As filed with the Securities and Exchange Commission on October 18, 2000
Registration No. 33-
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM N-14
_ _
|_|Pre-Effective Amendment No.__ |_| Post-Effective Amendment No.__
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
-------------------------
LIBERTY - STEIN ROE FUNDS MUNICIPAL TRUST*
(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)
-------------------------
Kevin M. Carome Cameron S. Avery
Executive Vice President Bell, Boyd & Lloyd LLC
Liberty-Stein Roe Three First National Plaza
Funds Municipal Trust 70 W. Madison Street,, Suite 3300
One Financial Center Chicago, Illinois 60602
Boston, Massachusetts 02111
(Name and Address of Agents for Service)
-------------------------
Approximate Date of Proposed Public Offering: As soon as practicable after this
Registration Statement becomes effective.
-------------------------
It is proposed that this filing will become effective on November 17, 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 Stein Roe Intermediate Municipals 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 27, 2000 at 10:00 a.m. Eastern
Time, at the offices of Colonial Management Associates, Inc. You will be asked
to vote on the acquisition of your Fund and on the election of eleven Trustees.
A formal Notice of Special Meeting of Shareholders appears on the next 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 24, 2000
[Job Code]
<PAGE>
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD
DECEMBER 27, 2000
LIBERTY FUNDS TRUST IV
ONE FINANCIAL CENTER, BOSTON, MASSACHUSETTS 02111
LIBERTY INTERMEDIATE TAX-EXEMPT FUND
NOTICE IS HEREBY GIVEN that a Special Meeting of the shareholders of
the Liberty Intermediate Tax-Exempt Fund will be held at 10:00 a.m. on
Wednesday, December 27, 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 Intermediate
Tax-Exempt Fund to, and the assumption of all of the
liabilities of the Liberty Intermediate Tax-Exempt Fund by,
the Stein Roe Intermediate Municipals Fund in exchange for
shares of the Stein Roe Intermediate Municipals Fund and the
distribution of such shares to the shareholders of the Liberty
Intermediate Tax-Exempt Fund in complete liquidation of the
Liberty Intermediate Tax-Exempt 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 24, 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 24, 2000
ACQUISITION OF THE ASSETS AND LIABILITIES OF
LIBERTY INTERMEDIATE TAX-EXEMPT FUND
c/o Liberty Funds Trust IV
One Financial Center
Boston, Massachusetts 02111
1-800-426-3750
BY AND IN EXCHANGE FOR SHARES OF
STEIN ROE INTERMEDIATE MUNICIPALS FUND
c/o Liberty-Stein Roe Funds Municipal Trust
One Financial Center
Boston, Massachusetts 02111
1-800-426-3750
TABLE OF CONTENTS
Synopsis........................................................................
Proposal 1 - Acquisition of the Liberty Intermediate Tax-Exempt Fund by
the Stein Roe Intermediate Municipals 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 Stein Roe
Intermediate Municipals Fund........................................
This combined Prospectus/Proxy Statement contains information you should
know before voting on the proposed acquisition of the Liberty Intermediate
Tax-Exempt Fund (the "Liberty Fund") by the Stein Roe Intermediate Municipals
Fund (the "Stein Roe Fund") or voting on the other proposals to be considered at
a Special Meeting of Shareholders of the Liberty Fund (the "Meeting"), which
will be held at 10:00 a.m. Eastern Time on December 27, 2000, at the offices of
Colonial Management Associates, Inc. ("Colonial"), One Financial Center, Boston,
Massachusetts 02111. Please read this Prospectus/Proxy Statement and keep it for
future reference.
Proposal 1 in this Prospectus/Proxy Statement relates to the proposed
acquisition of the Liberty Fund by the Stein Roe Fund (the "Acquisition"). If
the Acquisition occurs, you will become a shareholder of the Stein Roe Fund. The
Stein Roe Fund seeks a high level of total return, consisting of current income
exempt from federal
<PAGE>
income tax, consistent with the preservation of capital. If the Agreement and
Plan of Reorganization is approved by the shareholders of the Liberty Fund and
the Acquisition occurs, the Liberty Fund will transfer all of the assets and
liabilities attributable to each class of its shares to the Stein Roe Fund in
exchange for shares of the same class with the same aggregate net asset value as
the assets and liabilities transferred. After that exchange, shares of each
class received by the Liberty 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 IV ("Trust IV" or the "Liberty Trust"), of which
the Liberty Fund is a series.
Please review the enclosed Prospectuses of the Stein Roe Fund and the
"Financial Highlights" section contained in the enclosed Annual Report of the
Stein Roe Fund. The enclosed Prospectuses 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 Liberty Fund dated April 1, 2000, as
supplemented on August 18, 2000.
- The Statement of Additional Information of the Liberty Fund dated
April 1, 2000, as supplemented on August 18, 2000.
- The Statement of Additional Information of the Stein Roe Fund dated
November 1, 1999, as supplemented on February 17, 2000.
- The Report of Independent Accountants and financial statements
included in the Annual Report to Shareholders of the Liberty Fund
dated November 30, 1999.
- The financial statements included in the Liberty Fund's Semi-Annual
Report to Shareholders dated May 31, 2000.
- The Statement of Additional Information of the Stein Roe Fund dated
November 24, 2000 relating to the Acquisition.
The Liberty 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, Liberty Fund shareholders may call 1-800-426-3750 and Stein Roe
Fund shareholders may call 1-800-338-2550 or write to your Fund at the address
on the cover of this Prospectus/Proxy Statement. You may also obtain many of
these documents by accessing the web site of your Fund at www.libertyfunds.com
or www.steinroe.com. Our hearing impaired shareholders may call Liberty Funds
Services, Inc. at 1-800-528-6979 if you have special TTD equipment. Text-only
versions of all the Liberty Fund and Stein Roe Fund documents can be viewed
online or downloaded from the Edgar database on the SEC's internet site at
www.sec.gov. You can review and copy information about the Funds by visiting the
following location, and you can obtain copies, upon payment of a duplicating
fee, by writing the Public Reference Room, U.S. Securities and Exchange
Commission, Washington, DC 20549-0102. Information on the operation of the
Public Reference Room may be obtained by calling 202-942-8090.
-2-
<PAGE>
THE SEC HAS NOT APPROVED OR DISAPPROVED THE SHARES OF THE STEIN ROE 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
Stein Roe Fund acquire the Liberty Fund. This means that the Stein Roe
Fund would acquire all of the assets and liabilities of the Liberty Fund
in exchange for shares of the Stein Roe Fund representing the aggregate
net asset value of the Liberty Fund's assets and liabilities. If Proposal
1 is approved, you will receive shares of the Stein Roe Fund with an
aggregate net asset value equal to the aggregate net asset value of your
Acquired Fund shares as of the day before the closing of the Acquisition.
The Acquisition is currently scheduled to take place on or around January
22, 2001.
In addition, the Trustees of the Liberty 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 Liberty Fund recommend approval of the Acquisition
because it offers shareholders of the Liberty 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
Liberty 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 Liberty Fund will achieve
scale through sales 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 STEIN ROE FUND IF THE
ACQUISITION OCCURS?
You will receive the same class of shares that you currently own in the
Liberty Fund. The shares will have the same exchange rights and will bear
the same
-4-
<PAGE>
contingent deferred sales charges ("CDSCs"), if applicable, as
your current shares.
4. HOW DO THE INVESTMENT GOALS, STRATEGIES AND POLICIES OF THE LIBERTY FUND
AND THE STEIN ROE FUND COMPARE?
This table shows the investment goals and primary investment strategies of
each Fund:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
LIBERTY FUND STEIN ROE FUND
--------------------------------------------------------------------------------
<S> <C>
INVESTMENT GOAL: The Liberty INVESTMENT GOAL: The Stein Roe
Fund seeks as high a level of Fund seeks a high level of
after-tax total return as is total return, consisting of
consistent with moderate current income exempt from
volatility, by pursuing federal income tax, consistent
current income exempt from with the preservation of
federal income tax and capital.
opportunities for long-term
appreciation.
--------------------------------------------------------------------------------
PRIMARY INVESTMENT STRATEGIES: PRIMARY INVESTMENT STRATEGIES:
The Liberty Fund seeks The Stein Roe Fund seeks
to achieve its goal as to achieve its goal as follows:
follows: - At least 80% of the
- At least 80% of the Fund's income will be
Fund's total assets are exempt from federal tax.
invested in tax-exempt - The Fund invests
bonds that are investment primarily in
grade or unrated intermediate-term
securities that the tax-exempt bonds (generally
advisor believes to be of with a dollar-weighted
comparable quality. average maturity of 3 to 10
- The Fund may invest up years).
to 25% of total assets in - At least 75% of the
unrated bonds. Fund's total assets are
- The Fund maintains a invested in tax-exempt
weighted average maturity bonds that are investment
range of 3 to 10 grade, unrated securities
years. that the advisor believes
to be of comparable
quality, or backed by the
U.S. government.
- The Fund may invest up to 25% of total
assets in lower-rated debt securities.
--------------------------------------------------------------------------------
</TABLE>
The investment policies of the Liberty Fund and the Stein Roe Fund are
similar, except as follows:
-5-
<PAGE>
- The Stein Roe Fund, unlike the Liberty Fund, is permitted to have
more than 5% of its total assets invested in real estate acquired as
a result of owning securities.
- The Stein Roe Fund, unlike the Liberty Fund, is not permitted to
purchase or sell commodities or commodities contracts or oil, gas,
or mineral programs, except that it may enter into futures and
options transactions.
- The Stein Roe Fund is not permitted to invest more than 10% of its
net assets in illiquid securities, including repurchase agreements
maturing in more than seven days, while the Liberty Fund may invest
up to 15% of its net assets in illiquid assets.
- The Liberty Fund, unlike the Stein Roe Fund, may not invest more
than 20% of its assets in bonds subject to the federal alternative
minimum tax.
- In addition to the foregoing significant considerations, the Stein
Roe Fund has a number of investment restrictions that the Liberty
Fund is not subject to. Many of these restrictions were imposed by
regulations of state securities laws which are no longer applicable
to mutual funds.
For a complete list of the Funds' investment restrictions, see the
Statement of Additional Information of each Fund, each of which is
incorporated by reference into this Prospectus/Proxy Statement.
At a special meeting of the shareholders of the Stein Roe Fund scheduled
to be held on December 27, 2000, the shareholders will consider changing
the fundamental investment policies, which is expected to eliminate many
of the differences between the policies of the Funds.
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 Liberty Fund and the Stein Roe Fund and to
analyze the estimated expenses that Stein Roe & Farnham Incorporated, the
Stein Roe Fund's investment advisor, expects the combined fund to bear in
the first year following the Acquisition. Sales charges of the Liberty
Fund are paid directly by shareholders to Liberty Funds Distributor, Inc.,
the Fund's distributor. Annual Fund Operating Expenses are deducted from
the Fund. They include management and administration fees, 12b-1 fees and
administrative costs, including pricing and custody services. The Annual
Fund Operating Expenses shown in the table below represent expenses
incurred by the Liberty Fund for its last fiscal year ended November 30,
1999 and by the Stein Roe Fund for its last fiscal year ended June 30,
2000.
SHAREHOLDER FEES
(paid directly from your investment)
<TABLE>
<CAPTION>
LIBERTY FUND(1) STEIN ROE FUND(1)
------------------- ---------------------------------
CLASS CLASS CLASS CLASS CLASS CLASS CLASS
A B C A B C S
<S> <C> <C> <C> <C> <C> <C> <C>
Maximum sales charge
(load) on purchases
(%) (as a percentage 3.25 0.00 0.00 3.25 0.00 0.00 0.00
of the offering price)
------------------------------------------------------------------------------
</TABLE>
-6-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Maximum deferred
sales charge (load)
on redemptions (%)
(as a percentage of
the lesser of 1.00(2) 4.00 1.00 1.00(2) 4.00 1.00 0.00
purchase price or
redemption price)
------------------------------------------------------------------------------
Redemption fee (%)
(as a percentage of
amount redeemed, if (3) (3) (3) (3) (3) (3) (4)
applicable)
</TABLE>
--------
(1) For Class A, B and C shares, 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.
(4) There is a $7.00 charge for wiring sale proceeds to your bank. A fee of $5
per quarter may be charged to accounts that fall below the required minimum
balance.
ANNUAL FUND OPERATING EXPENSES
(deducted directly from Fund assets)
<TABLE>
<CAPTION>
LIBERTY FUND STEIN ROE FUND
------------------- ------------------------------
CLASS CLASS CLASS CLASS CLASS CLASS CLASS
A B C A B C S
<S> <C> <C> <C> <C> <C> <C> <C>
Management fee(5)(8)(%) 0.55 0.55 0.55 0.47 0.47 0.47 0.47(6)
-----------------------------------------------------------------------------
Distribution and
service (12b-1) fees
(%) 0.20 0.85 0.85(7) 0.20 0.85 0.85 0.00
-----------------------------------------------------------------------------
Other expenses (5)(8)(%) 0.74 0.74 0.74 0.29 0.29 0.29 0.29
-----------------------------------------------------------------------------
Total annual fund
operating expenses
(5)(8)(%) 1.49 2.14 2.14(7) 0.96 1.61 1.61 0.76(8)
-----------------------------------------------------------------------------
Expense reimbursements (0.06) (0.06) (0.06) (0.06)
-----------------------------------------------------------------------------
Net expenses 0.90 1.55 1.55 0.70
-----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
STEIN ROE FUND (PRO FORMA COMBINED)(9)
-----------------------------------
CLASS CLASS CLASS CLASS
A B C S
<S> <C> <C> <C> <C>
Management fee (%) 0.44 0.44 0.44 0.44
--------------------------------------------------------
Distribution and
service (12b-1) fees 0.20 0.85 0.85 0.00
(%)
--------------------------------------------------------
Other expenses (%) 0.36 0.36 0.36 0.36
--------------------------------------------------------
Total annual fund
operating expenses 1.00 1.65 1.65 0.80
(%)
Expense reimbursement
Net expenses
</TABLE>
--------
(5) The Liberty 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, 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
1.45%, respectively. This arrangement may be modified or terminated by the
advisor at any time.
(6) Management fees include both the management fee and the administration fee
charged to the Fund.
(7) The Liberty 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 0.40% and the total annual fund operating expenses
for Class C shares would be 1.00%. This arrangement may be modified or
terminated by the distributor at any time.
(8) Stein Roe will reimburse the Fund if its annual ordinary operating expenses
exceed 0.70% of average daily net assets. This commitment expires on
October 31, 2000. After reimbursement, management fees will be 0.47%. As a
result, the net expenses of the Fund would be 0.70%. A reimbursement lowers
the expense ratio and increases overall return to investors.
