Registration Nos: 2-62492
811-2865
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF [ X ]
1933
Pre Effective Amendment No. [ ]
Post Effective Amendment No. 40 [ X ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY [ X ]
ACT OF 1940
Amendment No. 38 [ X ]
COLONIAL TRUST IV
(Exact Name of Registrant as Specified in Charter)
One Financial Center, Boston, Massachusetts 02111
(Address of Principal Executive Office)
(617) 426-3750
(Registrant's Telephone Number, Including Area Code)
Name and Address of Agent for Copy to:
Service:
Arthur O. Stern, Esquire John M. Loder, Esquire
Colonial Management Associates, Inc. Ropes & Gray
One Financial Center One International Place
Boston, Massachusetts 02111 Boston, Massachusetts
02110-2624
It is proposed that this filing will become effective (check
appropriate box):
[ ] immediately upon filing pursuant to paragraph (b).
[ ] on (date) pursuant to paragraph (b).
[ ] 60 days after filing pursuant to paragraph (a)(2).
[ X ] on September 28, 1995 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.
DECLARATION PURSUANT TO RULE 24f-2
The Registrant has registered an indefinite number of its
shares of beneficial interest under the Securities Act of
1933 pursuant to Rule 24f-2 under the Investment Company Act
of 1940. On or about January 27, 1995, the Registrant filed
a Rule 24f-2 Notice in respect of its fiscal year ended
November 30, 1994.
MASTER FUND/FEEDER FUND REPRESENTATION
This Registration Statement includes the Prospectus and
Statement of Additional Information for the Colonial
Municipal Money Market Fund (currently known as Colonial Tax-
Exempt Money Market Fund), which uses a master fund/feeder
fund structure. In accordance with SEC requirements, the
master fund has executed this Registration Statement.
COLONIAL TRUST IV
Cross Reference Sheet
Colonial Municipal Money Market Fund
(formerly known as Colonial Tax-Exempt Money Market Fund)
Item Number of Form N-1A Location or Caption in Prospectus
Part A
1. Cover Page
2. Summary of expenses
3. The Fund's financial history
4. The Fund's investment objectives;
Organization and history; How the
Fund pursues its objectives
5. Back cover; How the Fund and the
Portfolio is managed;
Organization and history; The
Fund's investment objectives
6. Organization and history;
Distributions and taxes; How to
buy shares
7. Summary of expenses; How to buy
shares; How the Fund values its
shares; 12b-1 plans; Back cover
8. How to sell shares; How to
exchange shares; Telephone
transactions
9. Not applicable
September 28, 1995
COLONIAL MUNICIPAL
MONEY MARKET 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.
Colonial Municipal Money Market Fund (Fund), a diversified portfolio
of Colonial Trust IV (Trust), an open-end management investment
company, seeks maximum current income exempt from Federal income tax
by investing principally in a diversified portfolio of "short-term"
Municipal Securities.
Prior to its conversion to a master/feeder structure on September 28,
1995, the Fund invested directly in individual securities and was
managed by the Administrator. Unlike a traditional mutual fund which
invests directly in individual securities, the Fund currently seeks to
achieve its objective by investing all of its assets in SR&F Municipal
Money Market Portfolio (Portfolio), a municipal money market master
fund which has the same objective as the Fund. The Portfolio is a
series of the SR&F Base Trust, an open-end diversified management
investment company which was organized as a trust under the laws of
the Commonwealth of Massachusetts on August 23, 1993. Except for
certain separate expenses, the Fund's investment experience will
correspond directly to that of the Portfolio. The Portfolio is
managed by Stein Roe & Farnham Incorporated (Adviser), successor to an
investment advisory business that was founded in 1932.
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 September 28, 1995
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 1-800-248-2828. The Statement of Additional
Information is incorporated by reference in (which means it is
considered to be a part of) this Prospectus.
An investment in the Fund is not insured or guaranteed by the U.S.
Government. There can be no assurance that the $1.00 net asset value
per share will be maintained.
The Fund offers two classes of shares. Class A shares are offered at
net asset value; Class B shares are offered at net asset value plus an
annual distribution fee and a declining contingent deferred sales
charge on redemptions made within six years after purchase. Class B
shares automatically convert to Class A shares after approximately
eight years. See "How to buy shares".
Class B shares of the Fund are only for temporary investment while,
for example, considering investments in Class B shares of other
Colonial funds because, unlike shares of most money market funds,
investments in the Fund's Class B shares are subject to contingent
deferred sales charges, a distribution fee and a service fee.
Contents Page
Summary of expenses
The Fund's financial history
Two-tiered structure
The Fund's investment objective
How the Fund pursues its objective
and certain risk factors
How the Fund measures its performance
How the Fund and the Portfolio are managed
How the Fund values its shares
Distributions and taxes
How to buy shares
How to sell shares
How to exchange shares
Telephone transactions
12b-1 plan
Organization and history
Appendix
FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED,
ENDORSED OR INSURED BY, ANY BANK OR GOVERNMENT AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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 annual expenses for an investment in each Class of the Fund's
shares. Annual Operating Expenses include the expenses of the
Portfolio as well as the Fund. Annual Operating Expenses have been
restated to reflect current fees. See "How the Fund and the Portfolio
are Managed."
Shareholder Transaction Expenses (1)(2)
Class A Class B
------- -------
Maximum Contingent Deferred Sales
Charge (as a % of offering
price)(3) 0.00% 5.00%(4)
(1) For accounts less than $1,000 an annual fee of $10 may be
deducted. See "How to sell shares."
(2) Redemption proceeds exceeding $5,000 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 0.75% distribution fee applicable to Class B
shares, long-term Class B shareholders may pay more in aggregate
sales charges than the maximum 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.
Annual Operating Expenses (as a % of net assets)
Class A Class B
------- -------
Management fee 0.25% 0.25%
Administration fee (after expense
waiver) 0.00% 0.00%
12b-1 fees 0.00 1.00
Other expenses (after fee waiver) 0.50 0.50
---- ----
Total expenses 0.75%(5) 1.75%(5)
==== ====
(5) The Administrator has voluntarily agreed to waive or bear
certain Fund expenses until further notice to the Fund. Absent
such agreement, the "Administration fee" would have been 0.25% for
each Class, "Other expenses" would have been 0.61% for each Class
and "Total expenses" would have been 1.11% for Class A and 2.11%
for Class B.
Example
The following Example 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. The 5% return and expenses
used in this Example should not be considered indicative of actual or
expected Fund performance or expenses, both of which will vary.
Class A Class B
------- -------
Period: (6)
1 year $ 8 $ 68 $ 18
3 years 24 86 56
5 years 42 116 96
10 years 93 181(7) 181(7)
Without voluntary fee reduction the amounts would be:
Class A Class B
------- -------
Period: (6)
1 year $11 $ 72 $ 22
3 years 35 97 67
5 years 61 134 114
10 years 135 220(7) 220(7)
(6) Assumes no redemption.
(7) Class B shares convert to Class A shares after approximately 8
years; therefore, years 9 and 10 reflect Class A expenses.
THE FUND'S FINANCIAL HISTORY (b)
The following schedule of financial highlights for a share outstanding
throughout each period, has been audited by Price Waterhouse LLP,
independent accountants. Their unqualified report is included in the
Fund's 1994 Annual Report and is incorporated by reference into the
Statement of Additional Information.
[The financial information for the period 12/1/94 through 6/30/95 for
each Class of shares will be supplied by a 485(b) Amendment.]
<TABLE>
<CAPTION>
CLASS A
-------
Period 12/1/94 Year Ended November 30
-------------- ----------------------
through 6/30/95(c) 1994 1993 1992 1991 1990 1989 1988 1987(g)
------------------ ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of
period $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment income(a) 0.020 0.017 0.024 0.042 0.055 0.059 0.050 0.022
_____ _____ _____ _____ _____ _____ _____ _____
Less distributions declared to
shareholders:
From net investment income (0.020) (0.017) (0.024) (0.042) (0.055) (0.059) (0.050) (0.022)
------- ------- ------- ------- ------- ------- ------- -------
Net asset value - End of period $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
----- ----- ----- ----- ----- ----- ----- -----
Total return(d)(e) 2.00% 1.73% 2.44% 4.26% 5.64% 6.11% 5.12% 2.19%
---- ---- ---- ---- ---- ---- ---- ----
Ratios to average net assets:
Expenses 0.60% 0.75% 0.75% 0.75% 0.75% 0.66% 0.39% ---
Fees and expenses waived
or borne by the Adviser 0.59% 0.50% 0.61% 0.53% 0.38% 0.31% 0.49% 1.08%(f)
Net investment income 2.05% 1.69% 2.42% 4.23% 5.50% 5.96% 4.95% 5.37%(f)
Net assets at end of period (000) $28,808 $18,618 $34,956 $28,355 $37,158 $40,639 $53,758 $52,190
_________________________________
(a) Net of fees and
expenses waived or
or borne by the Adviser which amounted to $0.006 $0.005 $0.006 $0.005 $0.004 $0.003 $0.005 $0.005
</TABLE>
(b) Prior to September 28, 1995, the Fund was managed by the Administrator
and invested directly in individual securities.
(c) The Fund changed its fiscal year end from November 30 to June 30 on
June 16, 1995.
(d) Total return at net asset value assuming all distributions reinvested and
no contingent deferred sales charge.
(e) Had the Adviser not waived or reimbursed a portion of expenses total return
would have been reduced.
(f) Annualized.
(g) The Fund commenced investment operations on June 16, 1987.
THE FUND'S FINANCIAL HISTORY(continued)
<TABLE>
<CAPTION>
CLASS B
-------
Period 12/1/94 Year Ended November 30
-------------- ----------------------
Through 6/30/95(b) 1994 1993 1992(c)
------------------ ---- ---- -------
<S> <C> <C> <C>
Net asset value - Beginning of
period $1.000 $1.000 $1.000
------ ------ ------
Income from investment
operations:
Net investment income(a) 0.010 0.009 0.007
----- ----- -----
Less distributions declared to
shareholders:
From net investment income (0.010) (0.009) (0.007)
------- ------- -------
Net asset value - End of period $1.000 $1.000 $1.000
----- ----- -----
Total return(d)(e) 1.01% 0.93% 0.68% (f)
---- ---- ----
Ratios to average net assets:
Expenses 1.60% 1.75% 1.75% (g)
Fees and expenses waived
or borne by the Adviser 0.59% 0.50% 0.79% (g)
Net investment income 1.05% 0.69% 1.42% (g)
Net assets at end of period (000) $3,867 $908 $135
_________________________________
(a) Net of fees and
expenses waived or borne
by the Adviser which amounted to $0.006 $0.005 $0.003
</TABLE>
(b) The Fund changed its fiscal year end from November 30 to June 30
on June 16, 1995.
(c) Class B shares were initially offered on May 5, 1992. Per share amounts
reflect activity from that date.
(d) Total return at net asset value assuming all distributions reinvested and
no contingent deferred sales charge.
(e) Had the Adviser not waived or reimbursed a portion of expenses total
return would have been reduced.
(f) Not annualized.
(g) Annualized.
Further performance information is contained in the Fund's Annual
Report to shareholders, which is obtainable free of charge by calling
1-800-248-2828.
TWO-TIERED STRUCTURE
Unlike other mutual funds which invest directly in individual
securities, the Fund is an open-end management investment company that
seeks to achieve its investment objective by investing all of its
assets in the Portfolio, a separate registered investment company with
the same investment objective as the Fund and which invests directly
in portfolio securities. See "The Fund's Investment Objective," "How
the Fund Pursues its Objective and Certain Risk Factors" and "How the
Fund and the Portfolio are Managed" for information concerning the
Portfolio's and the Fund's investment objectives, policies, management
and expenses.
The Fund's and the Portfolio's investment objectives may be changed
without shareholder approval. Fund shareholders will be notified,
however, at least 30 days prior to any change in the Fund's or the
Portfolio's objective. Class B shareholders may incur a contingent
deferred sales charge if they redeem shares in response to a change in
objective.
Matters submitted by the Portfolio to its investors for a vote will be
passed along by the Fund to its shareholders, and the Fund will vote
its entire interest in the Portfolio in proportion to the votes
actually received from Fund shareholders. As of the date of this
Prospectus, the SteinRoe Municipal Money Market Fund (SteinRoe Fund)
is also an investor in the Portfolio. In the future, other funds or
institutional investors, including the Fund, may also invest in the
Portfolio. The SteinRoe Fund currently has, and in the future other
investors may have, sufficient voting interests in the Portfolio to
control matters relating to the operation of the Portfolio. You may
obtain additional information about other investors in the Portfolio
by writing or calling the Administrator at 1-800-248-2828.
The SteinRoe Fund has invested, and other feeder funds or institutions
may invest, in the Portfolio on substantially the same terms and
conditions as the Fund. Each investor in the Portfolio will bear its
proportionate share of the Portfolio's expenses. However, other
mutual fund investors in the Portfolio will not be required to issue
their shares at the same public offering price as the Fund and may
have direct expenses that are higher or lower than those of the Fund.
These differences may result in such other funds' generating
investment returns higher or lower than those of the Fund. Large
scale redemptions by such 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.
The Fund will continue to invest in the Portfolio as long as the
Trust's Board of Trustees determines it is in the best interest of
Fund shareholders to do so. In the event that the Portfolio's
investment objective or policies were changed so as to be inconsistent
with the Fund's investment objective or policies, the Board of
Trustees of the Trust would consider what action might be taken,
including changes to the Fund's investment objective or policies,
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 would 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.
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks maximum current income exempt from Federal income tax
by investing principally in a diversified portfolio of "short-term"
Municipal Securities.
HOW THE FUND PURSUES ITS OBJECTIVE AND CERTAIN RISK FACTORS
As indicated above, the Fund seeks to achieve its objective by
investing all its assets in the Portfolio, which has the same
investment objective and policies as the Fund. In pursuing its
objective, the Portfolio attempts to maintain relative stability of
principal and liquidity. The Portfolio invests principally in a
diversified portfolio of short-term Municipal Securities. "Short-
term" means a remaining maturity of no more than thirteen months (or a
comparable period). See the Statement of Additional Information for
more information.
It is a fundamental policy that normally at least 80% of the
Portfolio's investments will produce income that is exempt from
Federal income tax, except for periods that the Adviser believes
require a defensive position for the protection of shareholders.
As a fundamental policy, the Portfolio invests in Municipal Securities
that, at the time of purchase, are: (i) variable rate demand
securities whose demand feature is rated within the two highest
ratings assigned by Moody's Investors Service, Inc. (Moody's), VMIG1
or VMIG2; (ii) notes rated within the two highest short-term municipal
ratings assigned by Moody's, MIG1 or MIG2, or within the highest
rating assigned by Standard & Poor's Corporation (S&P), SP-1+; (iii)
municipal commercial paper (short-term promissory notes) rated Prime-1
by Moody's, or A-1 by S&P; (iv) municipal bonds, including industrial
development bonds, rated within the two highest ratings assigned to
municipal bonds by S&P, AAA or AA, or by Moody's, Aaa or Aa; (v)
securities not rated as described in (i) through (iv) but determined
by the Board of Trustees of the Portfolio to be at least equal in
quality to one or more of the foregoing ratings, although other types
of obligations of the same issuer might not be within the foregoing
ratings; (vi) securities backed by the full faith and credit of the
U.S. Government; or (vii) securities as to which the payment of
principal and interest is collateralized by securities issued or
guaranteed by the U.S. Government or by its agencies or
instrumentalities (U.S. government securities) deposited in an escrow
for the benefit of holders of the securities. In accordance with SEC
Rule 2a-7 under the Investment Company Act of 1940, each security in
which the Portfolio invests will be U.S. dollar denominated and (i)
rated (or be issued by an issuer that is rated with respect to its
short-term debt) within the two highest rating categories for short-
term debt by at least two nationally recognized statistical rating
organizations (NRSROs) or, if rated by only one NRSRO, rated within
the two highest rating categories by that NRSRO, or, if unrated,
determined by or under the direction of the Board of Trustees of the
Portfolio to be of comparable quality, and (ii) determined by or under
the direction of the Portfolio's Board of Trustees to present minimal
credit risks.
Municipal Securities. Municipal Securities are debt obligations
issued by or on behalf of the governments of states, territories or
possessions of the United States, the District of Columbia and their
political subdivisions, agencies and instrumentalities, the interest
on which is generally exempt from the regular Federal income tax.
The two principal classifications of Municipal Securities are "general
obligation" and "revenue" bonds. "General obligation" bonds are
secured by the issuer's pledge of its faith, credit and taxing power
for the payment of principal and interest. "Revenue" bonds are
usually payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds
of a special excise tax or other specific revenue source. Industrial
development bonds are usually revenue bonds, the credit quality of
which is normally directly related to the credit standing of the
industrial user involved. Municipal Securities may bear either fixed
or variable rates of interest. Variable rate securities bear rates of
interest that are adjusted periodically according to formulae intended
to minimize fluctuation in values of such instruments.
