As filed with the Securities and Exchange Commission on November 27, 2000
Registration No. 333-48148
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM N-14
_ _
|_|Pre-Effective Amendment No.__ |X| Post-Effective Amendment No._1_
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 December 27, 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 02111-2621
Dear Shareholder:
Your Fund will hold a special meeting on December 27, 2000 at 10:00 a.m.
Eastern Time, at the offices of Colonial Management Associates, Inc. You will be
asked to vote on the acquisition of your Fund and on the election of eleven
Trustees. A formal Notice of Special Meeting of Shareholders appears on the next
page, followed by the combined Prospectus/Proxy Statement which explains in more
detail the proposals to be considered. We hope that you can attend the Meeting
in person; however, we urge you in any event to vote your shares at your
earliest convenience.
Your Fund is part of one of several proposed acquisitions and liquidations
of funds in the Liberty and Stein Roe Fund groups proposed by Liberty Financial
Companies, Inc., the indirect parent of each of the investment advisors to the
Liberty and Stein Roe Funds. The overall purposes of these acquisitions and
liquidations include streamlining the product offerings of the Liberty and Stein
Roe Funds, potentially reducing fund expense ratios by creating larger funds and
permitting the Liberty Financial organization to concentrate its portfolio
management resources on a more focused group of portfolios. Please review the
enclosed Prospectus/Proxy Statement for a more detailed description of the
proposed acquisition of your Fund and the specific reasons it is being proposed.
YOUR VOTE IS IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. YOU CAN
VOTE EASILY AND QUICKLY BY MAIL, BY FAX (NOT AVAILABLE FOR ALL SHAREHOLDERS;
REFER TO ENCLOSED PROXY INSERT), BY PHONE OR IN PERSON. A SELF-ADDRESSED,
POSTAGE-PAID ENVELOPE HAS BEEN ENCLOSED FOR YOUR CONVENIENCE. PLEASE HELP YOUR
FUND AVOID THE EXPENSE OF A FOLLOW-UP MAILING BY VOTING TODAY!
Your Fund is using Shareholder Communications Corporation ("SCC"), a
professional proxy solicitation firm, to assist shareholders in the voting
process. As the date of the special meeting approaches, if we have not yet
received your vote, you may receive a telephone call from SCC reminding you to
exercise your right to vote.
Please take a few moments to review the details of each proposal. If you
have any questions regarding the combined Prospectus/Proxy Statement, please
feel free to call the contact number listed in the enclosed Prospectus/Proxy
Statement.
We appreciate your participation and prompt response in these matters and
thank you for your continued support.
Sincerely,
/s/Stephen E. Gibson
Stephen E. Gibson, President
November 24, 2000
G-60/610D-1000
<PAGE>
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD
DECEMBER 27, 2000
LIBERTY FUNDS TRUST IV
ONE FINANCIAL CENTER, BOSTON, MASSACHUSETTS 02111-2621
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. Eastern Time on
Wednesday, December 27, 2000, at the offices of Colonial Management Associates,
Inc., One Financial Center, Boston, Massachusetts 02111-2621, for these
purposes:
1. 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, Secretary
November 24, 2000
NOTICE: YOUR VOTE IS IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. YOU
CAN VOTE EASILY AND QUICKLY BY PHONE, BY MAIL, BY FAX (NOT AVAILABLE FOR
ALL SHAREHOLDERS; REFER TO ENCLOSED PROXY INSERT) OR IN PERSON. PLEASE
HELP YOUR FUND AVOID THE EXPENSE OF A FOLLOW-UP MAILING BY VOTING TODAY!
<PAGE>
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 02111-2621
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 02111-2621
1-800-426-3750
TABLE OF CONTENTS
<TABLE>
<S> <C>
QUESTIONS AND ANSWERS....................................... 3
PROPOSAL 1 -- Acquisition of the Liberty Intermediate
Tax-Exempt Fund by the Stein Roe Intermediate
Municipals Fund............................... 8
Principal Investment Risks................................ 8
Information about the Acquisition......................... 9
PROPOSAL 2 -- Election of Trustees.......................... 14
GENERAL..................................................... 18
Voting Information........................................ 18
Appendix A -- Agreement and Plan of Reorganization.......... A-1
Appendix B -- Fund Information.............................. B-1
Appendix C -- Capitalization................................ C-1
Appendix D -- Management's Discussion of Fund Performance
for the Stein Roe Intermediate Municipals
Fund.......................................... D-1
</TABLE>
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 02111-2621. Please read this Prospectus/Proxy Statement and keep
it for future reference.
Proposal 1 in this Prospectus/Proxy Statement relates to the proposed
acquisition of the 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 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 of the Stein Roe Fund 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.
1
<PAGE>
Proposal 2 in this Prospectus/Proxy Statement relates to the election of
Trustees of Liberty Funds Trust IV ("Trust IV"), of which the Liberty Fund is a
series.
Please review the enclosed Prospectus of the Stein Roe Fund for your class
of shares and the "Financial Highlights" section contained in the enclosed
Annual Report of the Stein Roe Fund. The enclosed Prospectus and the "Financial
Highlights" section contained in the enclosed Annual Report are incorporated in
this Prospectus/Proxy Statement by reference. The following documents have also
been filed with the Securities and Exchange Commission (the "SEC") and are
incorporated in this Prospectus/Proxy Statement by reference:
- The Prospectus of the Liberty Fund dated April 1, 2000, as supplemented
on August 18, 2000, October 23, 2000 and October 26, 2000.
- The Statement of Additional Information of the Liberty Fund dated April
1, 2000, as supplemented on August 18, 2000 and October 23, 2000.
- The Statement of Additional Information of the Stein Roe Fund dated
November 1, 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 you may 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 electronic request at the following e-mail
address: [email protected], or by writing the Public Reference Room, U.S.
Securities and Exchange Commission, Washington, DC 20549-0102. Information on
the operation of the Public Reference Room may be obtained by calling
202-942-8090.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS/PROXY STATEMENT IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
2
<PAGE>
QUESTIONS AND ANSWERS
THE FOLLOWING QUESTIONS AND ANSWERS 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.
1. WHAT IS BEING PROPOSED?
First, the Trustees of Trust IV 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 Liberty Fund shares as of the business 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 Trust IV 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 Trust IV recommend approval of the Acquisition. In reviewing the
Acquisition, the Trustees considered:
- that absent the Acquisition, Liberty Financial Companies, Inc. ("Liberty
Financial"), the indirect parent of the investment advisor to the Liberty
Fund, will recommend to the Trustees that the Fund be liquidated;
- that the Liberty Fund has not achieved sufficient sales growth and is not
likely to do so in the near future;
- that the Acquisition offers shareholders of the Liberty Fund an investment in
a larger fund with similar investment goals 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; and
- 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
<PAGE>
3. 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 Liberty Financial, the indirect parent of each Fund's
investment advisor, expects the combined fund to bear in the first year
following the Acquisition. The shareholder fees presented below for the Stein
Roe Fund apply both before and after giving effect to the Acquisition. Sales
charges of the Funds are paid directly by shareholders to Liberty Funds
Distributor, Inc., the Funds' distributor. Annual Fund Operating Expenses are
deducted from the Funds' assets. 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(1)
(paid directly from your investment)
<TABLE>
<CAPTION>
LIBERTY FUND STEIN ROE FUND
------------ --------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS S
<S> <C> <C> <C> <C> <C> <C> <C>
Maximum sales charge (load)
on purchases (%) (as a
percentage of the offering
price) 3.25 0.00 0.00 3.25 0.00 0.00 0.00
-------------------------------------------------------------------------------------------------------
Maximum deferred sales
charge (load) on redemptions
(%) (as a percentage of the
lesser of purchase price or
redemption price) 1.00(2) 4.00 1.00 1.00(2) 4.00 1.00 0.00
-------------------------------------------------------------------------------------------------------
Redemption fee (%) (as a
percentage of amount
redeemed, if applicable) (3) (3) (3) (3) (3) (3) (4)
</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 A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS S
<S> <C> <C> <C> <C> <C> <C> <C>
Management fee(5)(6)(7)(%) 0.55 0.55 0.55 0.58 0.58 0.58 0.58
-------------------------------------------------------------------------------------------------------
Distribution and service
(12b-1) fees(%) 0.20 0.85 0.85(8) 0.20 0.85 0.85(9) 0.00
-------------------------------------------------------------------------------------------------------
Other expenses(5)(7)(%) 0.74 0.74 0.74 0.23 0.23 0.23 0.23
-------------------------------------------------------------------------------------------------------
Total annual fund operating
expenses(5)(7)(%) 1.49 2.14 2.14(8) 1.01 1.66 1.66(9) 0.81
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
STEIN ROE FUND (PRO FORMA COMBINED)
-----------------------------------
CLASS A CLASS B CLASS C CLASS S
<S> <C> <C> <C> <C>
Management fee(10)(%) 0.58 0.58 0.58 0.58
------------------------------------------------------------------------------------------
Distribution and service (12b-1) fees(10)(%) 0.20 0.85 0.85 0.00
------------------------------------------------------------------------------------------
Other expenses(10)(%) 0.22 0.22 0.22 0.22
------------------------------------------------------------------------------------------
Total annual fund operating expenses(10)(%) 1.00 1.65 1.65 0.80
</TABLE>
---------------
(5) The Liberty Fund's investment 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
investment advisor at any time.
(6) The Stein Roe Fund's management fee includes both the management fee and
the administration fee charged to the Fund.
(7) The Stein Roe Fund's investment 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 0.47%,
other expenses for each share class would be 0.23% and total annual fund
operating expenses for Class A, B, C and S shares would be 0.90%, 1.55%,
1.55% and 0.70%, respectively. This arrangement may be modified or
terminated by the investment advisor at any time.
(8) 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.
(9) 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.