-7-
<PAGE>
(9) Subsequent to October 31, 2000, the Stein Roe 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, interest, taxes and
extraordinary expenses, if any) will not exceed 0.70%. As a result, the
actual management fee for each share class would be 0.34%, other expenses
for each share class would be 0.36% and total annual fund operating
expenses for Class A, B, C and S would be 0.90%, 1.55%, 1.55% and 0.70%,
respectively. This arrangement may be modified or terminated by the advisor
at any time. Additionally, the Stein Roe 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 0.40% and the total annual
fund operating expenses for Class C shares would be 1.10%. 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 Liberty Fund and
the Stein Roe 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>
LIBERTY 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 $217 $670 $1,149 $2,472
sold all your
shares at end of
period $317 $670 $1,149 $2,472
STEIN ROE FUND
Class A $420 $621 $ 839 $1,465
Class B: did not sell
your shares $164 $508 $ 876 $1,737
sold all your
shares at end of
period $564 $708 $ 876 $1,737
Class C: did not sell
your shares $164 $508 $ 876 $1,911
sold all your
shares at end of
period $264 $508 $ 876 $1,911
Class S $ 72 $237 $ 416 $ 937
STEIN ROE FUND
(pro forma combined)
Class A $424 $633 $ 860 $1,510
Class B: did not sell
your shares $168 $520 $ 897 $1,782
sold all your
shares at end of
period $568 $720 $ 897 $1,782
</TABLE>
-8-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Class C: did not sell
your shares $168 $520 $897 $1,955
sold all your
shares at end of
period $268 $520 $897 $1,955
Class S $82 $256 $444 $ 990
</TABLE>
Significant assumptions underlying the pro forma Annual Fund Operating Expenses
and Example Expenses are as follows: (1) the current contractual agreements will
remain in place; (2) certain fixed costs involved in operating the Liberty
Funds are eliminated; and (3) expense ratios are based on pro forma combined
average net assets for the year ended June 30, 2000.
6. WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE ACQUISITION?
The Acquisition is expected to be tax free to you for federal income tax
purposes. This means that no gain or loss will be recognized by the
Liberty Fund or its shareholders as a result of the Acquisition.
The cost basis and holding period of your Liberty Fund shares are expected
to carry over to your new shares in the Stein Roe Fund.
-9-
<PAGE>
PROPOSAL 1 - ACQUISITION OF THE LIBERTY INTERMEDIATE TAX-EXEMPT FUND BY THE
STEIN ROE INTERMEDIATE MUNICIPALS 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 Liberty Fund by the Stein Roe Fund under the Agreement and Plan of
Reorganization.
PRINCIPAL INVESTMENT RISKS
WHAT ARE THE PRINCIPAL INVESTMENT RISKS OF THE STEIN ROE FUND, AND HOW DO THEY
COMPARE WITH THE LIBERTY FUND?
Because the Funds have similar goals and strategies, the potential risks
associated with each Fund are similar. The actual risks of investing in each
Fund depend on the securities held in each Fund's portfolio and on market
conditions, both of which change over time. Please see the enclosed Prospectuses
of the Stein Roe Fund for a description of the principal investment risks of the
Stein Roe Fund.
INFORMATION ABOUT THE ACQUISITION
TERMS OF THE AGREEMENT AND PLAN OF REORGANIZATION
If approved by the shareholders of the Liberty 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 Liberty Fund will transfer all of the assets and liabilities
attributable to each class of shares of the Liberty Fund to the
Stein Roe Fund in exchange for shares of the same class of the Stein
Roe 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 Stein Roe Fund received by the
Liberty Fund will be distributed to the shareholders of the same
class of the
-10-
<PAGE>
Liberty Fund pro rata in accordance with their percentage ownership
of each class of the Liberty Fund in full liquidation of the Liberty
Fund.
- After the Acquisition, the Liberty Fund will be terminated, and its
affairs will be wound up in an orderly fashion.
- The Acquisition requires approval by the Liberty 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 Trust IV's 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 Stein Roe Fund
of the same class as the shares that you currently own in the Liberty 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 Valuation Date.
- If applicable, your Stein Roe Fund shares will bear the same sales
charges, redemption fees and CDSCs as your current shares, but for
purposes of determining the CDSC applicable to any redemption, the
new shares will continue to age from the date you purchased your
Liberty Fund shares.
- The procedures for purchasing and redeeming your shares will not
change as a result of the Acquisition.
- You will have the same exchange options as you currently have.
- You will have the same voting rights as you currently have, but as a
shareholder of the Stein Roe Fund and of Liberty-Stein Roe Funds
Municipal Trust ("Stein Roe Trust").
The rights of shareholders of the Liberty Trust and the Stein Roe Trust
are substantially similar, except that (1) either the Board of Trustees or the
shareholders of the Stein Roe Trust may amend its Agreement and Declaration of
Trust in certain circumstances, while the Board of Trustees of Trust IV may only
amend its Declaration when authorized to do so by a vote
of shareholders holding a majority of the shares of the Trust entitled to vote,
and (2) the Agreement and Declaration of Trust of the Stein Roe Trust, unlike
that of the Liberty Trust which includes no such provision, states that no
shareholder may bring an action on behalf of the Trust or any series without
first making demand on the Trustees requesting that they take such action on the
shareholder's behalf.
REASONS FOR THE ACQUISITION
-11-
<PAGE>
The Trustees of each Trust, including all Trustees who are not "interested
persons" of the Trust, have determined that the Acquisition would be in the best
interests of each Fund's shareholders. The Trustees have unanimously approved
the Acquisition and recommend that you vote in favor of the Acquisition by
approving the Agreement and Plan of Reorganization attached as Appendix A to
this Prospectus/Proxy Statement.
The Acquisition is one of several proposed acquisitions and liquidations
of funds in the Liberty and Stein Roe Fund groups proposed by Liberty Financial
Companies, Inc. ("Liberty Financial"), the indirect parent of each of the
investment advisors to the Liberty and Stein Roe Funds. The overall purposes of
these acquisitions and liquidations include streamlining and rationalizing the
product offerings of the Liberty and Stein Roe Funds, reducing fund expense
ratios by creating larger, more efficient funds and permitting the Liberty
Financial organization to focus its portfolio management resources on a more
focused group of portfolios.
In proposing the Acquisition, Liberty Financial presented to the Trustees
the following reasons for the Liberty Fund to enter into the Acquisition:
- The Acquisition is expected to create a larger fund with similar
investment goals and strategies to the Liberty Fund.
- The Liberty 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 reimbursements) over the long term. Thus, even though the
Stein Roe Fund has a higher expense ratio than the subsidized
expense ratio of the Liberty Fund, the Stein Roe Fund's expense
ratio after the Acquisition is expected to be materially lower than
the Liberty 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 Liberty and Stein Roe Funds on July
31, 2000 and the Funds' current expense structures, the Stein Roe
Fund's annualized expense ratio (excluding 12b-1 fees) immediately
after the Acquisition would be about 0.47% lower than the Liberty
Fund's current expense ratio would be if the current voluntary
expense limitation were discontinued (for example, after the
Acquisition, a 0.70% expense ratio for Class S of the Stein Roe Fund
(assuming the expense limitation continues; 0.83% if it were
discontinued), as compared to 1.17% for Class A of the Liberty 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 Liberty Fund are
0.20%, 0.85%, and 0.85%, respectively. The 12b-1 fee on Class C
shares of the Liberty Fund is voluntarily waived to 0.40%. There are
no 12b-1 fees on Class S shares.
- The Acquisition is intended to permit the Liberty Fund's
shareholders to exchange their investment for an investment in the
Stein Roe Fund without
-12-
<PAGE>
recognizing gain or loss for federal income tax purposes. By
contrast, if a Liberty Fund shareholder redeemed his or her shares
to invest in another fund, like the Stein Roe Fund, the transaction
would likely be a taxable event for such shareholder. Similarly, if
the Liberty Fund were liquidated or reorganized in a taxable
transaction, the transaction would likely be a taxable event for the
Fund's shareholders. After the Acquisition, shareholders may redeem
any or all of their Stein Roe 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 that: (1) the current contractual
agreements will remain in place; and (2) certain fixed costs involved in
operating the Liberty 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 Stein Roe 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 Stein Roe Fund will achieve any
particular level of performance after the Acquisition.
If the Acquisition does not occur, Liberty Financial has indicated that it
may recommend to the Trustees that the Liberty 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 S shares of the Stein Roe Fund and the Class A shares of the Liberty
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.
-13-
<PAGE>
LIBERTY FUND
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------
16%
---------------------------------------------------------------------------
---------------------------------------------------------------------------
14%
---------------------------------------------------------------------------
13.38%
---------------------------------------------------------------------------
12%
---------------------------------------------------------------------------
---------------------------------------------------------------------------
10%
---------------------------------------------------------------------------
8.03%
---------------------------------------------------------------------------
8%
---------------------------------------------------------------------------
6.17%
---------------------------------------------------------------------------
6%
---------------------------------------------------------------------------
4.32%
---------------------------------------------------------------------------
4%
---------------------------------------------------------------------------
---------------------------------------------------------------------------
2%
---------------------------------------------------------------------------
---------------------------------------------------------------------------
0%
---------------------------------------------------------------------------
-1.32%
---------------------------------------------------------------------------
-2%
---------------------------------------------------------------------------
-3.28%
---------------------------------------------------------------------------
-4%
---------------------------------------------------------------------------
---------------------------------------------------------------------------
-6%
---------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
The Fund's year-to-date total For period shown in bar chart:
return through September 30, 2000 Best quarter: First quarter
was 5.27%. 1995, +4.80%
Worst quarter: First quarter
1994, -4.44%
</TABLE>
STEIN ROE FUND
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------
15%
---------------------------------------------------------------------------------
12.91%
---------------------------------------------------------------------------------
12%
---------------------------------------------------------------------------------
10.67% 11.07%
---------------------------------------------------------------------------------
9%
---------------------------------------------------------------------------------
7.51% 7.63% 7.50%
---------------------------------------------------------------------------------
6%
---------------------------------------------------------------------------------
4.16% 5.45%
---------------------------------------------------------------------------------
3%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
0%
---------------------------------------------------------------------------------
-1.41%
---------------------------------------------------------------------------------
-3%
---------------------------------------------------------------------------------
-3.37%
---------------------------------------------------------------------------------
-6%
---------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
The Fund's year-to-date total For period shown in bar chart:
return through September 30, 2000 Best quarter: First quarter
was 5.30%. 1995, +4.73%
Worst quarter: First quarter
1994, -4.24%
</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.
LIBERTY FUND*
-14-
<PAGE>
<TABLE>
<CAPTION>
1 YEAR 5 YEARS LIFE OF FUND
<S> <C> <C> <C>
Class A (%) (4.53) 5.31 4.76
-------------------------------------------------------------------
Class B (%) (5.74) 5.32 4.58
-------------------------------------------------------------------
Class C (%) (2.47) 5.55(1) 4.75(1)
-------------------------------------------------------------------
Lehman Index (%) (2.06) 6.91 5.73(2)
-------------------------------------------------------------------
Lipper Average (%) (1.64) 5.55 4.90(2)
</TABLE>
STEIN ROE FUND+
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
<S> <C> <C> <C>
Class S (%) (1.41) 5.62 6.09
-------------------------------------------------------
Bond Index (%) (1.24) 7.12 7.10
</TABLE>
* The Liberty Fund's return is compared to the Lehman Brothers Municipal Bond
Index ("Lehman Index"), an unmanaged index that tracks the performance of
the municipal bond market. Unlike the Fund, indices are not investments, do
not incur fees or expenses and are not professionally managed. It is not
possible to invest directly in indices. The Liberty Fund's return is also
compared to the average return of the funds included in the Lipper
Intermediate Municipal Debt Universe Funds category average ("Lipper
Average"). This Lipper Average, which is calculated by Lipper, Inc., is
composed of funds with similar investment objectives to the Liberty Fund.
Sales charges are not reflected in the Lipper Average.
+ The Stein Roe Fund's return is compared to the Lehman Brothers 10-Year
Municipal Bond Index ("Bond Index"), an unmanaged group of securities that
differs from the Stein Roe Fund's composition. Unlike the Stein Roe Fund,
indices are not investments.
(1) Class C is a newer class of shares. Its performance information includes
returns of the Liberty Fund's Class B shares (the oldest existing fund
class) with a similar expense structure for periods prior to the inception
of the newer class of shares. Class A and Class B shares were initially
offered on February 1, 1993 and Class C shares were initially offered on
August 1, 1997.
(2) Performance information is from January 31, 1993.
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 opinions from Ropes & Gray and
Bell, Boyd & Lloyd LLC 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 Liberty Fund or the shareholders
of the Liberty Fund as a result of the Acquisition;
- under Section 358 of the Code, the tax basis of the Stein Roe Fund
shares you receive will be the same, in the aggregate, as the
aggregate tax basis of your Liberty Fund shares;
-15-
<PAGE>
- under Section 1223(1) of the Code, your holding period for the Stein
Roe Fund shares you receive will include the holding period for your
Liberty Fund shares if you hold the Liberty Fund shares as a capital
asset;
- under Section 1032 of the Code, no gain or loss will be recognized
by the Stein Roe Fund as a result of the Acquisition;
- under Section 362(b) of the Code, the Stein Roe Fund's tax basis in
the assets that the Stein Roe Fund receives from the Liberty Fund
will be the same as the Liberty Fund's basis in such assets; and
- under Section 1223(2) of the Code, the Stein Roe Fund's holding
period in such assets will include the Liberty Fund's holding period
in such assets.
The opinions will be based on certain factual certifications made by
officers of each Fund's Trust. The opinions are not a guarantee that the tax
consequences of the Acquisition will be as described above. Prior to the closing
of the Acquisition, the Liberty Fund and the Stein Roe 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 or dividends will be taxable to the Liberty
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 LIBERTY FUND UNANIMOUSLY RECOMMEND APPROVAL OF THE AGREEMENT
AND PLAN OF REORGANIZATION.
The Declaration establishing Trust IV provides that any series of Trust IV
(such as the Liberty 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 Liberty Fund may be
terminated by majority vote of the Liberty Fund's shares entitled to vote (or by
Trustee notice to shareholders), and will so amend the Declaration if a majority
of the Liberty Fund's shareholders entitled to vote on the proposal vote in
favor of such proposal.
REQUIRED VOTE FOR PROPOSAL 1
-16-
<PAGE>
Approval of the Agreement and Plan of Reorganization dated October 26,
2000 among Trust IV on behalf of the Liberty Fund, the Stein Roe Trust on
behalf of the Stein Roe Fund, and Liberty Financial Companies, Inc.
will require the affirmative vote of a majority of the shares of the Liberty
Fund outstanding at the record date for the Meeting.
PROPOSAL 2 - ELECTION OF TRUSTEES
THE PROPOSAL
You are being asked to approve the election of four new members as well as
seven of the currently serving members of the Board of Trustees of Trust IV, of
which the Liberty 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 IV, 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 IV.
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 IV until the next meeting of shareholders of
Trust IV 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 IV'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 IV (if so instructed). If any nominee listed below
becomes unavailable for election, the enclosed proxy card may be voted for a
substitute nominee in the discretion of the proxy holder(s).
-17-
<PAGE>
INFORMATION ABOUT THE NOMINEES
Set forth below is information concerning each of the nominees.
