Registration Nos: 2-41251
811-2214
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 45 / X /
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
Amendment No. 27 / X /
COLONIAL TRUST I
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(Exact Name of Registrant as Specified in Charter)
One Financial Center, Boston, Massachusetts 02111
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(Address of Principal Executive Offices)
617-426-3750
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(Registrant's Telephone Number, including Area Code)
Name and Address of
Agent for Service Copy to
- ----------------- -------
Michael H. Koonce Peter MacDougall, Esq.
Colonial Management Associates, Inc. Ropes & Gray
One Financial Center One International Place
Boston, MA 02111 Boston, MA 02110-2624
It is proposed that this filing will become effective (check appropriate box):
/ / immediately upon filing pursuant to paragraph (b).
/ X / on February 28, 1998 pursuant to paragraph (b).
/ / 60 days after filing pursuant to paragraph (a)(1).
/ / on (date) pursuant to paragraph (a)(1) of Rule 485.
/ / 75 days after filing pursuant to paragraph (a)(2).
/ / on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
/ / this post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
<PAGE>
COLONIAL TRUST I
Cross Reference Sheet
(Colonial Tax-Managed Growth Fund)
Classes A, B, C, E, F. G, H
Item Number of Form N-1A Prospectus Location or Caption
- ------------------------ ------------------------------
Part A
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1. Cover Page
2. Cover Page; Summary of Expenses
3. The Fund's Financial History
4. The Fund's Investment Objective;
Organization and History;
How the Fund Pursues Its Objective and Certain Risk
Factors
5. Cover Page;
How the Fund is Managed;
Organization and History;
Back Cover
6. Organization and History;
Distributions and Taxes;
General Information Regarding Buying and Selling
Shares;
Possible Two-Tiered Structure;
Traditional Shares;
Gift Shares
7. General Information Regarding Buying and Selling
Shares;
How the Fund Values Its Shares;
12b-1 Plan; Back Cover
8. General Information Regarding Buying and Selling
Shares;
Exchanges;
Telephone Transactions
9. Not Applicable
<PAGE>
February 28, 1998
STEIN ROE ADVISOR
TAX-MANAGED
GROWTH FUND
PROSPECTUS
BEFORE YOU INVEST
Colonial Management Associates, Inc. (Administrator) and your full-service
financial adviser want you to understand both the risks and benefits of mutual
fund investing.
While mutual funds offer significant opportunities and are professionally
managed, they also carry risks including possible loss of principal. Unlike
savings accounts and certificates of deposit, mutual funds are not insured or
guaranteed by any financial institution or government agency.
Please consult your full-service financial adviser to determine how investing in
this mutual fund may suit your unique needs, time horizon and risk tolerance.
Stein Roe Advisor Tax-Managed Growth Fund (Fund), a diversified portfolio of
Colonial Trust I (Trust), an open-end management investment company, seeks to
maximize long-term capital growth while reducing shareholder exposure to taxes.
The Fund is managed by Stein Roe & Farnham, Incorporated (Adviser), an affiliate
of the Administrator and successor to an investment advisory business that was
founded in 1932.
The Fund currently is structured as a traditional mutual fund investing in
individual securities but may in the future be converted to a master/feeder
structure. Under a master/feeder structure, the Fund would seek to achieve its
objective by investing all of its assets in another open-end management
investment company managed by the Adviser and having substantially the same
objective and investment policies as the Fund. Shareholders of the Fund would be
notified but would not have an opportunity to vote on such conversion.
The Fund's Traditional Shares (Classes A, B and C) are intended for traditional
individual, joint, corporate, custodial, trust or retirement account investors.
The Fund's Trust Shares (Classes E, F, G and H) are designed for persons who
wish to make an irrevocable gift to a child, grandchild or other individual. If
Trust Shares are chosen, the investment will be held in an irrevocable trust
until the date you have directed that it pass to the beneficiary of the gift.
See "Trust Shares." Distributions from the trust are permitted only for limited,
specified purposes.
This Prospectus explains concisely what you should know before investing in the
Fund. Read it carefully and retain it for future reference. More detailed
information about the Fund is in the February 28, 1998 Statement of Additional
Information which has been filed with the Securities and Exchange Commission and
is obtainable free of charge by calling the Administrator at 1-800-426-3750. The
Statement of Additional Information is incorporated by reference in (which means
it is considered to be a part of) this Prospectus.
Contents Page
Summary of Expenses
Possible Two-Tiered Structure
The Fund's Financial History
The Fund's Investment Objective
How the Fund Pursues its Objective
and Certain Risk Factors
How the Fund Measures its Performance
How the Fund is Managed
How the Fund Values its Shares
Traditional Shares
Trust Shares
General Information Regarding Buying and
Selling Shares
Distributions and Taxes
Exchanges of Traditional Shares
Telephone Transactions
12b-1 Plan
Organization and History
- ----------------------------- --------------------------
NOT FDIC-INSURED MAY LOSE VALUE
NO BANK GUARANTEE
- ----------------------------- --------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
SUMMARY OF EXPENSES
Expenses are one of several factors to consider when investing in the Fund. The
following tables summarize your maximum transaction costs and your estimated
annual expenses, adjusted to reflect current fees, for an investment in each
Class of the Fund's shares. See "How the Fund is Managed" and "12b-1 Plan" for a
more complete description of the Fund's various costs and expenses. It is
anticipated that the Fund's annual operating expenses would not change
materially upon conversion to a master/feeder structure.
Shareholder Transaction Expenses (1)(2)
<TABLE>
<CAPTION>
Class A Class B Class C Class E Class F Class G Class H
<S> <C> <C> <C> <C> <C> <C> <C>
Maximum Initial Sales Charge Imposed
on a Purchase (as a % of offering
price) (3) 5.75% 0.00%(4) 0.00%(4) 5.00%(4) 0.00%(4) 4.50%(4) 0.00%(4)
Maximum Contingent Deferred Sales
Charge (as a % of offering price)(3) 1.00%(5) 5.00% 1.00% 1.00%(6) 5.00% 1.00%(6) 5.00%
</TABLE>
(1) For accounts less than $1,000 an annual fee of $10 may be deducted. See
"General Information Regarding Buying and Selling Shares."
(2) Redemption proceeds exceeding $500 sent via federal funds wire will be
subject to a $7.50 charge per transaction.
(3) Does not apply to reinvested distributions.
(4) Because of the distribution fees applicable to Class B, C, E, F, G and H
shares, long-term shareholders may pay more in aggregate sales charges than
the maximum initial sales charge permitted by the National Association of
Securities Dealers, Inc. See "12b-1 Plan."
(5) Only with respect to any portion of purchases of $1 million to $5 million
redeemed within approximately 18 months after purchase. See "Traditional
Shares."
(6) Only with respect to any portion of purchases of $500,000 to $5 million
redeemed within approximately 18 months after purchase. See "Trust Shares."
Annual Operating Expenses (as a % of average net assets)
<TABLE>
<CAPTION>
Class A Class B Class C Class E Class F Class G Class H
<S> <C> <C> <C> <C> <C> <C> <C>
Management and administration fees
(after expense waiver or reimbursement) 0.03% 0.03% 0.03% 0.03% 0.03% 0.03% 0.03%
12b-1 fees 0.25 1.00 1.00 0.35 1.00 0.35(7) 1.00
Other expenses 1.22 1.22 1.22 1.29 1.29 1.29 1.29
---- ---- ---- ---- ---- ---- ----
Total operating expenses
(after expense waiver or reimbursement)(8) 1.50% 2.25% 2.25% 1.67% 2.32% 1.67% 2.32%
===== ===== ===== ===== ===== ===== =====
</TABLE>
(7) The actual 12b-1 fee will be 0.35% on assets attributed to shares
outstanding less than five years, and 0.50% on assets attributed to shares
outstanding for five years or more.
(8) Total expenses, excluding brokerage, interest, taxes, 12b-1 fees, trust
service expenses and extraordinary expenses, are, until further notice,
voluntarily limited by the Administrator and the Adviser to 1.25% of the
first $100 million of average net assets, and 1.50% of average net assets
over $100 million. Absent such expense limitation, "Management and
administration fees" would be 1.00% for each Class and "Total operating
expenses" would be 2.47%(Class A), 3.22%(Classes B and C), 2.64%(Classes E
and G) and 3.29%(Classes F and H).
<PAGE>
Examples
The following Examples show the cumulative transaction and operating expenses
attributable to a hypothetical $1,000 investment in each Class of shares of the
Fund for the periods specified, assuming a 5% annual return and reinvestment of
dividends and distributions. The expense numbers in the Examples assume the
expense limit described above is in effect. The 5% return and expenses used in
these Examples should not be considered indicative of actual or expected Fund
performance or expenses, both of which will vary: Example 1 (assumes redemption
at period end)
<TABLE>
<CAPTION>
Period Class A Class B Class C Class E Class F Class G Class H
<S> <C> <C> <C> <C> <C> <C> <C>
1 year $ 72 $ 73 $ 33 $ 66 $ 74 $ 61 $ 74
3 years $102 $100 $ 70(9) $100 $102 $ 95 $102
5 years $135 $140 $120 $136 $144 $132 $144
10 years $226 $240(10) $258 $238 $249(11) $234 $249(12)
<CAPTION>
Example 2 (assumes no redemption)
Period Class A Class B Class C Class E Class F Class G Class H
<S> <C> <C> <C> <C> <C> <C> <C>
1 year $ 72 $ 23 $ 23 $ 66 $ 24 $ 61 $ 24
3 years $102 $ 70 $ 70 $100 $ 72 $ 95 $ 72
5 years $135 $120 $120 $136 $124 $132 $124
10 years $226 $240(10) $258 $238 $249(11) $234 $249(12)
</TABLE>
(9) Class C shares do not incur a contingent deferred sales charge on
redemptions made after one year.
(10) Class B shares automatically convert to Class A shares after approximately
8 years; therefore, years 9 and 10 reflect Class A share expenses.
(11) Class F shares automatically convert to Class E shares after approximately
8 years; therefore, years 9 and 10 reflect Class E share expenses.
(12) Class H shares automatically convert to Class G shares after approximately
8 years; therefore, years 9 and 10 reflect Class G share expenses.
<PAGE>
POSSIBLE TWO-TIERED STRUCTURE
The Fund currently is structured as a traditional mutual fund investing in
individual securities, but may in the future convert to a master/feeder
structure by transferring all of its portfolio assets to a separate open-end
management investment company (Portfolio) with substantially the same investment
objective as the Fund in exchange for an interest in the Portfolio. Thereafter,
the Fund would seek to achieve its objective by investing all of its investable
assets in the Portfolio, and the Portfolio would invest directly in individual
portfolio securities. See "The Fund's Investment Objective," "How the Fund
Pursues its Objective and Certain Risk Factors" and "How the Fund is Managed"
for information concerning the Fund's investment objective, policies, management
and expenses. Shareholders of the Fund would be notified of, but would not have
an opportunity to vote on, such conversion.
After any such conversion, in addition to the Fund, other institutional
investors (including other investment companies) also would be able to invest in
the Portfolio. The conversion would be effected to allow other such investors to
invest in the Portfolio, potentially creating economies of scale and providing
additional portfolio management flexibility for the Portfolio which, if
achieved, also would indirectly benefit the Fund and its shareholders. The
following describes certain of the effects and risks of this structure.
After any such conversion, matters submitted by the Portfolio to its investors
for a vote would be passed along by the Fund to its shareholders, and the Fund
would vote its entire interest in the Portfolio in proportion to the votes
received from Fund shareholders. It is possible that other investors in the
Portfolio could alone or collectively acquire sufficient voting interests in the
Portfolio to control matters relating to the operation of the Portfolio. In
addition, large scale redemptions by any other investors in the Portfolio could
result in untimely liquidation of the Portfolio's security holdings, loss of
investment flexibility, and an increase in the operating expenses of the
Portfolio as a percentage of its assets. After any conversion, you would be able
to obtain information about whether there are other investors in the Portfolio
by writing or calling the Administrator at 1-800-426-3750.
After any conversion, the Fund would continue to invest in the Portfolio so long
as the Trust's Board of Trustees determined it was in the best interest of Fund
shareholders to do so. In the event that the Portfolio's investment objective
were changed so as to be inconsistent with the Fund's investment objective, the
Board of Trustees would consider what action might be taken, including changes
to the Fund's investment objective, or withdrawal of the Fund's assets from the
Portfolio and investment of such assets in another pooled investment entity or
the retention of an investment adviser to manage the Fund's investments. Certain
of these actions may require Fund shareholder approval. Withdrawal of the Fund's
assets from the Portfolio could result in a distribution by the Portfolio to the
Fund of portfolio securities in kind (as opposed to a cash distribution), and
the Fund could incur brokerage fees or other transaction costs and could realize
distributable taxable gains in converting such securities to cash. Such a
distribution in kind could also result in a less diversified portfolio of
investments for the Fund.
<PAGE>
THE FUND'S FINANCIAL HISTORY
The following financial highlights for a share
outstanding throughout the period has been audited by Price Waterhouse LLP,
independent accountants. Their unqualified report is included in the Fund's 1997
Annual Report and is incorporated by reference into the Statement of Additional
Information:
<TABLE>
<CAPTION>
Period Ended
October 31, 1997 (b)
--------------------------------------------------------------------------------
Class A Class B Class C (c) Class E Class F Class G Class H
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of period $10.080 $10.080 $10.080 $10.080 $10.080 $10.080 $10.080
-------- -------- -------- -------- -------- -------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (a)(d) 0.040 (0.032) (0.032) 0.030 (0.032) 0.030 (0.032)
Net realized and unrealized gain (d) 1.920 1.912 1.912 1.910 1.922 1.930 1.912
----- ----- ----- ----- ----- ----- -----
Total from Investment Operations 1.960 1.880 1.880 1.940 1.890 1.960 1.880
----- ----- ----- ----- ----- ----- -----
Net asset value - End of period $12.040 $11.960 $11.960 $12.020 $11.970 $12.040 $11.960
======== ======== ======== ======== ======== ======== =======
Total return (e)(f)(g) 19.44% 18.65% 18.65% 19.25% 18.75% 19.44% 18.65%
------ ------ ------ ------ ------ ------ ------
RATIOS TO AVERAGE NET ASSETS
Expenses (h)(i) 1.50% 2.25% 2.25% 1.60% 2.25% 1.60% 2.25%
Net investment income (loss) (h)(i) 0.39% (0.36)% (0.36)% 0.29% (0.36)% 0.29% (0.36)%
Fees and expenses waived or borne by
the Adviser/Administrator (h)(i) 0.98% 0.98% 0.98% 0.98% 0.98% 0.98% 0.98%
Portfolio turnover (g) 51% 51% 51% 51% 51% 51% 51%
Average commission rate $0.0564 $0.0564 $0.0564 $0.0564 $0.0564 $0.0564 $0.0564
Net assets at end of period (000) $17,142 $38,452 $5,923 $346 $421 $1,288 $1,156
(a) Net of fees and expenses waived or borne
by the Adviser/Adminstrator which
amounted to: $0.096 $0.096 $0.096 $0.096 $0.096 $0.096 $0.096
</TABLE>
(b) The Fund commenced investment operations on December 16, 1996. The activity
shown is from the effective date of registration (December 30, 1996) with
the Securities and Exchange Commission.
(c) Effective July 1, 1997, Class D shares were redesignated Class C shares.
(d) Per share data was calculated using average shares outstanding during the
period.
(e) Total return at net asset value assuming no initial sales charge or
contingent deferred sales charge.
(f) Had the Adviser/Administrator not waived or reimbursed a portion of
expenses, total return would have been reduced.
(g) Not annualized.
(h) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(i) Annualized.
Further performance information is contained in the Fund's Annual Report to
shareholders, which may be obtained without charge by calling 1-800-426-3750.
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks to maximize long-term capital growth while reducing shareholder
exposure to taxes.
HOW THE FUND PURSUES ITS OBJECTIVE AND CERTAIN RISK FACTORS
The Fund invests primarily (at least 65% of its assets) in common stocks of
large and medium capitalization companies (i.e., companies with at least $1
billion in equity market capitalization) believed by the Adviser to have above
average earnings growth prospects. The Adviser uses fundamental research
analysis and valuation techniques in order to identify potential investments for
the Fund. Up to 35% of the Fund's total assets may be invested in a combination
of (i) common stocks or American Depositary Receipts (receipts issued in the
U.S. by banks or trust companies evidencing ownership of underlying foreign
securities) of non-U.S. companies and (ii) common stocks of small capitalization
companies (i.e., companies with equity market capitalizations of less than $1
billion).
While the Fund's overriding objective is long-term capital growth, the Adviser
may use certain investment techniques designed to reduce the payment by the Fund
of taxable distributions to shareholders and thereby reduce the impact of taxes
on shareholder returns. Such techniques will be used only if, in the Adviser's
judgment, there will not be a materially negative impact on the Fund's pre-tax
total return. Such techniques may include, among others, (i) purchasing low or
non-dividend paying stocks, (ii) low portfolio turnover, which helps to minimize
the realization and distribution of taxable capital gains; (iii) deferring the
sale of a security until the realized gain would qualify as a long-term capital
gain rather than short-term; (iv) selling securities that have declined in value
to offset gains realized on the sale of other securities; and (v) when selling a
portion of a holding, selling those securities with a higher cost basis first.
The use of such techniques will not eliminate the payment by the Fund of taxable
distributions. The Administrator has retained the professional services firm of
Price Waterhouse LLP to provide tax consulting services.
Foreign Investments. The Fund may invest up to 35% of its total assets in
foreign securities including American Depositary Receipts. Investments in
foreign securities have special risks related to political, economic and legal
conditions outside of the U.S. As a result, the prices of such securities may
fluctuate substantially more than the prices of securities of issuers based in
the U.S. Special risks associated with foreign securities include the
possibility of unfavorable currency exchange rates, the existence of less liquid
markets, the unavailability of reliable information about issuers, the existence
(or potential imposition) of exchange control regulations (including currency
blockage), and political and economic instability, among others. In addition,
transactions in foreign securities may be more costly due to currency conversion
costs and higher brokerage and custodial costs. See "How the Fund Pursues its
Objective and Certain Risk Factors--Foreign Currency Transactions; Index and
Interest Rate Futures; Options" in this Prospectus and "Foreign Securities" and
"Foreign Currency Transactions" in the Statement of Additional Information for
more information about foreign investments.
Foreign Currency Transactions; Index and Interest Rate Futures; Options. In
connection with its investments in foreign securities, the Fund may (i) purchase
and sell foreign currencies on a spot or forward basis, (ii) enter into foreign
currency futures contracts, (iii) write both put and call options on foreign
currency futures contracts, and (iv) purchase and write both call and put
options on foreign currencies. Such transactions may be entered into (i) to lock
in a particular foreign exchange rate pending settlement of a purchase or sale
of a foreign security or pending the receipt of interest, principal or dividend
payments on a foreign security held by the Fund, or (ii) to hedge against a
decline in the value, in U.S. dollars or in another currency, of a foreign
currency in which securities held by the Fund are denominated.
In addition, the Fund may enter into (i) index and interest rate futures
contracts, (ii) write put and call options on such futures contracts, (iii)
purchase and write both call and put options on securities and indexes, and (iv)
purchase other types of forward or investment contracts linked to individual
securities, indexes or other benchmarks. The Fund may write a call or put option
on a security only if the option is covered.
A futures contract creates an obligation by the seller to deliver and the buyer
to take delivery of a type of instrument at the time and in the amount specified
in the contract. A sale of a futures contract can be terminated in advance of
the specified delivery date by subsequently purchasing a similar contract; a
purchase of a futures contract can be terminated by a subsequent sale. Gain or
loss on a contract generally is realized upon such termination.
An option generally gives the option holder the right, but not the obligation,
to purchase or sell prior to the option's specified expiration date. If the
option expires unexercised, the holder will lose any amount it paid to acquire
the option.
Transactions in futures, options and similar investments may not achieve the
goal of hedging to the extent there is an imperfect correlation between the
price movements of the contracts and of the underlying asset or benchmark. In
addition, because futures positions may require low margin deposits, the use of
futures contracts involves a high degree of leverage and may result in losses in
excess of the amount of the margin deposit. Finally, if the Adviser's prediction
on interest rates, stock market movements or other market factors is inaccurate,
the Fund may be worse off than if it had not engaged in such transactions.
See the Statement of Additional Information for information relating to the
Fund's obligations in entering into such transactions.
Small Companies. The smaller, less well established companies in which the Fund
may invest may offer greater opportunities for capital appreciation than larger,
better established companies, but may also involve certain special risks. Such
companies often have limited product lines, markets or financial resources and
depend heavily on a small management group. Their securities may trade less
frequently, in smaller volumes, and fluctuate more sharply in value than
exchange listed securities of larger companies.
Securities Loans. The Fund may lend its portfolio securities to broker-dealers
or banks. Such loans will not exceed 30% of the Fund's total assets. Each such
loan will be continuously secured by collateral at least equal at all times to
the market value of the securities loaned. In the event of bankruptcy or other
default of the borrower, the Fund could experience both delays in liquidating
the loan collateral or recovering the loaned securities and losses including (a)
possible decline in the value of the collateral or in the value of the
securities loaned during the period while the Fund seeks to enforce its rights
thereto, (b) possible subnormal levels of income and lack of access to income
during this period, and (c) expenses of enforcing its rights.
Temporary/Defensive Investments. Temporarily available cash may be invested in
certificates of deposit, bankers' acceptances, high quality commercial paper,
Treasury bills and repurchase agreements. Some or all of the Fund's assets also
may be invested in such investments or in investment grade U.S. or foreign debt
securities, Eurodollar certificates of deposit and obligations of savings
institutions during periods of unusual market conditions. Under a repurchase
agreement, the Fund buys a security from a bank or dealer, which is obligated to
buy it back at a fixed price and time. The security is held in a separate
account at the Fund's custodian and constitutes the Fund's collateral for the
bank's or dealer's repurchase obligation. Additional collateral will be added so
that the obligation will at all times be fully collateralized. However, if the
bank or dealer defaults or enters bankruptcy, the Fund may experience costs and
delays in liquidating the collateral, and may experience a loss if it is unable
to demonstrate its rights to the collateral in a bankruptcy proceeding. Not more
than 15% of the Fund's net assets will be invested in repurchase agreements
maturing in more than 7 days and other illiquid securities.
Borrowing of Money. The Fund may borrow money from banks for temporary or
emergency purposes up to 10% of the Fund's net assets; however, the Fund will
not purchase additional portfolio securities while borrowings exceed 5% of total
assets of the Fund.
Other. The Fund may not always achieve its investment objective. The Fund's
fundamental investment policies listed in the Statement of Additional
Information cannot be changed without the approval of a majority of the Fund's
outstanding voting securities. The Fund's investment objective and
non-fundamental investment policies may be changed without shareholder approval.
Additional information concerning certain of the securities and investment
techniques described above is contained in the Statement of Additional
Information.
HOW THE FUND MEASURES ITS PERFORMANCE
Performance may be quoted in sales literature and advertisements. Each Class's
average annual total returns are calculated in accordance with the Securities
and Exchange Commission's formula and assume the reinvestment of all
distributions, the maximum initial sales charge (if any) applicable to the
Class, and the contingent deferred sales charge or redemption fee (if any)
applicable to the time period quoted. Other total returns differ from average
annual total return only in that they may relate to different time periods, may
represent aggregate as opposed to average annual total returns and may not
reflect the initial or contingent deferred sales charges.
Each Class's yield, which differs from total return because it does not consider
changes in net asset value, is calculated in accordance with the Securities and
Exchange Commission's formula. Each Class's distribution rate is calculated by
dividing the most recent year's distributions by the maximum offering price of
that Class at the end of the year. Each Class's performance may be compared to
various indices. Quotations from various publications may be included in sales
literature and advertisements. See "Performance Measures" in the Statement of
Additional Information for more information. All performance information is
historical and does not predict future results.
HOW THE FUND IS MANAGED
The Fund's Trustees formulate the Fund's general policies and oversee the Fund's
affairs. The Fund's investment operations are managed by the Adviser. Subject to
the supervision of the Fund's Trustees, the Adviser makes the Fund's day-to-day
investment decisions, arranges for the execution of portfolio transactions and
generally manages the Fund's investments. See "Management of the Fund" in the
Statement of Additional Information for information concerning the Trustees and
officers of the Trust and the Fund.
The Fund is managed by a team of investment professionals assigned to it by the
Adviser. No single individual has primary management responsibility over the
Fund's portfolio securities.
The Adviser places all orders for the purchase and sale of securities for the
Fund. In doing so, the Adviser seeks to obtain the best combination of price and
execution, which involves a number of judgmental factors. When the Adviser
believes that more than one broker-dealer is capable of providing the best
combination of price and execution in a particular portfolio transaction, the
Adviser often selects a broker-dealer that furnishes it with research products
or services. For its investment management services, the Adviser receives from
the Fund a monthly fee at an annual rate of 0.60% of the Fund's average daily
net assets.
The Administrator provides the Fund with certain administrative services and
generally oversees the operation of the Fund. The Fund pays the Administrator a
monthly fee at the annual rate of 0.40% of average daily net assets for these
services. The Administrator also provides pricing and bookkeeping services to
the Fund for a monthly fee of $2,250 plus a percentage of the Fund's average net
assets over $50 million. Liberty Financial Investments, Inc. (Distributor), a
subsidiary of the Administrator, serves as the Fund's distributor. Colonial
Investors Service Center, Inc. (Transfer Agent), an affiliate of the
Administrator, serves as the Fund's shareholder services and transfer agent for
a fee of 0.25% annually of average net assets plus certain out-of-pocket
expenses. Commencing in October, 1997, the fee for such transfer agency and
shareholder services began to be reduced through twelve successive monthly
reductions. After such reductions, the fee will be 0.236% annually of average
net assets plus certain out-of-pocket expenses. The Transfer Agent also provides
the Fund with trust administration services with respect to the Fund's Trust
Shares (Classes E, F, G and H). The Fund pays a monthly fee for such services
equal to $1.50 times the number of open Trust Share accounts during the month.
Each of the foregoing fees is subject to any fee waiver or expense reimbursement
to which the Adviser and/or the Administrator may agree. See "Summary of
Expenses" on page 2.
The Administrator, the Distributor, the Adviser, and the Transfer Agent are all
indirect subsidiaries of Liberty Financial Companies, Inc. (Liberty Financial),
which in turn is an indirect subsidiary of Liberty Mutual Insurance Company
(Liberty Mutual). Liberty Mutual is an underwriter of workers' compensation
insurance and a property and casualty insurer in the U.S.
HOW THE FUND VALUES ITS SHARES
Per share net asset value is calculated by dividing the total value of each
Class's net assets by its number of outstanding shares. Shares of the Fund are
valued as of the close (normally 4:00 p.m. Eastern time) of the New York Stock
Exchange (Exchange) each day the exchange is open. Portfolio securities for
which market quotations are readily available are valued at current market
value. Short-term investments maturing in 60 days or less are valued at
amortized cost. All other securities and assets are valued at their fair value
following procedures adopted by the Fund's Trustees.
TRADITIONAL SHARES
Traditional Shares may be purchased by traditional investors (such as
individuals, joint tenants, corporations, custodians, individual retirement
accounts, or qualified retirement plan accounts, among others). Investors
desiring to purchase Traditional Shares may choose among Class A shares, Class B
shares or Class C shares, each of which is described below.
Class A Shares. Class A shares are offered at net asset value plus an initial
sales charge as follows:
_______Initial Sales Charge______
Retained
by Financial
Service
Firm
_____as % of______ as % of
Amount Offering Offering
Amount Purchased Invested Price Price
Less than $50,000 6.10% 5.75% 5.00%
$50,000 to less than
$100,000 4.71% 4.50% 3.75%
$100,000 to less than
$250,000 3.63% 3.50% 2.75%
$250,000 to less than
$500,000 2.56% 2.50% 2.00%
$500,000 to less than
$1,000,000 2.04% 2.00% 1.75%
$1,000,000 or more 0.00% 0.00% 0.00%
On purchases of $1 million or more, the Distributor pays the financial service
firm a cumulative commission as follows:
Amount Purchased Commission
First $3,000,000 1.00%
Next $2,000,000 0.50%
Over $5,000,000 0.25%(1)
(1) Paid over 12 months but only to the extent the shares remain outstanding.
In determining the sales charge and commission applicable to a new purchase
under the above schedules, the amount of the current purchase is added to the
current value of shares previously purchased and still held by the investor. If
a purchase results in an account having a value from $1 million to $5 million,
then the portion of the shares purchased that causes the account's value to
exceed $1 million will be subject to a contingent deferred sales charge of 1.00%
payable to the Distributor if redeemed within 18 months from the first day of
the month following the purchase. If the purchase results in an account having a
value in excess of $5 million, the contingent deferred sales charge will not
apply to the portion of the purchased shares comprising such excess amount.
Class B Shares. Class B shares are offered at net asset value without an initial
sales charge and are subject to a 0.75% annual distribution fee for
approximately eight years (at which time they automatically convert to Class A
shares not bearing a distribution fee) and a declining contingent deferred sales
charge if redeemed within six years after purchase equaling a percentage of the
purchase price of the shares being redeemed. As shown below, the amount of the
contingent deferred sales charge depends on the number of years after purchase
that the redemption occurs:
Years Contingent Deferred
After Purchase Sales Charge
0-1 5.00%
1-2 4.00%
2-3 3.00%
3-4 3.00%
4-5 2.00%
5-6 1.00%
More than 6 0.00%
Year one ends one year after the end of the month in which the purchase was
accepted and so on. The Distributor pays financial service firms a commission of
4.00% on Class B share purchases.
Class C Shares. Class C shares are offered at net asset value and are subject to
a 0.75% annual distribution fee and a 1.00% contingent deferred sales charge on
redemptions made within one year after the end of the month in which the
purchase was accepted.
The Distributor pays financial service firms an initial commission of 1.00% on
Class C share purchases and an ongoing commission of 0.75% annually commencing
after the shares purchased have been outstanding for one year. Payment of the
ongoing commission is conditioned on receipt by the Distributor of the 0.75%
annual distribution fee referred to above. The commission may be reduced or
eliminated by the Distributor at any time.
TRUST SHARES
Trust Shares may be purchased by individuals seeking a convenient way to give an
investment in the Fund to a child, grandchild or other individual. Rather than
being held directly by you or the gift's eventual recipient (beneficiary), Trust
Shares are held in an irrevocable trust, the trustee of which is an officer of
the Administrator, until the trust termination date you specify, at which time
the shares pass to the beneficiary. Distributions from the trust are permitted
only for limited specified purposes. Subsequent investments into the same
account do not affect the original trust termination date; however, no
additional investments into an account (other than reinvestment of
distributions) may be made within two years of the termination date. The
duration of the trust may be as long as you choose, but must be at least 5 years
from the initial purchase into the trust or until the beneficiary reaches the
age of 18, whichever is later. The trust will terminate, and amounts held in the
trust will be distributed, in the event of the beneficiary's death prior to the
original trust termination date.
Two types of trust plans are available: Colonial Gift Plan and Colonial
Advantage Plan. Each Plan has different provisions for the payment of
distributions prior to trust termination and different tax implications for the
donor and/or beneficiary. The Plan that is most suitable for you will depend on
your specific financial and tax circumstances and your gift-giving objectives.
The Transfer Agent provides the Fund with trust administration services with
respect to each Trust Share class for which the Fund pays a monthly fee for such
services equal to $1.50 times the number of open Trust Share accounts during the
month.
Each Plan is described below:
Colonial Gift Plan
The Colonial Gift Plan is designed to serve exclusively as a vehicle for making
a future gift of the Fund's shares. Under the Colonial Gift Plan the beneficiary
will have no ability to access or withdraw the shares until the trust's
termination. Because the gift is viewed by the Internal Revenue Service as a
gift of a future interest, the gift will not be eligible for the Federal annual
gift tax exclusion. The trust, not the beneficiary, will be taxed on any income
and capital gains earned by the trust in excess of $100 per year. The trustee
will prepare and file all Federal and state income tax returns that are required
each year, and will satisfy any taxes owed from the assets of the trust by
redeeming Fund shares.
Colonial Advantage Plan
The Colonial Advantage Plan is designed to permit the donor and, under certain
circumstances, the beneficiary, to direct the trustee to make distributions from
the trust for specified purposes, and to provide additional benefits to the
donor. Under the Colonial Advantage Plan, during the first 30 days following the
contribution the beneficiary will have the right to withdraw the shares
purchased by such contribution or their net asset value, plus any sales charge
paid on the purchase, and the contribution will be eligible for the Federal
annual gift tax exclusion. The trustee will provide the beneficiary with notice
of the withdrawal right at the time of each contribution. Under a Clinton
administration budgetary proposal, gifts made after December 31, 1998 to trusts
such as the Colonial Advantage Plan would not be eligible for the Federal annual
gift tax exclusion. Although it is too early to determine whether Congress will
approve the President's proposed repeal of this exclusion from Federal gift tax,
as of the date of this Prospectus, most commentators believe the likelihood of
repeal to be remote. The beneficiary will be taxed on all of the trust's income
and capital gains. In connection with the initial contribution the donor may
direct the trustee, or authorize the beneficiary (if he or she is over 18) or
the beneficiary's representative (if he or she is not also the donor), to direct
the trustee to redeem Fund shares and distribute the proceeds to the beneficiary
in order to provide funds for the beneficiary to pay such taxes. Such
distributions would be made within 90 days after the end of each calendar year.
The amount of each distribution would be determined by multiplying the amount of
each class of income earned by the trust during the year times the highest
marginal Federal tax rate for unmarried individuals applicable to that class of
income. Once made, the election to receive tax distributions may not be revoked.
In connection with the initial contribution, the donor also may authorize the
beneficiary (if he or she is over 18), or the beneficiary's representative (if
he or she is not also the donor), to direct the trustee to redeem shares and pay
the proceeds directly to a recognized post-secondary educational institution to
cover the beneficiary's post-secondary educational expenses. Once made, the
election to allow such distributions may not be revoked.
No other distributions from the trust are permitted until the trust's
termination date. The trustee will send an information statement to the
beneficiary each year showing the amount of income and capital gains to be
reported on his or her income tax returns for that year.
The foregoing is a general summary only of the tax implications of an investment
in the Fund's Trust Shares. More detailed information is available below under
"Distributions and Taxes" and in the Fund's Statement of Additional Information.
You should consult your financial or tax adviser for specific advice concerning
which option may be most suitable for you.
Under each Plan, upon termination of the trust, the underlying Trust Shares
(matured Trust Shares) automatically pass to the beneficiary. Prior to the
termination date a notice will be sent to the beneficiary notifying him or her
of the impending termination date and the options available to the beneficiary,
and requesting certain information including the beneficiary's social security
number. The beneficiary may be asked to sign and return a Form W-9. If not
redeemed at this time by the beneficiary, the shares will be reregistered in the
beneficiary's name. Thereafter, the beneficiary may not make additional
investments into his or her Trust Share account other than through reinvestment
of distributions. If the beneficiary dies during the term of the trust, the
shares automatically pass to the beneficiary's executors or administrators to be
disposed of as part of the beneficiary's estate.
Classes of Trust Shares
If you choose to purchase Trust Shares, the Class of shares you may purchase
will depend on the length of time between the purchase date and the designated
trust termination date. If that period is five years or more but less than ten
years, you have the option of purchasing Class E or F shares. If the termination
date is 10 years or more after the initial purchase date, you have the option of
purchasing Class G or H shares. Class E, Class F, Class G and Class H shares are
described below.
Five to Ten Year Trust Shares:
Class E Shares. Class E shares are offered at net asset value plus an initial
sales charge as follows:
_______Initial Sales Charge______
Retained
by
Financial
Service
Firm
_____as % of______ as % of
Amount Offering Offering
Amount Purchased Invested Price Price
Less than $50,000 5.26% 5.00% 5.00%
$50,000 to less than
$100,000 4.17% 4.00% 4.00%
$100,000 to less than
$250,000 3.09% 3.00% 3.00%
$250,000 to less than
$500,000 1.52% 1.50% 1.50%
$500,000 or more 0.00% 0.00% 0.00%
Class E shares also are subject to a 0.10% annual distribution fee. In addition
to the amounts shown above as being retained by the financial service firm, the
Distributor will pay to the financial service firm (i) an additional commission
at the time of purchase of 0.75% of the offering price for investments up to but
less than $500,000, and 1.00% for investments of $500,000 or more, and (ii) an
on-going commission of 0.10% annually. The ongoing commission may be reduced or
eliminated at any time.
Purchases of $500,000 to $5 million are subject to a contingent deferred sales
charge of 1.00% of the purchase price of the shares being redeemed payable to
the Distributor on redemptions within 18 months from the first day of the month
following the purchase. The contingent deferred sales charge does not apply to
the excess of any purchase over $5 million.
Class F Shares. Class F shares are offered at net asset value without an initial
sales charge and subject to the same declining contingent deferred sales charge
and annual distribution fee described above under Class B shares. Class F shares
convert automatically to Class E shares approximately eight years after
purchase. The Distributor pays financial service firms a commission of 4.75% on
Class F share purchases.
Ten or More Year Trust Shares:
Class G Shares. Class G shares are offered at net asset value plus an initial
sales charge as follows:
_______Initial Sales Charge______
Retained
by Financial
Service
Firm
_____as % of______ as % of
Amount Offering Offering
Amount Purchased Invested Price Price
Less than $50,000 4.71% 4.50% 4.50%
$50,000 to less than
$100,000 3.63% 3.50% 3.50%
$100,000 to less than
$250,000 2.56% 2.50% 2.50%
$250,000 to less than
$500,000 1.27% 1.25% 1.25%
$500,000 or more 0.00 0.00% 0.00%
Class G shares also are subject to an annual distribution fee of up to 0.25%. In
addition to the amounts shown above as being retained by the financial service
firm, the Distributor will pay to the financial service firm (i) an additional
commission at the time of purchase of 1.75% of the offering price for
investments up to but less than $500,000 and 1.25% for investments of $500,000
or more, and (ii) on-going commissions of 0.10% annually for shares outstanding
for less than five years and 0.25% annually for shares outstanding five years or
more; provided, however, that the additional 0.15% on-going commission payable
after five years will only be paid to financial service firms that pay such
additional amount in full to the individual representative. The ongoing
commission may be reduced or eliminated at any time.
Purchases of $500,000 to $5 million are subject to a contingent deferred sales
charge of 1.00% of the purchase price of the shares being redeemed payable to
the Distributor on redemptions within 18 months from the first day of the month
following the purchase. The contingent deferred sales charge does not apply to
the excess of any purchase over $5 million.
Class H Shares. Class H shares are offered at net asset value without an initial
sales charge and subject to the same declining contingent deferred sales charge
and annual distribution fee described above under Class B shares. Class H shares
convert automatically to Class G shares approximately eight years after
purchase. The Distributor pays financial service firms a commission of 5.25% on
Class H share purchases.
Withdrawal Under the Colonial Advantage Plan. If the beneficiary under an
Advantage Plan trust exercises his or her withdrawal rights, the financial
service firm shall refund to the Distributor any sales charge or initial
commission previously retained or paid on the withdrawn shares or amount
redeemed.
GENERAL INFORMATION REGARDING BUYING AND SELLING SHARES
Buying Shares. Shares of the Fund are offered continuously. Orders received in
good form prior to the time at which the Fund values its shares (or placed with
a financial service firm before such time and transmitted by the financial
service firm before the Fund processes that day's share transactions) will be
processed based on that day's closing net asset value, plus any applicable
initial sales charge. For purchases of Trust Shares, a signed Trust Declaration
Agreement adoption agreement must be received within ten days following the
purchase.
The minimum initial investment generally is $2,500; the minimum subsequent
investment generally is $250. For Colonial retirement accounts, the minimum
initial and subsequent investments are each $25. Certificates generally will be
issued only for Class A shares, and there are some limitations on the issuance
of Class A share certificates. The Fund may refuse any purchase order for its
shares. See the Statement of Additional Information for more information.
Which Class is more beneficial to an investor depends on the amount and intended
length of the investment. Purchasers of Traditional Shares may choose among
Class A, Class B and Class C shares. Purchasers of Trust Shares with trust terms
of at least five but less than ten years may choose between Class E and Class F
shares; Trust Share purchasers with trust terms of ten years or more may choose
between Class G and Class H shares. Investors generally should compare any
initial and/or deferred sales charges and distribution fees applicable to each
class, given the expected length of the investment or trust term, in deciding
which Class is most suitable for them. Investors also should consider whether
they prefer to have 100% of the purchase price invested immediately (as is the
case with Classes B, C, F and H). Purchases of $250,000 or more must be for
Class A, C, E or G shares. Purchases of $500,000 or more must be for Class A,
E or G shares. Consult your financial service firm.
Financial service firms may receive different compensation rates for selling
different Classes of shares. Payment of the ongoing commissions applicable to
Classes C, E and G are conditioned upon receipt by the Distributor of such
amounts from the Fund. The commission may be reduced or eliminated by the
Distributor for any reason. If the beneficiary under an Advantage Plan trust
exercises his or her withdrawal rights, the financial service firm shall refund
to the Distributor any sales charge or initial commission previously retained or
paid on the withdrawn shares or amount redeemed. The Distributor may pay
additional compensation to financial service firms which have made or may make
significant sales. Initial or contingent deferred sales charges may be reduced
or eliminated for certain persons or organizations purchasing Fund shares alone
or in combination with certain other mutual funds distributed by the
Distributor. See "Programs for Reducing or Eliminating Sales Charges" and "How
to Buy Shares" in the Statement of Additional Information for more information.
Selling Shares. Traditional Shares and matured Trust Shares may be sold on any
day the Exchange is open, either directly to the Fund or through your financial
service firm. The sale price is the net asset value (less any contingent
deferred sales charge or redemption fee) next calculated after the request and
any necessary documentation are received in proper form. Sale proceeds generally
are sent within seven days (usually on the next business day after your request
is received in good form). However, for Traditional Shares recently purchased by
check, the Fund will delay sending proceeds for up to 15 days in order to
protect the Fund against financial losses and dilution in net asset value caused
by dishonored purchase payment checks. To avoid delay in payment, investors are
advised to purchase shares unconditionally, such as by certified check or other
immediately available funds.
To sell shares directly to the Fund, send a signed letter of instruction or
stock power form to the Transfer Agent, along with any certificates for shares
to be sold. Signatures must be guaranteed by a bank, a member firm of a national
stock exchange or another eligible guarantor institution. Stock power forms are
available from financial service firms, the Transfer Agent and many banks.
Additional documentation is required for sales by corporations, agents,
fiduciaries, surviving joint owners and individual retirement account holders.
For details contact:
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
For sales through financial service firms, the firm must receive the sales
request prior to the time at which the Fund values its shares to receive that
day's price. The firm is responsible for furnishing all necessary documentation
to the Transfer Agent and may charge for this service.
The sale of shares is a taxable transaction for income tax purposes and may
involve the payment of a contingent deferred sales charge. Contingent deferred
sales charges are paid to the Distributor. Shares issued upon distribution
reinvestment and amounts representing appreciation are not subject to a
contingent deferred sales charge. The contingent deferred sales charge is
imposed on redemptions which result in the account value falling below its Base
Amount (the total dollar value of purchase payments (including initial sales
charges, if any) in the account, reduced by prior redemptions on which a
contingent deferred sales charge was paid and any exempt redemptions). When a
redemption subject to a contingent deferred sales charge is made, generally,
older shares will be redeemed first unless the shareholder instructs otherwise.
The amount of the contingent deferred sales charge is the applicable percentage
shown above for each Class, applied to the cost (including any initial sales
charge) of the shares at the time of purchase. Under unusual circumstances, the
Fund may suspend repurchases or postpone payment for up to seven days or longer,
as permitted by Federal securities law. No interest will accrue on amounts
represented by uncashed distribution or redemption checks.
Shareholder Services and Account Fees. A variety of shareholder services are
available. For more information about these services or your account, call
1-800-345-6611. Some services are described in the attached account application.
A shareholder's manual explaining all available services will be provided upon
request.
In June of any year, the Fund may deduct $10 (payable to the Transfer Agent)
from accounts valued at less than $1,000 unless the account value has dropped
below $1,000 solely as a result of share value depreciation. Shareholders will
receive 60 days' written notice to increase the account value before the fee is
deducted. The Fund also may deduct annual maintenance and processing fees
(payable to the Transfer Agent) in connection with certain retirement plan
accounts. See "Special Purchase Programs/Investor Services" in the Statement of
Additional Information for more information.
DISTRIBUTIONS AND TAXES
The Fund intends to qualify as a "regulated investment company" under the
Internal Revenue Code and to distribute to shareholders virtually all net income
and any net realized gain annually. Distributions on Traditional Shares and
matured Trust Shares are reinvested in additional shares of the same Class of
the Fund at net asset value unless the shareholder elects to receive cash.
Distributions on Trust Shares are automatically reinvested until the trust's
termination unless used to fund trust distributions permitted under the
Advantage Plan. Regardless of the shareholder's election, distributions on
Traditional Shares of $10 or less will be reinvested. If a shareholder of
Traditional Shares or matured Trust Shares has elected to receive dividends
and/or capital gain distributions in cash and the postal or other delivery
service selected by the Transfer Agent is unable to deliver checks to the
shareholder's address of record, such shareholder's distribution option will
automatically be converted to having all dividend and other distributions
reinvested. No interest will accrue on amounts represented by uncashed
distribution or redemption checks. To change your election on Traditional Shares
or matured Trust Shares, call the Transfer Agent for information.
Whether received in cash or in additional shares, distributions must be reported
as taxable income unless they are held in a tax qualified account or by a
tax-exempt institution. Under the Colonial Gift Plan, the trustee will file all
income tax returns and pay all income taxes for income earned prior to the
trust's termination. Under the Colonial Advantage Plan, the beneficiary will be
obligated to report any income earned by the trust on his or her tax returns and
to pay any applicable income taxes. If shares are purchased shortly before a
distribution is declared, the distribution will be taxable although it is in
effect a partial return of the amount invested. Each January, information on the
amount and nature of distributions for the prior year is sent to shareholders.
A gift made through the purchase of the Fund's Trust Shares may have to be
reported under Federal gift tax laws and may be subject to Federal gift taxes.
In general, a Federal gift tax return must be filed reporting all gifts made by
an individual during any calendar year, unless the gift qualifies for the
Federal annual gift tax exclusion. To so qualify, the gift must be a gift of a
"present interest" and must not exceed $10,000 when combined with any other
gifts made to the same beneficiary during the calendar year. The limit is
$20,000 for a married couple who elect "gift splitting," but such election must
be made on a gift tax return filed for the calendar year in which the gift is
made. Whether a gift made through the purchase of the Fund's Trust Shares
qualifies for the annual exclusion depends on the Plan selected by the donor as
well as on the combined amount of the gift and any other gifts made to the
beneficiary by the donor during the particular year. In general, if no other
gifts are made during the year to the beneficiary, a gift under the Advantage
Plan will qualify for the Federal gift tax exclusion to the extent it does not
exceed the $10,000/$20,000 maximum (see the reference under the subcaption
"Colonial Advantage Plan" above to a Clinton administration budgetary proposal);
a gift under the Gift Plan will not qualify for the annual exclusion. A gift tax
return reporting the amount of the gift under the Gift Plan and the amount of
any gift under the Advantage Plan not qualifying for the annual exclusion must
be filed by the donor. A gift tax return must also be filed by a married donor
to elect gift splitting and thereby take advantage of the higher $20,000
limitation on the annual exclusion. Any gift tax due on account of the purchase
of Trust Shares is the sole responsibility of the donor and will not be paid
from the Trust Shares.