(10) The Stein Roe Fund's investment 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 0.48%,
other expenses for each share class would be 0.22% 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
investment 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
5
<PAGE>
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 $2,320
sold all your shares at end of period $617 $870 $1,149 $2,320
--------------------------------------------------------------------------------------------------
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 $573 $782 $1,008 $1,659
--------------------------------------------------------------------------------------------------
Class B: did not sell your shares $169 $523 $ 902 $1,791
sold all your shares at end of period $669 $823 $1,102 $1,791
--------------------------------------------------------------------------------------------------
Class C: did not sell your shares $169 $523 $ 902 $1,965
sold all your shares at end of period $269 $523 $ 902 $1,965
--------------------------------------------------------------------------------------------------
Class S $ 83 $259 $ 450 $1,003
--------------------------------------------------------------------------------------------------
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
--------------------------------------------------------------------------------------------------
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 duplicate costs involved in operating the Liberty
Fund are eliminated; and (3) expense ratios are based on pro forma combined
average net assets for the year ended June 30, 2000.
6
<PAGE>
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> <C> <C>
INVESTMENT GOAL: The Liberty Fund INVESTMENT GOAL: The Stein Roe
seeks as high a level of after-tax Fund seeks a high level of total
total return as is consistent with return, consisting of current
moderate volatility, by pursuing income exempt from federal income
current income exempt from federal tax, consistent with the
income tax and opportunities for preservation of capital.
long-term appreciation.
---------------------------------------------------------------------------------
PRIMARY INVESTMENT STRATEGIES: PRIMARY INVESTMENT STRATEGIES:
The Liberty Fund seeks to achieve The Stein Roe Fund seeks to
its goal as follows: achieve its goal as follows:
- At least 80% of the Fund's total - At least 80% of the Fund's
assets are invested in income will be exempt from federal
tax-exempt bonds that are income tax.
investment grade or unrated - The Fund invests primarily in
securities that the Fund's intermediate-term tax-exempt
investment advisor believes to bonds (generally with a
be of comparable quality. dollar-weighted average maturity
- The Fund may invest up to 25% of of 3 to 10 years).
its total assets in unrated - At least 75% of the Fund's total
bonds. assets are invested in
- The Fund maintains a weighted tax-exempt bonds that are
average maturity range of 3 to investment grade, unrated
10 years. securities that the Fund's
investment advisor believes to
be of comparable quality, or
backed by the U.S. government.
- The Fund may invest up to 25% of
its total assets in lower-rated
debt securities.
---------------------------------------------------------------------------------
</TABLE>
The following compares the primary investment strategies that each Fund uses to
achieve its investment goal:
- Both Funds invest in tax-exempt bonds. At least 80% of the Liberty Fund's
total assets are invested in tax-exempt bonds, and at least 80% of the
Stein Roe Fund's net assets will be invested in securities that produce
income that is exempt from federal income tax.
- At least 80% of the Liberty Fund's total assets are invested in
tax-exempt bonds that are investment grade or of comparable quality,
while at least 75% of the Stein Roe Fund's total assets are invested in
tax-exempt bonds that are investment grade or of comparable quality, or
backed by the U.S. government.
- The Liberty Fund may invest up to 25% of its total assets in unrated
bonds, while the Stein Roe Fund may invest up to 25% of its total assets
in lower-rated debt securities.
- Both Funds maintain a weighted average maturity range of 3 to 10 years.
The fundamental and non-fundamental investment policies of the Liberty Fund and
the Stein Roe Fund are similar, except as follows:
- The Stein Roe Fund, unlike the Liberty Fund, is permitted to have more
than 5% of its net assets invested in real estate acquired as a result of
owning securities.
<PAGE>
- 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
("AMT").
- In addition to the foregoing significant considerations, the Stein Roe
Fund has a number of investment restrictions to which the Liberty Fund is
not subject. 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 Prospectus
and 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. 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
contingent deferred sales charges ("CDSCs"), if applicable, as your current
shares. The shares will also have the same distribution, purchase and redemption
procedures as your current shares.
6. WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE 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.
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 this 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 principal risks
associated with each Fund are similar. Both Funds are subject to market risk,
interest rate risk, issuer risk, call risk and the risks related to tax-exempt
bonds. Market risk means that security prices in a market, sector or industry
may move down. Downward movements will reduce the value of your investment.
Interest rate risk is the risk of a change in the price of a bond when interest
rates increase or decline, and issuer risk is the possibility that changes in
the financial condition of the issuer of a security, changes in general economic
conditions, or changes in economic
8
<PAGE>
conditions that affect the issuer may impact its ability to make timely payments
of interest or principal, which could result in a decrease in the price of a
security. Call risk is the chance that during periods of falling interest rates,
a bond issuer will "call," or repay, its high-yielding bond before the bond's
maturity date. The Funds could experience a decline in income if they have to
reinvest the unanticipated proceeds at a lower rate. Tax-exempt bonds are
subject to special risks, including changes in tax laws or adverse
determinations by the Internal Revenue Service that may make the income from
some of these bonds taxable. In addition, bonds that are backed by the issuer's
taxing authority, known as general obligation bonds, may partially depend for
payment on legislative appropriation and/or aid from other governments. These
bonds may be vulnerable to legal limits on a government's power to raise revenue
or increase taxes. Other tax-exempt bonds, known as special revenue obligations,
are payable from revenues earned by a particular project or other revenue
source. These bonds are subject to greater risk of default than general
obligations because investors can look only to the revenue generated by the
project or private company, rather than to the credit of the state or local
government issuer of the bonds.
In addition, the Stein Roe Fund is exposed to the risks related to
lower-rated debt securities (sometimes referred to as "junk bonds"). Lower-rated
debt securities involve greater risk of loss due to credit deterioration and are
less liquid, especially during periods of economic uncertainty or change, than
higher quality debt securities. Lower-rated debt securities have the added risk
that the issuer of the security may default and not make payment of interest or
principal.
Because both Funds may invest in bonds subject to the federal AMT, the
interest income distributed by each Fund from certain tax-exempt bonds may be
subject to the federal AMT. As a fundamental policy that cannot be changed
without shareholder approval, the Liberty Fund may not invest more than 20% of
total Fund assets in bonds subject to the federal AMT. The Stein Roe Fund,
however, is not subject to this restriction. Therefore, by becoming a
shareholder of the Stein Roe Fund, you are more exposed to the risk that the
interest income that you receive as a distribution will be subject to the
federal AMT. For more information about the principal investment risks of the
Stein Roe Fund, please see the enclosed Prospectus of the Stein Roe Fund. The
actual risks of investing in each Fund depend on the securities held in each
Fund's portfolio and on market conditions, both of which change over time.
INFORMATION ABOUT THE ACQUISITION
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, a form of which is attached as Appendix A to this combined
Prospectus/Proxy Statement. Please review Appendix A. The following is a brief
summary of the principal terms of the Agreement and Plan of Reorganization:
- 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 asset 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
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 Trust IV
and the Liberty-Stein Roe Municipal Trust (the "Stein Roe Trust").
9
<PAGE>
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, plus any applicable CDSC. In addition, shares may be redeemed (at net
asset value plus any applicable CDSC) at any time prior to the consummation of
the 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 the Stein Roe Trust.
The rights of shareholders of Trust IV 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 Trust IV 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.
Information concerning the capitalization of each of the Funds is contained
in Appendix C.
Reasons for the Acquisition
The Trustees of each Trust, including all Trustees who are not "interested
persons" of the Trust, have determined that the Acquisition would be in the best
interests of each Fund, on balance in light of all relevant factors, and that
the interests of existing shareholders of each Fund would not be diluted as a
result of the Acquisition. For these reasons, the Trustees have unanimously
approved the Acquisition and recommend that you vote in favor of the Acquisition
by approving the Agreement and Plan of Reorganization, a form of which is
attached as Appendix A to this Prospectus/Proxy Statement. Each shareholder
should carefully consider whether remaining a shareholder of the Stein Roe Fund
after the Acquisition is consistent with that shareholder's financial needs and
circumstances.
The Acquisition is one of several proposed acquisitions and liquidations of
funds in the Liberty and Stein Roe Fund groups proposed by Liberty Financial,
the indirect parent of each of the investment advisors to the Liberty and Stein
Roe Funds. The overall purposes of these acquisitions and liquidations include
streamlining the product offerings of the Liberty and Stein Roe Funds,
potentially reducing fund expense ratios by creating larger funds and permitting
the Liberty Financial organization to concentrate its portfolio management
resources on a more focused group of portfolios.
10
<PAGE>
In proposing the Acquisition, Liberty Financial presented to the Trustees
the following reasons for the Liberty Fund to enter into the Acquisition:
- Absent the Acquisition, Liberty Financial indicated to the Trustees that
it will discontinue subsidizing the Liberty Fund's operations (through
fee waivers or expense reductions) and that it will recommend to the
Trustees that the Liberty Fund be liquidated. Liberty Financial informed
the Trustees that the Liberty Fund has not achieved sufficient sales
growth and is not likely to do so in the near future, and, therefore, the
Fund may not be able to provide a competitive investment return in the
absence of a subsidy.
- The Acquisition is intended to permit the Liberty Fund's shareholders to
exchange their investment for an investment in a larger fund with similar
investment goals and strategies to the Liberty Fund without 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.
- As a result of Liberty Financial's decision to discontinue its expense
subsidy of the Liberty Fund, the expense ratio of the Liberty Fund will
increase significantly if the Acquisition does not occur. If the
Acquisition does occur, then the expense ratio of the combined Stein Roe
Fund is expected to be materially lower than the Liberty Fund's expense
ratio after Liberty Financial discontinues 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 Fund and the Stein Roe
Fund on July 31, 2000 and the Funds' current expense structures (assuming
the Liberty Fund's voluntary expense limitation is discontinued), the
Stein Roe Fund's annualized expense ratio (excluding 12b-1 fees)
immediately after the Acquisition would be about 0.67% lower than the
Liberty Fund's current expense ratio (for example, a 0.70% expense ratio
for Class S of the Stein Roe Fund, as compared to 1.37% for Class A of
the Liberty Fund if the limitation were discontinued and 0.80% if it
continued). Note that the 12b-1 fees on Class A, B and C shares 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 of the Stein Roe Fund.