<TABLE>
<CAPTION>
NOMINEE NAME & PRINCIPAL OCCUPATION(1) AND
AGE DIRECTORSHIPS
TRUSTEE SINCE
-------------- --------------------------- -------------
<S> <C> <C>
Douglas A. Executive Vice President and New nominee
Hacker Chief Financial Officer of
(43) UAL, Inc. (airline) since
July 1999; Senior Vice
President and Chief
Financial Officer of UAL,
Inc. prior thereto.
Janet Langford Executive Vice New nominee
Kelly President--Corporate
(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 1995
(64) August 1987. (Formerly
Chairman and Chief Executive
Officer of U.S. Plywood
Corporation from August 1985
to August 1987.)
Salvatore Macera Private Investor. (Formerly 1998
(69) Executive Vice President and
Director of Itek Corporation
(electronics) from 1975 to
1981.)
William E. Partner, Park Avenue Equity 1994
Mayer(2) Partners (venture capital);
(60) 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. Academic Vice President and 1985
Neuhauser Dean of Faculties, Boston
(57) College, since August 1999.
(Formerly Dean, Boston
College School of Management,
from September 1977 to
September 1999.)
Charles Nelson Van Voorhis Professor of New nominee
(57) Political Economy of the
University of Washington.
</TABLE>
-18-
<PAGE>
<TABLE>
<S> <C> <C>
Joseph R. Vice President of the Stein 2000
Palombo(3) Roe Mutual Funds since April
(47) 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. Business Consultant; 1998
Stitzel Chartered Financial Analyst.
(64) (Formerly Professor of
Finance, from 1975 to 1999,
and Dean, from 1977 to 1991,
College of Business, Boise
State University.)
Thomas C. Managing Director, William New nominee
Theobald Blair Capital Partners
(62) (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 Consultant. (Formerly 1998
Verville General Manager, Global
(54) Education Industry, from
1994 to 1997, and President,
Applications Solutions
Division, IBM Corporation
(global education and global
applications), from 1991 to
1994.)
</TABLE>
---------------------------
(1) Except as otherwise noted, each individual has held the office indicated or
other offices in the same company for the last five years.
(2) Mr. Mayer is not affiliated with Liberty Financial, but is an "interested
person," as defined in the Investment Company Act of 1940, as amended (the
"1940 Act"), because of his affiliation with WR Hambrecht & Co. (a
registered broker-dealer).
(3) Mr. Palombo is an "interested person," as defined in the 1940 Act, because
of his affiliation with Liberty Financial.
TRUSTEES' COMPENSATION
The members of the Board of Trustees will serve as Trustees of the Liberty
and Stein Roe Funds, for which service each Trustee, except for Mr. Palombo,
will receive an annual retainer of $45,000, and attendance fees of $8,000 for
each regular joint meeting and $1,000 for each special joint meeting. The Board
of Trustees is expected to hold six regular joint meetings each year. Committee
chairs will receive an additional annual retainer of $5,000, and receive $1,000
for each special meeting attended on a day other than a regular joint meeting
day. Committee members will receive an additional annual retainer of $1,000, and
receive $1,000 for each special meeting attended on a day other than a regular
joint meeting day. Two-thirds of the Trustees' fees are allocated among the
Liberty and Stein Roe Funds based on each Fund's relative net assets, and
one-third of the fees is divided equally among the Liberty and Stein Roe Funds.
-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 Liberty Fund.
Record of Board and Committee Meetings. During the fiscal year ended
November 30, 1999, Trust IV (excluding Liberty Tax-Exempt Money Market Fund
which has a different fiscal year end) held six meetings, the Audit Committee
held three meetings, the Compensation Committee held two meetings, and the
Governance Committee held four 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 IV 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
IV. Since the number of Trustees has been fixed at eleven, this means that the
eleven persons receiving the highest number of votes will be elected.
GENERAL
VOTING INFORMATION
The Trustees of Trust IV are soliciting proxies from the shareholders of
the Liberty Fund in connection with the Meeting, which has been called to be
held at 10:00 a.m. Eastern Time on December 27, 2000 at Colonial's offices, One
Financial Center, Boston, Massachusetts 02111. The meeting notice, this combined
Prospectus/Proxy Statement and proxy cards are being mailed to shareholders
beginning on or about November 24, 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 Liberty Fund or by employees or agents of Stein Roe
& Farnham Incorporated or 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
-21-
<PAGE>
you choose to vote by mail or by fax, and you are an individual account owner,
please sign exactly as your name appears on the proxy card. Either owner of a
joint account may sign the proxy card, but the signer's name must exactly match
the name that appears on the card.
Costs of Solicitation. The costs of the Meeting, including the costs
of soliciting proxies, and the costs of the Acquisition will be borne by the
following parties in the following percentages: the Stein Roe Fund __%, the
Liberty 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
Liberty 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 Liberty Fund as tellers for the Meeting (the "Tellers"). Thirty
percent (30%) of the shares of the 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 Liberty Fund at the Meeting. Shareholders of
the Liberty Fund vote together with the shareholders of the other series of
Trust IV for the election of Trustees; thirty percent (30%) of the outstanding
shares of Trust IV 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, Administrator's and Distributor's Addresses. The address of
Colonial Management Associates, Inc., the Liberty Fund's investment advisor and
the Stein Roe Fund's administrator, 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.
The address of the Stein Roe Fund's investment advisor, Stein Roe & Farnham
Incorporated, is One South Wacker Drive, Chicago, Illinois 60606.
Outstanding Shares and Significant Shareholders. Appendix B to this
Prospectus/Proxy Statement lists for the Liberty Fund and Trust IV 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 Stein Roe Fund the total number of shares outstanding as of September
29, 2000. It also identifies holders of more than 5% or 25% of any class of
shares of each Fund, and contains information about the executive officers and
Trustees of the Funds and their shareholdings in the Funds.
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Adjournments; Other Business. If the Liberty 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 Liberty 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 Liberty Fund intends to
present or knows that others will present is Proposal 1 and Proposal 2, as
described above. 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 Liberty Fund has previously received written contrary
instructions from the shareholder entitled to vote the shares.
Shareholder Proposals at Future Meetings. Trust IV, of which the Liberty
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 IV must be received by the Liberty Fund or
Trust IV in writing a reasonable amount of time before Trust IV solicits proxies
for that meeting, in order to be considered for inclusion in the proxy materials
for that meeting.
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APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION dated as of October 26, 2000
by and among Liberty Funds Trust IV (the "Trust"), a Massachusetts business
trust established under a Declaration of Trust dated August 29, 1978, as
amended, on behalf of Liberty Intermediate Tax-Exempt Fund (the "Acquired
Fund"), a series of the Trust, Liberty-Stein Roe Funds Municipal Trust (the
"Acquiring Trust"), a Massachusetts business trust established under a
Declaration of Trust dated July 31, 1996, as amended, on behalf of Stein Roe
Intermediate Municipals 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
Stock Exchange on the Valuation Date, using the valuation
procedures set forth in the
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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 November 30, 1999 of the
Acquired Fund, audited by PricwaterhouseCoopers LLP
and the statement of assets, the statement of changes
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in net assets and the schedule of investments for the
six months ended May 31, 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 May 31, 2000;
(g) Since May 31, 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 May 31, 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 June
30, 2000 of the Acquiring Fund, audited by Ernst &
Young LLP, 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 June 30, 2000;
(h) Since June 30, 2000, there has not been any material
adverse change in the Acquiring Fund's financial
condition, assets, liabilities or business (other
than changes occurring in the ordinary course of
business), or any incurrence by the Acquiring Fund of
indebtedness. For the purposes of this subparagraph
(h), changes in portfolio securities, changes in the
market value of portfolio securities or net
redemptions shall be deemed to be in the ordinary
course of business;
(i) By the Closing Date, all federal and other tax
returns and reports of the Acquiring Fund required by
law to have been filed by such date (giving effect to
extensions) shall have been filed, and all federal
and other taxes shown to be due on said returns and
reports shall have been paid so far as due, or
provision shall have been made for the payment
thereof, and to the best of the Acquiring Fund's
knowledge no such return is currently under audit and
no assessment has been asserted with respect to such
returns;
(j) For each fiscal year of its operation, the Acquiring
Fund has met the requirements of Subchapter M of the
Code for qualification as a regulated investment
company;
(k) The authorized capital of the Acquiring Trust
consists of an unlimited number of shares of
beneficial interest, no par value, of such number of
different series as the Board of Trustees may
authorize from time to time. The outstanding shares
of beneficial interest in the Acquiring Fund are, and
at the Closing Date will be, divided into Class A
shares, Class B shares and Class C shares each having
the characteristics described in the Acquiring Fund
Prospectus. All issued and outstanding shares of the
Acquiring Fund are, and at the Closing Date will be,
duly and validly issued and outstanding, fully paid
and non-assessable (except as set forth in the
Acquiring Fund Prospectus) by the Acquiring Trust,
and will have been issued in compliance with all
applicable registration or qualification requirements
of federal and state securities laws. Except for
Class B shares which convert to Class A shares after
the expiration of a period of time, no options,
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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 Bell,
Boyd & Lloyd LLC, counsel to the Acquiring Trust for the
transactions contemplated hereby, dated the Closing Date and,
in a form satisfactory to the Trust, to the following effect:
(a) The Acquiring Trust is a business trust duly
organized and validly existing under the laws of The
Commonwealth of Massachusetts and has power to own
all of its properties and assets and to carry on its
business as presently conducted, and the Acquiring
Fund is a separate series thereof duly constituted in
accordance with the applicable provisions of the 1940
Act and the Declaration of Trust and By-laws of the
Acquiring Trust; (b) this Agreement has been duly
authorized, executed and delivered on behalf of the
Acquiring Fund and, assuming the Prospectus and
Registration Statement referred to in paragraph 5.3
complies with applicable federal securities laws and
assuming the due authorization, execution and
delivery of this Agreement by the Trust on behalf of
the Acquired Fund, is the valid and binding
obligation of the Acquiring Fund enforceable against
the Acquiring Fund in accordance with its terms,
except as the same may be limited by bankruptcy,
insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights
generally and other equitable principles; (c) the
Acquiring Fund has the power to assume the
liabilities to be assumed by it hereunder and upon
consummation of the transactions contemplated hereby
the Acquiring Fund will have duly assumed such
liabilities; (d) the Acquiring Shares to be issued
for transfer to the shareholders of the Acquired Fund
as provided by this Agreement are duly authorized and
upon such transfer and delivery will be validly
issued and outstanding and fully paid and
nonassessable Class A shares, Class B shares and
Class C shares of beneficial interest in the
Acquiring Fund, and no shareholder of the Acquiring
Fund has any preemptive right of subscription or
purchase in respect thereof; (e) the execution and
delivery of this Agreement did not, and the
performance by the Acquiring Trust and the Acquiring
Fund of their respective obligations hereunder will
not, violate the Acquiring Trust's Declaration of
Trust or By-laws, or any provision of any agreement
known to such counsel to which the Acquiring Trust or
the Acquiring Fund is a party or by which either of
them is bound or, to the knowledge of such counsel,
result in the acceleration of any obligation or the
imposition of any penalty under any agreement,
judgment, or decree to which the Acquiring Trust or
the Acquiring Fund is a party or by which either of
them is bound; (f) to the knowledge of such counsel,
no consent, approval, authorization or order of any
court or governmental authority is required for the
consummation by the Acquiring Trust or the Acquiring
Fund of the
A-11
<PAGE>
transactions contemplated by this Agreement except
such as may be required under state securities or
"Blue Sky" laws or such as have been obtained; (g)
except as previously disclosed, pursuant to section
4.2(f) above, such counsel does not know of any legal
or governmental proceedings relating to the Acquiring
Trust or the Acquiring Fund existing on or before the
date of mailing of the Prospectus referred to in
paragraph 5.3 or the Closing Date required to be
described in the Registration Statement referred to
in paragraph 5.3 which are not described as required;
(h) the Acquiring Trust is registered with the
Securities and Exchange Commission as an investment
company under the 1940 Act; and (i) to the best
knowledge of such counsel, no litigation or
administrative proceeding or investigation of or
before any court or governmental body is presently
pending or threatened as to the Acquiring Trust or
the Acquiring Fund or any of their properties or
assets and neither the Acquiring Trust nor the
Acquiring Fund is a party to or subject to the
provisions of any order, decree or judgment of any
court or governmental body, which materially and
adversely affects its business.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND.
The obligations of the Acquiring Fund to complete the
transactions provided for herein shall be subject, at its
election, to the performance by the Acquired Fund of all the
obligations to be performed by it hereunder on or before the
Closing Date and, in addition thereto, to the following
further conditions:
7.1 The Trust, on behalf of the Acquired Fund, shall have
delivered to the Acquiring Trust a certificate executed in its
name by its President or Vice President and its Treasurer or
Assistant Treasurer, in form and substance satisfactory to the
Acquiring Trust and dated the Closing Date, to the effect that
the representations and warranties of the Acquired Fund made
in this Agreement are true and correct at and as of the
Closing Date, except as they may be affected by the
transactions contemplated by this Agreement, and that the
Trust and the Acquired Fund have complied with all the
covenants and agreements and satisfied all of the conditions
on its part to be performed or satisfied under this Agreement
at or prior to the Closing Date;
7.2 The Acquiring Trust shall have received a favorable opinion
from Ropes & Gray, counsel to the Trust, dated the Closing
Date and in a form satisfactory to the Acquiring Trust, to the
following effect:
(a) The Trust is a business trust duly organized and
validly existing under the laws of the Commonwealth
of Massachusetts and has corporate power to own all
of its properties and assets and to carry on its
business as presently conducted, and the Acquired
Fund is a separate series thereof duly constituted in
accordance with the applicable provisions of the 1940
Act and the Declaration of Trust of the Trust; (b)
this Agreement has been duly authorized, executed and
delivered on behalf of the Acquired Fund and,
assuming the Proxy Statement referred to in paragraph
5.3 complies with applicable federal securities laws
and assuming the due authorization, execution and
delivery of this Agreement by the Acquiring Trust on
behalf of the Acquiring Fund, is the valid and
binding obligation of the Acquired Fund enforceable
against the Acquired Fund in accordance with its
terms, except as the same may be limited by
bankruptcy, insolvency, reorganization or other
similar laws affecting the enforcement of creditors'
rights generally and other
A-12
<PAGE>
equitable principles; (c) the Acquired Fund has the
power to sell, assign, transfer and deliver the
assets to be transferred by it hereunder, and, upon
consummation of the transactions contemplated hereby,
the Acquired Fund will have duly transferred such
assets to the Acquiring Fund; (d) the execution and
delivery of this Agreement did not, and the
performance by the Trust and the Acquired Fund of
their respective obligations hereunder will not,
violate the Trust's Declaration of Trust or By-laws,
or any provision of any agreement known to such
counsel to which the Trust or the Acquired Fund is a
party or by which either of them is bound or, to the
knowledge of such counsel, result in the acceleration
of any obligation or the imposition of any penalty
under any agreement, judgment, or decree to which the
Trust or the Acquired Fund is a party or by which
either of them is bound; (e) to the knowledge of such
counsel, no consent, approval, authorization or order
of any court or governmental authority is required
for the consummation by the Trust or the Acquired
Fund of the transactions contemplated by this
Agreement, except such as may be required under state
securities or "Blue Sky" laws or such as have been
obtained; (f) such counsel does not know of any legal
or governmental proceedings relating to the Trust or
the Acquired Fund existing on or before the date of
mailing of the Prospectus referred to in paragraph
5.3 or the Closing Date required to be described in
the Registration Statement referred to in paragraph
5.3 which are not described as required; (g) the
Trust is registered with the Securities and Exchange
Commission as an investment company under the 1940
Act; and (h) to the best knowledge of such counsel,
no litigation or administrative proceeding or
investigation of or before any court or governmental
body is presently pending or threatened as to the
Trust or the Acquired Fund or any of its properties
or assets and neither the Trust nor the Acquired Fund
is a party to or subject to the provisions of any
order, decree or judgment of any court or
governmental body, which materially and adversely
affects its business.
