ 7.32 $ 6.82 $ 6.70 $ 12.67 $ 12.67
</TABLE>
(1) Adjustments reflect one time proxy, accounting, legal and other costs of the
reorganization of $29,057, $29,590, $30,151 and $160,239 to be borne by the
Florida Fund, the Michigan Fund, the Minnesota Fund and the National Fund,
respectively.
(2) Assumes the Acquisitions were consummated on July 31, 2000, and is for
information purposes only. No assurance can be given as to how many shares of
the National Fund will be received by the shareholders of each Acquired Fund on
the date the Acquisitions take place, and the foregoing should not be relied
upon to reflect the number of shares of the National Fund that actually will be
received on or after such date.
C-6
<PAGE>
CAPITALIZATION
(In Thousands)
The following table shows on an unaudited basis the capitalization of each of
the Florida Fund, the Michigan Fund, the North Carolina Fund and the National
Fund as of July 31, 2000, and on a pro forma combined basis, giving effect to
the acquisition of the assets and liabilities of the Florida, Michigan and North
Carolina Funds by the National Fund at net asset value as of that date:
<TABLE>
<CAPTION>
NORTH
FLORIDA MICHIGAN CAROLINA NATIONAL PRO FORMA PRO FORMA
FUND FUND FUND FUND ADJUSTMENTS (1) COMBINED (2)
<S> <C> <C> <C> <C> <C> <C>
Class A
Net asset value $ 23,369 $ 30,388 $ 15,687 $1,855,378 (98) $1,924,724
Shares outstanding 3,191 4,453 2,216 146,475 (4,415) 151,920
Net asset value per share $ 7.32 $ 6.82 $ 7.08 $ 12.67 $ 12.67
Class B
Net asset value $ 20,855 $ 8,750 $ 13,526 $ 221,809 (25) $ 264,915
Shares outstanding 2,849 1,282 1,910 17,511 (2,641) 20,911
Net asset value per share $ 7.32 $ 6.82 $ 7.08 $ 12.67 $ 12.67
Class C
Net asset value $ 396 $ 521 $ 552 $ 4,889 (1) $ 6,357
Shares outstanding 54 76 78 386 (93) 502
Net asset value per share $ 7.32 $ 6.82 $ 7.08 $ 12.67 $ 12.67
</TABLE>
(1) Adjustments reflect one time proxy, accounting, legal and other costs of the
reorganization of $29,057, $29,590, $28,442, and $160,239 to be borne by the
Florida Fund, the Michigan Fund, the North Carolina Fund and the National
Fund, respectively.
(2) Assumes the Acquisitions were consummated on July 31, 2000, and is for
information purposes only. No assurance can be given as to how many shares of
the National Fund will be received by the shareholders of each Acquired Fund on
the date the Acquisitions take place, and the foregoing should not be relied
upon to reflect the number of shares of the National Fund that actually will be
received on or after such date.
C-7
<PAGE>
CAPITALIZATION
(In Thousands)
The following table shows on an unaudited basis the capitalization of each of
the Florida Fund, the Michigan Fund and the National Fund as of July 31, 2000,
and on a pro forma combined basis, giving effect to the acquisition of the
assets and liabilities of the Florida Fund and the Michigan Fund by the National
Fund at net asset value as of that date:
<TABLE>
<CAPTION>
FLORIDA MICHIGAN NATIONAL PRO FORMA PRO FORMA
FUND FUND FUND ADJUSTMENTS (1) COMBINED (2)
<S> <C> <C> <C> <C> <C>
Class A
Net asset value $ 23,369 $ 30,388 $1,855,378 (91) $1,909,044
Shares outstanding 3,191 4,453 146,475 (3,438) 150,681
Net asset value per share $ 7.32 $ 6.82 $ 12.67 $ 12.67
Class B
Net asset value $ 20,855 $ 8,750 $ 221,809 (19) $ 251,395
Shares outstanding 2,849 1,282 17,511 (1,799) 19,843
Net asset value per share $ 7.32 $ 6.82 $ 12.67 $ 12.67
Class C
Net asset value $ 396 $ 521 $ 4,889 (1) $ 5,805
Shares outstanding 54 76 386 (58) 458
Net asset value per share $ 7.32 $ 6.82 $ 12.67 $ 12.67
</TABLE>
(1) Adjustments reflect one time proxy, accounting, legal and other costs of the
reorganization of $29,057, $29,590 and $160,239 to be borne by the Florida Fund,
the Michigan Fund and the National Fund, respectively.
(2) Assumes the Acquisitions were consummated on July 31, 2000, and is for
information purposes only. No assurance can be given as to how many shares of
the National Fund will be received by the shareholders of each Acquired Fund on
the date the Acquisitions take place, and the foregoing should not be relied
upon to reflect the number of shares of the National Fund that actually will be
received on or after such date.
C-8
<PAGE>
CAPITALIZATION
(In Thousands)
The following table shows on an unaudited basis the capitalization of each of
the Florida Fund, the Minnesota Fund and the National Fund as of July 31, 2000,
and on a pro forma combined basis, giving effect to the acquisition of the
assets and liabilities of the Florida Fund and the Minnesota Fund by the
National Fund at net asset value as of that date:
<TABLE>
<CAPTION>
FLORIDA MINNESOTA NATIONAL PRO FORMA PRO FORMA
FUND FUND FUND ADJUSTMENTS (1) COMBINED (2)
<S> <C> <C> <C> <C> <C>
Class A
Net asset value $ 23,369 $ 23,358 $1,855,378 (88) $1,902,017
Shares outstanding 3,191 3,488 146,475 (3,027) 150,127
Net asset value per share $ 7.32 $ 6.70 $ 12.67 $ 12.67
Class B
Net asset value $ 20,855 $ 16,424 $ 221,809 (22) $ 259,066
Shares outstanding 2,849 2,451 17,511 (2,362) 20,449
Net asset value per share $ 7.32 $ 6.70 $ 12.67 $ 12.67
Class C
Net asset value $ 396 $ 447 $ 4,889 (1) $ 5,731
Shares outstanding 54 67 386 (55) 452
Net asset value per share $ 7.32 $ 6.70 $ 12.67 $ 12.67
</TABLE>
(1) Adjustments reflect one time proxy, accounting, legal and other costs of the
reorganization of $29,057, $30,151 and $160,239 to be borne by the Florida Fund,
the Minnesota Fund and the National Fund, respectively.
(2) Assumes the Acquisitions were consummated on July 31, 2000, and is for
information purposes only. No assurance can be given as to how many shares of
the National Fund will be received by the shareholders of each Acquired Fund on
the date the Acquisitions take place, and the foregoing should not be relied
upon to reflect the number of shares of the National Fund that actually will be
received on or after such date.
C-9
<PAGE>
CAPITALIZATION
(In Thousands)
The following table shows on an unaudited basis the capitalization of each of
the Florida Fund, the North Carolina Fund and the National Fund as of July 31,
2000, and on a pro forma combined basis, giving effect to the acquisition of the
assets and liabilities of the Florida Fund and the North Carolina Fund by the
National Fund at net asset value as of that date:
<TABLE>
<CAPTION>
NORTH
FLORIDA CAROLINA NATIONAL PRO FORMA PRO FORMA
FUND FUND FUND ADJUSTMENTS (1) COMBINED (2)
<S> <C> <C> <C> <C> <C>
Class A
Net asset value $ 23,369 $ 15,687 $1,855,378 (86) $1,894,348
Shares outstanding 3,191 2,216 146,475 (2,361) 149,521
Net asset value per share $ 7.32 $ 7.08 $ 12.67 $ 12.67
Class B
Net asset value $ 20,855 $ 13,526 $ 221,809 (22) $ 256,168
Shares outstanding 2,849 1,910 17,511 (2,050) 20,220
Net asset value per share $ 7.32 $ 7.08 $ 12.67 $ 12.67
Class C
Net asset value $ 396 $ 552 $ 4,889 (1) $ 5,836
Shares outstanding 54 78 386 (57) 461
Net asset value per share $ 7.32 $ 7.08 $ 12.67 $ 12.67
</TABLE>
(1) Adjustments reflect one time proxy, accounting, legal and other costs of the
reorganization of $29,057, $28,442, and $160,239 to be borne by the Florida
Fund, the North Carolina Fund and the National Fund, respectively.
(2) Assumes the Acquisitions were consummated on July 31, 2000, and is for
information purposes only. No assurance can be given as to how many shares of
the National Fund will be received by the shareholders of each Acquired Fund on
the date the Acquisitions take place, and the foregoing should not be relied
upon to reflect the number of shares of the National Fund that actually will be
received on or after such date.
C-10
<PAGE>
CAPITALIZATION
(In Thousands)
The following table shows on an unaudited basis the capitalization of each of
the Oregon Fund, the Michigan Fund and the National Fund as of July 31, 2000,
and on a pro forma combined basis, giving effect to the acquisition of the
assets and liabilities of the Oregon Fund and the Michigan Fund by the National
Fund at net asset value as of that date:
<TABLE>
<CAPTION>
OREGON MICHIGAN NATIONAL PRO FORMA PRO FORMA
FUND FUND FUND ADJUSTMENTS (1) COMBINED (2)
<S> <C> <C> <C> <C> <C>
Class A
Net asset value $ 16,484 $ 30,388 $1,855,378 (97) $1,902,153
Shares outstanding 1,385 4,453 146,475 (2,175) 150,138
Net asset value per share $ 11.90 $ 6.82 $ 12.67 $ 12.67
Class B
Net asset value $ 55 $ 8,750 $ 221,809 (12) $ 230,602
Shares outstanding 5 1,282 17,511 (596) 18,202
Net asset value per share $ 11.90 $ 6.82 $ 12.67 $ 12.67
Class C
Net asset value $ 521 $ 4,889 (1) $ 5,409
Shares outstanding 76 386 (35) 427
Net asset value per share $ 6.82 $ 12.67 $ 12.67
</TABLE>
(1) Adjustments reflect one time proxy, accounting, legal and other costs of
the reorganization of $27,624, $29,590 and $160,239 to be borne by the Oregon
Fund, the Michigan Fund and the National Fund, respectively.
