COLONIAL SELECT VALUE FUND
One Financial Center, Boston, Massachusetts 02111
August 15, 1997
Dear Shareholder:
A Special Meeting of Shareholders (Meeting) of Colonial Select Value
Fund (Fund) will be held at 10 a.m. Eastern time on September 30, 1997, at the
offices of Colonial Management Associates, Inc. (Adviser). Formal notice of the
Meeting appears on the next page, followed by the proxy statement. We hope that
you can attend the Meeting in person; however, we urge you in any event to vote
your shares by completing and returning the enclosed proxy card in the envelope
provided at your earliest convenience.
At the Meeting, you will be asked to to approve a new Management
Agreement for the Fund, to approve the elimination of a fundamental investment
policy on illiquid securities and to ratify the selection of Price Waterhouse
LLP as the Fund's independent accountants for the fiscal year 1997. After
carefully considering each proposal, your Fund's Trustees recommend that
you vote FOR each of the proposals. No changes are being proposed to the way
the Fund is managed, advised or operated.
YOUR VOTE IS IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
PLEASE VOTE BY COMPLETING, DATING AND SIGNING THE ENCLOSED PROXY CARD,
REGARDLESS OF THE NUMBER OF SHARES YOU OWN. A SELF-ADDRESSED, POSTAGE-PAID
ENVELOPE HAS BEEN ENCLOSED FOR YOUR CONVENIENCE. IT IS IMPORTANT THAT YOU VOTE
AND THAT YOUR VOTE BE RECEIVED NO LATER THAN SEPTEMBER 29, 1997.
Your Fund is using Shareholder Communications Corporation (SCC), a
professional proxy solicitation firm, to assist shareholders in the voting
process. As the date of the Meeting approaches, if we have not yet received your
proxy card, you may receive a telephone call from SCC reminding you to exercise
your right to vote.
We appreciate your participation and prompt response in this matter,
and thank you for your continued support.
Sincerely,
Harold W. Cogger
President
<PAGE>
COLONIAL SELECT VALUE FUND
One Financial Center, Boston, Massachusetts 02111
(617) 426-3750
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 30, 1997
Dear Shareholder:
A Special Meeting of Shareholders (Meeting) of Colonial Select Value
Fund (Fund) will be held at the offices of Colonial Management Associates, Inc.
(Adviser), One Financial Center, Boston, Massachusetts, on Tuesday, September
30, 1997, at 10:00 a.m. Eastern time, to:
1. Approve or disapprove a new Management Agreement for the Fund
providing for an increase in the management fee paid by the Fund;
2. Approve or disapprove elimination of a fundamental policy
limiting the Fund's investments in illiquid securities to 10% of
net assets;
3. Ratify or reject the selection of independent accountants; and
4. Transact such other business as may properly come before the
Meeting or any adjournment thereof.
By order of the Trustees,
Michael H. Koonce, Secretary
August 15, 1997
NOTICE: YOUR VOTE IS IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. IF A
QUORUM IS NOT PRESENT AT THE MEETING, ADDITIONAL EXPENSES MAY BE INCURRED TO
SOLICIT ADDITIONAL PROXIES. TO AVOID THESE COSTS TO YOUR FUND, PLEASE VOTE, SIGN
AND RETURN YOUR PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE IMMEDIATELY.
SV-XXX-0797
<PAGE>
PROXY STATEMENT
August 15, 1997
The Trustees of the Fund have called a Special Meeting of the Fund's
shareholders for 10:00 a.m. Eastern Time, Tuesday, September 30, 1997, for the
purposes described in the accompanying Notice. The purpose of this Proxy
Statement is to provide you with additional information regarding the proposals
to be voted on at the Meeting and to request your proxy to vote in favor of the
proposals. By properly completing and returning the enclosed proxy card, you
will authorize the individuals named on the card to vote your Fund shares in
favor of each listed proposal and, in their discretion, on any other matter to
properly come before the Meeting. No other matters are contemplated at this
time. Additional information concerning the proxy solicitation and voting
process and who is eligible to vote is set forth below in Section 1; Sections 2,
3 and 4, respectively, contain additional information regarding the matters to
be voted on at the Meeting.