The Trustees also considered the differences in the Funds' investment
objectives, policies and strategies and the related risks. In addition, the
Trustees considered the relative Fund performance results which are based on the
factors and assumptions set forth below under "Performance Information." No
assurance can be given that the Stein Roe Fund will achieve any particular level
of performance after the Acquisition.
The projected post-Acquisition expense reductions presented above are based
on the Stein Roe Fund's current expense structure and the projected
post-Acquisition assets of the combined Fund. The projected reductions are
further based upon numerous material assumptions, including that: (1) the
current contractual agreements will remain in place; and (2) certain duplicate
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.
Performance Information
The charts below show the percentage gain or loss in each calendar year for
the 10-year period ending December 31, 1999 or, if shorter, since inception, for
the Class A shares of the Liberty Fund and the Class S shares of the Stein Roe
Fund. They should give you a general idea of how each Fund's return has varied
from year to year. The charts include the effects of Fund expenses, but not
sales charges (if applicable to the Fund's
11
<PAGE>
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.
LIBERTY FUND
[CHART]
<TABLE>
<S> <C>
The Fund's year-to-date total return through For period shows in bar chart:
September 30, 2000 was 5.27%. Best quarter: First quarter 1995, +4.80%
Worst quarter: First quarter 1994, -4.44%
</TABLE>
STEIN ROE FUND
[CHART]
<TABLE>
<S> <C>
The Fund's year-to-date total return through For period shown in bar chart:
September 30, 2000 was 5.30%. Best quarter: First quarter 1995, +4.73%
Worst quarter: First quarter 1994, -4.24%
</TABLE>
The following tables list each Fund's average annual total return for each
class of its shares for the one-year, five-year and ten-year (or, if shorter,
life of the Fund) periods ending December 31, 1999, including the applicable
sales charges. Class A, B, and C shares of the Stein Roe Fund are not included
in the tables as they were not in existence as of December 31, 1999. These
tables are intended to provide you with some indication
12
<PAGE>
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*
<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.
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.
(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. Ropes & Gray
has delivered to the Liberty Fund, and Bell, Boyd & Lloyd LLC has delivered to
the Liberty Fund and the Stein Roe Fund, an opinion to the effect that, on the
basis of existing law under specified sections of the Internal Revenue Code of
1986, as amended (the "Code"), for federal income tax purposes:
- under Section 361 or Section 354 of the Code, respectively, no gain or
loss will be recognized by 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;
- 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;
13
<PAGE>
- 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 closing of the Acquisition is conditioned on receipt of a letter from
each of Ropes & Gray and Bell, Boyd & Lloyd LLC confirming the above opinions.
The opinions are, and the confirmation letters will be, based on certain factual
certifications made by officers of each Trust. The opinions are not a guarantee
that the tax consequences of the 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 that have not previously been
distributed to shareholders. Such distributions will be taxable to the
shareholders of the respective Funds.
This description of the federal income tax consequences of the 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 TRUST IV 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
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 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 other Liberty open-end trusts (or, in
the case of Messrs. Lowry, Mayer and Neuhauser, eleven Liberty closed-end funds
and eight other Liberty open-end trusts (collectively, the "Liberty Mutual
Funds")), and have served in that capacity continuously since originally elected
or appointed. All of the currently serving members, other than Mr. Palombo, have
been previously elected by the shareholders of Trust 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 (collectively, the "Stein Roe Mutual
Funds"), and were recommended for election as Trustees of the Liberty Mutual
Funds by the Board of Trustees at meetings held on October 25 and 26, 2000. Each
of the nominees elected will serve as a Trustee of Trust IV until the next
meeting of
14
<PAGE>
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 Mutual 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 Mutual Funds. Creation of a
single, consolidated board should also provide certain administrative
efficiencies for Liberty Financial and potential future cost savings for both
the Liberty and Stein Roe Mutual Funds and Liberty Financial. The nominees
listed below will be the members of the single, consolidated Board of Trustees.
The persons named in the enclosed proxy card intend to vote at the 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
proxy may be voted for a substitute nominee in the discretion of the proxy
holder(s).
INFORMATION ABOUT THE NOMINEES
Set forth below is information concerning each of the nominees.
<TABLE>
<CAPTION>
NOMINEE NAME & AGE PRINCIPAL OCCUPATION(1) AND DIRECTORSHIPS TRUSTEE SINCE
------------------ ----------------------------------------- -------------
<S> <C> <C>
Douglas A. Hacker Executive Vice President and Chief Financial Officer New nominee
(43) of UAL, Inc. (airline) since July 1999; Senior Vice
President and Chief Financial Officer of UAL, Inc.
prior thereto.
Janet Langford Kelly Executive Vice President -- Corporate Development, New nominee
(41) General Counsel, and Secretary of Kellogg Company
(food, beverage and tobacco producer) since September
1999; Senior Vice President, Secretary and General
Counsel of Sara Lee Corporation (branded, packaged,
consumer-products manufacturer) prior thereto.
Richard W. Lowry Private Investor since 1987. (Formerly Chairman and 1995
(64) Chief Executive Officer of U.S. Plywood Corporation
(building products producer) from August 1985 to
August 1987.)
Salvatore Macera Private Investor since 1981. (Formerly Executive Vice 1998
(69) President and Director of Itek Corporation
(electronics) from 1975 to 1981.)
William E. Mayer(2) Partner, Park Avenue Equity Partners (venture 1994
(60) capital), since November 1996; Dean, College of
Business and Management, University of Maryland, prior
thereto; Director, Johns Manville (building products
producer), Lee Enterprises (print and on-line media)
and WR Hambrecht + Co. (financial services provider).
Charles R. Nelson Van Voorhis Professor, Department of Economics, New nominee
(57) University of Washington; Consultant on economic and
statistical matters.
John J. Neuhauser Academic Vice President and Dean of Faculties, Boston 1985
(57) College, since August 1999; Dean, Boston College
School of Management, prior thereto.
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
NOMINEE NAME & AGE PRINCIPAL OCCUPATION(1) AND DIRECTORSHIPS TRUSTEE SINCE
------------------ ----------------------------------------- -------------
<S> <C> <C>
Joseph R. Palombo(3) Trustee of the Stein Roe Mutual Funds since October 2000
(47) 2000; Executive Vice President and Director of
Colonial and Stein Roe & Farnham Incorporated ("Stein
Roe") since April 1999; Executive Vice President and
Chief Administrative Officer of Liberty Funds Group
LLC since April 1999; Director of AlphaTrade Inc.
(broker-dealer), Colonial Advisory Services, Inc.,
Liberty Funds Distributor, Inc. and Liberty Funds
Services, Inc. since April 1999. (Formerly Vice
President of the Stein Roe Mutual Funds from April
1999 to October 2000, Vice President of the Liberty
Mutual Funds from April 1999 to August 2000, and Chief
Operating Officer of Putnam Mutual Funds (investments)
from 1994 to 1998.)
Thomas E. Stitzel Business Consultant since 1999; Professor of Finance 1998
(64) and Dean, College of Business, Boise State University,
prior thereto; Chartered Financial Analyst.
Thomas C. Theobald Managing Director, William Blair Capital Partners New nominee
(62) (private equity investing), since 1994; Chief
Executive Officer and Chairman of the Board of
Directors of Continental Bank Corporation (banking
services) prior thereto.
Anne-Lee Verville Consultant since 1997; General Manager, Global 1998
(55) Education Industry (global education applications),
prior thereto. (Formerly President, Applications
Solutions Division, IBM Corporation (global education
and global applications), from 1991 to 1994.)
</TABLE>
---------------
(1) Except as otherwise noted, each individual has held the office indicated or
other offices in the same company for the last five years.
(2) Mr. Mayer is not affiliated with Liberty Financial, but is an "interested
person," as defined in the Investment Company Act of 1940, as amended (the
"1940 Act"), because of his affiliation with WR Hambrecht + Co. (a
registered broker-dealer).
(3) Mr. Palombo is an "interested person," as defined in the 1940 Act, because
of his affiliation with Liberty Financial.
The following persons who are currently serving on the Board of Trustees of
Trust IV are not standing for reelection:
<TABLE>
<CAPTION>
TRUSTEE NAME & AGE PRINCIPAL OCCUPATION(1) AND DIRECTORSHIPS TRUSTEE SINCE
------------------ ----------------------------------------- -------------
<S> <C> <C>
Tom Bleasdale Retired (formerly Chairman of the Board and Chief 1987
(70) Executive Officer, Shore Bank & Trust Company
(banking services) from 1992 to 1993); Director,
Empire Co. (food distributor).
Lora S. Collins Attorney (formerly Attorney, Kramer Levin Naftalis & 1991
(65) Frankel LLP (law firm) from 1986 to 1996).
James E. Grinnell Private investor since November 1988. 1995
(72)
James L. Moody, Jr. Retired (formerly Chairman of the Board, Hannaford 1986
(70) Bros. Co. (food retailer) from 1984 to 1997 and
Chief Executive Officer prior thereto).
</TABLE>
---------------
(1) Except as otherwise noted, each individual has held the office indicated or
other offices in the same company for the last five years.
Trustees' Compensation
The members of the Board of Trustees will serve as Trustees of the Liberty
and Stein Roe Mutual Funds, for which service each Trustee, except for Mr.
Palombo, will receive an annual retainer of $45,000, and attendance fees of
$8,000 for each regular joint meeting and $1,000 for each special joint meeting.
The Board
16
<PAGE>
of Trustees is expected to hold six regular joint meetings each year. Committee
chairs will receive an additional annual retainer of $5,000, and receive $1,000
for each special meeting attended on a day other than a regular joint meeting
day. Committee members will receive an additional annual retainer of $1,000, and
receive $1,000 for each special meeting attended on a day other than a regular
joint meeting day. Two-thirds of the Trustees' fees are allocated among the
Liberty and Stein Roe Mutual Funds based on each Fund's relative net assets, and
one-third of the fees is divided equally among the Liberty and Stein Roe Mutual
Funds.