(2) Assumes the Acquisitions were consummated on July 31, 2000, and is for
information purposes only. No assurance can be given as to how many shares of
the National Fund will be received by the shareholders of each Acquired Fund on
the date the Acquisitions take place, and the foregoing should not be relied
upon to reflect the number of shares of the National Fund that actually will be
received on or after such date.
C-11
<PAGE>
CAPITALIZATION
(In Thousands)
The following table shows on an unaudited basis the capitalization of each of
the Oregon Fund, the Minnesota Fund and the National Fund as of July 31, 2000,
and on a pro forma combined basis, giving effect to the acquisition of the
assets and liabilities of the Oregon Fund and the Minnesota Fund by the National
Fund at net asset value as of that date:
<TABLE>
<CAPTION>
OREGON MINNESOTA NATIONAL PRO FORMA PRO FORMA
FUND FUND FUND ADJUSTMENTS (1) COMBINED (2)
<S> <C> <C> <C> <C> <C>
Class A
Net asset value $ 16,484 $ 23,358 $ 1,855,378 (94) $ 1,895,126
Shares outstanding 1,385 3,488 146,475 (1,765) 149,583
Net asset value per share $ 11.90 $ 6.70 $ 12.67 $ 12.67
Class B
Net asset value $ 55 $ 16,424 $ 221,809 (15) $ 238,273
Shares outstanding 5 2,451 17,511 (1,160) 18,807
Net asset value per share $ 11.90 $ 6.70 $ 12.67 $ 12.67
Class C
Net asset value $ 447 $ 4,889 (1) $ 5,335
Shares outstanding 67 386 (32) 421
Net asset value per share $ 6.70 $ 12.67 $ 12.67
</TABLE>
(1) Adjustments reflect one time proxy, accounting, legal and other costs of
the reorganization of $27,624, $30,151 and $160,239 to be borne by the Oregon
Fund, the Minnesota Fund and the National Fund, respectively.
(2) Assumes the Acquisitions were consummated on July 31, 2000, and is for
information purposes only. No assurance can be given as to how many shares of
the National Fund will be received by the shareholders of each Acquired Fund on
the date the Acquisitions take place, and the foregoing should not be relied
upon to reflect the number of shares of the National Fund that actually will be
received on or after such date.
C-12
<PAGE>
CAPITALIZATION
(In Thousands)
The following table shows on an unaudited basis the capitalization of each of
the Oregon Fund, the North Carolina Fund and the National Fund as of July 31,
2000, and on a pro forma combined basis, giving effect to the acquisition of the
assets and liabilities of the Oregon Fund and the North Carolina Fund by the
National Fund at net asset value as of that date:
<TABLE>
<CAPTION>
NORTH
OREGON CAROLINA NATIONAL PRO FORMA PRO FORMA
FUND FUND FUND ADJUSTMENTS (1) COMBINED (2)
<S> <C> <C> <C> <C> <C>
Class A
Net asset value $ 16,484 $ 15,687 $ 1,855,378 (92) $ 1,887,457
Shares outstanding 1,385 2,216 146,475 (3,600) 148,977
Net asset value per share $ 11.90 $ 7.08 $ 12.67 $ 12.67
Class B
Net asset value $ 55 $ 13,526 $ 221,809 (15) $ 235,375
Shares outstanding 5 1,910 17,511 (1,914) 18,578
Net asset value per share $ 11.90 $ 7.08 $ 12.67 $ 12.67
Class C
Net asset value $ 552 $ 4,889 (1) $ 5,440
Shares outstanding 78 386 (77) 430
Net asset value per share $ 7.08 $ 12.67 $ 12.67
</TABLE>
(1) Adjustments reflect one time proxy, accounting, legal and other costs of
the reorganization of $27,624, $28,442 and $160,239 to be borne by the Oregon
Fund, the North Carolina Fund and the National Fund, respectively.
(2) Assumes the Acquisitions were consummated on July 31, 2000, and is for
information purposes only. No assurance can be given as to how many shares of
the National Fund will be received by the shareholders of each Acquired Fund on
the date the Acquisitions take place, and the foregoing should not be relied
upon to reflect the number of shares of the National Fund that actually will be
received on or after such date.
C-13
<PAGE>
CAPITALIZATION
(In Thousands)
The following table shows on an unaudited basis the capitalization of each of
the Michigan Fund, the Minnesota Fund, the North Carolina Fund and the National
Fund as of July 31, 2000, and on a pro forma combined basis, giving effect to
the acquisition of the assets and liabilities of the Michigan, Minnesota and
North Carolina Funds by the National Fund at net asset value as of that date:
<TABLE>
<CAPTION>
NORTH
MICHIGAN MINNESOTA CAROLINA NATIONAL PRO FORMA PRO FORMA
FUND FUND FUND FUND ADJUSTMENTS (1) COMBINED (2)
<S> <C> <C> <C> <C> <C> <C>
Class A
Net asset value $ 30,388 $ 23,358 $ 15,687 $1,855,378 (99) $1,924,712
Shares outstanding 4,453 3,488 2,216 146,475 (4,713) 151,919
Net asset value per share $ 6.82 $ 6.70 $ 7.08 $ 12.67 $ 12.67
Class B
Net asset value $ 8,750 $ 16,424 $ 13,526 $ 221,809 (24) $ 260,485
Shares outstanding 1,282 2,451 1,910 17,511 (2,593) 20,561
Net asset value per share $ 6.82 $ 6.70 $ 7.08 $ 12.67 $ 12.67
Class C
Net asset value $ 521 $ 447 $ 552 $ 4,889 (1) $ 6,408
Shares outstanding 76 67 78 386 (101) 506
Net asset value per share $ 6.82 $ 6.70 $ 7.08 $ 12.67 $ 12.67
</TABLE>
(1) Adjustments reflect one time proxy, accounting, legal and other costs of
the reorganization of $29,590, $30,151, $28,442, and $160,239 to be borne by
the Michigan Fund, the Minnesota Fund, the North Carolina Fund and the National
Fund, respectively.
(2) Assumes the Acquisitions were consummated on July 31, 2000, and is for
information purposes only. No assurance can be given as to how many shares of
the National Fund will be received by the shareholders of each Acquired Fund on
the date the Acquisitions take place, and the foregoing should not be relied
upon to reflect the number of shares of the National Fund that actually will be
received on or after such date.
C-14
<PAGE>
CAPITALIZATION
(In Thousands)
The following table shows on an unaudited basis the capitalization of each of
the Michigan Fund, the Minnesota Fund and the National Fund as of July 31, 2000,
and on a pro forma combined basis, giving effect to the acquisition of the
assets and liabilities of the Michigan Fund and the Minnesota Fund by the
National Fund at net asset value as of that date:
<TABLE>
<CAPTION>
MICHIGAN MINNESOTA NATIONAL PRO FORMA PRO FORMA
FUND FUND FUND ADJUSTMENTS (1) COMBINED (2)
<S> <C> <C> <C> <C> <C>
Class A
Net asset value $ 30,388 $ 23,358 $1,855,378 (92) $1,909,032
Shares outstanding 4,453 3,488 146,475 (3,736) 150,680
Net asset value per share $ 6.82 $ 6.70 $ 12.67 $ 12.67
Class B
Net asset value $ 8,750 $ 16,424 $ 221,809 (18) $ 246,965
Shares outstanding 1,282 2,451 17,511 (1,750) 19,494
Net asset value per share $ 6.82 $ 6.70 $ 12.67 $ 12.67
Class C
Net asset value $ 521 $ 447 $ 4,889 (1) $ 5,856
Shares outstanding 76 67 386 (67) 462
Net asset value per share $ 6.82 $ 6.70 $ 12.67 $ 12.67
</TABLE>
(1) Adjustments reflect one time proxy, accounting, legal and other costs of the
reorganization of $29,590, $30,151 and $160,239 to be borne by the Michigan
Fund, the Minnesota Fund and the National Fund, respectively.
(2) Assumes the Acquisitions were consummated on July 31, 2000, and is for
information purposes only. No assurance can be given as to how many shares of
the National Fund will be received by the shareholders of each Acquired Fund on
the date the Acquisitions take place, and the foregoing should not be relied
upon to reflect the number of shares of the National Fund that actually will be
received on or after such date.