1. Voting; Proxies; Shareholders Entitled to Vote.
The enclosed proxy, which was first mailed on August 15, 1997, is
solicited by the Board of Trustees for use at the Meeting. All properly executed
proxies received in time for the Meeting will be voted as specified in the proxy
or, if no specification is made, in favor of each proposal referred to in the
Proxy Statement. The proxy may be revoked prior to its exercise by a later dated
proxy, by written revocation received by the Secretary or by voting in person.
Solicitation may be made by mail, telephone, telegraph, telecopy and personal
interviews. Authorization to execute proxies may be obtained by telephonically
or electronically transmitted instructions. Shareholder Communications
Corporation (SCC) has been engaged to assist in the solicitation of proxies. The
cost of this assistance is not expected to exceed $65,434. The cost of
solicitation will be paid by the Fund.
Shareholders of record at the close of business on July 14, 1997 will have
one vote for each share held. On such date, the Fund had the following
outstanding shares of beneficial interest: Class A Shares: 16,848,658.813; Class
B Shares: 9,567,002.768. Holders of 30% of the shares outstanding on such
date constitute a quorum and must be present in person or represented by
proxy for business to be transacted at the Meeting.
As of July 14, 1997, the following shareholder owned more than 5% of the
Fund's outstanding Class B shares:
Number of Percentage of
Name and Address Shares Owned Shares Owned
----------------- ------------------- --------------
Merrill Lynch, Pierce,
Fenner & Smith, Inc., 4800
Deer Lake Drive East,
Jacksonville, Florida 32246 688,034.000 7.19%
Votes cast by proxy or in person will be counted by persons appointed by
the Fund to act as election tellers for the Meeting. The tellers will count the
total number of votes cast "for" approval of the proposals for purposes of
determining whether sufficient affirmative votes have been cast. Where a
shareholder withholds authority or abstains, or the proxy reflects a "broker
non-vote" (i.e., shares held by brokers or nominees as to which (i) instructions
have not been received from the beneficial owners or persons entitled to vote
and (ii) the broker or nominee does not have discretionary voting power on a
particular matter), the shares will be counted as present and entitled to vote
for purposes of determining the presence of a quorum. With respect to approval
of the new Management Agreement and elimination of the Fund's fundamental policy
on illiquid securities, withheld authority, abstentions and broker non-votes
will have the effect of votes against such proposals. With respect to the
ratification of independent accountants, withheld authority, abstentions and
broker non-votes have no effect on the outcome of the voting.
Further information concerning the Fund is contained in its most recent
Annual and/or Semiannual Reports to shareholders, which are obtainable free of
charge by writing the Adviser at One Financial Center, Boston, MA 02111 or by
calling 1-800-426-3750.
1. Approve or Disapprove a New Management Agreement.
a. Background of Proposal.
The Board of Trustees propose that shareholders approve a new Management
Agreement, in the form set forth in Appendix A, between Colonial Trust III
(Trust), on behalf of the Fund, and the Adviser. The new Management Agreement is
identical to the existing Management Agreement except for the management fee
payable by the Fund to the Adviser. The existing Management Agreement provides
for a monthly fee at the annual rate of 0.60% of the Fund's average daily net
assets during the preceding twelve months ("performance period"), as adjusted
upward or downward on the basis of the Fund's investment performance relative to
the performance of the Standard & Poor's Index of 500 Common Stocks (the
"Index"). Specifically, the monthly fee rate of 1/12 of 0.60% is increased or
decreased, respectively, by 1/12 of 0.02% for each percentage point, rounded to
the nearer point (the higher point if exactly one-half a point), that the Fund's
investment performance over the performance period exceeds or lags the record of
the Index, as then constituted, for the performance period; provided; however,
that the performance adjustment for any month may not exceed 1/12 of 0.20%. .
The new Management Agreement provides for a monthly fee at the annual rate of
0.70% of the Fund's average daily net assets without any performance adjustment.
During the period _____________ to _________, the Fund's investment performance
exceeded the record of the Index in _____________ performance periods. During
the fiscal year ended October 31, 1996, the performance adjustment resulted in
an effective fee at the annual rate of _____%. The Fund paid the Adviser
$1,743,000 for the fiscal year ended October 31, 1996. If the new Management
Agreement had been in effect during the fiscal year ended October 31, 1996, the
Fund would have paid the Adviser a fee of $2,228,053, an increase of
27.8%.
