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 II *
(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 Intermediate Government 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 MEETING OF SHAREHOLDERS TO BE HELD
DECEMBER 19, 2000
LIBERTY FUNDS TRUST II
ONE FINANCIAL CENTER, BOSTON, MASSACHUSETTS 02111
LIBERTY SHORT TERM GOVERNMENT FUND
NOTICE IS HEREBY GIVEN that a Special Meeting of the shareholders of
the Liberty Short Term Government Fund 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. To approve an Agreement and Plan of Reorganization providing
for the sale of all of the assets of the Liberty Short Term
Government Fund to, and the assumption of all of the
liabilities of the Liberty Short Term Government Fund by, the
Liberty Intermediate Government Fund in exchange for shares of
the Liberty Intermediate Government Fund and the distribution
of such shares to the shareholders of the Liberty Short Term
Government Fund in complete liquidation of the Liberty Short
Term Government Fund.
2. To elect eleven Trustees.
3. To consider and act upon any other matters that properly come
before the meeting and any adjourned session of the meeting.
Shareholders of record at the close of business on September 29, 2000,
are entitled to notice of and to vote at the meeting and any adjourned session.
By order of the Board of Trustees,
William J. Ballou, Assistant Secretary
November 8, 2000
NOTICE: YOUR VOTE IS IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES
YOU OWN. YOU CAN VOTE EASILY AND QUICKLY AT OUR WEB SITE, BY
PHONE, BY MAIL, BY FAX (NOT AVAILABLE FOR ALL SHAREHOLDERS;
REFER TO ENCLOSED PROXY INSERT) OR IN PERSON. TO VOTE THROUGH
OUR WEB SITE, JUST FOLLOW THE SIMPLE INSTRUCTIONS THAT APPEAR
ON THE ENCLOSED PROXY INSERT. PLEASE HELP YOUR FUND AVOID THE
EXPENSE OF A FOLLOW-UP MAILING BY VOTING TODAY!
<PAGE>
COMBINED PROSPECTUS AND PROXY STATEMENT
NOVEMBER 8, 2000
ACQUISITION OF THE ASSETS AND LIABILITIES OF
LIBERTY SHORT TERM GOVERNMENT FUND
c/o Liberty Funds Trust II
One Financial Center
Boston, Massachusetts 02111
1-800-426-3750
BY AND IN EXCHANGE FOR SHARES OF
LIBERTY INTERMEDIATE GOVERNMENT FUND
c/o Liberty Funds Trust II
One Financial Center
Boston, Massachusetts 02111
1-800-426-3750
TABLE OF CONTENTS
<TABLE>
<S> <C>
Synopsis.........................................................................................
Proposal 1 - Acquisition of the Liberty Short Term Government Fund by
the Liberty Intermediate Government Fund.........................................
Principal Investment Risks..................................................................
Information about the Acquisition...........................................................
Proposal 2 - Election of Trustees................................................................
General..........................................................................................
Voting Information..........................................................................
Appendix A - Agreement and Plan of Reorganization................................................
Appendix B - Fund Information....................................................................
Appendix C - Capitalization......................................................................
Appendix D - Management's Discussion of Fund Performance for the Liberty Intermediate Government
Fund
</TABLE>
This combined Prospectus/Proxy Statement contains information you
should know before voting on the proposed acquisition of the Liberty Short Term
Government Fund (the "Short Term Fund") by the Liberty Intermediate Government
Fund (the "Intermediate Fund") or voting on the other proposals to be considered
at a Special Meeting of Shareholders of the Short Term Fund (the "Meeting"),
which will be held at 10:00 a.m. Eastern Time on December 19, 2000 at the
offices of Colonial Management Associates, Inc. ("Colonial"), One Financial
Center, Boston, Massachusetts. 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 Short Term Fund by the Intermediate Fund (the "Acquisition").
If the
<PAGE>
Acquisition occurs, you will become a shareholder of the Intermediate Fund. The
Intermediate Fund seeks as high a level of current income and total return as is
consistent with prudent risk. If the Agreement and Plan of Reorganization is
approved by the shareholders of the Short Term Fund and the Acquisition occurs,
the Short Term Fund will transfer all of the assets and liabilities attributable
to each class of its shares to the Intermediate Fund in exchange for shares of
the same class (with the exception of Class C shares of the Short Term Fund
which will be exchanged for Class A shares of the Intermediate Fund) with the
same aggregate net asset value as the assets and liabilities transferred. After
that exchange, shares of each class received by the Short Term Fund will be
distributed pro rata to its shareholders of the same class.
Proposal 2 in this Prospectus/Proxy Statement relates to the election
of Trustees of Liberty Funds Trust II ("Trust II"), of which the Short Term Fund
is a series.
Please review the enclosed Prospectus of the Intermediate Fund and the
"Financial Highlights" section contained in the enclosed Annual Report of the
Intermediate Fund. The enclosed Prospectus and the "Financial Highlights"
section contained in the enclosed Annual Report are incorporated in this
Prospectus/Proxy Statement by reference. The following documents have also been
filed with the Securities and Exchange Commission (the "SEC") and are
incorporated in this Prospectus/Proxy Statement by reference:
- The Prospectus of the Short Term Fund dated January 1, 2000,
as supplemented on December 28, 1999, June 23, 2000 and August
1, 2000.
- The Statement of Additional Information of the Short Term Fund
dated January 1, 2000, as supplemented on June 23, 2000,
August 21, 2000 and August 23, 2000.
- The Statement of Additional Information of the Intermediate
Fund dated January 1, 2000, as supplemented on June 23, 2000,
August 21, 2000 and August 23, 2000.
- The Report of Independent Accountants and financial statements
included in the Annual Report to Shareholders of the Short
Term Fund dated August 31, 1999.
- The financial statements included in the Short Term Fund's
Annual Report to Shareholders dated August 31, 2000.
- The Statement of Additional Information of the Intermediate
Fund dated November 8, 2000 relating to the Acquisition.
The Short Term Fund has previously sent its Annual and Semi-Annual
Reports to its shareholders. For a free copy of these Reports or any of the
documents listed above, please call 1-800-426-3750 or write to your Fund at One
Financial Center, Boston, Massachusetts 02111. You may also obtain many of these
documents by accessing our web site at www.libertyfunds.com. Our hearing
impaired shareholders may call Liberty Funds Services, Inc. at 1-800-528-6979 if
you have special TTD equipment. Text-only versions of all the Short Term Fund
and Intermediate Fund documents can be viewed online or downloaded from the
Edgar database on the SEC's
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<PAGE>
internet site at www.sec.gov. You can review and copy information about the
Funds by visiting the following location, and you can obtain copies, upon
payment of a duplicating fee, by writing the Public Reference Room, U.S.
Securities and Exchange Commission, Washington, DC 20549-0102. Information on
the operation of the Public Reference Room may be obtained by calling
202-942-8090.
THE SEC HAS NOT APPROVED OR DISAPPROVED THE SHARES OF THE INTERMEDIATE
FUND OR DETERMINED WHETHER THIS PROSPECTUS/PROXY STATEMENT IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-3-
<PAGE>
SYNOPSIS
THE FOLLOWING QUESTIONS AND RESPONSES PROVIDE AN OVERVIEW OF KEY
FEATURES OF THE ACQUISITION AND OF THE OTHER MATTERS TO BE CONSIDERED
AT THE MEETING AND OF THE INFORMATION CONTAINED IN THIS COMBINED
PROSPECTUS/PROXY STATEMENT. PLEASE REVIEW THE FULL PROSPECTUS/PROXY
STATEMENT PRIOR TO CASTING YOUR VOTE, AS THIS SECTION IS ONLY A
SYNOPSIS OF THE COMPLETE DOCUMENT.
1. WHAT IS BEING PROPOSED?
First, the Trustees of the Funds are recommending in Proposal 1 that
the Intermediate Fund acquire the Short Term Fund. This means that the
Intermediate Fund would acquire all of the assets and liabilities of
the Short Term Fund in exchange for shares of the Intermediate Fund
representing the aggregate net asset value of the Short Term Fund's
assets and liabilities. If Proposal 1 is approved, you will receive
shares of the Intermediate Fund with an aggregate net asset value equal
to the aggregate net asset value of your Short Term Fund shares as of
the day before the closing of the Acquisition. The Acquisition is
currently scheduled to take place on or around January 22, 2001.
In addition, the Trustees of the Short Term Fund are recommending in
Proposal 2 that you vote in favor of eleven nominees for Trustees.
2. WHY IS THE ACQUISITION BEING PROPOSED?
The Trustees of the Short Term Fund recommend approval of the
Acquisition because it offers shareholders of the Fund an investment in
a fund with similar investment goals and the economies of scale of a
larger fund and with an expected reduction in the fees and expenses
payable by the Short Term Fund, assuming that the Fund's investment
advisor declined to continue the current voluntary fee waiver or
expense reimbursement in effect with respect to the Fund. In reviewing
the Acquisition, the Trustees also considered that it is unlikely the
Short Term Fund will achieve scale through internal growth and
considered the tax-free nature of the Acquisition as opposed to other
alternatives for the Funds and for shareholders. Please review "Reasons
for the Acquisition" in Proposal 1 of this Prospectus/Proxy Statement
for a full description of the factors considered by the Trustees.
3. WHAT CLASS OF SHARES WILL YOU RECEIVE IN THE INTERMEDIATE FUND IF THE
ACQUISITION OCCURS?
You will receive the same class of shares that you currently own in the
Short Term Fund, unless you own Class C shares of the Short Term Fund,
in which case you will receive Class A shares of the Intermediate 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, unless you own Class
-4-
<PAGE>
C shares of the Short Term Fund. If you own Short Term Fund Class C
shares, your shares will bear the CDSCs described under Question 5
below. As a result of the Acquisition, holders of Class A shares of
the Short Term Fund will receive Class A shares of the Intermediate
Fund which bear a higher 12b-1 fee (0.25% for the Intermediate Fund
and 0.20% for the Short Term Fund).
4. HOW DO THE INVESTMENT GOALS, STRATEGIES AND POLICIES OF THE SHORT TERM
FUND AND THE INTERMEDIATE FUND COMPARE?
This table shows the investment goals and primary investment strategies
of each Fund:
<TABLE>
<CAPTION>
The Short Term Fund The Intermediate Fund
--------------------------------------------- ---------------------------------------------
<S> <C>
Investment Goal: The Short Term Fund seeks Investment Goal: The Intermediate Fund
as high a level of current income as is seeks as high a level of current income and
consistent with very low price volatility. total return as is consistent with prudent
risk.
--------------------------------------------- ---------------------------------------------
Primary Investment Strategies: Primary Investment Strategies:
The Short Term Fund seeks to achieve its The Intermediate Fund seeks to achieve its
goal as follows: goal as follows:
- The Fund seeks to achieve its goal - The Fund generally maintains a
of low volatility by maintaining an duration of greater than two and a
average weighted duration of less than half years and less than seven years.
three years. - The Fund invests primarily in U.S.
- The Fund invests primarily in U.S. government securities, including U.S.
government securities, including U.S. treasuries and securities of various
treasuries and securities of various U.S. government agencies.
U.S. government agencies. - In selecting securities for the
- In selecting securities for the Fund, the advisor considers a
Fund, the advisor considers a security's expected income together
security's expected income together with its potential to rise or
with its potential to rise or fall in fall in price.
price.
--------------------------------------------- ---------------------------------------------
</TABLE>
The investment policies of the Short Term Fund and the
Intermediate Fund are substantially similar.
5. HOW DO THE MANAGEMENT FEES AND EXPENSES OF THE FUNDS COMPARE AND WHAT
ARE THEY ESTIMATED TO BE FOLLOWING THE ACQUISITION?
The following tables allow you to compare the sales charges and
management fees and expenses of the Short Term Fund and the
Intermediate Fund and to analyze the estimated expenses that Colonial
expects the combined fund to bear in the first year following the
Acquisition. Sales charges are paid directly by shareholders to Liberty
Funds Distributor, Inc., each Fund's distributor.
-5-
<PAGE>
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 each Fund for the fiscal
year ended August 31, 1999.
SHAREHOLDER FEES(1)
(paid directly from your investment)
<TABLE>
<CAPTION>
SHORT TERM FUND INTERMEDIATE FUND
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS Z
<S> <C> <C> <C> <C> <C> <C> <C>
Maximum sales charge (load) on
purchases (%) (as a percentage
of the offering price) 3.25 0.00 0.00 4.75 0.00 0.00 0.00
---------------------------------- -------- --------- --------- --------- --------- --------- ---------
Maximum deferred sales charge
(load) on redemptions (%) (as a
percentage of the lesser of
purchase price or redemption
price) 1.00(2) 4.00 1.00 1.00(2) 5.00 1.00 0.00
---------------------------------- -------- --------- --------- --------- --------- --------- ---------
Redemption fee (%) (as a
percentage of amount redeemed,
if applicable) (3) (3) (3) (3) (3) (3) (3)
</TABLE>
--------
(1) A $10 annual fee is deducted from accounts of less than $1,000 and paid
to the transfer agent.