7.3 [RESERVED]
7.4 Prior to the Closing Date, the Acquired Fund shall have
declared a dividend or dividends which, together with all
previous dividends, shall have the effect of distributing all
of the Acquired Fund's investment company taxable income for
its taxable years ending on or after November 30, 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
November 30, 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 Bell,
Boyd & Lloyd LLC 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-Stein Roe Funds
Municipal Trust, One Financial Center, Boston, MA 02111, attention Secretary
or to Liberty Funds Trust IV, One Financial Center, Boston, MA 02111, attention
Secretary.
14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT
NON-RECOURSE.
A-16
<PAGE>
14.1 The article and paragraph headings contained in this Agreement
are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
14.2 This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original.
14.3 This Agreement shall be governed by and construed in
accordance with the domestic substantive laws of The
Commonwealth of Massachusetts, without giving effect to any
choice or conflicts of law rule or provision that would result
in the application of the domestic substantive laws of any
other jurisdiction.
14.4 This Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns,
but no assignment or transfer hereof or of any rights or
obligations hereunder shall be made by any party without the
written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or
give any person, firm or corporation, other than the parties
hereto and their respective successors and assigns, any rights
or remedies under or by reason of this Agreement.
14.5 A copy of the Declaration of Trust of the Trust and the
Declaration of Trust of the Acquiring Trust are each on file
with the Secretary of State of the Commonwealth of
Massachusetts, and notice is hereby given that no trustee,
officer, agent or employee of either the Trust or the
Acquiring Trust shall have any personal liability under this
Agreement, and that this Agreement is binding only upon the
assets and properties of the Acquired Fund and the Acquiring
Fund.
A-17
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed as a sealed instrument by its President or Vice
President and its corporate seal to be affixed thereto and attested by its
Secretary or Assistant Secretary.
LIBERTY FUNDS TRUST IV,
on behalf of Liberty Intermediate
Tax-Exempt Fund
By:______________________________
Name:____________________________
Title:___________________________
ATTEST:
_________________________________
Name:____________________________
Title:___________________________
LIBERTY-STEIN ROE FUNDS MUNICIPAL
TRUST, on behalf of Stein Roe
Intermediate Municipals 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 LIBERTY FUND AND TRUST IV AND
SHARES OUTSTANDING OF THE STEIN ROE FUND AND STEIN ROE TRUST
For each class of the Liberty Fund's shares and Trust IV's shares entitled
to vote at the Meeting, and for each class of the Stein Roe Fund's shares and
Stein Roe Trust'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>
Liberty Fund A 1,598,122
------------------------------------------------------------------------------------------------------------
B 1,119,745
------------------------------------------------------------------------------------------------------------
C 181,420
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
Trust IV 256,523,247
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
Stein Roe Fund S 12,340,604
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
Stein Roe Trust 194,963,056
------------------------------------------------------------------------------------------------------------
</TABLE>
OWNERSHIP OF SHARES
As of September 29, 2000, Trust IV 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>
LIBERTY FUND
CLASS A
Merrill Lynch Pierce Fenner & Smith 93,766.769 5.87%
For the Sole Benefit of its Customers
Attn: Fund Administration #97AX9
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
CLASS C
Donald I. Coggins Trustee 12,820.513 7.07%
Donald I. Coggins Trust
U/A Dtd 2/6/1982
P.O. Box 544
</TABLE>
--------------------------------------------------------------------------------
B-1
<PAGE>
<TABLE>
<S> <C> <C> <C>
Wilmington, VT 05363-0544
Eleanor B. Coggins Trustee 16,025.641 8.83%
Eleanor B. Coggins Trust
U/A Dtd 2/6/1982
Lape Raponda
P.O. Box 544
Wilmington, VT 05363-0544
Merrill Lynch Pierce Fenner & Smith 71,220.571 39.26%
For the Sole Benefit of its Customers
Attn: Fund Administration #97AX9
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
Leone O'Ferrall 12,369.869 6.82%
Angeline O'Ferrall Trustees
Leone & Angeline O'Ferrall Rev Trust
P.O. Box 145
Gualala, CA 95445
STEIN ROE FUND
CLASS S
Charles Schwab & Co., Inc. 1,904,547.964 15.43%
Special Custody Account for the
Exclusive Benefit of Customers
Attn. Mutual Funds
101 Montgomery Street
San Francisco, CA 94104-4122
</TABLE>
OWNERSHIP OF SHARES UPON CONSUMMATION OF ACQUISITION
As of September 29, 2000, the shareholders of record that owned 5% or more
of the outstanding shares of the above noted class of shares of the above noted
Fund would own the following percentage of the Acquiring Fund upon consummation
of the Acquisition.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
PERCENTAGE OF OUTSTANDING
SHARES OF CLASS OWNED
NAME AND ADDRESS OF UPON CONSUMMATION OF
FUND AND CLASS SHAREHOLDER ACQUISITION
-------------------------------------------------------------------------------------------------
<S> <C> <C>
LIBERTY FUND
CLASS A
Merrill Lynch Pierce Fenner & Smith 6.00%
For the Sole Benefit of its Customers
Attn: Fund Administration #97AX9
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
CLASS C
Donald I. Coggins Trustee 6.48%
Donald I. Coggins Trust
U/A Dtd 2/6/1982
P.O. Box 544
Wilmington, VT 05363-0544
Eleanor B. Coggins Trustee 8.10%
Eleanor B. Coggins Trust
U/A Dtd 2/6/1982
Lape Raponda
P.O. Box 544
Wilmington, VT 05363-0544
Merrill Lynch Pierce Fenner & Smith 41.31%
For the Sole Benefit of its Customers
Attn: Fund Administration #97AX9
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
Leone O'Ferrall 6.23%
Angeline O'Ferrall Trustees
Leone & Angeline O'Ferrall Rev Trust
P.O. Box 145
Gualala, CA 95445
STEIN ROE FUND
CLASS S
Charles Schwab & Co., Inc. xx.xx%
Special Custody Account for the
Exclusive Benefit of Customers
Attn. Mutual Funds
101 Montgomery Street
San Francisco, CA 94104-4122
</TABLE>
INFORMATION CONCERNING EXECUTIVE OFFICERS
The following table sets forth certain information about the executive officers
of each Fund:
<TABLE>
<CAPTION>
EXECUTIVE OFFICER YEAR OF ELECTION AS
NAME & AGE OFFICE AND PRINCIPAL OCCUPATION (1) EXECUTIVE OFFICER
----------------- ----------------------------------- -------------------
<S> <C> <C>
Stephen E. Gibson President of the Liberty Funds since June, 1998; Chairman of 1998
(46) the Board since July, 1998, Chief Executive Officer and
President since December, 1996 and Director, since July,
1996 of CMA (formerly Executive Vice President from July,
1996 to December, 1996); Chairman of the Board, Director,
Chief Executive Officer and President of Liberty Funds Group
LLC (LFG) since December, 1998 (formerly Director, Chief
Executive Officer and President of The Colonial Group, Inc.
(TCG) from December, 1996 to December, 1998); Director of
Stein Roe & Farnham Incorporated (SR&F) since September,
2000, President since January, 2000 and Vice Chairman since
August, 1998 (formerly Assistant Chairman and Executive Vice
President from August, 1998 to January, 2000) (formerly
Managing Director of Marketing of Putnam Investments, June,
1992 to July, 1996.)
</TABLE>
B-2
<PAGE>
<TABLE>
<S> <C> <C>
Pamela A. McGrath Treasurer and Chief Financial Officer of the Liberty Funds and 1999
(46) Liberty All-Star Funds since April, 2000; Treasurer, Chief
Financial Officer and Vice President of LFG since
December, 1999; Chief Financial Officer, Treasurer and
Senior Vice President of CMA since December, 1999;
Director of Offshore Accounting for Putnam Investments
from May, 1998 to October, 1999; Managing Director of
Scudder Kemper Investments from October, 1984 to December,
1997.
</TABLE>
(1) Except as otherwise noted, each individual has held the office indicated or
other offices in the same company for the last five years.
B-3
<PAGE>
ADDITIONAL INFORMATION CONCERNING TRUSTEE COMPENSATION
The current Board of Trustees received the following compensation from the
Liberty Fund as of the Fund's fiscal year end and for the calendar year ended
December 31, 1999(1):
<TABLE>
<CAPTION>
-----------------------------------
LIBERTY FUND
-----------------------------------
11/30/99
-----------------------------------
<S> <C>
Mr. Bleasdale $662(2)
-----------------------------------
Ms. Collins 623
-----------------------------------
Mr. Grinnell 649
-----------------------------------
Mr. Lowry 630
-----------------------------------
Mr. Macera 629
-----------------------------------
Mr. Mayer 628
-----------------------------------
Mr. Moody 585(3)
-----------------------------------
Mr. Neuhauser 660
-----------------------------------
Mr. Stitzel 629
-----------------------------------
Ms. Verville 617(4)
-----------------------------------
</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(5)
----------------------------------------------------------
Ms. Collins 96,000
----------------------------------------------------------
Mr. Grinnell 100,000
----------------------------------------------------------
Mr. Lowry 97,000
----------------------------------------------------------
Mr. Macera 95,000
----------------------------------------------------------
Mr. Mayer 101,000
----------------------------------------------------------
Mr. Moody 91,000(6)
----------------------------------------------------------
Mr. Neuhauser 101,252
----------------------------------------------------------
Mr. Stitzel 95,000
----------------------------------------------------------
Ms. Verville 96,000(7)
----------------------------------------------------------
</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 (8)
------- --------------------------------
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
The current Board of Trustees of the Stein Roe Funds received the following
compensation from the Stein Roe Fund as of the Fund's fiscal year end:
------------------------------------------------
Stein Roe Fund
------------------------------------------------
6/30/00
------------------------------------------------
Mr. Bacon $2,200
------------------------------------------------
Mr. Boyd 2,400
------------------------------------------------
Mr. Hacker 2,200
------------------------------------------------
Ms. Kelly 2,200
------------------------------------------------
Mr. Nelson 2,300
------------------------------------------------
Mr. Theobald 2,200
------------------------------------------------
The following table sets forth the total compensation paid to each Trustee by
the Stein Roe Funds for the fiscal year ended June 30, 2000.
------------------------------------------------
TRUSTEE TOTAL COMPENSATION(9)
------------------------------------------------
Mr. Bacon $103,450
------------------------------------------------
Mr. Boyd $109,950
------------------------------------------------
Mr. Hacker $ 93,950
------------------------------------------------
Ms. Kelly $103,450
------------------------------------------------
Mr. Nelson $108,050
------------------------------------------------
Mr. Theobald $103,450
------------------------------------------------
(1) The Funds do not currently provide pension or retirement plan benefits to
the Trustees.
(2) Includes $338 payable in later years as deferred compensation.
(3) Total compensation of $585 for the fiscal year ended November 30, 1999,
will be payable in later years as deferred compensation.
(4) Total compensation of $617 for the fiscal year ended November 30, 1999,
will be payable in later years as deferred compensation.
(5) Includes $52,000 payable in later years as deferred compensation.
(6) Total compensation of $91,000 for the calendar year ended December 31,
1999, will be payable in later years as deferred compensation.
(7) Total compensation of $96,000 for the calendar year ended December 31,
1999, will be payable in later years as deferred compensation.
(8) 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).
(9) At June 30, 2000, the Stein Roe Fund Complex consisted of four series of
the Trust, one series of Liberty-Stein Roe Funds Trust, four series of
Liberty-Stein Roe Funds Income Trust, 12 series of Liberty-Stein Roe Funds
Investment Trust, five series of Liberty-Stein Roe Advisor Trust, five
series of Stein Roe Variable Investment Trust, 12 portfolios of SR&F Base
Trust, Liberty-Stein Roe Advisor Floating Rate Fund, Liberty-Stein Roe
Institutional Floating Rate Income Fund, and Stein Roe Floating Rate
Limited Liability Company.
B-4
<PAGE>
APPENDIX C
CAPITALIZATION
The following table shows on an unaudited basis the capitalization of each of
the Liberty Fund and the Stein Roe Fund as of June 30, 2000, and on a pro forma
combined basis, giving effect to the acquisition of the assets and liabilities
of the Liberty Fund by the Stein Roe Fund at net asset value as of that date:
<TABLE>
<CAPTION>
LIBERTY STEIN ROE PRO FORMA PRO FORMA
FUND FUND ADJUSTMENTS COMBINED (1)
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Class A
Net asset value $12,138,959 (16,092)(2) $12,122,867
Shares outstanding 1,564,295 (458,194) 1,106,101
Net asset value per share $7.76 $10.96
Class B
Net asset value $8,742,141 (11,589)(2) $8,730,552
Shares outstanding 1,126,562 (329,979) 796,583
Net asset value per share $7.76 $10.96
Class C
Net asset value $1,536,692 (2,037)(2) $1,534,655
Shares outstanding 198,027 (58,003) 140,024
Net asset value per share $7.76 $10.96
Class S
Net asset value $135,881,702 (26,176)(2) $135,855,526
Shares outstanding 12,398,030 12,398,030
Net asset value per share $10.96 $10.96
</TABLE>
(1) Assumes the Acquisition was consummated on June 30, 2000, and is for
information purposes only. No assurance can be given as to how many shares
of the Stein Roe Fund will be received by the shareholders of the Liberty
Fund on the date the Acquisition takes place, and the foregoing should not
be relied upon to reflect the number of shares of the Stein Roe Fund that
actually will be received on or after such date.
(2) Adjustments reflect one time proxy, accounting, legal and other costs of
the reorganization of $29,718 and $26,176 to be borne by the Liberty Fund
and the Stein Roe Fund, respectively.
C-1
<PAGE>
APPENDIX D
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE AS OF JUNE 30, 2000
STEIN ROE INTERMEDIATE MUNICIPALS FUND
PORTFOLIO MANAGEMENT REPORT
FUND PERFORMANCE BETWEEN JULY 1, 1999 AND JUNE 30, 2000
Rising interest rates hurt municipal bond performance during the period,
and the Fund's performance reflects the market's difficulties. The Fund returned
3.10% for the 12-month period ended June 30, 2000. This return outperformed the
Lipper Intermediate Municipal Debt Fund peer group average return of 2.50%. The
Lehman Brothers 10-Year Municipal Bond Average, a benchmark of bond market
performance, returned 4.47% for the same period.