The following table summarizes the Fund's current transaction expenses and
annual operating expenses for each class of the Fund's shares, based on expenses
incurred in the most recent fiscal year:
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%(5) 0.00%(5)
Maximum Contingent
Deferred Sales Charge
(as a % of offering price)(3) 1.00%(4) 5.00% 1.00%
(1) For accounts less than $1,000 an annual fee of $10 may be deducted.
See "How to Buy Shares."
(2) Redemption proceeds exceeding $1,000 sent via federal funds wire will
be subject to a $7.50 charge per transaction.
(3) Does not apply to reinvested distributions.
(4) Only with respect to any portion of purchases of $1 million to $5
million redeemed within approximately 18 months after purchase. See
"How to Buy Shares."
(5) Because of the 0.75% distribution fee applicable to Class B and Class C
shares, long-term Class B and Class C shareholders may pay more in
aggregate sales charges than the maximum initial sales charge permitted
by the National Association of Securities Dealers, Inc. However, because
the Fund's Class B shares automatically convert to Class A shares after
approximately 8 years, this is less likely for Class B shares than for a
class without a conversion feature.
Example
Class A Class B Class C
------- ------- --------
Management fee 0.60% 0.60% 0.60%
12b-1 fees (1) 0.24 0.99 0.99
Other expenses 0.38 0.38 0.38
---- ---- ----
Total operating expenses (2) 1.22% 1.97% 1.97%
==== ==== ====
(1) Service fee rate will fluctuate but will not exceed 0.25%.
(2) Excludes the management fee performance adjustment.
The following table shows the cumulative 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, unless otherwise noted,
redemption at period end:
Class A Class B Class C
------- ------- -------
Period: (3) (4) (3) (4)
1 year $ 69 $ 70 $ 20 $30 $20
3 years 94 92 62 62(6) 62(6)
5 years 121 126 106 106 106
10 years 197 210(5) 210(5) 230 230
(3) Assumes redemption at period end.
(4) Assumes no redemption.
(5) Class B shares automatically convert to Class A shares after
approximately 8 years; therefore, years 9 and 10 reflect Class A shares
expenses.
(6) Class C shares do not incur a contingent deferred sales charge on
redemptions made after one year.
Had the new Management Agreement been in effect, the Fund's annual
operating expenses for each class of shares would have been:
Class A Class B Class C
------- ------- -------
Management fee 0.70% 0.70% 0.70%
12b-1 fees (1) 0.24 0.99 0.99
Other expenses 0.38 0.38 0.38
---- ---- ----
Total operating expenses 1.32% 2.07% 2.07%
==== ==== ====
(1) Service fee rate will fluctuate but will not exceed 0.25%.
The following table shows the cumulative expenses attributable to a
hypothetical $1,000 investment in each class of shares of the Fund for the
periods specified, assuming that the new Management Agreement was in effect and
assuming a 5% annual return and, unless otherwise noted, redemption at period
end:
Class A Class B Class C
------- ------- -------
Period: (2) (3) (2) (3)
1 year $ 70 $ 71 $ 21 $31 $21
3 years 97 95 65 65(5) 65(5)
5 years 126 131 111 111 111
10 years 207 221(4) 221(4) 240 240
(2) Assumes redemption at period end.
(3) Assumes no redemption.
(4) Class B shares automatically convert to Class A shares after
approximately 8 years; therefore, years 9 and 10 reflect Class A shares
expenses.
(5) Class C shares do not incur a contingent deferred sales charge on
redemptions made after one year.
b. Consideration by the Board of Trustees.
The Advisory Fees and Expenses Committee (Committee) of the Board of
Trustees met on May 16, 1997 to consider, among other things, the new management
fee proposed by the Adviser. The Adviser stated that in light of the Fund's
investment objective and policies, in the Adviser's view the S&P 500 Index was
not a meaningful benchmark for measuring the Fund's performance and for
compensating the Adviser. The Adviser stated further that in general the mutual
fund industry had failed to embrace performance-adjusted fees and that they
would be more appropriate for a fund whose objective was to outperform the
relevant index.
The Adviser also stated that the Fund had performed well relative to funds
in the Lipper Analytical Services, Inc. equity growth fund category. The Adviser
suggested that the reasonableness of the proposed fee be considered in light of
the Fund's performance.