A purchase of Trust Shares may also be subject to state gift tax reporting
requirements under the laws of the state in which the donor of the gift resides.
See "Trust Shares" above and "Additional Tax Matters Concerning Trust Shares" in
the Fund's Statement of Additional Information for more detailed information
about these and other tax matters applicable to an investment in the Fund. Due
to the complexity of Federal and state laws pertaining to gifts in trust, you
should consult your financial or tax adviser before investing in the Fund's
Trust Shares.
EXCHANGES OF TRADITIONAL SHARES
Exchanges of Traditional Shares at net asset value may be made from any other
mutual fund distributed by the Distributor, including funds advised by the
Adviser and its affiliates, the Administrator and Newport Fund Management, Inc.
Generally, such exchanges must be among the same classes of shares. Consult your
financial service firm or the Transfer Agent for information regarding what
funds are available.
Exchanges which are the initial investment in the Fund's shares must meet the
minimum initial investment requirement. Exchanges of the Fund's Class A and
Class B shares into the same class of any other mutual fund distributed by the
Distributor are limited to one exchange per twelve-month period.
Shares will continue to age without regard to the exchange for purposes of
conversion and determining the contingent deferred sales charge, if any, upon
redemption. Carefully read the prospectus of the fund into which the exchange
will go before submitting the request. Call 1-800-426-3750 to receive a
prospectus and an exchange authorization form. Call 1-800-422-3737 to exchange
shares by telephone. An exchange is a taxable capital transaction. The exchange
service may be changed, suspended or eliminated on 60 days' written notice. The
Fund will terminate the exchange privilege as to a particular shareholder if it
is determined by the Administrator, in its sole and absolute discretion, that
the shareholder's exchange activity is likely to adversely impact the Adviser's
ability to manage the Fund's investments in accordance with its objective or
otherwise harm the Fund or its remaining shareholders. Trust Shares may not be
exchanged for shares of any other fund.
Class A Shares. An exchange from a money market fund into the Fund will be at
the applicable offering price next determined (including sales charge), except
for amounts on which an initial sales charge was paid. Non-money market fund
shares must be held for five months before qualifying for exchange to the Fund,
after which exchanges are made at the net asset value next determined.
Class B Shares. Exchanges of Class B shares are not subject to the contingent
deferred sales charge. However, if shares are redeemed within six years after
the original purchase, a contingent deferred sales charge will be assessed using
the schedule of the fund into which the original investment was made.
Class C Shares. Exchanges of Class C shares will not be subject to the
contingent deferred sales charge. However, if shares are redeemed within one
year after the original purchase, a 1.00% contingent deferred sales charge will
be assessed.
Only one "roundtrip" exchange of the Fund's Class C shares may be made per
three-month period, measured from the date of the initial purchase. For example,
an exchange from Fund A to Fund B and back to Fund A would be permitted only
once during each three-month period.
TELEPHONE TRANSACTIONS
Telephone redemption privileges may be elected for Traditional Shares on the
account application by completing the Telephone Withdrawal Option section
including the Bank Information. Such privileges also may be elected for Trust
Shares after the trust matures by providing such information at or after trust
maturity to the Transfer Agent. Once elected, telephone redemptions may be made
by calling toll-free 1-800-422-3737 any business day between 9:00 a.m. Boston
time and the time at which the Fund values its shares. The Transfer Agent will
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine and may be liable to the extent reasonable procedures are
not employed. Confirmations of telephone transactions will be mailed to the
shareholder's address of record. Proceeds of telephone redemptions must be sent
to a pre-designated bank account via federal funds wire or electronic funds
transfer. All telephone transactions are recorded. Shareholders and/or their
financial advisers are required to provide their name, address and account
number. Financial advisers are also required to provide their broker number.
Despite the employment of the foregoing procedures, a shareholder may suffer a
loss from unauthorized transactions.
Shareholders and/or their financial advisers wishing to redeem shares by
telephone may experience difficulty in reaching the Fund at its toll-free
telephone number during periods of drastic economic or market changes. In that
event, shareholders and/or their financial advisers should follow the procedures
for redemption by mail as described above under "General Information Regarding
Buying and Selling Shares." The Administrator, the Transfer Agent and the Fund
reserve the right to change, modify or terminate the telephone redemption
services at any time upon prior written notice to shareholders. Shareholders
and/or their financial advisers are not obligated to transact by telephone.
12B-1 PLAN
Under a 12b-1 Plan, the Fund pays the Distributor monthly a service fee at an
annual rate of 0.25% of the Fund's average net assets. Pursuant to its Plan, the
Fund also pays the Distributor distribution fees at the following annual rates:
0.75% of the average net assets attributed to its Class B, Class C, Class F and
Class H shares; 0.10% of average net assets attributed to Class E shares; and up
to 0.25% of average net assets attributed to Class G shares. The actual fee with
respect to Class G shares will be 0.10% on Class G assets attributed to shares
outstanding for less than five years and 0.25% on Class G assets attributable to
shares outstanding for five years or more. Total returns and dividends will be
lower on classes bearing a distribution fee than the returns and dividends of
Class A shares. Class B, F and H shares automatically convert to Class A, E and
G shares, respectively, approximately eight years after the original shares were
purchased. See the Statement of Additional Information for more information. The
Distributor uses the fees to defray the cost of commissions and service fees
paid to financial service firms which have sold Fund shares, and to defray other
expenses such as sales literature, prospectus printing and distribution,
shareholder servicing costs and compensation to wholesalers. Should the fees
exceed the Distributor's expenses in any year, the Distributor would realize a
profit. The Plans also authorize other payments to the Distributor and its
affiliates (including the Administrator and the Adviser) which may be construed
to be indirect financing of sales of Fund shares.
ORGANIZATION AND HISTORY
The Fund was organized in 1996 as a separate portfolio of the Trust, which is a
Massachusetts business trust established in 1985.
The Trust is not required to hold annual shareholder meetings, but special
meetings may be called for certain purposes. Shareholders receive one vote for
each Fund share. Shares of the Fund and of any other series of the Trust that
may be in existence from time to time generally vote together except when
required by law to vote separately by fund or by class. The trustee of trusts
holding Trust Shares will send notices, proxy statements and proxies for
shareholder meetings to the trusts' beneficiaries to enable them to attend
meetings in person or vote by proxy. The trustee will vote all Trust Shares in
accordance with instructions received from such beneficiaries and will vote all
shares for which instructions are not received in the same proportion as those
for which instructions are received.
Shareholders owning in the aggregate ten percent of Trust shares may call
meetings to consider removal of Trustees. Under certain circumstances, the Trust
will provide information to assist shareholders in calling such a meeting. See
the Statement of Additional Information for more information.
<PAGE>
Investment Adviser
Stein Roe & Farnham Incorporated
One South Wacker Drive
Chicago, IL 60606
Administrator
Colonial Management Associates, Inc.
One Financial Center
Boston, MA 02111-2621
Distributor
Liberty Financial Investments, Inc.
One Financial Center
Boston, MA 02111-2621
Custodian
Boston Safe Deposit and Trust Company
One Boston Place
Boston, MA 02108-2624
Shareholder Services and Transfer Agent
Colonial Investors Service Center, Inc.
One Financial Center
Boston, MA 02111-2621
1-800-345-6611
Independent Accountants
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110-2624
Legal Counsel
Ropes & Gray
One International Place
Boston, MA 02110-2624
Your financial service firm is:
Printed in U.S.A.
February 28, 1998
STEIN ROE ADVISOR TAX-MANAGED
GROWTH FUND
PROSPECTUS
Stein Roe Advisor Tax-Managed Growth Fund seeks to maximize long-term capital
growth while reducing shareholder exposure to taxes.
For more detailed information about the Fund, call the Administrator at
1-800-426-3750 for the February 28, 1998 Statement of Additional Information.
- ----------------------------- --------------------------
NOT FDIC-INSURED MAY LOSE VALUE
NO BANK GUARANTEE
- ----------------------------- --------------------------
<PAGE>
COLONIAL TRUST I
Cross Reference Sheet
(Colonial Tax-Managed Growth Fund)
Classes A, B, C
Item Number of Form N-1A Prospectus Location or Caption
- ------------------------ ------------------------------
Part A
- ------
1. Cover Page
2. Cover Page; Summary of Expenses
3. The Fund's Financial History
4. The Fund's Investment Objective;
Organization and History;
How the Fund Pursues Its Objective and Certain Risk
Factors
5. Cover Page;
How the Fund is Managed;
Organization and History;
Back Cover
6. Organization and History;
Distributions and Taxes;
General Information Regarding Buying and Selling
Shares;
Possible Two-Tiered Structure;
Classes of Shares
7. General Information Regarding Buying and Selling
Shares;
How the Fund Values Its Shares;
12b-1 Plan; Back Cover
8. General Information Regarding Buying and Selling
Shares;
Exchanges;
Telephone Transactions
9. Not Applicable
<PAGE>
February 28, 1998
STEIN ROE ADVISOR
TAX-MANAGED
GROWTH FUND
PROSPECTUS
BEFORE YOU INVEST
Colonial Management Associates, Inc. (Administrator) and your full-service
financial adviser want you to understand both the risks and benefits of mutual
fund investing.
While mutual funds offer significant opportunities and are professionally
managed, they also carry risks including possible loss of principal. Unlike
savings accounts and certificates of deposit, mutual funds are not insured or
guaranteed by any financial institution or government agency.
Please consult your full-service financial adviser to determine how investing in
this mutual fund may suit your unique needs, time horizon and risk tolerance.
Stein Roe Advisor Tax-Managed Growth Fund (Fund), a diversified portfolio of
Colonial Trust I (Trust), an open-end management investment company, seeks to
maximize long-term capital growth while reducing shareholder exposure to taxes.
The Fund is managed by Stein Roe & Farnham, Incorporated (Adviser), an affiliate
of the Administrator and successor to an investment advisory business that was
founded in 1932.
The Fund currently is structured as a traditional mutual fund investing in
individual securities but may in the future be converted to a master/feeder
structure. Under a master/feeder structure, the Fund would seek to achieve its
objective by investing all of its assets in another open-end management
investment company managed by the Adviser and having substantially the same
objective and investment policies as the Fund. Shareholders of the Fund would be
notified but would not have an opportunity to vote on such conversion.
This Prospectus explains concisely what you should know before investing in
the Fund's Class A, Class B or Class C shares. Read it carefully and retain it
for future reference. More detailed information about the Fund is in the
February 28, 1998 Statement of Additional Information which has been filed with
the Securities and Exchange Commission and is obtainable free of charge by
calling the Administrator at 1-800-426-3750. The Statement of Additional
Information is incorporated by reference in (which means it is considered to be
a part of) this Prospectus.
Contents Page
Summary of Expenses
Possible Two-Tiered Structure
The Fund's Financial History
The Fund's Investment Objective
How the Fund Pursues its Objective
and Certain Risk Factors
How the Fund Measures its Performance
How the Fund is Managed
How the Fund Values its Shares
Classes of Shares
General Information Regarding Buying
and Selling Shares
Distributions and Taxes
Exchanges
Telephone Transactions
12b-1 Plan
Organization and History
- ----------------------------- --------------------------
NOT FDIC-INSURED MAY LOSE VALUE
NO BANK GUARANTEE
- ----------------------------- --------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
SUMMARY OF EXPENSES
Expenses are one of several factors to consider when investing in the Fund. The
following tables summarize your maximum transaction costs and your estimated
annual expenses, adjusted to reflect current fees, for an investment in the
Class A, Class B and Class C shares of the Fund. See "How the Fund is Managed"
and "12b-1 Plan" for a more complete description of the Fund's various costs and
expenses. It is anticipated that the Fund's annual operating expenses would not
change materially upon conversion to a master/feeder structure.
Shareholder Transaction Expenses (1)(2)
Class A Class B Class C
Maximum Initial Sales Charge Imposed on a
Purchase (as a % of offering price) (3) 5.75% 0.00%(4) 0.00%(4)
Maximum Contingent Deferred Sales
Charge (as a % of offering price) (3) 1.00%(5) 5.00% 1.00%
(1) For accounts less than $1,000 an annual fee of $10 may be deducted. See
"General Information Regarding Buying and Selling Shares."
(2) Redemption proceeds exceeding $500 sent via federal funds wire will be
subject to a $7.50 charge per transaction.
(3) Does not apply to reinvested distributions.
(4) Because of the distribution fees applicable to Class B and C shares,
long-term shareholders may pay more in aggregate sales charges than the
maximum initial sales charge permitted by the National Association of
Securities Dealers, Inc. See "12b-1 Plan."
(5) Only with respect to any portion of purchases of $1 million to $5
million redeemed within approximately 18 months after purchase. See
"Classes of Shares."
Annual Operating Expenses (as a % of average net assets)
Class A Class B Class C
Management and administration fees
(after expense waiver or reimbursement) 0.03% 0.03% 0.03%
12b-1 fees 0.25 1.00 1.00
Other expenses 1.22 1.22 1.22
---- ---- ----
Total operating expenses (after expense
waiver or reimbursement)(7) 1.50% 2.25% 2.25%
===== ===== =====
(6) Total expenses, excluding brokerage, interest, taxes, 12b-1 fees and
extraordinary expenses, are, until further notice, voluntarily limited
by the Administrator and the Adviser to 1.25% of the first $100
million of average net assets, and 1.50% of average net assets over
$100 million. Absent such expense limitation, "Management and
administration fees" would be 1.00% for each Class and "Total
operating expenses" would be 2.47%(Class A) and 3.22%(Classes B and
C).
Examples
The following Examples show the cumulative transaction and operating expenses
attributable to a hypothetical $1,000 investment in each Class of shares of the
Fund for the periods specified, assuming a 5% annual return and reinvestment of
dividends and distributions. The expense numbers in the Examples assume the
expense limit described above is in effect. The 5% return and expenses used in
these Examples should not be considered indicative of actual or expected Fund
performance or expenses, both of which will vary:
Example 1 (assumes redemption at period end)
Period Class A Class B Class C
1 year $ 72 $ 73 $ 33
3 years $102 $100 $ 70(7)
5 years $135 $140 $120
10 years $226 $240(8) $258
Example 2 (assumes no redemption)
Period Class A Class B Class C
1 year $ 72 $ 23 $ 23
3 years $102 $ 70 $ 70
5 years $135 $120 $120
10 years $226 $240(8) $258
(7) Class C shares do not incur a contingent deferred sales charge redemptions
made after one year.
(8) Class B shares automatically convert to Class A shares after approximately
8 years; therefore, years 9 and 10 reflect Class A share expenses.
<PAGE>
POSSIBLE TWO-TIERED
STRUCTURE
The Fund currently is structured as a traditional mutual fund investing in
individual securities, but may in the future convert to a master/feeder
structure by transferring all of its portfolio assets to a separate open-end
management investment company (Portfolio) with substantially the same investment
objective as the Fund in exchange for an interest in the Portfolio. Thereafter,
the Fund would seek to achieve its objective by investing all of its investable
assets in the Portfolio, and the Portfolio would invest directly in individual
portfolio securities. See "The Fund's Investment Objective," "How the Fund
Pursues its Objective and Certain Risk Factors" and "How the Fund is Managed"
for information concerning the Fund's investment objective, policies, management
and expenses. Shareholders of the Fund would be notified of, but would not have
an opportunity to vote on, such conversion.
After any such conversion, in addition to the Fund, other institutional
investors (including other investment companies) also would be able to invest in
the Portfolio. The conversion would be effected to allow other such investors to
invest in the Portfolio, potentially creating economies of scale and providing
additional portfolio management flexibility for the Portfolio which, if
achieved, also would indirectly benefit the Fund and its shareholders. The
following describes certain of the effects and risks of this structure.
After any such conversion, matters submitted by the Portfolio to its investors
for a vote would be passed along by the Fund to its shareholders, and the Fund
would vote its entire interest in the Portfolio in proportion to the votes
received from Fund shareholders.
It is possible that other investors in the Portfolio could alone or collectively
acquire sufficient voting interests in the Portfolio to control matters relating
to the operation of the Portfolio. In addition, large scale redemptions by any
other investors in the Portfolio could result in untimely liquidation of the
Portfolio's security holdings, loss of investment flexibility, and an increase
in the operating expenses of the Portfolio as a percentage of its assets. After
any conversion, you would be able to obtain information about whether there are
other investors in the Portfolio by writing or calling the Administrator at
1-800-426-3750.
After any conversion, the Fund would continue to invest in the Portfolio so long
as the Trust's Board of Trustees determined it was in the best interest of Fund
shareholders to do so. In the event that the Portfolio's investment objective
were changed so as to be inconsistent with the Fund's investment objective, the
Board of Trustees would consider what action might be taken, including changes
to the Fund's investment objective, or withdrawal of the Fund's assets from the
Portfolio and investment of such assets in another pooled investment entity or
the retention of an investment adviser to manage the Fund's investments. Certain
of these actions may require Fund shareholder approval. Withdrawal of the Fund's
assets from the Portfolio could result in a distribution by the Portfolio to the
Fund of portfolio securities in kind (as opposed to a cash distribution), and
the Fund could incur brokerage fees or other transaction costs and could realize
distributable taxable gains in converting such securities to cash. Such a
distribution in kind could also result in a less diversified portfolio of
investments for the Fund.
<PAGE>
THE FUND'S FINANCIAL HISTORY
The following is derived from the financial highlights for a share outstanding
throughout the period which have been audited by Price Waterhouse LLP,
independent accountants. Their unqualified report is included in the Fund's 1997
Annual Report and is incorporated by reference into the Statement of Additional
Information:
<TABLE>
<CAPTION>
Period Ended
October 31, 1997 (b)
--------------------------------------------------
Class A Class B Class C (c)
<S> <C> <C> <C>
Net asset value - Beginning of period $10.080 $10.080 $10.080
-------- -------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (a)(d) 0.040 (0.032) (0.032)
Net realized and unrealized gain (d) 1.920 1.912 1.912
----- ----- -----
Total from Investment Operations 1.960 1.880 1.880
----- ----- -----
Net asset value - End of period $12.040 $11.960 $11.960
======== ======== =======
Total return (e)(f)(g) 19.44% 18.65% 18.65%
------ ------ ------
RATIOS TO AVERAGE NET ASSETS
Expenses (h)(i) 1.50% 2.25% 2.25%
Net investment income (loss) (h)(i) 0.39% (0.36)% (0.36)%
Fees and expenses waived or borne by
the Adviser/Administrator (h)(i) 0.98% 0.98% 0.98%
Portfolio turnover (g) 51% 51% 51%
Average commission rate $0.0564 $0.0564 $0.0564
Net assets at end of period (000) $17,142 $38,452 $5,923
(a) Net of fees and expenses waived or borne by
the Adviser/Administrator which amounted to: $0.096 $0.096 $0.096
</TABLE>
(b) The Fund commenced investment operations on December 16, 1996. The activity
shown is from the effective date of registration (December 30, 1996) with the
Securities and Exchange Commission.
(c) Effective July 1, 1997, Class D shares were redesignated Class C shares.
(d) Per share data was calculated using average shares outstanding during the
period.
(e) Total return at net asset value assuming no initial sales charge or
contingent deferred sales charge.
(f) Had the Adviser/Administrator not waived or reimbursed a portion of
expenses, total return would have been reduced.
(g) Not annualized.
(h) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(i) Annualized.
Further performance information is contained in the Fund's Annual Report to
shareholders, which may be obtained without charge by calling 1-800-426-3750.
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks to maximize long-term capital growth while reducing shareholder
exposure to taxes.
HOW THE FUND PURSUES ITS OBJECTIVE AND CERTAIN RISK FACTORS
The Fund invests primarily (at least 65% of its assets) in common stocks of
large and medium capitalization companies (i.e., companies with at least $1
billion in equity market capitalization) believed by the Adviser to have above
average earnings growth prospects. The Adviser uses fundamental research
analysis and valuation techniques in order to identify potential investments for
the Fund. Up to 35% of the Fund's total assets may be invested in a combination
of (i) common stocks or American Depositary Receipts (receipts issued in the
U.S. by banks or trust companies evidencing ownership of underlying foreign
securities) of non-U.S. companies and (ii) common stocks of small capitalization
companies (i.e., companies with equity market capitalizations of less than $1
billion).
While the Fund's overriding objective is long-term capital growth, the Adviser
may use certain investment techniques designed to reduce the payment by the Fund
of taxable distributions to shareholders and thereby reduce the impact of taxes
on shareholder returns. Such techniques will be used only if, in the Adviser's
judgment, there will not be a materially negative impact on the Fund's pre-tax
total return. Such techniques may include, among others, (i) purchasing low or
non-dividend paying stocks; (ii) low portfolio turnover, which helps to minimize
the realization and distribution of taxable capital gains; (iii) deferring the
sale of a security until the realized gain would qualify as a long-term capital
gain rather than short-term; (iv) selling securities that have declined in value
to offset gains realized on the sale of other securities; and (v) when selling a
portion of a holding, selling those securities with a higher cost basis first.
The use of such techniques will not eliminate the payment by the Fund of taxable
distributions. The Administrator has retained the professional services firm of
Price Waterhouse LLP to provide tax consulting services.
Foreign Investments. The Fund may invest up to 35% of its total assets in
foreign securities including American Depositary Receipts. Investments in
foreign securities have special risks related to political, economic and legal
conditions outside of the U.S. As a result, the prices of such securities may
fluctuate substantially more than the prices of securities of issuers based in
the U.S. Special risks associated with foreign securities include the
possibility of unfavorable currency exchange rates, the existence of less liquid
markets, the unavailability of reliable information about issuers, the existence
(or potential imposition) of exchange control regulations (including currency
blockage), and political and economic instability, among others. In addition,
transactions in foreign securities may be more costly due to currency conversion
costs and higher brokerage and custodial costs. See "How the Fund Pursues its
Objective and Certain Risk Factors--Foreign Currency Transactions; Index and
Interest Rate Futures; Options" in this Prospectus and "Foreign Securities" and
"Foreign Currency Transactions" in the Statement of Additional Information for
more information about foreign investments.
Foreign Currency Transactions; Index and Interest Rate Futures; Options. In
connection with its investments in foreign securities, the Fund may (i) purchase
and sell foreign currencies on a spot or forward basis, (ii) enter into foreign
currency futures contracts, (iii) write both put and call options on foreign
currency futures contracts, and (iv) purchase and write both call and put
options on foreign currencies. Such transactions may be entered into (i) to lock
in a particular foreign exchange rate pending settlement of a purchase or sale
of a foreign security or pending the receipt of interest, principal or dividend
payments on a foreign security held by the Fund, or (ii) to hedge against a
decline in the value, in U.S. dollars or in another currency, of a foreign
currency in which securities held by the Fund are denominated.
In addition, the Fund may enter into (i) index and interest rate futures
contracts, (ii) write put and call options on such futures contracts, (iii)
purchase and write both call and put options on securities and indexes, and (iv)
purchase other types of forward or investment contracts linked to individual
securities, indexes or other benchmarks. The Fund may write a call or put option
on a security only if the option is covered.
A futures contract creates an obligation by the seller to deliver and the buyer
to take delivery of a type of instrument at the time and in the amount specified
in the contract. A sale of a futures contract can be terminated in advance of
the specified delivery date by subsequently purchasing a similar contract; a
purchase of a futures contract can be terminated by a subsequent sale. Gain or
loss on a contract generally is realized upon such termination.
An option generally gives the option holder the right, but not the obligation,
to purchase or sell prior to the option's specified expiration date. If the
option expires unexercised, the holder will lose any amount it paid to acquire
the option.
Transactions in futures, options and similar investments may not achieve the
goal of hedging to the extent there is an imperfect correlation between the
price movements of the contracts and of the underlying asset or benchmark. In
addition, because futures positions may require low margin deposits, the use of
futures contracts involves a high degree of leverage and may result in losses in
excess of the amount of the margin deposit. Finally, if the Adviser's prediction
on interest rates, stock market movements or other market factors is inaccurate,
the Fund may be worse off than if it had not engaged in such transactions.
See the Statement of Additional Information for information relating to the
Fund's obligations in entering into such transactions.
Small Companies. The smaller, less well established companies in which the Fund
may invest may offer greater opportunities for capital appreciation than larger,
better established companies, but may also involve certain special risks. Such
companies often have limited product lines, markets or financial resources and
depend heavily on a small management group. Their securities may trade less
frequently, in smaller volumes, and fluctuate more sharply in value than
exchange listed securities of larger companies.
Securities Loans. The Fund may lend its portfolio securities to broker-dealers
or banks. Such loans will not exceed 30% of the Fund's total assets. Each such
loan will be continuously secured by collateral at least equal at all times to
the market value of the securities loaned. In the event of bankruptcy or other
default of the borrower, the Fund could experience both delays in liquidating
the loan collateral or recovering the loaned securities and losses including (a)
possible decline in the value of the collateral or in the value of the
securities loaned during the period while the Fund seeks to enforce its rights
thereto, (b) possible subnormal levels of income and lack of access to income
during this period, and (c) expenses of enforcing its rights.
Temporary/Defensive Investments. Temporarily available cash may be invested in
certificates of deposit, bankers' acceptances, high quality commercial paper,
Treasury bills and repurchase agreements. Some or all of the Fund's assets also
may be invested in such investments or in investment grade U.S. or foreign debt
securities, Eurodollar certificates of deposit and obligations of savings
institutions during periods of unusual market conditions. Under a repurchase
agreement, the Fund buys a security from a bank or dealer, which is obligated to
buy it back at a fixed price and time. The security is held in a separate
account at the Fund's custodian and constitutes the Fund's collateral for the
bank's or dealer's repurchase obligation. Additional collateral will be added so
that the obligation will at all times be fully collateralized. However, if the
bank or dealer defaults or enters bankruptcy, the Fund may experience costs and
delays in liquidating the collateral, and may experience a loss if it is unable
to demonstrate its rights to the collateral in a bankruptcy proceeding. Not more
than 15% of the Fund's net assets will be invested in repurchase agreements
maturing in more than 7 days and other illiquid securities.
Borrowing of Money. The Fund may borrow money from banks for temporary or
emergency purposes up to 10% of the Fund's net assets; however, the Fund will
not purchase additional portfolio securities while borrowings exceed 5% of total
assets of the Fund.
Other. The Fund may not always achieve its investment objective. The Fund's
fundamental investment policies listed in the Statement of Additional
Information cannot be changed without the approval of a majority of the Fund's
outstanding voting securities. The Fund's investment objective and
non-fundamental investment policies may be changed without shareholder approval.
Additional information concerning certain of the securities and investment
techniques described above is contained in the Statement of Additional
Information.
HOW THE FUND MEASURES ITS PERFORMANCE
Performance may be quoted in sales literature and advertisements. Each Class's
average annual total returns are calculated in accordance with the Securities
and Exchange Commission's formula and assume the reinvestment of all
distributions, the maximum initial sales charge (if any) applicable to the
Class, and the contingent deferred sales charge or redemption fee (if any)
applicable to the time period quoted. Other total returns differ from average
annual total return only in that they may relate to different time periods, may
represent aggregate as opposed to average annual total returns and may not
reflect the initial or contingent deferred sales charges.
Each Class's yield, which differs from total return because it does not consider
changes in net asset value, is calculated in accordance with the Securities and
Exchange Commission's formula. Each Class's distribution rate is calculated by
dividing the most recent year's distributions by the maximum offering price of
that Class at the end of the year. Each Class's performance may be compared to
various indices. Quotations from various publications may be included in sales
literature and advertisements. See "Performance Measures" in the Statement of
Additional Information for more information. All performance information is
historical and does not predict future results.
HOW THE FUND IS MANAGED
The Fund's Trustees formulate the Fund's general policies and oversee the Fund's
affairs. The Fund's investment operations are managed by the Adviser. Subject to
the supervision of the Fund's Trustees, the Adviser makes the Fund's day-to-day
investment decisions, arranges for the execution of portfolio transactions and
generally manages the Fund's investments. See "Management of the Fund" in the
Statement of Additional Information for information concerning the Trustees and
officers of the Trust and the Fund.
The Fund is managed by a team of investment professionals assigned to it by the
Adviser. No single individual has primary management responsibility over the
Fund's portfolio securities.
The Adviser places all orders for the purchase and sale of securities for the
Fund. In doing so, the Adviser seeks to obtain the best combination of price and
execution, which involves a number of judgmental factors. When the Adviser
believes that more than one broker-dealer is capable of providing the best
combination of price and execution in a particular portfolio transaction, the
Adviser often selects a broker-dealer that furnishes it with research products
or services. For its investment management services, the Adviser receives from
the Fund a monthly fee at an annual rate of 0.60% of the Fund's average daily
net assets.
The Administrator provides the Fund with certain administrative services and
generally oversees the operation of the Fund. The Fund pays the Administrator a
monthly fee at the annual rate of 0.40% of average daily net assets for these
services. The Administrator also provides pricing and bookkeeping services to
the Fund for a monthly fee of $2,250 plus a percentage of the Fund's average net
assets over $50 million. Liberty Financial Investments, Inc. (Distributor), a
subsidiary of the Administrator, serves as the Fund's distributor. Colonial
Investors Service Center, Inc. (Transfer Agent), an affiliate of the
Administrator, serves as the Fund's shareholder services and transfer agent for
a fee of 0.25% annually of average net assets plus certain out-of-pocket
expenses. Commencing in October, 1997, the fee for such transfer agency and
shareholder services began to be reduced through twelve successive monthly
reductions. After such reductions, the fee will be 0.236% annually of average
net assets plus certain out-of-pocket expenses.
Each of the foregoing fees is subject to any fee waiver or expense reimbursement
to which the Adviser and/or the Administrator may agree. See "Summary of
Expenses" above.
The Administrator, the Distributor, the Adviser, and the Transfer Agent are all
indirect subsidiaries of Liberty Financial Companies, Inc. (Liberty Financial),
which in turn is an indirect subsidiary of Liberty Mutual Insurance Company
(Liberty Mutual). Liberty Mutual is an underwriter of workers' compensation
insurance and a property and casualty insurer in the U.S.
HOW THE FUND VALUES ITS SHARES
Per share net asset value is calculated by dividing the total value of each
Class's net assets by its number of outstanding shares. Shares of the Fund are
valued as of the close (normally 4:00 p.m. Eastern time) of the New York Stock
Exchange (Exchange) each day the exchange is open. Portfolio securities for
which market quotations are readily available are valued at current market
value. Short-term investments maturing in 60 days or less are valued at
amortized cost. All other securities and assets are valued at their fair value
following procedures adopted by the Fund's Trustees.
CLASSES OF SHARES
Class A Shares. Class A shares are offered at net asset value plus an initial
sales charge as follows:
_______Initial Sales Charge______
Retained
by Financial
Service
Firm
_____as % of______ as % of
Amount Offering Offering
Amount Purchased Invested Price Price
Less than $50,000 6.10% 5.75% 5.00%
$50,000 to less than
$100,000 4.71% 4.50% 3.75%
$100,000 to less than
$250,000 3.63% 3.50% 2.75%
$250,000 to less
than 2.56% 2.50% 2.00%
$500,000
$500,000 to less than
$1,000,000 2.04% 2.00% 1.75%
$1,000,000 or more 0.00% 0.00% 0.00%
On purchases of $1 million or more, the Distributor pays the financial service
firm a cumulative commission as follows:
Amount Purchased Commission
First $3,000,000 1.00%
Next $2,000,000 0.50%
Over $5,000,000 0.25%(1)
(1) Paid over 12 months but only to the extent the shares remain
outstanding.
In determining the sales charge and commission applicable to a new purchase
under the above schedules, the amount of the current purchase is added to the
current value of shares previously purchased and still held by the investor. If
a purchase results in an account having a value from $1 million to $5 million,
then the portion of the shares purchased that causes the account's value to
exceed $1 million will be subject to a contingent deferred sales charge of 1.00%
payable to the Distributor if redeemed within 18 months from the first day of
the month following the purchase. If the purchase results in an account having a
value in excess of $5 million, the contingent deferred sales charge will not
apply to the portion of the purchased shares comprising such excess amount.
Class B Shares. Class B shares are offered at net asset value without an initial
sales charge and are subject to a 0.75% annual distribution fee for
approximately eight years (at which time they automatically convert to Class A
shares not bearing a distribution fee) and a declining contingent deferred sales
charge if redeemed within six years after purchase equaling a percentage of the
purchase price of the shares being redeemed. As shown below, the amount of the
contingent deferred sales charge depends on the number of years after purchase
that the redemption occurs:
Years Contingent Deferred
After Purchase Sales Charge
0-1 5.00%
1-2 4.00%
2-3 3.00%
3-4 3.00%
4-5 2.00%
5-6 1.00%
More than 6 0.00%
Year one ends one year after the end of the month in which the purchase was
accepted and so on. The Distributor pays financial service firms a commission of
4.00% on Class B share purchases.
Class C Shares. Class C shares are offered at net asset value and are subject to
a 0.75% annual distribution fee and a 1.00% contingent deferred sales charge on
redemptions made within one year after the end of the month in which the
purchase was accepted.
The Distributor pays financial service firms an initial commission of 1.00% on
Class C share purchases and an ongoing commission of 0.75% annually commencing
after the shares purchased have been outstanding for one year. Payment of the
ongoing commission is conditioned on receipt by the Distributor of the 0.75%
annual distribution fee referred to above. The commission may be reduced or
eliminated by the Distributor at any time.
The Fund also offers Class E, F, G and H shares (Trust Shares) which are offered
through a separate Prospectus and are designed for persons who wish to make an
irrevocable gift to a child, grandchild or other individual. Trust Shares are
held in an irrevocable trust until a specified date at which time they pass to a
beneficiary. For more information about Trust Shares or to obtain a Prospectus,
call the Distributor at 1-800-426-3750.
GENERAL INFORMATION REGARDING BUYING AND SELLING SHARES
Buying Shares. Shares of the Fund are offered continuously. Orders received in
good form prior to the time at which the Fund values its shares (or placed with
a financial service firm before such time and transmitted by the financial
service firm before the Fund processes that day's share transactions) will be
processed based on that day's closing net asset value, plus any applicable
initial sales charge.
The minimum initial investment generally is $2,500; the minimum subsequent
investment generally is $250. For retirement accounts sponsored by the
Distributor, the minimum initial and subsequent investments are each $25.
Certificates generally will be issued only for Class A shares, and there are
some limitations on the issuance of Class A share certificates. The Fund may
refuse any purchase order for its shares. See the Statement of Additional
Information for more information.
Which Class is more beneficial to an investor depends on the amount and intended
length of the investment. Investors generally should compare any initial and/or
deferred sales charges and distribution fees applicable to each class, given the
expected length of the investment or trust term, in deciding which Class is most
suitable for them. Investors also should consider whether they prefer to have
100% of the purchase price invested immediately (as is the case with Class B and
C shares). Purchases of $250,000 or more must be for Class A or C shares.
Purchases of $1,000,000 or more must be for Class A shares. Consult your
financial service firm.
Financial service firms may receive different compensation rates for selling
different Classes of shares. The Distributor may pay additional compensation to
financial service firms which have made or may make significant sales. Initial
or contingent deferred sales charges may be reduced or eliminated for certain
persons or organizations purchasing Fund shares alone or in combination with
certain other mutual funds distributed by the Distributor. See "Programs for
Reducing or Eliminating Sales Charges" and "How to Buy Shares" in the Statement
of Additional Information for more information.
Selling Shares. Fund shares may be sold on any day the Exchange is open, either
directly to the Fund or through your financial service firm. The sale price is
the net asset value (less any contingent deferred sales charge or redemption
fee) next calculated after the request and any necessary documentation are
received in proper form. Sale proceeds generally are sent within seven days
(usually on the next business day after your request is received in good form).
However, for shares recently purchased by check, the Fund will delay sending
proceeds for up to 15 days in order to protect the Fund against financial losses
and dilution in net asset value caused by dishonored purchase payment checks. To
avoid delay in payment, investors are advised to purchase shares
unconditionally, such as by certified check or other immediately available
funds.
To sell shares directly to the Fund, send a signed letter of instruction or
stock power form to the Transfer Agent, along with any certificates for shares
to be sold. Signatures must be guaranteed by a bank, a member firm of a national
stock exchange or another eligible guarantor institution. Stock power forms are
available from financial service firms, the Transfer Agent and many banks.
Additional documentation is required for sales by corporations, agents,
fiduciaries, surviving joint owners and individual retirement account holders.
For details contact:
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
For sales through financial service firms, the firm must receive the sales
request prior to the time at which the Fund values its shares to receive that
day's price. The firm is responsible for furnishing all necessary documentation
to the Transfer Agent and may charge for this service.
The sale of shares is a taxable transaction for income tax purposes and may
involve the payment of a contingent deferred sales charge. Contingent deferred
sales charges are paid to the Distributor. Shares issued upon distribution
reinvestment and amounts representing appreciation are not subject to a
contingent deferred sales charge. The contingent deferred sales charge is
imposed on redemptions which result in the account value falling below its Base
Amount (the total dollar value of purchase payments (including initial sales
charges, if any) in the account, reduced by prior redemptions on which a
contingent deferred sales charge was paid and any exempt redemptions). When a
redemption subject to a contingent deferred sales charge is made, generally,
older shares will be redeemed first. The amount of the contingent deferred sales
charge is the applicable percentage shown above for each Class, applied to the
cost (including any initial sales charge) of the shares at the time of purchase.
Under unusual circumstances, the Fund may suspend repurchases or postpone
payment for up to seven days or longer, as permitted by Federal securities law.
No interest will accrue on amounts represented by uncashed distribution or
redemption checks.
Shareholder Services and Account Fees. A variety of shareholder services are
available. For more information about these services or your account, call
1-800-345-6611. Some services are described in the attached account application.
A shareholder's manual explaining all available services will be provided upon
request.
In June of any year, the Fund may deduct $10 (payable to the Transfer Agent)
from accounts valued at less than $1,000 unless the account value has dropped
below $1,000 solely as a result of share value depreciation. Shareholders will
receive 60 days' written notice to increase the account value before the fee is
deducted. The Fund also may deduct annual maintenance and processing fees
(payable to the Transfer Agent) in connection with certain retirement plan
accounts. See "Special Purchase Programs/Investor Services" in the Statement of
Additional Information for more information.
DISTRIBUTIONS AND TAXES
The Fund intends to qualify as a "regulated investment company" under the
Internal Revenue Code and to distribute to shareholders virtually all net income
and any net realized gain annually. Distributions are reinvested in additional
shares of the same Class of the Fund at net asset value unless the shareholder
elects to receive cash. To change your election, call the Transfer Agent for
information. Regardless of the shareholder's election, distributions of $10 or
less will be reinvested. If a shareholder has elected to receive dividends
and/or capital gain distributions in cash and the postal or other delivery
service selected by the Transfer Agent is unable to deliver checks to the
shareholder's address of record, such shareholder's distribution option will
automatically be converted to having all dividend and other distributions
reinvested. No interest will accrue on amounts represented by uncashed
distribution or redemption checks.
Whether received in cash or in additional shares, distributions must be reported
as taxable income unless they are held in a tax qualified account or by a
tax-exempt institution. If shares are purchased shortly before a distribution is
declared, the distribution will be taxable although it is in effect a partial
return of the amount invested. Each January, information on the amount and
nature of distributions for the prior year is sent to shareholders.
EXCHANGES
Exchanges at net asset value may be made from any other mutual fund distributed
by the Distributor, including funds advised by the Adviser and its affiliates,
the Administrator and Newport Fund Management, Inc. Generally, such exchanges
must be among the same classes of shares. Consult your financial service firm
for information regarding what funds are available.
Exchanges which are the initial investment in the Fund's shares must meet the
minimum initial investment requirement. Exchanges of the Fund's Class A and
Class B shares into the same class of any other mutual fund distributed by the
Distributor are limited to one exchange per twelve-month period.
Shares will continue to age without regard to the exchange for purposes of
conversion and determining the contingent deferred sales charge, if any, upon
redemption. Carefully read the prospectus of the fund into which the exchange
will go before submitting the request. Call 1-800-426-3750 to receive a
prospectus and an exchange authorization form. Call 1-800-422-3737 to exchange
shares by telephone. An exchange is a taxable capital transaction. The exchange
service may be changed, suspended or eliminated on 60 days' written notice. The
Fund will terminate the exchange privilege as to a particular shareholder if it
is determined by the Administrator, in its sole and absolute discretion, that
the shareholder's exchange activity is likely to adversely impact the Adviser's
ability to manage the Fund's investments in accordance with its objective or
otherwise harm the Fund or its remaining shareholders.
Class A Shares. An exchange from a money market fund into the Fund will be at
the applicable offering price next determined (including sales charge), except
for amounts on which an initial sales charge was paid. Non-money market fund
shares must be held for five months before qualifying for exchange to the Fund,
after which exchanges are made at the net asset value next determined.
Class B Shares. Exchanges of Class B shares are not subject to the contingent
deferred sales charge. However, if shares are redeemed within six years after
the original purchase, a contingent deferred sales charge will be assessed using
the schedule of the fund into which the original investment was made.
Class C Shares. Exchanges of Class C shares will not be subject to the
contingent deferred sales charge. However, if shares are redeemed within one
year after the original purchase, a 1.00% contingent deferred sales charge will
be assessed.
Only one "roundtrip" exchange of the Fund's Class C shares may be made per
three-month period, measured from the date of the initial purchase. For example,
an exchange from Fund A to Fund B and back to Fund A would be permitted only
once during each three-month period.
TELEPHONE TRANSACTIONS
Telephone redemption privileges may be elected on the account application by
completing the Telephone Withdrawal Options section including the Bank
Information. Once elected, telephone redemptions may be made by calling
toll-free 1-800-422-3737 any business day between 9:00 a.m. Boston time and the
time at which the Fund values its shares. The Transfer Agent will employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine and may be liable to the extent reasonable procedures are not employed.
Confirmations of telephone transactions will be mailed to the shareholder's
address of record. Proceeds of telephone redemptions must be sent to a
pre-designated bank account via federal funds wire or electronic funds transfer.
All telephone transactions are recorded. Shareholders and/or their financial
advisers are required to provide their name, address and account number.
Financial advisers are also required to provide their broker number. Despite the
employment of the foregoing procedures, a shareholder may suffer a loss from
unauthorized transactions.
Shareholders and/or their financial advisers wishing to redeem shares by
telephone may experience difficulty in reaching the Fund at its toll-free
telephone number during periods of drastic economic or market changes. In that
event, shareholders and/or their financial advisers should follow the procedures
for redemption by mail as described above under "General Information Regarding
Buying and Selling Shares." The Administrator, the Transfer Agent and the Fund
reserve the right to change, modify or terminate the telephone redemption
services at any time upon prior written notice to shareholders. Shareholders
and/or their financial advisers are not obligated to transact by telephone.
12B-1 PLAN
Under its 12b-1 Plan, the Fund pays the Distributor monthly a service fee at an
annual rate of 0.25% of the Fund's average net assets. Pursuant to its Plan, the
Fund also pays the Distributor a distribution fee at an annual rate of 0.75% of
the average net assets attributed to its Class B and Class C shares. Total
returns and dividends will be lower on classes bearing a distribution fee than
the returns and dividends of Class A shares. Class B shares automatically
convert to Class A approximately eight years after the original shares were
purchased. See the Statement of Additional Information for more information. The
Distributor uses the fees to defray the cost of commissions and service fees
paid to financial service firms which have sold Fund shares, and to defray other
expenses such as sales literature, prospectus printing and distribution,
shareholder servicing costs and compensation to wholesalers. Should the fees
exceed the Distributor's expenses in any year, the Distributor would realize a
profit. The Plan also authorizes other payments to the Distributor and its
affiliates (including the Administrator and the Adviser) which may be construed
to be indirect financing of sales of Fund shares.
ORGANIZATION AND HISTORY
The Fund was organized in 1996 as a separate portfolio of the Trust, which is a
Massachusetts business trust established in 1985.
The Trust is not required to hold annual shareholder meetings, but special
meetings may be called for certain purposes. Shareholders receive one vote for
each Fund share. Shares of the Fund and of any other series of the Trust which
may be in existence from time to time generally vote together except when
required by law to vote separately by fund or by class.
Shareholders owning in the aggregate ten percent of Trust shares may call
meetings to consider removal of Trustees. Under certain circumstances, the Trust
will provide information to assist shareholders in calling such a meeting. See
the Statement of Additional Information for more information.
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
Investment Adviser
Stein Roe & Farnham Incorporated
One South Wacker Drive
Chicago, IL 60606
Administrator
Colonial Management Associates, Inc.
One Financial Center
Boston, MA 02111-2621
Distributor
Liberty Financial Investments, Inc.
One Financial Center
Boston, MA 02111-2621
Custodian
Boston Safe Deposit and Trust Company
One Boston Place
Boston, MA 02108-2624
Shareholder Services and Transfer Agent
Colonial Investors Service Center, Inc.
One Financial Center
Boston, MA 02111-2621
1-800-345-6611
Independent Accountants
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110-2624
Legal Counsel
Ropes & Gray
One International Place
Boston, MA 02110-2624
Your financial service firm is:
Printed in U.S.A.
February 28, 1998
STEIN ROE ADVISOR TAX-MANAGED
GROWTH FUND
PROSPECTUS
Stein Roe Advisor Tax-Managed Growth Fund seeks to maximize long-term capital
growth while reducing shareholder exposure to taxes.
For more detailed information about the Fund, call the Administrator at
1-800-426-3750 for the February 28, 1998 Statement of Additional Information.
- ----------------------------- --------------------------
NOT FDIC-INSURED MAY LOSE VALUE
NO BANK GUARANTEE
- ----------------------------- --------------------------
<PAGE>
Colonial Mutual Funds
Please send your completed application to:
Colonial Investors Service Center, Inc. (CISC)
P.O. Box 1722
Boston, Massachusetts 02105-1722
New A, B & C Shares Account Application/Revision to Existing Account
To open a new account, complete sections 1, 2, 3, & 7.
To apply for special services for a new or existing account, complete sections
4, 5, 6, or 8 as appropriate.
___ Please check here if this is a revision.
1-----------Account ownership--------------
Please choose one of the following.
__Individual: Print your name, Social Security #, U.S. citizen status.
__Joint Tenant: Print all names, the Social Security # for the first person,
and his/her U.S. citizen status.
__Uniform Gift to Minors: Names of custodian and minor, minor's Social Security
#, minor's U.S. citizen status.
__Corporation, Association, Partnership: Include full name, Taxpayer I.D. #.
__Trust: Name of trustee, trust title & date, and trust's Taxpayer I.D. #.
______________________________________
Name of account owner
______________________________________
Name of joint account owner
______________________________________
Street address
______________________________________
Street address
______________________________________
City, State, and Zip
______________________________________
Daytime phone number
______________________________________
Social Security # or Taxpayer I.D. #
Are you a U.S. citizen? ___Yes ___No
______________________________________
If no, country of permanent residence
______________________________________
Account Owner's date of birth
______________________________________
Account number (if existing account)
2 -----Colonial fund(s) you are purchasing--------
Your investment will be made in Class A shares if no class is indicated.
Certificates are not available for Class B or C shares. If no distribution
option is selected, distributions will be reinvested in additional fund
shares. Please consult your financial adviser to determine which class of
shares best suits your needs.