CHANGES MADE IN RESPONSE TO RISING INTEREST RATES
Like many investors, we believed that short-term interest rate hikes, which
totaled 1.5% over the past 12 months, would ultimately slow economic growth,
bringing it down to a non-inflationary level. Such a scenario would create a
better environment for bonds, so we have generally structured the Fund's
portfolio to take advantage of that favorable outcome. However, it appeared that
it would take some time for the Fed's preemptive strikes against inflation to
have the desired effect--perhaps a year or more. As a result, we chose to
maintain the portfolio's basic structure.
THE BOND MARKET AND UNIQUE STRATEGIC OPPORTUNITIES
Rising interest rates and declining municipal bond prices created the
opportunity to do some "tax swapping." We sold some of our poorer performing
bonds at a loss, in order to offset current and future capital gains elsewhere
in the portfolio. We then invested the proceeds from these sales in
higher-yielding bonds when the opportunity arose. These tax swaps helped improve
the Fund's tax efficiency, and also helped boost the Fund's 30-day SEC yield. As
of June 30, 2000, the Fund's 30-day SEC yield was 4.65%.
CHANGES TO THE FUND'S OVERALL CREDIT QUALITY
We normally keep the bulk of the Funds' portfolio in the higher end of the
quality spectrum. However, we may move the credit quality of the portfolio up or
down according to whether higher- or lower-quality securities are more
attractive during any given period. As interest rates rose during the period,
investors demanded more yield for lower-rated bonds as compensation for the
additional risk incurred. Wider spreads (which represent the difference between
the yields of higher- and lower-rated bonds) caused the
D-1
<PAGE>
Fund's relatively small stake in lower-quality bonds to underperform. However,
spreads did stabilize in the last few months of the period as demand for
municipal bonds rose. If this trend continues, spreads should continue to narrow
and performance of the high-yield sector should improve.
WHERE WE HAVE FOUND THE BEST VALUES LATELY
We found some compelling values among discount bonds, which trade below
their face value. We were able to purchase some discounts which were trading at
prices we believed to be well below their fair market value, locking in
attractive yields at the same time. We also found value among intermediate bonds
in the 15- to 20-year maturity range. Yields on longer-maturity bonds generally
show a greater increase in response to rising interest rates, so these bonds
offered attractive yields when compared to other maturities.
OUR OUTLOOK FOR THE YEAR TO COME
At this time, we believe the Fed's interest rate increases will have their
desired effect of slowing the economy and stifling inflation. If this is the
case, interest rates are likely to stabilize and may eventually start to
decline. This could be good news for investors in the bond market, because bonds
generally perform better in periods of slower economic growth and declining
interest rates. There may be favorable trends in the municipal market, as well.
In recent years, strong economies and high tax revenues have allowed state and
local entities to fund new projects with cash rather than debt, causing the
supply of municipal bonds to dwindle. However, as the economy starts to slow,
supply of municipal bonds should return to historical levels. Municipals should
also continue to be priced attractively in comparison with their Treasury
counterparts.
BILL LORING is the portfolio manager of the Stein Roe Fund.
Past performance is no guarantee of future results. Share price and investment
returns will vary, so you may have a gain or loss when you sell shares.
Total return includes changes in share price and reinvestment of income and
capital gains distributions, if any. Portfolio holdings are as of 6/30/00 and
are subject to change. The Advisor currently limits expenses to 0.70% of average
net assets. Fund return as of 6/30/00 would have been lower without the limit.
Absent past limits, the 30-day SEC and tax-equivalent yields as of 6/30/00 would
have been 7.70% and 4.50%, respectively. Income distributions are exempt from
federal income taxes but may be subject to the federal alternative minimum tax
and state and local taxes. Capital gains, if any, are also taxable. The Lehman
Brothers 10-Year Municipal Bond Index is an unmanaged group of investment-grade
municipal bonds; it is not available for direct investment.
Tax-exempt investing offers tax-free income, but also involves certain risks.
The value of the Fund will be affected by interest rate changes and the
creditworthiness of issues held in the Fund. The municipal bond management team
seeks to identify problems and opportunities and react quickly to market
changes.
D-2
<PAGE>
Source of Lipper data: Lipper, Inc.
PERFORMANCE INFORMATION
STEIN ROE FUND INVESTMENT PERFORMANCE VS. LEHMAN BROTHERS 10-YEAR MUNICIPAL BOND
INDEX
[LINE CHART: Initial and subsequent account values at end of each of the most
recently completed ten fiscal years]
Growth of a $10,000 Investment 6/30/90 to 6/30/00
<TABLE>
<CAPTION>
Intermediate Lehman Brothers
Municipals 10-Year Municipal
Fund Bond Index
<S> <C> <C>
6/30/90 10,000 10,000
6/30/91 10,820 10,924
6/30/92 11,931 12,160
6/30/93 13,234 13,690
6/30/94 13,387 13,825
6/30/95 14,269 15,039
6/30/96 15,054 16,000
6/30/97 16,114 17,335
6/30/98 17,216 18,805
6/30/99 17,574 19,236
6/30/00 18,119 20,095
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS AS OF JUNE 30, 2000
<TABLE>
<CAPTION>
----------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS
----------------------------------------------------------------------
<S> <C> <C> <C>
Stein Roe Fund 3.10% 4.89% 6.12%
----------------------------------------------------------------------
Lehman Brothers 10-Year 4.47% 5.97% 7.23%
Municipal Bond Index
----------------------------------------------------------------------
</TABLE>
Past performance is no guarantee of future results. Share price and investment
return will vary, so you may have a gain or loss when you sell shares. Total
return performance includes changes in share price and reinvestment of income
and capital gains distributions. The line chart assumes a $10,000 investment on
June 30, 1990, reinvestment of distributions, and compares fund performance to
an index, which is an unmanaged group of fixed income securities that differs
from the composition of any Stein Roe fund; it is not available for direct
investment. Source: Lipper, Inc.
An expense limitation of 0.70% was in effect for the Stein Roe Fund for part of
the periods shown. Returns would have been lower without the limitation. Total
return includes changes in share price and reinvestment of income and capital
gains distributions, if any. Each index shown above is an unmanaged group of
fixed-income securities that differs from the composition of each Stein Roe
fund; they are not available for direct investment. The U.S. Consumer Price
Index is the government's measure of annual changes in the cost of living.
Income may be subject to state or local taxes and the federal alternative
minimum tax. Capital gains, if any, are subject to federal, state and local
taxes. Sources: Lipper, Inc., a monitor of mutual fund performance.
Performance results reflect any voluntary waivers or reimbursement of Fund
expenses by the Advisor or its affiliates. Absent these waivers or reimbursement
arrangements, performance results would have been lower.
HOLDINGS
TOP 5 STATES AS OF JUNE 30, 2000
1. New York 15.9%
2. Illinois 9.9%
3. Arizona 6.2%
D-3
<PAGE>
4. Texas 5.9%
5. Georgia 5.7%
PORTFOLIO STATISTICS AS OF JUNE 30, 2000
Average Duration 6.2 years
Average Weighted Maturity 9.4 years
Average Weighted Coupon 6.12%
D-4
<PAGE>
LIBERTY-STEIN ROE FUNDS MUNICIPAL TRUST
STEIN ROE INTERMEDIATE MUNICIPALS FUND
FORM N-14
PART B
STATEMENT OF ADDITIONAL INFORMATION
November 24, 2000
This Statement of Additional Information (the "SAI") relates to the
proposed Acquisition (the "Acquisition") of the Liberty Intermediate Tax-Exempt
Fund (the "Acquired Fund"), a series of Liberty Funds Trust IV, by the Stein Roe
Intermediate Municipals Fund (the "Acquiring Fund"), a series of Liberty-Stein
Roe Funds Municipal Trust.
This SAI contains information which may be of interest to shareholders
but which is not included in the Prospectus/Proxy Statement dated November 24,
2000 (the "Prospectus/Proxy Statement") of the Acquiring Fund which relates to
the Acquisition. As described in the Prospectus/Proxy Statement, the Acquisition
would involve the transfer of all the assets of the Acquired Fund in exchange
for shares of the Acquiring Fund and the assumption of all the liabilities of
the Acquired Fund. The Acquired Fund would distribute the Acquiring Fund shares
it receives to its shareholders in complete liquidation of the Acquired Fund.
This SAI is not a prospectus and should be read in conjunction with the
Prospectus/Proxy Statement. The Prospectus/Proxy Statement has been filed with
the Securities and Exchange Commission and is available upon request and without
charge by writing to your Fund at One Financial Center, Boston, Massachusetts
02111 or by calling 1-800-426-3750.
Table of Contents
I. Additional Information about the Acquiring Fund.................
II. Additional Information about the Acquired Fund..................
III. Financial Statements............................................
<PAGE>
I. Additional Information about the Acquiring Fund.
Incorporated by reference to Post-Effective Amendment No. 27 to the
Registration Statement on Form N-1A (filed on August 19, 1999) of Liberty-Stein
Roe Funds Municipal Trust (Registration Statement Nos. 2-99356 and 811-4367).
II. Additional Information about the Acquired Fund.
Incorporated by reference to Post-Effective Amendment No. 59 to the
Registration Statement on Form N-1A (filed on March 17, 2000) of Liberty Funds
Trust IV (Registration Statement Nos. 2-62492 and 811-2865).
III. Financial Statements.
This SAI is accompanied by the Annual Report for the year ended June
30, 2000 of the Acquiring Fund and the Semi-Annual Report for the six months
ended May 31, 2000 and the Annual Report for the year ended November 30, 1999 of
the Acquired Fund, which contain historical financial information regarding such
Funds. Such reports have been filed with the Securities and Exchange Commission
and are incorporated herein by reference.
Pro forma financial statements of the Acquiring Fund for the
Acquisition are provided on the following pages.
-2-
<PAGE>
PRO FORMA COMBINING CONDENSED STATEMENT OF OPERATIONS FOR THE TWELVE MONTH
PERIOD ENDED JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
LIBERTY STEIN ROE
INTERMEDIATE INTERMEDIATE
TAX-EXEMPT MUNICIPALS PRO FORMA PRO FORMA
FUND FUND ADJUSTMENTS COMBINED
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends - - - -
Interest 1,245,210 8,232,558 - 9,477,769
--------- ---------- -------- ----------
Total investment income 1,245,210 8,232,558 - 9,477,769
EXPENSES
Management fee 127,786 647,045 (29,042)(a) 745,789
Service fee - Class A, B, C 46,468 - - (a) 46,468
Distribution fee - Class B 60,948 - - (a) 60,948
Distribution fee - Class C 3,298 - - (a) 3,298
Administration fee - 207,954 29,043 (a) 236,997
Transfer agent fee 31,931 219,545 (14,040)(a) 237,436
Bookkeeping fee 27,000 27,409 (26,419)(a) 27,990
Trustees fee 7,575 17,745 (12,420)(b) 12,900
All other expenses 107,010 76,750 (87,823)(c) 95,937
--------- ---------- -------- ----------
Total operating expenses 412,016 1,196,448 (140,701) 1,467,763
--------- ---------- -------- ----------
Expense reimbursement (161,899) (171,903) 163,935 (169,867)
--------- ---------- -------- ----------
Net Expenses 250,117 1,024,545 23,234 1,297,896
NET INVESTMENT INCOME 995,093 7,208,013 (23,234) 8,179,873
NET REALIZED & UNREALIZED GAIN (LOSS)
Net realized gain on:
Investments (236,729) 114,022 - (122,707)
Closed futures contracts 14,402 (50,424) - (36,022)
Foreign currency transactions - - - -
--------- ---------- -------- ----------
Net Realized Gain (222,327) 63,599 - (158,729)
Change in net unrealized appreciation/depreciation
during the period on:
Investments (103,942) (2,907,550) - (3,011,491)
Open futures contracts (26,365) (151,737) - (178,102)
Foreign currency transactions - - - -
--------- ---------- -------- ----------
Net Change in Unrealized Appreciation/Depreciation (130,306) (3,059,287) - (3,189,593)
--------- ---------- -------- ----------
Net Gain (352,633) (2,995,688) - (3,348,322)
--------- ---------- -------- ----------
Increase in Net Assets from Operations 642,460 4,212,325 (23,234) 4,831,551
</TABLE>
(a) Based on the contract in effect for the surviving fund.
(b) Based on trustee compensation plan of the surviving fund.
(c) Decrease due to the elimination of duplicative expenses achieved by
merging the funds.
<PAGE>
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
PRO FORMA COMBINING CONDENSED STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
LIBERTY STEIN ROE
INTERMEDIATE INTERMEDIATE
TAX-EXEMPT MUNICIPALS PRO FORMA PRO FORMA
FUND FUND ADJUSTMENTS COMBINED
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Investments, at market value $22,115,396 $133,664,255 155,779,651
Cash - - -
Receivable for investments sold - - -
Payable for investments purchased - - -
Other assets less other liabilities 302,396 2,217,447 (55,894)(a) 2,463,949
Net assets $22,417,792 $135,881,702 $158,243,600
Class A
Net assets $12,138,959 (16,092) $ 12,122,867
Shares outstanding 1,564,295 (458,194)(b) 1,106,101
Net asset value $ 7.76 $ 10.96
Class B
Net assets $ 8,742,141 (11,589) $ 8,730,552
Shares outstanding 1,126,562 (329,979)(b) 796,583
Net asset value $ 7.76 $ 10.96
Class C
Net assets $ 1,536,692 (2,037) $ 1,534,655
Shares outstanding 198,027 (58,003)(b) 140,023
Net asset value $ 7.76 $ 10.96
Net assets - Class S $135,881,702 (26,176) 135,855,526
Shares - Class S 12,398,030 12,398,030
Net asset value per share - Class S $ 10.96 $ 10.96
</TABLE>
(a) Adjustments reflect one time proxy, accounting, legal and other costs of the
reorganization of $29,718 and $26,176 to be borne by Liberty Intermediate Tax
Exempt Fund and Stein Roe Intermediate Municipals Fund respectively.
(b) Class A, B and C shares of Liberty Intermediate Tax-Exempt Fund are
exchanged for new Class A, B and C shares of Stein Roe Intermediate Municipals
Fund, to be established upon consummation of the merger. Initial per share
values of Class A, B and C shares are presumed to equal that of Stein Roe
Intermediate Municipals Fund, which will be designated as Class S shares.