The Adviser stated further that the Fund's current base management fee and
total expenses are each significantly below the median fee and expense ratio
among a group of comparable U.S. equity growth funds similar in size to the
Fund, and that had the proposed fee been in effect, the Fund's fee and expense
ratios would still have been below such medians. The Adviser also provided the
Committee with other information including but not limited to information
concerning the Adviser's investment, sales, marketing and administrative support
personnel, the benefits, including revenue and net income, derived by the
Adviser from managing the Fund under the current fee, and other information
requested by the Committee.
The Committee considered all of the information provided by the Adviser,
along with the nature, quality and scope of the services provided to the Fund by
the Adviser, and determined to recommend to the full Board of Trustees that the
proposed change in the management fee be approved.
The full Board of Trustees met on June 19 and 20, 1997 to consider, among
other things, the proposed management fee change. The Adviser reviewed the
proposal with the full Board of Trustees at the meeting and provided the Board
of Trustees with information supplied to the Committee along with additional
information. The Board of Trustees also was provided with the Committee's
recommendation and the reasons therefor. Based on the information provided to
the Board of Trustees, particularly information concerning the general level of
fees and expenses among comparable funds and the Fund's performance relative to
other funds in its category, the Board of Trustees unanimously approved the new
management fee.
c. Trustees and Officers and Other Information.
The following table sets forth certain information about the Board of
Trustees of the Fund:
Name Trustee Shares Beneficially Owned
(Age) Since of Fund at Percentage of Fund
July 14, 1997(1) Shares Owned
- ---- ----- ----------------------------- -------------------
Robert J. Birnbaum ---- ----
(69) 1995
Tom Bleasdale ---- ----
(67) 1991
Lora S. Collins 3,730.382 (2)
(61) 1989
James E. Grinnell ---- ----
(67) 1995
William D. Ireland, Jr. 898.215 (2)
(73) 1986
Richard W. Lowry ---- ----
(61) 1995
William E. Mayer (3) ---- ----
(57) 1994
James L. Moody, Jr. ---- ----
(65) 1986
John J. Neuhauser 823.730 (2)
(54) 1991
George L. Shinn ---- ----
(74) 1986
Robert L. Sullivan ---- ----
(69) 1991
Sinclair Weeks, Jr. 936.822 (2)
(74) 1986
Trustees and officers 281,964.090 (4) 1.67%
as a group
(1) Except as otherwise noted, each Trustees has sole investment power and
sole voting power with respect to his or her shares of the Fund.
(2) Ownership is less than 1%.
(3) Mr. Mayer is an "interested person," as defined in the Investment
Company Act of 1940 (1940 Act), because of his affiliation with
Hambrecht & Quist Incorporated (a registered broker-dealer).
(4) Mr. Stern, who is a former officer of the Trust, held 270,807.015
shares of the Fund, representing 1.61% of the then outstanding Class
A shares. This holding consisted entirely of shares held by him
and certain employees of the Adviser as co-Trustees of The
Colonial Group, Inc. Profit-Sharing Plan with respect to which
they share investment and voting power. Mr. Stern
previously served as Secretary of the Fund from 1985 to 1997.
The following table sets forth certain information about the executive
officers of the Fund:
<PAGE>
Shares
Beneficially
Executive Owned and
Name Officer Percent of Fund
(Age) Since Office with Fund (1)(2) at July 14, 1997
- ----- --------- ----------------------- -----------------
Harold W. Cogger President ----
(61) 1996
Davey S. Scoon Vice President ----
(50) 1993
Timothy J. Jacoby Treasurer and Chief ----
(45) 1996 Financial Officer
Peter L. Lydecker Controller and Chief ----
(43) 1993 Accounting Officer
Michael H. Koonce Secretary ----
(37) 1997
(1) Except as otherwise noted, each individual has held the office
indicated or other offices in the same company for the last five years.
(2) The Fund's executive officers may benefit from the proposal to increase
the management fee, in their capacity as officers, directors or
shareholders of the Adviser and its affiliates.
d. Information Concerning the Adviser and its Affiliates.