The Liberty Mutual Funds do not currently provide pension or retirement
plan benefits to the Trustees. However, certain Trustees currently serving on
the Board of Trustees of the Liberty Mutual Funds who are not continuing on the
combined Board of Trustees of the Liberty and Stein Roe Mutual Funds will
receive payments at an annual rate equal to their 1999 Trustee compensation for
the lesser of two years or until the date they would otherwise have retired at
age 72. These payments will be made quarterly, beginning in 2001. Liberty
Financial and the Liberty Mutual Funds will each bear one-half of the cost of
the payments; the Liberty Mutual Funds' portion of the payments will be
allocated among the Liberty Mutual Funds based on each fund's share of the
Trustee fees for 2000.
Further information concerning the Trustees' compensation is included in
Appendix B.
Meetings and Certain Committees
Composition. The current Board of Trustees of the Liberty Mutual Funds
consists of two interested and nine non-interested Trustees. Mr. Mayer is not
affiliated with Liberty Financial or any of its investment advisor affiliates,
but is considered interested as a result of his affiliation with a
broker-dealer. Mr. Palombo is an interested person because of his affiliation
with Liberty Financial.
Audit Committee. The Audit Committee of the Liberty Mutual Funds,
consisting of Ms. Verville (Chairperson) and Messrs. Bleasdale, Grinnell, Lowry,
Macera and Moody, all of whom are non-interested Trustees, recommends to the
Board of Trustees the independent accountants to serve as auditors, reviews with
the independent accountants the results of the auditing engagement and internal
accounting procedures and considers the independence of the independent
accountants, the range of their audit services and their fees.
Compensation Committee. The Compensation Committee of the Liberty Mutual
Funds, consisting of Messrs. Neuhauser (Chairman), Grinnell and Stitzel and Ms.
Collins, all of whom are non-interested Trustees, reviews compensation of the
Board of Trustees.
Governance Committee. The Governance Committee of the Liberty Mutual
Funds, consisting of Messrs. Bleasdale (Chairman), Lowry, Mayer and Moody and
Ms. Verville, all of whom are non-interested Trustees, except for Mr. Mayer (Mr.
Mayer is interested as a result of his affiliation with a broker-dealer, but is
not affiliated with Liberty Financial or any of its investment advisor
affiliates), recommends to the Board of Trustees, among other things, nominees
for trustee and for appointments to various committees. The Committee will
consider candidates for trustee recommended by shareholders. Written
recommendations with supporting information should be directed to the Committee
in care of Trust IV, Attention: Secretary, One Financial Center, Boston,
Massachusetts 02111-2621.
Record of Board and Committee Meetings. During the fiscal year ended
November 30, 1999, the Board of Trustees of Trust IV (excluding the 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 was a member.
17
<PAGE>
THE BOARD OF TRUSTEES RECOMMENDS THAT THE SHAREHOLDERS OF THE LIBERTY FUND VOTE
FOR EACH NOMINEE IN PROPOSAL 2.
Required Vote for Proposal 2
A plurality of the votes cast at the Meeting for Trust IV, 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 02111-2621. The meeting notice, this
combined Prospectus/Proxy Statement and proxy cards and inserts 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
or Colonial and its affiliated companies. In addition, Shareholder
Communications Corporation ("SCC") has been engaged to assist in the
solicitation of proxies, at an estimated total cost of $700,000 for all of the
proposed acquisitions of funds in the Liberty and Stein Roe Mutual Fund groups
scheduled to take place in January 2001.
Voting Process
You can vote in any one of the following four ways:
a. By mail, by filling out and returning the enclosed proxy card;
b. By phone, by calling toll-free 1-877-518-9416 between the hours of 9:00
a.m. and 11:00 p.m. Eastern Time and following the instructions;
c. By fax (not available for all shareholders; refer to enclosed proxy
insert); or
d. In person at the 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. If you choose to vote by mail or by fax,
and you are an individual account owner, please sign exactly as your name
appears on the proxy card. Either owner of a joint account may sign the proxy
card, but the signer's name must exactly match the name that appears on the
card.
Costs. The estimated costs of the Meeting, including the costs of
soliciting proxies, and the costs of the Acquisition to be borne by the Liberty
Fund and the Stein Roe Fund are approximately $33,000 and $21,000, respectively.
Liberty Financial is also bearing a portion of such costs. This portion to be
borne by Liberty Financial is in addition to the amounts to be borne by the
Funds.
Voting and Tabulation of Proxies. Shares represented by duly executed
proxies will be voted as instructed on the proxy card. If no instructions are
given, the proxy will be voted in favor of each Proposal. You can revoke your
proxy by sending a signed, written letter of revocation to the Secretary of the
Liberty Fund, by properly executing and submitting a later-dated proxy or by
attending the Meeting and voting in person.
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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 Liberty 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.
Advisors', Administrator's and Underwriter'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 02111-2621. The address of the Stein Roe Fund's investment
advisor, Stein Roe & Farnham Incorporated, is One South Wacker Drive, Chicago,
Illinois 60606. The address of each Fund's principal underwriter, Liberty Funds
Distributor, Inc., is One Financial Center, Boston, Massachusetts 02111-2621.
Information About Liberty Financial. On November 1, 2000, Liberty
Financial announced that it had retained CS First Boston to help it explore
strategic alternatives, including the possible sale of Liberty Financial.
Outstanding Shares and Significant Shareholders. Appendix B to this
Prospectus/Proxy Statement lists for the 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 and the Stein Roe Trust the total number of shares
outstanding as of September 29, 2000. It also identifies holders of more than 5%
or 25% of any class of shares of each Fund, and contains information about the
executive officers and Trustees of the Trusts and their shareholdings in the
Funds and Trusts.
Adjournments; Other Business. If the Liberty Fund or Trust IV, as
applicable, 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 or Trust IV, as applicable, 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
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 Liberty 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. Shareholder proposals should be sent to the Liberty
Fund, care of Trust IV, Attention: Secretary, One Financial Center, Boston,
Massachusetts 02111-2621.
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APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION dated as of October 26, 2000 is
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 the Acquiring Fund of the liabilities of the Acquired Fund (other
than certain expenses of the reorganization contemplated hereby) and the
distribution of such Acquiring Shares to the shareholders of the Acquired Fund
in liquidation of the Acquired Fund, all upon the terms and conditions set forth
in this Agreement.
In consideration of the premises and of the covenants and agreements
hereinafter set forth, the parties hereto covenant and agree as follows:
1. TRANSFER OF ASSETS OF ACQUIRED FUND IN EXCHANGE FOR ASSUMPTION OF LIABILITIES
AND ACQUIRING SHARES AND LIQUIDATION OF ACQUIRED FUND.
1.1 Subject to the terms and conditions herein set forth and on the basis
of the representations and warranties contained herein,
(a) The Trust, on behalf of the Acquired Fund, will transfer and deliver
to the Acquiring Fund, and the Acquiring Fund will acquire, all the
assets of the Acquired Fund as set forth in paragraph 1.2;
(b) The Acquiring Fund will assume all of the Acquired Fund's
liabilities and obligations of any kind whatsoever, whether
absolute, accrued, contingent or otherwise in existence on the
Closing Date (as defined in paragraph 1.2 hereof) (the
"Obligations"), except that expenses of reorganization contemplated
hereby to be paid by the Acquired Fund pursuant to paragraphs 1.5
and 9.2 shall not be assumed or paid by the Acquiring Fund; and
(c) The Acquiring Fund will issue and deliver to the Acquired Fund in
exchange for such assets the number of Acquiring Shares (including
fractional shares, if any) determined by dividing the net asset
value of the Acquired Fund, computed in the manner and as of the
time and date set forth in paragraph 2.1, by the net asset value of
one Acquiring Share, computed in the manner and as of the time and
date set forth in paragraph 2.2. Such transactions shall take place
at the closing provided for in paragraph 3.1 (the "Closing").
1.2 The assets of the Acquired Fund to be acquired by the Acquiring Fund
shall consist of all cash, securities, dividends and interest
receivable, receivables for shares sold and all other assets which are
owned by the Acquired Fund on the closing date provided in paragraph
3.1 (the "Closing Date") and any deferred expenses, other than
unamortized organizational expenses, shown as an asset on the books of
the Acquired Fund on the Closing Date.
1.3 As provided in paragraph 3.4, as soon after the Closing Date as is
conveniently practicable (the "Liquidation Date"), the Acquired Fund
will liquidate and distribute pro rata to its shareholders of record
("Acquired Fund Shareholders"), determined as of the close of business
on the Valuation Date (as defined in paragraph 2.1), the Acquiring
Shares received by the Acquired Fund pursuant to
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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 the Acquiring Fund in the names of the Acquired
Fund Shareholders and representing the respective pro rata number of
Acquiring Shares due such shareholders. The Acquiring Fund shall not be
obligated to issue certificates representing Acquiring Shares in
connection with such exchange.
1.4 With respect to Acquiring Shares distributable pursuant to paragraph
1.3 to an Acquired Fund Shareholder holding a certificate or
certificates for shares of the Acquired Fund, if any, on the Valuation
Date, the Acquiring Trust will not permit such shareholder to receive
Acquiring Share certificates therefor, exchange such Acquiring Shares
for shares of other investment companies, effect an account transfer of
such Acquiring Shares, or pledge or redeem such Acquiring Shares until
the Acquiring Trust has been notified by the Acquired Fund or its agent
that such Acquired Fund Shareholder has surrendered all his or her
outstanding certificates for Acquired Fund shares or, in the event of
lost certificates, posted adequate bond.
1.5 [RESERVED]
1.6 As promptly as possible after the Closing Date, the Acquired Fund shall
be terminated pursuant to the provisions of the laws of the
Commonwealth of Massachusetts, and, after the Closing Date, the
Acquired Fund shall not conduct any business except in connection with
its liquidation.