Fund Fund Fund
________________ ___________________ _____________________
Name of Fund Name of Fund Name of Fund
$_______________ $__________________ $____________________
Amount Amount Amount
Class
___ A Shares ___ B Shares (less than $250,000) ___ C Shares (less than
$1,000,000)
Method of Payment Choose one
___Check payable to the Fund ___Bank wired on ____/____/____ (Date)
Wire/Trade confirmation #_____________
Ways to receive your distributions
Choose one (If none chosen, dividends and capital gains will be reinvested)
Distributions of $10.00 or less will automatically be reinvested in additional
fund shares.
___Reinvest dividends and capital gains
___Dividends and capital gains in cash
___Dividends in cash; reinvest capital gains
___Automatic Dividend Diversification See section 5A, inside
___Direct Deposit via Colonial Cash Connection Complete Bank information
in section 4B. I understand that my bank must be a member of the
Automated Clearing House System.
3---Your signature & taxpayer I.D. number certification----
Each person signing on behalf of an entity represents that his/her actions are
authorized. I have received and read each appropriate fund prospectus and
understand that its terms are incorporated by reference into this application.
I understand that this application is subject to acceptance. I understand that
certain redemptions may be subject to a contingent deferred sales charge. It
is agreed that the fund, The Colonial Group, Inc. and its affiliates and their
officers, directors, agents, and employees will not be liable for any loss,
liability, damage, or expense for relying upon this application or any
instruction believed genuine.
I certify, under penalties of perjury, that:
1. The Social Security # or Taxpayer I.D. # provided is correct.
You must cross out Item 2a, b or c below only if you have been notified by the
Internal Revenue Service (IRS) that you are currently subject to back-up
withholding because of under-reporting interest or dividends on you tax return.
2. I am not subject to back-up withholding because: (a) I am exempt from back-
up withholding, or (b) I have not been notified by the IRS that I am
subject to back-up withholding as a result of a failure to report all
interest or dividends, or (c) the IRS has notified me that I am no longer
subject to back-up withholding.
The Internal Revenue Service does not require your consent to any provision of
this document other than the certifications required to avoid backup
withholdings.
X______________________________________________
Signature
_______________________________________________
Capacity, if applicable Date
X______________________________________________
Signature
_______________________________________________
Capacity, if applicable Date
4--------Ways to withdraw from your fund-------
It may take up to 30 days to activate the following features. Complete only
the sections that apply to the features you would like.
A. Systematic Withdrawal Plan (SWP)
You can receive monthly, quarterly, or semiannual checks from your account in
any amount you select, with certain limitations. Your redemption checks can
be sent to you at the address of record for your account, to your bank
account, or to another person you choose. The value of the shares in your
account must be at least $5,000 and you must reinvest all of your
distributions. Checks will be processed on the 10th calendar day of the month
or the preceding business day if the 10th falls on a non-business day. If you
receive your SWP payment via electronic funds transfer (EFT), you may request
it to be processed any day of the month. Withdrawals in excess of 12% annually
of your current account value will not be accepted. Redemptions made in
addition to SWP payments may be subject to a contingent deferred sales charge
for Class B or C shares. Please consult your financial or tax adviser before
electing this option.
Funds for withdrawal:
___________________
Name of fund
Withdrawal amount
Redeem shares from account as follows:
Dollar amount of payment $___________
or
Total annual %_________
Frequency (choose one)
__Monthly __Quarterly __Semiannually
I would like payments to begin _____/_____ (day, if indicating EFT, month).
___________________
Name of fund
Withdrawal Amount
Redeem shares from account as follows:
Dollar amount of payment $___________
or
Total annual %_________
Frequency (choose one)
__Monthly __Quarterly __Semiannually
I would like payments to begin _____/_____ (day,if indicating EFT, month).
Payment instructions
Send the payment to (choose one):
__My address of record.
__My bank account via EFT. Please complete the Bank Information section below.
All EFT transactions will be made two business days after the processing date.
Your bank must be a member of the Automated Clearing House System.
__The payee listed at right. If more than one payee, provide the name,
address, payment amount, and frequency for other payees (maximum of 5) on
a separate sheet. If you are adding this service to an existing account,
please sign below and have your signature(s) guaranteed.
______________________________________________
Name of payee
______________________________________________
Address of payee
______________________________________________
City
______________________________________________
State Zip
______________________________________________
Payee's bank account number, if applicable
B. Telephone withdrawal pptions
All telephone transaction calls are recorded. These options are not available
for retirement accounts. Please sign below and have your signature(s)
guaranteed.
1. Fast Cash
You are automatically eligible for this service. You or your financial
adviser can withdraw up to $50,000 from your account and have it sent to your
address of record. For your protection, this service is only available on
accounts that have not had an address change within 30 days of the redemption
request.
2. Telephone Redemption
__I would like the Telephone Redemption privilege either by federal fund wire
or EFT. Telephone redemptions over $500 will be sent via federal fund wire,
usually on the next business day ($7.50 will be deducted). Redemptions of
$500 or less will be sent by check to your designated bank.
3. On-Demand EFT Redemption
__I would like the On-Demand EFT Redemption Privilege. Proceeds paid via EFT
will be credited to your bank account two business days after the process
date. You or your financial adviser may withdraw shares from your fund account
by telephone and send your money to your bank account. If you are adding this
service to an existing account, complete the Bank Information section below
and have all shareholder signatures guaranteed.
Colonial Investor Service Center, Inc. (CISC) and the fund's liability is
limited when following telephone instructions; a shareholder may suffer a loss
from an unauthorized transaction reasonably believed by CISC to have been
authorized.
Bank Information (For Sections A and B Above)
I authorize deposits to the following bank account:
____________________________________________________________
Bank name City Bank account number
____________________________________________________________
Bank street address State Zip Bank routing # (your bank
can provide this)
X__________________________________
Signature of account owner(s)
X__________________________________
Signature of account owner(s) Place signature guarantee here.
5-----Ways to make additional investments--------
These services involve continuous investments regardless of varying share
prices. Please consider your ability to continue purchases through periods of
price fluctuations. Dollar cost averaging does not assure a profit or protect
against loss in declining markets.
A. Automatic Dividend Diversification
Please diversify my portfolio by investing distributions from one fund into
another Colonial, Newport or Stein Roe Advisor fund. These investments will
be made in the same share class and without sales charges. Accounts must be
identically registered. I have carefully read the prospectus for the
fund(s) listed below.
____________________________
From fund
____________________________
Account number (if existing)
____________________________
To fund
____________________________
Account number (if existing)
____________________________
From fund
____________________________
Account number (if existing)
____________________________
To fund
____________________________
Account number (if existing)
B. Automated Dollar Cost Averaging
This program allows you to automatically have money from any Colonial, Newport
or Stein Roe Advisor fund in which you have a balance of at least $5,000
exchanged into the same share class of up to four other identically registered
Colonial accounts, on a monthly basis. The minimum amount for each exchange is
$100. Please complete the section below.
____________________________________
Fund from which shares will be sold
$_________________________
Amount to redeem monthly
____________________________________
Fund to invest shares in
$_________________________
Amount to invest monthly
____________________________________
Fund to invest shares in
$_________________________
Amount to invest monthly
C. Fundamatic/On-Demand EFT Purchase
Fundamatic automatically transfers the specified amount from your bank
checking account to your Colonial, Newport or Stein Roe Advisor fund
account on a regular basis. The On-Demand EFT Purchase program moves money
from your bank checking account to your Colonial, Newport or Stein Roe
Advisor fund account by electronic funds transfer based on your
telephone request. You will receive the applicable price two
business days after the receipt of your request. Your bank needs to be a
member of the Automated Clearing House System. Please attach a blank check
marked "VOID." (Deposit slips are not a substitution). Also, complete the
section below. Please allow 3 weeks for CISC to establish these services
with your bank.
____________________________________
Fund name
_________________________________
Account number
$_____________________ _________________
Amount to transfer Month to start
___________________________________
Fund name
________________________________
Account number
$_____________________ _________________
Amount to transfer Month to start
__On-Demand Purchase (will be automatically established if you choose
Fundamatic)
__Fundamatic Frequency
__Monthly or __Quarterly
Check one:
__EFT- Choose any day of the month_____________________
__Paper Draft-Choose either the:
__5th day of the month
__20th day of the month
Authorization to honor checks drawn by Colonial Investors Service Center,
Inc. (CISC) Do Not Detach. Make sure all depositors on the bank account sign
to the far right. Please attach a blank check marked "VOID" here. (Deposit
slips are not a substitution). See reverse for bank instructions.
I authorize CISC to draw on my bank account, by check or electronic funds
transfer, for an investment in a Colonial, Newport or Stein Roe Advisor fund.
CISC and my bank are not liable for any loss arising from delays or dishonored
draws. If a draw is not honored, I understand that notice may not be given and
CISC may reverse the purchase and charge my account $15.
______________________________________
Bank name
______________________________________
Bank street address
______________________________________
Bank street address
______________________________________
City State Zip
______________________________________
Bank account number
______________________________________
Bank routing #
X_____________________________________
Depositor's Signature(s)
Exactly as appears on bank records
X_____________________________________
Depositor's Signature(s)
Exactly as appears on bank records
6------------Ways to reduce your sales charges------------
These services can help you reduce your sales charge while increasing your
share balance over the long term.
A. Right of Accumulation
If you, your spouse or your children own any other shares in other
Colonial, Newport or Stein Roe Advisor funds, you may be eligible for a reduced
sales charge. The combined value of your accounts must be $50,000 or more.
Class A shares of money market funds are not eligible unless purchased by
exchange from another Colonial, Newport or Stein Roe Advisor fund.
The sales charge for your purchase will be based on the sum of the purchase(s)
added to the value of all shares in other Colonial, Newport or Stein Roe
Advisor funds at the previous day's public offering price.
__Please link the accounts listed below for Right of Accumulation privileges,
so that this and future purchases will receive any discount for which they
are eligible.
_____________________________________
Name on account
_____________________________________
Account number
_____________________________________
Name on account
_____________________________________
Account number
B. Statement of Intent
If you agree in advance to invest at least $50,000 within 13 months, you'll
pay a lower sales charge on every dollar you invest. If you sign a Statement
of Intent within 90 days after you establish your account, you can receive a
retroactive discount on prior investments. The amount required to receive a
discount varies by fund; see the sales charge table in the "How to Buy Shares"
section of your fund prospectus.
__I want to reduce my sales charge.
I agree to invest $ _______________ over a 13-month period starting
______/______/ 19______ (not more than 90 days prior to this application). I
understand an additional sales charge must be paid if I do not complete this
Statement of Intent.
7-------------Financial service firm---------------------
To be completed by a Representative of your financial service firm.
This application is submitted in accordance with our selling agreement with
Liberty Financial Investments, Inc. (LFII), the Fund's prospectus, and this
application. We will notify LFII, of any purchase made under a Statement
of Intent, Right of Accumulation, or Sponsored Arrangement. We guarantee the
signatures on this application and the legal capacity of the signers.
_____________________________________
Representative's name
_____________________________________
Representative's number
_____________________________________
Representative's phone number
_____________________________________
Account # for client at financial
service firm
_____________________________________
Branch office address
_____________________________________
City
_____________________________________
State Zip
_____________________________________
Branch office number
_____________________________________
Name of financial service firm
_____________________________________
Main office address
_____________________________________
Main office address
_____________________________________
City
_____________________________________
State Zip
X____________________________________
Authorized signature
8----------Request for a combined quarterly statement mailing-----------
CISC can mail all of your quarterly statements in one envelope. This
option simplifies your record keeping and helps reduce fund expenses.
__I want to receive a combined quarterly mailing for all my accounts. Please
indicate account numbers or tax I.D. numbers of accounts to be linked.
________________________________________________________________________
Fundamatic (See reverse side)
Applications must be received before the start date for processing.
This program's deposit privilege can be revoked by CISC without prior
notice if any check is not paid upon presentation. CISC has no obligation
to notify the shareholder of non-payment of any draw. This program may be
discontinued by Colonial by written notice at least 30 business days prior
to the due date of any draw or by the shareholder at any time.
To the Bank Named on the Reverse Side:
Your depositor has authorized Colonial Investors Service Center, Inc. (CISC) to
collect amounts due under an investment program from his/her personal checking
account. When you pay and charge the draws to the account of your depositor
executing the authorization payable to the order of CISC, CISC, hereby
indemnifies and holds you harmless from any loss (including reasonable
expenses) you may suffer from honoring such draw, except any losses due to your
payment of any draw against insufficient funds.
Liberty Financial Investments, Inc., Distributor SH-185E-0997
<PAGE>
COLONIAL TRUST I
Cross Reference Sheet
(Colonial Tax-Managed Growth Fund)
Location or Caption in Statement of
Item Number of Form N-1A Additional Information
- ------------------------ ----------------------
Part B
- ------
10. Cover Page
11. Table of Contents
12. Not Applicable
13. Investment Policies; Portfolio Turnover
14. Fund Charges and Expenses; Management of the Fund
15. Management of the Fund
16. Management of the Fund
17. Management of the Fund
18. Shareholder Meetings; Shareholder Liability
19. How to Buy Shares; Determination of Net Asset Value;
Suspension of Redemptions; Special Purchase
Programs/Investor Services; Programs for Reducing or
Eliminating Sales Charge; How to Sell Shares
20. Taxes-General; Additional Tax Matters Concerning Gift
Shares
21. Management of the Colonial Fund
22. Performance Measures
23. Management of the Fund
<PAGE>
STEIN ROE ADVISOR TAX-MANAGED GROWTH FUND
Statement of Additional Information
February 28, 1998
This Statement of Additional Information (SAI) contains information which may be
useful to investors but which is not included in the Prospectus of Stein Roe
Advisor Tax-Managed Growth Fund (Fund). This SAI is not a prospectus and is
authorized for distribution only when accompanied or preceded by a Prospectus of
the Fund dated February 28, 1998. This SAI should be read together with a
Prospectus and the Fund's most recent Annual Report dated October 31, 1997.
Investors may obtain a free copy of the Prospectus from Liberty Financial
Investments, Inc., One Financial Center, Boston, MA 02111-2621. Effective with
the date of this SAI, the Fund's name is changed to its current name from
"Colonial Tax-Managed Growth Fund."
TABLE OF CONTENTS
Page
Definitions
Investment Policies
Additional Information Concerning Investment Practices
Taxes - General
Additional Tax Matters Concerning Gift Shares
Management of the Fund
Portfolio Turnover
Fund Charges and Expenses
Determination of Net Asset Value
How to Buy Shares
Special Purchase Programs/Investor Services
Programs for Reducing or Eliminating Sales Charges
How to Sell Shares
How to Exchange Shares
Suspension of Redemptions
Shareholder Liability
Shareholder Meetings
Performance Measures and Information
Appendix I
MG-16/869E-0298
<PAGE>
DEFINITIONS
"Trust" Colonial Trust I
"Fund" Stein Roe Advisor Tax-Managed Growth Fund
"Administrator" Colonial Management Associates, Inc., the Fund's
administrator
"LFII" Liberty Financial Investments, Inc., the Fund's
Distributor
"CISC" Colonial Investors Service Center, Inc., the Fund's
investor services and transfer agent
"Adviser" Stein Roe & Farnham Incorporated, the Fund's
investment adviser
INVESTMENT POLICIES
The Fund is subject to the following fundamental investment policies, which may
not be changed without the affirmative vote of a majority of the Fund's
outstanding voting securities. The Investment Company Act of 1940 (Act) provides
that a "vote of a majority of the outstanding voting securities" means the
affirmative vote of the lesser of (1) more than 50% of the outstanding shares of
the Fund or the Fund, or (2) 67% or more of the shares present at a meeting if
more than 50% of the outstanding shares are represented at the meeting in person
or by proxy.
As fundamental investment policies, the Fund may not:
1. Issue senior securities other than through borrowing money from banks for
temporary or emergency purposes up to 10% of its net assets;
2. Own real estate except real estate having a value no more than 5% of the
Fund's total assets acquired as the result of owning securities (nothing
in this restriction shall limit the Fund's ability to purchase and sell
(i) securities which are secured by real estate and (ii) securities of
companies which invest or deal in real estate);
3. Invest in commodities, except that the Fund may purchase and sell futures
contracts and related options to the extent that total initial margin and
premiums on the contracts do not exceed 5% of its total assets;
4. Underwrite securities issued by others except to the extent the Fund could
be deemed an underwriter when disposing of portfolio securities;
5. Make loans, except through (i) lending of securities not exceeding 30% of
total assets, (ii) the purchase of debt instruments or similar evidences
of indebtedness typically sold privately to financial institutions and
(iii) repurchase agreements; and
6. Concentrate more than 25% of its total assets in any one industry or with
respect to 75% of total assets purchase any security (other than
obligations of the U.S. government and cash items including receivables)
if as a result more than 5% of its total assets would then be invested in
securities of a single issuer, or purchase voting securities of an issuer
if, as a result of such purchase the Fund would own more than 10% of the
outstanding voting shares of such issuer.
As non-fundamental investment policies which may be changed without a
shareholder vote, the Fund may not:
1. Purchase securities on margin, but it may receive short-term credit to
clear securities transactions and may make initial or maintenance margin
deposits in connection with futures transactions;
2. Have a short securities position, unless the Fund owns, or owns rights
(exercisable without payment) to acquire, an equal amount of such
securities; and
3. Invest more than 15% of its net assets in illiquid assets.
Total assets and net assets are determined at current value for purposes of
compliance with investment restrictions and policies. All percentage limitations
will apply at the time of investment and are not violated unless an excess or
deficiency occurs as a result of such investment. For the purpose of the Act
diversification requirement, an issuer is the entity whose revenues support the
security.
ADDITIONAL INFORMATION CONCERNING CERTAIN INVESTMENT PRACTICES
Additional information concerning certain of the Fund's investments and
investment practices is set forth below.
Foreign Securities
The Fund may invest in securities traded in markets outside the United States.
Foreign investments can be affected favorably or unfavorably by changes in
currency rates and in exchange control regulations. There may be less publicly
available information about a foreign company than about a U.S. company, and
foreign companies may not be subject to accounting, auditing and financial
reporting standards comparable to those applicable to U.S. companies. Securities
of some foreign companies are less liquid or more volatile than securities of
U.S. companies, and foreign brokerage commissions and custodian fees may be
higher than in the United States. Investments in foreign securities can involve
other risks different from those affecting U.S. investments, including local
political or economic developments, expropriation or nationalization of assets
and imposition of withholding taxes on dividend or interest payments. Foreign
securities, like other assets of the Fund, will be held by the Fund's custodian
or by a subcustodian or depository. See also "Foreign Currency Transactions"
below.
The Fund may invest in certain Passive Foreign Investment Companies (PFICs)
which may be subject to U.S. federal income tax on a portion of any "excess
distribution" or gain (PFIC tax) related to the investment. The PFIC tax is the
highest ordinary income rate, and it could be increased by an interest charge on
the deemed tax deferral.
The Fund may possibly elect to include in its income its pro rata share of the
ordinary earnings and net capital gain of PFICs. This election requires certain
annual information from the PFICs which in many cases may be difficult to
obtain. An alternative election would permit the Fund to recognize as income any
appreciation (but not depreciation) on its holdings of PFICs as of the end of
its fiscal year.
Money Market Instruments
Government obligations are issued by the U.S. or foreign governments, their
subdivisions, agencies and instrumentalities. Supranational obligations are
issued by supranational entities and are generally designed to promote economic
improvements. Certificates of deposits are issued against deposits in a
commercial bank with a defined return and maturity. Banker's acceptances are
used to finance the import, export or storage of goods and are "accepted" when
guaranteed at maturity by a bank. Commercial paper is promissory notes issued by
businesses to finance short-term needs (including those with floating or
variable interest rates, or including a frequent interval put feature).
Short-term corporate obligations are bonds and notes (with one year or less to
maturity at the time of purchase) issued by businesses to finance long-term
needs. Participation Interests include the underlying securities and any related
guaranty, letter of credit, or collateralization arrangement which the Fund
would be allowed to invest in directly.
Securities Loans
The Fund may make secured loans of its portfolio securities amounting to not
more than the percentage of its total assets specified in the Prospectus,
thereby realizing additional income. The risks in lending portfolio securities,
as with other extensions of credit, consist of possible delay in recovery of the
securities or possible loss of rights in the collateral should the borrower fail
financially. As a matter of policy, securities loans are made to banks and
broker-dealers pursuant to agreements requiring that loans be continuously
secured by collateral in cash or short-term debt obligations at least equal at
all times to the value of the securities on loan. The borrower pays to the Fund
an amount equal to any dividends or interest received on securities lent. The
Fund retains all or a portion of the interest received on investment of the cash
collateral or receives a fee from the borrower. Although voting rights, or
rights to consent, with respect to the loaned securities pass to the borrower,
the Fund retains the right to call the loans at any time on reasonable notice,
and it will do so in order that the securities may be voted by the Fund if the
holders of such securities are asked to vote upon or consent to matters
materially affecting the investment. The Fund may also call such loans in order
to sell the securities involved.
Repurchase Agreements
The Fund may enter into repurchase agreements. A repurchase agreement is a
contract under which the Fund acquires a security for a relatively short period
(usually not more than one week) subject to the obligation of the seller to
repurchase and the Fund to resell such security at a fixed time and price
(representing the Fund's cost plus interest). It is the Fund's present intention
to enter into repurchase agreements only with commercial banks and registered
broker-dealers and only with respect to obligations of the U.S. government or
its agencies or instrumentalities. Repurchase agreements may also be viewed as
loans made by the Fund which are collateralized by the securities subject to
repurchase. The Adviser will monitor such transactions to determine that the
value of the underlying securities is at least equal at all times to the total
amount of the repurchase obligation, including the interest factor. If the
seller defaults, the Fund could realize a loss on the sale of the underlying
security to the extent that the proceeds of sale including accrued interest are
less than the resale price provided in the agreement including interest. In
addition, if the seller should be involved in bankruptcy or insolvency
proceedings, the Fund may incur delay and costs in selling the underlying
security or may suffer a loss of principal and interest if the Fund is treated
as an unsecured creditor and required to return the underlying collateral to the
seller's estate.
Options on Securities
Writing covered options. The Fund may write covered call options and covered put
options on securities held in its portfolio. Call options written by the Fund
give the purchaser the right to buy the underlying securities from the Fund at a
stated exercise price; put options give the purchaser the right to sell the
underlying securities to the Fund at a stated price.
The Fund may write only covered options, which means that, so long as the Fund
is obligated as the writer of a call option, it will own the underlying
securities subject to the option (or comparable securities satisfying the cover
requirements of securities exchanges). In the case of put options, the Fund will
hold cash and/or high-grade short-term debt obligations equal to the price to be
paid if the option is exercised. In addition, the Fund will be considered to
have covered a put or call option if and to the extent that it holds an option
that offsets some or all of the risk of the option it has written. The Fund may
write combinations of covered puts and calls on the same underlying security.
The Fund will receive a premium from writing a put or call option, which
increases the Fund's return on the underlying security if the option expires
unexercised or is closed out at a profit. The amount of the premium reflects,
among other things, the relationship between the exercise price and the current
market value of the underlying security, the volatility of the underlying
security, the amount of time remaining until expiration, current interest rates,
and the effect of supply and demand in the options market and in the market for
the underlying security. By writing a call option, the Fund limits its
opportunity to profit from any increase in the market value of the underlying
security above the exercise price of the option but continues to bear the risk
of a decline in the value of the underlying security. By writing a put option,
the Fund assumes the risk that it may be required to purchase the underlying
security for an exercise price higher than its then-current market value,
resulting in a potential capital loss unless the security subsequently
appreciates in value.
The Fund may terminate an option that it has written prior to its expiration by
entering into a closing purchase transaction in which it purchases an offsetting
option. The Fund realizes a profit or loss from a closing transaction if the
cost of the transaction (option premium plus transaction costs) is less or more
than the premium received from writing the option. Because increases in the
market price of a call option generally reflect increases in the market price of
the security underlying the option, any loss resulting from a closing purchase
transaction may be offset in whole or in part by unrealized appreciation of the
underlying security.
If the Fund writes a call option but does not own the underlying security, and
when it writes a put option, the Fund may be required to deposit cash or
securities with its broker as "margin" or collateral for its obligation to buy
or sell the underlying security. As the value of the underlying security varies,
the Fund may have to deposit additional margin with the broker. Margin
requirements are complex and are fixed by individual brokers, subject to minimum
requirements currently imposed by the Federal Reserve Board and by stock
exchanges and other self-regulatory organizations.
Purchasing put options. The Fund may purchase put options to protect its
portfolio holdings in an underlying security against a decline in market value.
Such hedge protection is provided during the life of the put option since the
Fund, as holder of the put option, is able to sell the underlying security at
the put exercise price regardless of any decline in the underlying security's
market price. For a put option to be profitable, the market price of the
underlying security must decline sufficiently below the exercise price to cover
the premium and transaction costs. By using put options in this manner, the Fund
will reduce any profit it might otherwise have realized from appreciation of the
underlying security by the premium paid for the put option and by transaction
costs.
Purchasing call options. The Fund may purchase call options to hedge against an
increase in the price of securities that the Fund wants ultimately to buy. Such
hedge protection is provided during the life of the call option since the Fund,
as holder of the call option, is able to buy the underlying security at the
exercise price regardless of any increase in the underlying security's market
price. In order for a call option to be profitable, the market price of the
underlying security must rise sufficiently above the exercise price to cover the
premium and transaction costs. These costs will reduce any profit the Fund might
have realized had it bought the underlying security at the time it purchased the
call option.
Over-the-Counter (OTC) options. The Staff of the Division of Investment
Management of the Securities and Exchange Commission (SEC) has taken the
position that OTC options purchased by the Fund and assets held to cover OTC
options written by the Fund are illiquid securities. Although the Staff has
indicated that it is continuing to evaluate this issue, pending further
developments, the Fund intends to enter into OTC options transactions only with
primary dealers in U.S. Government Securities and, in the case of OTC options
written by the Fund, only pursuant to agreements that will assure that the Fund
will at all times have the right to repurchase the option written by it from the
dealer at a specified formula price. The Fund will treat the amount by which
such formula price exceeds the amount, if any, by which the option may be
"in-the-money" as an illiquid investment. It is the present policy of the Fund
not to enter into any OTC option transaction if, as a result, more than 15% of
the Fund's net assets would be invested in (i) illiquid investments (determined
under the foregoing formula) relating to OTC options written by the Fund, (ii)
OTC options purchased by the Fund, (iii) securities which are not readily
marketable, and (iv) repurchase agreements maturing in more than seven days.
Risk factors in options transactions. The successful use of the Fund's options
strategies depends on the ability of the Adviser to forecast interest rate and
market movements correctly.
When it purchases an option, the Fund runs the risk that it will lose its entire
investment in the option in a relatively short period of time, unless the Fund
exercises the option or enters into a closing sale transaction with respect to
the option during the life of the option. If the price of the underlying
security does not rise (in the case of a call) or fall (in the case of a put) to
an extent sufficient to cover the option premium and transaction costs, the Fund
will lose part or all of its investment in the option. This contrasts with an
investment by the Fund in the underlying securities, since the Fund may continue
to hold its investment in those securities notwithstanding the lack of a change
in price of those securities.
The effective use of options also depends on the Fund's ability to terminate
option positions at times when the Adviser deems it desirable to do so. Although
the Fund will take an option position only if the Adviser believes there is a
liquid secondary market for the option, there is no assurance that the Fund will
be able to effect closing transactions at any particular time or at an
acceptable price.
If a secondary trading market in options were to become unavailable, the Fund
could no longer engage in closing transactions. Lack of investor interest might
adversely affect the liquidity of the market for particular options or series of
options. A marketplace may discontinue trading of a particular option or options
generally. In addition, a market could become temporarily unavailable if unusual
events -- such as volume in excess of trading or clearing capability -- were to
interrupt normal market operations.
A marketplace may at times find it necessary to impose restrictions on
particular types of options transactions, which may limit the Fund's ability to
realize its profits or limit its losses.
Disruptions in the markets for the securities underlying options purchased or
sold by the Fund could result in losses on the options. If trading is
interrupted in an underlying security, the trading of options on that security
is normally halted as well. As a result, the Fund as purchaser or writer of an
option will be unable to close out its positions until options trading resumes,
and it may be faced with losses if trading in the security reopens at a
substantially different price. In addition, the Options Clearing Corporation
(OCC) or other options markets may impose exercise restrictions. If a
prohibition on exercise is imposed at the time when trading in the option has
also been halted, the Fund as purchaser or writer of an option will be locked
into its position until one of the two restrictions has been lifted. If a
prohibition on exercise remains in effect until an option owned by the Fund has
expired, the Fund could lose the entire value of its option.
Special risks are presented by internationally-traded options. Because of time
differences between the United States and various foreign countries, and because
different holidays are observed in different countries, foreign options markets
may be open for trading during hours or on days when U.S. markets are closed. As
a result, option premiums may not reflect the current prices of the underlying
interest in the United States.
Futures Contracts and Related Options
Upon entering into futures contracts, in compliance with the SEC's requirements,
cash or liquid securities equal in value to the amount of the Fund's obligation
under the contract (less any applicable margin deposits and any assets that
constitute "cover" for such obligation), will be segregated with the Fund's
custodian.
A futures contract sale creates an obligation by the seller to deliver the type
of instrument called for in the contract in a specified delivery month for a
stated price. A futures contract purchase creates an obligation by the purchaser
to take delivery of the type of instrument called for in the contract in a
specified delivery month at a stated price. The specific instruments delivered
or taken at settlement date are not determined until on or near that date. The
determination is made in accordance with the rules of the exchanges on which the
futures contract was made. Futures contracts are traded in the United States
only on commodity exchange or boards of trade -- known as "contract markets" --
approved for such trading by the Commodity Futures Trading Commission (CFTC),
and must be executed through a futures commission merchant or brokerage firm
which is a member of the relevant contract market.
Although futures contracts by their terms call for actual delivery or acceptance
of commodities or securities, the contracts usually are closed out before the
settlement date without the making or taking of delivery. Closing out a futures
contract sale is effected by purchasing a futures contract for the same
aggregate amount of the specific type of financial instrument or commodity with
the same delivery date. If the price of the initial sale of the futures contract
exceeds the price of the offsetting purchase, the seller is paid the difference
and realizes a gain. Conversely, if the price of the offsetting purchase exceeds
the price of the initial sale, the seller realizes a loss. Similarly, the
closing out of a futures contract purchase is effected by the purchaser's
entering into a futures contract sale. If the offsetting sale price exceeds the
purchase price, the purchaser realizes a gain, and if the purchase price exceeds
the offsetting sale price, the purchaser realizes a loss.
Unlike when the Fund purchases or sells a security, no price is paid or received
by the Fund upon the purchase or sale of a futures contract, although the Fund
is required to deposit with its custodian in a segregated account in the name of
the futures broker an amount of cash and/or U.S. Government Securities. This
amount is known as "initial margin". The nature of initial margin in futures
transactions is different from that of margin in security transactions in that
futures contract margin does not involve the borrowing of funds by the Fund to
finance the transactions. Rather, initial margin is in the nature of a
performance bond or good faith deposit on the contract that is returned to the
Fund upon termination of the futures contract, assuming all contractual
obligations have been satisfied. Futures contracts also involve brokerage costs.
Subsequent payments, called "variation margin", to and from the broker (or the
custodian) are made on a daily basis as the price of the underlying security or
commodity fluctuates, making the long and short positions in the futures
contract more or less valuable, a process known as "marking to market."
The Fund may elect to close some or all of its futures positions at any time
prior to their expiration. The purpose of making such a move would be to reduce
or eliminate the hedge position then currently held by the Fund. The Fund may
close its positions by taking opposite positions which will operate to terminate
the Fund's position in the futures contracts. Final determinations of variation
margin are then made, additional cash is required to be paid by or released to
the Fund, and the Fund realizes a loss or a gain. Such closing transactions
involve additional commission costs.
Options on futures contracts. The Fund will enter into written options on
futures contracts only when, in compliance with the SEC's requirements, cash or
liquid securities equal in value to the commodity value (less any applicable
margin deposits) have been deposited in a segregated account of the Fund's
custodian. The Fund may purchase and write call and put options on futures
contracts it may buy or sell and enter into closing transactions with respect to
such options to terminate existing positions. The Fund may use such options on
futures contracts in lieu of writing options directly on the underlying
securities or purchasing and selling the underlying futures contracts. Such
options generally operate in the same manner as options purchased or written
directly on the underlying investments.
As with options on securities, the holder or writer of an option may terminate
his position by selling or purchasing an offsetting option. There is no
guarantee that such closing transactions can be effected.
The Fund will be required to deposit initial margin and maintenance margin with
respect to put and call options on futures contracts written by it pursuant to
brokers' requirements similar to those described above.
Risks of transactions in futures contracts and related options. Successful use
of futures contracts by the Fund is subject to the Adviser`s ability to predict
correctly movements in the direction of interest rates and other factors
affecting securities markets.
Compared to the purchase or sale of futures contracts, the purchase of call or
put options on futures contracts involves less potential risk to the Fund
because the maximum amount at risk is the premium paid for the options (plus
transaction costs). However, there may be circumstances when the purchase of a
call or put option on a futures contract would result in a loss to the Fund when
the purchase or sale of a futures contract would not, such as when there is no
movement in the prices of the hedged investments. The writing of an option on a
futures contract involves risks similar to those risks relating to the sale of
futures contracts.
There is no assurance that higher than anticipated trading activity or other
unforeseen events might not, at times, render certain market clearing facilities
inadequate, and thereby result in the institution, by exchanges, of special
procedures which may interfere with the timely execution of customer orders.
To reduce or eliminate a hedge position held by the Fund, the Fund may seek to
close out a position. The ability to establish and close out positions will be
subject to the development and maintenance of a liquid secondary market. It is
not certain that this market will develop or continue to exist for a particular
futures contract. Reasons for the absence of a liquid secondary market on an
exchange include the following: (i) there may be insufficient trading interest
in certain contracts or options; (ii) restrictions may be imposed by an exchange
on opening transactions or closing transactions or both; (iii) trading halts,
suspensions or other restrictions may be imposed with respect to particular
classes or series of contracts or options, or underlying securities; (iv)
unusual or unforeseen circumstances may interrupt normal operations on an
exchange; (v) the facilities of an exchange or a clearing corporation may not at
all times be adequate to handle current trading volume; or (vi) one or more
exchanges could, for economic or other reasons, decide or be compelled at some
future date to discontinue the trading of contracts or options (or a particular
class or series of contracts or options), in which event the secondary market on
that exchange (or in the class or series of contracts or options) would cease to
exist, although outstanding contracts or options on the exchange that had been
issued by a clearing corporation as a result of trades on that exchange would
continue to be exercisable in accordance with their terms.
Index futures contracts. An index futures contract is a contract to buy or sell
units of an index at a specified future date at a price agreed upon when the
contract is made. Entering into a contract to buy units of an index is commonly
referred to as buying or purchasing a contract or holding a long position in the
index. Entering into a contract to sell units of an index is commonly referred
to as selling a contract or holding a short position. A unit is the current
value of the index. The Fund may enter into stock index futures contracts, debt
index futures contracts, or other index futures contracts appropriate to its
objective(s). The Fund may also purchase and sell options on index futures
contracts.
There are several risks in connection with the use by the Fund of index futures
as a hedging device. One risk arises because of the imperfect correlation
between movements in the prices of the index futures and movements in the prices
of securities which are the subject of the hedge. The Adviser will attempt to
reduce this risk by selling, to the extent possible, futures on indices the
movements of which will, in its judgment, have a significant correlation with
movements in the prices of the Fund's portfolio securities sought to be hedged.
Successful use of index futures by the Fund for hedging purposes is also subject
to the Adviser's ability to predict correctly movements in the direction of the
market. It is possible that, where the Fund has sold futures to hedge its
portfolio against a decline in the market, the index on which the futures are
written may advance and the value of securities held in the Fund's portfolio may
decline. If this occurs, the Fund would lose money on the futures and also
experience a decline in the value in its portfolio securities. However, while
this could occur to a certain degree, the Adviser believes that over time the
value of the Fund's portfolio will tend to move in the same direction as the
market indices which are intended to correlate to the price movements of the
portfolio securities sought to be hedged. It is also possible that, if the Fund
has hedged against the possibility of a decline in the market adversely
affecting securities held in its portfolio and securities prices increase
instead, the Fund will lose part or all of the benefit of the increased values
of those securities that it has hedged because it will have offsetting losses in
its futures positions. In addition, in such situations, if the Fund has
insufficient cash, it may have to sell securities to meet daily variation margin
requirements.
In addition to the possibility that there may be an imperfect correlation, or no
correlation at all, between movements in the index futures and the securities of
the portfolio being hedged, the prices of index futures may not correlate
perfectly with movements in the underlying index due to certain market
distortions. First, all participants in the futures markets are subject to
margin deposit and maintenance requirements. Rather than meeting additional
margin deposit requirements, investors may close futures contracts through
offsetting transactions which would distort the normal relationship between the
index and futures markets. Second, margin requirements in the futures market are
less onerous than margin requirements in the securities market, and as a result
the futures market may attract more speculators than the securities market.
Increased participation by speculators in the futures market may also cause
temporary price distortions. Due to the possibility of price distortions in the
futures market and also because of the imperfect correlation between movements
in the index and movements in the prices of index futures, even a correct
forecast of general market trends by the Adviser may still not result in a
successful hedging transaction.
Options on index futures. Options on index futures are similar to options on
securities except that options on index futures give the purchaser the right, in
return for the premium paid, to assume a position in an index futures contract
(a long position if the option is a call and a short position if the option is a
put), at a specified exercise price at any time during the period of the option.
Upon exercise of the option, the delivery of the futures position by the writer
of the option to the holder of the option will be accompanied by delivery of the
accumulated balance in the writer's futures margin account which represents the
amount by which the market price of the index futures contract, at exercise,
exceeds (in the case of a call) or is less than (in the case of a put) the
exercise price of the option on the index future. If an option is exercised on
the last trading day prior to the expiration date of the option, the settlement
will be made entirely in cash equal to the difference between the exercise price
of the option and the closing level of the index on which the future is based on
the expiration date. Purchasers of options who fail to exercise their options
prior to the exercise date suffer a loss of the premium paid.
Options on indices. As an alternative to purchasing call and put options on
index futures, the Fund may purchase call and put options on the underlying
indices themselves. Such options could be used in a manner identical to the use
of options on index futures.
Foreign Currency Transactions
The Fund may engage in currency exchange transactions to protect against
uncertainty in the level of future currency exchange rates.
The Fund may engage in both "transaction hedging" and "position hedging". When
it engages in transaction hedging, the Fund enters into foreign currency
transactions with respect to specific receivables or payables of the Fund
generally arising in connection with the purchase or sale of its portfolio
securities. The Fund will engage in transaction hedging when it desires to "lock
in" the U.S. dollar price of a security it has agreed to purchase or sell, or
the U.S. dollar equivalent of a dividend or interest payment in a foreign
currency. By transaction hedging the Fund attempts to protect itself against a
possible loss resulting from an adverse change in the relationship between the
U.S. dollar and the applicable foreign currency during the period between the
date on which the security is purchased or sold, or on which the dividend or
interest payment is declared, and the date on which such payments are made or
received.
The Fund may purchase or sell a foreign currency on a spot (or cash) basis at
the prevailing spot rate in connection with the settlement of transactions in
portfolio securities denominated in that foreign currency. The Fund may also
enter into contracts to purchase or sell foreign currencies at a future date
("forward contracts") and purchase and sell foreign currency futures contracts.
For transaction hedging purposes the Fund may also purchase exchange-listed and
over-the-counter call and put options on foreign currency futures contracts and
on foreign currencies. Over-the-counter options are considered to be illiquid by
the SEC staff. A put option on a futures contract gives the Fund the right to
assume a short position in the futures contract until expiration of the option.
A put option on currency gives the Fund the right to sell a currency at an
exercise price until the expiration of the option. A call option on a futures
contract gives the Fund the right to assume a long position in the futures
contract until the expiration of the option. A call option on currency gives the
Fund the right to purchase a currency at the exercise price until the expiration
of the option.
When it engages in position hedging, the Fund enters into foreign currency
exchange transactions to protect against a decline in the values of the foreign
currencies in which its portfolio securities are denominated (or an increase in
the value of currency for securities which the Fund expects to purchase, when
the Fund holds cash or short-term investments). In connection with position
hedging, the Fund may purchase put or call options on foreign currency and
foreign currency futures contracts and buy or sell forward contracts and foreign
currency futures contracts. The Fund may also purchase or sell foreign currency
on a spot basis.
The precise matching of the amounts of foreign currency exchange transactions
and the value of the portfolio securities involved will not generally be
possible since the future value of such securities in foreign currencies will
change as a consequence of market movements in the value of those securities
between the dates the currency exchange transactions are entered into and the
dates they mature.
It is impossible to forecast with precision the market value of portfolio
securities at the expiration or maturity of a forward or futures contract.
Accordingly, it may be necessary for the Fund to purchase additional foreign
currency on the spot market (and bear the expense of such purchase) if the
market value of the security or securities being hedged is less than the amount
of foreign currency the Fund is obligated to deliver and if a decision is made
to sell the security or securities and make delivery of the foreign currency.
Conversely, it may be necessary to sell on the spot market some of the foreign
currency received upon the sale of the portfolio security or securities if the
market value of such security or securities exceeds the amount of foreign
currency the Fund is obligated to deliver.
Transaction and position hedging do not eliminate fluctuations in the underlying
prices of the securities which the Fund owns or intends to purchase or sell.
They simply establish a rate of exchange which one can achieve at some future
point in time. Additionally, although these techniques tend to minimize the risk
of loss due to a decline in the value of the hedged currency, they tend to limit
any potential gain which might result from the increase in value of such
currency.
Currency forward and futures contracts. Upon entering into such contracts, in
compliance with the SEC's requirements, cash or liquid securities equal in value
to the amount of the Fund's obligation under the contract (less any applicable
margin deposits and any assets that constitute "cover" for such obligation),
will be segregated with the Fund's custodian.
A forward currency contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract as agreed by the parties, at a price set at the time of
the contract. In the case of a cancelable contract, the holder has the
unilateral right to cancel the contract at maturity by paying a specified fee.
The contracts are traded in the interbank market conducted directly between
currency traders (usually large commercial banks) and their customers. A
contract generally has no deposit requirement, and no commissions are charged at
any stage for trades. A currency futures contract is a standardized contract for
the future delivery of a specified amount of a foreign currency at a future date
at a price set at the time of the contract. Currency futures contracts traded in
the United States are designed and traded on exchanges regulated by the CFTC,
such as the New York Mercantile Exchange.
Forward currency contracts differ from currency futures contracts in certain
respects. For example, the maturity date of a forward contract may be any fixed
number of days from the date of the contract agreed upon by the parties, rather
than a predetermined date in a given month. Forward contracts may be in any
amounts agreed upon by the parties rather than predetermined amounts. Also,
forward contracts are traded directly between currency traders so that no
intermediary is required. A forward contract generally requires no margin or
other deposit.
At the maturity of a forward or futures contract, the Fund may either accept or
make delivery of the currency specified in the contract, or at or prior to
maturity enter into a closing transaction involving the purchase or sale of an
offsetting contract. Closing transactions with respect to forward contracts are
usually effected with the currency trader who is a party to the original forward
contract. Closing transactions with respect to futures contracts are effected on
a commodities exchange; a clearing corporation associated with the exchange
assumes responsibility for closing out such contracts.
Positions in currency futures contracts may be closed out only on an exchange or
board of trade which provides a secondary market in such contracts. Although the
Fund intends to purchase or sell currency futures contracts only on exchanges or
boards of trade where there appears to be an active secondary market, there is
no assurance that a secondary market on an exchange or board of trade will exist
for any particular contract or at any particular time. In such event, it may not
be possible to close a futures position and, in the event of adverse price
movements, the Fund would continue to be required to make daily cash payments of
variation margin.
Currency options. In general, options on currencies operate similarly to options
on securities and are subject to many similar risks. Currency options are traded
primarily in the over-the-counter market, although options on currencies have
recently been listed on several exchanges. Options are traded not only on the
currencies of individual nations, but also on the European Currency Unit
("ECU"). The ECU is composed of amounts of a number of currencies, and is the
official medium of exchange of the European Economic Community's European
Monetary System.
The Fund will only purchase or write currency options when the Adviser believes
that a liquid secondary market exists for such options. There can be no
assurance that a liquid secondary market will exist for a particular option at
any specified time. Currency options are affected by all of those factors which
influence exchange rates and investments generally. To the extent that these
options are traded over the counter, they are considered to be illiquid by the
SEC staff.
The value of any currency, including the U.S. dollars, may be affected by
complex political and economic factors applicable to the issuing country. In
addition, the exchange rates of currencies (and therefore the values of currency
options) may be significantly affected, fixed, or supported directly or
indirectly by government actions. Government intervention may increase risks
involved in purchasing or selling currency options, since exchange rates may not
be free to fluctuate in respect to other market forces.
The value of a currency option reflects the value of an exchange rate, which in
turn reflects relative values of two currencies, the U.S. dollar and the foreign
currency in question. Because currency transactions occurring in the interbank
market involve substantially larger amounts than those that may be involved in
the exercise of currency options, investors may be disadvantaged by having to
deal in an odd lot market for the underlying currencies in connection with
options at prices that are less favorable than for round lots. Foreign
governmental restrictions or taxes could result in adverse changes in the cost
of acquiring or disposing of currencies.
There is no systematic reporting of last sale information for currencies and
there is no regulatory requirement that quotations available through dealers or
other market sources be firm or revised on a timely basis. Available quotation
information is generally representative of very large round-lot transactions in
the interbank market and thus may not reflect exchange rates for smaller odd-lot
transactions (less than $1 million) where rates may be less favorable. The
interbank market in currencies is a global, around-the-clock market. To the
extent that options markets are closed while the markets for the underlying
currencies remain open, significant price and rate movements may take place in
the underlying markets that cannot be reflected in the options markets.
Settlement procedures. Settlement procedures relating to the Fund's investments
in foreign securities and to the Fund's foreign currency exchange transactions
may be more complex than settlements with respect to investments in debt or
equity securities of U.S. issuers, and may involve certain risks not present in
the Fund's domestic investments, including foreign currency risks and local
custom and usage. Foreign currency transactions may also involve the risk that
an entity involved in the settlement may not meet its obligations.
Foreign currency conversion. Although foreign exchange dealers do not charge a
fee for currency conversion, they do realize a profit based on the difference
(spread) between prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to the Fund at one rate,
while offering a lesser rate of exchange should the Fund desire to resell that
currency to the dealer. Foreign currency transactions may also involve the risk
that an entity involved in the settlement may not meet its obligation.