The Adviser acts as investment adviser to the Fund under the existing
Management Agreement dated March 27, 1995, which was approved by the
shareholders on February 15, 1995, in connection with the merger of The Colonial
Group, Inc. (TCG) and Liberty Financial Companies, Inc. (Liberty Financial). The
Adviser is a wholly-owned subsidiary of TCG, One Financial Center, Boston,
Massachusetts 02111, which in turn is a wholly-owned subsidiary of Liberty
Financial. Liberty Financial is an indirect subsidiary of Liberty Mutual
Insurance Company (Liberty Mutual). Liberty Financial is a diversified and
integrated asset management organization which provides insurance and investment
products to individuals and institutions. Its principal executive offices are
located at 600 Atlantic Avenue, 24th Floor, Boston, Massachusetts 02210. Liberty
Mutual is an underwriter of workers' compensation insurance and a
Massachusetts-chartered mutual property and casualty insurance company. The
principal business activities of Liberty Mutual's subsidiaries other than
Liberty Financial are property-casualty insurance, insurance services and life
insurance (including group life and health insurance products) marketed through
its own sales force. Liberty Mutual's principal executive offices are located at
175 Berkeley Street, Boston, Massachusetts 02117. Liberty Mutual is deemed to be
the controlling entity of the Adviser and its affiliates.
The directors of the Adviser are Bonny E. Boatman, Sheila A. Carroll,
Harold W.Cogger, Carl C. Ericson, C. Frazier Evans, Stephen E. Gibson,
Donald S. MacKinnon, Helen Frame Peters, Daniel Rie, Davey S. Scoon and
Arthur O. Stern. Mr. Gibson is the principal executive officer of the
Adviser. The principal occupations of the Adviser's directors are as
officers and directors of the Adviser and certain of its affiliates. The
address of the directors and officers of the Adviser is One Financial
Center, Boston, Massachusetts 02111.
The Adviser's compensation under the existing and new Management
Agreements is subject to reduction to the extent that in any year the expenses
of the Fund exceed the limits on investment company expenses imposed by any
statute or regulatory authority of any jurisdiction in which shares of the Fund
are qualified for offer and sale. No such limits are currently in effect.
The existing and new Management Agreements provide that, subject to the
Board of Trustees' supervision, the Adviser will manage the assets of the Fund
in accordance with its Prospectus and Statement of Additional Information,
purchase and sell securities and other investments on behalf of the Fund and
report results to the Board of Trustees periodically. The existing and new
Management Agreements also require the Adviser to furnish, at its expense (a)
office space, supplies, facilities and equipment; (b) executive and other
personnel for managing the affairs of the Fund (excluding custodial, transfer
agency, pricing and certain record keeping services); and (c) compensation to
Trustees who are directors, officers or employees of the Adviser or its
affiliates.
The existing and new Management Agreements may be terminated at any time
by the Adviser, by the Board of Trustees or by vote of a majority of the
outstanding voting securities of the Fund without penalty on 60 days' written
notice; shall automatically terminate upon any assignment; and otherwise shall
continue in effect from year to year if approved annually (1) by the Board of
Trustees or by vote of a majority of the outstanding voting securities of the
Fund and (2) by a majority of the Trustees who are not "interested persons" as
defined under the 1940 Act.
The Adviser provides bookkeeping and pricing services to the Fund pursuant
to a separate Pricing and Bookkeeping Agreement under which the Adviser is paid
a monthly fee of $2,250 for the first $50 million of the Fund's net assets, plus
a monthly percentage fee at the following annual rates: 0.035% on the next $950
million; 0.025% on the next $1 billion; 0.015% on the next $1 billion; and
0.001% on the excess over $3 billion of the average daily net assets of the Fund
for such month. For these services, the Fund paid the Adviser $121,000 for the
fiscal year ended October 31, 1996.
Colonial Investors Service Center, Inc. (Transfer Agent), an affiliate of
the Adviser, serves as the Fund's shareholder servicing and transfer agent. The
Transfer Agent is paid a monthly fee of 0.25% annually of the Fund's average
daily net assets plus certain out-of-pocket expenses. For these services, the
Fund paid the Transfer Agent $926,000 for the fiscal year ended October 31,
1996. Effective October 1, 1997, the fee will begin to reduce so that after
September 30, 1998, the fee will be at the annual rate of 0.236% of the Fund's
average daily net assets plus certain out-of-pocket expenses.