(2) This charge applies only to certain Class A shares bought without an
initial sales charge that are sold within 18 months of purchase.
(3) There is a $7.50 charge for wiring sale proceeds to your bank.
ANNUAL FUND OPERATING EXPENSES
(deducted directly from Fund assets)
<TABLE>
<CAPTION>
SHORT TERM FUND INTERMEDIATE FUND
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
<S> <C> <C> <C> <C> <C> <C>
Management fee(4)(5)(%) 0.55 0.55 0.55 0.60 0.60 0.60
---------------------------------- -------- --------- --------- --------- --------- ---------
Distribution and service (12b-1)
fees(5) (%) 0.20 0.85 0.40 0.25 1.00 0.00
---------------------------------- -------- --------- --------- --------- --------- ---------
Other expenses(4) (%) 0.74 0.74 0.74 0.30 0.30 0.30
---------------------------------- -------- --------- --------- --------- --------- ---------
Total annual fund operating
expenses(4)(5) (%) 1.49 2.14 1.69 1.15 1.90 0.90
</TABLE>
<TABLE>
<CAPTION>
INTERMEDIATE FUND
(PRO FORMA COMBINED)
CLASS A CLASS B CLASS C CLASS Z
<S> <C> <C> <C> <C>
Management fee (%) 0.60 0.60 0.60 0.60
---------------------------------- -------- --------- --------- ---------
Distribution and service (12b-1) 0.25 1.00 1.00 0.00
fees (%)
---------------------------------- -------- --------- --------- ---------
Other expenses (%) 0.35 0.35 0.35 0.35
---------------------------------- -------- --------- --------- ---------
Total annual fund operating 1.20 1.95 1.95 0.95
expenses (%)
</TABLE>
--------
(4) The Short Term 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 0.60%. As a result, the actual
management fee for each share class would be 0.00%, other expenses for
each share class would be 0.60% and total annual fund operating
expenses for Class A, B and C shares would be 0.80%, 1.45% and 1.00%,
respectively. This arrangement may be modified or terminated by the
advisor at any time.
-6-
<PAGE>
(5) The Intermediate Fund's distributor has voluntarily agreed to waive a
portion of the 12b-1 fee for Class C shares. As a result, the actual
12b-1 fee for Class C shares would be 0.85% and the total annual fund
operating expenses for Class C shares would be 1.75%. This arrangement
may be modified or terminated by the distributor at any time.
EXAMPLE EXPENSES
Example Expenses help you compare the cost of investing in the Short Term Fund
and the Intermediate 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>
SHORT TERM FUND
Class A $472 $781 $1,112 $2,047
Class B: did not sell your shares $217 $670 $1,149 $2,307
sold all your
shares at end of period $617 $870 $1,149 $2,307
Class C: did not sell your shares $172 $533 $918 $1,998
sold all your
shares at end of period $272 $533 $918 $1,998
INTERMEDIATE FUND
Class A $586 $822 $1,076 $1,803
Class B: did not sell your shares $193 $596 $1,025 $2,024
sold all your
shares at end of period $693 $896 $1,225 $2,024
Class C: did not sell your shares $193 $596 $1,025 $2,219
sold all your
shares at end of period $293 $596 $1,025 $2,219
CLASS Z: $92 $286 $497 $1,105
INTERMEDIATE FUND
(pro forma combined)
Class A $592 $839 $1,105 $1,864
Class B: did not sell your shares $198 $613 $1,054 $2,084
sold all your
shares at end of period $698 $913 $1,254 $2,084
</TABLE>
-7-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Class C: did not sell your shares $198 $613 $1,054 $2,279
sold all your
shares at end of period $298 $613 $1,054 $2,279
Class Z $97 $304 $527 $1,171
</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) the elimination of certain fixed costs involved in
operating the Short Term Fund; and (3) expense ratios are based on pro forma net
assets as of July 31, 2000.
6. WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE ACQUISITION?
The Acquisition is expected to be tax free to you for federal income
tax purposes. This means that no gain or loss will be recognized by the
Short Term Fund or its shareholders as a result of the Acquisition.
The cost basis and holding period of your Short Term shares are
expected to carry over to your new shares in the Intermediate Fund.
-8-
<PAGE>
PROPOSAL 1 - ACQUISITION OF THE LIBERTY SHORT TERM GOVERNMENT FUND BY THE
LIBERTY INTERMEDIATE GOVERNMENT 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 Short Term Fund by the Intermediate Fund under the Agreement
and Plan of Reorganization.
PRINCIPAL INVESTMENT RISKS
WHAT ARE THE PRINCIPAL INVESTMENT RISKS OF THE INTERMEDIATE FUND, AND HOW DO
THEY COMPARE WITH THE SHORT TERM FUND?
Because the Funds have similar goals and strategies, the potential
risks associated with each Fund are similar, except that the Intermediate Fund
generally maintains an average weighted duration of 2-1/2 to 7 years, while the
Short Term Fund generally maintains an average weighted duration of less than 3
years. As duration is the most common measure of the interest rate risk of a
bond, this means that the Intermediate Fund's portfolio is generally subject to
greater interest rate sensitivity and that you may therefore be subject to
greater potential risk by becoming a shareholder of the Intermediate Fund.
Please see the Intermediate Fund's enclosed Prospectus for a more complete
description of the principal investment strategies and duration of the Fund. The
actual risks of investing in each Fund depend on the securities held in each
Fund's portfolio and on market conditions, both of which change over time.
Please see the enclosed Prospectus of the Intermediate Fund for a description of
the principal investment risks of the Fund.
INFORMATION ABOUT THE ACQUISITION
TERMS OF THE AGREEMENT AND PLAN OF REORGANIZATION
If approved by the shareholders of the Short Term Fund, the Acquisition
is expected to occur on or around January 22, 2001, under the Agreement and Plan
of Reorganization attached as Appendix A to this combined Prospectus/Proxy
Statement. Please review Appendix A. The following is a brief summary of the
principal terms of the Agreement and Plan of Reorganization:
- The Short Term Fund will transfer all of the assets and
liabilities attributable to each class of shares of the Short
Term Fund to the Intermediate Fund in exchange for shares of
the same class (with the exception of Class C shares of the
Short Term Fund which will be exchanged for Class A shares of
the Intermediate Fund) of the
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<PAGE>
Intermediate Fund with an aggregate net asset value equal to
the net value of the transferred assets and liabilities.
- The Acquisition 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 Acquisition (the "Valuation Date").
- The shares of each class of the Intermediate Fund received by
the Short Term Fund will be distributed to the shareholders of
the same class of the Short Term Fund, with the exception of
the Short Term Fund's Class C shares, pro rata in accordance
with their percentage ownership of each class of the Short
Term Fund in full liquidation of the Short Term Fund.
- After the Acquisition, the Short Term Fund will be terminated,
and its affairs will be wound up in an orderly fashion.
- The Acquisition requires approval by the Short Term Fund's
shareholders and satisfaction of a number of other conditions;
the Acquisition may be terminated at any time with the
approval of the Trustees of both Funds.
A shareholder who objects to the Acquisition will not be entitled under
Massachusetts law or the Declaration of Trust (the "Declaration") to demand
payment for, or an appraisal of, his or her shares. However, shareholders should
be aware that the Acquisition as proposed is not expected to result in
recognition of gain or loss to shareholders for federal income tax purposes and
that, if the Acquisition is consummated, shareholders will be free to redeem the
shares which they receive in the transaction at their then-current net asset
value. In addition, shares may be redeemed at any time prior to the consummation
of the Acquisition.
SHARES YOU WILL RECEIVE
If the Acquisition occurs, you will receive shares in the Intermediate
Fund of the same class as the shares that you currently own in the Short Term
Fund, unless you own Class C shares of the Short Term Fund, in which case you
will receive Class A shares of the Intermediate Fund. In comparison to the
shares you currently own, the shares you receive will have the following
characteristics:
- They will have an aggregate net asset value equal to the
aggregate net asset value of your current shares as of the
business day before the closing of the Acquisition.
- If applicable, your Intermediate 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
-10-
<PAGE>
new shares will continue to age from the date you purchased
your Short Term Fund shares. If you own Class C shares of the
Short Term Fund, the Class A shares of the Intermediate Fund
that you receive in exchange for your shares will bear the
sales charges, CDSCs and redemption charges described under
Question 5 of the Synopsis on page 7 of this Prospectus/Proxy
Statement.
- 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,
unless you own Class C shares of the Short Term Fund, in which
case you will have the exchange options of a Class A
shareholder of the Intermediate Fund as described in that
Fund's enclosed Prospectus.
- You will have the same voting rights as you currently have,
but as a shareholder of the Intermediate Fund.
REASONS FOR THE ACQUISITION
The Trustees of Trust II, including all Trustees who are not
"interested persons" of the Trust, have determined that the Acquisition would be
in the best interests of each Fund's shareholders. The Trustees have unanimously
approved the Acquisition and recommend that you vote in favor of the Acquisition
by approving the Agreement and Plan of Reorganization attached as Appendix A to
this Prospectus/Proxy Statement.
The Acquisition is one of several proposed acquisitions and
liquidations of funds in the Liberty and Stein Roe Fund groups proposed by
Liberty Financial Companies, Inc. ("Liberty Financial"), the indirect parent of
each of the investment advisors to the Liberty and Stein Roe Funds. The overall
purposes of these acquisitions and liquidations include streamlining and
rationalizing the product offerings of the Liberty and Stein Roe Funds, reducing
fund expense ratios by creating larger, more efficient funds and permitting the
Liberty 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 Short Term Fund to enter into the
Acquisition:
- The Acquisition is expected to create a larger fund with
similar investment goals and strategies to the Short Term
Fund.
- The Short Term Fund is not likely to achieve the scale
necessary to reduce Fund expenses through sales growth. 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
-11-
<PAGE>
term. Thus, even though the Intermediate Fund has a higher
expense ratio than the subsidized expense ratio of Short Term
Fund, the Intermediate Fund's expense ratio after the
Acquisition is expected to be materially lower than the Short
Term 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 Short Term and Intermediate Funds
on July 31, 2000 and the Funds' current expense structures,
the Intermediate Fund's annualized expense ratio (excluding
12b-1 fees) immediately after the Acquisition would be about
0.20% lower than the Short Term Fund's current expense ratio
would be if the current voluntary expense limitation were
discontinued (for example, for Class A shares, a 1.20% expense
ratio for the Intermediate Fund, as compared to 1.40% for the
Short Term Fund if the limitation were discontinued and 0.60%
if it continued). Note that the 12b-1 fees on Classes A, B and
C of the Short Term Fund are 0.20%, 0.85%, and 0.40%,
respectively. The 12b-1 fee on Classes A, B and C of the
Intermediate Fund are 0.25%, 1.00%, and 1.00%, respectively.
Also note that Class C shareholders of the Short Term Fund
will become Class A shareholders of the Intermediate Fund.
- The Acquisition is intended to permit the Short Term Fund's
shareholders to exchange their investment for an investment in
the Intermediate Fund without recognizing gain or loss for
federal income tax purposes. By contrast, if a Short Term Fund
shareholder redeemed his or her shares to invest in another
fund, like the Intermediate Fund, the transaction would likely
be a taxable event for such shareholder. Similarly, if the
Short Term Fund were liquidated or reorganized in a taxable
transaction, the transaction would likely be a taxable event
for its shareholders. After the Acquisition, shareholders may
redeem any or all of their Intermediate 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.
The projected post-Acquisition expense reductions presented above are
based upon numerous material assumptions, including: (1) the current contractual
agreements will remain in place; and that (2) certain fixed costs involved in
operating the Short Term Fund are eliminated. Although these projections
represent good faith estimates, there can be no assurance that any particular
level of expenses or expense savings will be achieved, because expenses depend
on a variety of factors, including the future level of fund assets, many of
which factors are beyond the control of the Intermediate 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 Intermediate Fund
will achieve any particular level of performance after the Acquisition.
-12-
<PAGE>
If the Acquisition does not occur, Liberty Financial has indicated that
it may recommend to the Trustees that the Short Term 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 Intermediate Fund and the Class A shares of the
Short Term 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.