C-15
<PAGE>
CAPITALIZATION
(In Thousands)
The following table shows on an unaudited basis the capitalization of each of
the Michigan Fund, the North Carolina Fund and the National Fund as of July 31,
2000, and on a pro forma combined basis, giving effect to the acquisition of the
assets and liabilities of the Michigan Fund and the North Carolina Fund by the
National Fund at net asset value as of that date
<TABLE>
<CAPTION>
NORTH
MICHIGAN CAROLINA NATIONAL PRO FORMA PRO FORMA
FUND FUND FUND ADJUSTMENTS(1) COMBINED (2)
<S> <C> <C> <C> <C> <C>
Class A
Net asset value $ 30,388 $ 15,687 $1,855,378 (90) $1,901,363
Shares outstanding 4,453 2,216 146,475 (3,069) 150,075
Net asset value per share $ 6.82 $ 7.08 $ 12.67 $ 12.67
Class B
Net asset value $ 8,750 $ 13,526 $ 221,809 (18) $ 244,067
Shares outstanding 1,282 1,910 17,511 (1,439) 19,264
Net asset value per share $ 6.82 $ 7.08 $ 12.67 $ 12.67
Class C
Net asset value $ 521 $ 552 $ 4,889 (1) $ 5,961
Shares outstanding 76 78 386 (70) 470
Net asset value per share $ 6.82 $ 7.08 $ 12.67 $ 12.67
</TABLE>
(1) Adjustments reflect one time proxy, accounting, legal and other costs of the
reorganization of $29,590, $28,442 and $160,239 to be borne by the Michigan
Fund, the North Carolina Fund and the National Fund, respectively.
(2) Assumes the Acquisitions were consummated on July 31, 2000, and is for
information purposes only. No assurance can be given as to how many shares of
the National Fund will be received by the shareholders of each Acquired Fund on
the date the Acquisitions take place, and the foregoing should not be relied
upon to reflect the number of shares of the National Fund that actually will be
received on or after such date.
C-16
<PAGE>
CAPITALIZATION
(In Thousands)
The following table shows on an unaudited basis the capitalization of each of
the Minnesota Fund, the North Carolina Fund and the National Fund as of July 31,
2000, and on a pro forma combined basis, giving effect to the acquisition of the
assets and liabilities of the Minnesota Fund and the North Carolina Fund by the
National Fund at net asset value as of that date:
<TABLE>
<CAPTION>
NORTH
MINNESOTA CAROLINA NATIONAL PRO FORMA PRO FORMA
FUND FUND FUND ADJUSTMENTS (1) COMBINED (2)
<S> <C> <C> <C> <C> <C>
Class A
Net asset value $ 23,358 $ 15,687 $1,855,378 (87) $1,894,336
Shares outstanding 3,488 2,216 146,475 (2,659) 149,520
Net asset value per share $ 6.70 $ 7.08 $ 12.67 $ 12.67
Class B
Net asset value $ 16,424 $ 13,526 $ 221,809 (21) $ 251,738
Shares outstanding 2,451 1,910 17,511 (2,002) 19,870
Net asset value per share $ 6.70 $ 7.08 $ 12.67 $ 12.67
Class C
Net asset value $ 447 $ 552 $ 4,889 (1) $ 5,887
Shares outstanding 67 78 386 (66) 465
Net asset value per share $ 6.70 $ 7.08 $ 12.67 $ 12.67
</TABLE>
(1) Adjustments reflect one time proxy, accounting, legal and other costs of the
reorganization of $30,151, $28,442 and $160,239 to be borne by the Minnesota
Fund, the North Carolina Fund and the National Fund, respectively.
(2) Assumes the Acquisitions were consummated on July 31, 2000, and is for
information purposes only. No assurance can be given as to how many shares of
the National Fund will be received by the shareholders of each Acquired Fund on
the date the Acquisitions take place, and the foregoing should not be relied
upon to reflect the number of shares of the National Fund that actually will be
received on or after such date.
C-17
<PAGE>
CAPITALIZATION
(In Thousands)
The following table shows on an unaudited basis the capitalization of each of
the Florida Fund, the Minnesota Fund, the North Carolina Fund and the National
Fund as of July 31, 2000, and on a pro forma combined basis, giving effect to
the acquisition of the assets and liabilities of the Florida, Minnesota and
North Carolina Funds by the National Fund at net asset value as of that date:
<TABLE>
<CAPTION>
NORTH
FLORIDA MINNESOTA CAROLINA NATIONAL PRO FORMA PRO FORMA
FUND FUND FUND FUND ADJUSTMENTS (1) COMBINED (2)
<S> <C> <C> <C> <C> <C> <C>
Class A
Net asset value $ 23,369 $ 23,358 $ 15,687 $1,855,378 (95) $1,917,697
Shares outstanding 3,191 3,488 2,216 146,475 (4,005) 151,365
Net asset value per share $ 7.32 $ 6.70 $ 7.08 $ 12.67 $ 12.67
Class B
Net asset value $ 20,855 $ 16,424 $ 13,526 $ 221,809 (28) $ 272,586
Shares outstanding 2,849 2,451 1,910 17,511 (3,205) 21,516
Net asset value per share $ 7.32 $ 6.70 $ 7.08 $ 12.67 $ 12.67
Class C
Net asset value $ 396 $ 447 $ 552 $ 4,889 (1) $ 6,283
Shares outstanding 54 67 78 386 (89) 496
Net asset value per share $ 7.32 $ 6.70 $ 7.08 $ 12.67 $ 12.67
</TABLE>
(1) Adjustments reflect one time proxy, accounting, legal and other costs of the
reorganization of $29,057, $30,151, $28,442 and $160,239 to be borne by the
Florida Fund, the Minnesota Fund, the North Carolina Fund and the National Fund,
respectively.
(2) Assumes the Acquisitions were consummated on July 31, 2000, and is for
information purposes only. No assurance can be given as to how many shares of
the National Fund will be received by the shareholders of each Acquired Fund on
the date the Acquisitions take place, and the foregoing should not be relied
upon to reflect the number of shares of the National Fund that actually will be
received on or after such date.
C-18
<PAGE>
CAPITALIZATION
(In Thousands)
The following table shows on an unaudited basis the capitalization of each of
the Oregon Fund, the Michigan Fund, the North Carolina Fund and the National
Fund as of July 31, 2000, and on a pro forma combined basis, giving effect to
the acquisition of the assets and liabilities of the Oregon, Michigan and North
Carolina Funds by the National Fund at net asset value as of that date:
<TABLE>
<CAPTION>
OREGON MICHIGAN NORTH CAROLINA NATIONAL PRO FORMA PRO FORMA
FUND FUND FUND FUND ADJUSTMENTS (1) COMBINED (2)
<S> <C> <C> <C> <C> <C> <C>
Class A
Net asset value $ 16,484 $ 30,388 $ 15,687 $1,855,378 (104) $1,917,833
Shares outstanding 1,385 4,453 2,216 146,475 (3,161) 151,368
Net asset value per share $ 11.90 $ 6.82 $ 7.08 $ 12.67 $ 12.67
Class B
Net asset value $ 55 $ 8,750 $ 13,526 $ 221,809 (18) $ 244,122
Shares outstanding 5 1,282 1,910 17,511 (1,439) 19,269
Net asset value per share $ 11.90 $ 6.82 $ 7.08 $ 12.67 $ 12.67
Class C
Net asset value $ 521 $ 552 $ 4,889 (1) $ 5,961
Shares outstanding 76 78 386 (70) 470
Net asset value per share $ 6.82 $ 7.08 $ 12.67 $ 12.67
</TABLE>
(1) Adjustments reflect one time proxy, accounting, legal and other costs of
the reorganization of $27,624, $29,590, $28,442 and $160,239 to be borne by the
Oregon Fund, the Michigan Fund, the North Carolina Fund and the National Fund,
respectively.
(2) Assumes the Acquisitions were consummated on July 31, 2000, and is for
information purposes only. No assurance can be given as to how many shares of
the National Fund will be received by the shareholders of each Acquired Fund on
the date the Acquisitions take place, and the foregoing should not be relied
upon to reflect the number of shares of the National Fund that actually will be
received on or after such date.
C-19
<PAGE>
CAPITALIZATION
(In Thousands)
The following table shows on an unaudited basis the capitalization of each of
the Oregon Fund, the Minnesota Fund, the North Carolina Fund and the National
Fund as of July 31, 2000, and on a pro forma combined basis, giving effect to
the acquisition of the assets and liabilities of the Oregon, Minnesota and North
Carolina Funds by the National Fund at net asset value as of that date:
<TABLE>
<CAPTION>
OREGON MINNESOTA NORTH CAROLINA NATIONAL PRO FORMA PRO FORMA
FUND FUND FUND FUND ADJUSTMENTS (1) COMBINED (2)
<S> <C> <C> <C> <C> <C> <C>
Class A
Net asset value $ 16,484 $ 23,358 $ 15,687 $1,855,378 (101) $1,910,806
Shares outstanding 1,385 3,488 2,216 146,475 (2,743) 150,821
Net asset value per share $ 11.90 $ 6.70 $ 7.08 $ 12.67 $ 12.67
Class B
Net asset value $ 55 $ 16,424 $ 13,526 $ 221,809 (21) $ 251,793
Shares outstanding 5 2,451 1,910 17,511 (2,003) 19,874
Net asset value per share $ 11.90 $ 6.70 $ 7.08 $ 12.67 $ 12.67
Class C
Net asset value $ 447 $ 552 $ 4,889 (1) $ 5,887
Shares outstanding 67 78 386 (66) 465
Net asset value per share $ 6.70 $ 7.08 $ 12.67 $ 12.67
</TABLE>
(1) Adjustments reflect one time proxy, accounting, legal and other costs of
the reorganization of $27,624, $30,151, $28,442 and $160,239 to be borne by the
Oregon Fund, the Minnesota Fund, the North Carolina Fund and the National Fund,
respectively.