Colonial Investment Services, Inc. (Distributor), a subsidiary of the
Adviser, serves as the distributor for the Fund's shares. For the fiscal year
ended October 31, 1996, the Distributor retained net underwriting discounts of
$112,410 on sales of the Fund's Class A shares and received contingent deferred
sales charges of $159,828 on Class B share redemptions. The Distributor is also
paid a monthly service fee at an annual rate of 0.15% of the Fund's net assets
attributed to shares outstanding prior to April 1, 1989 and 0.25% of the Fund's
net assets attributed to shares issued thereafter. The Fund also pays the
Distributor a monthly fee of 0.75% of the average daily net assets attributed to
the Fund's Class B and Class C shares. For these services, the Fund paid the
Distributor service fees of $749,000 and distribution fees applicable to Class B
shares of $727,000 for the fiscal year ended October 31, 1996. No Class C shares
were outstanding during such fiscal year.
In addition to the fees described above, the Fund pays all of its expenses
not assumed by the Adviser, including, without limitation, fees and expenses of
the Independent Trustees, interest charges, taxes, brokerage commissions,
expenses of issue or redemption of shares, fees and expenses of registering and
qualifying shares of the Fund for distribution under federal and state laws and
regulations, custodial, auditing and legal expenses, expenses of providing
reports to shareholders, expenses of meetings of shareholders, expenses of
printing and mailing prospectuses, proxy statements and proxies to existing
shareholders, and its proportionate share of insurance premiums and professional
association dues or assessments. With respect to Colonial Trust III, all general
Trust expenses are allocated among and charged to the assets of each fund in the
Trust, including the Fund, on a basis that the Board of Trustees deem fair and
equitable, which may be based on the relative net assets of such funds or the
nature of the services performed and relative applicability of the services to
each fund. Each fund also is responsible for such non-recurring expenses as may
arise, including litigation in which the fund may be a party, and other expenses
as determined by the Board of Trustees. Each fund may have an obligation to
indemnify its officers and Trustees with respect to litigation.
e. Additional Information Pertaining to the Adviser.
In addition to the services provided by the Adviser to the Fund, the
Adviser also provides management and other services and facilities to other
investment companieswith different investment objectives than the Fund.
Information with respect to the assets of and management fees payable to the
Adviser by the funds having investment objectives similar to those of the Fund
is set forth below:
<PAGE>
Total Net Annual
Assets at Management/Administration
July 31, 1997 Fee as % of Average
Funds (in millions) Daily Net Assets
- ----- -------------- --------------------------
Colonial Aggressive Growth Fund 0.85% (1)
Colonial Global Equity Fund 0.75% (2)
Colonial Small Cap Value Fund 0.60% (3)
Colonial U.S. Stock Fund 0.80% (4)
Colonial-Keyport U.S. Stock Fund 0.80% (5)
(1) The Adviser has voluntarily agreed to waive its fee so that the fund's
total expenses will not exceed 1.30%.
(2) The Adviser has voluntarily agreed to waive its fee so that the fund's
total expenses will not exceed 1.40%. Subject to shareholder approval on
September 30, 1997, the management fee will increase to 0.95%.
(3) Subject to shareholder approval on September 30, 1997, the management
fee will be increased to 0.80%.
(4) The Adviser has voluntarily agreed to waive its fee so that the fund's
total expenses will not exceed 1.25%.
(5) The Adviser is the sub-adviser and receives a sub-advisory fee of 0.60%
of the fund's average daily net assets. The fee is for investment
management services only. Keyport Advisory Services Corp., the Fund's
manager, has voluntarily agreed to waive its fee so that the fund's
total expenses will not exceed 1.00%.
f. Required Vote.
Approval of the new Management Agreement will require the affirmative vote
of a "majority of the outstanding voting securities" of the Fund (as defined in
the 1940 Act), which means the affirmative vote of the lesser of (1) more than
50% of the outstanding shares of the Fund or (2) 67% or more of the shares of
the Fund present at the Meeting if more than 50% of the outstanding shares of
the Fund are represented at the Meeting in person or by proxy.
The Trustees unanimously recommend that shareholders of the Fund vote to
approve the new Management Agreement.
2. Approve or Disapprove a Change in Investment Policy.
a. Background of Proposal.
The 1940 Act and the Securities and Exchange Commission (SEC) staff
require the Fund to make certain specified investment policies "fundamental,"
which means they can be changed only by shareholder vote. The Fund presently has
a fundamental investment policy that limits its investments in illiquid
securities to no more than 10% of its net assets. Consistent with current SEC
policy, the Board of Trustees recommends reclassifying the Fund's illiquid
securities policy as nonfundamental (not requiring a shareholder vote to change
it). Subject to shareholder approval of such reclassification, the Trustees have
increased the limit on investing in such securities from 10% of net assets to
15% of net assets to provide maximum investment flexibility. This change should
not materially affect the Fund's ability to meet its liquidity needs.
b. Required Vote.