Within the principal classifications of Municipal Securities, there
are various types of instruments, including municipal bonds, municipal
notes, municipal leases, custodial receipts and participation
certificates. Municipal notes include tax, revenue and bond
anticipation notes of short maturity, generally less than three years,
which are issued to obtain temporary funds for various public
purposes. Municipal lease securities, and participation certificates
therein, evidence certain types of interests in lease or installment
purchase contract obligations of a municipal authority or other
entity. Custodial receipts represent ownership in future interest or
principal payments (or both) on certain Municipal Securities and are
underwritten by securities dealers or banks. Some Municipal
Securities may not be backed by the faith, credit and taxing power of
the issuer and may be subject to "non-appropriation" clauses which
provide that the municipal authority is not obligated to make lease or
other contractual payments, unless specific annual appropriations are
made by the municipality. The Portfolio may invest more than 5% of
its net assets in municipal bonds and notes, but does not expect to
invest more than 5% of its net assets in the other Municipal
Securities described in this paragraph.
The Portfolio may also purchase Municipal Securities that are insured
as to the timely payment of interest and principal. Such insured
Municipal Securities may already be insured when purchased by the
Portfolio or the Portfolio may purchase insurance in order to turn an
uninsured Municipal Security into an insured Municipal Security.
Some Municipal Securities are backed by (i) the full faith and credit
of the U.S. government, (ii) agencies or instrumentalities of the U.S.
government, or (iii) U.S. government securities.
Except with respect to Municipal Securities with a demand feature
acquired by the Portfolio, if, after purchase by the Portfolio, an
issue of Municipal Securities ceases to meet the required rating
standards, if any, the Portfolio is not required to sell such
security, but the Adviser would consider such an event in deciding
whether it should retain security in its portfolio.
In the case of Municipal Securities with a demand feature acquired by
the Portfolio, if the quality of such a security falls below the
minimum level applicable at the time of acquisition, the Portfolio
must dispose of the security, unless the Portfolio's Board of Trustees
determines that it is in the best interest of the Portfolio and its
shareholders to retain the security.
Other Investment Practices. The Portfolio may enter into reverse
repurchase agreements and may purchase zero coupon securities and may
also engage to a limited extent in the following investment practices,
each of which may involve certain special risks.
When-Issued and Delayed-Delivery Securities; Stand-by Commitments.
The Portfolio's assets may include securities purchased on a when-
issued or delayed-delivery basis. Although the payment and interest
terms of these securities are established at the time the purchaser
enters into the commitment, the securities may be delivered and paid
for a month or more after the date of purchase, when their value may
have changed. The Portfolio makes such commitments only with the
intention of actually acquiring the securities, but may sell the
securities before settlement date if the Adviser deems it advisable
for investment reasons. Securities purchased in this manner involve a
risk of loss if the value of the security purchased declines before
settlement date.
Stand-By Commitments. To facilitate portfolio liquidity, the
Portfolio may obtain stand-by commitments when it purchases Municipal
Securities. A stand-by commitment gives the holder the right to sell
the underlying security to the seller at an agreed upon price on
certain dates within a specified period.
Participation Interests. The Portfolio may also purchase
participation interests or certificates of participation in all or
part of specific holdings of Municipal Securities, including municipal
obligations. Some participation interests, certificates of
participation and municipal lease obligations are illiquid and, as
such, will be subject to the Portfolio's 10% limit on investments in
illiquid securities.
Risk Factors. All investments, including those in mutual funds, have
risks. No investment is suitable for all investors. Although the
Portfolio seeks to reduce risk by investing in a diversified
portfolio, this does not eliminate all risk. The risks inherent in
the Portfolio depend primarily upon the term and quality of the
obligations in which it invests as well as on market conditions.
A decline in prevailing levels of interest rates generally increases
the value of the Portfolio's securities, while an increase in rates
usually reduces the value of those securities.
There can be no assurance that the Portfolio will achieve its
objective, nor can the Portfolio assure that payments of interest and
principal on portfolio securities will be made when due. Generally,
high-quality short-term obligations offer lower yields and less
fluctuation in value than long-term quality obligations.
Consequently, the Portfolio is designed for investors who seek little
or no fluctuation in portfolio value.
Although the Portfolio currently limits its investments in Municipal
Securities to those on which interest is exempt from the regular
Federal income tax, it may invest up to 100% of its total assets in
Municipal Securities the interest on which is subject to the Federal
alternative minimum tax.
The Portfolio may invest 25% or more of its assets in Municipal
Securities that are related in such a way that an economic, business,
or political development affecting one such security could also affect
the other securities. For example, Municipal Securities the interest
upon which is paid from revenues of similar-type projects, such as
hospitals, utilities or housing, would be so related. The Portfolio
may invest 25% or more of its assets in industrial development bonds
(subject to the concentration restrictions described in the Statement
of Additional Information). It is a fundamental policy that the
assets of the Portfolio that are not invested in Municipal Securities
may be held in cash or invested in short-term taxable investments.
Other. The Portfolio and, therefore, the Fund may not always achieve
its investment objective. The Fund's and the Portfolio's objectives
and non-fundamental policies may be changed without shareholder
approval. The Fund's and the Portfolio's fundamental policies listed
in the Statement of Additional Information cannot be changed without
the approval of a majority of the Fund's and the Portfolio's
outstanding voting securities, respectively. 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 advertisements and sales literature.
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 and the contingent deferred sales
charge applicable to the time period quoted on Class B shares. Other
total returns differ from average annual total return only in that
they may relate to different time periods, may represent aggregate
rather than average annual total returns, or may not reflect the
contingent deferred sales charge.
Each Class's yield and tax-equivalent yield are calculated in
accordance with the Securities and Exchange Commission's formula for
money market funds. 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.
Unlike bank deposits or other investments which pay a fixed yield for
a stated period of time, each Class's yield changes in response to
fluctuations in interest rates and Fund expenses. Therefore, past
Fund performance does not predict future performance. Yields on other
investments may be calculated differently. When comparing
investments, investors should consider the quality and maturity of the
portfolio securities involved.
HOW THE FUND AND THE PORTFOLIO ARE MANAGED
The Trust's Trustees formulate the Fund's general policies and oversee
the Fund's affairs. The Fund has not retained the services of an
investment adviser because the Fund seeks to achieve its investment
objective by investing all of its investable assets in the Portfolio.
The Portfolio is managed by the Adviser. Subject to the supervision
of the Portfolio's Trustees, the Adviser makes the Portfolio's day-to-
day investment decisions, arranges for the execution of portfolio
transactions and generally manages the Portfolio's investments. The
Adviser is an indirect subsidiary of Liberty Financial Companies, Inc.
(Liberty Financial), which in turn is an indirect subsidiary of
Liberty Mutual Insurance Company (Liberty Mutual). See "Management of
the Fund" and "Management of the Portfolio" in the Statement of
Additional Information for information concerning the Trustees and
officers of the Trust and the Portfolio.
The Adviser places all orders for the purchase and sale of securities
for the Portfolio. In doing so, the Adviser seeks to obtain the best
combination of price and execution, which involves a number of
judgmental factors.
For its management services, the Adviser receives from the Portfolio a
monthly fee at an annual rate of 0.25% of the Portfolio's average
daily net assets. The Adviser also provides pricing and bookkeeping
services to the Portfolio for a fee of $25,000 plus 0.0025% annually
of average daily net assets over $50 million. Stein Roe Services,
Inc., a wholly-owned indirect subsidiary of Liberty Mutual, serves as
the transfer agent to the Portfolio for a monthly fee of $500.
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 0.25% of
the Fund's average daily net assets for these services. The
Administrator also provides pricing and bookkeeping services to the
Fund for a monthly fee at the annual rate of $18,000 plus 0.0233%
annually of average daily net assets over $50 million. Colonial
Investment Services, Inc. (Distributor), serves as the Fund's
distributor. Colonial Investors Service Center, Inc. (Transfer
Agent), serves as the Fund's shareholder services and transfer agent
for a fee of 0.20% annually of average daily net assets plus out-of-
pocket expenses. The Administrator, the Distributor and the Transfer
Agent are all indirect subsidiaries of Liberty Financial.
Each of the foregoing fees is subject to any fee waiver or expense
reimbursement to which the Adviser or the Administrator may agree.
See "Summary of Expenses" above.
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 and the Portfolio are valued as of the close of the New
York Stock Exchange (Exchange) (currently 3:00 p.m., Chicago time, in
the case of the Portfolio) each day the Exchange is open . The net
asset value of the Portfolio will not be determined on days when the
Exchange is closed unless, in the judgment of the Portfolio's Board of
Trustees, the net asset value of the Portfolio should be determined on
any such day, in which case the determination will be made at 3:00
p.m., Chicago time.Portfolio securities are valued using the
"amortized cost" method (when such cost approximates market value
pursuant to procedures adopted by the Portfolio's Trustees), which
does not consider the effect of fluctuating interest rates on the
value of assets. The Fund's shares in the Portfolio are valued at
their net asset value. The Fund and the Portfolio intend to maintain
a per share net asset value of $1.00, but this cannot be assured.
DISTRIBUTIONS AND TAXES
The Fund intends to qualify as a "regulated investment company" under
the Internal Revenue Code and to distribute to its shareholders
virtually all net income and any net realized gains at least annually.
The Fund generally declares distributions daily and pays them monthly.
Distributions are invested in additional shares of the same Class of
the Fund at net asset value unless the shareholder elects to receive
cash. If an investment is made by federal funds wire, dividends start
accruing on the next business day. Regardless of the shareholder's
election, distributions of $10 or less will not be paid in cash but
will be invested in additional shares of the same Class of the Fund at
net asset value. To change your election call the Transfer Agent for
information. If the Fund makes taxable distributions, they will
generally be taxable whether you receive them in cash or in additional
Fund shares; you must report them as taxable income unless you are a
tax-exempt institution. Each January, information on the amount and
nature of distributions for the prior year is sent to shareholders.
HOW TO BUY SHARES
Shares are offered continuously. Orders received in good form prior
to the time shares are valued (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.
The minimum initial investment is $1,000; subsequent investments may
be as small as $50. The minimum initial investment for the Colonial
Fundamatic program is $50 and the minimum initial investment for a
Colonial retirement account is $25. Certificates will not be issued
for the Fund. The Fund may refuse any purchase order for its shares.
See the Statement of Additional Information for more information.
Class A Shares. Class A shares are offered at net asset value. The
Distributor pays no commission on sales of Class A shares.
Class B Shares. Class B shares are offered at net asset value,
without an initial sales charge, subject to a 0.75% annual
distribution fee and a 0.25% annual service fee for approximately 8
years (at which time they convert to Class A shares not bearing a
distribution or service fee), and a contingent deferred sales charge
if redeemed within 6 years after purchase. As shown below, the amount
of the contingent deferred sales charge depends on the number of years
after purchase that redemption occurs:
Years Contingent
After Deferred
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.
General. All contingent deferred sales charges are deducted from the
redemption, not the amount remaining in the account, and 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 in the
account, reduced by prior redemptions on which a continent deferred
sales charge was paid and any exempt redemptions). 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. Class B shares of the Fund are
only for temporary investment while considering investments in Class B
shares of other Colonial funds. Purchases of $250,000 or more must be
for Class A shares. Consult your financial service firm.
Financial service firms receive compensation only on sales of Class B
shares. The Distributor may pay additional compensation to financial
service firms which have made or may make significant sales of Class B
shares. Contingent deferred sales charges may be reduced or
eliminated for certain persons or organizations purchasing Fund shares
alone or in combination with certain other Colonial funds. See the
Statement of Additional information for more information.
Shareholder Services. 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.
HOW TO SELL SHARES
Shares of the Fund may be sold on any day the Exchange is open, either
directly to the Fund or through your financial service firm. 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 send proceeds as
soon as the check has cleared (which may take up to 15 days).
Selling 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. 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 financial service firms, the Transfer Agent
and many banks. Additional documentation is required for sales of
shares 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
Selling Shares Through Financial Service Firms. Financial service
firms must receive requests prior to the time the Fund values its
shares to receive that day's price, are responsible for furnishing all
necessary documentation to the Transfer Agent and may charge for this
service.
General. The sale of shares is a taxable transaction for federal tax
purposes and may be subject to a contingent deferred sales charge.
The contingent deferred sales charge may be waived under certain
circumstances. See the Statement of Additional Information for more
information. Under unusual circumstances, the Fund may suspend
repurchases or postpone payment for up to seven days or longer, as
permitted by federal securities law. 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.
HOW TO EXCHANGE SHARES
Exchanges at net asset value may be made among shares of the same
class of shares of most other Colonial funds. Shares will continue to
age without regard to the exchange for purposes of conversion and in
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 1-800-248-2828
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.
Class A Shares. An exchange from a money market fund into a non-money
market 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 a fund with a higher sales
charge, after which exchanges are made at the net asset value next
determined.
Purchasers of $1 million or more of Class A shares of other Colonial
funds who exchange their shares for Class A shares of the Fund and
redeem those Fund shares within 18 months after the original
investment are subject to a 1.00% contingent deferred sales charge.
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 in which
the original investment was made.
TELEPHONE TRANSACTIONS
All shareholders and/or their financial advisers may redeem up to
$50,000 of Fund shares by telephone and may elect telephone redemption
privileges for larger amounts on the account application. All
exchanges may be accomplished by telephone. See the Statement of
Additional Information for more information. The Adviser,
Administrator, the Transfer Agent and the Fund will not be liable when
following telephone instructions reasonably believed to be genuine and
a shareholder may suffer a loss from unauthorized transactions. The
Transfer Agent will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. Shareholders
and/or their financial advisers will be required to provide their
name, address and account number. Financial advisers will also be
required to provide their broker number. Proceeds and confirmations
of telephone transactions will be mailed or sent to the address of
record. Telephone redemptions are not available on accounts with an
address change in the preceding 60 days. All telephone transactions
are recorded. Shareholders are not obligated to transact by
telephone.
12B-1 PLAN
Under the Class B 12b-1 Plan, the Fund pays the Distributor annual
distribution and service fees of 0.75% and 0.25%, respectively, of the
average net assets attributed to its Class B shares. Because the
Class B shares bear the additional fees, their dividends will be lower
than the dividends of Class A shares. Class B shares automatically
convert to Class A shares, approximately eight years after the Class B
shares were purchased. The multiple class structure could be
terminated should certain Internal Revenue Service rulings be
rescinded. 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 Fund share
sales.
ORGANIZATION AND HISTORY
The Fund is the successor to Colonial Tax-Exempt Money Market Trust,
which was organized in 1987. The Fund represents the entire interest
in a separate portfolio of the Trust. The Trust is not required to
hold annual shareholder meetings, but special meetings may be called
for certain purposes. You receive one vote for each of your Fund
shares. Shares of the Trust 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.
APPENDIX
DESCRIPTION OF BOND RATINGS
S&P
AAA The highest rating assigned by S&P indicates an extremely strong
capacity to repay principal and interest.
AA bonds also qualify as high quality. Capacity to repay principal
and pay interest is very strong, and in the majority of instances,
they differ from AAA only in small degree.
A bonds have a strong capacity to repay principal and interest,
although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.
BBB bonds are regarded as having an adequate capacity to repay
principal and interest. Whereas they normally exhibit protection
parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to repay principal and
interest than for bonds in the A category.
BB, B, CCC and CC bonds are regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and principal in
accordance with the terms of the obligation. BB indicates the lowest
degree of speculation and CC the highest degree. While likely to have
some quality and protection characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions.
C ratings are reserved for income bonds on which no interest is being
paid.
D bonds are in default, and payment of interest and/or principal is in
arrears.
Plus(+) or minus (-) are modifiers relative to the standing within the
major rating categories.
Provisional Ratings. The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion
of the project being financed by the debt being rated and indicates
that payment of debt service requirements is largely or entirely
dependent upon the successful and timely completion of the project.
This rating, however, although addressing credit quality subsequent to
completion of the project, makes no comments on the likelihood of, or
the risk of default upon failure of, such completion. The investor
should exercise his own judgment with respect to such likelihood and
risk.
Municipal Notes:
SP-1. Notes rated SP-1 have very strong or strong capacity to pay
principal and interest. Those issues determined to possess
overwhelming safety characteristics are designated as SP-1+.
SP-2. Notes rated SP-2 have satisfactory capacity to pay principal
and interest.
Notes due in three years or less normally receive a note rating.
Notes maturing beyond three years normally receive a bond rating,
although the following criteria are used in making that assessment:
Amortization schedule (the larger the final maturity relative to
other maturities, the more likely the issue will be rated as a note).
Source of payment (the more dependent the issue is on the market
for its refinancing, the more likely it will be rated as a note).
Demand Feature of Variable Rate Demand Securities:
S&P assigns dual ratings to all long-term debt issues that have as
part of their provisions a demand feature. The first rating addresses
the likelihood of repayment of principal and interest as due, and the
second rating addresses only the demand feature. The long-term debt
rating symbols are used for bonds to denote the long-term maturity and
the commercial paper rating symbols are usually used to denote the put
(demand) option (for example, AAA/A-1+). Normally, demand notes
receive note rating symbols combined with commercial paper symbols
(for example, SP-1+/A-1+).