(2) Assumes the Acquisitions were consummated on July 31, 2000, and is for
information purposes only. No assurance can be given as to how many shares of
the National Fund will be received by the shareholders of each Acquired Fund on
the date the Acquisitions take place, and the foregoing should not be relied
upon to reflect the number of shares of the National Fund that actually will be
received on or after such date.
C-20
<PAGE>
CAPITALIZATION
(In Thousands)
The following table shows on an unaudited basis the capitalization of each of
the Oregon Fund, the Florida Fund, the Minnesota Fund and the National Fund as
of July 31, 2000, and on a pro forma combined basis, giving effect to the
acquisition of the assets and liabilities of the Oregon, Florida and Minnesota
Funds by the National Fund at net asset value as of that date:
<TABLE>
<CAPTION>
OREGON FLORIDA MINNESOTA NATIONAL PRO FORMA PRO FORMA
FUND FUND FUND FUND ADJUSTMENTS (1) COMBINED (2)
<S> <C> <C> <C> <C> <C> <C>
Class A
Net asset value $ 16,484 $ 23,369 $ 23,358 $1,855,378 (102) $1,918,487
Shares outstanding 1,385 3,191 3,488 146,475 (3,111) 151,428
Net asset value per share $ 11.90 $ 7.32 $ 6.70 $ 12.67 $ 12.67
Class B
Net asset value $ 55 $ 20,855 $ 16,424 $ 221,809 (22) $ 259,121
Shares outstanding 5 2,849 2,451 17,511 (2,363) 20,453
Net asset value per share $ 11.90 $ 7.32 $ 6.70 $ 12.67 $ 12.67
Class C
Net asset value $ 396 $ 447 $ 4,889 (1) $ 5,731
Shares outstanding 54 67 386 (55) 452
Net asset value per share $ 7.32 $ 6.70 $ 12.67 $ 12.67
</TABLE>
(1) Adjustments reflect one time proxy, accounting, legal and other costs of the
reorganization of $27,624, $29,057, $30,151 and $160,239 to be borne by the
Oregon Fund, the Florida Fund, the Minnesota Fund and the National Fund,
respectively.
(2) Assumes the Acquisitions were consummated on July 31, 2000, and is for
information purposes only. No assurance can be given as to how many shares of
the National Fund will be received by the shareholders of each Acquired Fund on
the date the Acquisitions take place, and the foregoing should not be relied
upon to reflect the number of shares of the National Fund that actually will be
received on or after such date.
C-21
<PAGE>
CAPITALIZATION
(In Thousands)
The following table shows on an unaudited basis the capitalization of each of
the Oregon Fund, the Florida Fund, the North Carolina Fund and the National Fund
as of July 31, 2000, and on a pro forma combined basis, giving effect to the
acquisition of the assets and liabilities of the Oregon, Florida and North
Carolina Funds by the National Fund at net asset value as of that date:
<TABLE>
<CAPTION>
OREGON FLORIDA NORTH CAROLINA NATIONAL PRO FORMA PRO FORMA
FUND FUND FUND FUND ADJUSTMENTS (1) COMBINED (2)
<S> <C> <C> <C> <C> <C> <C>
Class A
Net asset value $ 16,484 $ 23,369 $ 15,687 $1,855,378 (100) $1,910,818
Shares outstanding 1,385 3,191 2,216 146,475 (2,445) 150,822
Net asset value per share $ 11.90 $ 7.32 $ 7.08 $ 12.67 $ 12.67
Class B
Net asset value $ 55 $ 20,855 $ 13,526 $ 221,809 (22) $ 256,223
Shares outstanding 5 2,849 1,910 17,511 (2,050) 20,225
Net asset value per share $ 11.90 $ 7.32 $ 7.08 $ 12.67 $ 12.67
Class C
Net asset value $ 396 $ 552 $ 4,889 (1) $ 5,836
Shares outstanding 54 78 386 (57) 461
Net asset value per share $ 7.32 $ 7.08 $ 12.67 $ 12.67
</TABLE>
(1) Adjustments reflect one time proxy, accounting, legal and other costs of
the reorganization of $27,624, $29,057, $28,442 and $160,239 to be borne by the
Oregon Fund, the Florida Fund, the North Carolina Fund and the National Fund,
respectively.
(2) Assumes the Acquisitions were consummated on July 31, 2000, and is for
information purposes only. No assurance can be given as to how many shares of
the National Fund will be received by the shareholders of each Acquired Fund on
the date the Acquisitions take place, and the foregoing should not be relied
upon to reflect the number of shares of the National Fund that actually will be
received on or after such date.
C-22
<PAGE>
CAPITALIZATION
(In Thousands)
The following table shows on an unaudited basis the capitalization of each of
the Oregon Fund, the Michigan Fund, the Minnesota Fund and the National Fund as
of July 31, 2000, and on a pro forma combined basis, giving effect to the
acquisition of the assets and liabilities of the Oregon, Michigan and Minnesota
Funds by the National Fund at net asset value as of that date:
<TABLE>
<CAPTION>
OREGON MICHIGAN MINNESOTA NATIONAL PRO FORMA PRO FORMA
FUND FUND FUND FUND ADJUSTMENTS (1) COMBINED (2)
<S> <C> <C> <C> <C> <C> <C>
Class A
Net asset value $ 16,484 $ 30,388 $ 23,358 $1,855,378 (106) $1,925,502
Shares outstanding 1,385 4,453 3,488 146,475 (3,819) 151,982
Net asset value per share $ 11.90 $ 6.82 $ 6.70 $ 12.67 $ 12.67
Class B
Net asset value $ 55 $ 8,750 $ 16,424 $ 221,809 (18) $ 247,020
Shares outstanding 5 1,282 2,451 17,511 (1,751) 19,498
Net asset value per share $ 11.90 $ 6.82 $ 6.70 $ 12.67 $ 12.67
Class C
Net asset value $ 521 $ 447 $ 4,889 (1) $ 5,856
Shares outstanding 76 67 386 (67) 462
Net asset value per share $ 6.82 $ 6.70 $ 12.67 $ 12.67
</TABLE>
(1) Adjustments reflect one time proxy, accounting, legal and other costs of the
reorganization of $27,624, $29,590, $30,151 and $160,239 to be borne by the
Oregon Fund, the Michigan Fund, the Minnesota Fund and the National Fund,
respectively.
(2) Assumes the Acquisitions were consummated on July 31, 2000, and is for
information purposes only. No assurance can be given as to how many shares of
the National Fund will be received by the shareholders of each Acquired Fund on
the date the Acquisitions take place, and the foregoing should not be relied
upon to reflect the number of shares of the National Fund that actually will be
received on or after such date
C-23
<PAGE>
CAPITALIZATION
(In Thousands)
The following table shows on an unaudited basis the capitalization of each of
the Oregon Fund, the Michigan Fund, the Minnesota Fund, the North Carolina Fund
and the National Fund as of July 31, 2000, and on a pro forma combined basis,
giving effect to the acquisition of the assets and liabilities of the Oregon,
Michigan, Minnesota and North Carolina Funds by the National Fund at net asset
value as of that date:
<TABLE>
<CAPTION>
OREGON MICHIGAN MINNESOTA NORTH CAROLINA NATIONAL PRO FORMA PRO FORMA
FUND FUND FUND FUND FUND ADJUSTMENTS(1) COMBINED(2)
<S> <C> <C> <C> <C> <C> <C> <C>
Class A
Net asset value $ 16,484 $ 30,388 $ 23,358 $ 15,687 $1,855,378 (113) $1,941,182
Shares outstanding 1,385 4,453 3,488 2,216 146,475 (4,798) 153,219
Net asset value per share $ 11.90 $ 6.82 $ 6.70 $ 7.08 $ 12.67 $ 12.67
Class B
Net asset value $ 55 $ 8,750 $ 16,424 $ 13,526 $ 221,809 (24) $ 260,540
Shares outstanding 5 1,282 2,451 1,910 17,511 (2,594) 20,565
Net asset value per share $ 11.90 $ 6.82 $ 6.70 $ 7.08 $ 12.67 $ 12.67
Class C
Net asset value $ 521 $ 447 $ 552 $ 4,889 (1) $ 6,408
Shares outstanding 76 67 78 386 (101) 506
Net asset value per share $ 6.82 $ 6.70 $ 7.08 $ 12.67 $ 12.67
</TABLE>
(1) Adjustments reflect one time proxy, accounting, legal and other costs of the
reorganization of $27,624, $29,590, $30,151, $28,442 and $160,239 to be borne by
the Oregon Fund, the Michigan Fund, the Minnesota Fund, the North Carolina Fund
and the National Fund, respectively.
(2) Assumes the Acquisitions were consummated on July 31, 2000, and is for
information purposes only. No assurance can be given as to how many shares of
the National Fund will be received by the shareholders of each Acquired Fund on
the date the Acquisitions take place, and the foregoing should not be relied
upon to reflect the number of shares of the National Fund that actually will be
received on or after such date.