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS (UNAUDITED) LIBERTY INTERMEDIATE
June 30, 2000 TAX-EXEMPT FUND
---------------------------
RATE MATURITY PAR VALUE
---- -------- ---------- ------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS - 98.3%
EDUCATION - 2.5%
EDUCATION - 1.1%
IL State Development Finance Authority, Latin School of
Chicago, Series 1998 5.20% 8/1/11 250,000 $ 232,620
NY State Dormitory Authority, Series 2000(a) 5.00% 5/15/05 685,000 692,336
VT State Educational & Health Buildings Finance Agency,
Norwich University, Series 1998 5.75% 7/1/13 100,000 96,023
WV West Virginia University, Series 2000 A (e) 4/1/15 250,000 107,705
------------
1,128,684
STUDENT LOAN - 1.4%
ME Maine Educational Loan Authority Educational
Loan Revenue 6.65% 12/1/02
NM State Educational Assistance Foundation, Series 1A 6.20% 12/1/01 390,000 397,597
TX Texas State Higher Education Revenue Student Loan
Senior Lien 7.45% 10/1/06
------------
397,597
HEALTHCARE - 7.7%
HOSPITAL - 7.4%
AL East Health Care Authority, Health Care Facilities
and Tax Anticipation, Series 1993 5.63% 9/1/04 50,000 51,387
AR Baxter County Regional Hospital, Series 1999B 5.38% 9/1/14 200,000 172,926
CA State Health Facilities Authority, Cedars-Sinai
Medical Center, Series 1999A 6.13% 12/1/19
LA State Public Facilities Authority, Touro Infirmary,
Series 1999B 5.20% 8/15/10 150,000 135,594
MA Massachusetts State Health and Educational Facilities
Authority Revenue (Daughters of Charity) Series C 7.25% 7/1/00
NJ New Jersey Health Care Facilities Finance Authority
(Christ Hospital Group, Connie Lee Insured) 7.00% 7/1/03
NY State Dormitory Authority, Mount Sinai Health
Obligation Group, Series 2000 6.50% 7/1/25 200,000 206,182
NY State Dormitory Authority, St. Clare's Hospital,
Series 1998B 4.90% 2/15/09 250,000 244,045
OH Green Springs, St. Francis Health Care Center,
Series 1994A 7.00% 5/15/04 100,000 99,750
PA Dauphin County General Authority Hospital Revenue
(Hapsco Group, MBIA Insured) Series B 5.80% 7/1/02
SC Sumter County Hospital Facilities Revenue (Tuomey
Regional Medical Center, MBIA Insured) 6.63% 11/15/04
TN Knox County Health Educational & Housing Facilities
Board Health facilities Board Health Facilities
Revenue (Baptist Health Systems, Connie Lee Insured) 5.50% 4/15/11
TX Tarrant County Health Facilities Development Corp.
Hospital, Fort Worth Osteopathic Hospital, Series 1993 5.80% 5/15/04 50,000 51,550
TX Health Facilities Development Corporation Hospital.
All Saints Episcopal Hospitals, Series 1993A 5.80% 8/15/04 80,000 82,624
WV State Hospital Finance Authority, Series 2000 A 6.75% 9/1/22 225,000 225,846
------------
1,269,904
NURSING HOME - 0.3%
MN New Hope Minnesota Housing and Health Care
Facilities Revenue Series A 5.40% 3/1/08
HOUSING - 1.3%
SINGLE FAMILY - 1.1%
CA California Housing Finance Agency Revenue
Home Mortgage Series B-1 5.90% 2/1/04
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS (UNAUDITED) STEIN ROE INTERMEDIATE PRO-FORMA
June 30, 2000 MUNICIPALS FUND COMBINED FUND
------------------------- ---------------------------
PAR VALUE PAR VALUE
--------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS - 98.3%
EDUCATION - 2.5%
EDUCATION - 1.1%
IL State Development Finance Authority, Latin School of
Chicago, Series 1998 250,000 $ 232,620
NY State Dormitory Authority, Series 2000(a) 685,000 692,336
VT State Educational & Health Buildings Finance Agency,
Norwich University, Series 1998 100,000 96,023
WV West Virginia University, Series 2000 A 1,250,000 $ 538,525 1,500,000 646,230
------------ ------------
538,525 1,667,209
STUDENT LOAN - 1.4%
ME Maine Educational Loan Authority Educational
Loan Revenue 515,000 525,928 515,000 525,928
NM State Educational Assistance Foundation, Series 1A 390,000 397,597
TX Texas State Higher Education Revenue Student Loan
Senior Lien 1,280,000 1,311,987 1,280,000 1,311,987
------------ ------------
1,837,915 2,235,512
HEALTHCARE - 7.7%
HOSPITAL - 7.4%
AL East Health Care Authority, Health Care Facilities
and Tax Anticipation, Series 1993 50,000 51,387
AR Baxter County Regional Hospital, Series 1999B 200,000 172,926
CA State Health Facilities Authority, Cedars-Sinai
Medical Center, Series 1999A 1,250,000 1,260,938 1,250,000 1,260,938
LA State Public Facilities Authority, Touro Infirmary,
Series 1999B 755,000 682,490 905,000 818,084
MA Massachusetts State Health and Educational Facilities
Authority Revenue (Daughters of Charity) Series C 200,000 200,016 200,000 200,016
NJ New Jersey Health Care Facilities Finance Authority
(Christ Hospital Group, Connie Lee Insured) 1,730,000 1,831,793 1,730,000 1,831,793
NY State Dormitory Authority, Mount Sinai Health
Obligation Group, Series 2000 400,000 412,364 600,000 618,546
NY State Dormitory Authority, St. Clare's Hospital,
Series 1998B 250,000 244,045
OH Green Springs, St. Francis Health Care Center,
Series 1994A 100,000 99,750
PA Dauphin County General Authority Hospital Revenue
(Hapsco Group, MBIA Insured) Series B 1,600,000 1,632,048 1,600,000 1,632,048
SC Sumter County Hospital Facilities Revenue (Tuomey
Regional Medical Center, MBIA Insured) 1,040,000 1,110,647 1,040,000 1,110,647
TN Knox County Health Educational & Housing Facilities
Board Health facilities Board Health Facilities
Revenue (Baptist Health Systems, Connie Lee Insured) 2,000,000 2,015,700 2,000,000 2,015,700
TX Tarrant County Health Facilities Development Corp.
Hospital, Fort Worth Osteopathic Hospital, Series 1993 50,000 51,550
TX Health Facilities Development Corporation Hospital.
All Saints Episcopal Hospitals, Series 1993A 80,000 82,624
WV State Hospital Finance Authority, Series 2000 A 1,350,000 1,355,076 1,575,000 1,580,922
------------ ------------
10,501,072 11,770,976
NURSING HOME - 0.3%
MN New Hope Minnesota Housing and Health Care
Facilities Revenue Series A 500,000 459,375 500,000 459,375
HOUSING - 1.3%
SINGLE FAMILY - 1.1%
CA California Housing Finance Agency Revenue
Home Mortgage Series B-1 765,000 788,218 765,000 788,218
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS (Unaudited) LIBERTY INTERMEDIATE
June 30, 2000 TAX-EXEMPT FUND
---------------------------
RATE MATURITY PAR VALUE
---- -------- ---------- ------------
<S> <C> <C> <C> <C>
MD Montgomery County Housing Commission, Series A 5.75% 7/1/13 220,000 222,774
NE State Investment Authority, Series C 5.65% 9/1/07 495,000 499,252
RI Housing and Mortgage Finance Corp., Homeownership
Opportunity, Series 6-B: 6.50% 10/1/03 200,000 204,786
6.50% 4/1/03 100,000 102,051
------------
1,028,863
MULTI-FAMILY - 0.2%
MA State Housing Finance Agency, Series 1992 C 6.35% 5/15/03 200,000 206,862
NJ State Housing and Mortgage Finance Agency 6.50% 5/1/03 85,000 87,420
------------
294,282
INDUSTRIAL - 0.1%
MANUFACTURING - 0.1%
SC State Economic Development Authority
Caterpillar, Inc., Series 1998 5.05% 6/1/08 100,000 95,125
OTHER - 10.6%
POOL/BOND BANK - 1.4%
IN Indianapolis Local Public Improvement Bond Bank
Series D 6.50% 2/1/06
REFUNDED/ESCROWED (b) - 9.2%
AZ Maricopa County Unified School District No. 68
Sierra Vista GO Series B (FGIC Insured) 7.63% 1/1/08
CA Sacramento Cogeneration Authority, Proctor & Gamble
Project 6.50% 7/1/14 500,000 552,830
HI Honolulu City & County, Series 1995 6.00% 11/1/10 135,000 145,106
IL Chicago Skyway Toll Bridge Revenue, Series 1994 6.75% 1/1/17
IL State Health Facilities Authority, Edgewater Medical
Center, Series A 9.25% 7/1/24 95,000 109,726
IL Metropolitan Pier & Exposition Authority, McCormick
Place Expansion Project, Series 1992 A: 7.25% 6/15/05
7.25% 6/15/05
IN State Toll Road Commission Toll Road Revenue 9.00% 4/20/05
REFUNDED/ESCROWED (b) - CONT.
MA Massachusetts State Health and Educational Facilities
Authority Revenue (Daughters of Charity) Series D 6.00% 7/1/09
MI Dickinson County, Memorial Hospital System 7.63% 11/1/05 225,000 239,906
MI Michigan State Hospital Finance Authority Revenue
(Daughters of Charity) 6.50% 11/1/01
OH Cuyahoga County, Meridia Health System 6.30% 8/15/06 890,000 961,805
OH Olmstead Falls Local School District 6.85% 4/8/92 550,000 604,263
PA Westmoreland County Municipal Authority, Daughters of
Charity and Providence, Series 1991 (e) 8/15/17
SC Piedmont Municipal Power Agency Electric Revenue,
Series 1991A 6.13% 1/1/07
SC Sumter County Hospital Facilities Revenue (Tuomey
Regional Medical Center, MBIA Insured) 6.63% 11/15/04
------------
2,613,636
OTHER REVENUE - 0.8%
RETAIL - 0.1%
LA State Finance Authority, Mason City Shopping Center 8.50% 12/1/04 50,000 50,890
OH Lake County, North Madison Properties, Series 1993 8.07% 9/1/01 35,000 35,656
------------
86,546
RECREATION - 0.7%
NY Hamilton Industrial Development Agency, Adirondack
Historical Association 4.70% 11/1/08 100,000 93,961
OR State Department of Administrative Services,
Series 1999B 5.25% 4/1/15
------------
93,961
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS (Unaudited) STEIN ROE INTERMEDIATE PRO-FORMA
June 30, 2000 MUNICIPALS FUND COMBINED FUND
------------------------- ---------------------------
PAR VALUE PAR VALUE
--------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
MD Montgomery County Housing Commission, Series A 220,000 222,774
NE State Investment Authority, Series C 495,000 499,252
RI Housing and Mortgage Finance Corp., Homeownership
Opportunity, Series 6-B: 200,000 204,786
100,000 102,051
------------ ------------
788,218 1,817,081
MULTI-FAMILY - 0.2%
MA State Housing Finance Agency, Series 1992 C 200,000 206,862
NJ State Housing and Mortgage Finance Agency 85,000 87,420
------------
294,282
INDUSTRIAL - 0.1%
MANUFACTURING - 0.1%
SC State Economic Development Authority
Caterpillar, Inc., Series 1998 100,000 95,125
OTHER - 10.6%
POOL/BOND BANK - 1.4%
IN Indianapolis Local Public Improvement Bond Bank
Series D 2,100,000 2,248,596 2,100,000 2,248,596
REFUNDED/ESCROWED (b) - 9.2%
AZ Maricopa County Unified School District No. 68
Sierra Vista GO Series B (FGIC Insured) 1,935,000 2,121,515 1,935,000 2,121,515
CA Sacramento Cogeneration Authority, Proctor & Gamble
Project 500,000 552,830
HI Honolulu City & County, Series 1995 135,000 145,106
IL Chicago Skyway Toll Bridge Revenue, Series 1994 1,500,000 1,619,190 1,500,000 1,619,190
IL State Health Facilities Authority, Edgewater Medical
Center, Series A 95,000 109,726
IL Metropolitan Pier & Exposition Authority, McCormick
Place Expansion Project, Series 1992 A: 385,000 424,035 385,000 424,035
1,145,000 1,265,855 1,145,000 1,265,855
IN State Toll Road Commission Toll Road Revenue 2,240,000 3,014,413 2,240,000 3,014,413
REFUNDED/ESCROWED (b) - CONT.