SHORT TERM FUND
<TABLE>
<CAPTION>
----------- --------- --------- --------- --------- -------- --------- --------- --------- --------- --------
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
----------- --------- --------- --------- --------- -------- --------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12%
----------- --------- --------- --------- --------- -------- --------- --------- --------- --------- --------
----------- --------- --------- --------- --------- -------- --------- --------- --------- --------- --------
10%
----------- --------- --------- --------- --------- -------- --------- --------- --------- --------- --------
9.70%
----------- --------- --------- --------- --------- -------- --------- --------- --------- --------- --------
8%
----------- --------- --------- --------- --------- -------- --------- --------- --------- --------- --------
6.80%
----------- --------- --------- --------- --------- -------- --------- --------- --------- --------- --------
6%
----------- --------- --------- --------- --------- -------- --------- --------- --------- --------- --------
5.31% 5.94%
----------- --------- --------- --------- --------- -------- --------- --------- --------- --------- --------
4%
----------- --------- --------- --------- --------- -------- --------- --------- --------- --------- --------
3.94%
----------- --------- --------- --------- --------- -------- --------- --------- --------- --------- --------
2%
----------- --------- --------- --------- --------- -------- --------- --------- --------- --------- --------
0.82% 1.80
----------- --------- --------- --------- --------- -------- --------- --------- --------- --------- --------
0%
----------- --------- --------- --------- --------- -------- --------- --------- --------- --------- --------
</TABLE>
<TABLE>
<S> <C>
The Fund's year-to-date total return through For period shown in bar chart:
September 30, 2000 was 4.42%. Best quarter: First quarter 1995, +3.48%
Worst quarter: Second quarter 1994, -0.30%
</TABLE>
INTERMEDIATE FUND
<TABLE>
<CAPTION>
----------- --------- --------- --------- --------- -------- --------- --------- --------- --------- --------
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
----------- --------- --------- --------- --------- -------- --------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
16%
----------- --------- --------- --------- --------- -------- --------- --------- --------- --------- --------
14.93%
----------- --------- --------- --------- --------- -------- --------- --------- --------- --------- --------
14%
----------- --------- --------- --------- --------- -------- --------- --------- --------- --------- --------
----------- --------- --------- --------- --------- -------- --------- --------- --------- --------- --------
12%
----------- --------- --------- --------- --------- -------- --------- --------- --------- --------- --------
11.09%
----------- --------- --------- --------- --------- -------- --------- --------- --------- --------- --------
10%
----------- --------- --------- --------- --------- -------- --------- --------- --------- --------- --------
</TABLE>
-13-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
----------- --------- --------- --------- --------- -------- --------- --------- --------- --------- --------
9.67% 8.33% 8.14%
----------- --------- --------- --------- --------- -------- --------- --------- --------- --------- --------
8%
----------- --------- --------- --------- --------- -------- --------- --------- --------- --------- --------
----------- --------- --------- --------- --------- -------- --------- --------- --------- --------- --------
6%
----------- --------- --------- --------- --------- -------- --------- --------- --------- --------- --------
5.03% 5.66%
----------- --------- --------- --------- --------- -------- --------- --------- --------- --------- --------
4%
----------- --------- --------- --------- --------- -------- --------- --------- --------- --------- --------
2.82%
----------- --------- --------- --------- --------- -------- --------- --------- --------- --------- --------
2%
----------- --------- --------- --------- --------- -------- --------- --------- --------- --------- --------
----------- --------- --------- --------- --------- -------- --------- --------- --------- --------- --------
0%
----------- --------- --------- --------- --------- -------- --------- --------- --------- --------- --------
-1.78%
----------- --------- --------- --------- --------- -------- --------- --------- --------- --------- --------
-2%
----------- --------- --------- --------- --------- -------- --------- --------- --------- --------- --------
-2.16%
----------- --------- --------- --------- --------- -------- --------- --------- --------- --------- --------
-4%
----------- --------- --------- --------- --------- -------- --------- --------- --------- --------- --------
</TABLE>
<TABLE>
<S> <C>
The Fund's year-to-date total return through For period shown in bar chart:
September 30, 2000 was 5.48%. Best quarter: Third quarter 1998, +5.10%
Worst quarter: First quarter 1994, -1.91%
</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.
SHORT TERM FUND*
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS LIFE OF FUND
<S> <C> <C> <C> <C> <C>
Class A (%) (1.51) 5.18 N/A 4.29
----------------------------- --------------- -------------- ------------- --------------- ------------------
Class B (%) (2.73) 5.20 N/A 4.12(1)
----------------------------- --------------- -------------- ------------- --------------- ------------------
Class C (%) .63 5.67(1) N/A 4.62(1)
----------------------------- --------------- -------------- ------------- --------------- ------------------
Lehman Index (%) N/A 2.96 6.48 N/A 5.29(2)
----------------------------- --------------- -------------- ------------- --------------- ------------------
Lipper Average (%) N/A 2.45 5.65 N/A 4.62(2)
</TABLE>
INTERMEDIATE FUND+
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A (%) (6.81) 5.23 5.53
----------------------------- --------------- -------------- ------------- ---------------
Class B (%) (7.51) 5.14 5.45(3)
----------------------------- --------------- -------------- ------------- ---------------
Class C (%) (3.67) 5.94(3) 5.89(3)
----------------------------- --------------- -------------- ------------- ---------------
Class Z (%) 8.34(3) 6.34(3) 7.35(3)
----------------------------- --------------- -------------- ------------- ---------------
Lehman Index (%) .49 6.93 7.10
----------------------------- --------------- -------------- ------------- ---------------
Lipper Average (%) (1.67) 6.37 6.41
</TABLE>
* The Short Term Fund's return is compared to the Lehman Brothers U.S.
Government Bond (1-3 year) Index ("Lehman Index"), an unmanaged index
that tracks the performance of short-term U.S. Government securities.
Unlike the Fund, indices are not investments and do not incur fees or
expenses. It is not possible to invest directly in indices. The Short
Term Fund's return is also compared to the average return of the funds
included in the Lipper Short U.S. Government Funds category average
("Lipper Average"). This Lipper Average, which is calculated by Lipper,
Inc., is composed of funds with similar investment objectives to the
Short Term Fund. Sales charges are not reflected in the Lipper Average.
+ The Intermediate Fund's return is compared to the Lehman Brothers
Intermediate U.S. Government Bond Index ("Lehman Index"), an unmanaged
index that tracks the performance of intermediate
-14-
<PAGE>
U.S. government securities. Unlike the Fund, indices are not
investments and do not incur fees or expenses. It is not possible to
invest directly in indices. The Intermediate Fund's return is also
compared to the average return of the funds included in the Lipper
Intermediate U.S. Government Funds category average ("Lipper Average").
This Lipper Average, which is calculated by Lipper, Inc., is composed
of funds with similar investment objectives to the Intermediate 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 Short Term 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 1, 1992, Class B shares were
initially offered on February 1, 1993, and Class C shares were
initially offered on January 4, 1995.
(2) Performance information is from September 30, 1992.
(3) Class B, Class C and Class Z are newer classes of shares. Their
performance information includes returns of the Intermediate 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 for Class B and Class C shares and higher for Class Z shares.
Class A shares were initially offered on October 13, 1987, Class B
shares were initially offered on June 8, 1992, Class C shares were
initially offered on August 1, 1997 and Class Z shares were intially
offered on January 29, 1999.
FEDERAL INCOME TAX CONSEQUENCES
The Acquisition is intended to be a tax-free reorganization. The
closing of the Acquisition will be conditioned on receipt of an opinion from
Ropes & Gray to the effect that, on the basis of existing law under specified
sections of the Internal Revenue Code of 1986, as amended (the "Code"), for
federal income tax purposes:
- under Section 361 or Section 354 of the Code, respectively, no
gain or loss will be recognized by the Short Term Fund or the
shareholders of the Short Term Fund as a result of the
Acquisition;
- under Section 358 of the Code, the tax basis of the
Intermediate Fund shares you receive will be the same, in the
aggregate, as the aggregate tax basis of your Short Term Fund
shares;
- under Section 1223(1) of the Code, your holding period for the
Intermediate Fund shares you receive will include the holding
period for your Short Term Fund shares if you hold Short Term
Fund shares as a capital asset;
- under Section 1032 of the Code, no gain or loss will be
recognized by the Intermediate Fund as a result of the
Acquisition;
-15-
<PAGE>
- under Section 362(b) of the Code, the Intermediate Fund's tax
basis in the assets that the Intermediate Fund receives from
the Short Term Fund will be the same as the Short Term Fund's
basis in such assets; and
- under Section 1223(2) of the Code, the Intermediate Fund's
holding period in such assets will include the Short Term
Fund's holding period in such assets.
The opinion will be based on certain factual certifications made by
officers of Trust II. The opinion is not a guarantee that the tax consequences
of the Acquisition will be as described above. Prior to the closing of the
Acquisition, the Short Term Fund and the Intermediate Fund will each distribute
to their shareholders all of their respective investment company taxable income
and net realized capital gains, which have not previously been distributed to
shareholders. Such distributions will be taxable to the Short Term Fund's
shareholders.
This description of the federal income tax consequences of the
Acquisition does not take into account your particular facts and circumstances.
Consult your own tax advisor about the effect of state, local, foreign, and
other tax laws.
THE TRUSTEES OF THE SHORT TERM FUND UNANIMOUSLY RECOMMEND APPROVAL OF THE
AGREEMENT AND PLAN OF REORGANIZATION.
The Declaration establishing Trust II provides that any series of Trust
II (such as the Short Term 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 Short Term Fund may be
terminated by majority vote of the Short Term Fund's shares entitled to vote (or
by Trustee notice to shareholders), and will so amend the Declaration if a
majority of the Short Term Fund's shareholders entitled to vote on the proposal
vote in favor of such proposal.
REQUIRED VOTE FOR PROPOSAL 1
Approval of the Agreement and Plan of Reorganization dated October 26,
2000 between Trust II on behalf of the Short Term Fund and Trust II on behalf of
the Intermediate Fund will require the affirmative vote of a majority of the
shares of the Short Term Fund outstanding at the record date for the Meeting.
PROPOSAL 2 - ELECTION OF TRUSTEES
-16-
<PAGE>
THE PROPOSAL
You are being asked to approve the election of four new members as well
as seven of the currently serving members of the Board of Trustees of Trust II,
of which the Short Term Fund is a series. All of the nominees listed below,
except for the proposed four new members (Ms. Kelly and Messrs. Hacker, Nelson
and Theobald), are currently members of the Board of Trustees of Trust II, as
well as nine Liberty closed-end funds and seven (or, in the case of Messrs.
Lowry, Mayer and Neuhauser, eight) other Liberty open-end trusts (collectively,
the "Liberty Mutual Funds"), and have served in that capacity continuously since
originally elected or appointed. All of the currently serving members, other
than Mr. Palombo, have been previously elected by the shareholders of Trust II.
The proposed four new members currently serve on the Board of Trustees of two
Stein Roe closed-end funds and seven Stein Roe open-end trusts, and were
recommended for election as Trustees of the Liberty Mutual Funds by the Board of
Trustees at a meeting held on October 25, 2000. Each of the nominees elected
will serve as a Trustee of Trust II until the next meeting of shareholders of
Trust II called for the purpose of electing a Board of Trustees, and until a
successor is elected and qualified or until death, retirement, resignation or
removal.
Currently, two different boards of trustees are responsible for
overseeing substantially all of the Liberty and Stein Roe Funds. Liberty
Financial and Trust II's Trustees have agreed that shareholder interests can
more effectively be represented by a single board with responsibility for
overseeing substantially all of the Liberty and Stein Roe Funds. Creation of a
single, consolidated board should also provide certain administrative
efficiencies and potential future cost savings for both the Liberty and Stein
Roe Funds and Liberty Financial. The nominees listed below will be the members
of the single, consolidated Board of Trustees. The persons named in the
enclosed proxy card intend to vote at the Meeting in favor of the election of
the nominees named below as Trustees of Trust II (if so instructed). If any
nominee listed below becomes unavailable for election, the enclosed proxy card
may be voted for a substitute nominee in the discretion of the proxy holder(s).
-17-
<PAGE>
INFORMATION ABOUT THE NOMINEES
Set forth below is information concerning each of the nominees.
<TABLE>
<CAPTION>
Nominee Name & Age Principal Occupation(1) and Directorships Trustee Since
------------------ ----------------------------------------- -------------
<S> <C> <C>
Douglas A. Hacker Executive Vice President and Chief New nominee
(43) Financial Officer of UAL, Inc. (airline)
since July 1999; Senior Vice President and
Chief Financial Officer of UAL, Inc. prior
thereto.
Janet Langford Kelly Executive Vice President--Corporate New nominee
(41) Development, General Counsel, and
Secretary of Kellogg Company since
September 1999; Senior Vice President,
Secretary and General Counsel of Sara Lee
Corporation (branded, packaged,
consumer-products manufacturer) from 1995
to August 1999; partner at Sidley & Austin
(law firm) prior thereto.