2. VALUATION.
2.1 For the purpose of paragraph 1, the value of the Acquired Fund's assets
to be acquired by the Acquiring Fund hereunder shall be the net asset
value computed as of the close of regular trading on the New York Stock
Exchange on the business day next preceding the Closing (such time and
date being herein called the "Valuation Date") using the valuation
procedures set forth in the Declaration of Trust of the Acquiring Trust
and the then current prospectus or statement of additional information
of the Acquiring Fund, after deduction for the expenses of the
reorganization contemplated hereby to be paid by the Acquired Fund
pursuant to paragraphs 1.5, and shall be certified by the Acquired
Fund.
2.2 For the purpose of paragraph 2.1, the net asset value of an Acquiring
Share shall be the net asset value per share computed as of the close
of regular trading on the New York Stock Exchange on the Valuation
Date, using the valuation procedures set forth in the Declaration of
Trust of the Acquiring Trust and the then current prospectus or
prospectuses and the statement or statements of additional information
of the Acquiring Fund (collectively, as from time to time amended and
supplemented, the "Acquiring Fund Prospectus").
3. CLOSING AND CLOSING DATE.
3.1 The Closing Date shall be on January 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
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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.
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;
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(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 PricewaterhouseCoopers
LLP and the statement of assets, the statement of changes in net
assets and the schedule of investments for the six months ended May
31, 2000, copies of which have been furnished to the 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 or statements of additional information (collectively, as
amended or supplemented from time to time, the "Acquired Fund
Prospectus")), non-
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assessable by the Acquired Fund and will have been issued in
compliance with all applicable registration or qualification
requirements of federal and state securities laws. No options,
warrants or other rights to subscribe for or purchase, or
securities convertible into, any shares of beneficial interest of
the Acquired Fund are outstanding and none will be outstanding on
the Closing Date (except that Class B shares of the Acquired Fund
convert automatically into Class A shares, as set forth in the
Acquired Fund Prospectus);
(k) The Acquired Fund's investment operations from inception to the
date hereof have been in compliance in all material respects with
the investment policies and investment restrictions set forth in
its prospectus and statement of additional information as in effect
from time to time, except as previously disclosed in writing to the
Acquiring Fund;
(l) The execution, delivery and performance of this Agreement has been
duly authorized by the Trustees of the Trust, and, upon approval
thereof by the required majority of the shareholders of the
Acquired Fund, this Agreement will constitute the valid and binding
obligation of the Acquired Fund enforceable in accordance with its
terms except as the same may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of
creditors' rights generally and other equitable principles;
(m) The Acquiring Shares to be issued to the Acquired Fund pursuant to
paragraph 1 will not be acquired for the purpose of making any
distribution thereof other than to the Acquired Fund Shareholders
as provided in paragraph 1.3;
(n) The information provided by the Acquired Fund for use in the
Registration Statement and Proxy Statement referred to in paragraph
5.3 shall be accurate and complete in all material respects and
shall comply with federal securities and other laws and regulations
applicable thereto;
(o) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the
Acquired Fund of the transactions contemplated by this Agreement,
except such as may be required under the Securities Act of 1933, as
amended (the "1933 Act"), the Securities Exchange Act of 1934, as
amended (the "1934 Act"), the 1940 Act and state insurance,
securities or "Blue Sky" laws (which term as used herein shall
include the laws of the District of Columbia and of Puerto Rico);
(p) At the Closing Date, the Trust, on behalf of the Acquired Fund,
will have good and marketable title to its assets to be transferred
to the Acquiring Fund pursuant to paragraph 1.1 and will have full
right, power and authority to sell, assign, transfer and deliver
the Investments (as defined below) and any other assets and
liabilities of the Acquired Fund to be transferred to the Acquiring
Fund pursuant to this Agreement. At the Closing Date, subject only
to the delivery of the Investments and any such other assets and
liabilities and payment therefor as contemplated by this Agreement,
the Acquiring Fund will acquire good and marketable title thereto
and will acquire the Investments and any such other assets and
liabilities subject to no encumbrances, liens or security interests
whatsoever and without any restrictions upon the transfer thereof,
except as previously disclosed to the Acquiring Fund. As used in
this Agreement, the term "Investments" shall mean the Acquired
Fund's investments shown on the schedule of its investments as of
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
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investment restrictions as are set forth in the Acquiring Fund
Prospectus, as amended through the Closing Date; and
(r) No registration of any of the Investments would be required if they
were, as of the time of such transfer, the subject of a public
distribution by either of the Acquiring Fund or the Acquired Fund,
except as previously disclosed by the Acquired Fund to the
Acquiring Fund.
4.2 The Acquiring Trust, on behalf of the Acquiring Fund, represents and
warrants the following to the Trust and to the Acquired Fund as of the
date hereof and agrees to confirm the continuing accuracy and
completeness in all material respects of the following on the Closing
Date:
(a) The Acquiring Trust is a business trust duly organized, validly
existing and in good standing under the laws of The Commonwealth of
Massachusetts;
(b) The Acquiring Trust is a duly registered investment company
classified as a management company of the open-end type and its
registration with the Securities and Exchange Commission as an
investment company under the 1940 Act is in full force and effect,
and the Acquiring Fund is a separate series thereof duly designated
in accordance with the applicable provisions of the Declaration of
Trust of the Acquiring Trust and the 1940 Act;
(c) The Acquiring Fund Prospectus conforms in all material respects to
the applicable requirements of the 1933 Act and the rules and
regulations of the Securities and Exchange Commission thereunder
and does not include any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and there
are no material contracts to which the Acquiring Fund is a party
that are not referred to in such Prospectus or in the registration
statement of which it is a part;
(d) At the Closing Date, the Acquiring Fund will have good and
marketable title to its assets;
(e) The Acquiring Trust is not in violation in any material respect of
any provisions of its Declaration of Trust or By-laws or of any
agreement, indenture, instrument, contract, lease or other
undertaking to which the Acquiring Trust is a party or by which the
Acquiring Fund is bound, and the execution, delivery and
performance of this Agreement will not result in any such
violation;
(f) No litigation or administrative proceeding or investigation of or
before any court or governmental body is presently pending or
threatened against the Acquiring Fund or any of its properties or
assets. The Acquiring Fund knows of no facts which might form the
basis for the institution of such proceedings, and is not a party
to or subject to the provisions of any order, decree or judgment of
any court or governmental body which materially and adversely
affects its business or its ability to consummate the transactions
contemplated hereby;
(g) The statement of assets, the statement of operations, the statement
of changes in assets and the schedule of investments as at and for
the two years ended 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;
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(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, 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;
(o) The information to be furnished by the Acquiring Fund for use in
the Registration Statement and Proxy Statement referred to in
paragraph 5.3 shall be accurate and complete in all material
respects and shall comply with federal securities and other laws
and regulations applicable thereto; and
(p) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the
Acquiring Fund of the transactions contemplated by this Agreement,
except such as may be required under 1933 Act, the 1934 Act, the
1940 Act and state insurance, securities or "Blue Sky" laws (which
term as used herein shall include the laws of the District of
Columbia and of Puerto Rico).
A-7
<PAGE>
5. COVENANTS OF THE ACQUIRED FUND AND THE ACQUIRING FUND.
The Acquiring Trust, on behalf of the Acquiring Fund, and the Trust, on
behalf of the Acquired Fund, each hereby covenants and agrees with the other as
follows:
5.1 The Acquiring Fund and the Acquired Fund each will operate its business
in the ordinary course between the date hereof and the Closing Date, it
being understood that such ordinary course of business will include
regular and customary periodic dividends and distributions.
5.2 The Acquired Fund will call a meeting of its shareholders to be held
prior to the Closing Date to consider and act upon this Agreement and
take all other reasonable action necessary to obtain the required
shareholder approval of the transactions contemplated hereby.
5.3 In connection with the Acquired Fund shareholders' meeting referred to
in paragraph 5.2, the Acquired Fund will prepare a Proxy Statement for
such meeting, to be included in a Registration Statement on Form N-14
(the "Registration Statement") which the Acquiring Trust will prepare
and file for the registration under the 1933 Act of the Acquiring
Shares to be distributed to the Acquired Fund shareholders pursuant
hereto, all in compliance with the applicable requirements of the 1933
Act, the 1934 Act, and the 1940 Act.
5.4 The information to be furnished by the Acquired Fund for use in the
Registration Statement and the information to be furnished by the
Acquiring Fund for use in the Proxy Statement, each as referred to in
paragraph 5.3, shall be accurate and complete in all material respects
and shall comply with federal securities and other laws and regulations
thereunder applicable thereto.
5.5 The Acquiring Fund will advise the Acquired Fund promptly if at any
time prior to the Closing Date the assets of the Acquired Fund include
any securities which the Acquiring Fund is not permitted to acquire.
5.6 Subject to the provisions of this Agreement, the Acquired Fund and the
Acquiring Fund will each take, or cause to be taken, all action, and do
or cause to be done, all things reasonably necessary, proper or
advisable to cause the conditions to the other party's obligations to
consummate the transactions contemplated hereby to be met or fulfilled
and otherwise to consummate and make effective such transactions.
5.7 The Acquiring Fund will use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act and
such of the state securities or "Blue Sky" laws as it may deem
appropriate in order to continue its operations after the Closing Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND.
The obligations of the Acquired Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by the
Acquiring Trust and the Acquiring Fund of all the obligations to be performed by
them hereunder on or before the Closing Date and, in addition thereto, to the
following further conditions:
6.1 The Acquiring Trust, on behalf of the Acquiring Fund, shall have
delivered to the Trust a certificate executed in its name by its
President or Vice President and its Treasurer or Assistant Treasurer,
in form satisfactory to the Trust and dated as of the Closing Date, to
the effect that the representations and warranties of the Acquiring
Trust on behalf of the Acquiring Fund made in this Agreement are true
and correct at and as of the Closing Date, except as they may be
affected by the transactions contemplated by this Agreement, and that
the Acquiring Trust and the Acquiring Fund have complied with all the
covenants and agreements and satisfied all of the conditions on their
parts to be performed or satisfied under this Agreement at or prior to
the Closing Date.
A-8
<PAGE>
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
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.
A-9
<PAGE>
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
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.
A-10
<PAGE>
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.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH OF THE ACQUIRING FUND AND
THE ACQUIRED FUND.