C-24
<PAGE>
CAPITALIZATION
(In Thousands)
The following table shows on an unaudited basis the capitalization of each of
the Oregon Fund, the Florida Fund, the Minnesota Fund, the North Carolina Fund
and the National Fund as of July 31, 2000, and on a pro forma combined basis,
giving effect to the acquisition of the assets and liabilities of the Oregon,
Florida, Minnesota and North Carolina Funds by the National Fund at net asset
value as of that date:
<TABLE>
<CAPTION>
OREGON FLORIDA MINNESOTA NORTH CAROLINA NATIONAL PRO FORMA PRO FORMA
FUND FUND FUND FUND FUND ADJUSTMENTS(1) COMBINED(2)
<S> <C> <C> <C> <C> <C> <C> <C>
Class A
Net asset value $ 16,484 $ 23,369 $ 23,358 $ 15,687 $1,855,378 (109) $1,934,167
Shares outstanding 1,385 3,191 3,488 2,216 146,475 (4,089) 152,666
Net asset value per share $ 11.90 $ 7.32 $ 6.70 $ 7.08 $ 12.67 $ 12.67
Class B
Net asset value $ 55 $ 20,855 $ 16,424 $ 13,526 $ 221,809 (28) $ 272,641
Shares outstanding 5 2,849 2,451 1,910 17,511 (3,205) 21,521
Net asset value per share $ 11.90 $ 7.32 $ 6.70 $ 7.08 $ 12.67 $ 12.67
Class C
Net asset value $ 396 $ 447 $ 552 $ 4,889 (1) $ 6,283
Shares outstanding 54 67 78 386 (89) 496
Net asset value per share $ 7.32 $ 6.70 $ 7.08 $ 12.67 $ 12.67
</TABLE>
(1) Adjustments reflect one time proxy, accounting, legal and other costs of the
reorganization of $27,624, $29,057, $30,151, $28,442 and $160,239 to be borne by
the Oregon Fund, the Florida Fund, the Minnesota Fund, the North Carolina Fund
and the National Fund, respectively.
(2) Assumes the Acquisitions were consummated on July 31, 2000, and is for
information purposes only. No assurance can be given as to how many shares of
the National Fund will be received by the shareholders of each Acquired Fund on
the date the Acquisitions take place, and the foregoing should not be relied
upon to reflect the number of shares of the National Fund that actually will be
received on or after such date.
C-25
<PAGE>
CAPITALIZATION
(In Thousands)
The following table shows on an unaudited basis the capitalization of each of
the Oregon Fund, the Florida Fund, the Michigan Fund, the North Carolina Fund
and the National Fund as of July 31, 2000, and on a pro forma combined basis,
giving effect to the acquisition of the assets and liabilities of the Oregon,
Florida, Michigan and North Carolina Funds by the National Fund at net asset
value as of that date:
<TABLE>
<CAPTION>
OREGON FLORIDA MICHIGAN NORTH CAROLINA NATIONAL PRO FORMA PRO FORMA
FUND FUND FUND FUND FUND ADJUSTMENTS(1) COMBINED(2)
<S> <C> <C> <C> <C> <C> <C> <C>
Class A
Net asset value $ 16,484 $ 23,369 $ 30,388 $ 15,687 $1,855,378 (112) $1,941,194
Shares outstanding 1,385 3,191 4,453 2,216 146,475 (4,499) 153,221
Net asset value per share $ 11.90 $ 7.32 $ 6.82 $ 7.08 $ 12.67 $ 12.67
Class B
Net asset value $ 55 $ 20,855 $ 8,750 $ 13,526 $ 221,809 (25) $ 264,970
Shares outstanding 5 2,849 1,282 1,910 17,511 (2,642) 20,915
Net asset value per share $ 11.90 $ 7.32 $ 6.82 $ 7.08 $ 12.67 $ 12.67
Class C
Net asset value $ 396 $ 521 $ 552 $ 4,889 (1) $ 6,357
Shares outstanding 54 76 78 386 (93) 502
Net asset value per share $ 7.32 $ 6.82 $ 7.08 $ 12.67 $ 12.67
</TABLE>
(1) Adjustments reflect one time proxy, accounting, legal and other costs of the
reorganization of $27,624, $29,057, $29,590, $28,442 and $160,239 to be borne by
the Oregon Fund, the Florida Fund, the Michigan Fund, the North Carolina Fund
and the National Fund, respectively.
(2) Assumes the Acquisitions were consummated on July 31, 2000, and is for
information purposes only. No assurance can be given as to how many shares of
the National Fund will be received by the shareholders of each Acquired Fund on
the date the Acquisitions take place, and the foregoing should not be relied
upon to reflect the number of shares of the National Fund that actually will be
received on or after such date.
C-26
<PAGE>
CAPITALIZATION
(In Thousands)
The following table shows on an unaudited basis the capitalization of each of
the Oregon Fund and the National Fund as of July 31, 2000, and on a pro forma
combined basis, giving effect to the acquisition of the assets and liabilities
of the Oregon Fund by the National Fund at net asset value as of that date:
<TABLE>
<CAPTION>
OREGON NATIONAL PRO FORMA PRO FORMA
FUND FUND ADJUSTMENTS(1) COMBINED(2)
<S> <C> <C> <C> <C>
Class A
Net asset value $ 16,484 $1,855,378 (85) $1,871,777
Shares outstanding 1,385 146,475 (84) 147,776
Net asset value per share $ 11.90 $ 12.67 $ 12.67
Class B
Net asset value $ 55 $ 221,809 (9) $ 221,855
Shares outstanding 5 17,511 (1) 17,515
Net asset value per share $ 11.90 $ 12.67 $ 12.67
Class C
Net asset value $ 4,889 (1) $ 4,888
Shares outstanding 386 (0) 386
Net asset value per share $ 12.67 $ 12.67
</TABLE>
(1) Adjustments reflect one time proxy, accounting, legal and other costs of the
reorganization of $27,624 and $160,239 to be borne by the Oregon Fund and the
National Fund, respectively.
(2) Assumes the Acquisition was consummated on July 31, 2000, and is for
information purposes only. No assurance can be given as to how many shares of
the National Fund will be received by the shareholders of the Oregon Fund on the
date the Acquisition takes place, and the foregoing should not be relied upon to
reflect the number of shares of the National Fund that actually will be received
on or after such date.
C-27
<PAGE>
CAPITALIZATION
(In Thousands)
The following table shows on an unaudited basis the capitalization of each of
the Florida Fund and the National Fund as of July 31, 2000, and on a pro forma
combined basis, giving effect to the acquisition of the assets and liabilities
of the Florida Fund by the National Fund at net asset value as of that date:
<TABLE>
<CAPTION>
FLORIDA NATIONAL PRO FORMA PRO FORMA
FUND FUND ADJUSTMENTS(1) COMBINED(2)
<S> <C> <C> <C> <C>
Class A
Net asset value $ 23,369 $1,855,378 (79) $1,878,668
Shares outstanding 3,191 146,475 (1,347) 148,319
Net asset value per share $ 7.32 $ 12.67 $ 12.67
Class B
Net asset value $ 20,855 $ 221,809 (16) $ 242,648
Shares outstanding 2,849 17,511 (1,203) 19,157
Net asset value per share $ 7.32 $ 12.67 $ 12.67
Class C
Net asset value $ 396 $ 4,889 (1) $ 5,284
Shares outstanding 54 386 (23) 417
Net asset value per share $ 7.32 $ 12.67 $ 12.67
</TABLE>
(1) Adjustments reflect one time proxy, accounting, legal and other costs of the
reorganization of $29,057 and $160,239 to be borne by the Florida Fund and the
National Fund, respectively.
(2) Assumes the Acquisition was consummated on July 31, 2000, and is for
information purposes only. No assurance can be given as to how many shares of
the National Fund will be received by the shareholders of the Florida Fund on
the date the Acquisition takes place, and the foregoing should not be relied
upon to reflect the number of shares of the National Fund that actually will be
received on or after such date.
C-28
<PAGE>
CAPITALIZATION
(In Thousands)
The following table shows on an unaudited basis the capitalization of each of
the Michigan Fund and the National Fund as of July 31, 2000, and on a pro forma
combined basis, giving effect to the acquisition of the assets and liabilities
of the Michigan Fund by the National Fund at net asset value as of that date:
<TABLE>
<CAPTION>
MICHIGAN NATIONAL PRO FORMA PRO FORMA
FUND FUND ADJUSTMENTS(1) COMBINED(2)
<S> <C> <C> <C> <C>
Class A
Net asset value $ 30,388 $1,855,378 (83) $1,885,683
Shares outstanding 4,453 146,475 (2,055) 148,873
Net asset value per share $ 6.82 $ 12.67 $ 12.67
Class B
Net asset value $ 8,750 $ 221,809 (12) $ 230,547
Shares outstanding 1,282 17,511 (591) 18,202
Net asset value per share $ 6.82 $ 12.67 $ 12.67
Class C
Net asset value $ 521 $ 4,889 (1) $ 5,409
Shares outstanding 76 386 (35) 427
Net asset value per share $ 6.82 $ 12.67 $ 12.67
</TABLE>
(1) Adjustments reflect one time proxy, accounting, legal and other costs of the
reorganization of $29,590 and $160,239 to be borne by the Michigan Fund and the
National Fund, respectively.
(2) Assumes the Acquisition was consummated on July 31, 2000, and is for
information purposes only. No assurance can be given as to how many shares of
the National Fund will be received by the shareholders of the Michigan Fund on
the date the Acquisition takes place, and the foregoing should not be relied
upon to reflect the number of shares of the National Fund that actually will be
received on or after such date.