Commercial Paper:
A. Issues assigned this highest rating are regarded as having the
greatest capacity for timely payment. Issues in this category are
further refined with the designations 1, 2, and 3 to indicate the
relative degree to safety.
A-1. This designation indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues
determined to possess overwhelming safety characteristics are designed
A-1+.
Corporate Bonds:
The description of the applicable rating symbols and their meanings is
substantially the same as its Municipal Bond ratings set forth above.
MOODY'S
Aaa bonds are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as
"gilt edge". Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa bonds are judged to be of high quality by all standards. Together
with Aaa bonds they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of
protective elements may be of greater amplitude or there may be other
elements present which make the long-term risk appear somewhat larger
than in Aaa securities. Those bonds in the Aa through B groups which
Moody's believes possess the strongest investment attributes are
designated by the symbol Aa1, A1 and Baa1.
A bonds possess many of the favorable investment attributes and are to
be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa bonds are considered as medium grade, neither highly protected nor
poorly secured. Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length
of time. Such bonds lack outstanding investment characteristics and
in fact, have speculative characteristics as well.
Ba bonds are judged to have speculative elements; their future cannot
be considered as well secured. Often, the protection of interest and
principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future.
Uncertainty of position characterizes these bonds.
B bonds generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa bonds are of poor standing. They may be in default or there may
be present elements of danger with respect to principal or interest.
Ca bonds are speculative in a high degree, often in default or having
other marked shortcomings.
C bonds are the lowest rated class of bonds and can be regarded as
having extremely poor prospects of ever attaining any real investment
standing.
Conditional Ratings. Bonds for which the security depends upon the
completion of some act or the fulfillment of some condition are rated
conditionally. These are bonds secured by (a) earnings of projects
under construction, (b) earnings of projects unseasoned in operating
experience, (c) rentals which being when facilities are completed, or
(d) payments to which some other limiting conditions attaches.
Parenthetical rating denotes probable credit stature upon completion
of construction or elimination of basis of condition.
Note: Those bonds in the Aa, A, Baa, Ba, and B groups which Moody's
believes possess the strongest investment attributes are designated by
the symbols Aa 1, A 1, Baa 1, Ba 1, and B 1.
Municipal Notes:
MIG 1. This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity
support or demonstrated broad-based access to the market for
refinancing.
MIG 2. This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.
MIG 3. This designation denotes favorable quality. All security
elements are accounted for but there is lacking the undeniable
strength of the preceding grades. Liquidity and cash flow protection
may be narrow and market access for refinancing is likely to be less
well established.
Demand Feature of Variable Rate Demand Securities:
Moody's may assign a separate rating to the demand feature of a
variable rate demand security. Such a rating may include:
VMIG 1. This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity
support or demonstrated broad-based access to the market for
refinancing.
VMIG 2. This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.
VMIG 3. This designation denotes favorable quality. All security
elements are accounted for but there is lacking the undeniable
strength of the preceding grades. Liquidity and cash flow protection
may be narrow and market access for refinancing is likely to be less
well established.
Commercial Paper:
Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment capacity of rated
issuers:
Prime-1 Highest Quality
Prime-2 Higher Quality
Prime-3 High Quality
If an issuer represents to Moody's that its Commercial Paper
obligations are supported by the credit of another entity or entities,
Moody's, in assigning ratings to such issuers, evaluates the financial
strength of the indicated affiliated corporations, commercial banks,
insurance companies, foreign governments, or other entities, but only
as one factor in the total rating assessment.
Corporate Bonds:
The description of the applicable rating symbols (Aaa, Aa, A) and
their meanings is identical to that of its Municipal Bond ratings as
set forth above, except for the numerical modifiers. Moody's applies
numerical modifiers 1, 2, and 3 in the Aa and A classifications of its
corporate bond rating system. The modifier 1 indicates that the
security ranks in the higher end of its generic rating category; the
modifier 2 indicates a midrange ranking; and the modifier 3 indicates
that the issuer ranks in the lower end of its generic rating category.
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
Colonial Investment Services, Inc.
One Financial Center
Boston, MA 02111-2621
Shareholder Services and Transfer Agent
Colonial Investors Service Center, Inc.
One Financial Center
Boston, MA 02111-2621
1-800-345-6611
Portfolio Custodian
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02101
Independent Accountants of Fund
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110-2624
Independent Auditors of Portfolio
Ernst & Young LLP
233 South Wacker Drive
Chicago, IL 60606
Legal Counsel
Ropes & Gray
One International Place
Boston, MA 02110-2624
Your financial service firm is:
Printed in U.S.A.
September 28, 1995
COLONIAL MUNICIPAL MONEY MARKET FUND
PROSPECTUS
Colonial Municipal Money Market Fund seeks maximum current income
exempt from Federal income tax by investing principally in a
diversified portfolio of "short-term" Municipal Securities. The Fund
currently seeks to achieve its objective by investing all of its
assets in the Portfolio.
For more detailed information about the Fund, call the Administrator
at 1-800-248-2828 for the September 28, 1995 Statement of Additional
Information.
FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED,
ENDORSED OR INSURED BY, ANY BANK OR GOVERNMENT AGENCY.
Colonial Mutual Funds
_________________________________________________________________
Please send your completed application to:
Colonial Mutual Funds
P.O. Box 1722
Boston, Massachusetts 02105-1722
New Account Application/Revision to Existing Account
To open a new account, complete sections 1, 2, 3, & 8.
To apply for special services for a new or existing account,
complete sections 4, 5, 6, 7, or 9 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: Name 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
______________________________________
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 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 Choice(s)
Fund
___ A Shares ___ B Shares (less than $250,000)
$______________________________________________
Amount
Method of Payment
Choose one for each fund
___Check payable to the Fund, enclosed
___Bank wired on (Date) ____/____/____
Wire confirmation #
___Dealer purchased on (Date) ____/____/____
Trade confirmation #
Ways to Receive Your Distributions
Choose one for each fund
___Reinvest dividends and capital gains
___Dividends in cash; reinvest capital gains
___Dividends and capital gains in cash
___Automatic Dividend Diversification See section 5A, inside
___Direct Deposit via Colonial Cash Connection See section
4B, inside
Fund Choice(s)
Fund
___ A Shares ___ B Shares (less than $250,000)
$______________________________________________
Amount
Method of Payment
Choose one for each fund
___Check payable to the Fund, enclosed
___Bank wired on (Date) ____/____/____
Wire confirmation #
___Dealer purchased on (Date) ____/____/____
Trade confirmation #
Ways to Receive Your Distributions
Choose one for each fund
___Reinvest dividends and capital gains
___Dividends in cash; reinvest capital gains
___Dividends and capital gains in cash
___Automatic Dividend Diversification See section 5A, inside
___Direct Deposit via Colonial Cash Connection See section
4B, inside
Fund Choice(s)
Fund
___ A Shares ___ B Shares (less than $250,000)
$______________________________________________
Amount
Method of Payment
Choose one for each fund
___Check payable to the Fund, enclosed
___Bank wired on (Date) ____/____/____
Wire confirmation #
___Dealer purchased on (Date) ____/____/____
Trade confirmation #
Ways to Receive Your Distributions
Choose one for each fund
___Reinvest dividends and capital gains
___Dividends in cash; reinvest capital gains
___Dividends and capital gains in cash
___Automatic Dividend Diversification See section 5A, inside
___Direct Deposit via Colonial Cash Connection See section
4B, inside
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. I certify, under penalties of perjury, that:
1. The Social Security # or Taxpayer I.D. # provided is
correct.
Cross out 2(a) or 2(b) if either is not true in your case.
2. I am not subject to 31% backup withholding because (a) I
have not been notified that I am subject to backup
withholding or (b) the Internal Revenue Service has notified
me that I am no longer subject to backup withholding.
It is agreed that the Fund, all Colonial companies 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.
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 section(s) 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 following
business day. Withdrawals in excess of 12% annually of your
current account value will not be accepted. Redemptions made
in addition to Plan payments may be subject to a contingent
deferred sales charge for Class B 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 _________________ (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 _________________ (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 _________________ (month).
Payment Instructions
Send the payment to (choose one):
__My address of record.
__My bank account via Colonial Cash Connection. Please
complete Section 4B and the Bank Information section below.
__The payee listed at right.
______________________________________________
Name of payee
______________________________________________
Address of payee
______________________________________________
City
______________________________________________
State Zip
______________________________________________
Payee's bank account number, if applicable
X_____________________________________________
Signature of account owner(s)
X_____________________________________________
Signature of account owner(s)
Signatures of all owners must be guaranteed. Provide the
name, address, payment amount, and frequency for other
payees (maximum of 5) on a separate sheet.
B. Direct Deposit via Colonial Cash Connection
You can arrange to have distributions from your Colonial
fund account(s) or Systematic Withdrawal Plan checks
automatically deposited directly into your bank checking
account. Distribution deposits will be made 2 days after the
Fund's payable date. Please complete Bank Information below
and attach a blank check marked "VOID."
Please deposit my:
__Dividend distributions only
__Dividend and capital gain distributions
__Systematic Withdrawal Plan payments
I understand that my bank must be a member of the Automated
Clearing House system.
C. Telephone Withdrawal Options
All telephone transaction calls are recorded. These options
are not available for retirement accounts.
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 on our records. For
your protection, this service is only available on accounts
that have not had an address change within
60 days of the redemption request.
2. Telephone Redemption
__I would like the Telephone Redemption privilege.
You 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's and the Fund's liability is limited when
following telephone instructions; a shareholder may suffer a
loss from an unauthorized transaction reasonably believed by
Colonial to have been authorized. Telephone redemptions
exceeding $5,000 will be sent via Federal Fund Wire, usually
on the next business day ($7.50 will be deducted).
Redemptions of $5,000 or less will be sent by check to your
designated bank.
Bank Information (For A, B, or C 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)
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 fund
distributions in another Colonial fund. These investments
will be made in the same share class and without sales
charges. 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)
____________________________
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 fund in which you have a balance of at least
$5,000 transferred into the same share class of up to four
other Colonial funds, on a monthly basis. The minimum amount
for each transfer is $100. Please complete the section
below.
____________________________________
Fund from which shares will be sold
$_________________________
Amount to redeem monthly
____________________________________
Fund name
$_________________________
Amount to invest monthly
____________________________________
Fund name
$_________________________
Amount to invest monthly
____________________________________
Fund name
$_________________________
Amount to invest monthly
C. Fundamatic
Fundamatic automatically transfers the specified amount from
your bank checking account to your Colonial fund account.
Your bank needs to be a member of the Automated Clearing
House system. Please attach a blank check marked "VOID."
Also, complete the section below and Fundamatic
Authorization (Section 6).
____________________________________
Fund name
$_____________________ _________________
Amount to transfer Month to start
Frequency
__Monthly or __Quarterly
Date
__5th or __20th of the month
____________________________________
Fund name
$_____________________ _________________
Amount to transfer Month to start
Frequency
__Monthly or __Quarterly
Date
__5th or __20th of the month
____________________________________
Fund name
$_____________________ _________________
Amount to transfer Month to start
Frequency
__Monthly or __Quarterly
Date
__5th or __20th of the month
6 -------------Fundamatic Authorization--------------------
Authorization to honor checks drawn by Colonial Investors
Service Center, Inc. Do Not Detach. Make sure all depositors on
the bank account sign to the far right. Please attach a
blank check marked "VOID" here. See reverse for bank
instructions.
I authorize Colonial to draw on my bank account, by check or
electronic funds transfer, for an investment in a Colonial
fund. Colonial 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
Colonial 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
7--Ways to Reduce Your Sales Charges for Class A Shares--
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 Class A, B or D
shares in other Colonial 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 fund.
The sales charge for your purchase will be based on the sum
of the purchase added to the value of all shares in other
Colonial 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.
8-------------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 Colonial Investment Services, Inc. (CISI), the
Fund's prospectus, and this application. We will notify CISI
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
9--Request for a Combined Quarterly Statement Mailing--
Colonial 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.
Fundamatic (See Reverse Side)
Applications must be received before the start date for
processing.
This program's deposit privilege can be revoked by Colonial
without prior notice if any check is not paid upon
presentation. Colonial 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. 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 Colonial Investors
Service Center, Inc. Colonial Management Associates, Inc., 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.
D-461L-594
Checkwriting Signature Card
(Class A Shares Only)
Colonial Mutual Funds
Signature Card for the Bank of Boston ("Bank").
- -----------------------------------------------
Name of Fund
- -----------------------------------------------
Fund account number
To request additional signature cards, please call Colonial at 1-800-248-2828.
Account Name:
You must sign below exactly as your account is registered.
X
- -----------------------------------------------
Signature
X
- -----------------------------------------------
Signature
By signing this card, you are subject to the conditions printed on the reverse
side. If adding this privilege to an existing account, your signatures must be
guaranteed.
Checkwriting Privilege
By electing the checkwriting privilege and signing the signature card, I
acknowledge that I am subject to the rules and regulations of the Bank of
Boston ("Bank") as currently existing and as they may be amended from time
to time. I designate the Bank as my representative to present checks drawn
on my Fund account to the Fund or its Agent and deposit the proceeds in this
checking account. I understand that the shares for which share certificates
have been issued or requested cannot be redeemed in this manner.
I understand that if my Fund account is registered in joint tenancy, that all
checks must include all signatures of all persons named on the account.
If the account is registered in joint tenancy, each person guarantees the
genuineness of all other parties' signatures.
Minimum and Maximum
I understand that checks may not be in amounts less than $500 nor more than
$100,000, and that the Fund reserves the right to change these limits in its
sole discretion. I agree that neither the Fund nor its Agent is responsible
for any loss, expense, or cost arising from these redemptions. Also, if I have
recently made additional investments, I understand that redemption proceeds
will not be available until the check used to purchase the investment
(including a certified or cashier's check) has been cleared by the bank on
which it is drawn, which could take up to 15 days or more.
D-256A-1094
Part A of Post-Effective Amendment No. 40 filed with the
Commission on March 20, 1995 (Colonial High Yield Municipal Fund,
Colonial Tax-Exempt Insured Fund, Colonial Tax-Exempt Fund,
Colonial Short-Term Tax-Exempt Fund, Colonial Intermediate Tax-
Exempt Fund and Colonial Utilities Fund), is incorporated herein
in its entirety by reference.
COLONIAL TRUST IV
Cross Reference Sheet
Colonial Municipal Money Market Fund
(formerly known as Colonial Tax-Exempt Money Market Fund)
Location or Caption in Statement
Item Number of Form N-1A of Additional Information
Part B
10. Cover Page
11. Table of Contents
12. Not Applicable
13. Investment Objectives and
Policies; Fundamental Investment
Policies; Other Investment
Policies; Miscellaneous
Investment Practices; Portfolio
Turnover
14. Fund Charges and Expenses;
Management of the Funds
15. Fund Charges and Expenses
16. Fund Charges and Expenses;
Management of the Funds
17. Fund Charges and Expenses;
Management of the Funds
18. Shareholder Liability
19. How to Buy Shares; Determination
of Net Asset Value; Suspension of
Redemptions; Investor Services
20. Taxes
21. Fund Charges and Expenses;
Management of the Funds
22. Fund Charges and Expenses;
Investment Performance;
Performance Measures
23. Independent Accountants
COLONIAL MUNICIPAL MONEY MARKET FUND
Statement of Additional Information
September 28, 1995
This Statement of Additional Information (SAI) contains information
which may be useful to investors but which is not included in the
Prospectus of Colonial Municipal Money Market Fund (Fund). This SAI
is not a prospectus and is authorized for distribution only when
accompanied or preceded by the Prospectus of the Fund dated September
28, 1995. This SAI should be read together with the Prospectus.
Investors may obtain a free copy of the Prospectus from Colonial
Investment Services, Inc., One Financial Center, Boston, MA 02111-
2621.
Part 1 of this SAI contains specific information about the Fund. Part
2 includes information about the Colonial funds generally and
additional information about certain securities and investment
techniques described in the Fund's Prospectus.