Richard W. Lowry Private Investor since August 1987. 1995
(64) (Formerly 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 1994
(60) (venture capital); Director, Johns
Manville; Director, Lee Enterprises;
Director, WR Hambrecht & Co. (Formerly
Dean, College of Business and Management,
University of Maryland, from October 1992
to November 1996.)
John J. Neuhauser Academic Vice President and Dean of 1985
(57) Faculties, Boston College, since August
1999. (Formerly Dean, Boston College
School of Management, from September 1977
to September 1999.)
Charles Nelson Van Voorhis Professor of Political Economy New nominee
(57) of the University of Washington.
</TABLE>
-18-
<PAGE>
<TABLE>
<S> <C> <C>
Joseph R. Palombo(3) Vice President of the Stein Roe Mutual 2000
(47) Funds since April 1999; Executive Vice
President and Director of Colonial
Management Associates, Inc. and Stein Roe
& Farnham Incorporated since April 1999;
Executive Vice President and Chief
Administrative Officer of Liberty Funds
Group LLC since April 1999. (Formerly
Chief Operating Officer, Putnam Mutual
Funds, from 1994 to 1998.)
Thomas E. Stitzel Business Consultant; 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.)
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, 1998
(54) Global Education Industry, from 1994 to
1997, and President, Applications
Solutions Division, IBM Corporation
(global education and global
applications), from 1991 to 1994.)
</TABLE>
----------
(1) Except as otherwise noted, each individual has held the office
indicated or other offices in the same company for the last five years.
(2) Mr. Mayer is not affiliated with Liberty Financial, but is an
"interested person," as defined in the Investment Company Act of 1940,
as amended (the "1940 Act"), because of his affiliation with WR
Hambrecht & Co. (a registered broker-dealer).
(3) Mr. Palombo is an "interested person," as defined in the 1940 Act,
because of his affiliation with Liberty Financial.
TRUSTEES' COMPENSATION
The members of the Board of Trustees will serve as Trustees of the
Liberty and Stein Roe Funds, for which service each Trustee, except for Mr.
Palombo, will receive an annual retainer of $45,000, and attendance fees of
$8,000 for each regular joint meeting and $1,000 for each special joint meeting.
The Board of Trustees is expected to hold six regular joint meetings each year.
Committee chairs will receive an additional annual retainer of $5,000, and
receive $1,000 for each special meeting attended on a day other than a regular
joint meeting day. Committee members will receive an additional annual retainer
of $1,000, and receive $1,000 for each special meeting attended on a day other
than a regular joint meeting day. Two-thirds of the Trustees' fees are allocated
among the Liberty and Stein Roe Funds based on each Fund's relative net assets,
and one-third of the fees is divided equally among the Liberty and Stein Roe
Funds.
-19-
<PAGE>
The Liberty Mutual Funds do not currently provide pension or retirement
plan benefits to the Trustees. However, certain Trustees currently serving on
the Board of Trustees of the Liberty Trusts who are not continuing on the
combined Board of Trustees of the Liberty and Stein Roe Funds will receive
payments at an annual rate equal to their 1999 Trustee compensation for the
lesser of two years or until the date they would otherwise have retired at age
72. These payments will be made quarterly, beginning in 2001. Liberty Financial
and the Liberty Mutual Funds will each bear one-half of the cost of the
payments; the Liberty Mutual Funds' portion of the payments will be allocated
among the Liberty Mutual Funds based on each fund's share of the Trustee fees
for 2000.
Further information concerning the Trustees' compensation is included
in Appendix B.
MEETINGS AND CERTAIN COMMITTEES
Composition. The current Board of Trustees of the Liberty Mutual Funds
consists of two interested and nine non-interested Trustees. Mr. Mayer is not
affiliated with Liberty Financial or any of its affiliates, but is considered
interested as a result of his affiliation with a broker-dealer.
Audit Committee. The Audit Committee of the Liberty Mutual Funds,
consisting of Ms. Verville (Chairperson) and Messrs. Bleasdale, Grinnell, Lowry,
Macera and Moody, all of whom are non-interested Trustees, recommends to the
Board of Trustees the independent accountants to serve as auditors, reviews with
the independent accountants the results of the auditing engagement and internal
accounting procedures, and considers the independence of the independent
accountants, the range of their audit services and their fees.
Compensation Committee. The Compensation Committee of the Liberty
Mutual Funds, consisting of Messrs. Neuhauser (Chairman), Grinnell and Stitzel
and Ms. Collins, all of whom are non-interested Trustees, reviews compensation
of the Board of Trustees.
Governance Committee. The Governance Committee of the Liberty Mutual
Funds, consisting of Messrs. Bleasdale (Chairman), Lowry, Mayer and Moody and
Ms. Verville, all of whom are non-interested Trustees, except for Mr. Mayer
(Mr. Mayer is interested as a result of his affiliation with a broker-dealer,
but is not affiliated with Liberty Financial or any of its affiliates),
recommends to the Board of Trustees, among other things, nominees for trustee
and for appointments to various committees. The Committee will consider
candidates for trustee recommended by shareholders. Written recommendations with
supporting information should be directed to the Committee in care of the Short
Term Fund.
Record of Board and Committee Meetings. During the fiscal year ended
August 31, 2000, Trust II (excluding the Liberty Money Market Fund which has a
different fiscal year end) held six meetings, the Audit Committee held four
meetings, the Compensation Committee held one meeting, and the Governance
Committee held five meetings.
During the most recently completed fiscal year, each of the current
Trustees attended more than 75% of the meetings of the Board of Trustees and the
committees of which such Trustee is a member.
-20-
<PAGE>
THE BOARD OF TRUSTEES RECOMMENDS THAT THE SHAREHOLDERS OF TRUST II VOTE FOR
PROPOSAL 2.
REQUIRED VOTE FOR PROPOSAL 2
A plurality of the votes cast at the Meeting, if a quorum is
represented, is required for the election of each Trustee to the Board of
Trustees of Trust II. Since the number of Trustees has been fixed at eleven,
this means that the eleven persons receiving the highest number of votes will
be elected.
GENERAL
VOTING INFORMATION
The Trustees of the Short Term Fund are soliciting proxies from the
shareholders of the Fund in connection with the Meeting, which has been called
to be held at 10:00 a.m. Eastern Time on December 19, 2000 at Colonial's
offices, One Financial Center, Boston, Massachusetts. 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 MEETING
Solicitation of Proxies. Proxies will be solicited primarily by mailing
this combined Prospectus/Proxy Statement and its enclosures, but proxies may
also be solicited through further mailings, telephone calls, personal interviews
or e-mail by officers of the Short Term 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 Meeting.
Shareholders who owned shares on the record date, September 29, 2000,
are entitled to vote at the Meeting. Shareholders are entitled to cast one vote
for each share 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
-21-
<PAGE>
owner, please sign exactly as your name appears on the proxy card. Either owner
of a joint account may sign the proxy card, but the signer's name must exactly
match the name that appears on the card.
Costs of Solicitation. The costs of the Meeting, including the costs of
soliciting proxies, and the costs of the Acquisition will be borne by the
following parties in the following percentages: the Short Term Fund __%, the
Intermediate Fund __%, Liberty Financial __%.
Voting and Tabulation of Proxies. Shares represented by duly executed
proxies will be voted as instructed on the proxy. If no instructions are given,
the proxy will be voted in favor of each Proposal. You can revoke your proxy by
sending a signed, written letter of revocation to the Assistant Secretary of the
Short Term Fund, by properly executing and submitting a later-dated proxy or by
attending the Meeting and voting in person.
Votes cast in person or by proxy at the Meeting will be counted by
persons appointed by the Short Term Fund as tellers for the Meeting (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 the Short Term Fund at the
Meeting. Shareholders of the Short Term Fund vote together with the shareholders
of the other series of Trust II for the election of Trustees; thirty percent
(30%) of the outstanding shares of Trust II constitutes a quorum for voting on
the election of Trustees. In determining whether a quorum is present, the
Tellers will count shares represented by proxies that reflect abstentions and
"broker non-votes" as shares that are present and entitled to vote. Since these
shares will be counted as present, but not as voting in favor of any proposal,
these shares will have the same effect as if they cast votes against Proposal 1
and will have no effect on the outcome of Proposal 2. "Broker non-votes" are
shares held by brokers or nominees as to which (i) the broker or nominee does
not have discretionary voting power and (ii) the broker or nominee has not
received instructions from the beneficial owner or other person who is entitled
to instruct how the shares will be voted.
Advisor's and Distributor's Addresses. The address of each Fund's
investment advisor, Colonial Management Associates, Inc., is One Financial
Center, Boston, Massachusetts 02111. The address of each Fund's principal
underwriter, Liberty Funds Distributor, Inc., is One Financial Center, Boston,
Massachusetts 02111.
Outstanding Shares and Significant Shareholders. Appendix B to this
Prospectus/Proxy Statement lists for the Short Term Fund and Trust II the total
number of shares outstanding as of September 29, 2000 for each class of the
shares of the Fund and the Trust entitled to vote at the Meeting. It also lists
for the Intermediate Fund the total number of shares outstanding as of September
29, 2000 for each class of the Fund's shares. It also identifies holders of more
than 5% or 25% of any class of shares of each Fund, and contains information
about the executive officers and Trustees of the Funds and their shareholdings
in the Funds.
-22-
<PAGE>
Adjournments; Other Business. If the Short Term Fund has not received enough
votes by the time of the Meeting to approve any Proposal the persons named as
proxies may propose that the Meeting be adjourned one or more times to permit
further solicitation of proxies. Any adjournment requires the affirmative vote
of a majority of the total number of shares of the Short Term Fund that are
present in person or by proxy on the question when the adjournment is being
voted on. The persons named as proxies will vote in favor of any such
adjournment all proxies that they are entitled to vote in favor of the relevant
Proposal (or in favor of any nominee, in the case of Proposal 2). They will vote
against any such adjournment any proxy that directs them to vote against the
Proposal (or against all nominees, in the case of Proposal 2). They will not
vote any proxy that directs them to abstain from voting on the Proposal in
question.
The Meeting has been called to transact any business that properly
comes before it. The only business that management of the Short Term Fund
intends to present or knows that others will present is Proposal 1 and Proposal
2. If any other matters properly come before the Meeting, and on all matters
incidental to the conduct of the Meeting, the persons named as proxies intend to
vote the proxies in accordance with their judgment, unless the Assistant
Secretary of the Short Term Fund has previously received written contrary
instructions from the shareholder entitled to vote the shares.
Shareholder Proposals at Future Meetings. Trust II, of which the Short
Term Fund is a series, does not hold annual or other regular meetings of
shareholders. Shareholder proposals to be presented at any future meeting of
shareholders of the Fund or Trust II must be received by the Short Term Fund or
Trust II in writing a reasonable amount of time before the Trust solicits
proxies for that meeting, in order to be considered for inclusion in the proxy
materials for that meeting.
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APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION dated as of October 31, 2000 by
and among Liberty Funds Trust II (the "Trust"), a Massachusetts business trust
established under a Declaration of Trust dated February 14, 1980, as amended, on
behalf of Liberty Short Term Government Fund (the "Acquired Fund"), a series of
the Trust, Liberty Funds Trust II (the "Acquiring Trust"), a Massachusetts
business trust established under a Declaration of Trust dated February 14, 1980,
as amended, on behalf of Liberty Intermediate Government 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
August 31, 1999 of the Acquired Fund, audited by
PricewaterhouseCoopers LLP and the statement of assets, the
statement of changes in net assets and the
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schedule of investments for the six months ended February 29,
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 February 29, 2000;
(g) Since February 29, 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
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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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the Acquired Fund's investments shown on the schedule of its
investments as of February 29, 2000 referred to in Section
4.1(f) hereof, as supplemented with such changes in the
portfolio as the Acquired Fund shall make, and changes
resulting from stock dividends, stock split-ups, mergers and
similar corporate actions through the Closing Date.
(q) At the Closing Date, the Acquired Fund will have sold such of
its assets, if any, as are necessary to assure that, after
giving effect to the acquisition of the assets of the Acquired
Fund pursuant to this Agreement, the Acquiring Fund will
remain a "diversified company" within the meaning of Section
5(b)(1) of the 1940 Act and in compliance with such other
mandatory investment restrictions as are set forth in the
Acquiring Fund Prospectus, as amended through the Closing
Date.
(r) No registration of any of the Investments would be required if
they were, as of the time of such transfer, the subject of a
public distribution by either of the Acquiring Fund or the
Acquired Fund, except as previously disclosed by the Acquired
Fund to the Acquiring Fund.