C-29
<PAGE>
CAPITALIZATION
(In Thousands)
The following table shows on an unaudited basis the capitalization of each of
the Minnesota Fund and the National Fund as of July 31, 2000, and on a pro forma
combined basis, giving effect to the acquisition of the assets and liabilities
of the Minnesota Fund by the National Fund at net asset value as of that date:
<TABLE>
<CAPTION>
MINNESOTA NATIONAL PRO FORMA PRO FORMA
FUND FUND ADJUSTMENTS(1) COMBINED(2)
<S> <C> <C> <C> <C>
Class A
Net asset value $ 23,358 $1,855,378 (80) $1,878,656
Shares outstanding 3,488 146,475 (1,644) 148,319
Net asset value per share $ 6.70 $ 12.67 $ 12.67
Class B
Net asset value $ 16,424 $ 221,809 (15) $ 238,218
Shares outstanding 2,451 17,511 (1,155) 18,807
Net asset value per share $ 6.70 $ 12.67 $ 12.67
Class C
Net asset value $ 447 $ 4,889 (1) $ 5,335
Shares outstanding 67 386 (32) 421
Net asset value per share $ 6.70 $ 12.67 $ 12.67
</TABLE>
(1) Adjustments reflect one time proxy, accounting, legal and other costs of the
reorganization of $30,151 and $160,239 to be borne by the Minnesota Fund and the
National Fund, respectively.
(2) Assumes the Acquisition was consummated on July 31, 2000, and is for
information purposes only. No assurance can be given as to how many shares of
the National Fund will be received by the shareholders of the Minnesota Fund on
the date the Acquisition takes place, and the foregoing should not be relied
upon to reflect the number of shares of the National Fund that actually will be
received on or after such date.
C-30
<PAGE>
CAPITALIZATION
(In Thousands)
The following table shows on an unaudited basis the capitalization of each of
the North Carolina Fund and the National Fund as of July 31, 2000, and on a pro
forma combined basis, giving effect to the acquisition of the assets and
liabilities of the North Carolina Fund by the National Fund at net asset value
as of that date:
<TABLE>
<CAPTION>
NORTH CAROLINA NATIONAL PRO FORMA PRO FORMA
FUND FUND ADJUSTMENTS(1) COMBINED(2)
<S> <C> <C> <C> <C>
Class A
Net asset value $ 15,687 $1,855,378 (78) $1,870,987
Shares outstanding 2,216 146,475 (978) 147,713
Net asset value per share $ 7.08 $ 12.67 $ 12.67
Class B
Net asset value $ 13,526 $ 221,809 (15) $ 235,320
Shares outstanding 1,910 17,511 (842) 18,579
Net asset value per share $ 7.08 $ 12.67 $ 12.67
Class C
Net asset value $ 552 $ 4,889 (1) $ 5,440
Shares outstanding 78 386 (35) 429
Net asset value per share $ 7.08 $ 12.67 $ 12.67
</TABLE>
(1) Adjustments reflect one time proxy, accounting, legal and other costs of the
reorganization of $28,442 and $160,239 to be borne by the North Carolina Fund
and the National Fund, respectively.
(2) Assumes the Acquisition was consummated on July 31, 2000, and is for
information purposes only. No assurance can be given as to how many shares of
the National Fund will be received by the shareholders of the North Carolina
Fund on the date the Acquisition takes place, and the foregoing should not be
relied upon to reflect the number of shares of the National Fund that actually
will be received on or after such date.
C-31
<PAGE>
APPENDIX D
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE AS OF NOVEMBER 30, 1999
LIBERTY TAX-EXEMPT FUND
HIGHLIGHTS
- RISING RATES MADE FOR A CHALLENGING YEAR IN THE BOND MARKET
During the 12-month period, short-, mid- and long-term interest rates rose
dramatically. These increases significantly affected bond performance in
every sector because bond prices move in the opposite direction of yields.
Municipal bonds were no exception, although their declines were mitigated
somewhat by a reduction in supply.
- MUNICIPALS OUTPERFORMED TREASURY BONDS DURING THE PERIOD
Municipal bonds were slightly undervalued at the start of the period, and
they gained value, relative to Treasury bonds, during the year. The yield
on the 30-year AAA-rated general obligation (GO) bond -- a benchmark of
municipal bond market performance -- rose from 4.82% on November 30, 1998
to 5.73% on November 30, 1999.
- INDEX PERFORMANCE REFLECTED THE DIFFICULT MARKET ENVIRONMENT
The declines in the Fund and the Lehman Brothers Municipal Bond Index
reflect the difficult conditions in the bond market during the past year.
PORTFOLIO MANAGEMENT REPORT
FUND PERFORMANCE AFFECTED BY HIGH-YIELD HOLDINGS
During the 12-month period, the Fund had a total return of negative 3.87%,
based on Class A shares without a sales charge. This placed the Fund in the
third quartile of its Lipper peer group -- the Lipper General Municipal Debt
Funds category -- which had an average total return of negative 3.51% for the
same period.(1) The Fund underperformed its peer group average primarily because
it had a larger-than-average percentage of higher yielding non-rated bonds.
These did not perform well when credit spreads -- the difference in yield
between higher- and lower-yielding bonds -- widened during the year. When credit
spreads widen, the yields on high-yield bonds go up more, causing high-yield
bonds to underperform the market. However, we believe that these are solid
credits, and if interest rates stabilize in the coming year -- as we believe
they will -- credit spreads should again narrow and the extra yield from our
non-rated holdings have the potential to benefit the Fund. Moreover, we are
encouraged by the three-and five-year performance of the Fund, in which it
ranked in the second quartile of its Lipper peer group.(1)
D-1
<PAGE>
(1) Lipper, Inc., a widely respected data provider for the industry, calculates
an average total return for mutual funds with similar investment objectives
as the Fund. The average total return calculated for funds in the Lipper
General Municipal Debt Funds category was negative 3.51% for the 12 months
ended November 30, 1999. The Fund's Class A shares ranked in the third
quartile for one year (ranked 166 out of 264 funds), in the second quartile
for three years (ranked 66 out of 218 funds), in the second quartile for
five years (ranked 59 out of 171 funds), and in the third quartile for 10
years (ranked 54 out of 78 funds). Rankings do not include any sales
charges. Performance for different share classes will vary with fees
associated with each class. Past performance cannot guarantee future
results.
MUNICIPAL SUPPLY LOWER THAN USUAL
The supply of municipal bonds was down nearly 20% from January through
November from the same period in 1998, which helped stem the decline in
municipal bond prices generally. A reduction in supply is also typical in a
rising interest rate environment because it is more expensive for a municipality
to issue bonds at higher interest rates and because refinancings decline.
INCREASE OF HIGH-YIELD HOLDINGS REFLECTS LONG-TERM STRATEGY
During the period, there was an increase in "credit spreads" in the bond
market. This occurs when there is an increase in the yield of higher-yielding,
lower-quality bonds, as compared to the yield of lower-yielding, higher-quality
bonds. When this happens, as it did in 1999, higher-yielding bonds can offer
very good values and deliver competitive tax-exempt yields. As part of our
ongoing effort to seek above-average income for shareholders, we took advantage
of these values and increased our holdings of higher-yielding bonds. For
example, the health care and continuing care industries have been hard hit by
federal cutbacks of Medicare. We invested in select high-yield, non-rated health
care bonds that were attractively priced. We also found some non-rated
industrial revenue, or corporate-backed bonds that had attractive yields.
LOOKING FOR INTEREST RATE STABILITY IN 2000
Despite the continued expansion of the U.S. economy -- the duration of
which is nearing an all-time record -- and the tight labor market that has
existed for the past few years, inflation has been kept at bay because of
significant increases in productivity driven by technological advances. We
believe that this productivity rise, along with the Fed's rate increases (which
have a slowing effect on economic growth), can have a positive impact on bonds
over the long term by keeping inflation under control.
Our longer-term outlook is for the U.S. economy to slow down somewhat and
for interest rates to stabilize. We believe that the increases in both
short-term and long-term interest rates in the past year will begin to have an
effect on businesses as we go into next year. Productivity is still increasing,
and many companies do not have the ability to raise prices because of
competition from overseas. The efficiencies that
D-2
<PAGE>
companies and consumers have derived from the Internet and technology continue
to have a major impact on productivity.
In the near-term, the economy looks as though it will remain fairly strong.
Whatever the economy does, however, we will continue to work on structuring the
portfolio in such a way as to seek solid returns in any environment, while
leaving some room to make adjustments as conditions change.
/s/William Loring
/s/Brian Hartford
WILLIAM LORING and BRIAN HARTFORD are portfolio co-managers of Colonial
Tax-Exempt Fund and are senior vice presidents of Colonial Management
Associates, Inc. (CMA).
The Fund involves certain risks such as credit risks associated with lower-rated
bonds and changes in interest rates. High-yield municipal bond investing carries
increased credit risks.