Approval of the proposal requires the affirmative vote of a majority of
the outstanding voting securities of the Fund.
3. Ratification of Independent Accountants.
a. Background of Proposal.
Price Waterhouse LLP was selected as independent accountants for the Fund
for the Fund's fiscal year ending October 31, 1997, by unanimous vote of the
Board of Trustees, subject to ratification or rejection by the shareholders.
Neither Price Waterhouse LLP nor any of its partners has any direct or material
indirect financial interest in the Fund. A representative of Price Waterhouse
LLP will be available at the Meeting, if requested by a shareholder in writing
at least five days before the Meeting, to respond to appropriate questions and
make a statement (if the representative desires).
b. Required Vote.
Ratification requires the affirmative vote of a majority of the shares of
the Fund voted at the Meeting.
4. Other Matters and Discretion of Attorneys Named in the Proxy.
As of the date of this Proxy Statement, only the business mentioned in
Items 1 through 3 of the Notice of the Meeting is contemplated to be presented.
If any procedural or other matters properly come before the Meeting, the
enclosed proxy shall be voted in accordance with the best judgment of the proxy
holder(s).
The Meeting is to be held at the same time as the meeting of shareholders of
Colonial Global Equity Fund and Colonial Small Cap Value Fund. It is anticipated
that such meetings will be held simultaneously. In the event that any Fund
shareholder at the Meeting objects to the holding of a simultaneous meeting and
moves for an adjournment of the meetings so that the Meeting of the Fund may be
held separately, the persons named as proxies will vote in favor of such an
adjournment.
If a quorum of shareholders (thirty percent of the shares entitled to vote
at the Meeting) is not represented at the Meeting or at any adjournment thereof,
or, even though a quorum is so represented, if sufficient votes in favor of the
Items set forth in the Notice of the Meeting are not received by September 30,
1997, the persons named as proxies may propose one or more adjournments of the
Meeting for a period or periods of not more than ninety days in the aggregate
and further solicitation of proxies may be made. Any such adjournment may be
effected by a majority of the votes properly cast in person or by proxy on the
question at the session of the Meeting to be adjourned. The persons named as
proxies will vote in favor of such adjournment those proxies which they are
entitled to vote in favor of the Items set forth in the Notice of the Meeting.
They will vote against any such adjournment those proxies required to be voted
against any of such Items.
The Trust's Agreement and Declaration of Trust does not provide for an
annual meeting of shareholders. Shareholder proposals for inclusion in the proxy
statement for any subsequent meeting must be received by the Fund within a
reasonable period of time prior to such meeting.
Shareholders are urged to vote, sign and mail their proxies immediately.
<PAGE>
APPENDIX A
MANAGEMENT AGREEMENT
AGREEMENT dated as of September 30, 1997, between COLONIAL TRUST III, a
Massachusetts business trust (Trust), with respect to COLONIAL SELECT VALUE FUND
(Fund), and COLONIAL MANAGEMENT ASSOCIATES, INC., a Massachusetts corporation
(Adviser).
In consideration of the promises and covenants herein, the parties agree as
follows:
1. The Adviser will manage the investment of the assets of the Fund in
accordance with its prospectus and statement of additional information
and will perform the other services herein set forth, subject to the
supervision of the Board of Trustees of the Trust. The Adviser may
delegate its investment responsibilities to a sub-adviser.
2. In carrying out its investment management obligations, the Adviser
shall:
(a) evaluate such economic, statistical and financial information and
undertake such investment research as it shall believe advisable; (b)
purchase and sell securities and other investments for the Fund in
accordance with the procedures described in its prospectus and statement
of additional information; and (c) report results to the Board of
Trustees of the Trust.
3. The Adviser shall furnish at its expense the following:
(a) office space, supplies, facilities and equipment; (b) executive and
other personnel for managing the affairs of the Fund (including
preparing financial information of the Fund and reports and tax returns
required to be filed with public authorities, but exclusive of those
related to custodial, transfer, dividend and plan agency services,
determination of net asset value and maintenance of records required by
Section 31(a) of the Investment Company Act of 1940, as amended, and the
rules thereunder (1940 Act); and (c) compensation of Trustees who are
directors, officers, partners or employees of the Adviser or its
affiliated persons (other than a registered investment company).