TABLE OF CONTENTS
Part 1 Page
Definitions
Investment Objective and Policies
Fundamental Investment Policies
Other Investment Policies
Fund Charges and Expenses
Investment Performance
Custodian
Independent Accountants
Certain Information Concerning the Portfolio
Part 2
Miscellaneous Investment Practices
Taxes
Management of the Funds
Determination of Net Asset Value
How to Buy Shares
Investor Services
Suspension of Redemptions
Shareholder Liability
Performance Measures
Appendix I
Appendix II
PART 1
COLONIAL MUNICIPAL MONEY MARKET FUND
Statement of Additional Information
September 28, 1995
DEFINITIONS
"Trust" Colonial Trust IV
"Fund" Colonial Municipal Money Market Fund
"Administrator" Colonial Management Associates, Inc., the
Fund's administrator
"CISI" Colonial Investment Services, Inc., the Fund's
distributor
"CISC" Colonial Investors Service Center, Inc., the
Fund's shareholder services and transfer agent
"Portfolio" SR&F Municipal Money Market Portfolio
"Adviser" Stein Roe & Farnham Incorporated, the
Portfolio's investment adviser
INVESTMENT OBJECTIVE AND POLICIES
As described in the Fund's Prospectus, the Fund currently seeks
to achieve its objective by investing all its assets in the
Portfolio. Part 1 includes additional information concerning the
Fund and the Portfolio, including a description of the Fund's and
the Portfolio's fundamental investment policies. Except where
otherwise indicated, references to the Fund in connection with
descriptions of investment policies and practices shall include
the Portfolio. Part 2 of this SAI contains additional
information about the following securities and investment
practices that may be utilized by the Portfolio:
Short-term Trading
Zero Coupon Securities
Repurchase Agreements
Reverse Repurchase Agreements
Money Market Instruments
Forward Commitments
Participation Interests
Stand-by Commitments
Except as described below under "Fundamental Investment
Policies," the Fund's and the Portfolio's investment policies are
not fundamental, and the Fund's or the Portfolio's Trustees may
change the policies without shareholder approval.
FUNDAMENTAL INVESTMENT POLICIES
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 Portfolio, 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. The following fundamental investment policies cannot be
changed without such a vote.
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's
diversification requirement, an issuer is the entity whose
revenues support the security.
As fundamental policies, neither the Fund nor the Portfolio
may:
1. Invest in a security if, with respect to 75% of the Fund's
or the Portfolio's assets, as a result of such investment,
more than 5% of its total assets (taken at market value at
the time of such investment) would be invested in the
securities of any one issuer (for this purpose, the
issuer(s) of a security being deemed to be only the entity
or entities whose assets or revenues are subject to the
principal and interest obligations of the security), except
(1) in the case of a guarantor of securities (including an
issuer of a letter of credit), the value of the guarantee
(or letter of credit) may be excluded from this computation
if the aggregate value of securities owned by the Fund or
the Portfolio and guaranteed by such guarantor (plus any
other investments of the Fund or the Portfolio in securities
issued by the guarantor) does not exceed 10% of the Fund's
or the Portfolio's total assets (2) this restriction does
not apply to U.S. government securities or repurchase
agreements for such securities and (3) the Fund may invest
all or substantially all of its assets in another registered
investment company having the same investment objective and
substantially similar investment policies;
2. Purchase any securities on margin, except for use of short-
term credit necessary for clearance of purchases and sales
of portfolio securities (this restriction does not apply to
securities purchased on a when-issued or delayed-delivery
basis or to reverse repurchase agreements);
3. Make loans to other persons, except that the Fund or the
Portfolio may invest up to 100% of its assets in debt
obligations, including money market instruments;
4. Borrow, except that the Fund or the Portfolio may each
borrow up to 33 1/3% of its total assets, taken at current
value at the time of such borrowing, from banks as a
temporary measure for extraordinary or emergency purposes
but not to increase portfolio income (the total of reverse
repurchase agreements and such borrowings will not exceed 33
1/3% of either the Fund's or the Portfolio's total assets
and will not purchase additional securities at a time when
borrowings, less proceeds receivable from sales of portfolio
securities, exceed 5% of its total assets);
5. Mortgage, pledge, hypothecate or in any manner transfer, as
security for indebtedness, any securities owned or held by
the Fund or the Portfolio, except as may be necessary in
connection with borrowings permitted in (8) above;
6. Invest more than 25% of its total assets (taken at market
value at the time of each investment) in securities of non-
governmental issuers whose principal business activities are
in the same industry;
7. Purchase portfolio securities for the Fund or the Portfolio
from, or sell portfolio securities to, any of the officers,
directors or trustees of the Trust or the Portfolio or the
Portfolio's investment adviser;
8. Purchase or sell commodities or commodities contracts or
oil, gas or mineral programs;
9. Purchase any securities other than those described in
Prospectus; and
10. Issue any senior securities except to the extent permitted
under the Investment Company Act of 1940.
OTHER INVESTMENT POLICIES
As non-fundamental investment policies which may be changed
without a shareholder vote, neither the Fund nor the Portfolio
may:
1. Own more than 10% of the outstanding voting securities of an
issuer, except that the Fund may invest all or substantially
all of its assets in another registered investment company
having the same investment objective and substantially similar
investment policies;
2. Invest in companies for the purpose of exercising control or
management, except that all or substantially all of the assets
of the Fund may be invested in another registered investment
company having the same investment objective and substantially
similar investment policies;
3. Make investments in the securities of other investment
companies, except in connection with a merger, consolidation,
or reorganization, except that the Fund may invest all or
substantially all of its assets in another registered
investment company having the same investment objective and
substantially similar investment policies;
4. Purchase or sell real estate (other than Municipal Securities
or money market securities secured by real estate or interests
therein or such securities issued by companies which invest in
real estate or interests therein);
5. Invest in securities of issuers (other than issuers of Federal
agency obligations or of Municipal Securities) having a record
of less than three years of continuous operation (for this
purpose, the period of operation of any issuer shall include
the period of operation of any predecessor or unconditional
guarantor of such issuer) if regarding all such securities,
more than 5% of the Fund's or the Portfolio's total assets
(taken at market value at the time of such investment) would
be invested in such securities, except that the Fund may
invest all or substantially all of its assets in another
registered investment company having the same investment
objective and substantially similar investment policies;
6. Act as an underwriter of securities, except that the Fund or
the Portfolio may participate as part of a group in bidding,
or bid alone, for the purchase of Municipal Securities
directly from an issuer for the Fund's or the Portfolio's own
portfolio;
7. Purchase or retain securities of an issuer if 5% of the
securities of such issuer are owned by those officers,
trustees or directors of the Fund, the Portfolio or the
Adviser, who each own individually more than 1/2 of 1% of such
securities;
8. Invest more than 10% of its net assets (taken at market value
at the time of each purchase) in illiquid securities,
including repurchase agreements maturing in more than seven
days;
9. Sell securities short unless (i) the Fund or the Portfolio
owns or has the right to obtain securities equivalent in kind
and amount to those sold short at no added cost or (ii) the
securities sold are "when-issued" or "when-distributed"
securities which the Fund or the Portfolio expects to receive
in a recapitalization, reorganization or other exchange for
securities the Fund or the Portfolio contemporaneously owns or
has the right to obtain, and provided that the Fund or the
Portfolio may purchase stand-by commitments and securities
subject to a demand feature entitling the Portfolio to require
sellers of securities to the Fund or the Portfolio to
repurchase them upon demand by the Fund or the Portfolio; and
10. Purchase shares of other open-end investment companies, except
in connection with a merger, consolidation, acquisition, or
reorganization;
11. Invest more than 5% of its net assets (valued at time of
investment) in warrants, nor more than 2% of its net assets in
warrants which are not listed on the New York or American
Stock Exchange.
FUND CHARGES AND EXPENSES
Aggregate Fund expenses include the Fund's proportionate share of
the expenses of the Portfolio, which are borne indirectly by the
Fund, and the Fund's direct expenses. The Portfolio's expenses
include (i) a management fee paid to the Adviser at an annual
rate of 0.25% of the Portfolio's average daily net assets, (ii) a
pricing and bookkeeping fee of $25,000 plus 0.0025% annually of
average daily net assets over $50 million, (iii) a monthly
transfer agent fee of $500 and (iv) custody, legal and audit fees
and other miscellaneous expenses. The Fund's direct expenses
include (i) an administrative fee paid to the Administrator at
the annual rate of 0.25 % of average daily net assets, (ii) a
transfer agency and shareholder services fee paid to CISC at the
annual rate of 0.20% of average daily net assets plus CISC's out-
of-pocket expenses, (iii) the Rule 12b-1 fees paid to CISI
described below, (iv) a pricing and bookkeeping fee paid to the
Administrator in the amount of $18,000 per year plus 0.0233% of
average daily net assets in excess of $50 million and (v)
custody, legal and audit fees and other miscellaneous expenses.
Recent Fees paid by the Fund to the Administrator (a), CISI and
CISC (in thousands)
For the
period
December 1,
1994
through June Year ended November 30
30, 1995(e) 1994 1993 1992
----------- ---- ---- ----
Management fee $88 $ 131 $129 $144
Bookkeeping fee 16 27 27 27
Shareholder service and
Transfer agent fee (b) 43 59 60 73(b)
Amount of above fees waived 63 (153) (129) (174)
12b-1 fees:
Service fee (Class B)(d) 4 4 1 (c)
Distribution fee (Class B)(d) 13 14 2 (c)
(a) Prior to September 28, 1995, the Administrator was the
Adviser of the Fund.
(b) Under a prior fee schedule.
(c) Rounds to less than one.
(d) Class B shares were initially offered on May 5, 1992.
(e) The Fund changed its fiscal year end from November 30 to
June 30 on June 16, 1995.
Trustees Fees
For the periods set forth below, the Trustees received the
following compensation for serving as Trustees:
Aggregate Pension Total
Compensation or Compensation
From Fund Retirement From Fund
For The Benefits Complex For
Fiscal Year Accured As Estimated The Calendar
Ended Part of Annual Year Ended
Trustee November Fund Benefits December 31,
30, 1994 Expense Upon 1994(g)
Retirement
- -------- ------------ ---------- ---------- ------------
Tom Bleasdale $ 1,105(f) $ 0 $ 0 $ 101,000
Lora S. Collins 1,248 0 0 95,000
William D. Ireland, Jr. 1,189 0 0 110,000
William E. Mayer 1,026 0 0 89,752
John A. McNeice, Jr. 0 0 0 0
James L. Moody, Jr. 1,123 0 0 109,000
John J. Neuhauser 1,112 0 0 95,000
George L. Shinn 1,095 0 0 112,000
Robert L. Sullivan 1,219 0 0 104,561
Sinclair Weeks, Jr. 1,223 0 0 116,000
(f) Includes $573 payable as deferred compensation.
(g) At December 31, 1994, the Colonial Funds Complex consisted
of 31 open-end and 5 closed-end management investment
company portfolios.
Total
Compensation
From The
Aggregate Fund And
Compensation The Fund
From Fund For Complex For
The Period The Period
December 1, January 1,
1994 Through 1995
Trustee June 30, 1995 through
June 30,
1995(i)
- ---------- -------------- -------------
Robert J. Birnbaum(j) $ 853 $15,000
Tom Bleasdale 1,255(h) 24,500
Lora S. Collins 934 22,500
James E. Grinnell(j) 855 15,000
William D. Ireland, Jr. 1,589 29,500
Richard W. Lowry(j) 853 15,000
William E. Mayer 1,149 22,500
John A. McNeice, Jr. 0 0
James L. Moody, Jr. 1,286(k) 24,500
John J. Neuhauser 1,150 22,500
George L. Shinn 1,371 29,500
Robert L. Sullivan 1,216 24,000
Sinclair Weeks, Jr. 1,279 28,500
(h) Includes $398 payable as deferred compensation.
(i) At June 30, 1995, the Colonial Funds Complex consisted of 33
open-end and 5 closed-end management investment company
portfolios.
(j) Elected to the Colonial Funds Complex on April 21, 1995.
(k) Includes $1,204 payable as deferred compensation.
Ownership of the Fund
At June 30, 1995, the officers and Trustees of the Trust as a
group beneficially owned 2,307,256.270 shares of the Fund,
representing 8.30 of the then outstanding shares. The largest
single holding was 2,305,495.930 shares (8.30% of the outstanding
shares) by Mr. McNeice, a Trustee and President of the Fund.
At June 30, 1995, the above and the following shareholders owned
more than 5% of the Fund's outstanding Class A and Class B
shares:
Class A
Sekura Limited Partnership 7.61%
c/o Michael A. Kane
1887 Newton St., N.W.
Washington, DC 20010
Class B
Julianne F. Cole 6.29%
P.O. Box 160
Arcadia, LA 71001
Henry G. Taliaferro 6.94%
1015 Trenton
West Monroe, LA 71291
L.A. Hrnicek 7.96%
P.O. Box 606
Bayard, NE 69334-0606
At June 30, 1995, there were 798 Class A and 74 Class B record
holders of the Fund.
Sales Charges (in thousands)
Class B Shares
For the May 5, 1992
period (commencement
December 1, of investment
1994 Year Ended operations)
through November 30 through
June 30, 1994 1993 November 30,
1995 1992
--------- ---- ---- --------------
Aggregate
contingent deferred
sales charges
(CDSCs) on Fund
redemptions retained by CISI $21 $28 $10 $0
12b-1 Plan, CDSC and Conversion of Shares
The Fund offers two classes of shares - Class A and Class B. The
Fund may in the future offer other classes of shares. The
Trustees have approved 12b-1 Plans pursuant to Rule 12b-1 under
the Act. Under the Class B Plan, the Fund pays CISI a service
fee at an annual rate of 0.25% of average net assets attributed
to its Class B shares and a distribution fee at an annual rate of
0.75% of average net assets attributed to its Class B shares.
CISI may use the entire amount of such fees to defray the costs
of commissions and service fees paid to financial service firms
(FSFs) and for certain other purposes. Since the distribution
and service fees are payable regardless of the amount of CISI's
expenses, CISI may realize a profit from the fees. The Class A
Plan has no fee but like the Class B Plan authorizes any other
payments by the Fund to CISI and its affiliates (including the
Administrator and the Adviser) to the extent that such payments
might be construed to be indirect financing of the distribution
of Fund shares.
The Trustees of the Trust believe the Plans 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 Fund shareholders.
The Plans will continue in effect from year to year so long as
continuance is specifically approved at least annually by a vote
of the Trustees of the Trust, including a majority of the
Trustees who are not interested persons of the Trust and have no
direct or indirect financial interest in the operation of the
Plans or in any agreements related to the Plans (independent
Trustees), cast in person at a meeting called for the purpose of
voting on the Plans. The Plans 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 Plans must be approved by the
Trustees in the manner provided in the foregoing sentence. The
Plans 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 Plans will only be effective if the selection
and nomination of the Trustees who are non-interested Trustees is
effected by such non-interested Trustees.
Class A shares are offered at net asset value. Class B shares
are offered at net asset value subject to a CDSC if redeemed
within six years after purchase. The CDSC is described in the
Prospectus.
No CDSC will be imposed on shares derived from reinvestment of
distributions or on amounts representing capital appreciation.
In determining the applicability and rate of any CDSC, it will be
assumed that a redemption is made first of shares representing
capital appreciation, next of shares representing reinvestment of
distributions and finally of other shares held by the shareholder
for the longest period of time.
Eight years after the end of the month in which a Class B share
is purchased, such share and a pro rata portion of any shares
issued on the reinvestment of distributions will be automatically
converted into Class A shares having an equal value, which are
not subject to the distribution or service fee.
Sales-related expenses (for the period December 1, 1994 through
June 30, 1995)(in thousands) of CISI were:
Class A Shares Class B Shares
-------------- ---------------
Fees to FSF $ 0 $9
Cost of sales materi al $ 1 (l)
relating to the Fund
Allocated travel,
entertainment and other
promotional $ 0 $0
(/R>
(l) Rounds to less than one.
INVESTMENT PERFORMANCE
The Fund's yields for the seven days ended June 30, 1995, were:
Class A Shares Class B Shares
-------------- --------------
Yield 3.445% 2.439%
Effective Yield 3.504% 2.469%
Tax-equivalent yield 5.700% 4.040%
Tax-equivalent effective yield 5.800% 4.090%
The Fund's average annual total returns at June 30, 1995, were:
Class A Shares
Period
12/1/94 Since Inception
through 6/16/87 through
6/30/95 5 Years 6/30/95
------- ------- ---------------
N/A 2.90% 3.88%
Class B Shares
Period 12/1/94 Since Inception
through 6/30/95 5/2/92 through 6/30/95
--------------- ----------------------
With CDSC of 5.00% N/A 0.27%
Without CDSC N/A 1.21%
See Part 2 of this SAI, "Performance Measures," for how
calculations are made.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP are the Fund's independent accountants
providing audit and tax return preparation services and
assistance and consultation in connection with the review of
various SEC filings. The financial statements of the Fund
incorporated by reference in this SAI have been so incorporated,
and the schedule of 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.
CERTAIN INFORMATION CONCERNING THE PORTFOLIO
Portfolio's Investment Adviser
Under its Management Agreement with the Portfolio, the Adviser
provides the Portfolio with discretionary investment services.
Specifically, the Adviser is responsible for supervising and
directing the investments of the Portfolio in accordance with the
Portfolio's investment objective, policies and restrictions as
provided in the Fund's Prospectus and this Statement of
Additional Information. The Management Agreement provides for
the payment by the Portfolio to the Adviser of the management fee
described above under "Fund Charges and Expenses."
The Adviser is an indirect wholly-owned subsidiary of Liberty
Financial Companies, Inc., which in turn is an indirect
subsidiary of Liberty Mutual Insurance Company.