4.2 The Acquiring Trust, on behalf of the Acquiring Fund, represents and
warrants the following to the Trust and to the Acquired Fund as of
the date hereof and agrees to confirm the continuing accuracy and
completeness in all material respects of the following on the
Closing Date:
(a) The Acquiring Trust is a business trust duly organized,
validly existing and in good standing under the laws of The
Commonwealth of Massachusetts;
(b) The Acquiring Trust is a duly registered investment company
classified as a management company of the open-end type and
its registration with the Securities and Exchange Commission
as an investment company under the 1940 Act is in full force
and effect, and the Acquiring Fund is a separate series
thereof duly designated in accordance with the applicable
provisions of the Declaration of Trust of the Acquiring Trust
and the 1940 Act;
(c) The Acquiring Fund Prospectus conforms in all material
respects to the applicable requirements of the 1933 Act and
the rules and regulations of the Securities and Exchange
Commission thereunder and does not include any untrue
statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading, and there are no material
contracts to which the Acquiring Fund is a party that are not
referred to in such Prospectus or in the registration
statement of which it is a part;
(d) At the Closing Date, the Acquiring Fund will have good and
marketable title to its assets;
(e) The Acquiring Trust is not in violation in any material
respect of any provisions of its Declaration of Trust or
By-laws or of any agreement, indenture, instrument, contract,
lease or other undertaking to which the Acquiring Trust is a
party or by 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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(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 August 31, 1999 of the
Acquiring Fund, audited by PricewaterhouseCoopers LLP, and the
statement of assets, the statement of changes in net assets
and the schedule of investments for the six months ended
February 29, 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 February 29, 2000;
(h) Since February 29, 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
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requirements of federal and state securities laws. Except for
Class B shares which convert to Class A shares after the
expiration of a period of time, no options, warrants or other
rights to subscribe for or purchase, or securities convertible
into, any shares of beneficial interest in the Acquiring Fund
of any class are outstanding and none will be outstanding on
the Closing Date;
(l) The Acquiring Fund's investment operations from inception to
the date hereof have been in compliance in all material
respects with the investment policies and investment
restrictions set forth in its prospectus and statement of
additional information as in effect from time to time;
(m) The execution, delivery and performance of this Agreement have
been duly authorized by all necessary action on the part of
the Acquiring Trust, and this Agreement constitutes the valid
and binding obligation of the Acquiring Trust and the
Acquiring Fund enforceable in accordance with its terms,
except as the same may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement
of creditors' rights generally and other equitable principles;
(n) The Acquiring Shares to be issued and delivered to the
Acquired Fund pursuant to the terms of this Agreement will at
the Closing Date have been duly authorized and, when so issued
and delivered, will be duly and validly issued Class A shares,
Class B shares and Class C shares of beneficial interest in
the Acquiring Fund, and will be fully paid and non-assessable
(except as set forth in the Acquiring Fund Prospectus) by the
Acquiring Trust, and no shareholder of the Acquiring Trust
will have any preemptive right of subscription or purchase in
respect thereof; and
(o) The information to be furnished by the Acquiring Fund for use
in the Registration Statement and Proxy Statement referred to
in paragraph 5.3 shall be accurate and complete in all
material respects and shall comply with federal securities and
other laws and regulations applicable thereto.
(p) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the
Acquiring Fund of the transactions contemplated by this
Agreement, except such as may be required under 1933 Act, the
1934 Act, the 1940 Act and state insurance, securities or blue
sky laws (which term as used herein shall include the laws of
the District of Columbia and of Puerto Rico).
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5. COVENANTS OF THE ACQUIRED FUND AND THE ACQUIRING FUND.
The Acquiring Trust, on behalf of the Acquiring Fund, and the Trust, on
behalf of the Acquired Fund, each hereby covenants and agrees with the other as
follows:
5.1 The Acquiring Fund and the Acquired Fund each will operate its
business in the ordinary course between the date hereof and the
Closing Date, it being understood that such ordinary course of
business will include regular and customary periodic dividends and
distributions.
5.2 The Acquired Fund will call a meeting of its shareholders to be held
prior to the Closing Date to consider and act upon this Agreement
and take all other reasonable action necessary to obtain the
required shareholder approval of the transactions contemplated
hereby.
5.3 In connection with the Acquired Fund shareholders' meeting referred
to in paragraph 5.2, the Acquired Fund will prepare a Proxy
Statement for such meeting, to be included in a Registration
Statement on Form N-14 (the "Registration Statement") which the
Acquiring Trust will prepare and file for the registration under the
1933 Act of the Acquiring Shares to be distributed to the Acquired
Fund shareholders pursuant hereto, all in compliance with the
applicable requirements of the 1933 Act, the 1934 Act, and the 1940
Act.
5.4 The information to be furnished by the Acquired Fund for use in the
Registration Statement and the information to be furnished by the
Acquiring Fund for use in the Proxy Statement, each as referred to
in paragraph 5.3, shall be accurate and complete in all material
respects and shall comply with federal securities and other laws and
regulations thereunder applicable thereto.
5.5 The Acquiring Fund will advise the Acquired Fund promptly if at any
time prior to the Closing Date the assets of the Acquired Fund
include any securities which the Acquiring Fund is not permitted to
acquire.
5.6 Subject to the provisions of this Agreement, the Acquired Fund and
the Acquiring Fund will each take, or cause to be taken, all action,
and do or cause to be done, all things reasonably necessary, proper
or advisable to cause the conditions to the other party's
obligations to consummate the transactions contemplated hereby to be
met or fulfilled and otherwise to consummate and make effective such
transactions.
5.7 The Acquiring Fund will use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act
and such of the state securities or "Blue Sky" laws as it may deem
appropriate in order to continue its operations after the Closing
Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND.
The obligations of the Acquired Fund to consummate the transactions
provided for herein shall be subject, at its election, to the
performance by the Acquiring Trust and the
A-10
<PAGE>
Acquiring Fund of all the obligations to be performed by them
hereunder on or before the Closing Date and, in addition thereto, to
the following further conditions:
6.1 The Acquiring Trust, on behalf of the Acquiring Fund, shall have
delivered to the Trust a certificate executed in its name by its
President or Vice President and its Treasurer or Assistant
Treasurer, in form satisfactory to the Trust and dated as of the
Closing Date, to the effect that the representations and warranties
of the Acquiring Trust on behalf of the Acquiring Fund made in this
Agreement are true and correct at and as of the Closing Date, except
as they may be affected by the transactions contemplated by this
Agreement, and that the Acquiring Trust and the Acquiring Fund have
complied with all the covenants and agreements and satisfied all of
the conditions on their parts to be performed or satisfied under
this Agreement at or prior to the Closing Date.
6.2 The Trust shall have received a favorable opinion from Ropes & Gray,
counsel to the Acquiring Trust for the transactions contemplated
hereby, dated the Closing Date and, in a form satisfactory to the
Trust, to the following effect:
(a) The Acquiring Trust is a business trust duly organized and
validly existing under the laws of The Commonwealth of
Massachusetts and has power to own all of its properties and
assets and to carry on its business as presently conducted,
and the Acquiring Fund is a separate series thereof duly
constituted in accordance with the applicable provisions of
the 1940 Act and the Declaration of Trust and By-laws of the
Acquiring Trust; (b) this Agreement has been duly authorized,
executed and delivered on behalf of the Acquiring Fund and,
assuming the Prospectus and Registration Statement referred to
in paragraph 5.3 complies with applicable federal securities
laws and assuming the due authorization, execution and
delivery of this Agreement by the Trust on behalf of the
Acquired Fund, is the valid and binding obligation of the
Acquiring Fund enforceable against the Acquiring Fund in
accordance with its terms, except as the same may be limited
by bankruptcy, insolvency, reorganization or other similar
laws affecting the enforcement of creditors' rights generally
and other equitable principles; (c) the Acquiring Fund has the
power to assume the liabilities to be assumed by it hereunder
and upon consummation of the transactions contemplated hereby
the Acquiring Fund will have duly assumed such liabilities;
(d) the Acquiring Shares to be issued for transfer to the
shareholders of the Acquired Fund as provided by this
Agreement are duly authorized and upon such transfer and
delivery will be validly issued and outstanding and fully paid
and nonassessable Class A shares, Class B shares and Class C
shares of beneficial interest in the Acquiring Fund, and no
shareholder of the Acquiring Fund has any preemptive right of
subscription or purchase in respect thereof; (e) the execution
and delivery of this Agreement did not, and the performance by
the Acquiring Trust and the Acquiring Fund of their respective
obligations hereunder will not, violate the Acquiring Trust's
Declaration of Trust or By-laws, or any provision of any
agreement known to such counsel to which the Acquiring Trust
or the Acquiring Fund is a party or by which either of them is
bound or, to the knowledge of such counsel, result in the
acceleration of any obligation or the imposition of any
penalty under any agreement, judgment, or decree to which the
Acquiring Trust or the Acquiring Fund is a party or by which
either of them is bound; (f) to the knowledge of such counsel,
no consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the
Acquiring Trust or the Acquiring Fund of the
A-11
<PAGE>
transactions contemplated by this Agreement except such as may
be required under state securities or "Blue Sky" laws or such
as have been obtained; (g) except as previously disclosed,
pursuant to section 4.2(f) above, such counsel does not know
of any legal or governmental proceedings relating to the
Acquiring Trust or the Acquiring Fund existing on or before
the date of mailing of the Prospectus referred to in paragraph
5.3 or the Closing Date required to be described in the
Registration Statement referred to in paragraph 5.3 which are
not described as required; (h) the Acquiring Trust is
registered with the Securities and Exchange Commission as an
investment company under the 1940 Act; and (i) to the best
knowledge of such counsel, no litigation or administrative
proceeding or investigation of or before any court or
governmental body is presently pending or threatened as to the
Acquiring Trust or the Acquiring Fund or any of their
properties or assets and neither the Acquiring Trust nor the
Acquiring Fund is a party to or subject to the provisions of
any order, decree or judgment of any court or governmental
body, which materially and adversely affects its business.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND.
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the
performance by the Acquired Fund of all the obligations to be
performed by it hereunder on or before the Closing Date and, in
addition thereto, to the following further conditions:
7.1 The Trust, on behalf of the Acquired Fund, shall have delivered to
the Acquiring Trust a certificate executed in its name by its
President or Vice President and its Treasurer or Assistant
Treasurer, in form and substance satisfactory to the Acquiring Trust
and dated the Closing Date, to the effect that the representations
and warranties of the Acquired Fund made in this Agreement are true
and correct at and as of the Closing Date, except as they may be
affected by the transactions contemplated by this Agreement, and
that the Trust and the Acquired Fund have complied with all the
covenants and agreements and satisfied all of the conditions on its
part to be performed or satisfied under this Agreement at or prior
to the Closing Date;
7.2 The Acquiring Trust shall have received a favorable opinion from
Ropes & Gray, counsel to the Trust, dated the Closing Date and in a
form satisfactory to the Acquiring Trust, to the following effect:
(a) The Trust is a business trust duly organized and validly
existing under the laws of the Commonwealth of Massachusetts
and has corporate power to own all of its properties and
assets and to carry on its business as presently conducted,
and the Acquired Fund is a separate series thereof duly
constituted in accordance with the applicable provisions of
the 1940 Act and the Declaration of Trust of the Trust; (b)
this Agreement has been duly authorized, executed and
delivered on behalf of the Acquired Fund and, assuming the
Proxy Statement referred to in paragraph 5.3 complies with
applicable federal securities laws and assuming the due
authorization, execution and delivery of this Agreement by the
Acquiring Trust on behalf of the Acquiring Fund, is the valid
and binding obligation of the Acquired Fund enforceable
against the Acquired Fund in accordance with its terms, except
as the same may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement
of creditors' rights generally and other
A-12
<PAGE>
equitable principles; (c) the Acquired Fund has the power to
sell, assign, transfer and deliver the assets to be
transferred by it hereunder, and, upon consummation of the
transactions contemplated hereby, the Acquired Fund will have
duly transferred such assets to the Acquiring Fund; (d) the
execution and delivery of this Agreement did not, and the
performance by the Trust and the Acquired Fund of their
respective obligations hereunder will not, violate the Trust's
Declaration of Trust or By-laws, or any provision of any
agreement known to such counsel to which the Trust or the
Acquired Fund is a party or by which either of them is bound
or, to the knowledge of such counsel, result in the
acceleration of any obligation or the imposition of any
penalty under any agreement, judgment, or decree to which the
Trust or the Acquired Fund is a party or by which either of
them is bound; (e) to the knowledge of such counsel, no
consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the
Trust or the Acquired Fund of the transactions contemplated by
this Agreement, except such as may be required under state
securities or "Blue Sky" laws or such as have been obtained;
(f) such counsel does not know of any legal or governmental
proceedings relating to the Trust or the Acquired Fund
existing on or before the date of mailing of the Prospectus
referred to in paragraph 5.3 or the Closing Date required to
be described in the Registration Statement referred to in
paragraph 5.3 which are not described as required; (g) the
Trust is registered with the Securities and Exchange
Commission as an investment company under the 1940 Act; and
(h) to the best knowledge of such counsel, no litigation or
administrative proceeding or investigation of or before any
court or governmental body is presently pending or threatened
as to the Trust or the Acquired Fund or any of its properties
or assets and neither the Trust nor the Acquired Fund is a
party to or subject to the provisions of any order, decree or
judgment of any court or governmental body, which materially
and adversely affects its business.