Rule 144A Securities
The Fund may purchase securities that have been privately placed but that are
eligible for purchase and sale under Rule 144A under the 1933 Act. That Rule
permits certain qualified institutional buyers, such as the Fund, to trade in
privately placed securities that have not been registered for sale under the
1933 Act. The Adviser, under the supervision of the Board of Trustees, will
consider whether securities purchased under Rule 144A are illiquid and thus
subject to the Fund's investment restriction on illiquid securities. A
determination of whether a Rule 144A security is liquid or not is a question of
fact. In making this determination, the Adviser will consider the trading
markets for the specific security, taking into account the unregistered nature
of a Rule 144A security. In addition, the Adviser could consider the (1)
frequency of trades and quotes, (2) number of dealers and potential purchasers,
(3) dealer undertakings to make a market, and (4) nature of the security and of
marketplace trades (e.g., the time needed to dispose of the security, the method
of soliciting offers, and the mechanics of transfer). The liquidity of Rule 144A
securities would be monitored and, if as a result of changed conditions, it is
determined that a Rule 144A security is no longer liquid, the Fund's holdings of
illiquid securities would be reviewed to determine what, if any, steps are
required to assure that the Fund does not invest more than its investment
restriction on illiquid securities allows. Investing in Rule 144A securities
could have the effect of increasing the amount of the Fund's assets invested in
illiquid securities if qualified institutional buyers are unwilling to purchase
such securities.
TAXES - GENERAL
In this section, all discussions of taxation at the shareholder level relate to
federal taxes only. Consult your tax adviser for state, local and foreign tax
considerations and for information about special tax considerations that may
apply to shareholders that are not natural persons.
Alternative Minimum Tax. Distributions derived from interest which is exempt
from regular federal income tax may subject corporate shareholders to or
increase their liability under the corporate alternative minimum tax (AMT). A
portion of such distributions may constitute a tax preference item for
individual shareholders and may subject them to or increase their liability
under the AMT.
Dividends Received Deductions. Distributions will qualify for the corporate
dividends received deduction only to the extent that dividends earned by the
Fund qualify. Any such dividends are, however, includable in adjusted current
earnings for purposes of computing corporate AMT. The dividends received
deduction for eligible dividends is subject to a holding period requirement
imposed pursuant to the Taxpayer Relief Act of 1997 (the "1997 Act").
Fund Distributions. Distributions from the Fund (other than exempt-interest
dividends, as discussed below) will be taxable to shareholders as ordinary
income to the extent derived from the Fund's investment income and net
short-term gains. Pursuant to the 1997 Act, two different tax rates apply to net
capital gains (that is, the excess of net gains from capital assets held for
more than one year over net losses from capital assets held for not more than
one year). One rate (generally 28%) generally applies to net gains on capital
assets held for more than one year but not more than 18 months ("28% gains") and
a second, preferred rate (generally 20%) applies to the balance of such net
capital gains ("adjusted net capital gains"). Distributions of net capital gains
will be treated in the hands of shareholders as 28% gains to the extent
designated by the Fund as deriving from net gains from assets held for more than
one year but not more than 18 months, and the balance will be treated as
adjusted net capital gains. Distributions of 28% gains and adjusted net capital
gains will be taxable to shareholders as such, regardless of how long a
shareholder has held the shares in the Fund. Distributions will be taxed as
described above whether received in cash or in Fund shares.
Return of Capital Distributions. To the extent that a distribution is a return
of capital for federal tax purposes, it reduces the cost basis of the shares on
the record date and is similar to a partial return of the original investment
(on which a sales charge may have been paid). There is no recognition of a gain
or loss, however, unless the return of capital reduces the cost basis in the
shares to below zero.
U.S. Government Securities. Many states grant tax-free status to dividends paid
to shareholders of mutual funds from interest income earned by the Fund from
direct obligations of the U.S. government. Investments in mortgage-backed
securities (including GNMA, FNMA and FHLMC Securities) and repurchase agreements
collateralized by U.S. government securities do not qualify as direct federal
obligations in most states. Shareholders should consult with their own tax
advisers about the applicability of state and local intangible property, income
or other taxes to their fund shares and distributions and redemption proceeds
received from the fund.
Sales of Shares. The sale, exchange or redemption of Fund shares may give rise
to a gain or loss. In general, any gain realized upon a taxable disposition of
shares will be treated as 28% capital gain if the shares have been held for more
than 12 months but not more than 18 months, and as adjusted net capital gains if
the shares have been held for more than 18 months. Otherwise the gain on the
sale, exchange or redemption of fund shares will be treated as short-term
capital gain. In general, any loss realized upon a taxable disposition of shares
will be treated as long-term loss if the shares have been held more than 12
months, and otherwise as short-term loss if shares have been held for more than
18 months. However, any loss realized upon a taxable disposition of shares held
for six months or less will be treated as long-term, rather than short-term,
capital loss to the extent of any long-term capital gain distributions received
by the shareholder with respect to those shares. All or a portion of any loss
realized upon a taxable disposition of shares will be disallowed if other shares
are purchased within 30 days before or after the disposition. In such a case,
the basis of the newly purchased shares will be adjusted to reflect the
disallowed loss.
Backup Withholding. Certain distributions and redemptions may be subject to a
31% backup withholding unless a taxpayer identification number and certification
that the shareholder is not subject to the withholding is provided to the fund.
This number and form may be provided by either a Form W-9 or the accompanying
application. In certain instances, CISC may be notified by the Internal Revenue
Service that a shareholder is subject to backup withholding.
Excise Tax. To the extent that the Fund does not annually distribute
substantially all taxable income and realized gains, it is subject to an excise
tax. The Adviser intends to avoid this tax except when the cost of processing
the distribution is greater than the tax.
Tax Accounting Principles. To qualify as a "regulated investment company," the
Fund must (a) derive at least 90% of its gross income from dividends, interest,
payments with respect to securities loans, gains from the sale or other
disposition of stock, securities or foreign currencies or other income
(including but not limited to gains from options, futures or forward contracts)
derived with respect to its business of investing in such stock, securities or
currencies; (b) derive less than 30% of its gross income from the sale or other
disposition of certain assets held less than three months for tax years
beginning on or before August 5, 1997; (c) diversify its holdings so that, at
the close of each quarter of its taxable year, (i) at least 50% of the value of
its total assets consists of cash, cash items, U.S. Government securities, and
other securities limited generally with respect to any one issuer to not more
than 5% of the total assets of the Fund and not more than 10% of the outstanding
voting securities of such issuer, and (ii) not more than 25% of the value of its
total assets is invested in the securities of any issuer (other than U.S.
Government securities).
Hedging Transactions. If the fund engages in hedging transactions, including
hedging transactions in options, futures contracts, and straddles, or other
similar transactions, it will be subject to special tax rules (including
constructive sale, mark-to-market, straddle, wash sale, and short sale rules),
the effect of which may be to accelerate income to the fund, defer losses to the
fund, cause adjustments in the holding periods of the fund's securities, or
convert short-term capital losses into long-term capital losses. These rules
could therefore affect the amount, timing and character of distributions to
shareholders.
Foreign Currency-Denominated Securities and Related Hedging Transactions. The
Fund's transactions in foreign currencies, foreign currency-denominated debt
securities, certain foreign currency options, futures contracts and forward
contracts (and similar instruments) may give rise to ordinary income or loss to
the extent such income or loss results from fluctuations in the value of the
foreign currency concerned.
If more than 50% of the Fund's total assets at the end of its fiscal year are
invested in stock or securities of foreign corporate issuers, the Fund may make
an election permitting its shareholders to take a deduction or credit for
federal tax purposes for their portion of certain qualified foreign taxes paid
by the Fund. The Adviser will consider the value of the benefit to a typical
shareholder, the cost to the Fund of compliance with the election, and
incidental costs to shareholders in deciding whether to make the election. A
shareholder's ability to claim such a foreign tax credit will be subject to
certain limitations imposed by the Code (including a holding period requirement
imposed pursuant to the 1997 Act), as a result of which a shareholder may not
get a full credit for the amount of foreign taxes so paid by the Fund.
Shareholders who do not itemize on their federal income tax returns may claim a
credit (but no deduction) for such foreign taxes.
Investment by the Fund in certain "passive foreign investment companies" could
subject the Fund to a U.S. federal income tax (including interest charges) on
distributions received from the company or on proceeds received from the
disposition of shares in the company, which tax cannot be eliminated by making
distributions to Fund shareholders. However, the Fund may elect to treat a
passive foreign investment company as a "qualified electing fund," in which case
the Fund will be required to include its share of the company's income and net
capital gain annually, regardless of whether it receives any distribution from
the company. The Fund also may make an election to mark the gains (and to a
limited extent losses) in such holdings "to the market" as though it had sold
and repurchased its holdings in those passive foreign investment companies on
the last day of the Fund's taxable year. Such gains and losses are treated as
ordinary income and loss. The qualified electing fund and mark-to-market
elections may have the effect of accelerating the recognition of income (without
the receipt of cash) and increase the amount required to be distributed for the
Fund to avoid taxation. Making either of these elections therefore may require
the Fund to liquidate other investments (including when it is not advantageous
to do so) to meet its distribution requirement, which also may accelerate the
recognition of gain and affect the Fund's total return.
ADDITIONAL TAX MATTERS CONCERNING TRUST SHARES
Federal Gift Taxes. An investment in Trust Shares may be a taxable gift for
federal tax purposes, depending upon the option selected and other gifts that
the donor and his or her spouse may make during the year.
Under the Colonial Advantage Plan, the entire amount of the gift will be a
"present interest" that qualifies for the federal gift tax annual exclusion. In
that case, the donor will be required to file a federal gift tax return on
account of this gift only if (i) the aggregate present interest gifts by the
donor to the particular beneficiary (including the gift of Trust Shares) exceeds
$10,000 or (ii) the donor wishes to elect gift splitting on gifts with his or
her spouse for the year. The trustee will notify the beneficiary of his or her
right of withdrawal promptly following any contribution under the Advantage
Plan.
Under the Colonial Gift Plan, the entire amount of the gift will be a "future
interest" for federal gift tax purposes, so that none of the gift will qualify
for the federal gift tax annual exclusion. Consequently, the donor will have to
file a federal gift tax return (IRS Form 709) reporting the entire amount of the
gift, even if the gift is less than $10,000.
No federal gift tax will be payable by the donor until his or her cumulative
taxable gifts (i.e., gifts other than those qualifying for the annual exclusion
or otherwise exempt) exceed the federal gift and estate tax exemption equivalent
amount. the following are the applicable exclusion amounts through 2006:
In the case of estates of decedents The applicable
dying, and gifts made, during: exclusion amount is:
1998 $ 625,000
1999 $ 650,000
2000 and 2001 $ 675,000
2002 and 2003 $ 700,000
2004 $ 850.000
2005 $ 950,000
2006 or thereafter $1,000,000
Any gift of Trust Shares that does not qualify as a present interest or that
exceeds the available annual exclusion amount will reduce the amount of the
Federal gift and estate tax exemption that would otherwise be available for
future gifts for transfers at death. The donor and his or her spouse may elect
"gift-splitting" for any gift of Trust Shares (other than a gift to such
spouse), meaning that the donor and his or her spouse may elect to treat the
gift as having been made one-half by each of them.
The donor's gift of Fund shares may also have to be reported for state gift tax
purposes, if the state in which the donor resides imposes a gift tax. Many
states do not impose such a tax. Some states follow the Federal rules concerning
the types of transfers subject to tax and the availability of the annual
exclusion.
Generation-Skipping Transfer Taxes
If the beneficiary of a gift of Trust Shares is a relative who is two
generations or more younger than the donor, or is not a relative and is more
than 37 1/2 years younger than the donor, the gift will be subject in whole or
in part to the generation-skipping transfer tax (the "GST tax") unless the gift
is made under the Advantage Plan and does not exceed the available annual
exclusion amount. A $1,000,000 exemption (the "GST exemption") is allowed
against this tax, and so long as the GST exemption has not been used by other
transfers it will automatically be allocated to a gift of Trust Shares that is
subject to the GST tax unless the donor elects otherwise. Such an election is
made by reporting the gift on a timely filed gift tax return and paying the
applicable GST tax. The GST tax is imposed at a flat rate of 55% on the amount
of the gift, and payment of the tax by the donor is treated as an additional
gift for gift tax purposes.
Income Taxes The Internal Revenue Service takes the position that a trust
beneficiary who is given a power of withdrawal over contributions to the trust
should be treated, for Federal income tax purposes, as the "owner" of the
portion of the trust that was subject to the power. Accordingly, if the donor
selects Advantage Trust Shares, the beneficiary will be treated as the "owner"
of all of the Fund shares in the account for Federal income tax purposes, and
will be required to report all of the income and capital gains earned in the
trust on his or her personal Federal income tax return. The trust will not pay
Federal income taxes on any of the trust's income or capital gains. The trustee
will prepare and file the Federal income tax information returns that are
required each year (and any state income tax returns that may be required), and
will send the beneficiary a statement following each year showing the amounts
(if any) that the beneficiary must report on his or her income tax returns for
that year. If the beneficiary is under fourteen years of age, these amounts may
be subject to Federal income taxation at the marginal rate applicable to the
beneficiary's parents. The beneficiary may at any time after the creation of the
trust irrevocably elect to require the trustee to pay him or her a portion of
the trust's income and capital gains annually thereafter to provide funds with
which to pay any resulting income taxes, which the trustee will do by redeeming
Trust Shares. The amount distributed will be a fraction of the trust's ordinary
income and short-term capital gains and the trust's long-term capital gains
equal to the highest marginal Federal income tax rate imposed on each type of
income (currently, 39.6% and 28%, respectively). If the beneficiary selects this
option, he or she will receive those fractions of his or her trust's income and
capital gains annually for the duration of the trust.
Under the Advantage Plan, the beneficiary will also be able to require the
trustee to pay his or her tuition, room and board and other expense of his or
her college or post-graduate education, and the trustee will raise the cash
necessary to fund these distributions by redeeming Trust Shares. Any such
redemption will result in the realization of capital gain or loss on the shares
redeemed, which will be reportable by the beneficiary on his or her income tax
returns for the year in which the shares are redeemed, as described above.
Payments must be made directly to the educational institution.
If the donor selects the Gift Plan, the trust that he or she creates will be
subject to Federal income tax on all income and capital gains realized by it,
less a $100 annual exemption (in lieu of the personal exemption allowed to
individuals). The amount of the tax will be determined under the tax rate
schedule applicable to estates and trusts, which is more sharply graduated than
the rate schedule for individuals, reaching the same maximum marginal rate for
ordinary income or short-term capital gains (currently, 39.6%), but at a much
lower taxable income level ($8,350 for 1998) than would apply to an individual.
It is anticipated, however, that most of the gains taxable to the trust will be
long-term capital gain, on which the Federal income tax rate is currently
limited to 28%. The trustee will raise the cash necessary to pay any Federal or
state income taxes by redeeming Fund shares. The beneficiary will not pay
Federal income taxes on any of the trust's income or capital gains, except those
earned in the year when the trust terminates. The trustee will prepare and file
all Federal and state income tax returns that are required each year, and will
send the beneficiary an information statement for the year in which the trust
terminates showing the amounts (if any) that the beneficiary must report on his
or her Federal and state income tax returns for that year.
When the trust terminates, the distribution of the remaining shares held in the
trust to the beneficiary will not be treated as a taxable disposition of the
shares. Any Fund shares received by the beneficiary will have the same cost
basis as they had in the trust at the time of termination. Any Fund shares
received by the beneficiary's estate will have a basis equal to the value of the
shares at the beneficiary's death (or the alternate valuation date for Federal
estate tax purposes, if elected).
Consultation with Qualified Adviser
Due to the complexity of Federal and state gift, GST and income tax laws
pertaining to all gifts in trust, prospective donors should consider consulting
with their financial or tax adviser before investing in Trust Shares.
MANAGEMENT OF THE FUND
Each of the Adviser, the Administrator, CISC and LFII is an indirect
wholly-owned subsidiary of Liberty Financial Companies, Inc. (Liberty
Financial), which in turn is a direct majority-owned subsidiary of LFC Holdings,
Inc., which in turn is a direct subsidiary of Liberty Mutual Equity Corporation,
which in turn is a wholly-owned subsidiary of Liberty Mutual Insurance Company
(Liberty Mutual). Liberty Mutual is an underwriter of workers' compensation
insurance and a property and casualty insurer in the U.S. Liberty Financial's
address is 600 Atlantic Avenue, Boston, MA 02210. Liberty Mutual's address is
175 Berkeley Street, Boston, MA 02117.
<TABLE>
<CAPTION>
Trustees and Officers
Name and Address Age Position with Principal Occupation
Fund
<S> <C> <C> <C>
Robert J. Birnbaum 70 Trustee Retired (formerly Special Counsel, Dechert Price & Rhoads
313 Bedford Road from September, 1988 to December, 1993).
Ridgewood, NJ 07450
Tom Bleasdale 67 Trustee Retired (formerly Chairman of the Board and Chief
102 Clubhouse Drive #275 Executive Officer, Shore Bank & Trust Company from
Naples, FL 34105 1992-1993), is a Director of The Empire Company since
June, 1995.
Lora S. Collins 62 Trustee Attorney (formerly Attorney, Kramer, Levin, Naftalis,
1175 Hill Road Nessen, Kamin & Frankel from September, 1986 to November,
Southold, NY 11971 1996).
James E. Grinnell 68 Trustee Private Investor since November, 1988.
22 Harbor Avenue
Marblehead, MA 01945
William D. Ireland, Jr. 73 Trustee Retired, is a Trustee of certain charitable and
103 Springline Drive non-charitable organizations since February, 1990.
Vero Beach, FL 32963
Richard W. Lowry 61 Trustee Private Investor since August, 1987.
10701 Charleston Drive
Vero Beach, FL 32963
William E. Mayer* 57 Trustee Partner, Development Capital, LLC (formerly Dean, College
500 Park Avenue, 5th Floor of Business and Management, University of Maryland from
New York, NY 10022 October, 1992 to November, 1996, Dean, Simon Graduate
School of Business, University of Rochester from
October, 1991 to July, 1992).
James L. Moody, Jr. 66 Trustee Retired (formerly Chairman of the Board, Hannaford Bros.
P.O. Box 1000 Co. from May, 1984 to May, 1997, and Chief Executive
Portland, ME 04104 Officer, Hannaford Bros. Co. from May, 1973 to May, 1992).
John J. Neuhauser 54 Trustee Dean, Boston College School of Management since 1978.
140 Commonwealth Avenue
Chestnut Hill, MA 02167
George L. Shinn 74 Trustee Financial Consultant since 1989.
Credit Suisse First Boston
Corp.
Eleven Madison Avenue
25th Floor
New York, NY 10010-3629
Robert L. Sullivan 70 Trustee Retired Partner, Peat Marwick Main & Co.
7121 Natelli Woods Lane
Bethesda, MD 20817
Sinclair Weeks, Jr. 74 Trustee Chairman of the Board, Reed & Barton Corporation since
Bay Colony Corporate Ctr. 1987.
Suite 4550
1000 Winter Street
Waltham, MA 02154
Harold W. Cogger 62 President President of Colonial funds since March, 1996 (formerly
(formerly Vice Vice President from July, 1993 to March, 1996); is
President) Director since March, 1984 and Chairman of the Board,
since March, 1996 of the Administrator (formerly
President from July, 1993 to December,1996, Chief Executive Officer from
March, 1995 to December, 1996 and Executive Vice President from
October, 1989 to July, 1993); Director of the Adviser since November,
1996; Director since October, 1991 and Chairman of the Board, since
March, 1996, of The Colonial Group, Inc. (TCG)(formerly President from
October, 1994 to December, 1996, Chief Executive Officer from March,
1995 to December, 1996); Executive Vice President and Director since
March, 1995, Liberty Financial.
Timothy J. Jacoby 45 Treasurer, Chief Treasurer and Chief Financial Officer of Colonial funds
Financial since October, 1996 (formerly Controller and Chief Accounting Officer
Officer and from October, 1997 to February, 1998), is Senior Vice President of the
Chief Accounting Adviser since September, 1996 (formerly Senior Vice President,
Officer Fidelity Accounting and Custody Services from
September, 1993 to September,1996 and Assistant Treasurer to the
Fidelity Group of Funds from August, 1990 to September, 1993).
J. Kevin Connaughton 33 Controller and Controller and Chief Accounting Officer of Colonial
Chief Accounting funds since February, 1998, is Vice President of the
Officer Adviser since February, 1998 (formerly Senior Tax
Manager, Coopers & Lybrand, LLP from April 1996 to
January 1998; Vice President, 440 Financial Group/First
Data Investor Services Group from 1994 to 1996;
Vice President, Mellon Bank/The Boston Company/The
Shareholder Services Group from 1992 to 1994).
Davey S. Scoon 51 Vice President Vice President of Colonial funds since June, 1993, is
Executive Vice President since July, 1993 and Director
since March, 1985 of the Adviser (formerly Senior Vice
President and Treasurer of the Adviser from March, 1985
to July, 1993); Executive Vice President and Chief
Operating Officer, TCG since March, 1995 (formerly Vice
President - Finance and Administration of TCG from
November, 1985 to March, 1995).
Michael H. Koonce 37 Secretary Secretary of Colonial funds since August, 1997, is
Director, Senior Vice President, General Counsel, Clerk
and Secretary since August, 1997 of the Administrator
(formerly Vice President, Counsel, Asst. Secretary and
Asst. Clerk from June, 1992 to July, 1997); Vice
President Clerk and General Counsel of TCG since
August, 1997 (formerly Asst. Clerk from April, 1993 to
July, 1997).
</TABLE>
* A Trustee who is an "interested person" (as defined in the Act) of the Fund,
the Adviser or the Administrator.
The address of the officers of the Fund is One Financial Center, Boston, MA
02111.
The Trustees serve as trustees of all Colonial funds. For such service, each
Trustee receives an annual retainer of $45,000 and attendance fees of $7,500 for
each regular joint meeting and $1,000 for each special joint meeting. Committee
chairs receive an annual retainer of $5,000. Committee members receive an annual
retainer of $1,000 and $1,000 for each special meeting attended. Two-thirds of
the Trustee fees are allocated among the Colonial funds based on each fund's
relative net assets and one-third of the fees are divided equally among the
Colonial funds.
The Agreement and Declaration of Trust (Declaration) of the Trust provides that
the Trust will indemnify its Trustees and officers against liabilities and
expenses incurred in connection with litigation in which they may be involved
because of their offices with the Trust but that such indemnification will not
relieve any officer or Trustee of any liability to the Trust or its shareholders
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of his or her duties. The Trust, at its expense, provides liability
insurance for the benefit of its Trustees and officers.
Trustees Fees
For the fiscal period ended October 31, 1997 and the calendar year ended
December 31, 1997, the Trustees of the Trust received the following compensation
for serving as Trustees(a):
<TABLE>
<CAPTION>
Total Compensation From Trust and Fund
Aggregate Compensation From The Fund Complex Paid To The Trustees For The
For The Fiscal Period Ended October Calendar Year Ended December 31, 1997(c)
Trustee 31, 1997(b)
<S> <C> <C>
Robert J. Birnbaum $465 $ 93,949
Tom Bleasdale 548(d) 106,432(e)
Lora S. Collins 465 93,949
James E. Grinnell 471(f) 94,698(g)
William D. Ireland, Jr. 506 101,445
Richard W. Lowry 471 94,698
William E. Mayer 448 89,949
James L. Moody, Jr. 482(h) 98,447(i)
John J. Neuhauser 471 94,948
George L. Shinn 526 103,443
Robert L. Sullivan 505 99,945
Sinclair Weeks, Jr. 506 101,445
</TABLE>
(a) The Funds do not currently offer pension or retirement plan benefits to
Trustees. (b) Trustee fee information for the Fund is for the period December
30, 1996 through October 31, 1997. (c) At December 31, 1997, the Colonial Funds
complex consisted of 39 open-end and 5 closed-end management investment company
portfolios.
(d) Includes $202 payable in later years as deferred compensation.
(e) Includes $57,454 payable in later years as deferred compensation.
(f) Includes $8 payable in later years as deferred compensation.
(g) Includes $6,273 payable in later years as deferred compensation.
(h) Total compensation of $307 will be payable in later years as deferred
compensation.
(i) Total compensation of $98,447 will be payable in later years as deferred
compensation.
The following table sets forth the amount of compensation paid to Messrs.
Birnbaum, Grinnell and Lowry in their capacities as Trustees or Directors of the
Liberty All-Star Equity Fund and of the Liberty All-Star Growth Fund, Inc.
(formerly known as The Charles Allmon Trust, Inc.) (together, Liberty Funds) for
service during the calendar year ended December 31, 1997:
Total Compensation
From Liberty Funds For
The Calendar Year Ended
Trustee December 31, 1997 (j)
Robert J. Birnbaum $26,800
James E. Grinnell 26,800
Richard W. Lowry 26,800
(j) The Liberty Funds are advised by Liberty Asset Management Company
(LAMCO). LAMCO is an indirect wholly-owned subsidiary of Liberty
Financial Companies, Inc.(an intermediate parent of the Adviser and the
Administrator).
Investment Adviser
Under its Management Agreement with the Fund, the Adviser provides the Fund with
discretionary investment services. Specifically, the Adviser is responsible for
supervising and directing the investments of the Fund in accordance with the
Fund's investment objective, program, and restrictions as provided in the Fund's
prospectus and this SAI. The Adviser is also responsible for effecting all
security transactions on behalf of the Fund, including the allocation of
principal business and portfolio brokerage and the negotiation of commissions
(see "Fund Transactions" below). The Management Agreement provides for the
payment to the Adviser of the fee described in the Prospectus."
The Adviser and its predecessor have been providing investment advisory services
since 1932. The Adviser acts as investment adviser to wealthy individuals,
trustees, pension and profit sharing plans, charitable organizations and other
institutional investors. As of December 31, 1997, the Adviser managed over $27.5
billion in assets: over $9.8 billion in equities and over $17.7 billion in
fixed-income securities (including $1.7 billion in municipal securities). The
$27.5 billion in managed assets included over $7.1 billion held by open-end
mutual funds managed by the Adviser (approximately 15% of the mutual fund assets
were held by clients of the Adviser). These mutual funds were owned by over
268,000 shareholders. The $7.1 billion in mutual fund assets included over $714
million in over 41,000 Individual Retirement Accounts (IRAs). In managing those
assets, the Adviser utilizes a proprietary computer-based information system
that maintains and regularly updates information for approximately 9,000
companies. The Adviser also monitors over 1,400 issues via a proprietary credit
analysis system. At December 31, 1997, the Adviser employed 18 research analysts
and 55 account managers. The average investment-related experience of these
individuals was 24 years.
The directors of the Adviser are Harold W. Cogger, Kenneth R. Leibler, C. Allen
Merritt, Jr., Timothy K. Armour and Hans P. Ziegler. Mr. Cogger's affiliations
and business address are referenced above; Mr. Leibler is President and Chief
Executive Officer of Liberty Financial; Mr. Merritt is Executive Vice President
and Treasurer of Liberty Financial; Mr. Armour is President of the Adviser's
Mutual Funds division; and Mr. Ziegler is Chief Executive Officer of the
Adviser. The business address of Messrs. Leibler and Merritt is 600 Atlantic
Avenue, Federal Reserve Plaza , Boston, Massachusetts 02210; that of Messrs.
Armour and Ziegler is One South Wacker Drive, Chicago, Illinois 60606.
Under the Management Agreement, the Adviser is not liable for any error of
judgment or mistake of law or for any loss suffered by the Fund or the Fund in
connection with the matters to which such Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence in the
performance of its duties or from reckless disregard of its obligations and
duties under the Agreement.
Portfolio Transactions
The Adviser places the orders for the purchase and sale of the Fund's portfolio
securities and options and futures contracts.
The Adviser's overriding objective in effecting portfolio transactions is to
seek to obtain the best combination of price and execution. The best net price,
giving effect to brokerage commissions, if any, and other transaction costs,
normally is an important factor in this decision, but a number of other
judgmental factors may also enter into the decision. These include: the
Adviser's knowledge of negotiated commission rates currently available and other
current transaction costs; the nature of the security being traded; the size of
the transaction; the desired timing of the trade; the activity existing and
expected in the market for the particular security; confidentiality; the
execution, clearance and settlement capabilities of the broker or dealer
selected and others which are considered; the Adviser's knowledge of the
financial stability of the broker or dealer selected and such other brokers or
dealers; and the Adviser's knowledge of actual or apparent operational problems
of any broker or dealer. Recognizing the value of these factors, the Fund may
pay a brokerage commission in excess of that which another broker or dealer may
have charged for effecting the same transaction. Evaluations of the
reasonableness of brokerage commissions, based on the foregoing factors, are
made on an ongoing basis by the Adviser's staff while effecting portfolio
transactions. The general level of brokerage commissions paid is reviewed by the
Adviser, and reports are made annually to the Board of Trustees of the Fund.
With respect to issues of securities involving brokerage commissions, when more
than one broker or dealer is believed to be capable of providing the best
combination of price and execution with respect to a particular portfolio
transaction for the Fund, the Adviser often selects a broker or dealer that has
furnished it with research products or services such as research reports,
subscriptions to financial publications and research compilations, compilations
of securities prices, earnings, dividends, and similar data, and computer data
bases, quotation equipment and services, research-oriented computer software and
services, and services of economic and other consultants. Selection of brokers
or dealers is not made pursuant to an agreement or understanding with any of the
brokers or dealers; however, the Adviser uses an internal allocation procedure
to identify those brokers or dealers who provide it with research products or
services and the amount of research products or services they provide, and
endeavors to direct sufficient commissions generated by its clients' accounts in
the aggregate, including the Fund, to such brokers or dealers to ensure the
continued receipt of research products or services that the Adviser feels are
useful. In certain instances, the Adviser receives from brokers and dealers
products or services which are used both as investment research and for
administrative, marketing, or other non-research purposes. In such instances,
the Adviser makes a good faith effort to determine the relative proportions of
such products or services which may be considered as investment research. The
portion of the costs of such products or services attributable to research usage
may be defrayed by the Adviser (without prior agreement or understanding, as
noted above) through transaction charges generated by transactions by clients
(including the Fund), while the portions of the costs attributable to
non-research usage of such products or services is paid by the Adviser in cash.
No person acting on behalf of the Fund is authorized, in recognition of the
value of research products or services, to pay a commission in excess of that
which another broker or dealer might have charged for effecting the same
transaction. Research products or services furnished by brokers and dealers may
be used in servicing any or all of the clients of the Adviser and not all such
research products or services are used in connection with the management of the
Fund.
With respect to the Fund's purchases and sales of portfolio securities
transacted with a broker or dealer on a net basis, the Adviser may also consider
the part, if any, played by the broker or dealer in bringing the security
involved to the Adviser's attention, including investment research related to
the security and provided to the Fund. The Fund has arranged for its custodian
to act as a soliciting dealer to accept any fees available to the custodian as a
soliciting dealer in connection with any tender offer for the Fund's portfolio
securities held by the Fund. The custodian will credit any such fees received
against its custodial fees. In addition, the Board of Trustees has reviewed the
legal developments pertaining to and the practicability of attempting to
recapture underwriting discounts or selling concessions when portfolio
securities are purchased in underwritten offerings. However, the Board has been
advised by counsel that recapture by a mutual fund currently is not permitted
under the Rules of Fair Practice of the National Association of Securities
Dealers.
Administration Agreement
Pursuant to an Administration Agreement with the Fund, the Administrator
provides certain administrative services including: (i) providing office space,
equipment and clerical personnel necessary for maintaining the organization of
the Fund and for performing the administrative functions herein set forth; (ii)
arranging, if desired by the Trust, for Directors, officers and employees of the
Administrator to serve as Trustees, officers or agents of the Fund if duly
elected or appointed to such positions and subject to their individual consent
and to any limitations imposed by law; (iii) preparation of agendas and
supporting documents for and minutes of meetings of Trustees, committees of
Trustees and shareholders; (iv) coordinating and overseeing the activities of
the Fund's other third-party service providers; (v) maintaining certain books
and records of the Fund; and (vi) monitoring the tax-efficiency of the Fund. The
Administration Agreement has a one year term. The Administrator is paid a
monthly fee at the annual rate of average daily net assets set forth in the
Prospectus. The Administrator and/or its affiliate, Colonial Advisory Services,
Inc. (CASI), has rendered investment advisory services to investment company,
institutional and other clients since 1931. The Administrator currently serves
as investment adviser and/or administrator for 41 open-end and 5 closed-end
management investment company portfolios, and is the administrator for 5
open-end management investment company portfolios (collectively, Colonial
funds). Officers of the Trust who are also officers of the Administrator or its
affiliates will benefit from the administration fees, sales commissions and
other fees paid or allowed by the Trust. More than 30,000 financial advisers
have recommended Colonial funds to over 800,000 clients worldwide, representing
more than $17 billion in net assets.
Trust Services Agreement
Pursuant to a Trust Services Agreement, CISC provides the Fund's Trust Shares
with trust administration services, including tax return preparation and filing,
other tax and beneficiary reporting and recordkeeping. CISC's fee is described
in the Prospectus.
Pricing and Bookkeeping Agreement
The Administrator provides pricing and bookkeeping services to the Fund pursuant
to a Pricing and Bookkeeping Agreement. The Pricing and Bookkeeping Agreement
has a one-year term. The Administrator is paid monthly a fee of $2,250 by the
Fund, plus a monthly percentage fee based on net assets of the Fund equal to the
following: 1/12 of 0.000% of the first $50 million; 1/12 of 0.035% of the next
$950 million; 1/12 of 0.025% of the next $1 billion; 1/12 of 0.015% of the next
$1 billion; and 1/12 of 0.001% on the excess over $3 billion.
Principal Underwriter
LFII is the principal underwriter of the Fund's shares. LFII has no obligation
to buy shares, and purchases shares only upon receipt of orders from authorized
financial service firms (FSFs) or investors.
12b-1 Plan
The Fund offers seven classes of shares - Class A, Class B, Class C, Class E,
Class F, Class G and Class H. The Fund may in the future offer other classes of
shares. The Trustees have approved a 12b-1 Plan (Plan) pursuant to Rule 12b-1
under the Act. Under the Plan, the Fund pays LFII service and distribution fees
at the annual rates described in the Prospectus. LFII may use the entire amount
of such fees to defray the cost of commissions and service fees paid to FSFs and
for certain other purposes. Since the distribution and service fees are payable
regardless of LFII's expenses, LFII may realize a profit from the fees. The
Plans authorize any other payments by the Fund to LFII and its affiliates
(including the Adviser and the Administrator) to the extent that such payments
might be construed to be indirect financing of the distribution of Fund shares.
The Trustees believe the Plan could be a significant factor in the growth and
retention of Fund assets resulting in a more advantageous expense ratio and
increased investment flexibility which could benefit each class of Fund
shareholders. The Plan will continue in effect from year to year so long as
continuance is specifically approved at least annually by a vote of the
Trustees, including the Trustees who are not interested persons of the Trust and
have no direct or indirect financial interest in the operation of the Plan or in
any agreements related to the Plan (Independent Trustees), cast in person at a
meeting called for the purpose of voting on the Plan. The Plan may not be
amended to increase the fee materially without approval by vote of a majority of
the outstanding voting securities of the relevant class of shares and all
material amendments of the Plan must be approved by the Trustees in the manner
provided in the foregoing sentence. The Plan may be terminated at any time by
vote of a majority of the independent Trustees or by vote of a majority of the
outstanding voting securities of the relevant class of shares. The continuance
of the Plan will only be effective if the selection and nomination of the
Trustees who are not interested persons of the Trust is effected by such
disinterested Trustees.
Shareholder Servicing and Transfer Agent
CISC is the Fund's shareholder servicing agent (transfer, plan and dividend
disbursing agent), for which it receives fees as described in the Fund's
Prospectus which are paid monthly by the Fund. The agreement continues
indefinitely but may be terminated by 90 days' notice by the Fund to CISC or
generally by six months' notice by CISC to the Fund. The agreement limits the
liability of CISC to the Fund for loss or damage incurred by the Fund to
situations involving a failure of CISC to use reasonable care or to act in good
faith in performing its duties under the agreement. It also provides that the
Fund will indemnify CISC against, among other things, loss or damage incurred by
CISC on account of any claim, demand, action or suit made on or against CISC not
resulting from CISC's bad faith or negligence and arising out of, or in
connection with, its duties under the agreement.
Custodian of the Fund
Boston Safe Deposit and Trust Company is the Fund's custodian. The custodian is
responsible for safeguarding the Fund's cash and securities, receiving and
delivering securities and collecting the Fund's interest and dividends.
Independent Accountants of the Fund
Price Waterhouse LLP are the Fund's independent accountants providing audit
services, tax return review, other tax consulting services, and assistance and
consultation in connection with the review of various SEC filings. The financial
statements incorporated by reference in this SAI have been so incorporated, and
the financial highlights included in the Prospectus have been so included, in
reliance upon the report of Price Waterhouse LLP given on the authority of said
firm as experts in accounting and auditing.
The financial statements and Report of Independent Accountants appearing in the
October 31, 1997 Annual Report, are incorporated in this SAI by reference.
Ownership of the Fund
At January 31, 1998, the Trustees of the Trust as a group did not own any shares
of the Fund. The officers of the Trust did not own any shares of the Fund
individually, except that the Administrator, of which each of the Trust's
officers are also officers, owned the number of shares referenced below.
As of record, January 31, 1998, there were the following owners of 5% or more of
each class of the Fund's shares:
<TABLE>
<CAPTION>
Class A Class B Class C Class E Class F Class G Class H
<S> <C> <C> <C> <C> <C> <C> <C>
Merrill Lynch Pierce Fenner & Smith 229,750 1,036,459 139,331 -0- -0- -0- -0-
for the Sole Benefit of its Customers (12.22%) (24.50%) (19.25%)
Attn: Fund Administration
4800 Deer Lake Drive, East, 3rd Floor
Jacksonville, FL 32246--332,544
Colonial Management Associates, Inc. <5% <5% <5% 10,000 10,000 10,000 10,000
One Financial Center (25.86%) (20.99%) (6.53%) (7.09%)
Boston, MA 02111-2624
Class A Class B ClassC Class E Class F Class G Class H
Briena B. Jones -0- -0- -0- -0- 6,189 -0- -0-
Gift Plan Trust (12.99%)
c/o Beulah M. Crumpton
16150 Isal Maria Circle
Morena Valley, CA 92553
Benjamine Heins -0- -0- -0- 2,295 -0- -0- -0-
Advantage Plan Trust (5.94%)
2200 Oregon Road
Mattituck, NY 11952
Benjamin Jacobs -0- -0- -0- 4,943 -0- -0- -0-
Advantage Plan Trust (12.79%)
c/o Ivan Jacobs
1080 Saddlebrook Road
Mountainside, NJ 07092-1511
Lewis Tedaldi & Rick Tedaldi & -0- -0- 37,692 -0- -0- -0- -0-
Lynne Tedaldi JTWROS (5.21%)
P.O. Box 10
Washintonville, NY 10992
</TABLE>
At January 31, 1998, there were 1,051 Class A, 1,821 Class B, 282 Class C, 42
Class E, 48 Class F, 219 Class G and 221 Class H, shareholders of record.
FUND CHARGES AND EXPENSES
Recent Fees paid to the Adviser, the Administrator, LFII and CISC
(dollars in thousands)(k)(before voluntary reductions)
Period December 30, 1996
(effective date of registration)
through October 31, 1997
Management fee $142
Administration fee 96
Bookkeeping fee 24
Shareholder service and transfer agent fee 65
12b-1 fees:
Service fee 58
Distribution fee - Class B 105
Distribution fee - Class C 13
Distribution fee - Class E (l)
Distribution fee - Class F 2
Distribution fee - Class G 1
Distribution fee - Class H 3
Fees and expenses waived or borne by the Adviser/Administrator (239)
(k) The Fund commenced investment operations on December 16, 1996. The activity
shown is from the effective date of registration (December 30, 1996) with
the Securities and Exchange Commission.
(l) Rounds to less than one.
Brokerage Commissions (dollars in thousands)
Period December 30, 1996
(effective date of registration)
through October 31, 1997
Total commissions $94
Directed transactions 0
Commissions on directed transactions 0
Sales Charges (dollars in thousands)
Period December 30, 1996
(effective date of registration)
through October 31, 1997
Aggregate initial sales charges on Fund shares sales $645
Initial sales charges retained by LFII 69
Aggregate CDSCs on Fund redemptions retained by LFII 25
Sales-related Expenses (dollars in thousands) of LFII relating to the Fund for
the period December 30, 1996 (effective date of registration) through October
31, 1997 were:
<TABLE>
<CAPTION>
Class A Class B Class C Class E Class F Class G Class H
<S> <C> <C> <C> <C> <C> <C> <C>
Fees to FSFs $15 $1,387 $56 $7 $12 $21 $40
Cost of sales material relating to the Fund (including
printing and mailing expenses) 303 487 76 7 2 6 9
Allocated travel, entertainment and other promotional
expenses (including advertising) 61 125 22 1 1 4 4
</TABLE>
DETERMINATION OF NET ASSET VALUE
The Fund determines net asset value (NAV) per share for each Class as of the
close of the New York Stock Exchange (Exchange) (normally 4:00 p.m. Eastern
time, 3:00 p.m. Central time) each day the Exchange is open. Currently, the
Exchange is closed Saturdays, Sundays and the following holidays: New Year's
Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
the Fourth of July, Labor Day, Thanksgiving and Christmas.
The Fund may invest in securities which are primarily listed on foreign
exchanges that are open and allow trading on days on which the Fund does not
determine NAV. This may significantly affect the NAV of the Fund's redeemable
securities on days when an investor cannot redeem such securities. Debt
securities generally are valued by a pricing service which determines valuations
based upon market transactions for normal, institutional-size trading units of
similar securities. However, in circumstances where such prices are not
available or where the Adviser deems it appropriate to do so, an
over-the-counter or exchange bid quotation is used. Securities listed on an
exchange or on NASDAQ are valued at the last sale price. Listed securities for
which there were no sales during the day and unlisted securities are valued at
the last quoted bid price. Options are valued at the last sale price or in the
absence of a sale, the mean between the last quoted bid and offering prices.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost pursuant to procedures adopted by the Fund's Trustees. The values
of foreign securities quoted in foreign currencies are translated into U.S.
dollars at the exchange rate for that day. Fund positions for which there are no
such valuations and other assets are valued at fair value as determined by the
Adviser in good faith under the direction of the Fund's Trustees.
Generally, trading in certain securities (such as foreign securities) is
substantially completed each day at various times prior to the close of the
Exchange. Trading on certain foreign securities markets may not take place on
all business days in New York, and trading on some foreign securities markets
takes place on days which are not business days in New York and on which the
Fund's NAV is not calculated. The values of these securities used in determining
the NAV are computed as of such times. Also, because of the amount of time
required to collect and process trading information as to large numbers of
securities issues, the values of certain securities (such as convertible bonds,
U.S. government securities, and tax-exempt securities) are determined based on
market quotations collected earlier in the day at the latest practicable time
prior to the close of the Exchange. Occasionally, events affecting the value of
such securities may occur between such times and the close of the Exchange which
will not be reflected in the computation of the Fund's NAV. If events materially
affecting the value of such securities occur during such period, then these
securities will be valued at their fair value following procedures approved by
the Fund's Trustees.
HOW TO BUY SHARES
The Prospectus contains a general description of how investors may buy shares of
the Fund and tables of charges. This SAI contains additional information which
may be of interest to investors.
The Fund will accept unconditional orders for shares to be executed at the
public offering price based on the NAV per share next determined after the order
is placed in good order. The public offering price is the NAV plus the
applicable sales charge, if any. In the case of orders for purchase of shares
placed through FSFs, the public offering price will be determined on the day the
order is placed in good order, but only if the FSF receives the order prior to
the time at which shares are valued and transmits it to the Fund before the Fund
processes that day's transactions. If the FSF fails to transmit before the Fund
processes that day's transactions, the customer's entitlement to that day's
closing price must be settled between the customer and the FSF. If the FSF
receives the order after the time at which the Fund values its shares, the price
will be based on the NAV determined as of the close of the Exchange on the next
day it is open. If funds for the purchase of shares are sent directly to CISC,
they will be invested at the public offering price next determined after receipt
in good order. Payment for shares of the Fund must be in U.S. dollars; if made
by check, the check must be drawn on a U.S. bank. Purchases of Gift Shares
require the completion and delivery of additional documentation, and will not be
processed until such documentation is received by CISC in good order.
The Fund receives the entire NAV of shares sold. For shares subject to an
initial sales charge, LFII's commission is the sales charge shown in the Fund's
Prospectus less any applicable FSF discount. The FSF discount is the same for
all FSFs, except that LFIICISI retains the entire sales charge on any sales made
to a shareholder who does not specify a FSF on the Investment Account
Application ("Application"), and except that CISI may from time to time reallow
additional amounts to all or certain FSFs. LFII generally retains some or all of
any asset-based sales charge (distribution fee) or contingent deferred sales
charges. Such charges generally reimburse LFII for any up-front and/or ongoing
commissions paid to FSFs.
Checks presented for the purchase of shares of the Fund which are returned by
the purchaser's bank will subject the purchaser to a $15 service fee for each
check returned. Checks must be drawn on a U.S. bank and must be payable in U.S.
dollars.
CISC acts as the shareholder's agent whenever it receives instructions to carry
out a transaction on the shareholder's account. Upon receipt of instructions
that shares are to be purchased for a shareholder's account, the designated FSF
will receive the applicable sales commission. Shareholders may change FSFs at
any time by written notice to CISC, provided the new FSF has a sales agreement
with LFII.
Shares credited to an account are transferable upon written instructions in good
order to CISC and may be redeemed as described under General Information
Regarding Buying and Selling Shares in the Prospectus. Certificates will not be
issued for Class A shares unless specifically requested and no certificates will
be issued for Class B, C, E, F, G or H shares. Shareholders may send any
certificates which have been previously acquired to CISC for deposit to their
account.
SPECIAL PURCHASE PROGRAMS/INVESTOR SERVICES
The following special purchase programs/investor services may be changed or
eliminated at any time.
Fundamatic Program. (Classes A, B and C only) As a convenience to investors,
Class A and Class B shares of the Fund may be purchased through the Colonial
Fundamatic Program. Preauthorized monthly bank drafts or electronic funds
transfer for a fixed amount of at least $250 are used to purchase Fund shares at
the public offering price next determined after LFII receives the proceeds from
the draft (normally the 5th or the 20th of each month, or the next business day
thereafter). If your Fundamatic purchase is by electronic funds transfer, you
may request the Fundamatic purchase for any day. Further information and
application forms are available from FSFs or from LFII.
Tax-Sheltered Retirement Plans. (Classes A, B and C only) LFII offers prototype
tax-qualified plans, including IRAs, and Pension and Profit-Sharing Plans for
individuals, corporations, employees and the self-employed. The minimum initial
Retirement Plan investment is $25. BankBoston, N.A. is the Trustee of LFII
prototype plans and charges a $10 annual fee. Detailed information concerning
these Retirement Plans and copies of the Retirement Plans are available from
LFII.
Participants in non-LFII prototype Retirement Plans (other than IRAs) also are
charged a $10 annual fee unless the plan maintains an omnibus account with CISC.
Participants in LFII prototype Plans (other than IRAs) who liquidate the total
value of their account will also be charged a $15 close-out processing fee
payable to CISC. The fee is in addition to any applicable CDSC. The fee will not
apply if the participant uses the proceeds to open a LFII IRA Rollover account
in any fund, or if the Plan maintains an omnibus account.
Consultation with a competent financial and tax adviser regarding these Plans
and consideration of the suitability of Fund shares as an investment under the
Employee Retirement Income Security Act of 1974 or otherwise is recommended.
Telephone Address Change Services. By calling CISC, shareholders, beneficiaries
or their FSFs of record may change an address on a recorded telephone line.