The Adviser is the successor to an investment advisory business
that was founded in 1932. The Adviser acts as investment adviser
to wealthy individuals, trustees, pension and profit sharing
plans, charitable organizations and other institutional
investors. As of March 31, 1995, the Adviser managed over $22
billion in net assets: including over $5.2 billion in equities
and over $16.8 billion in fixed-income securities (including $2.3
billion in municipal securities). The $22 billion in managed
assets included over $6.5 billion held by open-end mutual funds
managed by the Adviser (approximately 23% of the mutual fund
assets were held by clients of the Adviser). The $6.5 billion
in mutual fund assets included over $532 million in over 33,000
IRA accounts. In managing those assets, the Adviser utilizes a
proprietary computer-based information system that maintains and
regularly updates information for approximately 6,500 companies.
The Adviser also monitors over 1,400 issues via a proprietary
credit analysis system. At March 31, 1995, the Adviser employed
approximately 17 research analysts and 34 account managers. The
average investment-related experience of these individuals is 19
years.
The directors of the Adviser are Gary L. Countryman, Kenneth R.
Leibler, Timothy K. Armour, N. Bruce Callow and Hans P. Ziegler.
Mr. Countryman is Chairman of Liberty Mutual Insurance Company;
Mr. Leibler is President and Chief Executive Officer of Liberty
Financial Companies, Inc. Mr. Armour is President of the
Adviser's Mutual Funds division; Mr. Callow is President of the
Adviser's Investment Counsel division; and Mr. Ziegler is Chief
Executive Officer of the Adviser. The business address of Mr.
Countryman is 175 Berkeley Street, Boston, MA 02117; that of Mr.
Leibler is Federal Reserve Plaza, 600 Atlantic Avenue, Boston,
Massachusetts 02210; that of Messrs. Armour, Callow 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 Portfolio 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
Portfolio's portfolio securities. Portfolio securities are
purchased both in underwritings and in the over-the-counter
market. Included in the price paid to an underwriter of a
portfolio security is the spread between the price paid by the
underwriter to the issuer and the price paid by the purchaser.
Purchases and sales of portfolio securities in the over-the-
counter market usually are transacted with a broker or dealer on
a net basis, without any brokerage commission being paid by the
Portfolio, but do reflect the spread between the bid and asked
prices. The Adviser may also transact purchases of portfolio
securities directly with the issuers. 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 transaction charges and other 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 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 Portfolio may pay a price in excess
of that which another broker or dealer may have charged for
effecting the same transaction or receive a price lower than that
which another broker-dealer may have paid. Evaluations of the
reasonableness of portfolio transactions, based on the foregoing
factors, are made on an ongoing basis by the Adviser's staff
while effecting portfolio transactions and reports are made
annually to the Board of Trustees of the Portfolio.
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 Portfolio, 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 Portfolio, 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 brokerage commissions
generated by transactions of clients (including the Portfolio),
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 Portfolio is authorized,
in recognition of the value of research products or services, to
pay a price 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 Portfolio.
The Board of Trustees of the SR&F Base Trust has reviewed the
legal aspects and the practicability of attempting to recapture
underwriting discounts or selling concessions included in prices
paid by the Portfolio for purchases of Municipal Securities in
underwritten offerings. The Portfolio attempts to recapture
selling concessions on purchases during underwritten offerings;
however, the Adviser will not be able to negotiate discounts from
the fixed offering price for those issues for which there is a
strong demand, and will not allow the failure to obtain a
discount to prejudice its ability to purchase an issue. The
Trustees of the SR&F Base Trust periodically review efforts to
recapture concessions and whether it is in the best interests of
the Portfolio to continue to attempt to recapture underwriting
discounts or selling concessions.
Custodian
State Street Bank and Trust Company (Bank) is the custodian for
the securities and cash of the Portfolio, but it does not
participate in the investment decisions of the Portfolio. The
Portfolio has authorized the Bank to deposit certain portfolio
securities in central depository systems as allowed by federal
law. The Bank's main office is at 225 Franklin Street, Boston,
Massachusetts 02107.
The Portfolio may invest in obligations (including repurchase
agreements) of the Bank and may purchase or sell securities from
or to the Bank.
Independent Auditors
The independent auditor for the Portfolio is Ernst & Young LLP,
233 South Wacker Drive, Chicago, IL 60606. Ernst & Young LLP
audits and reports on the annual financial statements of the
Portfolio, reviews certain regulatory reports of the Portfolio
and its Federal income tax returns, and performs such accounting,
auditing, tax and advisory services as the Portfolio may engage
them to do so.
Cross-Indemnification Agreement
The Trust, on behalf of the Fund, and the SR&F Base Trust (Base
Trust), on behalf of the Portfolio, have entered into a cross-
indemnification agreement relating to liability in connection
with the information relating to the Base Trust and the Portfolio
contained in the Registration Statement of which this SAI is a
part.
STATEMENT OF ADDITIONAL INFORMATION
PART 2
"Trust" Colonial Trust IV
"Fund" Colonial Municipal Money Market Fund
"Portfolio" SR&F Municipal Money Market Portfolio
Stein Roe & Farnham Incorporated, the Portfolio's
"Adviser" investment adviser
"Colonial Colonial Management Associates, Inc., the Administrator
" to the Fund and the investment manager to each of the
Colonial funds except for the Fund, Colonial Global
Utilities Fund, a series of Colonial Trust III and
Colonial Newport Tiger Fund, a series of Colonial Trust
VII.
"CISI" Colonial Investment Services, Inc., the Colonial fund's
distributor
"CISC" Colonial Investors Service Center, Inc., the Colonial
fund's shareholder services and transfer agent
The following information applies generally to Colonial funds. In
certain cases the discussion applies to some but not all of the
Colonial funds, and you should refer to your fund's Prospectus and to
Part 1 of this SAI to determine whether the matter is applicable to
your fund. You will also be referred to Part 1 for certain data
applicable to your fund.
MISCELLANEOUS INVESTMENT PRACTICES
Part 1 of this Statement lists on page b which of the following
investment practices are available to your fund.
Short-Term Trading
In seeking a fund's investment objective, Colonial (or if different,
your fund's Adviser) will buy or sell portfolio securities whenever
it believes is appropriate. Colonial's (or if different, your fund's
Adviser's) decision will not generally be influenced by how long a
fund may have owned the security. From time to time a fund will buy
securities intending to seek short-term trading profits. A change in
the securities held by a fund is known as "portfolio turnover" and
generally involves some expense to a fund. These expenses may
include brokerage commissions or dealer mark-ups and other
transaction costs on both the sale of securities and the reinvestment
of the proceeds in other securities. If sales of portfolio
securities cause a fund to realize net short-term capital gains, such
gains will be taxable as ordinary income. As a result of a fund's
investment policies, under certain market conditions a fund's
portfolio turnover rate may be higher than that of other mutual
funds. Portfolio turnover rate for a fiscal year is the ratio of the
lesser of purchases or sales of portfolio securities to the monthly
average of the value of portfolio securities, excluding securities
whose maturities at acquisition were one year or less. A fund's
portfolio turnover rate is not a limiting factor when Colonial (or if
different, your fund's Adviser) considers a change in a fund's
portfolio.
Lower Rated Bonds
Lower rated bonds are those rated lower than Baa by Moody's, BBB by
S&P, or comparable unrated securities. Relative to comparable
securities of higher quality:
1. the market price is likely to be more volatile because:
a. an economic downturn or increased interest rates may have a
more significant effect on the yield, price and potential for
default;
b. the secondary market may at times become less liquid or
respond to adverse publicity or investor perceptions,
increasing the difficulty in valuing or disposing of the
bonds;
c. existing or future legislation limits and may further limit
(i) investment by certain institutions or (ii) tax
deductibility of the interest by the issuer, which may
adversely affect value; and
d. certain lower rated bonds do not pay interest in cash on a
current basis. However, a fund will accrue and distribute
this interest on a current basis, and may have to sell
securities to generate cash for distributions.
2. a fund's achievement of its investment objective is more
dependent on Colonial's credit analysis.
3. lower rated bonds are less sensitive to interest rate changes,
but are more sensitive to adverse economic developments.
Small Companies
Smaller, less well established companies may offer greater
opportunities for capital appreciation than larger, better
established companies, but may also involve certain special risks
related to limited product lines, markets, or financial resources and
dependence on a small management group. Their securities may trade
less frequently, in smaller volumes, and fluctuate more sharply in
value than securities of larger companies.
Foreign Securities
A 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 a fund, will be held by a fund's
custodian or by a subcustodian or depository. See also "Foreign
Currency Transactions" below.
A 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.
A 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 a fund to recognize as income any appreciation (but not
depreciation) on its holdings of PFICs as of the end of its fiscal
year.
Zero Coupon Securities (Zeros)
A fund may invest in debt securities which do not pay interest, but
instead are issued at a deep discount from par. The value of the
security increases over time to reflect the interest accreted. The
value of these securities may fluctuate more than similar securities
which are issued at par and pay interest periodically. Although
these securities pay no interest to holders prior to maturity,
interest on these securities is reported as income to a fund and
distributed to its shareholders. These distributions must be made
from a fund's cash assets or, if necessary, from the proceeds of
sales of portfolio securities. A fund will not be able to purchase
additional income producing securities with cash used to make such
distributions and its current income ultimately may be reduced as a
result.
Step Coupon Bonds (Steps)
A fund may invest in debt securities which do not pay interest for a
stated period of time and then pay interest at a series of different
rates for a series of periods. In addition to the risks associated
with the credit rating of the issuers, these securities are subject
to the volatility risk of zero coupon bonds for the period when no
interest is paid.
Pay-In-Kind (PIK) Securities
A fund may invest in securities which pay interest either in cash or
additional securities at the issuer's option. These securities are
generally high yield securities and in addition to the other risks
associated with investing in high yield securities are subject to the
risks that the interest payments that are securities are also subject
to the risks of high yield securities.
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 a fund would be
allowed to invest in directly.
Securities Loans
A fund may make secured loans of its portfolio securities amounting
to not more than the percentage of its total assets specified in Part
1 of this SAI, 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 a fund an amount equal to
any dividends or interest received on securities lent. A 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, a 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 a fund if the holders of such
securities are asked to vote upon or consent to matters materially
affecting the investment. A fund may also call such loans in order
to sell the securities involved.
Forward Commitments
A fund may enter into contracts to purchase securities for a fixed
price at a future date beyond customary settlement time ("forward
commitments" and "when issued securities") if a fund holds until the
settlement date, in a segregated account, cash or high-grade debt
obligations in an amount sufficient to meet the purchase price, or if
a fund enters into offsetting contracts for the forward sale of other
securities it owns. Forward commitments may be considered securities
in themselves, and involve a risk of loss if the value of the
security to be purchased declines prior to the settlement date.
Where such purchases are made through dealers, a fund relies on the
dealer to consummate the sale. The dealer's failure to do so may
result in the loss to a fund of an advantageous yield or price.
Although a fund will generally enter into forward commitments with
the intention of acquiring securities for its portfolio or for
delivery pursuant to options contracts it has entered into, a fund
may dispose of a commitment prior to settlement if Colonial deems it
appropriate to do so. A fund may realize short-term profits or
losses upon the sale of forward commitments.
Repurchase Agreements
A fund may enter into repurchase agreements. A repurchase agreement
is a contract under which a 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 a fund to resell such
security at a fixed time and price (representing a fund's cost plus
interest). It is a 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 a fund which are collateralized by the
securities subject to repurchase. Colonial 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, a
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, a fund may incur delay and
costs in selling the underlying security or may suffer a loss of
principal and interest if a fund is treated as an unsecured creditor
and required to return the underlying collateral to the seller's
estate.
Reverse Repurchase Agreements
In a reverse repurchase agreement, a fund sells a security and agrees
to repurchase the same security at a mutually agreed upon date and
price. A reverse repurchase agreement may also be viewed as the
borrowing of money by a fund and, therefore, as a form of leverage.
A fund will invest the proceeds of borrowings under reverse
repurchase agreements. In addition, a fund will enter into a reverse
repurchase agreement only when the interest income expected to be
earned from the investment of the proceeds is greater than the
interest expense of the transaction. A fund will not invest the
proceeds of a reverse repurchase agreement for a period which exceeds
the duration of the reverse repurchase agreement. A fund may not
enter into reverse repurchase agreements exceeding in the aggregate
one-third of the market value of its total assets, less liabilities
other than the obligations created by reverse repurchase agreements.
Each fund will establish and maintain with its custodian a separate
account with a segregated portfolio of securities in an amount at
least equal to its purchase obligations under its reverse repurchase
agreements. If interest rates rise during the term of a reverse
repurchase agreement, entering into the reverse repurchase agreement
may have a negative impact on a money market fund's ability to
maintain a net asset value of $1.00 per share.
Options on Securities
Writing covered options. A fund may write covered call options and
covered put options on securities held in its portfolio when, in the
opinion of Colonial, such transactions are consistent with a fund's
investment objective and policies. Call options written by a fund
give the purchaser the right to buy the underlying securities from a
fund at a stated exercise price; put options give the purchaser the
right to sell the underlying securities to a fund at a stated price.
A fund may write only covered options, which means that, so long as a
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, a 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, a 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. A fund
may write combinations of covered puts and calls on the same
underlying security.
A fund will receive a premium from writing a put or call option,
which increases a 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, a 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, a 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.
A 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. A 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 a fund writes a call option but does not own the underlying
security, and when it writes a put option, a 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, a 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. A 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 a 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,
a 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. A fund may purchase call options to hedge
against an increase in the price of securities that a fund wants
ultimately to buy. Such hedge protection is provided during the life
of the call option since a 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 a 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 has
taken the position that OTC options purchased by a fund and assets
held to cover OTC options written by a fund are illiquid securities.
Although the Staff has indicated that it is continuing to evaluate
this issue, pending further developments, a 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 a
fund, only pursuant to agreements that will assure that a fund will
at all times have the right to repurchase the option written by it
from the dealer at a specified formula price. A 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 a fund not to enter into any OTC option
transaction if, as a result, more than 15% (10% in some cases, refer
to your fund's Prospectus) of a fund's net assets would be invested
in (i) illiquid investments (determined under the foregoing formula)
relating to OTC options written by a fund, (ii) OTC options purchased
by a 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 a fund's
options strategies depends on the ability of Colonial to forecast
interest rate and market movements correctly.
When it purchases an option, a fund runs the risk that it will lose
its entire investment in the option in a relatively short period of
time, unless a 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, a fund
will lose part or all of its investment in the option. This
contrasts with an investment by a fund in the underlying securities,
since a 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 a fund's ability to
terminate option positions at times when Colonial deems it desirable
to do so. Although a fund will take an option position only if
Colonial (or if different, your fund's Adviser) believes there is a
liquid secondary market for the option, there is no assurance that a
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,
a 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 a fund's
ability to realize its profits or limit its losses.
Disruptions in the markets for the securities underlying options
purchased or sold by a 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, a
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, a 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 a fund has expired, a 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
A fund will enter into futures contracts only when, in compliance
with the SEC's requirements, cash or cash equivalents, (or, in the
case of a fund investing primarily in foreign equity securities, such
equity securities), equal in value to the commodity value (less any
applicable margin deposits) have been deposited in a segregated
account of a 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 a fund purchases or sells a security, no price is paid or
received by a fund upon the purchase or sale of a futures contract,
although a 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 a 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 a 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."
A 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 a fund. A fund may close its positions by taking opposite
positions which will operate to terminate a 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 a
fund, and a fund realizes a loss or a gain. Such closing
transactions involve additional commission costs.
Options on futures contracts. A fund will enter into written options
on futures contracts only when, in compliance with the SEC's
requirements, cash or equivalents equal in value to the commodity
value (less any applicable margin deposits) have been deposited in a
segregated account of a fund's custodian. A 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. A 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.
A 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 a fund is subject to
Colonial's (or if different, your fund's 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 a 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 a 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 a fund, a 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.
Use by tax-exempt funds of U.S. Treasury security futures contracts
and options. A fund investing in tax-exempt securities issued by a
governmental entity may purchase and sell futures contracts and
related options on U.S. Treasury securities when, in the opinion of
Colonial (or if different, your fund's Adviser), price movements in
Treasury security futures and related options will correlate closely
with price movements in the tax-exempt securities which are the
subject of the hedge. U.S. Treasury securities futures contracts
require the seller to deliver, or the purchaser to take delivery of,
the type of U.S. Treasury security called for in the contract at a
specified date and price. Options on U.S. Treasury security futures
contracts give the purchaser the right in return for the premium paid
to assume a position in a U.S. Treasury futures contract at the
specified option exercise price at any time during the period of the
option.
In addition to the risks generally involved in using futures
contracts, there is also a risk that price movements in U.S. Treasury
security futures contracts and related options will not correlate
closely with price movements in markets for tax-exempt securities.
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. A 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 a 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. Colonial (or if different, your fund's
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 a fund's portfolio securities sought to be hedged.