The respective obligations of the Trust and the Acquiring Trust hereunder
are each subject to the further conditions that on or before the Closing Date:
8.1 This Agreement and the transactions contemplated herein shall have been
approved by the vote of the required majority of the holders of the
outstanding shares of the Acquired Fund of record on the record date
for the meeting of its shareholders referred to in paragraph 5.2.
8.2 On the Closing Date no action, suit or other preceding shall be pending
before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection
with, this Agreement or the transactions contemplated hereby.
8.3 All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities (including
those of the Securities and Exchange Commission and of state Blue Sky
and securities authorities) deemed necessary by the Trust or the
Acquiring Trust to permit consummation, in all material respects, of
the transactions contemplated hereby shall have been obtained, except
where failure to obtain any such consent, order or permit would not
involve a risk of a material adverse effect on the assets or properties
of the Acquiring Fund or the Acquired Fund.
8.4 The Registration Statement referred to in paragraph 5.3 shall have
become effective under the 1933 Act and no stop order suspending the
effectiveness thereof shall have been issued and, to the best knowledge
of the parties hereto, no investigation or proceeding for that purpose
shall have been instituted or be pending, threatened or contemplated
under the 1933 Act.
8.5 The Trust shall have received a favorable opinion of Ropes & Gray
satisfactory to the Trust and the Acquiring Trust shall have received a
favorable opinion of Bell, Boyd & Lloyd LLC satisfactory to the
Acquiring Trust, each substantially to the effect that, for federal
income tax purposes:
(a) The acquisition by the Acquiring Fund of the assets of the Acquired
Fund in exchange for the Acquiring Fund's assumption of the
Obligations of the Acquired Fund and issuance of the Acquiring
Shares, followed by the distribution by the Acquired Fund of such
the Acquiring Shares to the shareholders of the Acquired Fund in
exchange for their shares of the Acquired Fund, all as provided in
paragraph 1 hereof, will constitute a reorganization within the
meaning of Section 368(a) of the Code, and the Acquired Fund and the
Acquiring Fund will each be "a party to a reorganization" within the
meaning of Section 368(b) of the Code;
(b) No gain or loss will be recognized by the Acquired Fund (i) upon the
transfer of its assets to the Acquiring Fund in exchange for the
Acquiring Shares or (ii) upon the distribution of the Acquiring
Shares to the shareholders of the Acquired Fund as contemplated in
paragraph 1 hereof;
A-11
<PAGE>
(c) No gain or loss will be recognized by the Acquiring Fund upon the
receipt of the assets of the Acquired Fund in exchange for the
assumption of the Obligations and issuance of the Acquiring Shares
as contemplated in paragraph 1 hereof;
(d) The tax basis of the assets of the Acquired Fund acquired by the
Acquiring Fund will be the same as the basis of those assets in the
hands of the Acquired Fund immediately prior to the transfer, and
the holding period of the assets of the Acquired Fund in the hands
of the Acquiring Fund will include the period during which those
assets were held by the Acquired Fund;
(e) The shareholders of the Acquired Fund will recognize no gain or loss
upon the exchange of their shares of the Acquired Fund for the
Acquiring Shares;
(f) The tax basis of the Acquiring Shares to be received by each
shareholder of the Acquired Fund will be the same in the aggregate
as the aggregate tax basis of the shares of the Acquired Fund
surrendered in exchange therefor;
(g) The holding period of the Acquiring Shares to be received by each
shareholder of the Acquired Fund will include the period during
which the shares of the Acquired Fund surrendered in exchange
therefor were held by such shareholder, provided such shares of the
Acquired Fund were held as a capital asset on the date of the
exchange; and
(h) The Acquiring Fund will succeed to and take into account the items
of Acquired Fund described in Section 381(c) of the Code, subject to
the conditions and limitations specified in Sections 381, 382, 383
and 384 of the Code and the regulations thereunder.
8.6 At any time prior to the Closing, any of the foregoing conditions of
this Agreement may be waived jointly by the Board of Trustees of the
Trust and the Board of Trustees of the Acquiring Trust if, in their
judgment, such waiver will not have a material adverse effect on the
interests of the shareholders of the Acquired Fund and the Acquiring
Fund.
9. BROKERAGE FEES AND EXPENSES.
9.1 The Trust, on behalf of the Acquired Fund, and the Acquiring Trust, on
behalf of the Acquiring Fund, each represents and warrants to the other
that there are no brokers or finders entitled to receive any payments
in connection with the transactions provided for herein.
9.2 The Acquiring Trust, on behalf of the Acquiring Fund, shall pay all
fees paid to governmental authorities for the registration or
qualification of the Acquiring Shares. All of the other out-of-pocket
expenses (other than tabulation costs which will be borne in their
entirety by Liberty Financial) of the transactions contemplated by this
Agreement shall be borne as follows: (a) as to expenses allocable to
the Trust, on behalf of the Acquired Fund, seventy-five percent (75%)
of such expenses shall be borne by the Trust, on behalf of the Acquired
Fund, and twenty-five percent (25%) of such expenses shall be borne by
Liberty Financial; and (b) as to expenses allocable to the Acquiring
Trust, on behalf of the Acquiring Fund, fifty percent (50%) of such
expenses shall be borne by the Acquiring Trust, on behalf of the
Acquiring Fund, and fifty percent (50%) of such expenses shall be borne
by Liberty Financial. The foregoing sentence shall be subject, however,
to any undertaking by Liberty Financial to Liberty Funds Trust I, II,
III, IV, V, VI, VII and IX (or any of their series) (collectively, the
"Liberty Trusts") to limit the aggregate expenses (other than fees paid
to governmental authorities for the registration or qualification of
shares of the Liberty Trusts) of the transactions contemplated by this
Agreement and other transactions involving the Liberty Trusts.
A-12
<PAGE>
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES.
10.1 The Trust on behalf of the Acquired Fund and the Acquiring Trust on
behalf of the Acquiring Fund agree that neither party has made any
representation, warranty or covenant not set forth herein and that
this Agreement constitutes the entire agreement between the parties.
10.2 The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in
connection herewith shall not survive the consummation of the
transactions contemplated hereunder except paragraphs 1.1, 1.3, 1.5,
1.6, 5.4, 9, 10, 13 and 14.
11. TERMINATION.
11.1 This Agreement may be terminated by the mutual agreement of the
Acquiring Trust and the Trust. In addition, either the Acquiring Trust
or the Trust may at its option terminate this Agreement at or prior to
the Closing Date because:
(a) Of a material breach by the other of any representation, warranty,
covenant or agreement contained herein to be performed by the other
party at or prior to the Closing Date;
(b) A condition herein expressed to be precedent to the obligations of
the terminating party has not been met and it reasonably appears
that it will not or cannot be met; or
(c) If the transactions contemplated by this Agreement have not been
substantially completed by May 31, 2001 this Agreement shall
automatically terminate on that date unless a later date is agreed
to by both the Trust and the Acquiring Trust.
11.2 If for any reason the transactions contemplated by this Agreement are
not consummated, no party shall be liable to any other party for any
damages resulting therefrom, including without limitation
consequential damages.
12. AMENDMENTS.
This Agreement may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by the authorized officers of the Trust
on behalf of the Acquired Fund and the Acquiring Trust on behalf of the
Acquiring Fund; provided, however, that following the shareholders' meeting
called by the Acquired Fund pursuant to paragraph 5.2 no such amendment may have
the effect of changing the provisions for determining the number of the
Acquiring Shares to be issued to shareholders of the Acquired Fund under this
Agreement to the detriment of such shareholders without their further approval.
13. NOTICES.
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by prepaid
telegraph, telecopy or certified mail addressed to: Liberty-Stein Roe Funds
Municipal Trust, One Financial Center, Boston, Massachusetts 02111, Attention:
Secretary or to Liberty Funds Trust IV, One Financial Center, Boston,
Massachusetts 02111, Attention: Secretary.
14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT
NON-RECOURSE.
14.1 The article and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.2 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
14.3 This Agreement shall be governed by and construed in accordance with
the domestic substantive laws of The Commonwealth of Massachusetts,
without giving effect to any choice or conflicts of law rule or
provision that would result in the application of the domestic
substantive laws of any other jurisdiction.
A-13
<PAGE>
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-14
<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:
--------------------------------------
A-15
<PAGE>
Solely for purposes of Section 9.2 of
the Agreement:
LIBERTY FINANCIAL COMPANIES, INC.