Confirmations of address change will be sent to both the old and the new
addresses. Telephone redemption privileges are suspended for 30 days after an
address change is effected.
Colonial Cash Connection. Dividends and any other distributions, including
Systematic Withdrawal Plan (SWP) payments, on Class A, Class B or Class C shares
or on matured Gift Shares may be automatically deposited to a shareholder's bank
account via electronic funds transfer. Shareholders wishing to avail themselves
of this electronic transfer procedure should complete the appropriate sections
of the Application.
PROGRAMS FOR REDUCING OR ELIMINATING SALES CHARGES
Rights of Accumulation and Statement of Intent (Class A, Class E and Class G
only). Reduced sales charges on Class A, E and G shares can be effected by
combining a current purchase with prior purchases of shares of the Colonial
funds. The applicable sales charge is based on the combined total of:
1. the current purchase; and
2. the value at the public offering price at the close of business on
the previous day of all Colonial fund shares held by the shareholder
or donor (except Class A shares of any Colonial money market fund,
unless such shares were acquired by exchange from Class A shares of
another Colonial fund other than a money market fund).
LFII must be promptly notified of each purchase which entitles a shareholder to
a reduced sales charge. Such reduced sales charge will be applied upon
confirmation of the shareholder's or donor's holdings by CISC. The Fund may
terminate or amend this Right of Accumulation.
Any person may qualify for reduced sales charges on purchases of Class A, E and
G shares made within a thirteen-month period pursuant to a Statement of Intent
("Statement"). A shareholder may include, as an accumulation credit toward the
completion of such Statement, the value of all Colonial fund shares held by the
shareholder on the date of the Statement in Colonial funds (except Class A
shares of any Colonial money market fund, unless such shares were acquired by
exchange from Class A shares of another non-money market Colonial fund). The
value is determined at the public offering price on the date of the Statement.
Purchases made through reinvestment of distributions do not count toward
satisfaction of the Statement.
During the term of a Statement, CISC will hold shares in escrow to secure
payment of the higher sales charge applicable to Class A, E or G shares actually
purchased. Dividends and capital gains will be paid on all escrowed shares and
these shares will be released when the amount indicated has been purchased.
A Statement does not obligate the investor to buy or the Fund to sell the amount
of the Statement.
If a shareholder exceeds the amount of the Statement and reaches an amount which
would qualify for a further quantity discount, a retroactive price adjustment
will be made at the time of expiration of the Statement. The resulting
difference in offering price will purchase additional shares for the
shareholder's account at the applicable offering price. As a part of this
adjustment, the FSF shall return to CISI the excess commission previously paid
during the thirteen-month period.
If the amount of the Statement is not purchased, the shareholder shall remit to
LFII an amount equal to the difference between the sales charge paid and the
sales charge that should have been paid. If the shareholder fails within twenty
days after a written request to pay such difference in sales charge, CISC will
redeem that number of escrowed Class A , E or G shares to equal such difference.
The additional amount of FSF discount from the applicable offering price shall
be remitted to the shareholder's FSF of record.
Additional information about and the terms of Statements of Intent are available
from your FSF, or from CISC at 1-800-345-6611.
Reinstatement Privilege. An investor who has redeemed Fund shares may, upon
request, reinstate within one year a portion or all of the proceeds of such sale
in shares of the same Class of the Fund at the NAV next determined after CISC
receives a written reinstatement request and payment. Any CDSC paid at the time
of the redemption will be credited to the shareholder upon reinstatement. The
period between the redemption and the reinstatement will not be counted in aging
the reinstated shares for purposes of calculating any CDSC or conversion date.
Investors who desire to exercise this privilege should contact their FSF or
CISC. Shareholders may exercise this privilege an unlimited number of times.
Exercise of this privilege does not alter the Federal income tax treatment of
any capital gains realized on the prior sale of Fund shares, but to the extent
any such shares were sold at a loss, some or all of the loss may be disallowed
for tax purposes. Consult your tax adviser.
Shareholders may reinvest all or a portion of a recent cash distribution without
a sales charge. A shareholder request must be received within 30 calendar days
of the distribution. A shareholder may exercise this privilege only once. No
charge is currently made for reinvestment.
Privileges of Colonial Employees or Financial Service Firms. Class A, E and G
shares of the Fund may be sold at NAV to the following individuals whether
currently employed or retired: Trustees of funds advised or administered by the
Adviser; directors, officers and employees of the Administrator, LFII and other
companies affiliated with the Administrator; registered representatives and
employees of FSFs (including their affiliates) that are parties to dealer
agreements or other sales arrangements with LFII; and such persons' families and
their beneficial accounts.
Sponsored Arrangements. Class A, E and G shares of the Fund may be purchased at
reduced or no sales charge pursuant to sponsored arrangements, which include
programs under which an organization makes recommendations to, or permits group
solicitation of, its employees, members or participants in connection with the
purchase of shares of the Fund on an individual basis. The amount of the sales
charge reduction will reflect the anticipated reduction in sales expense
associated with sponsored arrangements. The reduction in sales expense, and
therefore the reduction in sales charge, will vary depending on factors such as
the size and stability of the organization's group, the term of the
organization's existence and certain characteristics of the members of its
group. The Fund reserves the right to revise the terms of or to suspend or
discontinue sales pursuant to sponsored plans at any time.
Class A, E and G shares of the Fund may also be purchased at reduced or no sales
charge by clients of dealers, brokers or registered investment advisers that
have entered into agreements with LFII pursuant to which the Fund is included as
an investment option in programs involving fee-based compensation arrangements.
Waiver of Contingent Deferred Sales Charges (CDSCs) (Classes B, C, E and G and ,
matured Class F and H shares). CDSCs may be waived on redemptions in the
following situations with the proper documentation:
1. Death. CDSCs may be waived on redemptions within one year following
the death of (i) the sole shareholder on ----- an individual account,
(ii) a joint tenant where the surviving joint tenant is the deceased's
spouse, or (iii) the beneficiary of a Uniform Gifts to Minors Act
(UGMA), Uniform Transfers to Minors Act (UTMA) or other custodial
account. If, upon the occurrence of one of the foregoing, the account
is transferred to an account registered in the name of the deceased's
estate, the CDSC will be waived on any redemption from the estate
account occurring within one year after the death. If the shares are
not redeemed within one year of the death, they will remain subject to
the applicable CDSC, when redeemed from the transferee's account. If
the account is transferred to a new registration and then a redemption
is requested, the applicable CDSC will be charged.
2. Systematic Withdrawal Plan (SWP). CDSCs may be waived on redemptions
occurring pursuant to a monthly, quarterly or semi-annual SWP
established with CISC, to the extent the redemptions do not exceed, on
an annual basis, 12% of the account's value, so long as at the time of
the first SWP redemption the account had had distributions reinvested
for a period at least equal to the period of the SWP (e.g., if it is a
quarterly SWP, distributions must have been reinvested at least for
the three month period prior to the first SWP redemption); otherwise
CDSCs will be charged on SWP redemptions until this requirement is
met; this requirement does not apply to Class B or C accounts if the
SWP is set up at the time the account is established, and
distributions are being reinvested. See below under "How to Sell
Shares - Systematic Withdrawal Plan."
3. Disability. CDSCs may be waived on redemptions occurring within one
year after the sole shareholder on an individual account or a joint
tenant on a spousal joint tenant account becomes disabled (as defined
in Section 72(m)(7) of the Internal Revenue Code). To be eligible for
such waiver, (i) the disability must arise after the purchase of
shares and (ii) the disabled shareholder must have been under age 65
at the time of the initial determination of disability. If the account
is transferred to a new registration and then a redemption is
requested, the applicable CDSC will be charged.
4. Death of a trustee. CDSCs may be waived on redemptions occurring upon
dissolution of a revocable living or grantor trust following the death
of the sole trustee where (i) the grantor of the trust is the sole
trustee and the sole life beneficiary, (ii) death occurs following the
purchase and (iii) the trust document provides for dissolution of the
trust upon the trustee's death. If the account is transferred to a new
registration (including that of a successor trustee), the applicable
CDSC will be charged upon any subsequent redemption.
5. Returns of excess contributions. CDSCs may be waived on redemptions
required to return excess contributions made to retirement plans or
IRAs, so long as the FSF agrees to return the applicable portion of
any commission paid by Colonial.
6. Qualified Retirement Plans. CDSCs may be waived on redemptions
required to make distributions from qualified retirement plans
following normal retirement (as stated in the Plan document). CDSCs
also will be waived on SWP redemptions made to make required minimum
distributions from qualified retirement plans that have invested in
funds distributed by LFII for at least two years.
7. Trust Share Taxes. CDSCs will be waived on redemptions of Class E, F,
G and H shares (i) where the proceeds are used to directly pay trust
taxes, and (ii) where the proceeds are used to pay beneficiaries for
the payment of trust taxes.
The CDSC also may be waived where the FSF agrees to return all or an agreed upon
portion of the commission earned on the sale of the shares being redeemed.
HOW TO SELL SHARES
Shares may also be sold on any day the Exchange is open, either directly to the
Fund or through the shareholder's FSF. Sale proceeds generally are sent within
seven days (usually on the next business day after your request is received in
good form). However, for shares recently purchased by check, the Fund will delay
sending proceeds for up to 15 days in order to protect the Fund against
financial losses and dilution in net asset value caused by dishonored purchase
payment checks.
To sell shares directly to the Fund, send a signed letter of instruction or
stock power form to CISC, along with any certificates for shares to be sold. The
sale price is the net asset value (less any applicable contingent deferred sales
charge) next calculated after the Fund receives the request in proper form.
Signatures must be guaranteed by a bank, a member firm of a national stock
exchange or another eligible guarantor institution. Stock power forms are
available from FSFs, CISC, and many banks. Additional documentation is required
for sales by corporations, agents, fiduciaries, surviving joint owners and IRA
holders. Call CISC for more information 1-800-345-6611.
FSFs must receive requests before the time at which the Fund's shares are valued
to receive that day's price, are responsible for furnishing all necessary
documentation to CISC and may charge for this service.
Systematic Withdrawal Plan (Class A, B and C shares and matured Trust Shares
only)
If a shareholder's account balance is at least $5,000, the shareholder may
establish a SWP. A specified dollar amount or percentage of the then current net
asset value of the shareholder's investment in the Fund designated by the
shareholder will be paid monthly, quarterly or semi-annually to a designated
payee. The amount or percentage the shareholder specifies generally may not, on
an annualized basis, exceed 12% of the value, as of the time the shareholder
makes the election of the shareholder's investment. Withdrawals from Class B, C,
F and H shares of the under a SWP will be treated as redemptions of shares
purchased through the reinvestment of Fund distributions, or, to the extent such
shares in the shareholder's account are insufficient to cover Plan payments, as
redemptions from the earliest purchased shares of the Fund in the shareholder's
account. No CDSCs apply to a redemption pursuant to a SWP of 12% or less, even
if, after giving effect to the redemption, the shareholder's account balance is
less than the shareholder's base amount. Qualified plan participants who are
required by Internal Revenue Service regulation to withdraw more than 12%, on an
annual basis, of the value of their Class B, C, F or H share account may do so
but will be subject to a CDSC ranging from 1% to 5% of the excess over 12%. If a
shareholder wishes to participate in a SWP, the shareholder must elect to have
all of the shareholder's income dividends and other distributions payable in
shares of the Fund rather than in cash.
A shareholder or a shareholder's FSF of record may establish a SWP account by
telephone on a recorded line. However, SWP checks will be payable only to the
shareholder and sent to the address of record. SWPs from retirement accounts
cannot be established by telephone.
A shareholder may not establish a SWP if the shareholder holds shares in
certificate form. Purchasing additional shares (other than through dividend and
distribution reinvestment) while receiving SWP payments is ordinarily
disadvantageous because of duplicative sales charges. For this reason, a
shareholder may not maintain a plan for the accumulation of shares of the Fund
(other than through the reinvestment of dividends) and a SWP at the same time.
SWP payments are made through share redemptions, which may result in a gain or
loss for tax purposes, may involve the use of principal and may eventually use
up all of the shares in a shareholder's account.
The Fund may terminate a shareholder's SWP if the shareholder's Account Balance
falls below $5,000 due to any transfer or liquidation of shares other than
pursuant to the SWP. SWP payments will be terminated on receiving satisfactory
evidence of the death or incapacity of a shareholder. Until this evidence is
received, CISC will not be liable for any payment made in accordance with the
provisions of a SWP.
The cost of administering SWPs for the benefit of shareholders who participate
in them is borne by the Fund as an expense of all shareholders.
Shareholders whose positions are held in "street name" by certain FSFs may not
be able to participate in a SWP. If a shareholder's Fund shares are held in
"street name", the shareholder should consult his or her FSF to determine
whether he or she may participate in a SWP.
Telephone Redemptions. Telephone redemption privileges are described in the
Prospectus.
Non Cash Redemptions. For redemptions of any single shareholder within any
90-day period exceeding the lesser of $250,000 or 1% of the Fund's net asset
value, the Fund may make the payment or a portion of the payment with portfolio
securities held by the Fund instead of cash, in which case the redeeming
shareholder may incur brokerage and other costs in selling the securities
received.
HOW TO EXCHANGE SHARES
Exchanges at net asset value may be made at any time from any other continuously
offered Colonial fund into shares of the same class of the Fund. The Class A, B
and C shares of the Fund may be exchanged for the same class of shares of any
other continuously offered funds distributed by LFII (with certain exceptions)
on the basis of the NAVs per share at the time of exchange and only once per
twelve-month period measured from the time the account was opened. The
prospectus of each Colonial fund describes its investment objective and
policies, and shareholders should obtain a prospectus and consider these
objectives and policies carefully before requesting an exchange. Shares of
certain funds distributed by LFII are not available to residents of all states.
Consult CISC before requesting an exchange.
By calling CISC, shareholders or their FSF of record may exchange among accounts
with identical registrations, provided that the shares are held on deposit.
During periods of unusual market changes and/or shareholder activity,
shareholders may experience delays in contacting CISC by telephone to exercise
the telephone exchange privilege. Because an exchange involves a redemption and
reinvestment in another Colonial fund, completion of an exchange may be delayed
under unusual circumstances, such as if the fund suspends repurchases or
postpones payment for the fund shares being exchanged in accordance with federal
securities law. CISC will also make exchanges upon receipt of a written exchange
request and, share certificates, if any. If the shareholder is a corporation,
partnership, agent, or surviving joint owner, CISC will require customary
additional documentation. Prospectuses of the other funds are available from the
Colonial Literature Department by calling 1-800-426-3750.
A loss to a shareholder may result from an unauthorized transaction reasonably
believed to have been authorized. No shareholder is obligated to use the
telephone to execute transactions.
In all cases, the shares to be exchanged must be registered on the records of
the fund in the name of the shareholder desiring to exchange.
An exchange is a capital sale transaction for federal income tax purposes. The
exchange privilege may be revised, suspended or terminated at any time.
SUSPENSION OF REDEMPTIONS
The Fund may suspend shareholders' right of redemption or postpone payment for
more than seven days (i) if the Exchange is closed for other than customary
weekends or holidays, (ii) during certain periods when trading on the Exchange
is restricted, (iii) during any emergency which makes it impracticable for the
Fund to dispose of its securities or to determine fairly the value of its net
assets, or (v) during any other period permitted by order of the SEC for
protection of investors.
SHAREHOLDER LIABILITY
Under Massachusetts law, shareholders could, under certain circumstances, be
held personally liable for the obligations of the Trust. However, the
Declaration disclaims shareholder liability for acts or obligations of the Fund
and the Trust and requires that notice of such disclaimer be given in each
agreement, obligation, or instrument entered into or executed by the Fund or the
Trust's Trustees. The Declaration provides for indemnification out of Fund
property for all loss and expense of any shareholder held personally liable for
the obligations of the Fund. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances (which are
considered remote) in which the Fund would be unable to meet its obligations and
the disclaimer was inoperative.
The risk of a particular fund incurring financial loss on account of another
fund of the Trust is also believed to be remote, because it would be limited to
circumstances in which the disclaimer was inoperative and the other fund was
unable to meet its obligations.
SHAREHOLDER MEETINGS
As described under the caption "Organization and History" in the Prospectus, the
Fund will not hold annual shareholders' meetings. The Trustees may fill any
vacancies in the Board of Trustees except that the Trustees may not fill a
vacancy if, immediately after filling such vacancy, less than two-thirds of the
Trustees then in office would have been elected to such office by the
shareholders. In addition, at such times as less than a majority of the Trustees
then in office have been elected to such office by the shareholders, the
Trustees must call a meeting of shareholders. Trustees may be removed from
office by a written consent signed by a majority of the outstanding shares of
the Trust or by a vote of the holders of a majority of the outstanding shares at
a meeting duly called for the purpose, which meeting shall be held upon written
request of the holders of not less than 10% of the outstanding shares of the
Trust. Upon written request by the holders of 1% of the outstanding shares of
the Trust stating that such shareholders of the Trust, for the purpose of
obtaining the signatures necessary to demand a shareholders' meeting to consider
removal of a Trustee, request information regarding the Trust's shareholders,
the Trust will provide appropriate materials (at the expense of the requesting
shareholders). Except as otherwise disclosed in the Prospectus and this SAI, the
Trustees shall continue to hold office and may appoint their successors.
At any shareholders' meetings that may be held, shareholders of all series would
vote together, irrespective of series, on the election of Trustees or the
selection of independent accountants, but each series would vote separately from
the others on other matters, such as changes in the investment policies of that
series or the approval of the management agreement for that series.
PERFORMANCE MEASURES AND INFORMATION
Total Return
Standardized average annual total return. Average annual total return is the
actual return on a $1,000 investment in a particular class of shares of the
Fund, made at the beginning of a stated period, adjusted for the maximum sales
charge or applicable CDSC for the class of shares of the and assuming that all
distributions were reinvested at NAV, converted to an average annual return
assuming annual compounding.
Nonstandardized total return. Nonstandardized total returns may differ from
standardized average annual total returns in that they may relate to
nonstandardized periods, represent aggregate rather than average annual total
returns or may not reflect the sales charge or CDSC.
Yield
Non money market. The yield for each class of shares is determined by (i)
calculating the income (as defined by the SEC for purposes of advertising yield)
during the base period and subtracting actual expenses for the period (net of
any reimbursements), (ii) dividing the result by the product of the average
daily number of shares of the Fund entitled to dividends for the period and the
maximum offering price of the on the last day of the period, and (iii) then
annualizing the result assuming semi-annual compounding. Adjusted yield is
calculated in the same manner as yield except that expenses voluntarily borne or
waived by Colonial have been added back to actual expenses.
Distribution rate. The distribution rate for each class of shares is calculated
by annualizing the most current period's distributions and dividing by the
maximum offering price on the last day of the period. Generally, the Fund's
distribution rate reflects total amounts actually paid to shareholders, while
yield reflects the current earning power of the Fund's portfolio securities (net
of the Fund's expenses). The Fund's yield for any period may be more or less
than the amount actually distributed in respect of such period.
Performance Depictions and Comparisons. The Fund may compare its performance to
various unmanaged indices published by such sources as listed in Appendix II.
The Fund may also refer to quotations, graphs and electronically transmitted
data from sources believed by CISI or the Administrator to be reputable, and
publications in the press pertaining to the Fund's performance or to the Adviser
or its affiliates, including comparisons with competitors and matters of
national and global economic and financial interest. Examples include Forbes,
Business Week, Money Magazine, The Wall Street Journal, The New York Times, The
Boston Globe, Barron's National Business & Financial Weekly, Financial Planning,
Changing Times, Reuters Information Services, Wiesenberger Mutual Funds
Investment Report, Lipper Analytical Services Corporation, Morningstar, Inc.,
Sylvia Porter's Personal Finance Magazine, Money Market Directory, SEI Funds
Evaluation Services, FTA World Index and Disclosure Incorporated.
All data are based on past performance and do not predict future results.
Tax-Related Illustrations. The Fund also may present hypothetical illustrations
(i) comparing the Fund's and other mutual fund's pre-tax and after-tax total
returns, and (ii) showing the effects of income, capital gain and estate taxes
on performance.
Investment Performance. The Fund's yields for the month ended October 31, 1997
were as follows:
<TABLE>
<CAPTION>
Class A Class B Class C Class E Class F Class G Class H
<S> <C> <C> <C> <C> <C> <C> <C>
Yield -0.27% -1.09% -1.09% -0.39% -1.18% -0.38% -1.12%
Adjusted Yield -0.89% -1.75% -1.75% -1.02% -1.84% -1.01% -1.78%
</TABLE>
The Fund's total returns at October 31, 1997 were as follows:
Class A Shares
Period December 30, 1996
(effective date of registration)
through October 31, 1997
With sales charge of 5.75% 12.58%
Without sales charge 19.44%
Class B Shares
Period December 30, 1996
(effective date of registration)
through October 31, 1997
With applicable CDSC 13.65% (5.00%CDSC)
Without CDSC 18.65%
Class C Shares
Period December 30, 1996
(effective date of registration)
through October 31, 1997
With applicable CDSC 17.65% (1.00%CDSC)
Without CDSC 18.65%
Class E Shares
Period December 30, 1996
(effective date of registration)
through October 31, 1997
With sales charge of 5.00% 13.28%
Without sales charge 19.25%
Class F Shares
Period December 30, 1996
(effective date of registration)
through October 31, 1997
With applicable CDSC 13.75% (5.00%CDSC)
Without CDSC 18.75%
Class G Shares
Period December 30, 1996
(effective date of registration)
through October 31, 1997
With sales charge of 4.50% 14.07%
Without sales charge 19.44%
Class H Shares
Period December 30, 1996
(effective date of registration)
through October 31, 1997
With applicable CDSC 13.65% (5.00%CDSC)
Without CDSC 18.65%
<PAGE>
<TABLE>
<CAPTION>
APPENDIX I
1997
SOURCE CATEGORY RETURN (%)
<S> <C> <C>
Donoghue Tax-Free Funds 4.93
Donoghue U.S. Treasury Funds 4.65
Dow Jones & Company Industrial Index 24.87
Lipper Global Funds 13.04
Lipper Growth Funds 25.30
Lipper Growth & Income Funds 27.14
Lipper Mid Cap Funds 19.76
Lipper U.S. Government Money Market Funds 4.90
Lipper Small Cap Funds 20.75
S&P S&P 500 Index 33.35
S&P S&P Utility Index 24.65
S&P Barra Growth 36.38
S&P Barra Value 29.99
S&P Midcap 400 19.00
Morgan Stanley Capital International Pacific Region Funds Ex-Japan (31.00)
Bureau of Labor Statistics Consumer Price Index (Inflation) 1.70
FHLB-San Francisco 11th District Cost-of-Funds Index N/A
Federal Reserve Six-Month Treasury Bill 5.41
Federal Reserve One-Year Constant-Maturity Treasury Rate N/A
Federal Reserve Five-Year Constant-Maturity Treasury Rate N/A
Frank Russell & Co. Russell 2000 (Registered Mark) Index 22.36
Frank Russell & Co. Russell 1000 (Registered Mark) Value Index 35.18
Frank Russell & Co. Russell 1000 (Registered Mark) Growth Index 30.49
Bloomberg N/A N/A
Credit Lyonnais N/A N/A
Statistical Abstract of the U.S. N/A N/A
World Economic Outlook N/A N/A
</TABLE>
The Russell 2000 (Registered Mark), the Russell 1000 (Registered Mark) Value
Index and the Russell 1000 (Registered Mark) Growth Index are each a trademark/
service mark of the Frank Russell Company. Russell (Trademark symbol) is a
trademark of the Frank Russell Company.
Part C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Part A
Summary of Expenses
The Fund's Financial History
Incorporated by reference into Part B are the financial statements
contained in the Annual Report for the Registrant's series, Colonial Tax-Managed
Growth Fund, dated October 31, 1997 (which were previously filed electronically
pursuant to Section 30(b)(2) of the Investment Company Act of 1940):
Fund Accession Number
---- ----------------
Colonial Tax-Managed Growth Fund (CTMGF) 0000883163-98-000011
The Financial Statements contained in such series' Annual Report are as
follows:
Investment Portfolio
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
Independent Auditors' Report
(b) Exhibits:
---------
1. Amendment No. 3 to the Agreement and Declaration
of Trust (c)
2. Amended By-Laws dated 2/16/96 (a)
3. Not applicable
4. Form of Specimen of Share Certificate - filed as
Exhibit 4 in Part C, Item 24(b) of
Post-Effective Amendment No. 45 to the
Registration Statement on Form N-1A of Colonial
Trust IV (File Nos. 2-62492 and 811-2865) and is
hereby incorporated by reference and made a part
of this Registration Statement
5. Form of Management Agreement between Colonial
Trust I, with respect to CTMGF and Stein Roe &
Farnham Incorporated (b)
6. (a) Distributor's Contract with Colonial Investment
Services, Inc. (d)
(b) Form of Selling Agreement with Liberty Financial
Investments, Inc. filed as Exhibit 6(b) in Part
C, Item 24(b) of Post-Effective Amendment No. 10
to the Registration Statement on Form N-1A of
Colonial Trust VI (File Nos. 33-45117 and
811-6529) and is hereby
<PAGE>
incorporated by reference and made a part of
this Registration Statement
(c) Form of Bank and Bank Affiliated Selling
Agreement - filed as Exhibit 6(c)in Part C, Item
24(b) of Post-Effective Amendment No. 10 to the
Registration Statement on Form N-1A of Colonial
Trust VI (File Nos. 33-45117 and 811-6529) and
is hereby incorporated by reference and made a
part of this Registration Statement
(d) Form of Asset Retention Agreement - filed as
Exhibit 6(d) in Part C, Item 24(b) of
Post-Effective Amendment No. 10 to the
Registration Statement on Form N-1A of Colonial
Trust VI (File Nos. 33-45117 and 811-6529) and
is hereby incorporated by reference and made a
part of this Registration Statement
7. Not applicable
8. (a) Custody Agreement with Boston Safe Deposit
and Trust Company - filed as Exhibit 8 in Part
C, Item 24(b) of Post-Effective Amendment No. 10
to the Registration Statement on Form N-1A of
Colonial Trust VI (File Nos. 33-45117 and
811-6529) and is hereby incorporated by
reference and made a part of this Registration
Statement
(b) Amendment to Custody Agreement with Boston Safe
Deposit and Trust Company filed as Exhibit 8(a)
in Part C, Item 24(b) of Post-Effective
Amendment No. 10 to the Registration Statement
on Form N-1A of Colonial Trust VI (File Nos.
33-45117 and 811-6529) and is hereby
incorporated by reference and made a part of
this Registration Statement
(c) Custody Agreement with The Chase Manhattan Bank
- filed as Exhibit 8. in Part C, Item 24(b) of
Post-Effective Amendment No 13 to the
Registration Statement on Form N-1A of Colonial
Trust VI (File Nos. 33-45117 and 811-6529) and
is hereby incorporated by reference and made a
part of this Registration Statement
(d) Form of Customer, Safekeeping and Procedural
Agreements (c)
9. (a) Pricing and Bookkeeping Agreement - filed as
Exhibit 9(b) in Part C, Item 24(b) of
Post-Effective Amendment No. 10 to the
Registration Statement on Form N-1A of Colonial
Trust VI (File Nos. 33-45117 and 811-6529) and
is hereby incorporated by reference and made a
part of this Registration Statement
(b) Amendment to Appendix I of Pricing and
Bookkeeping Agreement - filed as Exhibit 9(i)(a)
in Part C, Item 24(b) of Post-Effective
Amendment No. 29 to the
<PAGE>
Registration Statement on Form N-1A of Colonial
Trust II (File Nos. 2-66976 and 811-3009) and is
incorporated by reference and made a part of
this Registration Statement
(c) Form of Administration Agreement with Colonial
Management Associates, Inc. (CTMGF) (b)
(d) Amended and Restated Shareholders' Servicing and
Transfer Agent Agreement as amended -filed as
Exhibit No. 9(b) in Part C, Item 24(b) of
Post-Effective Amendment No. 10 to the
Registration Statement on Form N-1A of Colonial
Trust VII, (File Nos. 33-41559 & 811-6347) and
is hereby incorporated by reference and made a
part of this Registration Statement
(e) Amendment No. 10 to Schedule A of Amended and
Restated Shareholders' Servicing and Transfer
Agent Agreement as amended - filed as Exhibit
9(a)(ii) in Part C, Item 24(b) of Post-Effective
Amendment No. 13 to the Registration Statement
on Form N-1A of Colonial Trust VI (File Nos.
33-45117 & 811-6529) and is hereby incorporated
by reference and made a part of this
Registration Statement
(f) Amendment No. 15 to Appendix I of Amended and
Restated Shareholders' Servicing and Transfer
Agent Agreement as amended - filed as Exhibit
9(a)(ii) in Part C, Item 24(b) of Post-Effective
Amendment No. 13 to the Registration Statement
on Form N-1A of Colonial Trust VI (File Nos.
33-45117 & 811-6529) and is hereby incorporated
by reference and made a part of this
Registration Statement
(g) Form of Colonial Tax-Managed Growth Fund Gift
Shares Trust (b)
(h) Credit Agreement - filed as Exhibit 9.(f) in
Part C, Item 24(b) of Post-Effective Amendment
No. 19 to the Registration Statement on Form
N-1A of Colonial Trust V (File Nos. 33-12109 &
811-5030) and is hereby incorporated by
reference and made a part of this Registration
Statement
(i) Amendment No. 1 to the Credit Agreement - filed
as Exhibit 9(f) in Part C, Item 24(b) of
Post-Effective Amendment No. 99 to the
Registration Statement on Form N-1A of Colonial
Trust III (File Nos. 2-15184 and 811-881) and is
hereby incorporated by reference and made a part
of this Registration Statement
(j) Amendment No. 2 to the Credit Agreement - filed
as Exhibit 9(g) in Part C, Item 24(b) of
Post-Effective Amendment No. 99 to the
Registration Statement on Form N-1A of Colonial
Trust III (File Nos. 2-15184 and 811-881) and is
hereby incorporated by reference and made
<PAGE>
a part of this Registration Statement
(k) Amendment No. 3 to the Credit Agreement - filed
as Exhibit 9(h) in Part C, Item 24(b) of
Post-Effective Amendment No. 99 to the
Registration Statement on Form N-1A of Colonial
Trust III (File Nos. 2-15184 and 811-881) and is
hereby incorporated by reference and made a part
of this Registration Statement
(h) Investment Account Application (incorporated
herein by reference to the Prospectuses)
10. Opinion and Consent of Counsel (b)
11. Consent of Independent Accountants
12. Not applicable
13. Not applicable
14. (a) Form of Colonial Mutual Funds Money Purchase
Pension and Profit Sharing Plan Document and
Employee Communications Kit - filed as Exhibit
14(a) in Part C, Item 24(b) of Post-Effective
Amendment No. 99 to the Registration Statement
on Form N-1A of Colonial Trust III (File Nos.
2-15184 & 811-881) and is hereby incorporated by
reference and made a part of this Registration
Statement
(b) Form of Colonial Mutual Funds Money Purchase
Pension and Profit Sharing Plan Establishment
Booklet - filed as Exhibit 14(b) in Part C, Item
24(b) of Post-Effective Amendment No. 99 to the
Registration Statement on Form N-1A of Colonial
Trust III (File Nos. 2-15184 & 811-881) and is
hereby incorporated by reference and made a part
of this Registration Statement
(c) Form of Colonial IRA Application, Forms,
Custodial Agreement and Disclosure Statement and
Distribution Form - filed as Exhibit 14(c) in
Part C, Item 24(b) of Post-Effective Amendment
No. 99 to the Registration Statement on Form
N-1A of Colonial Trust III (File Nos. 2-15184 &
811-881) and is hereby incorporated by reference
and made a part of this Registration Statement
(d) IRA Application and Fact Kit - filed as Exhibit
14(d) in Part C, Item 24(b) of Post-Effective
Amendment No. 99 to the Registration Statement
on Form N-1A of Colonial Trust III (File Nos.
2-15184 & 811-881) and is hereby incorporated by
reference and made a part of this Registration
Statement
(e) Form of Colonial Mutual Funds Simplified
Employee Plan and Salary Reduction Simplified
Employee Pension Plan Application and Fact Kit
filed as Exhibit 14(e) in
<PAGE>
Part C, Item 24(b) of Post-Effective Amendment
No. 99 to the Registration Statement on Form
N-1A of Colonial Trust III (File Nos. 2-15184 &
811-881) and is hereby incorporated by reference
and made a part of this Registration Statement
(f) Form of Colonial of Mutual Funds 401(k) Plan
Document, Trust Agreement and IRS Opinion Letter
- filed as Exhibit 14.(v) in Part C, Item 24(b)
of Post-Effective Amendment No. 27 to the
Registration Statement on Form N-1A of Colonial
Trust II (File Nos. 2-66976 & 811-3009) and is
hereby incorporated by reference and made a part
of this Registration Statement
(g) Form of Colonial Mutual Funds 401(k) Plan
Establishment Booklet and Employee
Communications Kit - filed as Exhibit 14.(vi) in
Part C, Item 24(b) of Post-Effective Amendment
No. 27 to the Registration Statement on Form
N-1A of Colonial Trust II (File Nos. 2-66976 &
811-3009) and is hereby incorporated by
reference and made a part of this Registration
Statement
(h) Form of Colonial 401(k) Beneficiary Designation
and Participant Enrollment Forms - filed as
Exhibit 14(h) in Part C, Item 24(b) of
Post-Effective Amendment No. 99 to the
Registration Statement on Form N-1A of Colonial
Trust III (File Nos. 2-15184 & 811-881) and is
hereby incorporated by reference and made a part
of this Registration Statement
(i) Form of Liberty Simple Ira Plan
(j) Form of Liberty Roth IRA
15. (a) Distribution Plan adopted pursuant to
Section 12b-1 of the Investment Company Act of
1940, incorporated by reference to the
Distributor's Contract filed as Exhibit 6(a)
hereto
16. (a) Calculation of Performance Information (CTMGF)
(b) Calculation of Yield (CTMGF)
17. (a) Financial Data Schedule (Class A)(CTMGF)
(b) Financial Data Schedule (Class B)(CTMGF)
(c) Financial Data Schedule (Class C)(CTMGF)
(d) Financial Data Schedule (Class E)(CTMGF)
(e) Financial Data Schedule (Class F)(CTMGF)
(f) Financial Data Schedule (Class G)(CTMGF)
(g) Financial Data Schedule (Class H)(CTMGF)
<PAGE>
18. (a) Power of Attorney for: Robert J. Birnbaum,
Tom Bleasdale, Lora S. Collins, James E.
Grinnell, William D. Ireland, Jr., Richard W.
Lowry, William E. Mayer, James L. Moody, Jr.,
John J. Neuhauser, George L. Shinn, Robert L.
Sullivan and Sinclair Weeks, Jr. - filed as
Exhibit 18(a) in Part C, Item 24(b) of
Post-Effective Amendment No. 99 to the
Registration Statement on Form N-1A of Colonial
Trust III (File Nos. 2-15184 and 811-881) and is
hereby incorporated by reference and made a part
of this Registration Statement
18. (b) Plan pursuant to Rule 18f-3(d) under the
Investment Company Act of 1940 (d)
(a) Incorporated by reference to Post-Effective Amendment No. 40
filed with the Commission via EDGAR on April 15, 1996.
(b) Incorporated by reference to Post-Effective Amendment No. 41
filed with the Commission via EDGAR on October 15, 1996
(c) Incorporated by reference to Post-Effective Amendment No. 42
filed with the Commission via EDGAR on April 22, 1997.
(d) Incorporated by reference to Post-Effective Amendment No. 44
filed with the Commission via EDGAR on July 28, 1997.
Item 25. Persons Controlled by or under Common Control with
Registrant
None
Item 26. Number of Holders of Securities
(1) (2)
Title of Class Number of Shareholders of Record as of
- -------------- January 31, 1998
--------------------------------------------
Shares of beneficial interest 1,051 Class A recordholders (CTMGF)
1,821 Class B recordholders (CTMGF)
282 Class C recordholders (CTMGF)
42 Class E recordholders (CTMGF)
48 Class F recordholders (CTMGF)
219 Class G recordholders (CTMGF)
221 Class H recordholders (CTMGF)
Item 27. Indemnification
See Article VIII of Amendment No. 3 to the Agreement
and Declaration of Trust filed as Exhibit 1 hereto.
Item 28. Business and Other Connections of Investment Adviser
The following sets forth business and other connections of Colonial Tax-Managed
Growth Fund's investment adviser, Stein Roe & Farnham Incorporated:
Stein Roe & Farnham Incorporated (Manager), the investment manager of
the Colonial Tax-Managed Growth Fund, is a wholly owned subsidiary of SteinRoe
Services Inc. (SSI), which in turn is a wholly owned subsidiary of Liberty
Financial Companies, Inc. (LFCI), which is a majority owned subsidiary of LFC
Holdings, Inc., which in turn is a subsidiary of Liberty Mutual Equity
Corporation, which in turn is a subsidiary of Liberty Mutual Insurance
Company (LMIC). The Manager acts as investment adviser to
individuals, trustees, pension and profit-sharing plans, charitable
organizations, and other investors. In addition to the Fund, it
also acts as investment adviser to other investment companies having
different investment policies.
For a two-year history of officers and directors of the Manager,
please refer to the Form ADV of the Manager.
Certain directors and officers of the Manager also serve and have
during the past two years served in various capacities as officers,
directors or trustees of SSI, the SR&F Base Trust or investment
companies managed by the Manager, as shown below. (The listed
entities are all located at One South Wacker Drive, Chicago, IL 60606;
the address of SteinRoe Variable Investment Trust and Liberty Variable
Investment Trust is Federal Reserve Plaza, 600 Atlantic Avenue,
Boston, MA 02110 and the address of LFC Utilities Trust is One
Financial Center, Boston, MA 02111).
Position Formerly
Held Within Past
Current Position Two Years
SteinRoe Services Inc.:
Gary A. Anetsberger Vice President
Timothy K. Armour Vice President
Kenneth J. Kozanda Vice President;
Treasurer
Kenneth R. Leibler Director
C. Allen Merritt, Jr. Director; Vice
President
Hans P. Ziegler Director; President; Vice Chairman
Chairman; Vice President
SR&F Base Trust
William D. Andrews Executive Vice
President
Gary A. Anetsberger Senior Vice President Treasurer
Timothy K. Armour President; Trustee
Thomas W. Butch Executive Vice
President
Loren A. Hansen Executive Vice
President
Michael T. Kennedy Vice President
Lynn C. Maddox Vice President
Jane M. Naesath Vice President
Hans P. Ziegler Executive Vice
President
Stein Roe Income Trust, Stein Roe Institutional Trust and Stein
Roe Trust
William D. Andrews Executive Vice
President
Gary A. Anetsberger Senior Vice President Treasurer
Timothy K. Armour President; Trustee
Thomas W. Butch Executive Vice Vice President
President
Philip J. Crosley Vice President
Michael T. Kennedy Vice President
Loren A. Hansen Executive Vice
President
Stephen F. Lockman Vice President
Steven P. Luetger Vice President
Lynn C. Maddox Vice President
Anne E. Marcel Vice President
Jane M. Naeseth Vice President
Hans P. Ziegler Executive Vice
President
Stein Roe Investment Trust:
William D. Andrews Executive Vice
President
Gary A. Anetsberger Senior Vice President Treasurer
Timothy K. Armour President; Trustee
Bruno Bertocci Vice President
David P. Brady Vice President
Thomas W. Butch Executive Vice Vice President
President
Daniel K. Cantor Vice President
Philip J. Crosley Vice President
E. Bruce Dunn Vice President
Erik P. Gustafson Vice President
Loren A. Hansen Executive Vice
President
David P. Harris Vice President
Harvey B. Hirschhorn Vice President
Eric S. Maddix Vice President
Lynn C. Maddox Vice President
Anne E. Marcel Vice President
Arthur J. McQueen Vice President
Richard B. Peterson Vice President
M. Gerard Sandel Vice President
Gloria J. Santella Vice President
Hans P. Ziegler Executive Vice
President
Stein Roe Municipal Trust:
William D. Andrews Executive Vice
President
Gary A. Anetsberger Senior Vice President Treasurer
Timothy K. Armour President; Trustee
Loren A. Hansen Executive Vice
President
Thomas W. Butch Executive Vice Vice President
President
Joanne T. Costopoulos Vice President
Philip J. Crosley Vice President
Lynn C. Maddox Vice President
Anne E. Marcel Vice President
M. Jane McCart Vice President
Hans P. Ziegler Executive Vice
President
SteinRoe Variable Investment Trust:
Gary A. Anetsberger Treasurer
Timothy K. Armour Vice President
E. Bruce Dunn Vice President
Erik P. Gustafson Vice President
Harvey B. Hirschhorn Vice President
Michael T. Kennedy Vice President
Jane M. Naeseth Vice President
Richard B. Peterson Vice President
LFC Utilities Trust:
Gary A. Anetsberger Vice President
Ophelia L. Barsketis Vice President
Deborah A. Jansen Vice President
Liberty Variable Investment Trust
Ophelia L. Barsketis Vice President
Deborah A. Jansen Vice President
Stein Roe Advisor Trust:
William D. Andrews Executive Vice
President
Gary A. Anetsberger Senior Vice President Treasurer
Timothy K. Armour President; Trustee
David P. Brady Vice President
Thomas W. Butch Executive Vice Vice President
President
Daniel K. Cantor Vice President
Philip J. Crosley Vice President
E. Bruce Dunn Vice President
Erik P. Gustafson Vice President
Loren A. Hansen Executive Vice
President
David P. Harris Vice President
Harvey B. Hirschhorn Vice President
Michael T. Kennedy Vice President
Stephen F. Lockman Vice President
Eric S. Maddix Vice President
Lynn C. Maddox Vice President
Anne E. Marcel Vice President
M. Jane McCart Vice President
Arthur J. McQueen Vice President
Richard B. Peterson Vice President
M. Gerard Sandel Vice President
Gloria J. Santella Vice President
Hans P. Ziegler Executive Vice
President
<PAGE>
Item 29 Principal Underwriter
- ------- ---------------------
(a) Liberty Financial Investments, Inc. (LFII), a subsidiary of Colonial
Management Associates, Inc., is the Registrant's principal
underwriter. LFII acts in such capacity for Colonial Trust I, Colonial
Trust II, Colonial Trust III, Colonial Trust IV, Colonial Trust V,
Colonial Trust VI and Colonial Trust VII, Stein Roe Advisor Funds and
Stein Roe NO-LOAD Funds. LFII is also the sponsor
for Colony Growth Plans (public offering of which were discontinued
June 14, 1971).
(b) The table below lists each director or officer of the principal
underwriter named in the answer to Item 21.
(1) (2) (3)
Position and Offices Positions and
Name and Principal with Principal Offices with
Business Address* Underwriter Registrant
- ------------------ ------------------- --------------
Anderson, Judith V.P. None
Armour, Timothy K. V.P. None
Babbitt, Debra V.P. and None
Comp. Officer
Ballou, Rich Regional V.P. None
Balzano, Christine R. V.P. None
Bartlett, John Managing Director None
Blumenfeld, Alex Regional V.P. None
Brown, Beth V.P. None
Burtman, Tracy V.P. None
Campbell, Patrick V.P. None
Chrzanowski, Regional V.P. None
Daniel
Claiborne, Regional V.P. None
Douglas
Clapp, Elizabeth A. Sr. V.P. None
Daniszewski, V.P. None
Joseph J.
Davey, Cynthia Regional Sr. V.P. None
Desilets, Marian V.P. None
Devaney, James Regional V.P. None
DiMaio, Steve V.P. None
Donovan, John Regional V.P. None
Downey, Christopher V.P. None
Eckelman, Bryan Sr. V.P. None
Emerson, Kim P. Regional V.P. None
Erickson, Cynthia G. Sr. V.P. None
Evans, C. Frazier Managing Director None
Feldman, David Sr. V.P. None
Fifield, Robert Regional V.P. None
Gauger, Richard V.P. None
Gerokoulis, Sr. V.P. None
Stephen A.
Gibson, Stephen E. Director; Chairman None
of the Board
Goldberg, Matthew Regional V.P. None
Guenard, Brian Regional V.P. None
Harrington, Tom Sr. Regional V.P. None
Hodgkins, Joseph Sr. Regional V.P. None
Iudice, Jr., Philip Treasurer and CFO None
Jones, Cynthia V.P. None
Karagiannis, Managing Director None
Marilyn
Kelley, Terry M. Regional V.P. None
Kelson, David W. Sr. V.P. None
Koonce, Michael H. Dir.; Clerk Secretary
Libutti, Chris Regional V.P. None
McCombs, Gregory Regional Sr. V.P. None
McKenzie, Mary V.P. None
Menchin, Catherine V.P. None
Moberly, Ann R. Regional Sr. V.P. None
Morner, Patrick V.P. None
Morse, Jonathan Regional V.P. None
Nerney, Andrew Regional V.P. None
O'Shea, Kevin Managing Director None
Piken, Keith V.P. None
Predmore, Tracy Regional V.P. None
Quirk, Frank V.P. None
Reed, Christopher B. Sr. Regional V.P. None
Riegel, Joyce V.P. None
Robb, Douglas Regional V.P. None
Sandberg, Travis Regional V.P. None
Scarlott, Rebecca V.P. None
Schulman, David Regional V.P. None
Scoon, Davey Director V.P.
Scott, Michael W. Sr. V.P. None
Sideropoulos, Lou V.P. None
Smith, Darren Regional V.P. None
Spanos, Gregory J. Sr. V.P. None
Studer, Eric Regional V.P. None
Sutton, R. Andrew Regional V.P. None
Tambone, James CEO None
Tasiopoulos, Lou President None
VanEtten, Keith H. Sr. V.P. None
Villanova, Paul Regional V.P. None
Wallace, John V.P. None
Walter, Heidi V.P. None
Welsh, Stephen Treasurer Asst. Treasurer
Wess, Valerie Regional V.P. None
Young, Deborah V.P. None
- --------------------------
* The address for each individual is One Financial Center, Boston, MA
02111.
<PAGE>
Item 30. Location of Accounts and Records
Persons maintaining physical possession of accounts,
books and other documents required to be maintained
by Section 31(a) of the Investment Company Act of
1940 and the Rules thereunder include Registrant's
Secretary; Registrant's investment adviser and/or
administrator, Colonial Management Associates, Inc.;
Registrant's principal underwriter, Liberty Financial
Investments, Inc.; Registrant's transfer and dividend
disbursing agent, Colonial Investors Service Center,
Inc.; and the Registrant's custodian, Boston Safe
Deposit and Trust Company. The custodian's address is
One Boston Place, Boston, MA 02108-2624.
Item 31. Management Services
See Item 5, Part A and Item 16, Part B
Item 32. Undertakings
(a) Not applicable
(b) The Registrant hereby undertakes to promptly
call a meeting of shareholders for the purpose
of voting upon the question of removal of any
trustee or trustees when requested in writing
to do so by the record holders of not less
than 10 per cent of the Registrant's
outstanding shares and to assist its
shareholders in the communicating with other
shareholders in accordance with the
requirements of Section 16(c) of the
Investment Company Act of 1940.
(c) The Registrant hereby undertakes to furnish
each person to whom a prospectus is delivered
a copy of the Registrant's series' latest
annual report to shareholders upon request and
without charge.