Successful use of the index futures by a fund for hedging purposes is
also subject to Colonial's (or if different, your fund's Adviser),
ability to predict correctly movements in the direction of the
market. It is possible that, where a 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 a
fund's portfolio may decline. If this occurs, a 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, Colonial (or if different, your fund's Adviser)
believes that over time the value of a 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 a fund has hedged
against the possibility of a decline in the market adversely
affecting securities held in its portfolio and securities prices
increase instead, a fund will lose part or all of the benefit of the
increased valued of those securities that it has hedged because it
will have offsetting losses in its futures positions. In addition,
in such situations, if a 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 Colonial (or if
different, your fund's 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, a 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
A fund may engage in currency exchange transactions to protect
against uncertainty in the level of future currency exchange rates.
A fund may engage in both "transaction hedging" and "position
hedging". When it engages in transaction hedging, a fund enters into
foreign currency transactions with respect to specific receivables or
payables of a fund generally arising in connection with the purchase
or sale of its portfolio securities. A 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 a 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.
A 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. A 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 a 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 a fund the right to assume a short
position in the futures contract until expiration of the option. A
put option on currency gives a 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 a fund the right to assume a long
position in the futures contract until the expiration of the option.
A call option on currency gives a fund the right to purchase a
currency at the exercise price until the expiration of the option.
When it engages in position hedging, a 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 a fund expects to purchase, when a fund holds cash
or short-term investments). In connection with position hedging, a
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. A 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 a 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 a
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 a fund is obligated to
deliver.
Transaction and position hedging do not eliminate fluctuations in the
underlying prices of the securities which a 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. A fund will enter into such
contracts only when, in compliance with the SEC's requirements, cash
or equivalents equal in value to the commodity value (less any
applicable margin deposits) have been deposited in a segregated
account of a 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, a 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 a 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, a 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.
A fund will only purchase or write currency options when Colonial
(or, if different, your fund's 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 a fund's
investments in foreign securities and to a 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 a 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 a fund at one rate, while offering a
lesser rate of exchange should a 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.
Participation Interests
A fund may invest in municipal obligations either by purchasing them
directly or by purchasing certificates of accrual or similar
instruments evidencing direct ownership of interest payments or
principal payments, or both, on municipal obligations, provided that,
in the opinion of counsel to the initial seller of each such
certificate or instrument, any discount accruing on such certificate
or instrument that is purchased at a yield not greater than the
coupon rate of interest on the related municipal obligations will be
exempt from federal income tax to the same extent as interest on such
municipal obligations. A fund may also invest in tax-exempt
obligations by purchasing from banks participation interests in all
or part of specific holdings of municipal obligations. Such
participations may be backed in whole or part by an irrevocable
letter of credit or guarantee of the selling bank. The selling bank
may receive a fee from a fund in connection with the arrangement. A
fund will not purchase such participation interests unless it
receives an opinion of counsel or a ruling of the Internal Revenue
Service that interest earned by it on municipal obligations in which
it holds such participation interests is exempt from federal income
tax.
Stand-by Commitments
When a fund purchases municipal obligations it may also acquire stand-
by commitments from banks and broker-dealers with respect to such
municipal obligations. A stand-by commitment is the equivalent of a
put option acquired by a fund with respect to a particular municipal
obligation held in its portfolio. A stand-by commitment is a
security independent of the municipal obligation to which it relates.
The amount payable by a bank or dealer during the time a stand-by
commitment is exercisable, absent unusual circumstances relating to a
change in market value, would be substantially the same as the value
of the underlying municipal obligation. A stand-by commitment might
not be transferable by a fund, although it could sell the underlying
municipal obligation to a third party at any time.
A fund expects that stand-by commitments generally will be available
without the payment of direct or indirect consideration. However, if
necessary and advisable, a fund may pay for stand-by commitments
either separately in cash or by paying a higher price for portfolio
securities which are acquired subject to such a commitment (thus
reducing the yield to maturity otherwise available for the same
securities.) The total amount paid in either manner for outstanding
stand-by commitments held in the Fund portfolio will not exceed 10%
of the value of a fund's total assets calculated immediately after
each stand-by commitment is acquired. A fund will enter into stand-
by commitments only with banks and broker-dealers that, in the
judgment of the Trust's Board of Trustees, present minimal credit
risks.
Inverse Floaters
Inverse floaters are derivative securities whose interest rates vary
inversely to changes in short-term interest rates and whose values
fluctuate inversely to changes in long-term interest rates. The
value of certain inverse floaters will fluctuate substantially more
in response to a given change in long-term rates than would a
traditional debt security. These securities have investment
characteristics similar to leverage, in that interest rate changes
have a magnified effect on the value of inverse floaters.
TAXES
All discussions of taxation at the shareholder level relate to
federal taxes only. Consult your tax adviser for state and local tax
considerations and for information about special tax considerations
that may apply to shareholders that are not natural persons.
Dividends Received Deductions. Distributions will qualify for the
corporate dividends received deduction only to the extent that
dividends earned by a fund qualify. Any such dividends are, however,
includable in adjusted current earnings for purposes of computing
corporate AMT.
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.
Funds that invest in U.S. Government Securities. Many states grant
tax-free status to dividends paid to shareholders of mutual funds
from interest income earned bya 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 a fund.
Distributions from Tax-Exempt Funds. Each tax-exempt Fund will have
at least 50% of its total assets invested in tax-exempt bonds at the
end of each quarter so that dividends from net interest income on tax-
exempt bonds will be exempt from Federal income tax when received by
a shareholder. The tax-exempt portion of dividends paid will be
designated within 60 days after year-end based upon the ratio of net
tax-exempt income to total net investment income earned during the
year. That ratio may be substantially different than the ratio of
net tax-exempt income to total net investment income earned during
any particular portion of the year. Thus, a shareholder who holds
shares for only a part of the year may be allocated more or less tax-
exempt dividends than would be the case if the allocation were based
on the ratio of net tax-exempt income to total net investment income
actually earned while a shareholder.
The Tax Reform Act of 1986 makes income from certain "private
activity bonds" issued after August 7, 1986, a tax preference item
for the alternative minimum tax (AMT) at the maximum rate of 28% for
individuals and 20% for corporations. If the Fund invests in private
activity bonds, shareholders may be subject to the AMT on that part
of the distributions derived from interest income on such bonds.
Other provisions of the Tax Reform Act affect the tax treatment of
distributions for corporations, casualty insurance companies and
financial institutions; interest on all tax-exempt bonds is included
in corporate adjusted current earnings when computing the AMT
applicable to corporations. Seventy-five percent of the excess of
adjusted current earnings over the amount of income otherwise subject
to the AMT is included in a corporation's alternative minimum taxable
income.
Dividends derived from any investments other than tax-exempt bonds
and any distributions of short-term capital gains are taxable to
shareholders as ordinary income. Any distributions of net long-term
gains will in general be taxable to shareholders as long-term capital
gains regardless of the length of time Fund shares are held.
Shareholders receiving social security and certain retirement
benefits may be taxed on a portion of those benefits as a result of
receiving tax-exempt income, including tax-exempt dividends from the
Fund.
Special Tax Rules Applicable to Tax-Exempt Funds. Income
distributions to shareholders who are substantial users or related
persons of substantial users of facilities financed by industrial
revenue bonds may not be excludable from their gross income if such
income is derived from such bonds. Income derived from Fund
investments other than tax-exempt instruments may give rise to
taxable income. Fund shares must be held for more than six months in
order to avoid the disallowance of a capital loss on the sale of Fund
shares to the extent of tax-exempt dividends paid during that period.
A shareholder that borrows money to purchase Fund shares will not be
able to deduct the interest paid with respect to such borrowed money.
Sales of Shares. In general, any gain or loss realized upon a
taxable disposition of shares by a shareholder will be treated as
long-term capital gain or loss if the shares have been held for more
than twelve months, and otherwise as short-term capital gain or loss
assuming such shares are held as a capital asset. 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. Colonial (or, if different, your fund's 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 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 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; (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 assets is invested in the securities of any issuer
(other than U.S. Government securities).
Futures Contracts. Accounting for futures contracts will be in
accordance with generally accepted accounting principles. The amount
of any realized gain or loss on the closing out of a futures contract
will result in a capital gain or loss for tax purposes. In addition,
certain futures contracts held by the Fund (so-called "Section 1256
contracts") will be required to be "marked-to-market" (deemed sold)
for federal income tax purposes at the end of each fiscal year.
Sixty percent of any net gain or loss recognized on such deemed sales
or on actual sales will be treated as long-term capital gain or loss,
and the remainder will be treated as short-term capital gain or loss.
However, if a futures contract is part of a "mixed straddle" (i.e., a
straddle comprised in part of Section 1256 contracts), a Fund may be
able to make an election which will affect the character arising from
such contracts as long-term or short-term and the timing of the
recognition of such gains or losses. In any event, the straddle
provisions described below will be applicable to such mixed
straddles.
Special Tax Rules Applicable to "Straddles". The straddle provisions
of the Code may affect the taxation of the Fund's options and futures
transactions and transactions in securities to which they relate. A
"straddle" is made up of two or more offsetting positions in
"personal property," including debt securities, related options and
futures, equity securities, related index futures and, in certain
circumstances, options relating to equity securities, and foreign
currencies and related options and futures.
The straddle rules may operate to defer losses realized or deemed
realized on the disposition of a position in a straddle, may suspend
or terminate the Fund's holding period in such positions, and may
convert short-term losses to long-term losses in certain
circumstances.
Foreign Currency-Denominated Securities and Related Hedging
Transactions. The Fund's transactions in foreign currency-
denominated debt securities, certain foreign currency options,
futures contracts and forward contracts 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 a fund's total assets at the end of its fiscal
year are invested in securities of foreign corporate issuers, a fund
may make an election permitting its shareholders to take a deduction
or credit for federal tax purposes for their portion of certain
foreign taxes paid by a fund. Colonial (or, if different, your
fund's Adviser), will consider the value of the benefit to a typical
shareholder, the cost to a fund of compliance with the election, and
incidental costs to the shareholder 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, as a
result of which a shareholder may not get a full credit for the
amount of foreign taxes so paid by a fund. Shareholders who do not
itemize on their federal income tax returns may claim a credit (but
no deduction) for such foreign taxes.
Certain securities are considered to be Passive Foreign Investment
Companies (PFICS) under the Code, and a fund is liable for any PFIC-
related taxes.
MANAGEMENT OF A FUND
Colonial, in its capacity as the investment adviser to each of the
Colonial funds (except for Colonial Municipal Money Market Fund,
Colonial Global Utilities Fund, a series of Colonial Trust III and
Colonial Newport Tiger Fund, a series of Colonial Trust VII), is a
subsidiary of The Colonial Group, Inc. (TCG), One Financial Center,
Boston, MA 02111. TCG is a subsidiary 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 worker's 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.The
Trustees and Officers (this section applies to all of the Colonial
funds, including Colonial Municipal Money Market Fund, Colonial
Global Utilities Fund and Colonial Newport Tiger Fund)
Robert J. Birnbaum(1)(Age 67), Trustee, is a Trustee (formerly
Special Counsel, Dechert Price & Rhoads; President and Chief
Operating Officer, New York Stock Exchange, Inc.), 313 Bedford Road,
Ridgewood, NJ 07450
Tom Bleasdale (Age 64), Trustee, is a Trustee (formerly Chairman of
the Board and Chief Executive Officer, Shore Bank & Trust Company),
1508 Ferncroft Tower, Danvers, MA 01923
Lora S. Collins (Age 59), Trustee, is an Attorney with Kramer, Levin,
Naftalis, Nessen, Kamin & Frankel, 919 Third Avenue, New York, NY
10022
James E. Grinnell(1)(Age 65), Trustee, is a Private Investor
(formerly Senior Vice President-Operations, The Rockport Company), 22
Harbor Avenue, Marblehead, MA 01945
William D. Ireland, Jr. (Age 71), Trustee, is a Trustee (formerly
Chairman of the Board, Bank of New England, - Worcester), 103
Springline Drive, Vero Beach, FL 32963
Richard W. Lowry(1)(Age 58), Trustee, is a Private Investor (formerly
Chairman and Chief Executive Officer, U.S. Plywood Corporation),
10701 Charleston Drive, VeroBeach, FL 32963
William E. Mayer (Age 54), Trustee, is Dean, College of Business and
Management, University of Maryland (formerly Dean, Simon Graduate
School of Business, University of Rochester; Chairman and Chief
Executive Officer, C.S. First Boston Merchant Bank; and President and
Chief Executive Officer, The First Boston Corporation), College Park,
MD 20742
John A. McNeice, Jr.(2)(Age 62), Trustee and President, is Chairman
of the Board and Director, TCG and Colonial, Director, Liberty
Financial (formerly Chief Executive Officer, Colonial and TCG)
James L. Moody, Jr. (Age 63), Trustee, is Chairman of the Board,
Hannaford Bros., Co. (formerly Chief Executive Officer, Hannaford
Bros. Co.), P.O. Box 1000, Portland, ME 04104
John J. Neuhauser (Age 51), Trustee, is Dean, Boston College School
of Management, 140 Commonwealth Avenue, Chestnut Hill, MA 02167
George L. Shinn (Age 72), Trustee, is a Financial Consultant
(formerly Chairman, Chief Executive Officer and Consultant, The First
Boston Corporation), The First Boston Corporation, Tower Forty Nine,
12 East 49th Street, New York, NY 10017
Robert L. Sullivan (Age 67), Trustee, is a Management Consultant
(formerly Management Consultant, Saatchi and Saatchi Consulting Ltd.
and Principal and International Practice Director, Management
Consulting, Peat Marwick Main & Co.), 7121 Natelli Woods Lane,
Bethesda, MD 20817
Sinclair Weeks, Jr. (Age 71), Trustee, is Chairman of the Board, Reed
& Barton Corporation, Bay Colony Corporate Center, Suite 4550, 1000
Winter Street, Waltham, MA 02154
Harold W. Cogger (Age 59), Vice President, is President, Chief
Executive Officer and Director, Colonial (formerly Executive Vice
President; Colonial); President, Chief Executive Officer and
Director, TCG; Executive Vice President and Director, Liberty
Financial
Peter L. Lydecker (Age 41), Controller (formerly Assistant
Controller), is Vice President, Colonial (formerly Assistant Vice
President, Colonial)
Davey S. Scoon (Age 48), Vice President, is Executive Vice President
and Director, Colonial (formerly Senior Vice President and Treasurer,
Colonial); Executive Vice President and Chief Operating Officer, TCG,
(formerly Vice President - Finance and Administration, TCG)
Richard A. Silver (Age 48), Treasurer and Chief Financial Officer
(formerly Controller), is Senior Vice President, Director, Treasurer
and Chief Financial Officer, Colonial; Treasurer and Chief Financial
Officer, TCG (formerly Assistant Treasurer, TCG)
Arthur O. Stern (Age 56),Secretary, is Director, Executive Vice
President, General Counsel, Clerk and Secretary, Colonial; Executive
Vice President, Legal and Compliance and Clerk, TCG (formerly Vice
President - Legal, TCG)
(1) Elected to the Colonial Funds Complex on April 21, 1995.
(2) Trustees who are "interested persons" (as defined in the
1940 Act) of a fund or Colonial.
The address of the officers of the funds is One Financial Center,
Boston, MA 02111.
The Trustees serve as trustees of all Colonial funds (including
Colonial Municipal Money Market Fund, Colonial Global Utilities Fund
and Colonial Newport Tiger Fund), for which each Trustee (except Mr.
McNeice) will receive 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 a funds'
relative net assets and one-third of the fees are divided equally
among the Colonial funds.
Colonial or its affiliate, Colonial Advisory Services, Inc. (CASI),
has rendered investment advisory services to investment company,
institutional and other clients since 1931. Colonial currently
serves as investment adviser for 33 open-end and 5 closed-end
management investment company portfolios (collectively, Colonial
funds). Trustees and officers of the Trust who are also officers of
Colonial or its affiliates will benefit from the advisory fees, sales
commissions and agency 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 $15.5 billion in
assets.
MANAGEMENT OF THE PORTFOLIO (this section applies to the Portfolio in
which the Colonial Municipal Money Market Fund is invested)
The Adviser is an indirect subsidiary of Liberty Financial, which in
turn is an indirect subsidiary of Liberty Mutual. Liberty Mutual is
an underwriter of worker's 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. The Adviser is the successor to
an investment advisory business that was founded in 1932. The
Adviser's address is One South Wacker Drive, Chicago, IL 60606.
Trustees and Officers of the Portfolio
Gary A. Anetsberger(4), (Age 39), Senior Vice President and
Controller, is Vice President of the Adviser since January, 1991
(formerly associate of the Adviser)
Timothy K. Armour(3)(4) (Age 46), President and Trustee, is President
of the Mutual Funds division of the Adviser and director of the
Adviser since June, 1992; (formerly Senior Vice President and
Director of Marketing of Citibank Illinois)
Jilaine Hummel Bauer(4) (Age 39), Executive Vice President and
Secretary, is Senior Vice President since April, 1992 and Assistant
Secretary since May, 1990 of the Adviser (formerly Vice President of
the Adviser)
Kenneth L. Block, (4) (Age 75) Trustee, is Chairman Emeritus of A. T.