MA Massachusetts State Health and Educational Facilities
Authority Revenue (Daughters of Charity) Series D 1,000,000 1,056,390 1,000,000 1,056,390
MI Dickinson County, Memorial Hospital System 225,000 239,906
MI Michigan State Hospital Finance Authority Revenue
(Daughters of Charity) 585,000 594,565 585,000 594,565
OH Cuyahoga County, Meridia Health System 890,000 961,805
OH Olmstead Falls Local School District 550,000 604,263
PA Westmoreland County Municipal Authority, Daughters of
Charity and Providence, Series 1991 1,250,000 464,113 1,250,000 464,113
SC Piedmont Municipal Power Agency Electric Revenue,
Series 1991A 335,000 357,616 335,000 357,616
SC Sumter County Hospital Facilities Revenue (Tuomey
Regional Medical Center, MBIA Insured) 960,000 1,027,939 960,000 1,027,939
------------ ------------
11,945,631 14,559,267
OTHER REVENUE - 0.8%
RETAIL - 0.1%
LA State Finance Authority, Mason City Shopping Center 50,000 50,890
OH Lake County, North Madison Properties, Series 1993 35,000 35,656
------------
86,546
RECREATION - 0.7%
NY Hamilton Industrial Development Agency, Adirondack
Historical Association 100,000 93,961
OR State Department of Administrative Services,
Series 1999B 1,000,000 983,790 1,000,000 983,790
------------ ------------
983,790 1,077,751
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS (Unaudited) LIBERTY INTERMEDIATE
June 30, 2000 TAX-EXEMPT FUND
---------------------------
RATE MATURITY PAR VALUE
---- -------- ---------- ------------
<S> <C> <C> <C> <C>
RESOURCE RECOVERY - 3.1%
RESOURCE RECOVERY - 1.5%
MA State Industrial finance Agency, Ogden Hill project,
Series 1998A 5.45% 9/1/05 250,000 228,048
NJ Bergen County Utility Authority (FGIC Insured)
Series A 6.25% 6/15/06
------------
228,048
DISPOSAL - 1.6%
IL Development finance Authority, Waste Management, Inc.,
Series 1997 5.05% 1/1/10 250,000 213,773
MA State Industrial Finance Agency, Peabody Monofill
Associates, Inc., Series 1995 9.00% 9/1/05 75,000 78,000
MI State Strategic FD LTD Obligation Revenue
(Waste Management, Inc.) 5.20% 4/1/10
PA Westmoreland County Industrial Development Authority,
Mid-America Waste Systems, Inc., Series 1993 5.10% 5/1/18
------------
291,773
TAX-BACKED - 39.7%
LOCAL APPROPRIATED - 0.0%
AZ Phoenix Civic Improvement Corp, Waste Water Lease,
Series 1993 5.75% 7/1/04 50,000 51,803
LOCAL GENERAL OBLIGATIONS - 17.7%
AZ Cochise County Unified School District No. 68 Sierra
Vista GO Series B (FGIC Insured) 9.00% 7/1/01
AZ Maricopa County Unified School District No. 69,
Paradise Valley, Series 1995 6.35% 7/1/10 500,000 551,630
AZ Maricopa County Unified School District No. 97
Deer Valley GO Series A (MBIA Insured) 6.25% 7/1/06
AZ Phoenix General Obligation 6.13% 7/1/03 250,000 260,010
AZ Pima County GO 6.30% 7/1/02
AZ Tempe Unified High School District No. 213 GO
(FGIC Insured) 7.00% 7/1/08
CA Carlsbad Unified School District, Series 1997 0.00% 11/1/14 300,000 138,591
CA Natomas Unified School District, Series 1999 5.85% 3/1/15 250,000 269,183
CA Union Elementary School District, Series 1999A (e) 9/1/20
CA Yuba City Unified School District, Series 2000 (e) 9/1/16 260,000 105,612
CO Adams County, School District No. 12, Series 1995A (e) 12/15/12
HI Honolulu City & County, Series 1990A 7.35% 7/1/06
HI Honolulu City & County, Series 1995 6.00% 7/1/06 365,000 389,897
IL Chicago Board of Education GO (MBIA Insured) 6.25% 12/1/12
LA Orleans Levee District Series A (FSA Insured) 5.95% 11/1/07
MI Berkley City School District 7.00% 1/1/09 500,000 565,620
MN West St. Paul, Independent School District (e) 2/1/04 500,000 419,140
NY New York City, Series 1997A 7.00% 8/1/06 850,000 937,278
NY New York City GO:
Series 1996C 5.70% 2/1/06
Series 1997H 6.00% 8/1/17
Series 1997J 6.13% 8/1/11
OH Olmstead Falls Ohio City School District Tax
Anticipation Notes 5.50% 12/1/04
OH Strongsville 6.00% 12/1/06 500,000 524,565
WA Snohomish County School District No. 2 Everett GO
(MBIA Insured) 7.00% 12/1/02
------------
4,161,526
STATE APPROPRIATED - 8.2%
KS State Development Authority Lease Juvenile Detention
Facility Project, Series 1992H 5.75% 6/1/02 60,000 61,229
KY State Turnpike Authority Economic Development
Revitalization Projects, Series 1992 5.50% 1/1/01 50,000 50,261
KY Kentucky State Turnpike Authority Economic Development
Road Revenue 5.80% 1/1/04
MO State Regional Convention & Sports Complex Authority
Series A 6.60% 8/15/03
NY Metropolitan Transportation Authority, Series 1993O 5.50% 4/29/17
NY State University New York Series 1989B 7.10% 5/15/01 100,000 102,089
NY State Dormitory Authority, Series 1995A 6.50% 5/15/05
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS (Unaudited) STEIN ROE INTERMEDIATE PRO-FORMA
June 30, 2000 MUNICIPALS FUND COMBINED FUND
------------------------- ---------------------------
PAR VALUE PAR VALUE
--------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
RESOURCE RECOVERY - 3.1%
RESOURCE RECOVERY - 1.5%
MA State Industrial finance Agency, Ogden Hill project,
Series 1998A 250,000 228,048
NJ Bergen County Utility Authority (FGIC Insured)
Series A 2,000,000 2,140,140 2,000,000 2,140,140
------------ ------------
2,140,140 2,368,188
DISPOSAL - 1.6%
IL Development finance Authority, Waste Management, Inc.,
Series 1997 615,000 525,880 865,000 739,653
MA State Industrial Finance Agency, Peabody Monofill
Associates, Inc., Series 1995 75,000 78,000
MI State Strategic FD LTD Obligation Revenue
(Waste Management, Inc.) 1,000,000 863,980 1,000,000 863,980
PA Westmoreland County Industrial Development Authority,
Mid-America Waste Systems, Inc., Series 1993 1,000,000 870,870 1,000,000 870,870
------------ ------------
2,260,730 2,552,503
TAX-BACKED - 39.7%
LOCAL APPROPRIATED - 0.0%
AZ Phoenix Civic Improvement Corp, Waste Water Lease,
Series 1993 50,000 51,803
LOCAL GENERAL OBLIGATIONS - 17.7%
AZ Cochise County Unified School District No. 68 Sierra
Vista GO Series B (FGIC Insured) 1,115,000 1,164,216 1,115,000 1,164,216
AZ Maricopa County Unified School District No. 69,
Paradise Valley, Series 1995 500,000 551,630
AZ Maricopa County Unified School District No. 97
Deer Valley GO Series A (MBIA Insured) 1,750,000 1,879,098 1,750,000 1,879,098
AZ Phoenix General Obligation 250,000 260,010
AZ Pima County GO 2,500,000 2,581,775 2,500,000 2,581,775
AZ Tempe Unified High School District No. 213 GO
(FGIC Insured) 500,000 568,115 500,000 568,115
CA Carlsbad Unified School District, Series 1997 300,000 138,591
CA Natomas Unified School District, Series 1999 250,000 269,183
CA Union Elementary School District, Series 1999A 1,000,000 310,110 1,000,000 310,110
CA Yuba City Unified School District, Series 2000 1,700,000 690,540 1,960,000 796,152
CO Adams County, School District No. 12, Series 1995A 1,300,000 643,097 1,300,000 643,097
HI Honolulu City & County, Series 1990A 1,000,000 1,123,330 1,000,000 1,123,330
HI Honolulu City & County, Series 1995 365,000 389,897
IL Chicago Board of Education GO (MBIA Insured) 2,100,000 2,295,762 2,100,000 2,295,762
LA Orleans Levee District Series A (FSA Insured) 2,200,000 2,331,010 2,200,000 2,331,010
MI Berkley City School District 500,000 565,620
MN West St. Paul, Independent School District 500,000 419,140
NY New York City, Series 1997A 850,000 937,278
NY New York City GO:
Series 1996C 1,000,000 1,035,670 1,000,000 1,035,670
Series 1997H 2,000,000 2,041,980 2,000,000 2,041,980
Series 1997J 5,000,000 5,281,350 5,000,000 5,281,350
OH Olmstead Falls Ohio City School District Tax
Anticipation Notes 420,000 408,450 420,000 408,450
OH Strongsville 500,000 524,565
WA Snohomish County School District No. 2 Everett GO
(MBIA Insured) 1,500,000 1,579,005 1,500,000 1,579,005
------------ ------------
23,933,508 28,095,034
STATE APPROPRIATED - 8.2%
KS State Development Authority Lease Juvenile Detention
Facility Project, Series 1992H 60,000 61,229
KY State Turnpike Authority Economic Development
Revitalization Projects, Series 1992 50,000 50,261
KY Kentucky State Turnpike Authority Economic Development
Road Revenue 2,500,000 2,574,850 2,500,000 2,574,850
MO State Regional Convention & Sports Complex Authority
Series A 830,000 870,512 830,000 870,512
NY Metropolitan Transportation Authority, Series 1993O 1,000,000 989,120 1,000,000 989,120
NY State University New York Series 1989B 100,000 102,089
NY State Dormitory Authority, Series 1995A 1,000,000 1,066,780 1,000,000 1,066,780
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS (Unaudited) LIBERTY INTERMEDIATE
June 30, 2000 TAX-EXEMPT FUND
---------------------------
RATE MATURITY PAR VALUE
---- -------- ---------- ------------
<S> <C> <C> <C> <C>
NY State Dormitory Authority, New York City University,
Series A 5.63% 7/1/16 500,000 512,490
NY State Urban Development Corp 6.25% 4/1/02 500,000 511,665
NY State Urban Development Corp 5.75% 4/1/11 500,000 514,085
OH State Higher Education Commission, Series II B. 5.75% 11/1/04 500,000 519,350
------------
2,271,169
STATE GENERAL OBLIGATION - 4.7%
MA Massachusetts Bay Transportation Authority,
Series 1994A 7.00% 3/1/07
MA State, Series 1998 C 5.25% 8/1/12 500,000 501,140
MA State College Building Authority, Series 1994A 7.50% 4/12/22
NJ State General Obligation, Series D (e) 4/13/22 90,000 75,434
TX State, Series A 5.80% 4/14/22 500,000 519,960
TX State, Series 1998B 5.13% 4/15/22
------------
1,096,534
SPECIAL NON-PROPERTY TAX - 6.0%
GA Metropolitan Atlanta Rapid Transit Authority,
Series 1998A 6.25% 7/1/10 1,000,000 1,092,510
IL Metropolitan Pier & Exposition Authority, McCormick
Place expansion Project, Series 1992 A 7.25% 6/15/05
LA Sulphur Public Import Sales and Tse Tax,
Series 1993ST 5.65% 4/1/04 50,000 51,440
MI State, Underground Storage Tank Financial Assistance,
Series 1996I 6.00% 5/1/05
NM Santa Fe, Series 1996 A 6.50% 6/1/06
NY State Local Government Assistance Corp., Series C 6.00% 4/1/12 150,000 159,760
NY State Local Government Assistance Corp., Series 1993E 5.25% 4/24/61
------------
1,303,710
SPECIAL PROPERTY TAX - 3.1%
FL Stoneybrook Community Development District,
Series 1998B 5.70% 5/1/08
MO State Development Finance Board, Midtown Redevelopment
Project, Series 2000 6.00% 4/1/14 500,000 526,340
------------
526,340
TRANSPORTATION - 9.5%
AIR TRANSPORTATION - 2.0%
IL Chicago O'Hare International Airport, United Airlines,
Inc. Series 2000A 6.75% 11/1/11 200,000 204,426
OH Cleveland Series, 1999 5.70% 12/1/19
------------
204,426
TRANSPORTATION - 1.3%
CO State Department of Transportation, Series 2000 6.00% 6/15/12 500,000 533,075
DC Metropolitan Area Transit Authority 6.00% 7/1/07 250,000 265,375
WA Port of Seattle, Series A 6.00% 10/1/08 250,000 266,193
------------
1,064,643
AIRPORT - 4.6%
CO Denver City & County Airport Airport System,
Series 1992C 6.25% 11/15/00 50,000 50,270
FL Greater Orlando Aviation Authority, Series 1999A 5.25% 10/1/09 320,000 322,541
GA Atlanta, Airport Facilities, Series 1996 6.50% 1/1/07
IL Chicago, Midway Airport, Series 1994A 5.70% 1/1/04
IN State Transportation Finance Authority, Airport
Facilities Lease, Series 1992A 6.50% 11/1/07
NY Monroe County Airport Authority Greater Rochester
International Airport, Series 1999 5.75% 1/1/12 500,000 519,194
------------
892,005
TOLL FACILITIES - 1.6%
CO Public Highway Authority, Series 2000B (e) 9/1/18 500,000 171,100
OH State Turnpike Commission, Series 1996A 6.00% 2/15/06 500,000 528,230
OH State Turnpike Commission, Series 1998A 5.50% 2/15/24
PA State Turnpike Commission, Series 1998A 5.25% 12/1/14 500,000 493,020
------------
1,192,350
UTILITY - 23.0%
MUNICIPAL ELECTRIC - 0.9%
TX Lower Colorado River Authority, Series 1999A 5.50% 5/15/21
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS (Unaudited) STEIN ROE INTERMEDIATE PRO-FORMA
June 30, 2000 MUNICIPALS FUND COMBINED FUND
------------------------- ---------------------------
PAR VALUE PAR VALUE
--------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
NY State Dormitory Authority, New York City University,
Series A 5,000,000 5,124,900 5,500,000 5,637,390
NY State Urban Development Corp 500,000 511,665
NY State Urban Development Corp 500,000 514,085
OH State Higher Education Commission, Series II B. 500,000 519,350
------------ ------------
10,626,162 12,897,331
STATE GENERAL OBLIGATION - 4.7%
MA Massachusetts Bay Transportation Authority,
Series 1994A 2,250,000 2,514,510 2,250,000 2,514,510
MA State, Series 1998 C 500,000 501,140
MA State College Building Authority, Series 1994A 500,000 601,195 500,000 601,195
NJ State General Obligation, Series D 90,000 75,434
TX State, Series A 500,000 519,960
TX State, Series 1998B 3,250,000 3,149,413 3,250,000 3,149,413
------------ ------------
6,265,118 7,361,652
SPECIAL NON-PROPERTY TAX - 6.0%
GA Metropolitan Atlanta Rapid Transit Authority,
Series 1998A 1,000,000 1,092,510
IL Metropolitan Pier & Exposition Authority, McCormick
Place expansion Project, Series 1992 A 1,220,000 1,339,755 1,220,000 1,339,755
LA Sulphur Public Import Sales and Tse Tax,
Series 1993ST 50,000 51,440
MI State, Underground Storage Tank Financial Assistance,
Series 1996I 4,000,000 4,201,160 4,000,000 4,201,160
NM Santa Fe, Series 1996 A 1,555,000 1,683,085 1,555,000 1,683,085
NY State Local Government Assistance Corp., Series C 150,000 159,760
NY State Local Government Assistance Corp., Series 1993E 1,000,000 977,910 1,000,000 977,910
------------ ------------
8,201,910 9,505,620
SPECIAL PROPERTY TAX - 3.1%
FL Stoneybrook Community Development District,
Series 1998B 2,870,000 2,776,725 2,870,000 2,776,725
MO State Development Finance Board, Midtown Redevelopment
Project, Series 2000 1,500,000 1,579,020 2,000,000 2,105,360
------------ ------------
4,355,745 4,882,085
TRANSPORTATION - 9.5%
AIR TRANSPORTATION - 2.0%
IL Chicago O'Hare International Airport, United Airlines,
Inc. Series 2000A 1,200,000 1,226,556 1,400,000 1,430,982
OH Cleveland Series, 1999 2,000,000 1,683,920 2,000,000 1,683,920
------------ ------------
2,910,476 3,114,902
TRANSPORTATION - 1.3%
CO State Department of Transportation, Series 2000 1,000,000 1,066,150 1,500,000 1,599,225
DC Metropolitan Area Transit Authority 250,000 265,375
WA Port of Seattle, Series A 250,000 266,193
------------ ------------
1,066,150 2,130,793