<PAGE>
******************
NOTICE
A copy of the Agreement and Declaration of Trust, as amended, of Colonial Trust
I is on file with the Secretary of State of the Commonwealth of Massachusetts
and notice is hereby given that the instrument has been executed on behalf of
the Trust by an officer of the Trust as an officer and by its Trustees as
trustees and not individually and the obligations of or arising out of this
instrument are not binding upon any of the Trustees, officers or shareholders
individually but are binding only upon the assets and property of the Trust.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of the Registration Statement pursuant to Rule
485(b) and has duly caused this Post-Effective Amendment No. 45 to its
Registration Statement under the Securities Act of 1933 and the Post-Effective
Amendment No. 27 under the Investment Company Act of 1940, to be signed in this
City of Boston, and The Commonwealth of Massachusetts on this 23rd day of
February, 1998.
COLONIAL TRUST I
By: HAROLD W. COGGER
----------------
Harold W. Cogger, President
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment has been signed below by the following persons in their capacities and
on the date indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ---------- ----- ----
<S> <C> <C>
HAROLD W. COGGER President (chief February 23, 1998
- ---------------- executive officer)
Harold W. Cogger
TIMOTHY J. JACOBY Treasurer and Chief Financial Officer February 23, 1998
- ----------------- (principal financial officer)
Timothy J. Jacoby
J. KEVIN CONNAUGHTON Controller and Chief Accounting February 23, 1998
- -------------------- Officer (principal accounting officer)
J. Kevin Connaughton
</TABLE>
<PAGE>
/s/ROBERT J. BIRNBAUM* Trustee
- ----------------------
Robert J. Birnbaum
/s/TOM BLEASDALE* Trustee
- -----------------
Tom Bleasdale
/s/LORA S. COLLINS* Trustee
- -------------------
Lora S. Collins
/s/JAMES E. GRINNELL* Trustee
- ---------------------
James E. Grinnell
/s/WILLIAM D. IRELAND, JR.* Trustee */s/ WILLIAM J. BALLOU
- --------------------------- ----------------------
William D. Ireland, Jr. William J. Ballou
Attorney-in-fact
For each Trustee
February 23, 1998
/s/RICHARD W. LOWRY* Trustee
- --------------------
Richard W. Lowry
/s/WILLIAM E. MAYER* Trustee
- --------------------
William E. Mayer
/s/JAMES L. MOODY, JR.* Trustee
- -----------------------
James L. Moody, Jr.
/s/JOHN J. NEUHAUSER* Trustee
- ---------------------
John J. Neuhauser
/s/GEORGE L. SHINN* Trustee
- -------------------
George L. Shinn
/s/ROBERT L. SULLIVAN* Trustee
- ----------------------
Robert L. Sullivan
/s/SINCLAIR WEEKS, JR.* Trustee
- -----------------------
Sinclair Weeks, Jr.
<PAGE>
Exhibit Index
Exhibit
- -------
11. Consent of Independent Accountants
14.(i) Form of Liberty Simple Ira Plan
14.(j) Form of Liberty Roth IRA
16.(a) Calculation of Performance Information (CTMGF)
16.(b) Calculation of Yield (CTMGF)
17.(a) Financial Data Schedule (Class A)(CTMGF)
17.(b) Financial Data Schedule (Class B)(CTMGF)
17.(c) Financial Data Schedule (Class C) (CTMGF)
17.(d) Financial Data Schedule (Class E)(CTMGF)
17.(e) Financial Data Schedule (Class F)(CTMGF)
17.(f) Financial Data Schedule (Class G)(CTMGF)
17.(g) Financial Data Schedule (Class H)(CTMGF)
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Statement of
Additional Information constituting part of this Post-Effective Amendment No. 45
to the registration statement on Form N-1A (the "Registration Statement") of our
report dated December 10, 1997, relating to the financial statements and
financial highlights appearing in the October 31, 1997 Annual Report to
Shareholders of Colonial Tax-Managed Growth Fund, a series of Colonial Trust I,
which are also incorporated by reference into the Registration Statement. We
also consent to the references to us under the headings "The Fund's Financial
History" in the Prospectuses and "Independent Accountants" in the Statement of
Additional Information.
PRICE WATERHOUSE LLP
- --------------------
Price Waterhouse LLP
Boston, Massachusetts
February 24, 1998
How to Establish your Liberty(TM) Simple IRA Plan
The forms in this booklet are the only forms you need to adopt a Liberty SIMPLE
IRA Plan. You must complete the following steps:
1 Complete IRS Form 5304-SIMPLE. Review the instructions carefully to determine
whether or not you are eligible to establish a SIMPLE IRA Plan, and which
employees are eligible to contribute. Additional information is available in IRS
Notice 98-4, available through the IRS. You may wish to consult with your tax
and/or legal advisors.
2 Determine the plan effective date and the initial 60 day enrollment period.
This initial 60 day enrollment period (or longer period, if you elect) must
include either the effective date or the day before the effective date. For
example, if you choose July 1, 1998 as the effective date, the election period
may begin as early as May 3, 1998 or as late as July 1, 1998. Employees can
submit and change salary reduction agreements at any time during the enrollment
period. Eligible employees must be allowed to contribute as soon as
administratively possible after the effective date. Newly eligible employees
must also be given at least a 60 day enrollment period. This period must include
the day the employee becomes eligible, or the prior day.
3 Complete the IRS Model Notification to Employees and provide a copy to each
eligible employee along with the IRS Model Salary Reduction Agreement. You must
provide this notification immediately before the 60 day enrollment period
begins. This notifies employees that they are eligible to participate and
indicates what type of employer contribution you will make. It also tells
employees when they must enroll and that they may select a SIMPLE IRA provider.
You may use your own forms if you prefer.
4 Provide each eligible employee with a Summary Description. You must provide
the Summary Description immediately before the 60 day enrollment period begins.
If the employee is using the Liberty SIMPLE IRA, provide copies of pages 1 and 2
of the completed Form 5304-SIMPLE with Article VI completed by Liberty Financial
Investments. If the employee is using another SIMPLE IRA provider, you may
supply pages 1 and 2 of a completed Form 5304-SIMPLE with Article VI completed
by the other financial institution. See form 5304-SIMPLE instructions and IRS
Notice 98-4 for additional information.
5 Provide each eligible employee with a Liberty SIMPLE IRA employee kit. This
kit includes the Liberty SIMPLE IRA Custodial Agreement and Application,
Disclosure Statement and other pertinent information. If an eligible employee
does not elect a SIMPLE IRA provider by the time contributions are to begin, you
must establish one for your employee. You may use the Liberty SIMPLE IRA.
6 Complete the Liberty SIMPLE IRA Employer Adoption Agreement. You must complete
and sign the Adoption Agreement before Liberty Financial Investments can
establish your SIMPLE IRA Plan. Liberty Financial Investments can only accept
SIMPLE-IRA contributions from adopting employers who agree to use the CPI-Lite
Software. [Note: You must forward employee salary deferrals to the financial
institution maintaining your employee's SIMPLE IRA as soon as they can
reasonably be segregated from your general assets, but in no event later than 30
days after the month they are withheld from the employee's paycheck. Your
matching or non-elective contributions must be made to the selected financial
institution no later than the due date
<PAGE>
(including extensions) for filing your federal income tax return for the year.]
7 Send:
(bullet) A copy of your completed Form 5304-SIMPLE (keep the original for your
records)
(bullet) Your signed Liberty SIMPLE IRA Employer Adoption Agreement
(bullet) All employee Liberty SIMPLE IRA Applications
To:
Colonial Investors Service Center, Inc.
ATTN: Retirement Plan Services
P.O. Box 1722
Boston, MA 02105-1722
Software Specifications
Requirements for utilizing:
CPI-Lite Software
Processor IBM PC or compatible with 486 or higher processor
Hard Drive 6 MB of free space for each package
Disk Drive 3.5" diskette
Memory 8 MB of RAM
Monitor EGA/VGA or higher resolution video card
Printer HP LaserJet or compatible
Mouse Microsoft Mouse or compatible
MS-DOS 5.0 or later
Windows 3.1 or later (Not Windows NT compatible)
Modem 2400 Baud or higher, Hayes compatible
Liberty(TM) SIMPLE IRA Employer Adoption Agreement
Employer Telephone
Address
City State ZIP
Instructions: Read Sections I and II carefully. Select a class of shares in
Section I. Sign the Adoption Agreement in Section III. You must complete both
Sections I and III before Liberty Financial Investments can establish your
SIMPLE IRA Plan and accept any plan contributions. Your financial services firm
must complete Section IV.
Section I -- Class of Shares
All contributions you and your employees make to the Liberty SIMPLE IRA Plan
will be invested in mutual funds available through Liberty Financial
Investments, Inc., (the "Sponsor"). The Sponsor offers three classes of shares.
You may select only one class of shares for all plan investments. The following
is a summary only. You must read the prospectus for the funds before selecting
the class of shares.
Choose ONE:
Section II -- CPI-Lite Agreement
In connection with the provision to the Employer of the Colonial Plan
Investor-Lite software (the "Software") the Employer hereby agrees to the
following:
1. BankBoston, N.A., Custodian, and its Agent, Colonial Investors Service
Center, Inc., will only accept SIMPLE IRA Plan contributions which are
transmitted using the Software. Any
<PAGE>
contributions that are not transmitted using the Software will be returned to
the Employer, unless Colonial Investors Service Center, Inc., has otherwise
agreed to accept such contributions in advance and in writing.
2. The entry of any information into and the initiation of any transaction
through the Software shall have been duly and properly authorized, to the extent
required by law or any plan document, by the plan participant and/or any other
person, and the Employer shall have received all necessary and proper
documentation evidencing such authorization and/or relating to such information
or transactions.
3. The Employer authorizes Colonial Investors Service Center, Inc. to invest
contributions and execute transactions in accordance with the instructions
transmitted by the Employer using the Software.
4. Any information entered into the Software shall be accurate and complete in
all material respects.
5. Use of the Software by the Employer shall be solely in accordance with its
purpose. The Employer shall not reverse engineer, disassemble or decompile the
Software or any part thereof.
6. The Employer shall indemnify and hold harmless the Custodian, Colonial
Investors Service Center, Inc., each of the Colonial, Newport or Stein Roe
Advisor funds, Liberty Financial Investments, Inc., and each of their respective
affiliates, officers, directors, agents and employees, from any and all damages,
liabilities, cost and expenses (including reasonable attorneys' fees) arising
out of this Agreement and the Employer's entry of information into or initiation
of any transaction through the Software.
7. The Employer has reviewed the Software specifications below, agrees to
maintain computer systems adequate to run the Software and accepts full and sole
responsibility for doing so.
Section III -- Signature
The above-named Employer makes the Class of Shares designation in Section I, and
has read and agrees to the terms of the CPI-Lite Agreement set forth in Section
II.
Signature of Authorized Employer Representative Date
Print Name Title
Section IV -- Financial Services Firm
For Dealer Use Only -- To be completed by a representative of your financial
services firm.BankBoston, N.A., is hereby authorized and appointed on behalf of
the below-signed financial services firm to execute the purchase transactions in
accordance with the terms and conditions of SIMPLE IRA applications made in
connection with the above-named employer's Liberty SIMPLE IRA Plan, and to
confirm each purchase and to forward to the applicant a copy of each new
prospectus of the designated funds or supplements thereto, delivered to you for
that purpose. With respect to each purchase, the amount of any commissions due
will be remitted to the financial services firm, except that no commissions will
be paid to the firm for any transactions for which the firm's net sales
commission is less than $1.00. The financial services firm's representative also
represents that he may lawfully sell shares of the designated funds in the state
designated as the applicant's record address, and that he has entered into a
dealer agreement with the principal underwriter with respect to the sale of
shares of the designated fund(s).
The SIMPLE IRA applications are submitted in accordance with our selling
agreement with Liberty Financial Investments, Inc. (LFII), and the Fund's
prospectus. We will notify LFII of any purchase made under a Statement of
Intent, Right of Accumulation or Sponsored Arrangement.
Representative's Name Branch Office Number
Representative's Number Name of Financial Services Firm
<PAGE>
Representative's Phone Number Main Office Address
Account # for Client at Financial Services Firm Main Office Address
Branch Office Address
City State ZIP
Authorized Signature
Liberty(TM) Simple IRA Application
Please print. For assistance in completing this form, call 1-800-799-7526.
1 Your employer
Employer Name Employer Telephone Number
2 Your name and address
Name Telephone Number
Address
City State ZIP
Social Security Number Date of Birth
3 Your beneficiary
The following person(s) is/are designated to receive the balance of my SIMPLE
IRA upon my death. If no primary or contingent beneficiary survives me, or if I
have not named a beneficiary hereunder, any balance remaining in the plan will
be payable to my surviving spouse if I am married; otherwise to my estate.
Primary Beneficiary Spouse Non-Spouse
Social Security Number Date of Birth
Contingent Beneficiary* Spouse Non-Spouse
Social Security Number Date of Birth
*A contingent beneficiary will receive proceeds only if all primary
beneficiaries predecease the SIMPLE IRA holder.
Spousal Consent: I am the spouse of the above named Participant. I hereby
consent to the beneficiary designation(s) indicated above. I assume full
responsibility for any adverse consequences that may result. I acknowledge that
a designation of a non-spouse beneficiary may not be effective in my state
without my consent, and that I should consult my legal advisor. No legal or tax
advice was given to me by Liberty Financial Investments, Inc. or BankBoston,
N.A., as the Custodian.
Print Spouse's Spouse's Signature Date
4 Your Investment Selection
I direct the Custodian to invest all contributions and reinvest all dividends
and capital gains distributions in shares of the following funds unless
otherwise specified and until I provide additional investment instructions. I
understand that if no funds are designated, my contributions will remain
uninvested pending proper investment directions from me or my employer were
applicable.
Investment Amount
% or $ amount*
Fund Name
Fund Name
Fund Name
<PAGE>
*Figures must equal total dollar amount of initial contribution or 100%. Total
5 Your Signature
I hereby establish a Liberty SIMPLE IRA, appoint BankBoston, N.A., as Custodian,
direct contributions to be invested as provided in Section 4 of this application
and designate the beneficiary(ies) named in Section 3. I also hereby:
(a) acknowledge that I have received, read and understood the Liberty SIMPLE IRA
Custodial Agreement (IRS Form 5305-SA and any attachments thereto) and the
Liberty SIMPLE IRA Disclosure Statement and I agree to the provisions of those
documents;
(b) agree that I have received and read the Summary Description and Notice from
the Employer relating to the Employer's SIMPLE IRA Plan;
(c) acknowledge that I have received and read a current prospectus for the
Fund(s) selected in Section 4 of this Application and that this SIMPLE IRA
account will be subject to the prospectus as amended from time to time;
(d) consent to the Custodial Account fee of $25 (subject to change as provided
in the Liberty SIMPLE IRA Custodial Agreement);
(e) certify that I am eligible to establish this SIMPLE IRA Account and make
elective deferrals and, where applicable, rollover and transfer contributions to
the Account;
(f) certify, under penalty of perjury, that my Social Security number is
correctly stated on this Application;
(g) understand that certain redemptions may be subject to a Contingent Deferred
Sales Charge (CDSC); and
(h) understand that a financial services firm retained by my Employer may
receive a commission as a result of my SIMPLE IRA investments; as discussed in
the Fund(s) prospectus. This could include front-end loads or CDSCs.
Participant Signature Date
Important:
Return this Application to your Employer along with your completed Salary
Reduction Agreement.
Custodian Acceptance
This plan shall be deemed to have been accepted by the Custodian, BankBoston,
N.A., upon receipt by its Agent, Colonial Investors Service Center, Inc., of all
necessary forms, properly completed.
Liberty(TM) Simple IRA Transfer of Assets Form
This form must be accompanied or preceded by a Colonial, Stein Roe Advisor or
Newport fund prospectus describing the fund's policies, sales charges, expenses
and other matters of interest to prospective investors.
How to transfer assets to a Liberty SIMPLE IRA:
(bullet) Complete this Transfer of Assets Form and return it to Colonial
Investor Service Center, Inc.
(bullet) If you don't currently have a Liberty SIMPLE IRA, you also need to
complete a SIMPLE IRA Application. Return the Application and Salary Reduction
Agreement to your employer. Colonial Investors Service Center, Inc. will not
initiate the transfer of assets until we receive your SIMPLE IRA Application
from your employer.
<PAGE>
1 Name and Address - Please Print
Name Social Security Number
Address Telephone Number
City State ZIP
2 SIMPLE IRA Assets To Be Transferred
SIMPLE IRA Custodian/Trustee Account Number
Address Account Number
City State ZIP
3 Investment Selection
I am establishing a new Liberty SIMPLE IRA. My investment choices are indicated
on the attached Liberty SIMPLE IRA Application.
I already have a Liberty SIMPLE IRA. Please invest these transferred assets as
follows:
Investment Amount
Fund Name(s) Account # $ or %*
Total
*Figures must equal total dollar amount of initial contribution or 100%.
4 SIMPLE IRA Owner's Authorization
To BankBoston, N.A.: Please initiate a Transfer of Assets with my existing
SIMPLE IRA Trustee or Custodian. I certify that this Transfer of Assets is
permissible under Sections 408(a) and 408(p) of the Internal Revenue Code.
To Resigning Trustee or Custodian: I have established a SIMPLE IRA with Liberty
Financial Investments, Inc. I want to initiate a Transfer of Assets from my
SIMPLE IRA account(s) indicated in Section 2. Please act on the instructions
below.
I would appreciate your prompt attention to this request.
Check one of the following options:
A Liquidate all or part ($___________) of the account(s) indicated and send
the proceeds immediately or n at maturity / / (date) in cash as described
in Section 5 below.
B Transfer in kind all my shares, i.e. re-register, of the following Colonial,
Stein Roe Advisor or Newport fund(s), account number(s)__________________, to
BankBoston, N.A., Custodian. Please provide Colonial Investors Service Center,
Inc., Agent for the Custodian, with transfer instructions signed by an
authorized officer of your company/institution. I acknowledge that a penalty may
apply for early withdrawals from certain types of investments, such as
certificates of deposit.
Name
Signature of SIMPLE IRA Account Holder Date Signature guarantee
(By eligible guarantor if
necessary as explained below)*
5 Payment Instructions/Custodian Acceptance
To be completed by Colonial Investors Service Center, Inc.BankBoston, N.A., has
agreed to serve as Custodian for the above-named person's SIMPLE IRA Account. As
Custodian, BankBoston, N.A., will accept the assets in the manner selected in
Section 4 above upon receipt of properly completed paperwork. Please forward the
assets on a
<PAGE>
custodian/trustee-to-custodian basis and make the check payable to Colonial
Investors Service Center, Inc., (Agent for BankBoston, N.A.). Send the check,
along with a copy of this request, to:
Colonial Investors Service Center, Inc., Attn: Retirement Plan Services, P. O.
Box 1722, Boston, MA 02105-1722.
Please include the following information on your check:
Account Number For the Benefit of (FBO)
Account Number
Account Number
*The signature of the SIMPLE IRA depositor (participant) may require a guarantee
by a bank, a trust company, a member of a domestic stock exchange or any other
eligible guarantor institution. Notarization is not acceptable. The resigning
trustee/custodian or employer will inform you if this is necessary.
Liberty(TM) Simple IRA Custodial Agreement
Form 5305-SA
(Under Section 408(a) and 408(p) of the Internal Revenue Code) (December 1996)
Department of the Treasury
Internal Revenue Service
Name of Custodian Address or Principal Place of Business of Custodian
BankBoston, N.A. c/o Colonial Investors Service Center, Inc.
One Financial Center, 9th FL, Boston, MA 02111
The Participant whose name appears above is establishing a savings incentive
match plan for employees of small employers individual retirement account
(SIMPLE IRA) under sections 408(a) and 408(p) of the Internal Revenue Code to
provide for his/her retirement and for the support of his/her beneficiaries
after death.
The Custodian named above has given the Participant the disclosure statement
required under Regulation section 1.408-6.
The Participant and the Custodian make the following agreement:
Article I
The Custodian will accept cash contributions on behalf of the participant's
employer under the terms of a SIMPLE Plan for a tax year of the Participant. In
addition, the custodian will accept transfers or rollovers from other SIMPLE
IRAs of the participant. No other contributions will be accepted by the
custodian.
Article II
The Participant's interest in the balance in the custodial account is
nonforfeitable.
Article III
1. No part of the custodial funds may be invested in life insurance contracts,
nor may the assets of the custodial account be commingled with other property
except in a common trust fund or common investment fund (within the meaning of
section 408(a)(5)).
2. No part of the custodial funds may be invested in collectibles (within the
meaning of section 408(m)) except as otherwise permitted by section 408(m)(3)
which provides an exception for certain gold and silver coins and coins issued
under the laws of any state.
Article IV
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the
<PAGE>
Participant's interest in the custodial account shall be made in accordance with
the following requirements and shall otherwise comply with section 408(a)(6) and
Proposed Regulations section 1.408-8, including the incidental death benefit
provisions of Proposal Regulations section 1.401(a)(9)-2, the provisions of
which are incorporated by reference.
2. Unless otherwise elected, by the time distributions are required to begin to
the Participant under paragraph 3, or to the surviving spouse under paragraph 4,
other than in the case of a life annuity, life expectancies shall be
recalculated annually. Such election shall be irrevocable, as to the Participant
and the surviving spouse, and shall apply to all subsequent years. The life
expectancy of a nonspouse beneficiary may not be recalculated.
3. The Participant's entire interest in the custodial account must be, or begin
to be, distributed by the Participant's required beginning date (April 1
following the calendar year end in which the Participant reaches age 70-1/2). By
that date, the Participant may elect, in a manner acceptable to the Custodian,
to have the balance in the custodial account distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially equal monthly,
quarterly or annual payments over the life of the Participant.
(c) An annuity contract that provides equal or substantially equal monthly,
quarterly or annual payments over the joint and last survivor lives of the
Participant and his/her designated beneficiary.
(d) Equal or substantially equal annual payments over a specified period
that may not be longer than the Participant's life expectancy.
(e) Equal or substantially equal annual payments over a specified period
that may not be longer than the joint life and last survivor expectancy of the
Participant and his/her designated beneficiary.
4. If the Participant dies before his/her entire interest is distributed to
him/her, the entire remaining interest will be distributed as follows:
(a) If the Participant dies on or after distribution of his/her interest
has begun, distribution must continue to be made in accordance with paragraph 3.
(b) If the Participant dies before distribution of his/her interest has
begun, the entire remaining interest will, at the election of the Participant
or, if the Participant has not so elected, at the election of the beneficiary or
beneficiaries, either;
(i) Be distributed by the December 31 of the year containing the fifth
anniversary of the Participant's death, or
(ii) Be distributed in equal or substantially equal payments over the life
or life expectancy of the designated beneficiary or beneficiaries starting by
December 31 of the year following the year of the Participant's death. If,
however, the beneficiary is the Participant's surviving spouse, then this
distribution is not required to begin before December 31 of the year in which
the Participant would have turned age 70-1/2.
(c) Except where distribution in the form of an annuity meeting the
requirements of section 408(b)(3) and its related regulations has irrevocably
commenced, distributions are treated as having begun on the Participant's
required beginning date, even though payments may actually have been made before
that date.
(d) If the Participant dies before his/her entire interest has been
distributed and if the beneficiary is other than the surviving spouse, no
additional cash contributions or rollover contributions may be accepted in the
account.
5. In the case of a distribution over life expectancy in equal or substantially
equal annual payments, to determine the minimum annual payment for each year,
divide the Participant's entire interest in the custodial account as of the
close of business on December 31 of the preceding year by the life expectancy of
the Participant (or the joint life and last survivor expectancy of the
Participant and the Participant's designated beneficiary, or the life expectancy
<PAGE>
of the designated beneficiary, whichever applies). In the case of distributions
under paragraph 3, determine the initial life expectancy (or joint life and last
survivor expectancy) using the attained ages of the Participant and designated
beneficiary as of their birthdays in the year the Participant reaches age
70-1/2. In the case of a distribution in accordance with paragraph 4(b)(ii),
determine life expectancy using the attained age of the designated beneficiary
as of the beneficiary's birthday in the year distributions are required to
commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy the
minimum distribution requirements above. This method permits an individual to
satisfy these requirements by taking from one individual retirement account the
amount required to satisfy the requirement for another.
Article V
1. The Participant agrees to provide the Custodian with information necessary
for the Custodian to prepare any reports required under section 408(i) and
Regulation sections 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal Revenue Service and
the Participant as prescribed by the Internal Revenue Service.
3. The Custodian also agrees to provide the participant's employer the summary
description described in section 408(1)(2) unless this SIMPLE IRA is a transfer
SIMPLE IRA.
Article VI
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling. Any
additional articles that are not consistent with sections 408(a) and 408(p) and
the related regulations will be invalid.
Article VII
This agreement will be amended from time to time to comply with the provisions
of the Code and related regulations. Other amendments may be made with the
consent of the persons whose signatures appear below.
Article VIII
1. The Participant appoints BankBoston, N.A., or any successor thereto as
Custodian of this custodial account. After deduction of all appropriate fees and
charges, the balance of Participant's contributions shall be invested as
provided herein.
2. The Participant directs the Custodian to invest the custodial account in
shares of mutual funds distributed by Liberty Financial Investments, Inc. (the
"Sponsor"), or investments otherwise authorized by the Sponsor for use under
this Agreement.
If the Participant fails to make an investment direction, and no investment
direction is made on behalf of the Participant by the Participant's employer, or
if any such investment direction is unclear in the opinion of the Custodian, the
Custodian may hold or return all or a portion of the contribution uninvested
without liability pending receipt of proper investment directions or
clarification.
The participant acknowledges that the Custodian and the Sponsor do not
undertake to render any investment advice and that neither the Custodian nor the
Sponsor is responsible for any loss that results from the Participant's (and
where applicable, the Participant's employer's) exercise (or failure to
exercise) investment control of the Account. The Custodian shall be entitled to
rely completely on investment instructions furnished to it by the Participant
(and where applicable, the Participant's employer) and shall have no duty or
obligation to question such investment instructions.
3. The Custodian shall have no investment responsibility or discretion with
respect to this custodial account. The Custodian shall not vote any fund shares
except in accordance with written instructions received from the Participant. In
the event the Participant fails or declines to direct the Custodian as to voting
any such shares, that failure or declination shall be deemed to
<PAGE>
be a direction not to vote such shares.
4. This document, together with the Liberty SIMPLE IRA Application,
constitutes the entire agreement between the Participant and Custodian and no
representative of the Sponsor, any Colonial, Newport or Stein Roe Advisor Fund
or any broker-dealer shall be deemed to be a representative of or acting on
behalf of Custodian, nor shall any representative have any authority to make
representations or to bind the Custodian beyond the terms of this document.
5. The Participant shall have the right, only by written notice in a form
acceptable to the Custodian, to designate or to change a beneficiary to receive
any benefit to which the Participant may be entitled in the event of his death
prior to the complete distribution of the Account. The Custodian may rely upon
the last written designation received at the Custodian's office which shall
supersede all prior designations. Unless specifically designated otherwise by
the Participant in a form acceptable to the Custodian, death benefits shall be
distributed equally among all surviving primary beneficiaries or all surviving
contingent beneficiaries (should all primary beneficiaries predecease the
Participant). If no beneficiary designation is in effect upon the Participant's
death, or if the Custodian receives satisfactory proof that all such named
beneficiaries have predeceased the Participant, then the Account shall be
distributed to the Participant's surviving spouse if the Participant was married
at death, otherwise to the Participant's estate.
6. Neither Custodian, Sponsor nor any Colonial, Newport or Stein Roe Advisor
Fund assumes any responsibility to make any distribution unless and until
Participant specifies in a form acceptable to the Custodian the occasion for
such distribution, and the manner of distribution. Custodian and Sponsor shall
not be responsible to make distributions in accordance with Article IV following
the Participant's attainment of age 70-1/2 other than upon Participant's express
instructions. Distributions shall not be made as described in subsection (b) or
(c) of section 3 of Article IV, but only as provided in subsections (a), (d) and
(e).
7. This Liberty SIMPLE IRA Agreement shall terminate upon the complete
distribution of the custodial account to Participant or his beneficiaries, to
successor individual retirement accounts or annuities, or when no assets
otherwise remain in the custodial account and the Custodian shall be relieved
from all further liability with respect to the custodial account.
8. The Participant assumes full and sole responsibility for making sure that
contributions (including rollovers) are qualified for contribution to the
custodial account and that the sum of contributions during a taxable year do not
exceed those limits or violate those rules for contributions to SIMPLE IRAs
specified in the Code. Upon request of the Participant in a form and manner
acceptable to the Custodian, the Custodian shall pay as soon as practicable any
excess contribution (within the meaning of section 4973(a) of the Internal
Revenue Code), and any income attributable to such excess contribution, as
directed by the Participant.
9. The Sponsor may remove the Custodian and appoint a successor custodian upon
written notice to Custodian and Participant or any current beneficiary.
Custodian may resign upon written notice to Participant or any current
beneficiary. Upon its resignation, Custodian may, but shall not be required to,
appoint a successor custodian. If a resigning Custodian does not appoint a
successor custodian and if no successor custodian is appointed, this Agreement
shall be terminated and all assets held in the custodial account distributed to
Participant or current beneficiary. Any successor custodian appointed hereunder
shall satisfy the requirements of Section 408(a)(2) of the Code. Upon any such
successor's acceptance of appointment, the Custodian shall transfer the assets
of the custodial account together with copies of relevant books and records to
such successor custodian; provided, however, that Custodian is authorized to
reserve such sum of money or property as it may deem advisable for payment of
any liabilities constituting a charge on or against the assets of the custodial
account or of Custodian and where necessary may liquidate such assets. The
Custodian shall not be liable for the acts or omissions of any successor
custodian.
<PAGE>
10. The Custodian shall be entitled to compensation for its services hereunder
in accordance with its custodial account fees as may be published and amended
from time to time. The Custodian shall also be entitled to reasonable
compensation for any extraordinary services rendered and to be reimbursed for
any administrative expenses incurred in the performance of its duties hereunder
including fees for legal services. All such fees and expenses of the Custodian
may be charged against the custodial account in such manner as the Custodian may
determine, or at the Custodian's option, may be paid directly by the
Participant. The Custodian may pay from the custodial account any other costs,
fees or expenses associated with the maintenance or management of the custodial
account on the written authorization of the Participant. The Custodian may
employ agents and may subcontract in fulfilling its obligations hereunder.
11. The Sponsor may amend this Agreement as the Sponsor determines in its
discretion is necessary or desirable, provided, however, that no such amendment
may be made which increases the duties of the Custodian without the Custodian's
consent.
12. This Agreement shall be construed under the laws of Commonwealth of
Massachusetts, or if different, the state of the domicile of Custodian, and
shall become effective upon the date accepted by the Custodian as specified in
the confirmation statement sent to the Participant by the Sponsor as agent for
the Custodian
13. Acceptance of this Agreement by the Participant is indicated by the
Participant's signature in the related application Liberty SIMPLE IRA
Application.
14. The Sponsor and Custodian may rely upon statements made by the Participant
and beneficiary. The Participant and beneficiary shall indemnify the Sponsor and
Custodian against any loss or liability which may arise from this Agreement,
except which arises from the Custodian's negligence or willful misconduct.
15. The Custodian reserves the right to refuse to accept SIMPLE IRA
contributions from employers who do not use the Sponsor's designated
contribution transfer software.
16. The parties do not intend to confer any fiduciary duties on the Custodian or
Sponsor, and none shall be implied. The Custodian and Sponsor may rely
conclusively upon, and shall be protected in acting upon, any written order from
the Participant (and where applicable, the Participant's employer) or any other
notice, request, consent or certificate reasonably believed to be genuine.
Neither the Custodian nor the Sponsor shall have any obligation to verify the
allowability, amount, deductibility or effect of any contribution made to, or
distribution made from, the Account.
17. The Custodian has the right to liquidate assets in the Participant's SIMPLE
IRA account if necessary, to make distributions or pay fees, expenses or taxes
properly chargeable against the account. If the Participant fails to direct the
Custodian as to when to liquidate assets, the Custodian will decide in its
complete and sole discretion and the Participant agrees not to hold the
Custodian liable for any adverse consequences that results from the Custodian's
decision.
18. Any notice, report, accounting or other communication that the Custodian may
give the Participant shall be deemed given when mailed to the Participant at the
address on record with the Custodian. All notices that the Participant is
required, pursuant to this Agreement, to give to the Custodian shall be deemed
given when received by the Custodian if mailed to Colonial Investors Service
Center, Inc., or such other address as the Custodian shall provide to the
Participant from time to time.
Liberty Simple IRA Disclosure Statement
Introduction
The following information is being provided to you in accordance with the
requirements of the Internal Revenue Service and is based on the law as in
effect on January 1, 1997, for tax years 1997 and later. This statement
describes rules applicable to SIMPLE IRAs. The rules for regular
<PAGE>
(not SIMPLE) IRAs are different. If you would like a copy of Liberty's
traditional IRA Disclosure Statement please call Colonial Investors Service
Center, Inc., at 1-800-345-6611. This disclosure statement should be read
together with the Liberty SIMPLE IRA Application, the SIMPLE IRA Custodial
Agreement and the prospectus which you have already received from your
registered representative.
Revocation
You may revoke this account at any time within seven days after it is
established by mailing or delivering a written request for revocation to:
Colonial Investors Service Center, Inc., Agent, P.O. Box 1722, Boston, MA
02105-1722.
Mailed notice will be considered given on the date postmarked (or on the date
certified or registered if mailed by this method). Upon proper written
notification, you will receive a full refund of your initial contribution,
including sales commissions and/or administrative fees. If you have any
questions, please call 1-800-345-6611.
Eligibility
You are eligible to establish a SIMPLE IRA if you are eligible to participate in
your employer's SIMPLE IRA plan, or if you wish to establish a "rollover" SIMPLE
IRA to receive funds which will be rolled over or transferred from another
SIMPLE IRA. Please refer to the section titled "Rollovers and Transfers" below.
Generally, you are eligible to participate in your employer's SIMPLE IRA plan in
any calendar year if you are reasonably expected to receive at least $5,000 of
compensation from your employer in that year, and you earned at least $5,000
from the employer in any two prior calendar years. Your employer's plan may
contain more liberal participation rules but may not impose any other conditions
on your participation. Your employer's plan may exclude certain employees
covered by collective bargaining agreements, and nonresident aliens with no U.S.
source income. Please refer to your employer's SIMPLE IRA plan document and the
plan's summary description for further information.
If you are a common law employee, "compensation" for SIMPLE IRA plan purposes
generally means your W-2 income is increased by any elective deferrals under
401(k), 403(b), SARSEP, 457, and SIMPLE plans. If you are self employed,
"compensation" means your net earnings from self-employment under Internal
Revenue Code 1402(a) is determined prior to subtracting your SIMPLE IRA
contributions.
Limit on Annual Contributions
There are two types of contributions that can be made to your SIMPLE IRA:
1. Rollover contributions from another SIMPLE IRA. You may transfer, or "roll
over" funds from another SIMPLE IRA to this IRA. There is no dollar limit on the
amount that you may roll over or transfer to this SIMPLE IRA. Please refer to
the section titled "Rollovers and Transfers" below.
2. Employer contributions under your employer's SIMPLE IRA plan. If your
employer maintains a SIMPLE IRA plan in any year, and you are eligible to
participate, you may elect to forego cash compensation from your employer and
instead have your employer contribute those dollars on your behalf to your
SIMPLE IRA (these contributions are called "elective deferrals"). You may elect
to defer up to $6,000* of your compensation in any year. However, if you
participate in another employer's qualified plan in the same year, and also
defer compensation into that plan, your total elective deferrals for the year
may be subject to additional limits. Please refer to the section titled "Excess
Contributions and Deferrals" below.
Your employer must make either a "matching contribution" or a "non-elective
contribution" to your SIMPLE IRA account. If your employer elects to make a
matching contribution, then your employer must match your elective deferrals to
the SIMPLE IRA plan on a dollar-for-dollar basis, up to 3% of your annual
compensation. Your employer may elect to match less than 3% of your annual
compensation (but not less than 1%) but your employer may not do this more often
<PAGE>
than two years in any five year period.
Your employer may elect instead to make a contribution (called a "non-elective
contribution") on behalf of all eligible employees equal to 2% of each
employee's annual compensation up to $160,000.* Your employer's plan may limit
eligibility for non-elective contributions in any year to employees who receive
at least $5,000 of compensation (or a lower dollar amount selected by your
employer).
No other contributions may be made to this SIMPLE IRA. Your interest in your
SIMPLE IRA is fully vested and nonforfeitable. Please refer to your employer's
SIMPLE IRA plan document and the plan's summary description for further
information.
*These dollar amounts apply in 1998. These amounts are indexed, and may change
each year.
Deductibility of SIMPLE IRA Contributions
You do not deduct the elective deferrals that your employer contributes to the
SIMPLE IRA on your behalf. Your income is reduced by the amount of your elective
deferrals and your employer reports the reduced amount on your W-2. Employer
matching or non-elective contributions to your SIMPLE IRA are not included in
your income when made. However, all contributions to your SIMPLE IRA, and
earnings, are taxable when withdrawn by you. Please refer to the sections titled
"Federal Tax Consequences" and "Distributions from your SIMPLE IRA During Your
Life," on page 9 of this application. If you are self-employed you should
consult your tax advisor for the proper reporting of SIMPLE IRA contributions.
Annual Contributions
Contributions to your SIMPLE IRA must be made in cash. Your employer must
deposit your elective deferrals into your SIMPLE IRA as soon as those
contributions can reasonably be segregated from your employer's general assets,
but in no event later than the close of the 30 day period following the last day
of the month in which your elective deferrals would have otherwise been paid to
you in cash. Your employer must deposit employer matching or non-elective
contributions into your SIMPLE IRA no later than your employer's due date for
filing it's federal tax return for the year.
Excess Contributions and Deferrals
If your employer makes contributions to your SIMPLE IRA that exceed the amount
permissible in any year, the excess is includible in your gross income in that
year and is treated as an IRA contribution subject to the regular IRA
contribution limits. Depending on your circumstances, this may result in an
excess IRA contribution. If you withdraw the excess contributions plus related
earnings by the due date (including extensions) for filing your tax return for
the year, you will avoid a 6% nondeductible excise tax on those excess
contributions. (The earnings you withdraw may be subject to the 10%/25% early
distribution penalty tax.) If you fail to withdraw the excess contributions and
related earnings by your tax return due date the excess contributions will be
subject to the 6% penalty tax each year until withdrawn, and may be includible
in your gross income again at that time.
Similarly, if you work for more than one employer, and you make salary deferrals
both to your employer's SIMPLE IRA plan and to the other employer's plan, you
are subject to an overall deferral limit of $10,000 if the other plan is a
401(k), 403(b), salary reduction SEP (SARSEP) or SIMPLE IRA plan, and $8,000 if
the other plan is a 457 salary deferral plan. The limit applies to deferrals you
make during your taxable year, and any excess is includible in your gross income
in the year of deferral. You are responsible for calculating whether you have
exceeded your limit for any taxable year. You must withdraw excess deferrals and
related income by April 15 following the close of the taxable year to which the
deferrals relate. If you do so no penalties will apply. If you fail to do so the
excess deferrals will be treated (in that following year) as an IRA contribution
subject to the regular IRA contribution limits. Depending on your circumstances,
this may result in an excess IRA contribution. If you withdraw the excess
contributions plus related earnings by the due date (including extensions) for
filing your tax
<PAGE>
return for that year you will avoid a 6% nondeductible excise tax on the excess
contributions. (The earnings you withdraw may be subject to the 10%/25% early
distribution penalty tax.) If you fail to withdraw the excess contributions and
related earnings by your tax return due date the excess contributions will be
subject to the 6% penalty tax each year until withdrawn, and may be includible
in your gross income again at that time.
It is your and your Employer's responsibility to ensure that contributions to
your SIMPLE IRA do not exceed applicable limits. Neither the Custodian nor
Colonial Investors Service Center, Inc. is responsible for advising you with
respect to excess contributions or deferrals and their consequences. The
Custodian will only make distributions to you in accordance with your specific
instructions. The IRS has not yet provided guidance on how these complex rules
apply to SIMPLE IRAs, and you should consult your tax advisor if you have any
questions.
Rollovers To Your SIMPLE IRA
You may roll over distributions you receive from another SIMPLE IRA to this
SIMPLE IRA. You must complete the rollover within 60 days of receiving the
distribution from the other SIMPLE IRA. However, you are limited to one rollover
from that other SIMPLE IRA in any 12 month period. Further, you may not rollover
distributions from the other SIMPLE IRA that are required minimum distributions,
or that are part of a series of periodic payments made for your life, your life
expectancy or for a period of ten or more years.
If the other SIMPLE IRA permits, you may also arrange for a direct transfer of
funds from another SIMPLE IRA to this SIMPLE IRA. Direct transfers between
SIMPLE IRA trustees or custodians are not subject to the "one rollover per year"
rule described above.
If your employer maintains a SIMPLE IRA plan which requires that you invest your
contributions with a particular financial institution, you may have the right to
request that your contributions be directly transferred from that financial
institution without cost or penalty to the SIMPLE IRA of a financial institution
of your choice. Your employer is required to provide you with information
regarding this right to make "no cost or penalty" transfers, and the procedures
you must follow. You can use this SIMPLE IRA to receive these no cost or penalty
transfers.You may not rollover or transfer funds from a regular (not a SIMPLE)
IRA to this SIMPLE IRA. You may not rollover or transfer funds from a qualified
retirement plan to this SIMPLE IRA.The Custodian will not accept any rollover
contribution or transfer which is not in the form of cash.
Distributions From Your SIMPLE IRA During Your Life
(a) Withdrawals. You can make withdrawals from your SIMPLE IRA at any time. Your
employer may not require that you retain any portion of the contributions in
your SIMPLE IRA account or otherwise impose any withdrawal restrictions. Call
1-800-426-3750 to request a Liberty SIMPLE IRA Distribution Form.
Generally, amounts you withdraw from your SIMPLE IRA are included in your gross
income (see "Federal Tax Consequences" on page 10 of this application) and may
be subject to an additional 10% nondeductible early distribution tax if you have
not attained age 59-1/2. This 10% early distribution penalty is increased to 25%
for amounts you receive within the first two years you participate in your
employer's SIMPLE IRA plan. The early distribution tax does not apply to:
(1) payments made to your beneficiary or estate after your death;
(2) payments to you because of disability within the meaning of Internal Revenue
Code section 72(m)(7);
(3) payments which are part of a series of substantially equal periodic payments
(not less frequently than annually) made for your life (or life expectancy) or
the joint lives (or life expectancies) of you and your designated beneficiary
(you should be aware, however, that the premature distribution tax will be
applied retroactively (with interest) to all systematic payments if you change
to a method of distribution that does not qualify for the exception either
before you
<PAGE>
attain age 59-1/2 or during the first five years of the distribution);
(4) certain payments you receive after you terminate employment, if you receive
unemployment compensation for at least 12 consecutive weeks, up to the amount
you pay for health or qualified long-term care insurance in the year you receive
the unemployment insurance, or the next year;
(5) payments (other than those in (1) to (4) above) you receive in a year to the
extent you have medical expenses in excess of 7.5% of your adjusted gross income
for that year (whether or not you itemize deductions);
(6) certain distributions of excess contributions and excess deferrals;
(7) amounts you properly rollover or transfer to another SIMPLE IRA or regular
IRA (see (b) below).
(8) distributions from your IRA after December 31, 1997, if you use the amounts
to pay qualified higher education expenses for you, your spouse, your child or
grandchild or your spouse's child or grandchild. This provision is effective
with respect to academic periods beginning after December 31, 1997. An academic
period includes a semester, trimester, quarter or other academic term designated
by the educational institution.
(9) distributions from your IRA after December 31, 1997, if you use the amounts
for qualifying first time homebuyer expenses. This exclusion is limited to
$10,000 over your lifetime. A "first time homebuyer" is an individual who has
not had (and whose spouse has not had) an ownership interest in a principal
residence during the two year period ending on the date the new home is
acquired.
(b) Rollovers and Direct Transfers from your SIMPLE IRA. During the first two
years you participate in your employer's SIMPLE IRA plan you may withdraw funds
from your SIMPLE IRA and deposit them within 60 days to any other SIMPLE IRA in
a "tax free rollover." You may also direct the Custodian to transfer funds
directly to the custodian or trustee of another SIMPLE IRA.
If, during this two year period, you make a rollover or direct transfer from
your SIMPLE IRA to an IRA that is not a SIMPLE IRA the amount of the rollover or
transfer will be treated as a distribution from your SIMPLE IRA and includible
in your gross income (and you may be subject to the 10% or 25% early
distribution tax described above), and will be treated as a contribution to the
other IRA. Depending upon your circumstances this could result in an excess
contribution to the other IRA. Please refer to the section titled "Excess
Contributions and Deferrals" on page 8 of this application.
After the first two years you participate in your employer's SIMPLE IRA plan you
may make a tax free rollover or transfer from your SIMPLE IRA to another SIMPLE
IRA or regular IRA. Only one rollover may be made from your SIMPLE IRA to
another SIMPLE IRA or regular IRA in any one-year period. Direct transfers
between trustees or custodians are not subject to this "one rollover per year"
rule.
Your employer's SIMPLE IRA plan may require that all plan contributions be
invested with a "designated financial institution." If so, you can direct the
designated financial institution to transfer your plan assets to a SIMPLE IRA
provider of your choice.
(c) Required Distributions: No later than April 1 of the year following the year
you attain age 70-1/2 (the "required beginning date") you must begin receiving
distributions from your SIMPLE IRA. You may elect to receive either a lump sum
payment of your entire balance or monthly, quarterly or annual payments over a
period that does not exceed your life expectancy, or that of you and your
designated beneficiary. If you elect periodic payments there is a minimum amount
you must withdraw by the required beginning date, and each December 31
thereafter. This could result in two minimum distributions in one calendar year.
If the distributions during a taxable year are less than the minimum required
distribution for the year the IRS may impose a tax equal to 50% of the
deficiency.
If you have more than one IRA (including rollover IRAs, SEP IRAs, SIMPLE IRAs
and regular
<PAGE>
IRAs) you must determine the minimum required distribution separately for each
IRA. However, you can total these minimum amounts and take the total from any
one or more of the IRAs.Neither the Custodian nor Colonial Investors Service
Center, Inc. is responsible for advising you with respect to the minimum amount
you are required to receive from your SIMPLE IRA. The Custodian will only make
distributions to you in accordance with your specific instructions.
Payments From Your SIMPLE IRA After Your Death
If you die before all the funds held in your SIMPLE IRA have been distributed,
the remaining funds in the account will be distributed to your designated
beneficiary either outright or periodically, as selected by your beneficiary.