PERFORMANCE INFORMATION
NATIONAL FUND INVESTMENT PERFORMANCE VS. LEHMAN MUNICIPAL BOND INDEX
[LINE CHART: Initial and subsequent account values at end of each of the most
recently completed ten fiscal years]
PERFORMANCE OF A $10,000 INVESTMENT IN CLASS A SHARES 11/30/89 - 11/30/99
<TABLE>
<CAPTION>
Without With Lehman Brothers
Sales Sales Municipal
Charge Charge Bond Index
------- ------- ---------------
<S> <C> <C> <C>
11/30/89 $10,000 $ 9,525 $10,000
11/30/90 10,695 10,187 10,770
11/30/91 11,779 11,220 11,875
11/30/92 12,871 12,260 13,066
11/30/93 14,133 13,462 14,515
11/30/94 13,129 12,506 13,753
11/30/95 15,671 14,927 16,352
11/30/96 16,373 15,596 17,314
11/30/97 17,546 16,712 18,555
11/30/98 18,988 18,086 19,995
11/30/99 18,253 17,386 19,781
</TABLE>
The Lehman Brothers Municipal Bond Index is an unmanaged index that tracks the
performance of the municipal bond market. Unlike mutual funds, indexes are not
investments and do not incur fees or expenses. It is not possible to invest
directly in an index.
AVERAGE ANNUAL TOTAL RETURNS AS OF 11/30/99
<TABLE>
<CAPTION>
Share Class A B C
Inception Date 10/1/84 5/5/92 8/1/97
----------------------------------------------------------------------------------------------------
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 (3.87)% (8.43)% (4.59)% (9.08)% (4.45)% (5.34)%
5 years 6.81 5.77 6.01 5.69 6.51 6.51
10 years 6.20 5.69 5.60 5.60 6.05 6.05
</TABLE>
PERFORMANCE OF A $10,000 INVESTMENT IN ALL SHARE CLASSES FROM 11/30/1989 TO
11/30/1999
D-3
<PAGE>
<TABLE>
<CAPTION>
Without With
Sales Sales
Charge Charge
<S> <C> <C>
Class A $18,253 $17,386
Class B $17,252 $17,252
Class C $17,996 $17,996
</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 4.75% charge for Class A shares and the maximum contingent deferred
sales charges (CDSC) of 5% for one year and 2% for five years for Class B shares
and 1% for one year for Class C shares. Performance for different share classes
will vary based on differences in sales charges and fees associated with each
class.
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.
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 its inception date. These Class A share returns are not
restated to reflect any expense differential (e.g., Rule 12b-1 fees) between
Class A shares and the newer class shares. Had the expense differential been
reflected, the returns for the periods prior to the inception of Class B and
Class C shares would have been lower.
NET ASSET VALUE AS OF 11/30/1999
Class A $12.67
Class B $12.67
Class C $12.67
DISTRIBUTIONS DECLARED PER SHARE FROM 12/1/1998 TO 11/30/1999
Class A $0.923
Class B $0.822
Class C $0.842
30-DAY SEC YIELDS ON 11/30/1999
Class A 4.78%
Class B 4.26%
Class C 4.41%
30-day SEC yields reflect the portfolio's earning power net of expenses,
expressed as an annualized percentage of the public offering price per share at
the end of the period. If the Advisor or its affiliates had not waived certain
expenses, the SEC yield would have been 4.26% for Class C shares.
TAXABLE-EQUIVALENT SEC YIELDS ON 11/30/1999
Class A 7.91%
Class B 7.05%
Class C 7.30%
D-4
<PAGE>
Taxable-equivalent SEC yields are based on the maximum federal income tax rate
of 39.6%. This tax rate does not reflect the phase out of exemptions or the
reduction of otherwise allowable deductions which occur when Adjusted Gross
Income exceeds certain levels.
QUALITY BREAKDOWN AS OF 11/30/99
AAA 55.5%
AA 10.9%
A 7.6%
BBB 6.8%
BB 1.0%
CC 0.1%
Non-rated 17.3%
Cash equivalents 0.8%
MATURITY BREAKDOWN AS OF 11/30/99
0-1 year 0.3%
1-3 years 1.8%
3-5 years 3.7%
5-7 years 1.9%
7-10 years 3.0%
10-15 years 21.1%
15-20 years 23.2%
20-25 years 25.2%
25+ years 19.0%
Cash equivalents 0.8%
Quality and maturity breakdowns are calculated as a percentage of total
investments, including short-term obligations. Ratings shown in the Quality
Breakdowns represent the highest rating assigned to a particular bond by one of
the following respected rating agencies: Standard & Poor's Corporation, Moody's
Investors Service, Inc. or Fitch Investors Service, Inc.
Maturity breakdown is based on each security's effective maturity, which
reflects pre-refundings, mandatory puts and other conditions that affect a
bond's maturity.
Because the Fund is actively managed, there can be no guarantee the Fund will
continue to maintain these quality and maturity breakdowns in the future.
D-5
<PAGE>
LIBERTY FUNDS TRUST IV
LIBERTY TAX-EXEMPT FUND
FORM N-14
PART B
STATEMENT OF ADDITIONAL INFORMATION
November 8, 2000
This Statement of Additional Information (the "SAI") relates to the
proposed Acquisition (the "Acquisition") of the Liberty Florida Tax-Exempt Fund
(the "Florida Fund"), the Liberty Michigan Tax-Exempt Fund (the "Michigan
Fund"), the Liberty Minnesota Tax-Exempt Fund (the "Minnesota Fund"), the
Liberty North Carolina Tax-Exempt Fund (the "North Carolina Fund"), all a series
of Liberty Funds Trust V, and the Liberty Oregon Tax-Free Fund (the "Oregon
Fund"), a series of Liberty Funds Trust III (together, the "Acquired Funds"), by
the Liberty Tax-Exempt Fund (the "Acquiring Fund"), a series of Liberty Funds
Trust IV.
This SAI contains information which may be of interest to shareholders
but which is not included in the Prospectus/Proxy Statement dated November 8,
2000 (the "Prospectus/Proxy Statement") of the Acquiring Fund which relates to
the Acquisition. As described in the Prospectus/Proxy Statement, the Acquisition
would involve the transfer of all the assets of the Acquired Funds in exchange
for shares of the Acquiring Fund and the assumption of all the liabilities of
each of the Acquired Funds. Each of the Acquired Funds would distribute the
Acquiring Fund shares it receives to its shareholders in complete liquidation of
the Acquired Funds.
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........................
II. ADDITIONAL INFORMATION ABOUT THE ACQUIRED FUNDS........................
III. FINANCIAL STATEMENTS...................................................
<PAGE>
I. ADDITIONAL INFORMATION ABOUT THE ACQUIRING FUND.
Incorporated by reference to Post-Effective Amendment No. 59 to the
Registration Statement on Form N-1A (filed on March 17, 2000) of Liberty Funds
Trust IV (Registration Statement Nos. 2-62492 and 811-2865).
II. ADDITIONAL INFORMATION ABOUT THE ACQUIRED FUNDS.
With respect to the Florida Fund, the Michigan Fund, the Minnesota Fund
and the North Carolina Fund, incorporated by reference to Post-Effective
Amendment No. 26 to the Registration Statement on Form N-1A (filed on May 30,
2000) of Liberty Funds Trust V (Registration Statement Nos. 33-12109 and
811-5030).
With respect to the Oregon Fund, incorporated by reference to
Post-Effective Amendment No. 114 to the Registrant's Registration Statement on
Form N-1A (filed on February 28, 2000) (Registration Nos. 2-15184 and 811-881).
III. FINANCIAL STATEMENTS.
This SAI is accompanied by (i) the Semi-Annual Report for the six
months ended May 31, 2000 and the Annual Report for the year ended November 30,
1999 of the Acquiring Fund; (ii) the Semi-Annual Report for the six-months ended
July 31, 2000 and the Annual Reports for the year ended January 31, 2000 of the
Florida Fund, the Michigan Fund, the Minnesota Fund and the North Carolina Fund;
and (iii) 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 Oregon Fund, all of
which contain historical financial information regarding such Funds. Such
reports have been filed with the Securities and Exchange Commission and are
incorporated herein by reference.