By:
------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
ATTEST:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
A-16
<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 Meetings, 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>
NUMBER OF SHARES
OUTSTANDING AND
FUND OR TRUST CLASS 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............................... A 0
B 0
C 0
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 each Trust as a whole. As of September 29, 2000, the following
shareholders of record owned 5% or more of the outstanding shares of the noted
class of shares of the noted Fund:
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
OUTSTANDING OUTSTANDING
SHARES OF CLASS SHARES OF CLASS
FUND AND CLASS NAME AND ADDRESS OF SHAREHOLDER OWNED OWNED
-------------- ------------------------------- --------------- ---------------
<S> <C> <C> <C>
LIBERTY FUND
CLASS A............ Merrill Lynch Pierce Fenner & 93,766.769 5.87%
Smith
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
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
</TABLE>
B-1
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
OUTSTANDING OUTSTANDING
SHARES OF CLASS SHARES OF CLASS
FUND AND CLASS NAME AND ADDRESS OF SHAREHOLDER OWNED OWNED
-------------- ------------------------------- --------------- ---------------
<S> <C> <C> <C>
Merrill Lynch Pierce Fenner & 71,220.571 39.26%
Smith
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 noted class of shares of the noted Fund would
own the following percentage of the Stein Roe Fund upon consummation of the
Acquisition:
<TABLE>
<CAPTION>
PERCENTAGE OF OUTSTANDING
SHARES OF CLASS OWNED UPON
CONSUMMATION OF
FUND AND CLASS NAME AND ADDRESS OF SHAREHOLDER ACQUISITIONS
-------------- ------------------------------- --------------------------
<S> <C> <C>
LIBERTY FUND
CLASS A............ Merrill Lynch Pierce Fenner & Smith 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 7.07%
Donald I. Coggins Trust
U/A Dtd 2/6/1982
P.O. Box 544
Wilmington, VT 05363-0544
Eleanor B. Coggins Trustee 8.83%
Eleanor B. Coggins Trust
U/A Dtd 2/6/1982
Lape Raponda
P.O. Box 544
Wilmington, VT 05363-0544
</TABLE>
B-2
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF OUTSTANDING
SHARES OF CLASS OWNED UPON
CONSUMMATION OF
FUND AND CLASS NAME AND ADDRESS OF SHAREHOLDER ACQUISITIONS
-------------- ------------------------------- --------------------------
<S> <C> <C>
Merrill Lynch Pierce Fenner & Smith 39.26%
For the Sole Benefit of its Customers
Attn: Fund Administration #97B42
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
Leone O'Ferrall 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. 15.43%
Special Custody Account for the
Exclusive Benefit of Customers
Attn. Mutual Funds
101 Montgomery Street
San Francisco, CA 94104-4122
</TABLE>
B-3
<PAGE>
INFORMATION CONCERNING EXECUTIVE OFFICERS
The following table sets forth certain information about the executive
officers of each Fund:
<TABLE>
<CAPTION>
YEAR OF
ELECTION
EXECUTIVE OFFICER AS EXECUTIVE
NAME & AGE OFFICE AND PRINCIPAL OCCUPATION* OFFICER
----------------- -------------------------------- ------------
<S> <C> <C>
Stephen E. Gibson.................... President of the Stein Roe Mutual 1998
(46) Funds since November 1999; President
of the Liberty Mutual Funds since
June 1998; Chairman of the Board
since July 1998, Chief Executive
Officer and President since December
1996, and Director since July 1996 of
Colonial (formerly Executive Vice
President of Colonial from July 1996
to December 1996); Chairman of the
Board, Director, Chief Executive
Officer and President of Liberty
Funds Group LLC ("LFG") since
December 1998 (formerly Director,
Chief Executive Officer and President
of The Colonial Group, Inc. from
December 1996 to December
1998);Director since September 2000,
President since January 2000, and
Vice Chairman since August 1998 of
Stein Roe (formerly Assistant
Chairman and Executive Vice President
of Stein Roe from August 1998 to
January 2000). (Formerly Managing
Director of Marketing of Putnam
Investments (investment advisor) from
June 1992 to July 1996.)
</TABLE>
B-4
<PAGE>
<TABLE>
<CAPTION>
YEAR OF
ELECTION
EXECUTIVE OFFICER AS EXECUTIVE
NAME & AGE OFFICE AND PRINCIPAL OCCUPATION* OFFICER
----------------- -------------------------------- ------------
<S> <C> <C>
William J. Ballou.................... Secretary of the Liberty Mutual Funds 2000
(35) since October 2000 (formerly
Assistant Secretary of the Liberty
Mutual Funds from October 1997 to
October 2000); Assistant Secretary of
the Stein Roe Mutual Funds since May
2000; Vice President, Assistant
Secretary and Counsel of Colonial
since October 1997; Vice President
and Counsel since April 2000, and
Assistant Secretary since December
1998 of LFG; Associate Counsel,
Massachusetts Financial Services
Company (financial services provider)
prior thereto.
Kevin M. Carome...................... Executive Vice President of the 1999
(44) Liberty Mutual Funds since October
2000; Executive Vice President of the
Stein Roe Mutual Funds since May 1999
(formerly Vice President from April
1998 to May 1999, Secretary from
February 2000 to May 2000 and
Assistant Secretary from April 1998
to February 2000 of the Stein Roe
Mutual Funds); Chief Legal Officer of
Liberty Financial since August 2000;
Senior Vice President, Legal, of LFG
since January 1999; General Counsel
and Secretary of Stein Roe since
January 1998; Associate General
Counsel and Vice President of Liberty
Financial prior thereto.
</TABLE>
---------------
* Except as otherwise noted, each individual has held the office indicated or
other offices in the same company for the last five years.
B-5
<PAGE>
ADDITIONAL INFORMATION CONCERNING TRUSTEE COMPENSATION
The current Board of Trustees of the Liberty Mutual Funds received the
following compensation from the Liberty Fund as of the Fund's fiscal year
end(1):
<TABLE>
<CAPTION>
LIBERTY FUND
TRUSTEE 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"):
<TABLE>
<CAPTION>
TRUSTEE TOTAL COMPENSATION(8)
------- ----------------------
<S> <C>
Mr. Grinnell........................................... $25,000
Mr. Lowry.............................................. 25,000
Mr. Mayer.............................................. 25,000
Mr. Neuhauser.......................................... 25,000
</TABLE>
The current Board of Trustees of the Stein Roe Trust received the following
compensation from the Stein Roe Fund as of the Fund's fiscal year end:
<TABLE>
<CAPTION>
STEIN ROE FUND
TRUSTEE 6/30/00
------- ----------------------
<S> <C>
Mr. Bacon.............................................. $2,200
Mr. Boyd............................................... 2,400
Mr. Hacker............................................. 2,200
Ms. Kelly.............................................. 2,200
Mr. Nelson............................................. 2,300
Mr. Theobald........................................... 2,200
</TABLE>
B-6
<PAGE>
The following table sets forth the total compensation paid to each Trustee
by the Stein Roe Mutual Funds for the fiscal year ended June 30, 2000.
<TABLE>
<CAPTION>
TRUSTEE TOTAL COMPENSATION(9)
------- ----------------------
<S> <C>
Mr. Bacon.............................................. $103,450
Mr. Boyd............................................... 109,950
Mr. Hacker............................................. 93,950
Ms. Kelly.............................................. 103,450
Mr. Nelson............................................. 108,050
Mr. Theobald........................................... 103,450
</TABLE>
---------------
(1) The Liberty Mutual 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.
(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-7
<PAGE>
APPENDIX C
CAPITALIZATION
The following table shows on an unaudited basis the capitalization 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>
STEIN ROE
STEIN ROE FUND
LIBERTY FUND PRO FORMA PRO FORMA
FUND (ACQUIRING FUND) ADJUSTMENTS(1) COMBINED(2)
----------- ---------------- -------------- ------------
<S> <C> <C> <C> <C>
Class A(3)
Net asset value................... $12,138,959 $ (18,093) $ 12,120,866
Shares outstanding................ 1,564,295 (458,371) 1,105,924
Net asset value per share......... $ 7.76 $ 10.96
Class B(3)
Net asset value................... $ 8,742,141 $ (13,030) $ 8,729,111
Shares outstanding................ 1,126,562 (330,106) 796,456
Net asset value per share......... $ 7.76 $ 10.96
Class C(3)
Net asset value................... $ 1,536,692 $ (2,290) $ 1,534,402
Shares outstanding................ 198,027 (58,026) 140,001
Net asset value per share......... $ 7.76 $ 10.96
Class S
Net asset value................... $135,881,702 $ (20,929) $135,860,773
Shares outstanding................ 12,398,030 (1,910) 12,396,120
Net asset value per share......... $ 10.96 $ 10.96
</TABLE>
---------------
(1) Adjustments reflect estimated one time proxy, accounting, legal and other
costs of the reorganization of $33,413 and $20,929 to be borne by the
Liberty Fund and the Stein Roe Fund, respectively.
(2) Assumes the Acquisition was consummated on June 30, 2000, and is for
information purposes only. No assurance can be given as to how many shares
of the 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.
(3) As of June 30, 2000, there were no Class A, B or C shares of the Stein Roe
Fund outstanding.
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 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
D-1
<PAGE>
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.
Source of Lipper data: Lipper, Inc.
PERFORMANCE INFORMATION
Stein Roe Fund Investment Performance vs. Lehman Brothers 10-Year Municipal
Bond Index
GROWTH OF A $10,000 INVESTMENT June 30, 1990 to June 30, 2000
[Performance Information Chart]
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 the Stein Roe Fund; it is not available for direct
investment. Source: Lipper, Inc.
D-2
<PAGE>
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
Municipal Bond Index.................................... 4.47% 5.97% 7.23%
</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.
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. The index shown above is an unmanaged group of
fixed-income securities that differs from the composition of the 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
<TABLE>
<S> <C> <C>
1. New York.................................................... 15.9%
2. Illinois.................................................... 9.9%
3. Arizona..................................................... 6.2%
4. Texas....................................................... 5.9%
5. Georgia..................................................... 5.7%
</TABLE>
PORTFOLIO STATISTICS AS OF JUNE 30, 2000
<TABLE>
<S> <C>
Average Duration........................................ 6.2 years
Average Weighted Maturity............................... 9.4 years
Average Weighted Coupon................................. 6.12%
</TABLE>
D-3
<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
02111-2621 or by calling 1-800-426-3750.