7.3 The Acquired Fund shall have furnished to the Acquiring Fund tax
returns, signed by a partner of PricewaterhouseCoopers LLP for the
fiscal year ended August 31, 2000 and signed pro forma tax returns
for the period from September 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 August 31, 2000 and on or prior to the Closing Date (computed
without regard to any deduction for dividends paid), and all of its
net capital gains realized in each of its taxable years ending on or
after August 31, 2000 and on or prior to the Closing Date.
7.5 The Acquired Fund shall have furnished to the Acquiring Fund a
certificate, signed by the President (or any Vice President) and the
Treasurer of the Trust, as to the adjusted tax basis in the hands of
the Acquired Fund of the securities delivered to the Acquiring Fund
pursuant to this Agreement.
7.6 The custodian of the Acquired Fund shall have delivered to the
Acquiring Fund a certificate identifying all of the assets of the
Acquired Fund held by such custodian as of the Valuation Date.
A-13
<PAGE>
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH OF THE
ACQUIRING FUND AND THE ACQUIRED FUND.
The respective obligations of the Trust and the Acquiring Trust hereunder
are each subject to the further conditions that on or before the Closing Date:
8.1 This Agreement and the transactions contemplated herein shall have
been approved by the vote of the required majority of the holders of
the outstanding shares of the Acquired Fund of record on the record
date for the meeting of its shareholders referred to in paragraph
5.2;
8.2 On the Closing Date no action, suit or other preceding shall be
pending before any court or governmental agency in which it is
sought to restrain or prohibit, or obtain damages or other relief in
connection with, this Agreement or the transactions contemplated
hereby;
8.3 All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities
(including those of the Securities and Exchange Commission and of
state Blue Sky and securities authorities) deemed necessary by the
Trust or the Acquiring Trust to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been
obtained, except where failure to obtain any such consent, order or
permit would not involve a risk of a material adverse effect on the
assets or properties of the Acquiring Fund or the Acquired Fund.
8.4 The Registration Statement referred to in paragraph 5.3 shall have
become effective under the 1933 Act and no stop order suspending the
effectiveness thereof shall have been issued and, to the best
knowledge of the parties hereto, no investigation or proceeding for
that purpose shall have been instituted or be pending, threatened or
contemplated under the 1933 Act;
8.5 The Trust shall have received a favorable opinion of Ropes & Gray
satisfactory to the Trust and the Acquiring Trust shall have
received a favorable opinion of Ropes & Gray satisfactory to the
Acquiring Trust, each substantially to the effect that, for federal
income tax purposes:
(a) The acquisition by the Acquiring Fund of the assets of the
Acquired Fund in exchange for the Acquiring Fund's assumption
of the Obligations of the Acquired Fund and issuance of the
Acquiring Shares, followed by the distribution by the Acquired
Fund of such the Acquiring Shares to the shareholders of the
Acquired Fund in exchange for their shares of the Acquired
Fund, all as provided in paragraph 1 hereof, will constitute a
reorganization within the meaning of Section 368(a) of the
Code, and the Acquired Fund and the Acquiring Fund will each
be "a party to a reorganization" within the meaning of Section
368(b) of the Code;
(b) No gain or loss will be recognized to the Acquired Fund (i)
upon the transfer of its assets to the Acquiring Fund in
exchange for the Acquiring Shares or (ii) upon the
distribution of the Acquiring Shares to the shareholders of
the Acquired Fund as contemplated in paragraph 1 hereof;
A-14
<PAGE>
(c) No gain or loss will be recognized to the Acquiring Fund upon
the receipt of the assets of the Acquired Fund in exchange for
the assumption of the Obligations and issuance of the
Acquiring Shares as contemplated in paragraph 1 hereof;
(d) The tax basis of the assets of the Acquired Fund acquired by
the Acquiring Fund will be the same as the basis of those
assets in the hands of the Acquired Fund immediately prior to
the transfer, and the holding period of the assets of the
Acquired Fund in the hands of the Acquiring Fund will include
the period during which those assets were held by the Acquired
Fund;
(e) The shareholders of the Acquired Fund will recognize no gain
or loss upon the exchange of their shares of the Acquired Fund
for the Acquiring Shares;
(f) The tax basis of the Acquiring Shares to be received by each
shareholder of the Acquired Fund will be the same in the
aggregate as the aggregate tax basis of the shares of the
Acquired Fund surrendered in exchange therefor;
(g) The holding period of the Acquiring Shares to be received by
each shareholder of the Acquired Fund will include the period
during which the shares of the Acquired Fund surrendered in
exchange therefor were held by such shareholder, provided such
shares of the Acquired Fund were held as a capital asset on
the date of the exchange.
(h) Acquiring Fund will succeed to and take into account the items
of Acquired Fund described in Section 381(c) of the Code,
subject to the conditions and limitations specified in
Sections 381, 382, 383 and 384 of the Code and the regulations
thereunder.
8.6 At any time prior to the Closing, any of the foregoing conditions of
this Agreement may be waived jointly by the Board of Trustees of the
Trust and the Board of Trustees of the Acquiring Trust if, in their
judgment, such waiver will not have a material adverse effect on the
interests of the shareholders of the Acquired Fund and the Acquiring
Fund.
9. BROKERAGE FEES AND EXPENSES.
9.1 The Trust, on behalf of the Acquired Fund, and the Acquiring Trust,
on behalf of the Acquiring Fund, each represents and warrants to the
other that there are no brokers or finders entitled to receive any
payments in connection with the transactions provided for herein.
9.2 The Acquiring Trust, on behalf of the Acquiring Fund, shall pay all
fees paid to governmental authorities for the registration or
qualification of the Acquiring Shares. The other expenses of the
transactions contemplated by this Agreement shall be borne by the
following parties in the percentages indicated: (a) the Trust, on
behalf of the Acquired Fund, __%, (b) the Acquiring Trust, on behalf
of the Acquiring Fund, __%, and (c) Liberty Financial Companies,
Inc. __%.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES.
10.1 The Trust on behalf of the Acquired Fund and the Acquiring Trust on
behalf of the Acquiring Fund agree that neither party has made any
representation, warranty or
A-15
<PAGE>
covenant not set forth herein and that this Agreement constitutes
the entire agreement between the parties.
10.2 The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in
connection herewith shall not survive the consummation of the
transactions contemplated hereunder except paragraphs 1.1, 1.3, 1.5,
1.6, 5.4, 9, 10, 13 and 14.
11. TERMINATION.
11.1 This Agreement may be terminated by the mutual agreement of the
Acquiring Trust and the Trust. In addition, either the Acquiring
Trust or the Trust may at its option terminate this Agreement at or
prior to the Closing Date because:
(a) Of a material breach by the other of any representation,
warranty, covenant or agreement contained herein to be
performed by the other party at or prior to the Closing Date;
or
(b) A condition herein expressed to be precedent to the
obligations of the terminating party has not been met and it
reasonably appears that it will not or cannot be met.
(c) If the transactions contemplated by this Agreement have not
been substantially completed by May 31, 2001 this Agreement
shall automatically terminate on that date unless a later date
is agreed to by both the Trust and the Acquiring Trust.
11.2 If for any reason the transactions contemplated by this Agreement
are not consummated, no party shall be liable to any other party for
any damages resulting therefrom, including without limitation
consequential damages.
12. AMENDMENTS.
This Agreement may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by the authorized officers of the Trust
on behalf of the Acquired Fund and the Acquiring Trust on behalf of the
Acquiring Fund; provided, however, that following the shareholders' meeting
called by the Acquired Fund pursuant to paragraph 5.2 no such amendment may have
the effect of changing the provisions for determining the number of the
Acquiring Shares to be issued to shareholders of the Acquired Fund under this
Agreement to the detriment of such shareholders without their further approval.
13. NOTICES.
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by prepaid
telegraph, telecopy or certified mail addressed to: Liberty Funds Trust II, One
Financial Center, Boston, MA 02111, attention Secretary.
14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT NON-RECOURSE.
A-16
<PAGE>
14.1 The article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
14.2 This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original.
14.3 This Agreement shall be governed by and construed in accordance with
the domestic substantive laws of The Commonwealth of Massachusetts,
without giving effect to any choice or conflicts of law rule or
provision that would result in the application of the domestic
substantive laws of any other jurisdiction.
14.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no
assignment or transfer hereof or of any rights or obligations
hereunder shall be made by any party without the written consent of
the other party. Nothing herein expressed or implied is intended or
shall be construed to confer upon or give any person, firm or
corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of
this Agreement.
14.5 A copy of the Declaration of Trust of the Trust and Acquiring Trust
is on file with the Secretary of State of the Commonwealth of
Massachusetts, and notice is hereby given that no trustee, officer,
agent or employee of either the Trust or the Acquiring Trust shall
have any personal liability under this Agreement, and that this
Agreement is binding only upon the assets and properties of the
Acquired Fund and the Acquiring Fund.
A-17
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed as a sealed instrument by its President or Vice President and its
corporate seal to be affixed thereto and attested by its Secretary or Assistant
Secretary.