4. The Adviser shall be free to render similar services to others so long
as its services hereunder are not impaired thereby.
5. The Fund shall pay the Adviser monthly a fee at the annual rate of 0.70%
of the average daily net assets of the Fund.
6. If the operating expenses of the Fund for any fiscal year exceed the
most restrictive applicable expense limitation for any state in which
shares are sold, the Adviser's fee shall be reduced by the excess but
not to less than zero. Operating expenses shall not include brokerage,
interest, taxes, deferred organization expenses, Rule 12b-1 distribution
fees, service fees and extraordinary expenses, if any. The Adviser may
waive its compensation (and bear expenses of the Fund) to the extent
that expenses of the Fund exceed any expense limitation the Adviser
declares to be effective.
7. This Agreement shall become effective as of the date of its execution,
and
(a) unless otherwise terminated, shall continue until two years from its
date of execution and from year to year thereafter so long as approved
annually in accordance with the 1940 Act; (b) may be terminated without
penalty on sixty days' written notice to the Adviser either by vote of
the Board of Trustees of the Trust or by vote of a majority of the
outstanding shares of the Fund; (c) shall automatically terminate in the
event of its assignment; and (d) may be terminated without penalty by
the Adviser on sixty days' written notice to the Trust.
8. This Agreement may be amended in accordance with the 1940 Act.
9. For the purpose of the Agreement, the terms "vote of a majority of the
outstanding shares", "affiliated person" and "assignment" shall have
their respective meanings defined in the 1940 Act and exemptions and
interpretations issued by the Securities and Exchange Commission under
the 1940 Act.
10. In the absence of willful misfeasance, bad faith or gross negligence on
the part of the Adviser, or reckless disregard of its obligations and
duties hereunder, the Adviser shall not be subject to any liability to
the Trust or the Fund, to any shareholder of the Trust or the Fund or to
any other person, firm or organization for any act or omission in the
course of, or connected with, rendering services hereunder.
COLONIAL TRUST III on behalf of
COLONIAL SELECT VALUE FUND
By: ----------------------------
Title:
COLONIAL MANAGEMENT ASSOCIATES, INC.
By: ----------------------------
Title:
A copy of the document establishing the Trust is filed with the Secretary of The
Commonwealth of Massachusetts. This Agreement is executed by officers not as
individuals and is not binding upon any of the Trustees, officers or
shareholders of the Trust individually but only upon the assets of the Fund.
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COLONIAL SELECT VALUE FUND
This Proxy is Solicited on Behalf of the Trustees
PROXY
The undersigned shareholder hereby appoints Harold W. Cogger, Michael
H. Koonce, and Arthur O. Stern, and each of them, proxies of the undersigned,
with power of substitution, to vote at the Special Meeting of Shareholders of
Colonial Select Value Fund, to be held at Boston, Massachusetts, on Tuesday,
September 30, 1997 and at any adjournments, as follows on the reverse side:
CONTINUED AND TO BE SIGNED ON REVERSE SIDE /SEE REVERSE SIDE/
/X/ Please mark votes as in this example.
This proxy when properly executed will be voted in the manner directed above
and, absent direction, will be voted for Items 1 through 3 listed below.
1. APPROVE OR DISAPPROVE A NEW MANAGEMENT AGREEMENT FOR THE FUND PROVIDING FOR
AN INCREASE IN THE MANAGEMENT FEE PAID BY THE FUND. (Item 1 of the Notice)
/ / FOR / / AGAINST / / ABSTAIN
2. APPROVE OR DISAPPROVE ELIMINATION OF A FUNDAMENTAL POLICY LIMITING THE FUND'S
INVESTMENTS IN ILLIQUID SECURITIES TO 10% OF NET ASSETS.(Item 2 of
the Notice)
/ / FOR / / AGAINST / / ABSTAIN
3. PROPOSAL TO RATIFY THE SELECTION OF INDEPENDENT ACCOUNTANTS. (Item 3 of
the Notice)
/ / FOR / / AGAINST / / ABSTAIN
4. IN THEIR DISCRETION, UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING.
<PAGE>
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
Please sign exactly as name appears hereon. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
Signature______________ Date_____________
Signature______________ Date_____________
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
PROMPTLY USING THE ENCLOSED ENVELOPE.