Kearney, Inc. (international management consultants
William W. Boyd, (4) (Age 68)Trustee, is Chairman and Director of
Sterling Plumbing Group, Inc. (manufacturer of plumbing projects)
since 1992; (formerly Chairman, President, and Chief Executive
Officer of Sterling Plumbing Group, Inc.)
N. Bruce Callow(4), (Age 49) Executive Vice President, is President
of the Investment Counsel division of the Adviser since June, 1994,
(formerly Senior Vice President of financial services for The
Northern Trust)
Lindsay Cook(3) (4), (Age 43)Trustee, is Senior Vice President of
Liberty Financial, 600 Atlantic Avenue, Boston, Massachusetts 02210
Philip D. Hausken(4), (Age 37) Vice President, is Legal Counsel for
the Adviser since July, 1994, (formerly Assistant Regional Director,
Midwest Regional office of the Securities and Exchange Commission)
Stephen P. Lautz(4), (Age 38) Vice President, is Vice President of
the Adviser since May, 1994 (formerly Associate of the Adviser)
Francis W. Morley(4), (Age 75) Trustee, is Chairman of Employer Plan
Administrators and Consultants Co. (designer, administrator, and
communicator of employee benefits plans
Charles R. Nelson(4), (Age 52) Trustee, is Professor, Department of
Economics of the University of Washington, Seattle, Washington 98195
Nicolette D. Parrish(4), (Age 45) Vice President and Assistant
Secretary, is Associate of the Adviser
Janet B. Rysz(4), (Age 39) Assistant Secretary, is Assistant
Secretary of the Adviser
Gordon R. Worley(4), (Age 75) Trustee, is Private Investor
Hans P. Ziegler(4), (Age 54) Executive Vice President, is Chief
Executive Officer of the Adviser since May, 1994; President of the
Investment Counsel division of the Adviser from July, 1993 to June,
1994 (formerly President and Chief Executive Officer, Pitcairn
Financial Management Group)
(3) Trustee who is an "interested person" of the Portfolio and of
the Adviser, as defined in the Investment Company Act of
1940.
(4) The address of each Trustee and Officer is One South Wacker
Drive, Chicago, IL 60606
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.
The Management Agreement (this section does not apply to the Colonial
Municipal Money Market Fund)
Under a Management Agreement (Agreement), Colonial has contracted to
furnish a fund with investment research and recommendations or fund
management, respectively, and accounting, and administrative
personnel and services, and with office space, equipment and other
facilities. For these services and facilities, a fund pays a monthly
fee based on the average of the daily closing value of the total net
assets of a fund for such month.
Colonial's compensation under the Agreement is subject to reduction
in any fiscal year to the extent that the total expenses of a fund
for such year (subject to applicable exclusions) exceed the most
restrictive applicable expense limitation prescribed by any state
statute or regulatory authority in which the Trust's shares are
qualified for sale. The most restrictive expense limitation
applicable to a fund is 2.5% of the first $30 million of the Trust's
average net assets for such year, 2% of the next $70 million and 1.5%
of any excess over $100 million.
Under the Agreement, any liability of Colonial to a fund and its
shareholders is limited to situations involving Colonial's own
willful misfeasance, bad faith, gross negligence or reckless
disregard of duties.
The Agreement may be terminated with respect to a fund at any time on
60 days' written notice by Colonial or by the Trustees of the Trust
or by a vote of a majority of the outstanding voting securities of a
fund. The Agreement will automatically terminate upon any assignment
thereof and shall continue in effect from year to year only so long
as such continuance is approved at least annually (i) by the Trustees
of the Trust or by a vote of a majority of the outstanding voting
securities of a fund and (ii) by vote of a majority of the Trustees
who are not interested persons (as such term is defined in the 1940
Act) of Colonial or the Trust, cast in person at a meeting called for
the purpose of voting on such approval.
Colonial pays all salaries of officers of the Trust. The Trust pays
all expenses not assumed by Colonial including, but not limited to,
auditing, legal, custodial, investor servicing and shareholder
reporting expenses. The Trust pays the cost of typesetting for its
Prospectuses and the cost of printing and mailing any Prospectuses
sent to shareholders. CISI pays the cost of printing and
distributing all other Prospectuses.
The Agreement provides that Colonial shall not be subject to any
liability to the Trust or to any shareholder of the Trust for any act
or omission in the course of or connected with rendering services to
the Trust in the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of its duties on the part of
Colonial.
The Management Agreement (this section applies to the Portfolio in
which the Colonial Municipal Money Market Fund is invested)
Under a Management Agreement, the Adviser has agreed to make day to
day investment decisions for the Portfolio, arrange for the execution
of portfolio transactions and generally manage the Portfolio's
investments. The Adviser has also agreed to perform administrative
services to the Portfolio, including without limitation, providing
all executive and other facilities required to render investment
management and administrative services. For these services and
facilities, the Portfolio pays a monthly fee based on the average
daily net assets of the Portfolio for such month.
Administration Agreement (this section is applies only to the
Colonial Municipal Money Market Fund))
Under an Administration Agreement, Colonial, in its capacity as the
Administrator of the Fund, has contracted to perform the following
administrative services:
(a) providing office space, equipment and clerical personnel;
(b) arranging, if desired by the Trust, for its Directors,
officers and employees to serve as Trustees, officers or
agents of the Fund;
(c) preparing and, if applicable, filing all document
required for compliance by the Fundwith applicable laws
and regulations;
(d) preparation of agendas and supporting documents for and
minutes of meetings of Trustees, committees of Trustees
and shareholders;
(e) monitoring compliance by the Fundwith Rule 2a-7 under the
Investment Company Act of 1940 (the "1940 Act") and
reporting to the Trustees from time to time with respect
thereto;
(f) monitoring the investments and operations of the
Portfolio and reporting to the Trustees from time to time
with respect thereto;
(g) coordinating and overseeing the activities of the
Fundother third-party service providers; and
(h) maintaining certain books and records of the Fund.
The Pricing and Bookkeeping Agreement
Colonial provides pricing and bookkeeping services to a fund pursuant
to a Pricing and Bookkeeping Agreement. The Pricing and Bookkeeping
Agreement has a one-year term. For a fund, Colonial, in its capacity
as the Administrator of the Fund, is paid an annual fee of $18,000,
plus 0.0233% of average daily net assets in excess of $50 million.
For each of the other Colonial funds (except for Colonial Newport
Tiger Fund and Colonial Global Utilities Fund), Colonial is paid
monthly a fee of $2,250 by each 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
The Adviser of the Portfolio provides pricing and bookkeeping
services to the Portfolio for a fee of $25,000 plus 0.0025% annually
of average daily net assets of the Portfolio over $50 million.
Portfolio Transactions(this section does not apply to the Colonial
Municipal Money Market Fund)
Investment decisions. Colonial also acts as investment adviser to
the other Colonial funds (as defined under Management of the Fund
herein) and its affiliate, CASI, advises other institutional,
corporate, fiduciary and individual clients for which CASI performs
various services. Various officers and Trustees of the Trust also
serve as officers or Trustees of other Colonial funds and the other
corporate or fiduciary clients of Colonial. The other funds and
clients advised by Colonial sometimes invest in securities in which
the Fund also invests and sometimes engage in covered option writing
programs and enter into transactions utilizing stock index options
and stock index and financial futures and related options ("other
instruments"). If the Fund, such other funds and such other clients
desire to buy or sell the same portfolio securities, options or other
instruments at about the same time, the purchases and sales are
normally made as nearly as practicable on a pro rata basis in
proportion to the amounts desired to be purchased or sold by each.
Although in some cases these practices could have a detrimental
effect on the price or volume of the securities, options or other
instruments as far as the Fund is concerned, in most cases it is
believed that these practices should produce better executions. It
is the opinion of the Trustees that the desirability of retaining
Colonial as investment adviser to a fund outweighs the disadvantages,
if any, which might result from these practices.
Brokerage and research services. Consistent with the Rules of Fair
Practice of the National Association of Securities Dealers, Inc., and
subject to seeking "best execution" (as defined below) and such other
policies as the Trustees may determine, Colonial may consider sales
of shares of a fund and of the other Colonial funds as a factor in
the selection of broker-dealers to execute securities transactions
for a fund.
Colonial places the transactions of the Funds with broker-dealers
selected by Colonial and, if applicable, negotiates commissions.
Broker-dealers may receive brokerage commissions on portfolio
transactions, including the purchase and writing of options, the
effecting of closing purchase and sale transactions, and the purchase
and sale of underlying securities upon the exercise of options and
the purchase or sale of other instruments. The Colonial funds from
time to time also execute portfolio transactions with such broker-
dealers acting as principals. The Colonial fund not intend to deal
exclusively with any particular broker-dealer or group of broker-
dealers.
Except as described below in connection with commissions paid to a
clearing agent on sales of securities, it is Colonial's policy always
to seek best execution, which is to place the Colonial fund's
transactions where the Colonial funds can obtain the most favorable
combination of price and execution services in particular
transactions or provided on a continuing basis by a broker-dealer,
and to deal directly with a principal market maker in connection with
over-the-counter transactions, except when it is believed that best
execution is obtainable elsewhere. In evaluating the execution
services of, including the overall reasonableness of brokerage
commissions paid to, a broker-dealer, consideration is given to,
among other things, the firm's general execution and operational
capabilities, and to its reliability, integrity and financial
condition.
Subject to such practice of always seeking best execution, securities
transactions of the Colonial funds may be executed by broker-dealers
who also provide research services (as defined below) to Colonial,
the Fund and the other Colonial funds. Colonial may use all, some or
none of such research services in providing investment advisory
services to each of its investment company and other clients,
including a fund. To the extent that such services are used by
Colonial, they tend to reduce Colonial's expenses. In Colonial's
opinion, it is impossible to assign an exact dollar value for such
services.
Subject to such policies as the Trustees may determine, Colonial may
cause the Colonial funds to pay a broker-dealer which provides
brokerage and research services to Colonial an amount of commission
for effecting a securities transaction, including the sale of an
option or a closing purchase transaction, for the Colonial funds in
excess of the amount of commission which another broker-dealer would
have charged for effecting that transaction. As provided in Section
28(e) of the Securities Exchange Act of 1934, "brokerage and research
services" include advice as to the value of securities, the
advisability of investing in, purchasing or selling securities and
the availability of securities or purchasers or sellers of
securities; furnishing analyses and reports concerning issues,
industries, securities, economic factors and trends and portfolio
strategy and performance of accounts; and effecting securities
transactions and performing functions incidental thereto (such as
clearance and settlement). Colonial must determine in good faith
that such greater commission is reasonable in relation to the value
of the brokerage and research services provided by the executing
broker-dealer viewed in terms of that particular transaction or
Colonial's overall responsibilities to the Colonial funds and all its
other clients.
The Trustees have authorized Colonial to utilize the services of a
clearing agent with respect to all call options written by Colonial
Funds that write options and to pay such clearing agent commissions
of a fixed amount per share (currently 1.25 cents) on the sale of the
underlying security upon the exercise of an option written by a Fund.
The Trustees may further authorize Colonial to depart from the
present policy of always seeking best execution and to pay higher
brokerage commissions from time to time for other brokerage and
research services as described above in the future if developments in
the securities markets indicate that such would be in the interests
of the shareholders of the Colonial funds.
Principal Underwriter
CISI is the principal underwriter of the Trust's shares. CISI has no
obligation to buy the Colonial Funds shares, and purchases the
Colonial Funds shares, only upon receipt of orders from authorized
FSFs or investors.
Investor Servicing and Transfer Agent
CISC is the Trust's investor servicing agent (transfer, plan and
dividend disbursing agent), for which it receives fees which are paid
monthly by the Trust. The fee paid to CISC is based on the average
daily net assets of the Fund and each Colonial fund. See "Fund
Charges and Expenses" in Part 1 of this SAI for information on fees
received by CISC. The agreement continues indefinitely but may be
terminated by 90 days' notice by the Fund or Colonial funds to CISC
or generally by 6 months' notice by CISC to the Fund or Colonial
funds. The agreement limits the liability of CISC to the Fund or
Colonial funds for loss or damage incurred by the Fund or Colonial
funds 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 or Colonial funds 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.
DETERMINATION OF NET ASSET VALUE
The Fund or Colonial funds determine net asset value (NAV) per share
for each Class as of the close of the New York Stock Exchange
(currently 3:00 p.m., Chicago time, in the case of the Portfolio in
which the Colonial Municipal Money Market Fund is invested) each day
the Exchange is open. Currently, the Exchange is closed Saturdays,
Sundays and the following holidays: New Year's Day, Presidents' Day,
Good Friday, Memorial Day, the Fourth of July, Labor Day,
Thanksgiving and Christmas.A fund The net asset value of the
Portfolio (in which the Colonial Municipal Money Market Fund is
invested) will not be determined on days when the Exchange is closed
unless, in the judgment of the Portfolio's Board of Trustees, the net
asset value of the Portfolio should be determined on any such day, in
which case the determination will be made at 3:00 p.m., Chicago time.
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 Colonial
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 Trustees. The values of foreign securities quoted in foreign
currencies are translated into U.S. dollars at the exchange rate for
that day. Portfolio positions for which there are no such valuations
and other assets are valued at fair value as determined in good faith
under the direction of the 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. 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 Trust's Trustees.
Amortized Cost for Money Market Funds
Money market funds generally value their portfolio securities at
amortized cost according to Rule 2a-7 under the 1940 Act.
Portfolio instruments are valued under the amortized cost method,
whereby the instrument is recorded at cost and thereafter amortized
to maturity. This method assures a constant NAV but may result in a
yield different than that of the same portfolio under the market
value method. The Trust'sTrustees have adopted procedures intended
to stabilize a fund's NAV per share at $1.00. When a fund's market
value deviates from the amortized cost of $1.00, and results in a
material dilution to existing shareholders, the Trust's Trustees will
take corrective action to: realize gains or losses; shorten the
portfolio's maturity; withhold distributions; redeem shares in kind;
or convert to the market value method (in which case the NAV per
share may differ from $1.00). All investments will be determined
pursuant to procedures approved by the Trust's Trustees to present
minimal credit risk.
See the Statement of Assets and Liabilities of the Fund for a
specimen price sheet showing the computation of maximum offering
price per share of Class A shares .
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 before
4:00 p.m. Eastern time 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 4:00 p.m.
Eastern time, 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.
As a convenience to investors, shares of most Colonial funds may be
purchased through the Colonial Fundamatic Check Program.
Preauthorized monthly bank drafts or electronic funds transfer for a
fixed amount (at least $50) are used to purchase Fund shares at the
public offering price next determined after CISI receives the
proceeds from the draft (normally the 5th or the 20th of each month,
or the next business day thereafter). Further information and
application forms are available from FSFs or from CISI.
Class A Shares
Most Funds continuously offer Class A shares. The Fund receives the
entire NAV of shares sold. CISI's commission is the sales charge
shown in the Prospectus less any applicable FSF discount. The FSF
discount is the same for all FSFs, except that CISI retains the
entire sales charge on any sales made to a shareholder who does not
specify an FSF on the investment account application and retains the
entire contingent deferred sales charge (CDSC).
CISI offers several plans by which an investor may obtain reduced
sales charges on purchases of a Fund's Class A shares. These plans
may be altered or discontinued at any time.
Right of Accumulation and Statement of Intent (Class A Shares only)
Reduced sales charges on Class A shares can be effected by combining
a current purchase with prior purchases of Class A, B or D 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 Class A
shares held by the shareholder (except 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 and any Class C shares) and Class B
and D shares.
CISI 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 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 shares (exclusive of reinvested distributions of all Colonial
funds) made within a thirteen-month period pursuant to a Statement of
Intent ("Statement"). A shareholder may include, as an accumulation
credit towards the completion of such Statement, the value of all
Class A, B and D shares held by the shareholder in Colonial funds
(except money market fund, unless acquired by exchange from another
non-money market Colonial fund). The value is determined at the
public offering price on the date 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
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 a 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 CISI 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 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.
Class B Shares
For those Funds offering Class B shares, the Prospectus contains a
general description of how investors may buy Class B shares of a the
Fund and a description of the CDSC. This SAI contains additional
information which may be of interest to investors.
Most Funds continuously offer Class B shares. The Fund receives the
entire NAV of shares sold. The FSF commission is the same for all
FSFs; CISI retains the entire CDSC.
Colonial money market fund Class B shares are subject to higher
charges than those normally associated with money market funds, and
checkwriting privileges are not offered.
Class C Shares
For those Funds offering Class C shares, the Prospectus contains a
general description of how investors may buy Class C shares of the
Fund. This SAI contains additional information which may be of
interest to investors.
Class C shares are offered continuously. The Fundreceives the entire
NAV of shares sold.
Class D Shares
For those Funds offering Class D Shares, the Prospectus contains a
general description of how investors may buy Class D shares of the
Fundand a description of the CDSC. This SAI contains additional
information which may be of interest to investors.