The Custodian will make distributions to your beneficiary in accordance with
his/her specific instructions. Your beneficiary should be aware that he/she is
subject to minimum distribution rules and it is his/her responsibility to make
sure that the rules are met. Under the post-death minimum distribution rules, if
you die after your Required Distribution Date, the funds remaining in your
SIMPLE IRA must continue to be distributed to your designated beneficiary at
least as rapidly as under the method or distribution in effect prior to your
death. If you die prior to your Required Distribution Date, all the funds in
your SIMPLE IRA must be completely distributed to your designated beneficiary by
December 31 of the year containing the fifth anniversary of your death unless
your designated beneficiary elects, no later than December 31 of the year
following the year of your death, to receive funds from your IRA over a fixed
period that is no longer than his/her life expectancy. If your beneficiary is
your surviving spouse, distribution of funds from your SIMPLE IRA can be made to
him/her over a fixed period that is no longer than his/her life expectancy and
commencing at any date prior to December 31 of the year in which you would have
attained age 70-1/2 (or, if later, December 31 of the calendar year in which you
die. In all instances, your spousal beneficiary may also elect to rollover the
funds in your SIMPLE IRA into his/her own account or treat your account as
his/her own. In this case he/she is not required to make withdrawals from the
IRA until April 1 following the year in which he/she reaches age 70-1/2.
The designation of a beneficiary to receive funds from your SIMPLE IRA at your
death is not considered a transfer subject to Federal gift taxes. However, any
funds remaining in your SIMPLE IRA at your death would be includible in your
Federal gross estate. If your spouse is your beneficiary or the beneficiary is a
trust which qualifies for the unlimited marital estate tax deduction, no federal
estate taxes will be due until after the death of your surviving spouse.
Finally, estate taxes may be offset by the $600,000 unified credit against
federal estate and gift tax.
Federal Tax Returns
(a) Each year the Custodian will send you IRS Form 5498 reporting contributions
made to your SIMPLE IRA for the prior year. The Custodian will also report to
you your prior year distributions on IRS Form 1099-R. Copies of these reports
are also filed with the IRS.
(b) If you owe additional taxes on excess contributions or deferrals, premature
distributions or for insufficient or excessive distributions, you must file IRS
Form 5329 with the IRS. IRS Form 5330 must be filed in connection with a
prohibited transaction.
(c) If you make nondeductible contributions to any IRA you are required to file
Form 8606 in years you make nondeductible contributions, and also in years you
make withdrawals from any IRA, including this SIMPLE IRA.
Federal Tax Consequences
(a) Income on your SIMPLE IRA is not taxed as it is earned, but only when it is
distributed to you.
(b) Generally, amounts paid to you from your SIMPLE IRA are taxable as ordinary
income. However, if you have made nondeductible contributions to any IRA, a
portion of your distribution will be nontaxable. The nontaxable amount is the
portion of your distribution that bears the same ratio to the distribution as
(i) your aggregate nondeductible contributions to all of
<PAGE>
your IRAs bear to and (ii) the aggregate balance in all of your IRAs on the last
day of the year in which you received your distribution plus the amount of your
distribution. For this purpose the balances in all IRAs that you maintain
(including regular IRAs, rollover IRAs, SIMPLE IRAs, and SEP IRAs) and all
distributions you receive during the year must be aggregated.
Distributions from IRAs, including your SIMPLE IRA, are not eligible for
taxation under the special 5 year forwarding averaging rules that apply to
distributions from qualified retirement plans.
(c) If you engage in a so-called "prohibited transaction" as defined in the
Code, your SIMPLE IRA will be disqualified and the entire balance in your
account will be taxed as ordinary income during the year in which such
transaction occurs. You may also have to pay the 10%/25% penalty tax on
premature distributions. A "prohibited transaction" includes:
(i) the sale, exchange or leasing of any property between your SIMPLE IRA
account and you;
(ii) the lending of money or other extension of credit between your SIMPLE IRA
account and you;
(iii) the furnishing of goods, services or facilities between your SIMPLE IRA
account and you;
(iv) the transfer of assets of your SIMPLE IRA account for your use or for your
benefit.
(d) If you pledge all or part of your SIMPLE IRA as security for a loan, the
amount so pledged or invested is considered by the Internal Revenue Service to
have been distributed to you and will be taxed as ordinary income during the
year in which you make such pledge or investment. You may also have to pay the
10%/25% premature distribution tax.
Financial Disclosure
Because the assets held in your SIMPLE IRA are invested at your direction and
will be subject to market fluctuation, the value of your account can neither be
guaranteed nor projected. However, you will be provided with periodic statements
of your SIMPLE IRA, including current market values of investments.
Information about the shares of each mutual fund that you choose for investment
through your SIMPLE IRA must be furnished to you in the form of a prospectus
governed by the rules of the Securities and Exchange Commission. Please refer to
the prospectus for detailed information concerning the fund objectives, the
sales charges and the income and expenses of your mutual funds.
Miscellaneous
If you cease participating in your employer's SIMPLE IRA plan (for example, you
terminate employment) you may treat your SIMPLE IRA as a regular IRA if two
years have elapsed since you first participated in the SIMPLE IRA plan. You
should request a current copy of Liberty Financial Investments' regular IRA
Disclosure Statement at that time. Call us at 1-800-426-3750.
The IRA Trustee or custodian must be a bank or other person who has been
approved by the Secretary of the Treasury. Your contributions may not be
invested in life insurance, or be commingled with other property except in a
trust or investment fund.
The form of your SIMPLE IRA has been approved by the Internal Revenue Service.
Such approval is a determination only as to the form of the SIMPLE IRA and does
not represent a determination of the merits of the SIMPLE IRA.
Further information regarding your SIMPLE IRA, and IRAs in general, is available
in IRS Publication 590. You may obtain this publication from any IRS district
office or by calling the IRS Tax Forms Distribution Center at 1-800-TAX-FORMS.
<PAGE>
<TABLE>
<S> <C> <C>
Form 5304-SIMPLE Savings Incentive Match Plan for Employees of OMB No. 1545-1502
(December 1996) Small Employers (SIMPLE) DO NOT File with
(Not Subject to the Designated Financial Institution Rules) the Internal
Department of the Treasury Revenue Service
</TABLE>
Internal Revenue Service
- --------------------------------------------------------------------------------
_______________________________________________ establishes the following SIMPLE
Name of Employer
plan under section 408(p) of the Internal Revenue Code and pursuant to the
instructions contained in this form.
- --------------------------------------------------------------------------------
Article I - Employee Eligibility Requirements (Complete appropriate box(es) and
blanks - see instructions.)
- --------------------------------------------------------------------------------
1 General Eligibility Requirements. The Employer agrees to permit salary
reduction contributions to be made in each calendar year to the SIMPLE IRA
established by each employee who meets the following requirements (select
either 1a or 1b):
a |_| Full Eligibility. All employees are eligible.
b |_| Limited Eligibility. Eligibility is limited to employees who are
described in both (i) and (ii) below:
(i)Current compensation. Employees who are reasonably expected to
receive at least $________________ in compensation (not to exceed
$5,000) for the calendar year.
(ii) Prior compensation. Employees who have received at least
$________________ in compensation (not to exceed $5,000) during any
________ calendar year(s) (insert 0, 1, or 2) preceding the calendar
year.
2 Excludable Employees (OPTIONAL)
|_| The Employer elects to exclude employees covered under a collective
bargaining agreement for which retirement benefits were the subject of
good faith bargaining.
- --------------------------------------------------------------------------------
Article II - Salary Reduction Agreements (Complete the box and blank, if
appropriate - see instructions.)
- --------------------------------------------------------------------------------
1 Salary Reduction Election. An eligible employee may make a salary reduction
election to have his or her compensation for each pay period reduced by a
percentage. The total amount of the reduction in the employee's compensation
cannot exceed $6,000* for any calendar year.
2 Timing of Salary Reduction Elections
a For a calendar year, an eligible employee may make or modify a salary
reduction election during the 60-day period immediately preceding January 1
of that year. However, for the year in which the employee becomes eligible to
make salary reduction contributions, the period during which the employee may
make or modify the election is a 60-day period that includes either the date
the employee becomes eligible or the day before.
b In addition to the election periods in 2a, eligible employees may make salary
reduction elections or modify prior elections ______________________________
_________________________________________________________________(If the
Employer chooses this option, insert a period or periods (e.g. semi-annually,
quarterly, monthly, or daily) that will apply uniformly to all eligible
employees.)
c No salary reduction election may apply to compensation that an employee
received, or had a right to immediately receive, before execution of the
salary reduction election.
d An employee may terminate a salary reduction election at any time during the
calendar year. |_| If this box is checked, an employee who terminates a
salary reduction election not in accordance with 2b may not resume salary
reduction contributions during the calendar year.
- --------------------------------------------------------------------------------
Article III - Contributions (Complete the blank, if appropriate - see
instructions.)
- --------------------------------------------------------------------------------
1 Salary Reduction Contributions. The amount by which the employee agrees to
reduce his or her compensation will be contributed by the Employer to the
employee's SIMPLE IRA.
2 Other Contributions
a Matching Contributions
(i) For each calendar year, the Employer will contribute a matching
contribution to each eligible employee's SIMPLE IRA equal to the
employee's salary reduction contributions up to a limit of 3% of the
employee's compensation for the calendar year.
(ii) The Employer may reduce the 3% limit for the calendar year in (i) only
if:
(1) The limit is not reduced below 1%; (2) The limit is not reduced for
more than 2 calendar years during the 5-year period ending with the
calendar year the reduction is effective; and (3) Each employee is
notified of the reduced limit within a reasonable period of time before
the employees' 60-day election period for the calendar year (described
in Article II, item 2a).
b Nonelective Contributions
(i) For any calendar year, instead of making matching contributions, the
Employer may make nonelective contributions equal to 2% of compensation
for the calendar year to the SIMPLE IRA of each eligible employee who
has at least $_____________ (not more than $5,000) in compensation for
the calendar year. No more than $160,000* in compensation can be taken
into account in determining the nonelective contribution for each
eligible employee.
(ii) For any calendar year, the Employer may make 2% nonelective
contributions instead of matching contributions only if:
(1) Each eligible employee is notified that a 2% nonelective
contribution will be made instead of a matching contribution; and
(2) This notification is provided within a reasonable period of time
before the employees' 60-day election period for the calendar year
(described in Article II, item 2a).
3 Time and Manner of Contributions
a The Employer will make the salary reduction contributions (described in 1
above) for each eligible employee to the SIMPLE IRA established at the
financial institution selected by that employee no later than 30 days after
the end of the month in which the money is withheld from the employee's pay.
See instructions.
b The Employer will make the matching or nonelective contributions (described
in 2a and 2b above) for each eligible employee to the SIMPLE IRA established
at the financial institution selected by that employee no later than the due
date for filing the Employer's tax return, including extensions, for the
taxable year that includes the last day of the calendar year for which the
contributions are made.
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<TABLE>
<S> <C> <C>
For Paperwork Reduction Act Notice, see Instructions. Cat. No. 23377W Form 5304-SIMPLE (12-96)
SM-498E-1297 M (1/98)
</TABLE>
<PAGE>
Form 5304 - SIMPLE (12-96) Page 2
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Article IV - Other Requirements and Provisions
- --------------------------------------------------------------------------------
1 Contributions in General. The Employer will make no contributions to the
SIMPLE IRAs other than salary reduction contributions (described in Article
III, item 1) and matching or nonelective contributions (described in Article
III, items 2a and 2b).
2 Vesting Requirements. All contributions made under this SIMPLE plan are fully
vested and nonforfeitable.
3 No Withdrawal Restrictions. The Employer may not require the employee to
retain any portion of the contributions in his or her SIMPLE IRA or otherwise
impose any withdrawal restrictions.
4 Selection of IRA Trustee. The employer must permit each eligible employee to
select the financial institution that will serve as the trustee, custodian,
or issuer of the SIMPLE IRA to which the employer will make all contributions
on behalf of that employee.
5 Amendments To This SIMPLE Plan. This SIMPLE plan may not be amended except to
modify the entries inserted in the blanks or boxes provided in Article I, II,
III, VI, and VII.
6 Effects Of Withdrawals and Rollovers
a An amount withdrawn from the SIMPLE IRA is generally includible in gross
income. However, a SIMPLE IRA balance may be rolled over or transferred on a
tax-free basis to another IRA designed solely to hold funds under a SIMPLE
plan. In addition, an individual may roll over or transfer his or her SIMPLE
IRA balance to any IRA on a tax-free basis after a 2-year period has expired
since the individual first participated in a SIMPLE plan. Any rollover or
transfer must comply with the requirements under section 408.
b If an individual withdraws an amount from a SIMPLE IRA during the 2-year
period beginning when the individual first participated in a SIMPLE plan and
the amount is subject to the additional tax on early distributions under
section 72(t), this additional tax is increased from 10% to 25%.
- --------------------------------------------------------------------------------
Article V - Definitions
- --------------------------------------------------------------------------------
1 Compensation
a General Definition of Compensation. Compensation means the sum of the wages,
tips, and other compensation from the Employer subject to federal income tax
withholding (as described in section 6051(a)(3)) and the employee's salary
reduction contributions made under this plan, and, if applicable, elective
deferrals under a section 401(k) plan, a SARSEP, or a section 403(b) annuity
contract and compensation deferred under a section 457 plan required to be
reported by the Employer on Form W-2 (as described in section 6051(a)(8)).
b Compensation for Self-Employed Individuals. For self-employed individuals,
compensation means the net earnings from self-employment determined under
section 1402(a) prior to subtracting any contributions made pursuant to this
plan on behalf of the individual.
2 Employee. Employee means a common-law employee of the Employer. The term
employee also includes a self-employed individual and a leased employee
described in section 414(n) but does not include a nonresident alien who
received no earned income from the Employer that constitutes income from
sources within the United States.
3 Eligible Employee. An eligible employee means an employee who satisfies the
conditions in Article I, item 1 and is not excluded under Article I, item 2.
4 SIMPLE IRA. A SIMPLE IRA is an individual retirement account described in
section 408(a), or an individual retirement annuity described in section
408(b), to which the only contributions that can be made are contributions
under a SIMPLE plan and rollovers or transfers from another SIMPLE IRA.
- --------------------------------------------------------------------------------
Article VI - Procedures for Withdrawal (The employer will provide each employee
with the procedures for withdrawals of contributions received by the financial
institution selected by that employee, and that financial institution's name and
address (by attaching that information or inserting it in the space below)
unless: (1) that financial institution's procedures are unavailable, or (2) that
financial institution provides the procedures directly to the employee. See
Employee Notification section in the instructions.)
- --------------------------------------------------------------------------------
The Liberty Simple IRA custodian is BankBoston, N.A. You may request a
Liberty Simple IRA distribution form by calling 1-800-799-7526 or by
writing to Colonial Investors Service Center, Inc., Attn: Retirement
Plan Services, P.O. Box 1722 Boston, MA 02105-1722
- --------------------------------------------------------------------------------
Article VII - Effective Date
- --------------------------------------------------------------------------------
This SIMPLE plan is effective ___________________________. (See instructions.)
o o o o o
__________________________________________ ___________________________________
Name of Employer By: Signature Date
__________________________________________ ___________________________________
Address of Employer Name and title
* This amount will be adjusted to reflect any annual cost-of-living increases
announced by the IRS.
- --------------------------------------------------------------------------------
SM-498E-1297 M (1/98)
<PAGE>
Form 5304 - SIMPLE (12-96) Page 3
- --------------------------------------------------------------------------------
Model Notification to Eligible Employees
I. Opportunity to Participate in the SIMPLE Plan
You are eligible to make salary reduction contributions to the
___________________________________________________SIMPLE plan. This notice and
the attached summary description provide you with information that you should
consider before you decide whether to start, continue, or change your salary
reduction agreement.
II. Employer Contribution Election
For the _________ calendar year, the employer elects to contribute to your
SIMPLE IRA (employer must select either (1), (2), or (3)):
|_| (1) A matching contribution equal to your salary reduction
contributions up to a limit of 3% of your compensation for the
year;
|_| (2) A matching contribution equal to your salary reduction
contributions up to a limit of _______% (employer must insert a
number from 1 to 3 and is subject to certain restrictions) of
your compensation for the year; or
|_| (3) A nonelective contribution equal to 2% of your compensation for
the year (limited to $160,000*) if you are an employee who makes
at least $________________ (employer must insert an amount that
is $5,000 or less) in compensation for the year.
III. Administrative Procedures
If you decide to start or change your salary reduction agreement, you must
complete the salary reduction agreement and return it to________________________
(employer should designate a place or (individual) by ________________________
(employer should insert a date that is not less than 60 days after notice is
given).
IV. Employee Selection of Financial Institution
You must select the financial institution that will serve as the trustee,
custodian, or issuer of your SIMPLE IRA and notify your employer of your
selection.
- -----------------------------------------------------------------
Model Salary Reduction Agreement
I. Salary Reduction Election
Subject to the requirements of the SIMPLE plan of _______________________
(name of employer) I authorize _________% or $______________ (which equals
___________% of my current rate of pay) to be withheld from my pay for each pay
period and contributed to my SIMPLE IRA as a salary reduction contribution.
II. Maximum Salary Reduction
I understand that the total amount of my salary reduction contributions in
any calendar year cannot exceed $6,000.*
III. Date Salary Reduction Begins
I understand that my salary reduction contributions will start as soon as
permitted under the SIMPLE plan and as soon as administratively feasible or, if
later, ______________________________. (Fill in the date you want the salary
reduction contributions to begin. The date must be after you sign this
agreement.)
IV. Employee Selection of Financial Institution
I select the following financial institution to serve as the trustee,
custodian, or issuer of my SIMPLE IRA.
---------------------------------------------------------------------
Name of financial institution
---------------------------------------------------------------------
Address of financial institution
---------------------------------------------------------------------
SIMPLE IRA account name and number
I understand that I must establish a SIMPLE IRA to receive any
contributions made on my behalf under this SIMPLE plan. If the information
regarding my SIMPLE IRA is incomplete when I first submit my salary reduction
agreement, I realize that it must be completed by the date contributions must be
made under the SIMPLE plan. If I fail to update my agreement to provide this
information by that date, I understand that my employer may select a financial
institution for my SIMPLE IRA.
V. Duration of Election
This salary reduction agreement replaces any earlier agreement and will
remain in effect as long as I remain an eligible employee under the SIMPLE plan
or until I provide my employer with a request to end my salary reduction
contributions or provide a new salary reduction agreement as permitted under
this SIMPLE plan.
Signature of employee ____________________________________________________
Date ____________________________________________________
*This amount will be adjusted to reflect any annual cost-of-living increases
announced by the IRS.
- --------------------------------------------------------------------------------
SM-498E-1297 M (1/98)
<PAGE>
Form 5304 - SIMPLE (12-96) Page 4
- --------------------------------------------------------------------------------
Paperwork Reduction Act Notice
You are not required to provide the information requested on a form that is
subject to the Paperwork Reduction Act unless the form displays a valid OMB
control number. Books or records relating to a form or its instructions must
be retained as long as their contents may become material in the administration
of any Internal Revenue law. Generally, tax returns and return information are
confidential, as required by section 6103.
The time needed to complete this form will vary depending on individual
circumstances. The estimated average time is:
Recordkeeping . . . . . 3 hr., 38 min.
Learning about the
law or the form . . . . . 2 hr., 26 min.
Preparing the form . . . . . . 47 min.
If you have comments concerning the accuracy of these time estimates or
suggestions for making this form simpler, we would be happy to hear from you.
You can write to the Tax Forms Committee, Western Area Distribution Center,
Rancho Cordova, CA 95743-0001. DO NOT send this form to this address. Instead,
keep it for your records.
General Instructions
Section references are to the Internal Revenue Code unless otherwise noted.
Note: The instructions for this form are designed to assist in the establishment
and administration of the SIMPLE plan; they are not intended to supersede any
provisions in the SIMPLE plan.
Purpose of Form
Form 5304-SIMPLE is a model Savings Incentive Match Plan for Employees of Small
Employers (SIMPLE) plan document that an employer may use to establish a SIMPLE
plan described in section 408(p), under which each eligible employee is
permitted to select the financial institution for his or her SIMPLE IRA. It is
important that you keep this form for your records. DO NOT file this form with
the IRS. For more information, see Pub. 560, Retirement Plans for the
Self-Employed, and Pub. 590, Individual Retirement Arrangements (IRAs).
Instructions for the Employer
Which Employers May Establish and Maintain a SIMPLE Plan?
You are eligible to establish and maintain a SIMPLE plan only if you meet both
of the following requirements:
1. Last calendar year, you had no more than 100 employees (including
self-employed individuals) who earned $5,000 or more in compensation from you
during the year. If you have a SIMPLE plan but later exceed this 100-employee
limit, you will be treated as meeting the limit for the two years following the
calendar year in which you last satisfied the limit. If the failure to continue
to satisfy the 100-employee limit is due to an acquisition or similar
transaction involving your business, special rules apply. Consult your tax
advisor to find out if you can still maintain the plan after the transaction.
2. You do not maintain during any part of the calendar year another
qualified plan with respect to which contributions are made, or benefits are
accrued, for service in the calendar year. For this purpose, a qualified plan
(defined in section 219(g)(5)) includes a qualified pension plan, a
profit-sharing plan, a stock bonus plan, a qualified annuity plan, a
tax-sheltered annuity plan, and a simplified employee pension (SEP) plan.
Certain related employers (trades or businesses under common control) must
be treated as a single employer for purposes of the SIMPLE requirements. These
are: (1) a controlled group of corporations under section 414(b); (2) a
partnership or sole proprietorship under common control under section 414(c); or
(3) an affiliated service group under section 414(m). In addition, if you have
leased employees required to be treated as your own employees under the rules of
section 414(n), then you must count all such leased employees for the
requirements listed above.
What is a SIMPLE Plan?
A SIMPLE plan is a written arrangement that provides you and your employees with
a simplified way to make contributions to provide retirement income for your
employees. Under a SIMPLE plan, employees may choose whether to make salary
reduction contributions to the SIMPLE plan rather than receiving these amounts
as part of their regular compensation. In addition, you will contribute matching
or nonelective contributions on behalf of eligible employees (see Employee
Eligibility Requirements below and Contributions on page 5). All contributions
under this plan will be deposited into a SIMPLE individual retirement account or
annuity established for each eligible employee with the financial institution
selected by each eligible employee (SIMPLE IRA).
The information provided below is intended to help you understand and
administer the rules of your SIMPLE plan.
When to Use Form 5304-SIMPLE
A SIMPLE plan may be established by using this Model Form or any other document
that satisfies the statutory requirements. Thus, you are not required to use
Form 5304-SIMPLE to establish and maintain a SIMPLE plan. Further, do not use
Form 5304-SIMPLE if:
1. You want to require that all SIMPLE plan contributions initially go to a
financial institution designated by you. (i.e., you do not want to permit each
of your eligible employees to choose a financial institution that will initially
receive contributions.) However, Form 5305-SIMPLE, Savings Incentive Match Plan
for Employees of Small Employers (SIMPLE)(for Use With a Designated Financial
Institution), may be used in such a case;
2. You want employees who are nonresident aliens receiving no earned income
from you that constitutes income from sources within the United States to be
eligible under this plan; or
3. You want to establish a SIMPLE 401(k) plan.
Completing Form 5304-SIMPLE
Pages 1 and 2 of Form 5304-SIMPLE contain the operative provisions of your
SIMPLE plan. This SIMPLE plan is considered adopted when you have completed all
appropriate boxes and blanks and it has been executed by you.
The SIMPLE plan is a legal document with important tax consequences for you
and your employees. You may want to consult with your attorney or tax advisor
before adopting this plan.
Employee Eligibility Requirements (Article I)
Each year for which this SIMPLE plan is effective, you must permit salary
reduction contributions to be made by all of your employees who are reasonably
expected to receive at least $5,000 in compensation from you during the year,
and who received at least $5,000 in compensation from you in any 2 preceding
years. However, you can expand the group of employees who are eligible to
participate in the SIMPLE plan by completing the options provided in Article I,
items 1a and 1b. To choose full eligibility, check the box in Article I, item
1a. Alternatively, to choose limited eligibility, check the box in Article I,
item 1b, and then insert $5,000 or a lower compensation amount (including
SM-498E-1297 M (1/98)
<PAGE>
Form 5304 - SIMPLE (12-96) Page 5
- --------------------------------------------------------------------------------
zero) and 2 or a lower number of years of service in the blanks in (i) and (ii)
of Article I, item 1b.
In addition, you can exclude from participation those employees covered
under a collective bargaining agreement for which retirement benefits were the
subject of good faith bargaining. You may do this by checking the box in Article
I, item 2.
Salary Reduction Agreements (Article II)
As indicated in Article II, item 1, a salary reduction agreement permits an
eligible employee to make a salary reduction election to have his or her
compensation for each pay period reduced by a percentage (expressed as a
percentage or dollar amount). The total amount of the reduction in the
employee's compensation cannot exceed $6,000* for any calendar year.
Timing of Salary Reduction Elections
For a calendar year, an eligible employee may make or modify a salary reduction
election during the 60-day period immediately preceding January 1 of that year.
However, for the year in which the employee becomes eligible to make salary
reduction contributions, the period during which the employee may make or modify
the election is a 60-day period that includes either the date the employee
becomes eligible or the day before.
You can extend the 60-day election periods to provide additional
opportunities for eligible employees to make or modify salary reduction
elections using the blank in Article II, item 2b. For example, you can provide
that eligible employees may make new salary reduction elections or modify prior
elections for any calendar quarter during the 30 days before that quarter.
You may use (but are not required to) the Model Salary Reduction Agreement
on page 3 to enable eligible employees to make or modify salary reduction
elections.
Employees must be permitted to terminate their salary reduction elections
at any time. They may resume salary reduction contributions if permitted under
Article II, item 2b. However, by checking the box in Article II, item 2d, you
may prohibit an employee who terminates a salary reduction election outside the
normal election cycle from resuming salary reduction contributions during the
remainder of the calendar year.
Contributions (Article III)
Only contributions described below may be made to this SIMPLE plan. No
additional contributions may be made.
Salary Reduction Contributions
As indicated in Article III, item 1, salary reduction contributions consist of
the amount by which the employee agrees to reduce his or her compensation. You
must contribute the salary reduction contributions to the financial institution
selected by each eligible employee.
Other Contributions
Matching Contributions
In general, you must contribute a matching contribution to each eligible
employee's SIMPLE IRA equal to the employee's salary reduction contributions.
This matching contribution cannot exceed 3% of the employee's compensation. See
Definition of Compensation, below.
You may reduce this 3% limit to a lower percentage, but not lower than 1%.
You cannot lower the 3% limit for more than 2 calendar years out of the 5-year
period ending with the calendar year the reduction is effective.
Note: If any year in the 5-year period described above is a year before you
first established any SIMPLE plan, you will be treated as making a 3% matching
contribution for that year for purposes of determining when you may reduce the
employer matching contribution.
In order to elect this option, you must notify the employees of the reduced
limit within a reasonable period of time before the applicable 60-day election
periods for the year. See Timing of Salary Reduction Elections above.
Nonelective contributions. - Instead of making a matching contribution, you may,
for any year, make a nonelective contribution equal to 2% of compensation for
each eligible employee who has at least $5,000 in compensation for the year.
Nonelective contributions may not be based on more than $160,000* of
compensation.
In order to elect to make nonelective contributions, you must notify
employees within a reasonable period of time before the applicable 60-day
election periods for such year. See Timing of Salary Reduction Elections above.
Note: Insert $5,000 in Article III, item 2b(i) to impose the $5,000 compensation
requirement. You may expand the group of employees who are eligible for
nonelective contributions by inserting a compensation amount lower than $5,000.
Effective Date (Article VII)
Insert in Article VII, the date you want the provisions of the SIMPLE plan to
become effective. You must insert January 1 of the applicable year unless this
is the first year for which you are adopting any SIMPLE plan. If this is the
first year for which you are adopting a SIMPLE plan, you may insert any date
between January 1 and October 1, inclusive of the applicable year. Do not insert
any date before January 1, 1997.
Other Important Information About Your SIMPLE Plan
Timing of Salary Reduction Contributions
Under the Internal Revenue Code, for all SIMPLE plans, the employer must make
the salary reduction contributions to the financial institution selected by each
eligible employee for his or her SIMPLE IRA no later than the 30th day of the
month following the month in which the amounts would otherwise have been payable
to the employee in cash. The Department of Labor has indicated that most SIMPLE
plans are also subject to Title I of the Employee Retirement Income Security Act
of 1974 (ERISA). The Department of Labor has informed the IRS that, as a matter
of enforcement policy, for these plans, salary reduction contributions must be
made to each participant's SIMPLE IRA as of the earliest date on which those
contributions can reasonably be segregated from the employer's general assets,
but in no event later than the 30-day deadline described above.
Definition of Compensation
"Compensation" means the amount described in section 6051(a)(3) (wages, tips,
and other compensation from the employer subject to federal income tax
withholding under section 3401(a)). Usually, this is the amount shown in box 1
of Form W-2, Wage and Tax Statement. For further information, see Pub. 15
(Circular E), Employer's Tax Guide. Compensation also includes the salary
reduction contributions made under this plan, and, if applicable, compensation
deferred under a section 457 plan. In determining an employee's compensation for
prior years, the employee's elective deferrals under a section 401(k) plan, a
SARSEP, or a section 403(b) annuity contract are also included in the employee's
compensation.
*This amount will be adjusted to reflect any annual cost-of-living increases
announced by the IRS.
SM-498E-1297 M (1/98)
<PAGE>
Form 5304 - SIMPLE (12-96) Page 6
- --------------------------------------------------------------------------------
For self-employed individuals, compensation means the net earnings from
self-employment determined under section 1402(a) prior to subtracting any
contributions made pursuant to this SIMPLE plan on behalf of the individual.
Employee Notification
You must notify each eligible employee prior to the employee's 60-day election
period described above that he or she can make or change salary reduction
elections and select the financial institution that will serve as the trustee,
custodian, or issuer of the employee's SIMPLE IRA. In this notification, you
must indicate whether you will provide:
1. A matching contribution equal to your employees' salary reduction
contributions up to a limit of 3% of their compensation;
2. A matching contribution equal to your employees' salary reduction
contributions subject to a percentage limit that is between 1 and 3% of their
compensation; or
3. A nonelective contribution equal to 2% of your employees' compensation.
You can use the Model Notification to Eligible Employees on page 3 to
satisfy these employee notification requirements for this SIMPLE plan. A Summary
Description must also be provided to eligible employees at this time. This
summary description requirement may be satisfied by providing a completed copy
of pages 1 and 2 of Form 5304-SIMPLE (including the information described in
Article VI - Procedures for Withdrawal).
If you fail to provide the employee notification (including the summary
description) described above, you will be liable for a penalty of $50 per day
until the notification is provided. If you can show that the failure was due to
reasonable cause, the penalty will not be imposed.
If the summary description information with respect to the financial
institution (i.e., the name and address of the financial institution and its
withdrawal procedures) is not available at the time the employee must be given
the summary description, you must provide the summary description without this
information. In such a case, you will have reasonable cause for not including
this information with respect to the financial institution in the summary
description, but only if you see to it that this information is provided to the
employee as soon as administratively feasible once the financial institution has
been selected.
Reporting Requirements
You are not required to file any annual information returns for your SIMPLE
plan, such as Forms 5500, 5500-C/R, or 5500-EZ. However, you must report to the
IRS which eligible employees are active participants in the SIMPLE plan and the
amount of your employees' salary reduction contributions to the SIMPLE plan on
Form W-2. These contributions are subject to social security, medicare, railroad
retirement, and federal unemployment tax.
Deducting Contributions
Contributions to this SIMPLE plan are deductible in your tax year containing the
end of the calendar year for which the contributions are made.
Contributions will be treated as made for a particular tax year if they are made
for that year and are made by the due date (including extensions) of your income
tax return for that year.
Summary Description
Each year the SIMPLE plan is in effect, the financial institution for the SIMPLE
IRA of each eligible employee must provide the employer the information
described in section 408(I)(2)(B). This requirement may be satisfied by
providing the employer a current copy of Form 5304-SIMPLE (including
instructions) together with the financial institution's procedures for
withdrawals from SIMPLE IRAs established at that financial institution,
including the financial institution's name and address. The summary description
must be received by the employer in sufficient time to comply with the Employee
Notification requirements above.
There is a penalty of $50 per day imposed on the financial institution for
each failure by the financial institution to provide the summary description
described above. However, if the failure was due to reasonable cause, the
penalty will not be imposed.
SM-498E-1297 M (1/98)
Liberty(TM) Roth IRA
Look ahead to retirement - with increased earnings and lower taxes
Keep more retirement earnings
When you invest through a traditional IRA, you have to consider the difference
between what you earn for retirement and what you keep after taxes. With the
Liberty Roth IRA, you keep what your investment earns.
NOT FDIC INSURED
May Lose Value
No Bank Guarantee
This brochure must be preceded or accompanied by a current prospectus that
contains more complete information, including fees, risks and expenses for any
Colonial, Stein Roe Advisor or Newport fund you consider purchasing.
Please read the prospectus carefully before you invest or send money.
1 Keep more of your retirement earnings. Pay less taxes.
Your IRA investment can grow free from federal income taxes with a Liberty Roth
IRA, compared to a traditional IRA where your earnings grow tax deferred.
Because contributions to your Liberty Roth IRA are made after-tax, your
distributions, when withdrawn at retirement, are tax and penalty free.* For
many, the sum of the earnings from their IRA investments are more than the sum
of their original yearly contributions. A Roth IRA lets you keep all of those
earnings -- providing you with more money at retirement -- a benefit no other
retirement plan can deliver.
Increase your income and reduce your tax burden at retirement
The Liberty Roth IRA means greater long-term results versus a deductible
traditional IRA.
<TABLE>
<CAPTION>
Prior to retirement During retirement
Contributions Earnings Taxes Paid Taxes Paid Spendable income
during retirement
<S> <C> <C> <C> <C> <C>
Roth IRA $50,000 $134,648 $14,000 $0 $325,784
Traditional IRA $50,000 $134,648 $0 $91,219 $234,565
</TABLE>
* Must be a qualified distribution to be federal income tax-free. State, local
and federal estate taxes may apply.
The illustration above compares a Roth IRA with a traditional deductible IRA.
The example assumes a $2,000 annual contribution for 25 years; a 28% federal tax
bracket; compounded annual earnings of 9%; and a payout of 7% over 20 years. If
the traditional IRA owner invested the tax savings from the IRA deduction ($560
annually) in a taxable investment earning 9%, he or she would accumulate an
additional $35,014 after taxes, that would produce an additional $53,678 of
after-tax retirement income over 20 years. The Roth IRA contributions are
non-deductible, so there are no similar up-front tax savings. However, the
distributions from the Roth IRA are free from federal income tax, resulting in a
significantly higher after-tax retirement payout than the traditional IRA, where
the distributions are fully taxable.
This chart is for illustrative purposes and does not represent past, current or
future performance of any Colonial, Newport or Stein Roe Advisor Fund. The value
of fund shares will fluctuate with changes in market conditions.
<PAGE>
2 More control of your IRA dollars
The Liberty Roth IRA takes the benefits of the traditional IRA a giant step
further -- providing investors with control of their own money. Unlike the
traditional IRA, contributions can be made as long as you like, even past age
70-1/2. Distributions are not required at any age, providing you with the
advantage of additional tax-free earnings and the opportunity to pass your
Liberty Roth IRA assets on to your beneficiaries. The longer the money remains
in your Liberty Roth IRA, the more you can benefit from the power of tax-free
growth.
The Liberty Roth IRA provides many features
The Roth IRA offers you flexibility not found in other retirement plans.
[bullet] Contributions are not tax deductible.
[bullet] Contributions can be made past the age of 70-1/2.
[bullet] Both you and your spouse can contribute to a Liberty Roth IRA.
[bullet] The income cap for contributions is $110,000 for singles and $160,000
for joint filers; anyone below the income cap is eligible to contribute.
[bullet] You may also participate in other retirement plans, like a 401(k).
[bullet] Converting your existing IRA assets is possible if your adjusted gross
income is $100,000 or less. This is a taxable event.
[bullet] You may make tax-free withdrawals, equal to the amount of your
contributions, at any time.
[bullet] Qualified distributions are federal income tax free after five years,
and: age 59-1/2, death, disability or first time qualifying home purchases.
[bullet] You may delay distributions indefinitely.
3 Should you convert your IRA?
If your adjusted gross income is $100,000 or less, whether you file singly or
jointly, you can convert your traditional IRA assets into a Liberty Roth IRA.
The conversion is treated as a distribution -- you must pay taxes on your
taxable balance, but early withdrawal penalties do not apply. For the 1998 tax
year only, you have an opportunity to convert your traditional IRA assets to a
Liberty Roth IRA and spread your tax payments over a four-year period. After
1998, you must pay the tax consequences of a conversion in that tax year.
Questions you should consider before you convert
Several factors must be considered before you convert your traditional IRA
assets to a Liberty Roth IRA. Your financial advisor can help you evaluate your
financial situation and assist you in making the most informed decision.
Do you believe you will be in the same or higher tax bracket at retirement?
Will you let your earnings accumulate for at least five years?
Can you pay the conversion taxes from funds outside your IRA account?
HOW TO INVEST
To establish your Liberty Roth IRA
Read the Liberty Roth IRA Application Form and supporting documentation.
Complete the Liberty Roth IRA Application Form.
Send the Liberty Roth IRA Application Form to:
Colonial Investors Service Center, Attn.: Retirement Plan Services, P.O. Box
1722, Boston, MA 02105-1722
<PAGE>
To convert assets from an existing IRA to your Liberty Roth IRA
Read the instructions on the front of the Transfer of Assets Form. If you are
converting from a Liberty Traditional IRA to a Liberty Roth IRA, you must also
complete and read the Liberty Roth IRA Conversion Form.
Complete the Liberty Roth IRA Transfer of Assets Form.
Send the Liberty Roth IRA Transfer of Assets Form and Liberty Roth IRA
Application, if necessary, to:
Colonial Investors Service Center, Attn.: Retirement Plan Services, P.O. Box
1722, Boston, MA 02105-1722
LIBERTY ROTH IRA APPLICATION
(Roth Individual Retirement Account) This application must be accompanied or
preceded by a current prospectus for the appropriate Colonial, Stein Roe Advisor
or Newport fund(s).
Amount (if known) Tax year
1 Name and address - Please print
Name Date of birth
Address Social Security Number
City State ZIP Telephone Number
2 Type of IRA - Check either contributory or conversion, not both
A. Contributory Roth IRA - Please specify source of funds
Regular Contribution
Rollover from a Contributory Roth IRA
Transfer of Assets from a Contributory Roth IRA(1)
B. Roth Conversion IRA(2) - Please specify source of funds
Rollover from a Traditional IRA or a Roth Conversion IRA
Transfer of Assets from a Traditional IRA(1)
Transfer of Assets from a Roth Conversion IRA(1)
Total Amount Enclosed
Make check payable to Colonial Investors Service Center, Inc.
For transfers or rollovers from a Roth IRA, please indicate the tax year you
established your account (tax year).
(1) You must complete the Liberty Roth IRA Transfer of Assets form.
(2) A separate Roth Conversion IRA must be established to hold only assets
rolled over or transferred from a traditional IRA in any one tax year.
You may not make regular contributions to a Roth Conversion IRA.
3 Investment Selection
I direct the Custodian to invest all contributions, and reinvest all dividends
and capital gain distributions in shares of the following funds unless otherwise
specified in section 6 of this Application and until I provide additional
investment instructions. I understand that if no fund or share class is
designated, my contributions will remain uninvested pending proper investment
directions.
Fund Name Share Class (circle only one) Dollar or percentage amount(3)
1. A B C $ or %
2. A B C $ or %
3. A B C $ or %
(3) Figures must equal dollar amount of initial contribution or 100%
4 Beneficiary
The following person(s) is/are designated to receive the balance of my Roth IRA
upon my death. If no
<PAGE>
primary or contingent beneficiary survives me, or if I have not named a
beneficiary hereunder, any balance remaining in the account will be payable to
my surviving spouse if I am married, otherwise to my estate.
Primary Beneficiary
Name Percent
Spouse Non-Spouse Date of birth Social Security Number
Contingent Beneficiary
Name Percent
Spouse Non-Spouse Date of birth Social Security Number
(4) A contingent beneficiary will receive proceeds only if all primary
beneficiary predecease the Roth IRA holder.
Spousal Consent: I am the spouse for the above named Depositor. I hereby consent
to the beneficiary designation(s) indicated above. I assume full responsibility
for any adverse consequences that may result. I acknowledge that a designation
of a non-spouse beneficiary may not be effective in my state without my consent,
and that I should consult my legal advisor. No legal or tax advice was given to
me by Liberty Financial Investments, Inc. or the Custodian.
Print Spouse's Name
Spouse's Signature Date
5 Investment Privileges (Not Applicable to Class B or C shares)
(a) Rights of Accumulation
(Lower sales charges if you or your spouse own other Colonial, Stein Roe Advisor
or Newport funds.)
I have accounts in:
Fund name Account number
Fund name Account number
(b) Statement of Intent (lower sales charges if you or your spouse plan to
invest more). I agree to the provisions of the Statement of Intent set forth in
the prospectus of the designated fund(s), which I have received. I intend to
invest over a 13-month period beginning:
at least (amount): $50,000 $100,000 $250,000 $500,000 $1,000,000
Start date
If you or your spouse already have a Statement of Intent, check here.
6 Automatic Dividend Diversification (ADD)
This section is used to diversify your portfolio by investing your
dividends/capital gains into another Colonial, Stein Roe Advisor or Newport fund
with no sales charge. Dividends and/or capital gains may pay from one fund to
another fund in the same share class, not from one fund to two or more other
funds.
Name of Fund to receive distributions Account Number, if existing account
Name of Fund to receive distributions Account Number, if existing account
7 I hereby establish a Liberty Roth IRA, appoint BankBoston, N.A. as
Custodian, direct the contributions to be invested as provided in Section 3 of
this Application and designate the beneficiary(ies) named in Section 4. I also
hereby:
(a) acknowledge that I have received and read the Liberty Roth IRA Custodial
Agreement (IRS Form 5305-RA and any attachments thereto) and the Liberty Roth
IRA Disclosure Statement and I agree to the provisions of those documents;
(b) acknowledge that I have received and read a current prospectus of the
Fund(s) selected in Section 3 of this Application and that this Roth IRA Account
will be subject to the prospectus as amended from time
<PAGE>
to time;
(c) consent to the Custodial Account fee of $10 (subject to change as provided
in the Liberty Roth IRA Custodial Agreement);
(d) certify, under penalty of perjury, that my Social Security number is
correctly stated on this Application; and
(e) understand that certain redemptions may be subject to a contingent deferred
sales charge (CDSC).
Depositor signature Date
This account shall be deemed to have been accepted by the Custodian, BankBoston,
N.A., upon receipt by its Agent, Colonial Investors Service Center, Inc., of all
necessary forms, properly completed.
To: BankBoston, N.A., Custodian:
You are hereby authorized and appointed on behalf of the below-signed financial
services firm to execute the purchase transactions in accordance with the terms
and conditions of this application, and to confirm each purchase and to forward
to the applicant a copy of each new prospectus of the designated funds or
supplements therein, delivered to you for that purpose. With respect to each
purchase, the amount of any commissions due will be remitted to the financial
services firm, except that no commissions will be paid to the firm of any
transactions for which the firm's net sales commission is less than $1.00. The
financial services firm's representative also represents that he may lawfully
sell shares of the designated funds in the state designated as the applicant's
record address, and that he has entered into a dealer agreement with the
principal underwriter with respect to the sale of shares of the designated
fund(s).
8 Financial Services Firm (FSF)
FSF name Branch office location
Main office address Telephone number
City State ZIP
Representative's last name Representative's number
Authorized signature Branch number
Send completed application and check made payable to Colonial Investors Services
Center, Inc. (agent for BankBoston, N.A.), Custodian, to:
Colonial Investors Service Center, Inc., Attn: Retirement Plan Services, P. O.
Box 1722, Boston, MA 02105-1722.
Colonial Investors Service Center, Inc.
LIBERTY ROTH IRA TRANSFER OF ASSETS
This form must be accompanied or preceded by a current prospectus for the
appropriate Colonial, Stein Roe Advisor or Newport fund(s).
Instructions (Also, please refer to the Liberty Roth IRA Disclosure Statement)
1. Conversion from a Traditional IRA to a Liberty Roth IRA
Note: The conversion of assets from a Traditional IRA to a Roth IRA can have
significant tax consequences. Please consult your tax advisor.
[bullet]If you are converting assets from a Traditional (non-Roth) IRA to a Roth
IRA you should establish a separate Liberty Roth Conversion IRA to hold assets
converted each tax year.
[bullet]If you have already established a Liberty Roth Conversion IRA for this
tax year, you do not need to establish a new one. Enter your account number(s)
in Section 1.
[bullet]If you have not established a Liberty Roth Conversion IRA for this tax
year, you must also complete a Liberty Roth IRA Application.
<PAGE>
2. Transfer from an existing Roth IRA to a Liberty Roth IRA
[bullet]If you currently have a Liberty Roth IRA, you need not establish a new
one. Enter your account number (s) in Section 1.
[bullet]If you don't currently have a Liberty Roth IRA, you must also complete a
Liberty Roth IRA Application.
1 Name and address - Please print
Name Social Security Number
Address
City State ZIP Telephone Number
2 Assets to be transferred
Name of Financial Institutions Account Number
Address Account Number
City State ZIP
Type of existing IRA
Traditional IRA Contributory Roth IRA____(initial contribution year) Roth
Conversion IRA ____(initial contribution year)
Type of Investment
Mutual Fund Name
CD (Date of Maturity) Other
3 Investment selection
I am establishing a new Liberty Roth IRA. My investment choices are indicated on
the attached Liberty Roth IRA application.
I already have a Liberty Roth IRA. Please invest these transferred assets as
follows:
<TABLE>
<CAPTION>
Fund name(s) Share class (Circle only one) Account # Dollar or percentage amount*
<S> <C> <C> <C>
1. A B C $ or %
2. A B C $ or %
3. A B C $ or %
</TABLE>
* Figures must equal dollar total amount of initial contribution or 100%.
4 RA Owner's Authorization
To BankBoston, N.A.: Please initiate a Transfer of Assets with my existing IRA
Trustee or Custodian. I certify that this Transfer of Assets is permissible
under Section 408A of the Internal Revenue Code.To Resigning Trustee or
Custodian: I have established a Roth IRA or Conversion Roth IRA with Liberty
Financial Investments, Inc. I want to initiate a Transfer of Assets from my IRA
account(s) indicated in Section 2. Please act on the instructions below. I would
appreciate your prompt attention to this request.
Check one of the following options:
A. Liquidate all or part of the account(s) indicated and send the proceeds in
cash immediately or at maturity(date) in cash as described in Section 5 below.
B. Transfer in kind all my shares, i.e. re-register, of the following Colonial,
Stein Roe Advisor or Newport fund(s), account number(s) , to BankBoston, N.A.
Custodian. Please provide Colonial Investors Service Center, Inc., agent for the
Custodian, with transfer instructions signed by an authorized officer of your
company/institution.
I understand that this conversion of a traditional IRA to a Liberty Roth IRA
will be reported by you as a taxable distribution and will be subject to 10%
federal income tax withholding unless I elect otherwise. I certify that this
conversion is permissible under section 408A of the Internal Revenue Code that
my
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adjusted gross income does not exceed $100,000 and/or I am not married filing a
separate return. I hereby elect not to have federal income tax withholding apply
unless I have checked the box below. I understand that in either case I am
responsible for paying any federal, state, and local income taxes that might
apply as a result of this conversion.
I DO want federal income taxes withheld at the rate of 10% in connection with
the conversion of my traditional IRA to my Liberty Roth Conversion IRA. I
understand that if I am not yet age 59-1/2 I may be subject to an additional 10%
premature distribution tax on all or part of the amount withheld.