AIRPORT - 4.6%
CO Denver City & County Airport Airport System,
Series 1992C 50,000 50,270
FL Greater Orlando Aviation Authority, Series 1999A 320,000 322,541
GA Atlanta, Airport Facilities, Series 1996 4,000,000 4,341,160 4,000,000 4,341,160
IL Chicago, Midway Airport, Series 1994A 1,000,000 1,025,790 1,000,000 1,025,790
IN State Transportation Finance Authority, Airport
Facilities Lease, Series 1992A 1,040,000 1,087,975 1,040,000 1,087,975
NY Monroe County Airport Authority Greater Rochester
International Airport, Series 1999 500,000 519,194
------------ ------------
6,454,925 7,346,930
TOLL FACILITIES - 1.6%
CO Public Highway Authority, Series 2000B 1,000,000 342,200 1,500,000 513,300
OH State Turnpike Commission, Series 1996A 500,000 528,230
OH State Turnpike Commission, Series 1998A 1,000,000 980,500 1,000,000 980,500
PA State Turnpike Commission, Series 1998A 500,000 493,020
------------ ------------
1,322,700 2,515,050
UTILITY - 23.0%
MUNICIPAL ELECTRIC - 0.9%
TX Lower Colorado River Authority, Series 1999A 1,500,000 1,447,575 1,500,000 1,447,575
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS (Unaudited) LIBERTY INTERMEDIATE
June 30, 2000 TAX-EXEMPT FUND
---------------------------
RATE MATURITY PAR VALUE
---- -------- ---------- ------------
<S> <C> <C> <C> <C>
WA Grant County Public Utilities, District Number 002
Electric System, Series 1993E 5.30% 1/1/03 50,000 50,478
------------
50,478
INVESTOR OWNED - 1.7%
MN Anoka county, Northern States Power Co., Series 1998 4.60% 12/1/08 125,000 117,334
NH State Business Finance Authority, United Illuminating
Co., Series 1999 5.40% 12/1/29
NV Clark County, Southern California Edison Co.,
Series 1990A 7.13% 6/1/09
------------
117,334
JOINT POWER AUTHORITY - 6.4%
GA Municipal Electric Authority Power, Series 1997Y 6.40% 1/1/13
NC Eastern Municipal Power Agency, Series 1993C 5.50% 1/1/07
NC State Municipal Power Agency, Catawba No. 1,
Series 1992 5.90% 1/1/03
SC Piedmont Municipal Power Agency, Series 1991A 6.13% 1/1/07
TX State Municipal Power Agency (e) 9/1/15 250,000 105,020
------------
105,020
INDEPENDENT POWER PRODUCE - 0.3%
MI Midland County Economic Development Corp., Series 2000 6.88% 7/23/09
WATER & SEWER - 13.7%
AR Beaver Water District, Benton & Washington Counties,
Series 1994 6.00% 11/15/04
AZ State Central Water Conservation District Central
Arizona Project, Series A 5.50% 11/1/08 250,000 259,280
CA Metropolitan Water District, Series 1998A 4.75% 7/1/22 500,000 436,330
DE State Economic Development Authority, Wilmington
Suburban Water Corp., Series 1992B 6.45% 12/1/07
IL Chicago, Series 1993 6.50% 11/1/09
IL Du Page County Special Service Area No. 11,
Series 1995 6.75% 1/1/14
MA State Water Pollution Abatement Trust, Series 1999A 6.00% 8/1/19
TN Metropolitan Government of Nashville & Davidson
Countries, Series 1993 6.50% 1/1/10
NY State Environmental Facilities Corp., Series 1994D 6.30% 5/15/05
TX Houston Water & Sewer System, Series C 5.90% 12/1/05 800,000 839,966
TX Houston Water Conveyance System, Series J 6.13% 12/15/06
TX Water Development Board, Series 1996B 5.13% 7/15/18
------------
1,535,576
TOTAL MUNICIPAL BONDS (COST $21,688,902, $128,948,190
AND $150,637,092) 22,101,333
OPTIONS - 0.1% CONTRACTS
September 2000 Treasury Bond Put, Strike Price 92.00,
Expiration 9/22/00 7,700,000 1,828
September 2000 Treasury Bond Call, Strike Price 100.00,
Expiration 9/22/00 16,100,000 12,235
------------
TOTAL OPTIONS (COST $40,624, $241,654, AND $282,278) 14,063
SHORT-TERM OBLIGATIONS - 0.1%
VARIABLE RATE DEMAND NOTE (c) - 0.1% PAR
IL Galesburg, Knox college, Series 1999 (cost $100,000) 4.75% 7/1/24
TOTAL INVESTMENTS - 98.5% 22,115,396
OTHER ASSETS, LESS LIABILITIES - 1.5% 302,396
------------
NET ASSETS - 100.0% $ 22,417,792
============
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS (Unaudited) STEIN ROE INTERMEDIATE PRO-FORMA
June 30, 2000 MUNICIPALS FUND COMBINED FUND
------------------------- ---------------------------
PAR VALUE PAR VALUE
--------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
WA Grant County Public Utilities, District Number 002
Electric System, Series 1993E 50,000 50,478
------------ ------------
1,447,575 1,498,053
INVESTOR OWNED - 1.7%
MN Anoka county, Northern States Power Co., Series 1998 125,000 117,334
NH State Business Finance Authority, United Illuminating
Co., Series 1999 1,000,000 999,500 1,000,000 999,500
NV Clark County, Southern California Edison Co.,
Series 1990A 1,500,000 1,541,985 1,500,000 1,541,985
------------ ------------
2,541,485 2,658,819
JOINT POWER AUTHORITY - 6.4%
GA Municipal Electric Authority Power, Series 1997Y 3,000,000 3,304,680 3,000,000 3,304,680
NC Eastern Municipal Power Agency, Series 1993C 3,100,000 3,060,072 3,100,000 3,060,072
NC State Municipal Power Agency, Catawba No. 1,
Series 1992 1,500,000 1,537,770 1,500,000 1,537,770
SC Piedmont Municipal Power Agency, Series 1991A 2,015,000 2,137,230 2,015,000 2,137,230
TX State Municipal Power Agency 250,000 105,020
------------ ------------
10,039,752 10,144,772
INDEPENDENT POWER PRODUCE - 0.3%
MI Midland County Economic Development Corp., Series 2000 500,000 501,875 500,000 501,875
WATER & SEWER - 13.7%
AR Beaver Water District, Benton & Washington Counties,
Series 1994 2,580,000 2,703,814 2,580,000 2,703,814
AZ State Central Water Conservation District Central
Arizona Project, Series A 250,000 259,280
CA Metropolitan Water District, Series 1998A 2,000,000 1,745,320 2,500,000 2,181,650
DE State Economic Development Authority, Wilmington
Suburban Water Corp., Series 1992B 1,165,000 1,250,965 1,165,000 1,250,965
IL Chicago, Series 1993 2,155,000 2,368,302 2,155,000 2,368,302
IL Du Page County Special Service Area No. 11,
Series 1995 1,090,000 1,162,213 1,090,000 1,162,213
MA State Water Pollution Abatement Trust, Series 1999A 2,500,000 2,634,274 2,500,000 2,634,274
TN Metropolitan Government of Nashville & Davidson
Countries, Series 1993 2,750,000 3,041,472 2,750,000 3,041,472
NY State Environmental Facilities Corp., Series 1994D 3,000,000 3,202,200 3,000,000 3,202,200
TX Houston Water & Sewer System, Series C 800,000 839,966
TX Houston Water Conveyance System, Series J 1,000,000 1,061,420 1,000,000 1,061,420
TX Water Development Board, Series 1996B 1,000,000 939,120 1,000,000 939,120
------------ ------------
20,109,100 21,644,676
TOTAL MUNICIPAL BONDS (COST $21,688,902, $128,948,190
AND $150,637,092) 133,480,473 155,581,806
OPTIONS - 0.1% CONTRACTS CONTRACTS
September 2000 Treasury Bond Put, Strike Price 92.00,
Expiration 9/22/00 7,700,000 10,828 15,400,000 12,656
September 2000 Treasury Bond Call, Strike Price 100.00,
Expiration 9/22/00 16,100,000 72,954 32,200,000 85,189
------------ ------------
TOTAL OPTIONS (COST $40,624, $241,654, AND $282,278) 83,782 97,845
SHORT-TERM OBLIGATIONS - 0.1%
VARIABLE RATE DEMAND NOTE (c) - 0.1% PAR PAR
IL Galesburg, Knox college, Series 1999 (cost $100,000) 100,000 100,000 100,000 100,000
------------ ------------
TOTAL INVESTMENTS - 98.5% 133,664,255 155,779,651
OTHER ASSETS, LESS LIABILITIES - 1.5% 2,217,447 2,463,949(f)
------------ ------------
NET ASSETS - 100.0% $135,881,702 $158,243,600(f)
============ ============
</TABLE>
<PAGE>
SCHEDULE OF INVESTMENTS (Unaudited)
JUNE 30, 2000
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) The Funds have been informed that each issuer has placed direct obligations
of the U.S. Government in an irrevocable trust, solely for the payment of
the principal and interest.
(c) Variable rate demand notes are considered short-term obligations. Interest
rates change periodically on specified dates. These securities are payable
on demand and are secured by either letters of credit or other credit
support agreements from banks. The rates are listed as of June 30, 2000.
(e) Zero coupon bond.
(f) Adjusted for one time proxy, accounting, legal and other costs of the
reorganization of $29,718 and $26,176 to be borne by Liberty Intermediate
Tax Exempt Fund and Stein Roe Intermediate Municipals Fund respectively.
STEIN ROE INTERMEDIATE MUNICIPALS FUND:
Short futures contracts open at June 30, 2000:
<TABLE>
<CAPTION>
PAR VALUE COVERED EXPIRATION UNREALIZED
TYPE BY CONTRACTS MONTH APPRECIATION
---- ------------ ----- ------------
<S> <C> <C> <C>
Treasury Note 5,300,000 September $157,941
</TABLE>
LIBERTY INTERMEDIATE TAX-EXEMPT FUND
Short futures contracts open at June 30, 2000:
<TABLE>
<CAPTION>
PAR VALUE COVERED EXPIRATION UNREALIZED
TYPE BY CONTRACTS MONTH DEPRECIATION
---- ------------ ----- ------------
<S> <C> <C> <C>
Treasury Bond 200,000 September ($5,307)
</TABLE>
<PAGE>
Part C. OTHER INFORMATION
Item 15. Indemnification
Article 9 of the Registrant's Amended and Restated Agreement and Declaration of
Trust, provides for indemnification of the Registrant's Trustees and officers.
The effect of the relevant section of Article 9 of the Registrant's Amended and
Restated Agreement and Declaration of Trust, 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
[Note: As used herein, the term "PEA" refers to a post- effective
amendment to the Registration Statement of the Registrant under the
Securities Act of 1933, No. 2-99356.]
(1) Form of Agreement and Declaration of Trust as amended and restated
dated July 28, 2000 (Exhibit (a)(1) to PEA #29.)*
(2)(a) By-Laws of Registrant as amended through 2/3/93.
(Exhibit 2 to PEA #21.)*
(b) Amendment to By-Laws dated 2/4/98. (Exhibit 2(b) to
PEA #26.)*
(3) None.
(4) Form of Agreement and Plan of Reorganization between Liberty Intermediate
Tax-Exempt Fund and Stein Roe Intermediate Municipals Fund
(5) Article 4, 5, 10,11 and 13 of the Registrant's Agreement and Declaration
of Trust and Article VII and X of the Registrant's By-Laws define the
rights of shareholders
(6) Management agreement between Registrant and Stein Roe & Farnham
Incorporated ("Stein Roe") relating to the series designated Stein Roe
Intermediate Municipals Fund dated 7/1/96 as amended through 2/2/98.
(Exhibit 5 to PEA #26.)*
(7) Underwriting agreement between Registrant and Liberty Funds
Distributor, Inc. dated 8/4/99.
(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) Custodian contract between Registrant and State Street Bank and Trust
Company ("Bank") dated 12/31/87 as amended through 5/8/95. (Exhibit 8 to
PEA #18.)*
(10) Rule 12b-1 Plan. (Exhibit (m) to PEA #27)*
(11) Opinion and consent of Ropes & Gray
(12)(a)Opinion and Consent of Counsel on Tax Matters and Consequences
to Shareholders of Bell, Boyd & Lloyd
(b)Opinion and Consent of Counsel on Tax Matters and Consequences
to Shareholders of Ropes & Gray
(13) None.
(14)(a)Consent of Independent Auditors/Accountants. (PWC)
(b)Consent of Independent Auditors/Accountants. (E&Y)
(15) None.
(16)(a)Power of Attorney for John Bacon, William Boyd, Lindsay Cook,
Douglas Hacker, Janet Kelly, Charles Nelson and Thomas Theobald.
(See PEA #28.)*
(b)Power of Attorney for Joseph R. Palombo
(17)(a)Rule 18f-3 Plan. (Exhibit (n) to PEA #27)*
(b) Revised Code of Ethics-filed as Exhibit 23(p) to Registration Statement
on Form N-1A to Liberty Funds Trust V (file #033-12109 and 811-05030)
filed on August 31, 2000 and hereby incorporated by reference and made a
part of this Registration Statement.
(c) Form of Proxy Card and Proxy Insert
(d) 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 Liberty Fund dated April 1, 2000 -
0000883163-00-000022
o As supplemented on August 18, 2000 - 0000021832-00-000181
o The Statement of Additional Information of the Liberty Fund dated April 1,
2000 - 0000883163-00-000022
o As supplemented on August 18, 2000 - 0000021832-00-000181
o The Statement of Additional Information of the Stein Roe Fund dated
November 1, 1999 - 0000773757-99-000097
o As supplemented on February 17, 2000 - 0000773757-00-000018
o The Report of Independent Accountants and financial statements included in
the Annual Report to Shareholders of the Liberty Fund dated November 30,
1999 - 0000950156-00-000045
o The financial statements included in the Liberty Fund's Semi-Annual Report
to Shareholders dated May 31, 2000 - 0000950156-00-000425
o The Statement of Additional Information of the Stein Roe Fund dated
November 8, 2000 relating to the Acquisition.
o The Report of Independent Auditors and financial statements included in
the Annual Report to Shareholders of the Stein Roe Fund dated June 30,
2000 - 0000891804-00-001725
--------------------------------------
*Incorporated by reference.
--------------------------------------
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>
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 18th day of October, 2000.
LIBERTY - STEIN ROE FUNDS MUNICIPAL TRUST
By: /s/ STEPHEN E GIBSON
---------------------------------
Stephen E. Gibson
President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated:
Signature Title Date
- ------------------------ ------------------- --------------
/s/ STEPHEN E. GIBSON President October 18, 2000
Stephen E. Gibson
Principal Executive Officer
/s/ PAMELA A. MCGRATH Treasurer October 18, 2000
Pamela A. McGrath
Principal Financial
and Accounting Officer
<PAGE>
JOHN A. BACON JR.* Trustee
John A. Bacon Jr.
WILLIAM W. BOYD* Trustee
William W. Boyd
LINDSAY COOK* Trustee
Lindsay Cook
DOUGLAS A. HACKER* Trustee
Douglas A. Hacker
JANET LANGFORD KELLY* Trustee
Janet Langford Kelly
CHARLES R. NELSON* Trustee
Charles R. Nelson
JOSEPH R. PALOMBO* Trustee
Joseph R. Palombo
THOMAS C. THEOBALD* Trustee
Thomas C. Theobald
/s/VINCENT P. PIETROPAOLO* October 18, 2000
Vincent P. Pietropaolo
Attorney-in-Fact for the Trustees
EXHIBIT INDEX
Exhibit Item
(4) Form of Agreement and Plan of Reorganization between Liberty Intermediate
Tax-Exempt Fund and Stein Roe Intermediate Municipals Fund
(11) Opinion and consent of Ropes & Gray
(12)(a)Opinion and Consent of Counsel on Tax Matters and Consequences
to Shareholders of Bell, Boyd & Lloyd
(b)Opinion and Consent of Counsel on Tax Matters and Consequences
to Shareholders of Ropes & Gray
(14)(a)Consent of Independent Auditors/Accountants. (PWC)
(b)Consent of Independent Auditors/Accountants. (E&Y)
(16)(b)Power of Attorney for Joseph R. Palombo
(17)(c) Form of Proxy Card and Proxy Insert