LIBERTY FUNDS TRUST II,
on behalf of Liberty Short Term
Government Fund
By:
---------------------------------
Name:
------------------------------
Title:
------------------------------
ATTEST:
------------------------------------
Name:
------------------------------
Title:
------------------------------
LIBERTY FUNDS TRUST II,
on behalf of Liberty Intermediate
Government 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 SHORT TERM FUND AND TRUST II AND
SHARES OUTSTANDING OF THE INTERMEDIATE FUND
For each class of the Short Term Fund's shares and Trust II's shares
entitled to vote at the Meeting, and for each class of the Liberty Intermediate
Government Fund'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>
Short Term Fund A 1,102,216
------------------------------------------------------------------------------------------------------------
B 819,067
------------------------------------------------------------------------------------------------------------
C 390,705
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
Trust II 431,833,211
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
Intermediate Fund A 76,405,556
------------------------------------------------------------------------------------------------------------
B 26,876,142
------------------------------------------------------------------------------------------------------------
C 307,789
------------------------------------------------------------------------------------------------------------
Z 966,002
------------------------------------------------------------------------------------------------------------
</TABLE>
OWNERSHIP OF SHARES
As of September 29, 2000, Trust II believes that the Trustees and officers
of the Trust, as a group, owned less than one percent of each class of shares of
each Fund and of the Trust as a whole. As of September 29, 2000, the following
shareholders of record owned 5% or more of the outstanding shares of the noted
class of shares of the noted Fund:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
NUMBER OF
OUTSTANDING
NAME AND ADDRESS OF SHARES OF PERCENTAGE OF OUTSTANDING
FUND AND CLASS SHAREHOLDER CLASS OWNED SHARES OF CLASS OWNED
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHORT TERM FUND
CLASS A
Enele Co. 78,263.066 7.10%
FBO #20 6051
c/o Copper Mountain Trust
601 SW Second Avenue, Ste. 1800
Portland, OR 97204
CLASS B
Merrill Lynch Pierce Fenner & Smith 49,110.799 6.00%
For the Sole Benefit of its Customers
</TABLE>
B-1
<PAGE>
<TABLE>
<S> <C> <C>
Attn: Fund Administration #97AX6
4800 Deer Lake Drive E. 3rd Floor
Jacksonville, FL 32246-6484
CLASS C
Merrill Lynch Pierce Fenner & Smith 24,494.715 6.27%
For the Sole Benefit of its Customers
Attn: Fund Administration #97AX6
4800 Deer Lake Drive E. 3rd Floor
Jacksonville, FL 32246-6484
USB Piper Jaffray Custodian 28,235.759 7.23%
222 So 9th Street
Minneapolis, MN 55402
INTERMEDIATE FUND
CLASS B
Merrill Lynch Pierce Fenner & Smith 1,950,512.625 7.26%
For the Sole Benefit of its Customers
Attn: Fund Administration #97E96
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
CLASS C
Merrill Lynch Pierce Fenner & Smith 38,210.617 12.45%
For the Sole Benefit of its Customers
Attn: Fund Administration #97E96
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
Cynthia D. Frankel 17,236.089 5.60%
P.O. Box 25003
Asheville, NC 28813
The Reese Family Partnership 16,307.041 5.30%
17317 Wood Road
Bow, WA 98232
CLASS Z
Colonial Counselor Select Income Portfolio 333,593.438 34.53%
c/o Christie McCullough
245 Summer Street
Boston, MA 02111
Colonial Counselor Select Balanced Portfolio 632,244.524 65.45%
c/o Christie McCullough
245 Summer Street
Boston, MA 02111
</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:
--------------------------------------------------------------------------------
PERCENTAGE OF OUTSTANDING
SHARES OF CLASS OWNED
NAME AND ADDRESS OF UPON CONSUMMATION OF
FUND AND CLASS SHAREHOLDER ACQUISITION
--------------------------------------------------------------------------------
SHORT-TERM FUND
CLASS A
Enele Co. 0.16%
FBO #20 6051
c/o Copper Mountain Trust
601 SW Second Avenue, Ste. 1800
Portland, OR 97204
CLASS B
Merrill Lynch Pierce Fenner & Smith 0.25%
For the Sole Benefit of its Customers
Attn: Fund Administration #97AX6
4800 Deer Lake Drive E. 3rd Floor
Jacksonville, FL 32246-6484
CLASS C
Merrill Lynch Pierce Fenner & Smith 3.84%
For the Sole Benefit of its Customers
Attn: Fund Administration #97AX6
4800 Deer Lake Drive E. 3rd Floor
Jacksonville, FL 32246-6484
USB Piper Jaffray Custodian 4.42%
222 So 9th Street
Minneapolis, MN 55402
INTERMEDIATE FUND
CLASS B
Merrill Lynch Pierce Fenner & Smith 6.40%
For the Sole Benefit of its Customers
Attn: Fund Administration #97E96
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
CLASS C
Merrill Lynch Pierce Fenner & Smith 3.89%
For the Sole Benefit of its Customers
Attn: Fund Administration #97E96
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
Cynthia D. Frankel 1.75%
P.O. Box 25003
Asheville, NC 28813
The Reese Family Partnership 1.66%
17317 Wood Road
Bow, WA 98232
CLASS Z
Colonial Counselor Select Income Portfolio 32.74%
c/o Christie McCullough
245 Summer Street
Boston, MA 02111
Colonial Counselor Select Balanced Portfolio 62.05%
c/o Christie McCullough
245 Summer Street
Boston, MA 02111
B-2
<PAGE>
INFORMATION CONCERNING EXECUTIVE OFFICERS
The following table sets forth certain information about the executive officers
of each Fund:
<TABLE>
<CAPTION>
EXECUTIVE OFFICER YEAR OF ELECTION AS
NAME & AGE OFFICE AND PRINCIPAL OCCUPATION (1) EXECUTIVE OFFICER
----------------- ----------------------------------- -------------------
<S> <C> <C>
Stephen E. Gibson President of the Liberty Funds since June, 1998; Chairman of 1998
(46) the Board since July, 1998, Chief Executive Officer and
President since December, 1996 and Director, since July,
1996 of CMA (formerly Executive Vice President from
July, 1996 to December, 1996); Chairman of the Board,
Director, Chief Executive Officer and President of Liberty
Funds Group LLC (LFG) since December, 1998 (formerly
Director, Chief Executive Officer and President of The
Colonial Group, Inc. (TCG) from December, 1996 to
December, 1998); Director of Stein Roe & Farnham
Incorporated (SR&F) since September, 2000, President since
January, 2000 and Vice Chairman since August, 1998
(formerly Assistant Chairman and Executive Vice President
from August, 1998 to January, 2000) (formerly Managing
Director of Marketing of Putnam Investments, June, 1992 to
July, 1996.)
Pamela A. McGrath Treasurer and Chief Financial Officer of the Liberty Funds and 1999
(46) Liberty All-Star Funds since April, 2000; Treasurer, Chief
Financial Officer and Vice President of LFG since
December, 1999; Chief Financial Officer, Treasurer and
Senior Vice President of CMA since December, 1999;
Director of Offshore Accounting for Putnam Investments
from May, 1998 to October, 1999; Managing Director of
Scudder Kemper Investments from October, 1984 to December,
1997.
</TABLE>
(1) Except as otherwise noted, each individual has held the office indicated or
other offices in the same company for the last five years.
B-3
<PAGE>
ADDITIONAL INFORMATION CONCERNING TRUSTEE COMPENSATION
The current Board of Trustees received the following compensation from each Fund
as of each Fund's fiscal year end and for the calendar year ended December 31,
1999(1):
<TABLE>
<CAPTION>
-------------------------------------------------------
SHORT TERM INTERMEDIATE
FUND FUND
-------------------------------------------------------
8/31/99 8/31/99
-------------------------------------------------------
<S> <C> <C>
Mr. Bleasdale $791(2) $4,845(3)
-------------------------------------------------------
Ms. Collins 665 4,060
-------------------------------------------------------
Mr. Grinnell 694 4,232
-------------------------------------------------------
Mr. Lowry 672 4,098
-------------------------------------------------------
Mr. Macera 577 3,497
-------------------------------------------------------
Mr. Mayer 673 4,091
-------------------------------------------------------
Mr. Moody 654(4) 3,979(5)
-------------------------------------------------------
Mr. Neuhauser 705 4,276
-------------------------------------------------------
Mr. Stitzel 577 3,497
-------------------------------------------------------
Ms. Verville 588(6) 3,573(7)
-------------------------------------------------------
</TABLE>
The following table sets forth the total compensation paid to each Trustee by
the Liberty Mutual Funds for the calendar year ended December 31, 1999.
<TABLE>
<CAPTION>
----------------------------------------------------------
TRUSTEE TOTAL COMPENSATION
----------------------------------------------------------
<S> <C>
Mr. Bleasdale $103,000(8)
----------------------------------------------------------
Ms. Collins 96,000
----------------------------------------------------------
Mr. Grinnell 100,000
----------------------------------------------------------
Mr. Lowry 97,000
----------------------------------------------------------
Mr. Macera 95,000
----------------------------------------------------------
Mr. Mayer 101,000
----------------------------------------------------------
Mr. Moody 91,000(9)
----------------------------------------------------------
Mr. Neuhauser 101,252
----------------------------------------------------------
Mr. Stitzel 95,000
----------------------------------------------------------
Ms. Verville 96,000(10)
----------------------------------------------------------
</TABLE>
For the calendar year ended December 31, 1999, certain of the Trustees received
the following compensation in their capacities as Trustees or Directors of the
Liberty All-Star Equity Fund, the Liberty All-Star Growth Fund, Inc. and Liberty
Funds Trust IX (together, the "Liberty All-Star Funds"):
Total Compensation From Liberty
All-Star Funds For The Calendar
Trustee Year Ended December 31, 1999 (11)
------- ---------------------------------
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
--------------------------------
(1) The Funds do not currently provide pension or retirement plan benefits to
the Trustees.
(2) Includes $366 payable in later years as deferred compensation.
(3) Includes $2,234 payable in later years as deferred compensation.
(4) Total compensation of $654 for the fiscal year ended August 31, 1999,
will be payable in later years as deferred compensation.
(5) Total compensation of $3,979 for the fiscal year ended August 31, 1999,
will be payable in later years as deferred compensation.
(6) Total compensation of $588 for the fiscal year ended August 31, 1999,
will be payable in later years as deferred compensation.
(7) Total compensation of $3,573 for the fiscal year ended August 31, 1999,
will be payable in later years as deferred compensation.
(8) Includes $52,000 payable in later years as deferred compensation.
(9) Total compensation of $91,000 for the calendar year ended December 31,
1999, will be payable in later years as deferred compensation.
(10) Total compensation of $96,000 for the calendar year ended December 31,
1999, will be payable in later years as deferred compensation.
(11) The Liberty All-Star Funds are advised by Liberty Asset Management
Company ("LAMCO"). LAMCO is an indirect wholly-owned subsidiary of
Liberty Financial Companies, Inc. (an intermediate parent of the
Advisor of each Fund).
B-4
<PAGE>
--------------------------------------------------------------------------------
B-5
<PAGE>
APPENDIX C
CAPITALIZATION
The following table shows on an unaudited basis the capitalization of each of
the Short Term Fund and the Intermediate Fund as of August 31, 2000, and on a
pro forma combined basis, giving effect to the acquisition of the assets and
liabilities of the Short Term Fund by the Intermediate Fund at net asset value
as of that date (all amounts except per share data shown in thousands):
<TABLE>
<CAPTION>
SHORT TERM INTERMEDIATE PRO FORMA PRO FORMA
FUND FUND ADJUSTMENTS COMBINED (1)
<S> <C> <C> <C> <C>
Class A
Net asset value $10,549 $465,738 $(91) $476,196
Shares outstanding 1,091 74,138 574 75,803
Net asset value per share $ 9.67 $ 6.28 $ 6.28
Class B
Net asset value $ 7,854 $183,760 $(40) $191,574
Shares outstanding 812 29,244 432 30,488
Net asset value per share $ 9.67 $ 6.28 $ 6.28
Class C
Net asset value $ 4,250 $ 1,931 $ (6) $ 6,175
Shares outstanding 439 307 236 983
Net asset value per share $ 9.67 $ 6.28 $ 6.28
Class Z
Net asset value $ 6,402 $ (1) $ 6,401
Shares outstanding 1,019 1,019
Net asset value per share 6.28 6.28
</TABLE>
(1) Assumes the Acquisition was consummated on August 31, 2000, and is for
information purposes only. No assurance can be given as to how many shares of
the Intermediate Fund will be received by the shareholders of the Short Term
Fund on the date the Acquisition takes place, and the foregoing should not be
relied upon to reflect the number of shares of the Intermediate Fund that
actually will be received on or after such date.
C-1
<PAGE>
APPENDIX D
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE AS OF AUGUST 31, 1999
LIBERTY INTERMEDIATE GOVERNMENT FUND
HIGHLIGHTS
- INTEREST RATE VOLATILITY CHALLENGED BOND MARKET INVESTORS
Long-term interest rates rose more than three-quarters of a percentage
point to 6.07% between the beginning and end of the period. Volatility was
significant, with Treasury rates falling as low as 4.98% and rising as high
as 6.10%.
- FEDERAL RESERVE BOARD REVERSED ITS POSITION ON INTEREST RATES
After a series of interest rate cuts in the fall of 1998, the Federal
Reserve Board (the Fed) adopted a neutral stance on the direction of rates.
However, continued economic strength prompted a bias towards raising rates,
and bond prices fell further. Subsequently, the Fed increased rates twice,
in June and in August.
- TREASURY BOND PERFORMANCE REFLECTED VOLATILE MARKET CONDITIONS
Treasury bonds outperformed mortgage-backed securities early in the period.
However, as investors became concerned about a potential Fed increase in
interest rates, Treasury bond prices declined sharply, while
mortgage-backed security prices remained stable.
PORTFOLIO MANAGEMENT REPORT
The Fund maintains a conservative portfolio invested primarily in U.S.
government securities, with a risk profile similar to a five-year Treasury. The
Fund is managed to maintain an average duration of between 2.2 and 5.5 years.
Early in the period, investors' low risk tolerance, falling interest rates
and increased fears of mortgage prepayments led us to reduce the portfolio's
investment in mortgage-backed securities. However, early in 1999 interest rates
began to rise and we emphasize attractively valued mortgage securities that we
expected would benefit from lowered prepayment expectations, as homeowners
became less likely to refinance their mortgages. We increased the relative
weight of mortgages in the portfolio from 60.1% to 68.9%(1) and decreased our
investment in Treasurys and U.S. agency debt. In addition to changing the Fund's
asset mix, we positioned the portfolio to take advantage of more stable interest
rates, which have historically been positive for mortgage-backed securities.
Increasing the portfolio's duration and its investment in mortgage
securities held back the Fund's 12-month performance because interest rates rose
with a speed and
--------
(1) Calculated as a percentage of senior securities.
D-1
<PAGE>
magnitude that we hadn't anticipated. As a result, despite attractive mortgage
sector investment characteristics, investors favored assets with lower duration
and lower perceived risk than mortgage securities. In response, mortgage bond
prices fell. Conditions were further aggravated by heavy mortgage issuance as
the period ended. However, we believe that our active duration and asset mix
management should benefit the Fund over the longer term.
ACTIVE PORTFOLIO MANAGEMENT HELPED IN NEGATIVE MARKET CONDITIONS
As market conditions shifted dramatically during the course of the year, we
sought to reduce the negative effects of volatility by actively managing the
portfolios, particularly their duration characteristics.
During the first part of the year, we reduced the Fund's sensitivity to
interest rate movements in response to rapidly falling interest rates and
heightened concerns that prepayments would increase. We also increased the
duration of the portfolio's other holdings -- including Treasury securities --
to position the portfolio to take advantage of rising Treasury bond prices.