-2-
<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. 4 to the Agreement and Declaration of Trust (2)
(1)(b) Amendment No. 5 to the Agreement and Declaration of Trust (3)
(2) By-Laws as Amended (4/1/99) (3)
(3) Not Applicable
(4)(a) Form of Agreement and Plan of Reorganization between Liberty
Oregon Tax-Free Fund and Liberty Tax-Exempt Fund
(4)(b) Form of Agreement and Plan of Reorganization between Liberty
Florida Tax-Exempt Fund and Liberty Tax-Exempt Fund
(4)(c) Form of Agreement and Plan of Reorganization between Liberty
Michigan Tax-Exempt Fund and Liberty Tax-Exempt Fund
(4)(d) Form of Agreement and Plan of Reorganization between Liberty
Minnesota Tax-Exempt Fund and Liberty Tax-Exempt Fund
(4)(e) Form of Agreement and Plan of Reorganization between Liberty
North Carolina Tax-Exempt Fund and Liberty Tax-Exempt 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)(a) Form of Management Agreement between Liberty Funds Trust IV on
behalf of Liberty Tax-Exempt Fund (formerly Colonial Tax-Exempt
Fund) and Colonial Management Associates, Inc.(1)
(6)(b) Form of Amendment No. 2 to Management Agreement between
Liberty Funds Trust IV on behalf of Liberty Tax-Exempt Fund
(formerly Colonial Tax-Exempt Fund) and Colonial Management
Associates, Inc.(1)
(7)(a) Distribution Agreement between the Registrant and Liberty
Funds Distributor, Inc. - filed as Exhibit 6.(a) 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
(7)(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
(7)(c) Form of Selling Agreement - filed as Exhibit 6.(b) in Part C,
Item 24(b) of Post-Effective Amendment No. 49 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 November 20, 1998, and is hereby incorporated by
reference and made a part of this Registration Statement
(7)(d) Form of Asset Retention Agreement - filed as Exhibit 6.(d) in
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
(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 - filed
as Exhibit 8. to Part C, Item 24(b) of Post-Effective Amendment
No. 13 to the Registration Statement on Form N1-A of Liberty
Funds Trust VI (File Nos. 33-45117 and 811-6529), filed with
the Commission on or about October 24, 1997, and is hereby
incorporated by reference and made a part of this Registration
Statement
(9)(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
(10)(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
(10)(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
(10)(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)(a) Opinion and Consent of Counsel of Ropes & Gray (Liberty Oregon
Tax-Free Fund)
(11)(b) Opinion and Consent of Counsel of Ropes & Gray (Liberty Florida
Tax-Exempt Fund)
(11)(c) Opinion and Consent of Counsel of Ropes & Gray (Liberty
Michigan Tax-Exempt Fund)
(11)(d) Opinion and Consent of Counsel of Ropes & Gray (Liberty
Minnesota Tax-Exempt Fund)
(11)(e) Opinion and Consent of Counsel of Ropes & Gray (Liberty North
Carolina Tax-Exempt Fund)
(12)(a) Opinion and Consent of Counsel on Tax Matters and
Consequences to Shareholders of Ropes & Gray with
respect to the Acquisition of Liberty Oregon Tax-Free Fund
(12)(b) Opinion and Consent of Counsel on Tax Matters and
Consequences to Shareholders of Ropes & Gray with
respect to the Acquisition of Liberty Florida
Tax-Exempt Fund
(12)(c) Opinion and Consent of Counsel on Tax Matters and
Consequences to Shareholders of Ropes & Gray with
respect to the Acquisition of Liberty Michigan
Tax-Exempt Fund
(12)(d) Opinion and Consent of Counsel on Tax Matters and
Consequences to Shareholders of Ropes & Gray with
respect to the Acquisition of Liberty Minnesota
Tax-Exempt Fund
(12)(e) Opinion and Consent of Counsel on Tax Matters and Consequences
to Shareholders of Ropes & Gray with respect to the Acquisition
of Liberty North Carolina Tax-Exempt Fund
(13) Not Applicable
(14)(a) Consent of Independent Accountants (PWC)
(14)(b) Consent of Independent Auditors (E&Y)
(14)(c) Consent of Independent Accountants (KPMG)
(15) Not Applicable
<PAGE>
(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
(16)(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
(17)(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
(17)(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
(17)(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
<PAGE>
(17)(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
(17)(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
(17)(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
(17)(h) Code of Ethics of The Liberty Funds, Colonial Management
Associates, Inc. and 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
(17)(i) Form of Proxy Card and Proxy Insert (Oregon Fund)
(17)(j) Form of Proxy Card and Proxy Insert (Florida Fund)
(17)(k) Form of Proxy Card and Proxy Insert (Michigan Fund)
(17)(l) Form of Proxy Card and Proxy Insert (Minnesota Fund)
(17)(m) Form of Proxy Card and Proxy Insert (North Carolina)
(17)(n) 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 each of the Florida Fund, the Michigan Fund, the Minnesota
Fund and the North Carolina Fund dated June 1, 2000 - 0000021832-00-000096
o As supplemented on September 12, 2000 - 0000021832-00-000230
o The Prospectus of the Oregon Fund dated March 1, 2000 - 0000276716-00-000014
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 each of the Florida Fund, the
Michigan Fund, the Minnesota Fund and the North Carolina Fund dated June 1, 2000
- 0000021832-00-000096
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 Oregon Fund dated
March 1, 2000 - 0000276716-00-000014
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 National Fund dated
April 1, 2000 - 0000883163-00-000022
o As supplemented on August 18, 2000 - 0000021832-00-000181
o The Report of Independent Accountants and financial statements included in the
Annual Report to Shareholders of the Florida Fund dated January 31, 2000 -
0000950135-00-001940
o The Report of Independent Accountants and financial statements included in the
Annual Report to Shareholders of the Michigan Fund dated January 31, 2000 -
0000950135-00-001965
o The Report of Independent Accountants and financial statements included in the
Annual Report to Shareholders of the Minnesota Fund dated January 31, 2000 -
0000950156-00-000217
o The Report of Independent Accountants and financial statements included in the
Annual Report to Shareholders of the North Carolina Fund dated January 31, 2000
- 0000950135-00-001939
o The Report of Independent Accountants and financial statements included in the
Annual Report to Shareholders of the Oregon Fund dated October 31, 1999 -
0000950146-00-000038
o The financial statements included in the Oregon Fund's Semi-Annual
Report to Shareholders dated April 30, 2000 - 0000950135-00-003559
o The Report of Independent Accountants and financial statements included in the
Annual Report to Shareholders of the National Fund dated November 30, 1999 -
0000950156-00-000051
o The financial statements included in the National Fund's Semi-Annual
Report to Shareholders dated May 31, 2000 - 0001005477-00-006915
o The Statement of Additional Information of the National Fund dated
November 8, 2000 relating to the Acquisitions.
-------------------------------------
(1) Incorporated by reference to the Registrant's Post-Effective
Amendment No. 42 on Form N-1A, filed with the Securities and
Exchange Commission on March 22, 1996.
(2) Incorporated by reference to the Registrant's Post-Effective
Amendment No. 46 on Form N-1A, filed with the Securities and
Exchange Commission on July 31, 1997.
(3) Incorporated by reference to the Registrant's Post-Effective
Amendment No. 54 on Form N-1A, filed with the Securities and
Exchange Commission on May 26, 1999.
(4) Incorporated by reference to the Registrant's Post-Effective
Amendment No. 58 on Form N-1A, filed with the Securities and
Exchange Commission on February 18, 2000.
(5) Incorporated by reference to the Registrant's Post-Effective
Amendment No. 59 on Form N-1A, filed with the Securities and
Exchange Commission on March 17, 2000.
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 IV
(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 IV.
<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 5th day of October, 2000.
LIBERTY FUNDS TRUST IV
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 5, 2000
-----------------
Stephen E. Gibson executive officer)
/s/PAMELA A. MCGRATH Treasurer and Chief Financial October 5, 2000
-----------------
Pamela A. McGrath Officer (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
--------------------
William E. Mayer For each Trustee
October 5, 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
<PAGE>
EXHIBIT INDEX
Exhibit
(4)(a) Form of Agreement and Plan of Reorganization between Liberty
Oregon Tax-Free Fund and Liberty Tax-Exempt Fund
(4)(b) Form of Agreement and Plan of Reorganization between Liberty
Florida Tax-Exempt Fund and Liberty Tax-Exempt Fund
(4)(c) Form of Agreement and Plan of Reorganization between Liberty
Michigan Tax-Exempt Fund and Liberty Tax-Exempt Fund
(4)(d) Form of Agreement and Plan of Reorganization between Liberty
Minnesota Tax-Exempt Fund and Liberty Tax-Exempt Fund
(4)(e) Form of Agreement and Plan of Reorganization between Liberty
North Carolina Tax-Exempt Fund and Liberty Tax-Exempt Fund
(11)(a) Opinion and Consent of Counsel of Ropes & Gray (Liberty Oregon
Tax-Free Fund)
(11)(b) Opinion and Consent of Counsel of Ropes & Gray (Liberty Florida
Tax-Exempt Fund)
(11)(c) Opinion and Consent of Counsel of Ropes & Gray (Liberty Michigan
Tax-Exempt Fund)
(11)(d) Opinion and Consent of Counsel of Ropes & Gray (Liberty Minnesota
Tax-Exempt Fund)
(11)(e) Opinion and Consent of Counsel of Ropes & Gray (Liberty North
Carolina Tax-Exempt Fund)
(12)(a) Opinion and Consent of Counsel on Tax Matters and Consequences to
Shareholders of Ropes & Gray with respect to the Acquisition of
Liberty Oregon Tax-Free Fund
(12)(b) Opinion and Consent of Counsel on Tax Matters and Consequences to
Shareholders of Ropes & Gray with respect to the Acquisition of
Liberty Florida Tax-Exempt Fund
(12)(c) Opinion and Consent of Counsel on Tax Matters and Consequences to
Shareholders of Ropes & Gray with respect to the Acquisition of
Liberty Michigan Tax-Exempt Fund
(12)(d) Opinion and Consent of Counsel on Tax Matters and Consequences to
Shareholders of Ropes & Gray with respect to the Acquisition of
Liberty Minnesota Tax-Exempt Fund
(12)(e) Opinion and Consent of Counsel on Tax Matters and Consequences
to Shareholders of Ropes & Gray with respect to the Acquisition
of Liberty North Carolina Tax-Exempt Fund
(14)(a) Consent of Independent Accountants (PWC)
(14)(b) Consent of Independent Auditors (E&Y)
(14)(c) Consent of Independent Accountants (KPMG)
(17)(i) Form of Proxy Card and Proxy Insert (Oregon Fund)
(17)(j) Form of Proxy Card and Proxy Insert (Florida Fund)
(17)(k) Form of Proxy Card and Proxy Insert (Michigan Fund)
(17)(l) Form of Proxy Card and Proxy Insert (Minnesota Fund)
(17)(m) Form of Proxy Card and Proxy Insert (North Carolina)