Table of Contents
I. Additional Information about the Acquiring Fund.......................2
II. Additional Information about the Acquired Fund........................2
III. Financial Statements..................................................2
<PAGE>
I. Additional Information about the Acquiring Fund.
Incorporated by reference to Post-Effective Amendment No. 32 to the
Registration Statement on Form N-1A (filed on October 26, 2000) 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>
<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 1998 B 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
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
</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 1998 B 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
MD Montgomery County Housing Commission, Series A 220,000 222,774
NE State Investment Authority, Series C 495,000 499,252
</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>
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 1991 A 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 1999 B 5.25% 4/1/15
-----------
93,961
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
</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>
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 1991 A 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 1999 B 1,000,000 983,790 1,000,000 983,790
------------ ------------
983,790 1,077,751
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
</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>
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 Unifies 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 1999 A (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 1995 A (e) 12/15/12
HI Honolulu City & County, Series 1990 A 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, 5.75% 6/1/02 60,000 61,229
Series 1992H
KY State Turnpike Authority Economic Development Revitalization Projects, 5.50% 1/1/01 50,000 50,261
Series 1992
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 1993 O 5.50% 4/29/17
NY State University New York Series 1989 B 7.10% 5/15/01 100,000 102,089
NY State Dormitory Authority, Series 1995 A 6.50% 5/15/05
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%
</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>
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 Unifies 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 1999 A 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 1995 A 1,300,000 643,097 1,300,000 643,097
HI Honolulu City & County, Series 1990 A 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 1993 O 1,000,000 989,120 1,000,000 989,120
NY State University New York Series 1989 B 100,000 102,089
NY State Dormitory Authority, Series 1995 A 1,000,000 1,066,780 1,000,000 1,066,780
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%
</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>
MA Massachusetts Bay Transportation Authority, Series 1994 A 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 1994 A 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 1998 B 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 1993 ST 5.65% 4/1/04 50,000 51,440
MI State, Underground Storage Tank Financial Assistance,
Series 1996 I 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 1993 E 5.25% 4/24/61
-----------
1,303,710
SPECIAL PROPERTY TAX - 3.1%
FL Stoneybrook Community Development District, Series 1998 B 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 1992 C 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 1994 A 5.70% 1/1/04
IN State Transportation Finance Authority, Airport
Facilities Lease, Series 1992 A 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 2000 B (e) 9/1/18 500,000 171,100
OH State Turnpike Commission, Series 1996 A 6.00% 2/15/06 500,000 528,230
OH State Turnpike Commission, Series 1998 A 5.50% 2/15/24
PA State Turnpike Commission, Series 1998 A 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 1999 A 5.50% 5/15/21
WA Grant County Public Utilities, District Number 002
Electric System, Series 1993 E 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 1990 A 7.13% 6/1/09
-----------
117,334
</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>
MA Massachusetts Bay Transportation Authority, Series 1994 A 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 1994 A 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 1998 B 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 1993 ST 50,000 51,440
MI State, Underground Storage Tank Financial Assistance,
Series 1996 I 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 1993 E 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 1998 B 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 1992 C 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 1994 A 1,000,000 1,025,790 1,000,000 1,025,790
IN State Transportation Finance Authority, Airport
Facilities Lease, Series 1992 A 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 2000 B 1,000,000 342,200 1,500,000 513,300
OH State Turnpike Commission, Series 1996 A 500,000 528,230
OH State Turnpike Commission, Series 1998 A 1,000,000 980,500 1,000,000 980,500
PA State Turnpike Commission, Series 1998 A 500,000 493,020
------------ ------------
1,322,700 2,515,050
UTILITY - 23.0%
MUNICIPAL ELECTRIC 0.9%
TX Lower Colorado River Authority, Series 1999 A 1,500,000 1,447,575 1,500,000 1,447,575
WA Grant County Public Utilities, District Number 002
Electric System, Series 1993 E 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 1990 A 1,500,000 1,541,985 1,500,000 1,541,985
------------ ------------
2,541,485 2,658,819
</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>
JOINT POWER AUTHORITY - 6.4%
GA Municipal Electric Authority Power, Series 1997 Y 6.40% 1/1/13
NC Eastern Municipal Power Agency, Series 1993 C 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 1991 A 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 1998 A 4.75% 7/1/22 500,000 436,330
DE State Economic Development Authority, Wilmington
Suburban Water Corp., Series 1992 B 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 1999 A 6.00% 8/1/19
TN Metropolitan Government of Nashville & Davidson Counties,
Series 1993 6.50% 1/1/10
NY State Environmental Facilities Corp., Series 1994 D 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 1996 B 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>
JOINT POWER AUTHORITY - 6.4%
GA Municipal Electric Authority Power, Series 1997 Y 3,000,000 3,304,680 3,000,000 3,304,680
NC Eastern Municipal Power Agency, Series 1993 C 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 1991 A 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 1998 A 2,000,000 1,745,320 2,500,000 2,181,650
DE State Economic Development Authority, Wilmington
Suburban Water Corp., Series 1992 B 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 1999 A 2,500,000 2,634,274 2,500,000 2,634,274
TN Metropolitan Government of Nashville & Davidson Counties,
Series 1993 2,750,000 3,041,472 2,750,000 3,041,472
NY State Environmental Facilities Corp., Series 1994 D 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 1996 B 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 2,465,501
------------ ------------
NET ASSETS - 100.0% $135,881,702 $158,245,152
============ ============
</TABLE>
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 $33,413 and $20,929 to be borne by Liberty Intermediate
Tax Exempt Fund and Stein Roe Intermediate Municipals Fund respectively.
<PAGE>
(g) No adjustments are shown to the unaudited pro forma combined portfolio of
investments due to the fact that upon consummation of the Acquisitions, no
securities would need to be sold in order for the Acquiring Fund to comply
with its Prospectus and SEC and IRS guidelines and restrictions. However,
the foregoing sentence shall not be deemed to restrict in any way the
ability of the investment advisor of any of the funds from buying or
selling securities in the normal course of such Fund's business and
operations.
STEIN ROE INTERMEDIATE MUNICIPALS 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 Note 5,300,000 September $157,941
</TABLE>
LIBERTY INTERMEDIATE TAX-EXEMPT FUND
futures contracts open at June 30, 2000:
<TABLE>
<CAPTION>
PAR VALUE COVERED EXPIRATION UNREALIZED
TYPE BY CONTRACTS MONTH
--------- ---------------------------- ----------------------- -------------------------
<S> <C> <C> <C>
Treasury Bond 200,000 September ($5,307)
</TABLE>
<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 liablities 302,396 2,217,447 (54,342)(a) 2,465,501
Net assets $ 22,417,792 $ 135,881,702 $ 158,245,152
Class A
Net assets $ 12,138,959 (18,093) $ 12,120,866
Shares outstanding 1,564,295 (458,371)(b) 1,105,924
Net asset value $ 7.76 $ 10.96
Class B
Net assets $ 8,742,141 (13,030) $ 8,729,111
Shares outstanding 1,126,562 (330,106)(b) 796,456
Net asset value $ 7.76 $ 10.96
Class C
Net assets $ 1,536,692 (2,290) $ 1,534,402
Shares outstanding 198,027 (58,026)(b) 140,001
Net asset value $ 7.76 $ 10.96
Net assets - Class S $ 135,881,702 (20,929) 135,860,773
Shares - Class S 12,398,030 (1,910) 12,396,120
Net asset value per share - Class S $ 10.96 $ 10.96
</TABLE>
(a) Adjustment reflects one time proxy, accounting, legal and other costs of the
reorganization of $33,413 and $20,929 to be borne by Liberty Intermediate Tax
Exempt Fund and Stein Roe Intermediate Municipals Fund respectively. These costs
reflect each fund's share of the total costs of the reorganization that will be
shared between Liberty Financial and the Funds, subject to the terms of each
Agreement and Plan of Reorganization, as follows:
<TABLE>
<CAPTION>
Liberty Financial Fund
----------------- ----
<S> <C> <C>
Liberty Intermediate Tax-Exempt Fund 25% 75%
Stein Roe Intermediate Municipals Fund 50% 50%
</TABLE>
The Funds will bear their full portion of the one time costs of the
reorganization only if the expense reduction experienced as a result of the
Acquisition in the first year after Acquisition Date exceeds the one time costs.
If the one time costs exceed the expense reduction, the Fund will only bear the
share of its portion up to the amount of the expense reduction.
(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 comsummation 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>
PRO FORMA COMBINING CONDENSED STATEMENT OF OPERATIONS FOR THE TWELVE
MONTH PERIOD ENDED JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
LIBERTY STEIN ROE
INTERMEDIATE INTERMEDIATE PRO FORMA PRO FORMA
TAX-EXEMPT FUND MUNICIPALS 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.
NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 2000
<PAGE>
1. These financial statements set forth the unaudited pro forma condensed
statement of assets and liabilities, including the portfolio of investments, as
of June 30, 2000, and the unaudited pro forma condensed statement of operations
for the twelve month period ended June 30, 2000 for Liberty Intermediate
Tax-Exempt Fund and Stein Roe Intermediate Municipals Fund as adjusted giving
effect to the Acquisition as if it had occurred as of the beginning of the
period. These statements have been derived from the books and records utilized
in calculating daily net asset value for each fund.
<PAGE>
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 (Exhibit (4)
to Registrant's Registration Statement of Form N-14 filed on October 18,
2000)*
(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 (Exhibit (11) to Registrant's
Registration Statement of Form N-14 filed on October 18, 2000)*
(12)(a)Opinion and Consent of Counsel on Tax Matters and Consequences
to Shareholders of Bell, Boyd & Lloyd (Exhibit (12)(a) to Registrant's
Registration Statement of Form N-14 filed on October 18, 2000)*
(b)Opinion and Consent of Counsel on Tax Matters and Consequences
to Shareholders of Ropes & Gray (Exhibit (12)(b)
to Registrant's Registration Statement of Form N-14 filed on October 18,
2000)*
(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 (Exhibit (16)(b)
to Registrant's Registration Statement of Form N-14 filed on October 18,
2000)*
(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 (Exhibit (17)(c)
to Registrant's Registration Statement of Form N-14 filed on October 18,
2000)*
(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 Class A, B and C share Prospectus of the Stein Roe Fund dated
November 1, 2000 - 0000021832-00-000299
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 As supplemented on October 23, 2000 - 0000021832-00-000279
o As supplemented on October 26, 2000 - 0000021832-00-000322
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 As supplemented on October 23, 2000 - 0000021832-00-000279
o The Class A, B and C share Statement of Additional Information of the
Stein Roe Fund dated November 1, 2000 - 0000021832-00-000299
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 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
o The Statement of Additional Information of the Stein Roe Fund dated
November 24, 2000 relating to the Acquisition.
--------------------------------------
*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 27th day of November, 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 November 27, 2000
Stephen E. Gibson
Principal Executive Officer
/s/JOSEPH R. PALOMBO Principal Financial November 27, 2000
Joseph R. Palombo 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* November 27, 2000
Vincent P. Pietropaolo
Attorney-in-Fact for the Trustees
<PAGE>
EXHIBIT INDEX
Exhibit Item
(14)(a)Consent of Independent Auditors/Accountants. (PWC)
(b)Consent of Independent Auditors/Accountants. (E&Y)