When interest rates reversed direction early in 1999, we altered our
strategy and reduced the proportion of Treasury securities in the portfolio to
offset an increase in mortgage security duration. When interest rates rise as
rapidly as they did during the period, a large position in mortgage-backed
securities can cause a portfolio's interest rate sensitivity, as measured by its
duration, to increase dramatically. Although funds with a longer duration
generally do not perform as well as funds with a shorter duration when rates
rise, we believed that mortgage-backed securities offered compelling values and
attractive long-term performance potential. Therefore, instead of selling the
portfolio's mortgage holdings as prices fell, we elected to maintain and, in
some cases, modestly increase our investment in mortgage-backed securities.
OUTLOOK SUGGESTS IMPROVED MARKET CONDITIONS AND LOWER VOLATILITY
We are optimistic that conditions should improve. Despite continued
economic growth, we don't anticipate any significant increases in inflation. We
believe any increase in costs should be offset by changes that have taken place
in the economy, including increased global competition that should act to keep
prices of goods and services stable. We also expect volatility to decline as
investors become more risk tolerant as conditions stabilize worldwide, which
could encourage better supply and demand dynamics for mortgage-backed
securities. We are confident that the Funds are well positioned to take
advantage of improving conditions should they occur.
LESLIE W. FINNEMORE is a senior vice president of Colonial Management Associates
(CMA). MS. FINNEMORE is co-portfolio manager of the Intermediate Fund. ANN T.
PETERSON is a vice president of CMA and co-portfolio manager of the Intermediate
Fund.
D-2
<PAGE>
PERFORMANCE INFORMATION
INTERMEDIATE GOVERNMENT FUND INVESTMENT PERFORMANCE VS. LEHMAN BROTHERS
INTERMEDIATE U.S. GOV'T BOND
[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 8/31/89 - 8/31/99
<TABLE>
<CAPTION>
Lehman Brothers
Intermediate U.S. Without Sales With
Govt Bond Charge Sales Charge
<S> <C> <C> <C>
8/31/89 10000 10000 9525
11/30/89 10360 10255 9768
2/28/90 10364 10284 9796
5/31/90 10563 10582 10079
8/31/90 10813 10794 10282
11/30/90 11228 11187 10656
2/28/91 11570 11431 10888
5/31/91 11821 11665 11111
8/30/91 12186 12024 11453
11/29/91 12682 12391 11802
2/28/92 12905 12565 11968
5/31/92 13162 12726 12122
8/31/92 13747 13023 12404
11/30/92 13711 13100 12478
2/28/93 14356 13420 12783
5/31/93 14482 13570 12925
8/31/93 14941 13863 13205
11/30/93 14963 13837 13180
2/28/94 14965 13838 13182
5/31/94 14662 13636 12988
8/31/94 14900 13747 13094
11/30/94 14714 13666 13017
2/28/95 15292 14097 13427
5/31/95 15993 14895 14187
8/31/95 16235 15059 14344
11/30/95 16725 15572 14832
2/29/96 16852 15693 14948
5/31/96 16718 15367 14637
8/31/96 16959 15492 14756
11/30/96 17671 16281 15508
2/28/97 17672 16253 15481
5/31/97 17908 16478 15695
8/31/97 18324 16883 16081
11/30/97 18780 17400 16574
2/28/98 19160 17632 16794
5/31/98 19444 17977 17123
8/20/98 20022 18381 17508
11/20/98 20460 18798 17905
2/20/99 20348 18717 17828
5/20/99 20413 18692 17804
8/31/99 20474 18418 17543
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS AS OF 8/31/99
<TABLE>
<CAPTION>
Share Class A B C Z
Inception Date 10/13/87 6/8/92 8/1/97 1/29/99
----------------------------------------------------------------------------------------------------------------
Without With Without With Without With Without
Sales Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge Charge
<S> <C> <C> <C> <C> <C> <C> <C>
1 year (0.70)% (5.42)% (1.44)% (6.14)% (1.29)% (2.23)% (0.55)%
5 years 5.96 4.93 5.17 4.84 5.69 5.69 5.99
10 years 6.30 5.78 5.73 5.73 6.16 6.16 6.31
</TABLE>
Past performance cannot predict future investment results.
Class B, C and Z share (newer class shares) performance information includes
returns of the Fund's Class A shares (the oldest existing fund class) for
periods prior to the inception of the newer class shares. These Class A share
returns were not restated to reflect any expense differential (e.g. Rule 12b-1
fees) between Class A shares and the newer class shares.
PERFORMANCE OF A $10,000 INVESTMENT IN ALL SHARE CLASSES FROM 8/31/89 - 8/31/99
<TABLE>
<CAPTION>
Without With
Sales Sales
Charge Charge
<S> <C> <C>
Class A $18,418 $17,543
Class B $17,455 $17,455
Class C $18,187 $18,187
Class Z $18,448 N/A
</TABLE>
DURATION
8/31/99 5.40 years
8/31/98 4.73 years
NET ASSET VALUE AS OF 8/31/99
Class A $6.32
Class B $6.32
D-3
<PAGE>
Class C $6.32
Class Z $6.32
DISTRIBUTIONS DECLARED PER SHARE FROM 9/1/98 TO 8/31/99
Class A $0.369
Class B $0.319
Class C $0.329
Class Z (1/29/99-8/31/99) $0.229
30-DAY SEC YIELDS ON 8/31/99
Class A 5.63%
Class B 5.15%
Class C 5.31%
Class Z 6.18%
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. If
the Advisor or its affiliates had not borne certain expenses, the SEC yield
would have been 5.16% for Class C shares.
AVERAGE LIFE BREAKDOWN AS OF 8/31/99
0-5 years 25.35%
5-10 years 53.73%
10-15 years 15.91%
15-20 years 5.01%
Average life is the expected maturity of a bond and is calculated as a
percentage of total investments.
SECTOR BREAKDOWNS
<TABLE>
<CAPTION>
FUND AS OF FUND AS OF
8/31/99 VS. 8/31/98
<S> <C> <C>
Treasury Securities 29.05% 42.40%
FNMAs 37.84% 26.57%
GNMAs 28.70% 25.90%
FHLMCs 2.33% 2.54%
SBA 2.08% 2.59%
</TABLE>
Sector breakdowns are calculated as a percentage of total investments. Because
the Fund is actively managed, there is no guarantee the Fund will continue to
maintain this breakdown in the future.
D-4
<PAGE>
LIBERTY FUNDS TRUST II
LIBERTY INTERMEDIATE GOVERNMENT 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 Short Term Government
Fund (the "Acquired Fund"), a series of Liberty Funds Trust II, by the Liberty
Intermediate government Fund (the "Acquiring Fund"), a series of Liberty Funds
Trust II.
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 Fund in exchange
for shares of the Acquiring Fund and the assumption of all the liabilities of
the Acquired Fund. The Acquired Fund would distribute the Acquiring Fund shares
it receives to its shareholders in complete liquidation of the Acquired Fund.
This SAI is not a prospectus and should be read in conjunction with the
Prospectus/Proxy Statement. The Prospectus/Proxy Statement has been filed with
the Securities and Exchange Commission and is available upon request and without
charge by writing to your Fund at One Financial Center, Boston, Massachusetts
02111 or by calling 1-800-426-3750.
Table of Contents
<TABLE>
<S> <C>
I. Additional Information about the Acquiring Fund and the Acquired Fund.......................
II. Financial Statements........................................................................
</TABLE>
<PAGE>
I. Additional Information about the Acquiring Fund and the Acquired Fund.
Incorporated by reference to Post-Effective Amendment No. 44 to the
Registrant's Registration Statement Form N-1A (filed on December 22, 1999)
(Registration Nos. 2-66976 and 811-3009).
II. Financial Statements.
This SAI is accompanied by the Annual Reports for the years ended
August 31, 1999 and August 31, 2000 of the Acquiring Fund and Acquired Fund,
which contain historical financial information regarding such Funds. Such
reports have been filed with the Securities and Exchange Commission. The
Annual Report for the year ended August 31, 1999, and the financial statements
contained in the Annual Report for the year ended August 31, 2000.
-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. 5 to the Agreement and Declaration of Trust (2)
(1)(b) Amendment No. 6 to the Agreement and Declaration of Trust (3)
(2) Amended By-Laws dated 4/1/99 (3)
(3) Not Applicable
(4) Form of Agreement and Plan of Reorganization between Liberty Short-Term
Government Fund and Liberty Intermediate Government Fund
(5) Article III, Section 4, Article V, Section 1, Article VIII Section 4 and
Article IX Sections 1 and 7 of the Agreement and Declaration of Trust, as
amended, and Sections 2.1, 2.3 and 2.5 of the By-Laws, as amended, each
define the rights of shareholders
(6) Form of Management Agreement between Liberty Funds Trust II on behalf of
Liberty Intermediate Government Fund (formerly Colonial Intermediate U.S.
Government 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) Opinion and Consent of Counsel (Ropes & Gray)
(12) Opinion and Consent of Counsel on Tax Matters and Consequences to
Shareholders (Ropes & Gray)
(13) Not Applicable
(14) Consent of Independent Accountants (PWC)
(15) Not Applicable
(16)(a) Power of Attorney for: Tom Bleasdale, Lora S. Collins, James E.
Grinnell, Richard W. Lowry, Salvatore Macera, William E. Mayer, James L.
Moody, Jr., John J. Neuhauser, Thomas E. Stitzel and Anne-Lee Verville -
filed with Part C, Item 23 of Post-Effective Amendment No. 62 to the
Registration Statement on Form N-1A of Liberty Funds Trust I (File Nos.
2-41251 and 811-2214), filed with the Commission on or about May 17, 2000
and is hereby incorporated by reference and made a part of this
Registration Statement
(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
(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
(17)(j) The following documents, each filed via EDGAR and listed with their
filing accession number, are incorporated by reference into the
Proxy/Prospectus and the Statement of Additional Information for the funds
referenced below:
o The Prospectus of the Short Term Fund dated January 1, 2000 -
0000021832-99-000074
o As supplemented on December 28, 1999 - 0000021847-99-000122
o As supplemented on June 23, 2000 - 0000021832-00-000114
o As supplemented on and August 1, 2000 - 0000883163-00-000068
o The Statement of Additional Information of the Short Term Fund dated
January 1, 2000 - 0000021832-99-000074
o As supplemented on June 23, 2000 - 0000021832-00-000114
o As supplemented on August 21, 2000 - 0000021832-00-000188
o As supplemented on August 23, 2000 - 0000021832-00-000198
o The Statement of Additional Information of the Intermediate Fund dated
January 1, 2000- 0000021832-99-000074
o As supplemented on June 23, 2000 - 0000021832-00-000114
o As supplemented on August 21, 2000 - 0000021832-00-000188
o As supplemented on August 23, 2000 - 0000021832-00-000198
o The Report of Independent Accountants and financial statements included
in the Annual Report to Shareholders of the Short Term Fund and
Intermediate Fund dated August 31, 1999 -0000949377-99-000389
o The financial statements included in the Short Term Fund and Intermediate
Fund's Annual Report to Shareholders dated August 31, 2000 (To be filed)
o The Statement of Additional Information of the Intermediate Fund
dated November 8, 2000 relating to the Acquisition.
-------------------------------------
(1) Incorporated by reference to the Registrant's Post-Effective
Amendment No. 24 on Form N-1A, filed with the Securities and
Exchange Commission on or about December 11, 1995.
(2) Incorporated by reference to the Registrant's Post-Effective
Amendment No. 36 on Form N-1A, filed with the
Securities and Exchange Commission on or about October 30, 1998.
(3) Incorporated by reference to the Registrant's Post-Effective
Amendment No. 41 on Form N-1A, filed with the Securities and Exchange
Commission on or about August 27, 1999.
(4) Incorporated by reference to the Registrant's Post-Effective
Amendment No. 45 on Form N-1A, filed with the Securities and Exchange
Commission on or about December 29, 1999.
<PAGE>
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 II
(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 II.
<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 II
By:/s/STEPHEN E. GIBSON
---------------------------------
Stephen E. Gibson
President
<TABLE>
<CAPTION>
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.
<S> <C> <C>
SIGNATURE TITLE DATE
--------- ----- ----
/s/STEPHEN E. GIBSON President (chief October 5, 2000
----------------- executive officer)
Stephen E. Gibson
/s/PAMELA A. MCGRATH Treasurer and Chief Financial Officer October 5, 2000
----------------- (principal financial and accounting
Pamela A. Mcgrath 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
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibit
(4) Form of Agreement and Plan of Reorganization between
Liberty Short-Term Government Fund and Liberty
Intermediate Government Fund
(11) Opinion and Consent of Counsel (Ropes & Gray)
(12) Opinion and Consent of Counsel on Tax Matters and
Consequences to Shareholders (Ropes & Gray)
(14) Consent of Independent Accountants (PWC)
(17)(i) Form of Proxy Card and Proxy Insert