Note: In most cases you should not elect to have withholding apply, so that the
full amount of your traditional IRA can be converted to your Liberty Roth IRA.
If you do elect to have withholding apply you may rollover an equal amount to
your Roth Conversion IRA within 60 days. Please consult your tax advisor.
I acknowledge that a penalty may apply for early withdrawals from certain types
of investments, such as certificates of deposit.
Name (Please type or print clearly.)
Signature of Depositor Date Signature guarantee
* The signature of the Roth IRA depositor may require a guarantee by a bank, a
trust company, a member of a domestic stock exchange or any other eligible
guarantor institution. Notarization is not acceptable. Your resigning
trustee/custodian will inform you if this is necessary.
5 Payment Instructions/Custodian Acceptance
To be completed by Colonial Investors Service Center, Inc.
BankBoston, N.A. has agreed to serve as Custodian for the above-named person's
Roth IRA Account. As Custodian, BankBoston, N.A. will accept the assets in the
manner selected in Section 4 above upon receipt of properly completed paperwork.
Please forward the assets on a custodian/trustee-to-custodian basis and make the
check payable to Colonial Investors Service Center, Inc., (agent for BankBoston,
N.A., Custodian). Send the check, along with a copy of this request, to:
Colonial Investors Service Center, Inc., Attn: Retirement Plan Services, P.O.
Box 1722, Boston, MA 02105-1722.
Please include the following information on your check:
Account Number For the Benefit of (FBO)
Account Number
Account Number
Colonial Investors Service Center, Inc.
LIBERTY ROTH IRA CUSTODIAL AGREEMENT
The Depositor whose name appears on the Application is establishing a Roth
Individual Retirement Account under section 408A to provide for his or her
retirement and for the support of his or her beneficiaries after death.
The Custodian named on the Application has given the Depositor the disclosure
statement required under Regulations section 1.408-6.
The Depositor has assigned the custodial account the sum indicated on the
Application.
The Depositor and the Custodian make the following Agreement:
ARTICLE I
1. If this Roth IRA is not designated as a Roth Conversion IRA, then, except in
the case of a rollover contribution described in section 408A(e), the Custodian
will accept only cash contributions and only up to a maximum amount of $2,000
for any tax year of the Depositor.
2. If this Roth IRA is designated as a Roth Conversion IRA, no contributions
other than IRA
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Conversion Contributions made during the same tax year will be accepted.
ARTICLE II
The $2,000 limit described in Article I is gradually reduced to $0 between
certain levels of adjusted gross income (AGI). For a single Depositor, the
$2,000 annual contribution is phased out between AGI of $95,000 and $110,000;
for a married Depositor who files jointly, between AGI of $150,000 and $160,000;
and for a married depositor who files separately, between $0 and $10,000. In the
case of a conversion, the Custodian will not accept IRA Conversion Contributions
in a tax year if the Depositor's AGI for that tax year exceeds $100,000 or if
the Depositor is married and files a separate return. Adjusted gross income is
defined in section 408A(c)(3) and does not include IRA Conversion Contributions.
ARTICLE III
The Depositor's interest in the balance in the Custodial account is
nonforfeitable.
ARTICLE IV
1. No part of the custodial funds may be invested in life insurance contracts,
nor may the assets of the Custodial account be commingled with other property
except in a common trust fund or common investment fund (within the meaning of
section 408(a)(5)).
2. No part of the custodial funds may be invested in collectibles (within the
meaning of section 408(m)) except as otherwise permitted by section 408(m)(3),
which provides an exception for certain gold, silver, and platinum coins, coins
issued under the laws of any state, and certain bullion.
ARTICLE V
1. If the Depositor dies before his or her entire interest is distributed to him
or her and the Depositor's surviving spouse is not the sole beneficiary, the
entire remaining interest will, at the election of the Depositor or, if the
Depositor has not so elected, at the election of the beneficiary or
beneficiaries, either:
(a) Be distributed by December 31 of the year containing the fifth anniversary
of the Depositor's death, or
(b) Be distributed over the life expectancy of the designated beneficiary
starting no later than December 31 of the year following the year of the
Depositor's death.
If distributions do not begin by the date described in (b), distribution method
(a) will apply.
2. In the case of distribution method 1.(b) above, to determine the minimum
annual payment for each year, divide the Depositor's entire interest in the
Custodial account as of the close of business on December 31 of the preceding
year by the life expectancy of the designated beneficiary using the attained age
of the designated beneficiary as of the beneficiary's birthday in the year
distributions are required to commence and subtract 1 for each subsequent year.
3. If the Depositor's spouse is the sole beneficiary on the Depositor's date of
death, such spouse will then be treated as the Depositor.
ARTICLE VI
1. The Depositor agrees to provide the Custodian with information necessary for
the Custodian to prepare any reports required under sections 408(i) and
408A(d)(3)(E), Regulations sections 1.408-5 and 1.408-6, and under guidance
published by the Internal Revenue Service.
2. The Custodian agrees to submit reports to the Internal Revenue Service and
the Depositor as prescribed by the Internal Revenue Service.
ARTICLE VII
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through IV and this sentence will be controlling. Any
additional articles that are not consistent with section 408A, the related
regulations, and other published guidance will be invalid.
ARTICLE VIII
This Agreement will be amended from time to time to comply with the provisions
of the Code, related regulations, and other published guidance. Other amendments
may be made with the consent of the custodian and depositor.
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ARTICLE IX
9.01 Definitions and Establishment: In this part of this Agreement (Article IX),
the words "you" and "your" mean the Depositor, the words "we", "us" and "our"
mean BankBoston, N.A. (or any successor trustee), "Sponsor" means Liberty
Financial Investments, Inc., and "Code" means the Internal Revenue Code.
Roth Conversion IRA: A Roth Conversion IRA is a Roth IRA that accepts only
IRA Conversion Contributions made during the same tax year.
IRA Conversion Contributions: IRA Conversion Contributions are amounts
rolled over, transferred, or considered transferred from a nonRoth IRA to a Roth
IRA. A nonRoth IRA is an individual retirement account or annuity described in
section 408(a) or 408(b), other than a Roth IRA.
You appoint us as Custodian of this Roth IRA custodial account. This
Agreement shall become effective upon the date accepted by us as specified in
the confirmation statement sent to you by our agent. Your acceptance of this
Agreement is indicated by your signature in the related account Application.
After deduction of all appropriate fees and charges, you direct us to invest the
custodial account solely in shares of mutual funds distributed by the Sponsor or
other investments authorized by the Sponsor for use under this Agreement.
9.02 Notices And Change Of Address: Any required notice regarding this Roth IRA
will be considered effective when we mail it to the last address of the intended
recipient which we have in our records. Any notice to be given to us will be
considered effective when we actually receive it. You must notify us of any
change of address. You may send notice to us by writing to Colonial Investors
Service Center, Inc., Agent, Attn: Retirement Plan Services, P.O. Box 1722,
Boston MA 02105-1722.
9.03 Representations And Responsibilities: You represent and warrant to us that
any information you have given or will give us with respect to this Agreement is
complete and accurate. Further, you agree that any directions you give us, or
action you take will be proper under this Agreement and that we are entitled to
rely upon any such information or directions without further inquiry. We shall
not be responsible for losses of any kind that may result from your directions
to us or your actions or failures to act and you agree to reimburse us for any
loss we may incur as a result of such directions, actions or failures to act. We
shall not be responsible for any penalties, taxes, judgments or expenses you
incur in connection with your Roth IRA. You assume full and sole responsibility
for determining whether your contributions or distributions comply with the
Code, regulations, rulings or this Agreement. You (and your beneficiaries after
your death) shall hold us harmless and indemnify us and the Sponsor against any
loss or liability which may arise under this Agreement, except which rises from
our negligence or willful misconduct.
9.04 Service Fees: We have the right to charge an annual service fee or other
designated fees (for example, a transfer, rollover or termination fee) for
maintaining your Roth IRA. In addition, we have the right to be reimbursed for
all reasonable expenses we incur in connection with the administration of your
Roth IRA. We reserve the right to charge any additional fee upon 30 days notice
to you that the fee will be effective. We may employ agents and may subcontract
in fulfilling our obligations under this Agreement.
Any brokerage commissions attributable to the assets in your Roth IRA
will be charged to your Roth IRA. You cannot reimburse your Roth IRA for those
commissions.
9.05 Investment Of Amounts In The Roth IRA:
(a) Direction Of Investment - You have exclusive responsibility for and control
over the investment of the assets of your Roth IRA. You shall direct all
investment transactions, including earnings and the proceeds from securities
sales. Your selection of investments, however, including IRA conversion
contributions, shall be limited to publicly traded securities, mutual funds,
money market instruments and other investments that are obtainable by us and
that we are capable of holding in the ordinary course of our business, and that
are authorized by the Sponsor for use under this Agreement.
In the absence of instructions from you or if your instructions are not in
a form acceptable to us, we shall hold any uninvested amounts in cash and we
shall have no responsibility to invest uninvested
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cash unless and until directed by you. We shall not undertake any transactions
for the custodial account without direction in proper form from you.
All transactions shall be subject to any and all applicable Federal and
State laws and regulations and the rules, regulations, customs and usages of any
exchange, market or clearing house where the transaction is executed and to our
policies and practices.
After your death, your beneficiary(ies) shall have the right to direct the
investment of your Roth IRA assets, subject to the same conditions that applied
to you during your lifetime under this Agreement (including, without limitation,
section 9.03).
(b) Our Investment Powers And Duties - We shall have no discretion to direct any
investment in your Roth IRA. We assume no responsibility for rendering
investment advice with respect to your Roth IRA, nor will we offer any opinion
or judgment to you on matters concerning the value or suitability of any
investment or proposed investment for your Roth IRA. We shall exercise the
voting rights and other shareholder rights with respect to securities in your
Roth IRA but only in accordance with the instructions you give to us. If you
fail or decline to issue such instructions, that failure or declination shall be
deemed to be a direction to us not to exercise such voting or other shareholder
rights.
(c) Delegation Of Investment Responsibility - We may, but are not required to,
permit you to delegate your investment responsibility for your Roth IRA to
another party acceptable to us by giving written notice of your delegation in a
format we prescribe. We shall follow the direction of any such party who is
properly appointed and we shall be under no duty to review or question, nor
shall we be responsible for, any of that party's directions, actions or failures
to act.
9.06 Beneficiaries: If you die before you receive all of the amounts in your
Roth IRA, payments from your Roth IRA will be made to your beneficiaries.
You may designate one or more persons or entities as beneficiary of your
Roth IRA. This designation can only be made on a form prescribed by us. The
consent of a beneficiary shall not be required for you to revoke a beneficiary
designation. We may rely upon the last written designation received at our
office, which shall supersede all prior designations. Unless you specifically
designate otherwise in a form acceptable to us, death benefits shall be
distributed equally among all surviving primary beneficiaries or all surviving
contingent beneficiaries (should all primary beneficiaries predecease you). If
no beneficiary designation is in effect at your death, or if we receive
satisfactory proof that all such named beneficiaries have predeceased you, then
amounts in the custodial account shall be paid to your spouse, if he or she
survives you, otherwise to your estate.
If your surviving spouse is your sole beneficiary, your spouse may treat
your Roth IRA as his or her own Roth IRA and would not be subject to the
required minimum distribution rules. Your surviving spouse will also be entitled
to such additional beneficiary payment options as are permitted under the law or
related regulations, and by the Sponsor. If the beneficiary or beneficiaries
include anyone other than your surviving spouse, distributions must commence in
accordance with Article V. If the beneficiary payment election described in
Article V is not made by December 31 of the year following the year of your
death, the payment method described in Article V(1)(a) will be deemed elected.
9.07 Termination: The Sponsor may remove us and appoint a successor custodian or
trustee upon written notice to us and to you (or to your beneficiary if you are
deceased). Either party may terminate this Agreement at any time by giving
written notice to the other. We can resign as Custodian at any time effective 30
days after we mail written notice of our resignation to you. Upon receipt of
that notice, you must make arrangements to transfer your Roth IRA to another
financial organization. If you do not complete a transfer of your Roth IRA
within 30 days from the date we mail the notice to you, we have the right to
transfer your Roth IRA assets to a successor Roth IRA trustee or custodian that
we choose in our sole discretion or we may pay your Roth IRA to you in a single
sum. We shall not be liable for any actions or failures to act on the part of
any successor trustee or custodian nor for any tax consequences you may incur
that result from the transfer or
<PAGE>
distribution of your assets pursuant to this section.
This Agreement shall terminate upon the complete distribution of the
custodial account to you or your beneficiaries, to successor individual
retirement accounts or annuities, or when no assets otherwise remain in the
custodial account, and we shall be relieved from all further liability with
respect to the custodial account.
If this Agreement is terminated, we may hold back from your Roth IRA a
reasonable amount of money that we believe is necessary to cover any one or more
of the following:
*any fees, expenses or taxes chargeable against your Roth IRA;
*any penalties associated with the early withdrawal of any savings
instrument or other investment in your Roth IRA.
If our organization is merged with another organization (or comes under the
control of any Federal or State agency) or if our entire organization (or any
portion which includes your Roth IRA) is bought by another organization, that
organization (or agency) shall automatically become the trustee or custodian of
your Roth IRA, but only if it is the type of organization authorized to serve as
a Roth IRA trustee or custodian.
If we are required to comply with section 1.408-2(e) of the Treasury
Regulations and we fail to do so, or we are not keeping the records, making the
returns or sending the statements as are required by forms or regulations, the
IRS may, after notifying you, require you to substitute another trustee or
custodian.
9.08 Amendments: The Sponsor has the right to amend this Agreement at any time.
No such amendment may be made which increases our duties without our consent.
Any amendment made to comply with the Code and related regulations does not
require your consent. You will be deemed to have consented to any other
amendment unless, within 30 days from the date the Sponsor mails the amendment,
you notify us in writing that you do not consent.
9.09 Withdrawals: All requests for withdrawal shall be in writing on a form
provided by or acceptable to us. The method of distribution must be specified in
writing and must be in a form permitted by the Sponsor. The tax identification
number of the recipient must be provided to us before we are obligated to make a
distribution.
Any withdrawals shall be subject to all applicable tax and other laws and
regulations, including possible early withdrawal penalties and withholding
requirements.
9.10 Minimum Distributions: You are not required to take a distribution from
your Roth IRA at age 70-1/2. At your death, however, your beneficiaries must
begin taking distributions in accordance with Article V and section 9.06 of this
Agreement. Neither we, the Sponsor, nor any mutual fund assume any
responsibility to make any distribution to you from your Roth IRA account unless
and until you provide us with a written request for a distribution on a form
provided by or approved by us.
9.11 Transfers From Other Plans: We can receive amounts transferred or rolled
over to this Roth IRA from the trustee or custodian of another Roth IRA as
permitted by statute or applicable regulations.
However, if this Custodial account is designated as a Roth Conversion IRA,
no contributions other than IRA Conversion Contributions made during the same
tax year will be accepted.
9.12 Liquidation Of Assets: We have the right to liquidate assets in your Roth
IRA if necessary to make distributions or to pay fees, expenses or taxes
properly chargeable against your Roth IRA. If you fail to direct us as to which
assets to liquidate, we will decide in our complete and sole discretion and you
agree not to hold us liable for any adverse consequences that result from our
decision.
9.13 Restrictions On The Fund: Neither you nor any beneficiary may sell,
transfer or pledge any interest in your Roth IRA in any manner whatsoever,
except as provided by law or this Agreement.
The assets in your Roth IRA shall not be responsible for the debts,
contracts or torts of any person entitled to distributions under this Agreement.
9.14 What Law Applies: This Agreement is subject to all applicable Federal and
State laws and regulations. This Agreement shall be construed under the laws of
the Commonwealth of Massachusetts, or if different, the state of the domicile of
the custodian.
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If any part of this Agreement is held to be illegal or invalid, the
remaining parts shall not be affected. Neither your nor our failure to enforce
at any time or for any period of time any of the provisions of this Agreement
shall be construed as a waiver of such provisions, or your right or our right
thereafter to enforce each and every such provision.
This document, together with the Liberty Roth IRA Application, constitutes
the entire agreement between you and us, and no representative of the Sponsor,
any mutual fund, or any broker-dealer shall have any authority to make
representations or to bind us beyond the terms of this document.
LIBERTY ROTH IRA DISCLOSURE STATEMENT
The following information is being provided in accordance with the requirements
of the Internal Revenue Service and is based on the law as in effect on January
1, 1998, together with anticipated technical corrections. This disclosure
statement should be read together with the Liberty Roth IRA Application, Liberty
Roth IRA Custodial Agreement and the prospectus(es) which you have already
received from your registered representative.
RIGHT TO REVOKE YOUR ROTH IRA
You have the right to revoke your Roth IRA within seven (7) days of its
establishment. If revoked, you are entitled to a full refund of the initial
contribution you made to your Roth IRA, including sales commissions and/or
administrative fees. You may make this revocation only by mailing or delivering
a written notice to Colonial Investors Service Center, Inc., Agent, Attn:
Retirement Plan Services, P.O. Box 1722, Boston, MA 02105-1722.
Your revocation will be deemed mailed as of the date of the postmark if you send
your notice by first class mail (or on the date certified or registered if
mailed by this method).If you have any questions about the procedure for
revoking your Roth IRA, please call 1-800-345-6611.
REQUIREMENTS OF A ROTH IRA
A. CASH CONTRIBUTIONS - Your contribution must be in cash, unless it is a
qualified rollover contribution.
B. MAXIMUM CONTRIBUTION - The total amount you may contribute to a Roth IRA for
any taxable year cannot exceed the lesser of $2,000 or 100 percent of your
compensation. If you also maintain a Traditional IRA (i.e., an IRA subject to
the limits of Internal Revenue Code (IRC) Sec. 408(a) or 408(b)) the maximum
contribution to your Roth IRA is reduced by any contributions you make to your
Traditional IRA. Your total annual contribution to all Traditional IRAs and Roth
IRAs cannot exceed the lesser of $2,000 or 100 percent of your compensation.
Your Roth IRA contribution is further limited if your adjusted gross income
(AGI) exceeds $150,000 and you are a married individual filing jointly ($95,000
for single taxpayers). Married individuals filing jointly with AGI which exceeds
$160,000 may not fund a Roth IRA. Married individuals filing separately with AGI
exceeding $10,000 may not fund a Roth IRA. Single individuals with AGI exceeding
$110,000 may not fund a Roth IRA.
If you are married filing jointly and your AGI is between $150,000 and
$160,000, your maximum Roth IRA contribution is determined as follows: (1)
Subtract your AGI from $160,000, (2) divide the difference by $10,000, and (3)
multiply the result in step (2) by $2,000. For example, if your AGI is $155,000,
your maximum Roth IRA contribution is $1,000. This amount is determined as
follows: [($160,000 minus $155,000) divided by $10,000] multiplied by $2,000.
If you are single and your AGI is between $95,000 and $110,000, your
maximum Roth IRA contribution is determined as follows: (1) Subtract your AGI
from $110,000, (2) divide the difference by $15,000, and (3) multiply the result
in step (2) by $2,000. For example, if your AGI is $98,000, your maximum Roth
IRA contribution is $1,600. This amount is determined as follows: [($110,000
minus $98,000) divided by $15,000] multiplied by $2,000.
Your Roth IRA contribution is not limited by your participation in a
retirement plan other than a Traditional IRA, as discussed above. In addition,
unlike Traditional IRAs, you may continue to fund a
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Roth IRA after age 70-1/2 so long as you have compensation and your AGI is below
the maximum thresholds discussed above.
C. NONFORFEITABILITY - Your interest in your Roth IRA is nonforfeitable.
D. ELIGIBLE CUSTODIANS - The Custodian of your Roth IRA must be a bank, savings
and loan association, credit union, or a person approved by the Secretary of the
Treasury.
E. COMMINGLING ASSETS - The assets of your Roth IRA cannot be commingled with
other property except in a common trust fund or common investment fund.
F. LIFE INSURANCE - No portion of your Roth IRA may be invested in life
insurance contracts.
G. COLLECTIBLES - You may not invest the assets of your Roth IRA in collectibles
(within the meaning of Internal Revenue Code (IRC) section 408(m)). A
collectible is defined as any work of art, rug or antique, metal or gem, stamp
or coin, alcoholic beverage, or other tangible personal property specified by
the Internal Revenue Service. However, specially minted United States gold and
silver bullion coins and certain state-issued coins are permissible investments.
Platinum coins and certain gold, silver, platinum or palladium bullion (as
described in IRC Sec. 408(m)(3)) are also permitted as Roth IRA investments. The
Roth IRA sponsor may further limit the investments available to you.
H. BENEFICIARY PAYOUTS - If your surviving spouse is your sole beneficiary, your
spouse may treat your Roth IRA as his or her own Roth IRA and would not be
subject to the required minimum distribution rules. Your surviving spouse will
also be entitled to such additional beneficiary payment options as are permitted
under the law or related regulations (and permitted by the Sponsor). If the
beneficiary or beneficiaries include anyone other than your surviving spouse,
the entire amount remaining in your account will, at the election of your
beneficiary or beneficiaries, either
(a) be distributed by December 31 of the year containing the fifth anniversary
of your death, or
(b) be distributed in equal or substantially equal payments over the life or
life expectancy of your designated beneficiary or beneficiaries. Beginning no
later than December 31 of the year following the year of death.
A nonspouse beneficiary or beneficiaries must elect either option (a) or
(b) by December 31 of the year following the year of your death. If no election
is made, distribution will be made in accordance with option (a).
INCOME TAX CONSEQUENCES OF ESTABLISHING A ROTH IRA
A. CONTRIBUTIONS NOT DEDUCTIBLE - No deduction is allowed for Roth IRA
contributions, including transfers and rollover contributions.
B. TAX-DEFERRED EARNINGS - The investment earnings of your Roth IRA are not
subject to federal income tax as they accumulate in your Roth IRA. In addition,
distributions of your Roth IRA earnings will be free from federal income tax if
you take a qualified distribution, as discussed below.
C. TAXATION OF DISTRIBUTIONS - The taxation of a Roth IRA distribution depends
on whether the distribution is a qualified distribution or a nonqualified
distribution.
1. Qualified Distributions - Qualified distributions from your Roth IRA (both
the contributions and earnings) are not included in gross income. A qualified
distribution occurs when the assets have been in the Roth IRA for five years and
one of the following events occurs:
[bullet] attainment of age 59-1/2,
[bullet] disability,
[bullet] qualified first time home purchase ($10,000 lifetime limit), or
[bullet] death.
For contributory Roth IRAs (Roth IRA's eligible to receive annual
distributions), the five-year period begins with the first year for which you
make a Roth IRA contribution. For example, if you make a contribution to your
Roth IRA for 1998, the five-year period will be completed at the end of 2002.
However, a separate five-year requirement applies to each rollover/transfer
contribution from a Traditional IRA to a Roth Conversion IRA (Roth IRA's
containing only qualified rollovers made in the same tax year.) The five-year
period for these rollovers begins with the
<PAGE>
year in which the rollover contribution is made.
2. Nonqualified Distributions - If you do not meet the requirements for a
qualified distribution, any earnings you withdraw from your Roth IRA will be
included in your gross income and, if you are under age 59-1/2, may be subject
to an early distribution penalty. However, when you take a nonqualified
distribution, your basis (the amounts you contributed to the account) will
generally be removed first. Therefore, your nonqualified distributions will not
be taxable to you until your withdrawals exceed the amount of your
contributions. Under pending technical corrections, nonqualified distributions
from a Roth Conversion IRA may be subject to taxes and penalties.
D. NO REQUIRED MINIMUM DISTRIBUTIONS - You are not required to take
distributions from your Roth IRA at age 70-1/2 (as required for Traditional
IRAs).
E. ROLLOVERS AND CONVERSIONS - Your Roth IRA may be rolled over to another Roth
IRA of yours, or may receive rollover contributions, provided that all of the
applicable rollover rules are followed. Rollover is a term used to describe a
movement of cash or other property to your Roth IRA from any of your Roth or
Traditional IRAs. The rollover rules are generally summarized below. These
transactions are often complex. If you have any questions regarding a rollover,
please see a competent tax advisor.
1. Roth IRA To Roth IRA Rollovers - Funds distributed from your Roth IRA may be
rolled over to a Roth IRA of yours if the requirements of IRC section 408(d)(3)
are met. A proper Roth IRA to Roth IRA rollover is completed if all or part of
the distribution is rolled over not later than 60 days after the distribution is
received. You may not have completed another Roth IRA to Roth IRA rollover from
the distributing Roth IRA during the 12 months preceding the date you receive
the distribution. Further, you may roll the same dollars or assets only once
every 12 months. Roth IRA assets may not be rolled over to other types of IRAs
(e.g., Traditional IRA, SIMPLE IRA). (Alternatively, you may make a direct
transfer of assets from one Liberty Roth IRA to another.)
2. Traditional IRA To Roth IRA Conversions - Unless your adjusted gross income
is more than $100,000, or you are married filing a separate tax return, you are
eligible to roll over, transfer or convert all or any portion of your existing
Traditional IRA(s) into your Roth IRA(s). A separate Roth Conversion IRA should
generally be established to hold conversion amounts. If your Roth IRA is
designated as a Roth Conversion IRA, the only permissible contributions are
amounts converted from a Traditional IRA during the same tax year. The amount of
the conversion from your Traditional IRA to your Roth IRA will be treated as a
distribution for income tax purposes and is includible in your gross income
(except for any nondeductible contributions). Although the conversion amount is
generally included in income, the 10 percent early distribution penalty will not
apply to rollovers or conversions from a Traditional IRA to a Roth IRA,
regardless of whether you qualify for any exceptions to the 10 percent penalty.
If you convert assets from your Traditional IRA to your Roth IRA prior to
January 1, 1999, you may include the taxable amount of the distribution in your
gross income ratably over a four year period beginning with 1998.
3. Written Election - At the time you make a proper rollover to a Roth IRA, you
must designate to the Custodian, in writing, your election to treat that
contribution as a rollover. Once made, the rollover election is irrevocable.
4. No Rollovers From Employer Plans - You may not roll over distributions from
your employer's
<PAGE>
qualified retirement plan or 403(b) arrangement into your Roth IRA.
F. CARRYBACK CONTRIBUTIONS - A contribution is deemed to have been made on the
last day of the preceding taxable year if you make a contribution by the
deadline for filing your income tax return (not including extensions), and you
designate that contribution as a contribution for the preceding taxable year.
For example, if you are a calendar year taxpayer and you make your Roth IRA
contribution on or before April 15, your contribution is considered to have been
made for the previous tax year if you designate it as such.
LIMITATIONS AND RESTRICTIONS
A. SPOUSAL ROTH IRA - If you are married, you may make payments to a Roth IRA
established for the benefit of your spouse. You must file a joint tax return for
the year for which the contribution is made.
The amount you may contribute to your Roth IRA and your spouse's Roth IRA is the
lesser of $4,000 or 100 percent of your combined compensation. However, you may
not contribute more than $2,000 to any one Roth IRA. Your contribution may be
further limited if your AGI exceeds the levels discussed in the section titled
Maximum Contribution.
B. ESTATE TAX - The designation of a beneficiary to receive funds from your Roth
IRA at your death is not considered a transfer subject to Federal gift taxes.
However, any funds remaining in your Roth IRA at your death would be includible
in your Federal gross estate. If your spouse is your beneficiary or the
beneficiary is a trust which qualifies for the unlimited marital estate tax
deduction, no federal estate taxes will be due until after the death of your
surviving spouse. Finally, estate taxes may be offset by the $625,000
(increasing to $1 million by the year 2006) unified credit against federal
estate and gift tax.
C. SPECIAL TAX TREATMENT - Capital gains treatment and the favorable five or ten
year forward averaging tax authorized by IRC section 402 do not apply to Roth
IRA distributions.
D. INCOME TAX TREATMENT - Any nonqualified withdrawal of earnings from your Roth
IRA is subject to federal income tax withholding. You may, however, elect not to
have withholding apply to your Roth IRA withdrawal. If withholding is applied to
your withdrawal, not less than 10 percent of the amount withdrawn must be
withheld.
E. PROHIBITED TRANSACTIONS - If you or your beneficiary engage in a prohibited
transaction with your Roth IRA, as described in IRC section 4975, your Roth IRA
will lose its tax-exempt status and you must generally include the value of the
earnings in your account in your gross income for that taxable year.
F. PLEDGING - If you pledge any portion of your Roth IRA as collateral for a
loan, the amount so pledged will be treated as a distribution and may be
included in your gross income for that year to the extent it represents
earnings.
FEDERAL TAX PENALTIES
A. EARLY DISTRIBUTION PENALTY - If you are under age 59-1/2 and receive a
nonqualified Roth IRA distribution, an additional tax of 10 percent will apply
to the amount includible in income (i.e., the earnings), unless the distribution
is made on account of death, disability, a qualifying rollover, a direct
transfer, the timely withdrawal of an excess contribution; or if the
distribution is part of a series of substantially equal periodic payments (at
least annual payments) made over your life expectancy or the joint life
expectancy of you and your beneficiary. Payments made to pay medical expenses
which exceed 7.5 percent of your adjusted gross income and distributions to pay
for health insurance by an individual who has separated from employment and who
has received unemployment compensation under a federal or state program for at
least 12 weeks are also exempt from the 10 percent tax. Payments to cover
certain qualified education expenses and distributions for first-home purchases
(up to life-time maximum of $10,000) are exempt from the 10 percent tax. This
additional tax will apply only to the portion of a distribution which is
includible in your income.
<PAGE>
B. EXCESS CONTRIBUTION PENALTY - An excise tax of 6 percent is imposed upon any
excess contribution you make to your Roth IRA. This tax will apply each year in
which an excess remains in your Roth IRA. An excess contribution is any
contribution amount which exceeds your contribution limit, excluding rollover
and direct transfer amounts. Your contribution limit is the lesser of $2,000 or
100 percent of your compensation for the taxable year. Your contribution may be
further limited if your AGI exceeds the levels discussed in the section titled
Maximum Contribution.
C. MINIMUM DISTRIBUTION PENALTY - Unless your sole beneficiary is your surviving
spouse, your designated beneficiary(ies) is required to take certain minimum
distributions after your death. An additional tax of 50 percent is imposed on
the amount of the required minimum distribution which should have been taken but
was not.
D. PENALTY REPORTING - You must file Form 5329 with the Internal Revenue Service
to report and remit any penalties or excise taxes.
OTHER
A. IRS PLAN APPROVAL - The agreement used to establish this Roth IRA (IRS Form
5305-RA) has been approved by the Internal Revenue Service. The Internal Revenue
Service approval is a determination only as to form. It is not an endorsement of
the plan in operation or of the investments offered.
B. ADDITIONAL INFORMATION - You may obtain further information on Roth IRAs from
your District Office of the Internal Revenue Service. In particular, you may
wish to obtain IRS Publication 590, Individual Retirement Arrangements (IRAs).
FINANCIAL DISCLOSURE
Because the assets held in your Liberty Roth IRA are invested at your direction
and will be subject to market fluctuation, the value of your account can neither
be guaranteed nor projected. However, you will be provided with periodic
statements of your Roth IRA, including the current market values of investments.
Information about the shares of each mutual fund that you choose for investment
through your Roth IRA must be furnished to you in the form of a prospectus
governed by the rules of the Securities and Exchange Commission. Please refer to
the prospectus for detailed information concerning the fund objectives, the
sales charges, and the income and expenses of your mutual funds before you
invest.
Choose funds that match your goals
Colonial Government Money Market Fund
Colonial Short Duration U.S. Government Fund
Colonial Intermediate U.S. Government Fund
Colonial Federal Securities Fund
Colonial Income Fund
Colonial Strategic Income Fund
Colonial High Yield Securities Fund
The Colonial Fund
Colonial Utilities Fund
Colonial Strategic Balanced Fund
Colonial Global Equity Fund
Colonial U.S. Stock Fund
Colonial Select Value Fund
Colonial International Horizons Fund
Colonial International Fund for Growth
Colonial Small Cap Value Fund
Stein Roe Advisor Growth Stock Fund
Colonial Tax-Managed Growth Fund
Colonial Global Utilities Fund
<PAGE>
Colonial Newport Tiger Fund
Newport Japan Opportunities Fund
Colonial Newport Tiger Cub Fund
Newport Greater China Fund
For more complete information on any of the funds listed above, including fees,
risks and expenses, please obtain the current prospectus from your full-service
financial advisor. Please read the prospectus carefully before you invest or
send money.
Liberty Retirement Plans
At Liberty Financial Investments you can choose from a select group of
investment managers that include Colonial Management Associates, Inc., Stein Roe
& Farnham, Inc. and Newport Fund Management, Inc. Each of these managers adheres
to a consistent investment management style -- and is dedicated to that style.
Each is part of the Liberty Financial Companies (NYSE: L), a diversified asset
management company with more than $50 billion in assets under management for
more than 1.5 million investors.
Before you invest, consult your financial advisor
Ask your financial advisor to help you develop a retirement plan strategy that
blends the complementary disciplines of different investment managers into a
well-balanced program tailored to your goals.
LIBERTY ROTH IRA CONVERSION
TO CONVERT A LIBERTY TRADITIONAL IRA TO A LIBERTY ROTH IRA PLEASE USE THIS FORM.
DO NOT use the Transfer of Assets Form enclosed in the Liberty Roth IRA
brochure. This form CANNOT be used to convert a non-Liberty Traditional IRA.
Note: The conversion of assets from a traditional IRA to a Roth IRA can have
significant tax consequences. Please read the Liberty Roth IRA Disclosure
Statement and consult your tax advisor before you complete this transaction.
Instructions
(bullet) Complete sections 1 - 3 below.
(bullet) Complete sections 1, 2, 4 and 7 of the Liberty Roth IRA Application
Form (You must establish a separate Liberty Roth Conversion IRA to hold
assets converted each tax year.) In Section 2 of the application, check
"Roth Conversion IRA" and "Transfer of Assets from a Traditional IRA."
Note: Your previous beneficiary designation(s) will NOT carry over to
your new Liberty Roth IRA. You MUST complete section 4 of the
application to designate a beneficiary for your Liberty Roth IRA.
1 Account Information
Please type or print clearly
Owner's name (First, middle, last) Social Security Number
2 Liberty Traditional IRA Accounts to be Converted
Please convert all or part of my Liberty Traditional IRA account(s) specified
below to a Liberty Roth IRA.
Account Number(s) Specify Amount to be Transferred
all or $
all or $
all or $
<PAGE>
For additional accounts, please attach a separate sheet of paper that includes
the information above.
3 Authorization/Signature for Liberty IRA Conversion
To BankBoston, N.A.:
Please initiate a transfer-in-kind of the shares specified above from my Liberty
Traditional IRA to a Liberty Roth IRA. I certify that this conversion is
permissible under section 408A of the Internal Revenue Code that my adjusted
gross income does not exceed $100,000 and/or I am not married filing a separate
return.
Tax Election
I understand that this conversion will be reported by you as a taxable
distribution and will be subject to 10% federal income tax withholding unless I
elect otherwise. I hereby elect not to have federal income tax withholding apply
unless I have checked the box below. I understand that in either case I am
responsible for paying any federal, state and local income taxes that might
apply as a result of this conversion.
I DO want federal income taxes withheld at the rate of 10% in connection with
the conversion of my Liberty Traditional IRA with you to my Liberty Roth
Conversion IRA. I understand that if I am not yet age 59-1/2, I may be subject
to an additional 10% premature distribution tax on all or part of the amount
withheld.
Note: In most cases you should not elect to have withholding apply, so that the
full amount of your Traditional IRA can be converted to your Liberty Roth IRA.
If you do elect to have withholding apply you may rollover an equal amount to
your Roth Conversion IRA within 60 days. Please consult your tax advisor.
Depositor's Signature Date Daytime Telephone #
Please forward this form and your Liberty Roth IRA Application Form to:
Colonial Investors Service Center, Inc.
Attn.: Retirement Plan Services
P.O. Box 1722
Boston, MA 02105-1722
PERFORMANCE CALCULATION
COLONIAL TAX-MANAGED GROWTH FUND -CLASS A
Year Ended: 10/31/97
Inception Date: 12/30/96
SINCE INCEPTION
12/30/96 TO 10/31/97
Standard Non-Standard
Initial Inv. $1,000.00 $1,000.00
Max. Load 5.75%
Amt. Invested $942.50 $1,000.00
Initial NAV 10.08 10.08
Initial Shares 93.502 99.206
Shares From Dist. 0.000 0.000
End of Period NAV 12.04 12.04
Total Return 12.58% 19.44%
Average Annual
Total Return N/A N/A
PERFORMANCE CALCULATION
COLONIAL TAX-MANAGED GROWTH FUND -CLASS B
Year Ended: 10/31/97
Inception Date: 12/30/96
SINCE INCEPTION
12/30/96 TO 10/31/97
Standard Non-Standard
Initial Inv. $1,000.00 $1,000.00
Amt. Invested $1,000.00 $1,000.00
Initial NAV 10.08 10.08
Initial Shares 99.206 99.206
Shares From Dist. 0.000 0.000
End of Period NAV 11.96 11.96
CDSC 5.00%
Total Return 13.65% 18.65%
Average Annual
Total Return N/A N/A
PERFORMANCE CALCULATION
COLONIAL TAX-MANAGED GROWTH FUND -CLASS C
Year Ended: 10/31/97
Inception Date: 12/30/96
SINCE INCEPTION
12/30/96 TO 10/31/97
Standard Non-Standard
Initial Inv. $1,000.00 $1,000.00
Amt. Invested $1,000.00 $1,000.00
Initial NAV 10.08 10.08
Initial Shares 99.206 99.206
Shares From Dist. 0.000 0.000
End of Period NAV 11.96 11.96
CDSC 1.00%
Total Return 17.65% 18.65%
Average Annual
Total Return N/A N/A
PERFORMANCE CALCULATION
COLONIAL TAX-MANAGED GROWTH FUND -CLASS E
Year Ended: 10/31/97
Inception Date: 12/30/96
SINCE INCEPTION
12/30/96 TO 10/31/97
Standard Non-Standard
Initial Inv. $1,000.00 $1,000.00
Max. Load 5.00%
Amt. Invested $950.00 $1,000.00
Initial NAV 10.08 10.08
Initial Shares 94.246 99.206
Shares From Dist. 0.000 0.000
End of Period NAV 12.02 12.02
Total Return 13.28% 19.25%
Average Annual
Total Return N/A N/A
PERFORMANCE CALCULATION
COLONIAL TAX-MANAGED GROWTH FUND -CLASS F
Year Ended: 10/31/97
Inception Date: 12/30/96
SINCE INCEPTION
12/30/96 TO 10/31/97
Standard Non-Standard
Initial Inv. $1,000.00 $1,000.00
Amt. Invested $1,000.00 $1,000.00
Initial NAV 10.08 10.08
Initial Shares 99.206 99.206
Shares From Dist. 0.000 0.000
End of Period NAV 11.97 11.97
CDSC 5.00%
Total Return 13.75% 18.75%
Average Annual
Total Return N/A N/A
PERFORMANCE CALCULATION
COLONIAL TAX-MANAGED GROWTH FUND -CLASS G
Year Ended: 10/31/97
Inception Date: 12/30/96
SINCE INCEPTION
12/30/96 TO 10/31/97
Standard Non-Standard
Initial Inv. $1,000.00 $1,000.00
Max. Load 4.50%
Amt. Invested $955.00 $1,000.00
Initial NAV 10.08 10.08
Initial Shares 94.742 99.206
Shares From Dist. 0.000 0.000
End of Period NAV 12.04 12.04
Total Return 14.07% 19.44%
Average Annual
Total Return N/A N/A
PERFORMANCE CALCULATION
COLONIAL TAX-MANAGED GROWTH FUND -CLASS H
Year Ended: 10/31/97
Inception Date: 12/30/96
SINCE INCEPTION
12/30/96 TO 10/31/97
Standard Non-Standard
Initial Inv. $1,000.00 $1,000.00
Amt. Invested $1,000.00 $1,000.00
Initial NAV 10.08 10.08
Initial Shares 99.206 99.206
Shares From Dist. 0.000 0.000
End of Period NAV 11.96 11.96
CDSC 5.00%
Total Return 13.65% 18.65%
Average Annual
Total Return N/A N/A
<TABLE>
<CAPTION>
COLONIAL TAX-MANAGED GROWTH FUND
FUND YIELD CALCULATION
(CALENDAR MONTH-END METHOD)
30-DAY BASE PERIOD ENDED 10/31/97
a-b 6
FUND YIELD = 2 ----- +1 -1
c*d
CLASS A CLASS B CLASS C CLASS E CLASS F CLASS G CLASS H
<S> <C> <C> <C> <C> <C> <C> <C>
a = dividends and interest earned during
the month ................................ $17,482 $38,284 $5,837 $368 $451 $1,352 $1,206
b = expenses accrued during the month 21,253 70,324 10,741 482 860 1,764 2,243
c = average dividend shares outstanding
during the month ......................... 1,335,316 2,942,833 449,102 28,079 34,566 103,231 92,649
d = class maximum offering price per share
on the last day of the month ............. $12.77 $11.96 $11.96 $12.65 $11.97 $12.61 $11.96
YIELD ............................ -0.27% -1.09% -1.09% -0.39% -1.18% -0.38% -1.12%
YIELD WITHOUT WAIVER........ -0.89% -1.75% -1.75% -1.02% -1.84% -1.01% -1.78%
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF COLONIAL TAX MANAGED GROWTH FUND, CLASS A YEAR END OCT-31-1997 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS OF
COLONIAL TAX MANAGED FROWTH FUND, CLASS A YEAR END OCT-31-1997.
</LEGEND>
<CIK> 0000021832
<NAME> COLONIAL TRUST I
<SERIES>
<NUMBER> 4
<NAME> COLONIAL TAX-MANAGED GROWTH FUND, CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 57413
<INVESTMENTS-AT-VALUE> 52230
<RECEIVABLES> 4367
<ASSETS-OTHER> 3
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 66600
<PAYABLE-FOR-SECURITIES> 1615
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 257
<TOTAL-LIABILITIES> 1872
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 60489
<SHARES-COMMON-STOCK> 1424
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (578)
<ACCUM-APPREC-OR-DEPREC> 4817
<NET-ASSETS> 64728
<DIVIDEND-INCOME> 381
<INTEREST-INCOME> 80
<OTHER-INCOME> 0
<EXPENSES-NET> 486
<NET-INVESTMENT-INCOME> (25)
<REALIZED-GAINS-CURRENT> (578)
<APPREC-INCREASE-CURRENT> 4810
<NET-CHANGE-FROM-OPS> 4207
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 16100
<NUMBER-OF-SHARES-REDEEMED> (615)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 63720
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 142
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 725
<AVERAGE-NET-ASSETS> 28984
<PER-SHARE-NAV-BEGIN> 10.08
<PER-SHARE-NII> 0.04
<PER-SHARE-GAIN-APPREC> 1.92
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.04
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF COLONIAL TAX MANAGED GROWTH FUND, CLASS B YEAR END OCT-31-1997 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS OF
COLONIAL TAX MANAGED FROWTH FUND, CLASS B YEAR END OCT-31-1997.
</LEGEND>
<CIK> 0000021832
<NAME> COLONIAL TRUST I
<SERIES>
<NUMBER> 4
<NAME> COLONIAL TAX-MANAGED GROWTH FUND, CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 57413
<INVESTMENTS-AT-VALUE> 52230
<RECEIVABLES> 4367
<ASSETS-OTHER> 3
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 66600
<PAYABLE-FOR-SECURITIES> 1615
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 257
<TOTAL-LIABILITIES> 1872
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 60489
<SHARES-COMMON-STOCK> 3215
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (578)
<ACCUM-APPREC-OR-DEPREC> 4817
<NET-ASSETS> 64728
<DIVIDEND-INCOME> 381
<INTEREST-INCOME> 80
<OTHER-INCOME> 0
<EXPENSES-NET> 486
<NET-INVESTMENT-INCOME> (25)
<REALIZED-GAINS-CURRENT> (578)
<APPREC-INCREASE-CURRENT> 4810
<NET-CHANGE-FROM-OPS> 4207
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 36603
<NUMBER-OF-SHARES-REDEEMED> (747)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 63720
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 142
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 725
<AVERAGE-NET-ASSETS> 28984
<PER-SHARE-NAV-BEGIN> 10.08
<PER-SHARE-NII> (0.032)
<PER-SHARE-GAIN-APPREC> 1.912
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.96
<EXPENSE-RATIO> 2.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF COLONIAL TAX MANAGED GROWTH FUND, CLASS C YEAR END OCT-31-1997 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS OF
COLONIAL TAX MANAGED FROWTH FUND, CLASS C YEAR END OCT-31-1997.
</LEGEND>
<CIK> 0000021832
<NAME> COLONIAL TRUST I
<SERIES>
<NUMBER> 4
<NAME> COLONIAL TAX-MANAGED GROWTH FUND, CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 57413
<INVESTMENTS-AT-VALUE> 52230
<RECEIVABLES> 4367
<ASSETS-OTHER> 3
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 66600
<PAYABLE-FOR-SECURITIES> 1615
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 257
<TOTAL-LIABILITIES> 1872
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 60489
<SHARES-COMMON-STOCK> 495
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (578)
<ACCUM-APPREC-OR-DEPREC> 4817
<NET-ASSETS> 64728
<DIVIDEND-INCOME> 381
<INTEREST-INCOME> 80
<OTHER-INCOME> 0
<EXPENSES-NET> 486
<NET-INVESTMENT-INCOME> (25)
<REALIZED-GAINS-CURRENT> (578)
<APPREC-INCREASE-CURRENT> 4810
<NET-CHANGE-FROM-OPS> 4207
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5703
<NUMBER-OF-SHARES-REDEEMED> (90)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 63720
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 142
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 725
<AVERAGE-NET-ASSETS> 28984
<PER-SHARE-NAV-BEGIN> 10.08
<PER-SHARE-NII> (0.032)
<PER-SHARE-GAIN-APPREC> 1.912
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.96
<EXPENSE-RATIO> 2.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF COLONIAL TAX MANAGED GROWTH FUND, CLASS E YEAR END OCT-31-1997 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS OF
COLONIAL TAX MANAGED FROWTH FUND, CLASS E YEAR END OCT-31-1997.
</LEGEND>
<CIK> 0000021832
<NAME> COLONIAL TRUST I
<SERIES>
<NUMBER> 4
<NAME> COLONIAL TAX-MANAGED GROWTH FUND, CLASS E
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 57413
<INVESTMENTS-AT-VALUE> 52230
<RECEIVABLES> 4367
<ASSETS-OTHER> 3
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 66600
<PAYABLE-FOR-SECURITIES> 1615
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 257
<TOTAL-LIABILITIES> 1872
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 60489
<SHARES-COMMON-STOCK> 29
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (578)
<ACCUM-APPREC-OR-DEPREC> 4817
<NET-ASSETS> 64728
<DIVIDEND-INCOME> 381
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF COLONIAL TAX MANAGED GROWTH FUND, CLASS F YEAR END OCT-31-1997 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS OF
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF COLONIAL TAX MANAGED GROWTH FUND, CLASS G YEAR END OCT-31-1997 AND
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<TABLE> <S> <C>
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF COLONIAL TAX MANAGED GROWTH FUND, CLASS H YEAR END OCT-31-1997 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS OF
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<NAME> COLONIAL TRUST I
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