The Fund receives the entire NAV of shares sold. The FSF commission
is the same for all FSFs; CISI retains the entire CDSC.
Waiver of Contingent Deferred Sales Charges (CDSCs) (Classes A, B and
D)
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 Class B 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 Colonial, 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
if the SWP is set-up at the time the account is established,
and distributions are being reinvested).
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 current
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 individual retirement accounts, 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 (i) normal retirement (as stated in
the Plan document) or (ii) separation from service. CDSCs
also will be waived on SWP redemptions made to make required
minimum distributions from qualified retirement plans that
have invested in Colonial funds for at least two years.
Fundamatic Check Program
As a convenience to investors, shares of most Colonial funds may be
purchased through the Colonial Fundamatic Check Program.
Preauthorized monthly bank drafts or electronic funds transfer for a
fixed amount of at least $50 are used to purchase Fund shares at the
public offering price next determined after CISI receives the
proceeds from the draft (normally the 5th or the 20th of each month,
or the next business day thereafter). Further information and
application forms are available from FSFs or from CISI.
Automated Dollar Cost Averaging (Classes A, B and D)
Colonial's Automated Dollar Cost Averaging Program allows you to
exchange on a monthly basis from any Colonial fund in which you have
a current balance of at least $5,000 into the same class of shares of
up to four other Colonial funds. Complete the Automated Dollar
Cost Averaging section of the application agreeing to a monthly
exchange of $100 or more to the same class of shares of the Colonial
fund you designate on your written application. The designated
amount will be exchanged on the third Tuesday of each month. There
is no charge for the exchanges made pursuant to the Automated Dollar
Cost Averaging program. Exchanges will continue so long as your
Colonial fund balance is sufficient to complete the transfers. Your
normal rights and privileges as a shareholder remain in full force
and effect. Thus you can: buy any funds, exchange between the same
Class of shares of funds by written instruction or by telephone
exchange if you have so elected and withdraw amounts from any fund,
subject to the imposition of any applicable CDSC.
Any additional payments or exchanges into your fund will extend the
time of the Automated Dollar Cost Averaging program.
An exchange is a taxable capital transaction for federal tax
purposes.
You may terminate your program, change the amount of the exchange
(subject to the $100 minimum), or change your selection of funds, by
telephone or in writing; if in writing by mailing it to Colonial
Investors Service Center, P.O. Box 1722, Boston, MA 02105-1722.
You should consult your FSF or investment adviser to determine
whether or not the Automated Dollar Cost Averaging program is
appropriate for you.
Colonial Asset Builder Investment Program (Class A only)
A reduced sales charge applies to a purchase of certain Colonial
fund's Class A shares under a statement of intent for the Colonial
Asset Builder Investment Program. The Program offer may be withdrawn
at any time without notice. A completed Program may serve as the
initial investment for a new Program, subject to the maximum of
$4,000 in initial investments per investor. CISC will escrow shares
to secure payment of the additional sales charge on amounts invested
if the Program is not completed. Escrowed shares are credited with
distributions and will be released when the Program has ended. Prior
to completion of the Program, only scheduled Program investments may
be made in a Colonial fund in which an investor has a Program
account. The following services are not available to Program
accounts until a Program has ended:
Systematic Withdrawal Telephone Redemption Statement of Intent
Plan
Sponsored Colonial Cash Share Certificates
Arrangements Connection
$50,000 Fast Cash Reduced Sales Charges Automatic Dividend
Diversification
Right of Accumulation for any "person" Exchange Privilege*
*Exchanges may be made to other Colonial funds offering the Program.
Because of the unavailability of certain services, the Program may
not be suitable for all investors.
The FSF receives 3% of the investor's intended purchases under a
Program at the time of initial investment and 1% after the 24th
monthly payment. CISI may require the FSF to return all applicable
commissions paid with respect to a Program terminated within six
months of inception, and thereafter to return commissions in excess
of the FSF discount applicable to shares actually purchased.
Since the Asset Builder plan involves continuous investment
regardless of the fluctuating prices of funds shares, investors
should consult their FSF to determine whether it is appropriate. The
Plan does not assure a profit nor protects against loss in declining
markets.
Tax-Sheltered Retirement Plans (Classes A, B and D)
Certain Colonial funds offer prototype tax-qualified plans, including
Individual Retirement Accounts, and Pension and Profit-Sharing Plans
for individuals, corporations, employees and the self-employed. The
minimum initial Retirement Plan investment in any of a funds is $25.
The First National Bank of Boston is the Trustee and charges a $10
annual fee. Detailed information concerning these retirement plans
and copies of the Retirement Plans are available from CISI.
Other Plans (Class A only)
Shares of certain funds may be sold at NAV to current and retired:
Trustees of funds advised by Colonial; directors, officers and
employees of Colonial, CISI and other companies affiliated with
Colonial; registered representatives and employees of FSFs (including
their affiliates) that are parties to dealer agreements or other
sales arrangements with CISI; and such persons' families and their
beneficial accounts.
Class A Shares of certain funds 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 a 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 organizations group, the term of the
organization's existence and certain characteristics of the members
of its group. The Colonial funds reserve the right to revise the
terms of or to suspend or discontinue sales pursuant to sponsored
plans at any time.
Class A shares of certain funds 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 CISI
pursuant to which the Colonial funds are included as investment
options in programs involving fee-based compensation arrangements.
Class A shares of certain funds may also be purchased at reduced or
no sales charge by investors moving from another mutual fund complex
and by participants in certain retirement plans. In lieu of the
commissions described in the Prospectus, Colonial will pay the FSF a
finder's fee of 0.25% of the applicable account value during the
first twelve months in connection with such purchases.
Consultation with a competent financial and tax advisor 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.
INVESTOR SERVICES
Your Open Account
The following information provides more detail concerning the
operation of a Colonial Open Account (an account with book entry
shares only). For further information or assistance, investors
should consult CISC.
The Open Account permits a shareholder to 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.
The $10 fee on small accounts is paid to CISC.
If a shareholder changes his or her address and does not notify the
Fund, the Fund will reinvest all future distributions regardless of
the option chosen.
The Open Account also provides a way to accumulate shares of the
Fund. Checks presented for the purchase of shares of the Fund which
are returned by the purchaser's bank, or checkwriting privilege
checks for which there are insufficient funds in a shareholder's
account to cover redemption, will subject such purchaser or
shareholder 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 CISI.
Shares credited to an account are transferable upon written
instructions in good order to CISC and may be redeemed as described
under "How to sell 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 or D shares. Money market
funds will not issue certificates. A shareholder may send any
certificates which have been previously acquired to CISC for deposit
to their account.
Shares of funds that pay daily dividends will normally earn dividends
starting with the date the Fundreceives payment for the shares and
will continue through the day before the shares are redeemed,
transferred or exchanged.
Undelivered distribution checks returned by the post office may be
invested in your account.
Reinvestment Privilege
An investor who has redeemed Class A, B, or D shares may, upon
request, reinvest within one year a portion or all of the proceeds of
such sale in shares of the same Class of any Colonial fund at the NAV
next determined after CISC receives a written reinvestment request
and payment. Any CDSC paid at the time of the redemption will be
credited to the shareholder upon reinvestment. The period between
the redemption and the reinvestment will not be counted in aging the
reinvested 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.
Exchange Privilege
Shares of the Fund may be exchanged for the same class of shares of
the other continuously offered Colonial funds (with certain
exceptions) on the basis of the NAVs per share at the time of
exchange. The prospectus of each 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 Colonial funds 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
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
Colonial funds are available from the Colonial Literature Department.
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.
You need to hold your Class A shares for five months before
exchanging to certain funds having a higher maximum sales charge.
Consult your FSF or CISC. 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.
Shareholders of the other Colonial open-end Funds generally may
exchange their shares at NAV for the same class of shares of the
Fund.
An exchange is a capital sale transaction for federal income tax
purposes. The Exchange Privilege may be revised, suspended or
terminated at any time.
Telephone Address Change Services
By calling CISC, shareholders or their FSF 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. The
$50,000 Fast Cash privilege is suspended for 60 days after an address
change is effected.
Plans Available To Shareholders
The Plans described below are offered by most Colonial funds, are
voluntary and may be terminated at any time without the imposition by
the Fund or CISC of any penalty.
Checkwriting (Available only on the Class A and C shares of certain
Funds)
Shares may be redeemed by check if a shareholder completed an
Investment Account Application and Signature Card. Colonial will
provide checks to be drawn on The First National Bank of Boston (the
"Bank"). These checks may be made payable to the order of any person
in the amount of not less than $500 nor more than $100,000. The
shareholder will continue to earn dividends on shares until a check
is presented to the Bank for payment. At such time a sufficient
number of full and fractional shares will be redeemed at the next
determined net asset value to cover the amount of the check.
Certificate shares may not be redeemed in this manner.
Shareholders utilizing checkwriting drafts will be subject to the
Bank's rules governing checking accounts. There is currently no
charge to the shareholder for the use of checks. The shareholder
should make sure that there are sufficient shares in his or her Open
Account to cover the amount of any check drawn since the net asset
value of shares will fluctuate. If insufficient shares are in the
shareholder's Open Account, the check will be returned marked
"insufficient funds" and no shares will be redeemed. It is not
possible to determine in advance the total value of an Open Account
because prior redemptions and possible changes in net asset value may
cause the value of an Open Account to change. Accordingly, a check
redemption should not be used to close an Open Account.
Systematic Withdrawal Plan
If a shareholder's Account Balance is at least $5,000, the
shareholder may establish a Systematic Withdrawal Plan (SWP). A
specified dollar amount or percentage of the then current net asset
value of the shareholder's investment in any Colonial fund designated
by the shareholderwill be paid monthly or quarterly 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 and Class D shares of a Fund
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
such Fund in the shareholder's account. Generally, no CDSCs apply to
a redemption pursuant to a SWP, 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 Code regulation to withdraw more than
12%, on an annual basis, of the value of their Class B and Class D
share account may do so but will be subject to a CDSC ranging from
1.00% to 5% of the amount withdrawn. If a shareholder wishes to
participate in a SWP, the shareholder must elect to have all of the
shareholder's income dividends and other Fund 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 a 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 open
account.
The Funds 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 Funds 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.
Colonial cash connection. Dividends and any other distributions,
including SWP payments, 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 Investment
Account Application.
Automatic dividend diversification. The automatic dividend
diversification reinvestment program (ADD) generally allows
shareholders to have all distributions from a Fund automatically
invested in the same class of shares of the other Colonial funds. An
ADD account must be in the same name as the shareholder's existing
Open Account with the particular fund. Call CISC for more
information at 1-800- 422-3737.
Telephone Redemptions. Shareholders and/or their financial advisers
may select telephonic redemptions on their account application. A
redemption of up to $50,000 may be sent to a shareholder's address
without preauthorization, by calling 1-800-422-3737 between 9:00 a.m.
and 4:00 p.m. (NY time) on business days. CISC will employ
reasonable procedures to confirm that instructions communicated by
telephone are genuine. Telephone redemptions are not available on
accounts with an address change in the preceding 60 days and proceeds
and confirmations will only be mailed or sent to the address of
record. Shareholders and/or their financial advisers will be
required to provide their name, address and account number.
Financial advisers will also be required to provide their broker
number. All telephone transactions are recorded. A loss to a
shareholder may result from an unauthorized transaction reasonably
believed to have been authorized. No shareholder is obligated to
execute the telephone authorization form or to use the telephone to
execute transactions.
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.
SUSPENSION OF REDEMPTIONS
The Fund may not suspend shareholders' right of redemption or
postpone payment for more than seven days unless the New York Stock
Exchange is closed for other than customary weekends or holidays, or
if permitted by the rules of the SEC during periods when trading on
the Exchange is restricted or 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 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
Fund. However, the Declaration disclaims shareholder liability for
acts or obligations of the Fund and requires that notice of such
disclaimer be given in each agreement, obligation, or instrument
entered into or executed by the Fund or the 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 in which the Fund would be unable to meet its
obligations. The likelihood of such circumstances is remote.
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
shareholder's 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 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 investment advisory agreement for that series.
PERFORMANCE MEASURES
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 a 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 Fund and assuming that all distributions were
reinvested at NAV, converted to an average annual return assuming
annual compounding.
Nonstandardized total return. Nonstandardized total returns differ
from standardized average annual total returns only in that they may
relate to nonstandardized periods, represent aggregate rather than
average annual total returns or in that the sales charge or CDSC is
not deducted.
Yield
Money market. A Money Market fund's yield and effective yield is
computed in accordance with the SEC's formula for money market fund
yields.
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), and (ii)
dividing the result by the product of the average daily number of
shares of the a Colonial fund entitled to dividends for the period
and the maximum offering price of the Fund on the last day of the
period, (iii) then annualizing the result assuming semi-annual
compounding. Tax-equivalent yield is calculated by taking that
portion of the yield which is exempt from income tax and determining
the equivalent taxable yield which would produce the same after tax
yield for any given Federal and State tax rate, and adding to that
the portion of the yield which is fully taxable. 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, a fund's distribution rate reflects total amounts actually
paid to shareholders, while yield reflects the current earning power
of a fund's portfolio securities (net of a fund's expenses). A
fund's yield for any period may be more or less than the amount
actually distributed in respect of such period.
A fund may compare its performance to various unmanaged indices
published by such sources as listed in Appendix II.
A fund may also refer to quotations, graphs and electronically
transmitted data from sources believed by Colonial (or if different,
your fund's Adviser) to be reputable, and publications in the press
pertaining to a Fund's performance or to Colonial or its affiliates
(or if different, your fund's Adviser), 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 is based on past performance and does not predict future
results.
APPENDIX I
DESCRIPTION OF BOND RATINGS
S&P
AAA The highest rating assigned by S&P indicates an extremely strong
capacity to repay principal and interest.
AA bonds also qualify as high quality. Capacity to repay principal and pay
interest is very strong, and in the majority of instances, they differ from
AAA only in small degree.
A bonds have a strong capacity to repay principal and interest, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB bonds are regarded as having an adequate capacity to repay principal
and interest. Whereas they normally exhibit protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to repay principal and interest than for bonds in the A
category.
BB, B, CCC, and CC bonds are regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and principal in
accordance with the terms of the obligation. BB indicates the lowest
degree of speculation and CC the highest degree. While likely to have some
quality and protection characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
C ratings are reserved for income bonds on which no interest is being paid.
D bonds are in default, and payment of interest and/or principal is in
arrears.
Plus(+) or minus (-) are modifiers relative to the standing within the
major rating categories.
Provisional Ratings. The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of the
project being financed by the debt being rated and indicates that payment
of debt service requirements is largely or entirely dependent upon the
successful and timely completion of the project. This rating, however,
although addressing credit quality subsequent to completion of the project,
makes no comments on the likelihood of, or the risk of default upon failure
of, such completion. The investor should exercise his own judgment with
respect to such likelihood and risk.
Municipal Notes:
SP-1. Notes rated SP-1 have very strong or strong capacity to pay
principal and interest. Those issues determined to possess overwhelming
safety characteristics are designated as SP-1+.
SP-2. Notes rated SP-2 have satisfactory capacity to pay principal and
interest.
Notes due in three years or less normally receive a note rating. Notes
maturing beyond three years normally receive a bond rating, although the
following criteria are used in making that assessment:
Amortization schedule (the larger the final maturity relative to other
maturities, the more likely the issue will be rated as a note).
Source of payment (the more dependent the issue is on the market for
its refinancing, the more likely it will be rated as a note).
Demand Feature of Variable Rate Demand Securities:
S&P assigns dual ratings to all long-term debt issues that have as part of
their provisions a demand feature. The first rating addresses the
likelihood of repayment of principal and interest as due, and the second
rating addresses only the demand feature. The long-term debt rating
symbols are used for bonds to denote the long-term maturity and the
commercial paper rating symbols are usually used to denote the put (demand)
option (for example, AAA/A-1+). Normally, demand notes receive note rating
symbols combined with commercial paper symbols (for example, SP-1+/A-1+).
Commercial Paper:
A. Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are further refined
with the designations 1, 2, and 3 to indicate the relative degree to
safety.
A-1. This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are designed A-1+.
Corporate Bonds:
The description of the applicable rating symbols and their meanings is
substantially the same as its Municipal Bond ratings set forth above.
MOODY'S
Aaa bonds are judged to be of the best quality. They carry the smallest
degree of investment risk and are generally referred to as "gilt edge".
Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While various protective elements are
likely to change, such changes as can be visualized are most unlikely to
impair a fundamentally strong position of such issues.
Aa bonds are judged to be of high quality by all standards. Together with
Aaa bonds they comprise what are generally known as high-grade bonds. They
are rated lower than the best bonds because margins of protective elements
may be of greater amplitude or there may be other elements present which
make the long-term risk appear somewhat larger than in Aaa securities.
Those bonds in the Aa through B groups that Moody's believes possess the
strongest investment attributes are designated by the symbol Aa1, A1 and
Baa1.
A bonds possess many of the favorable investment attributes and are to be
considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
that suggest a susceptibility to impairment sometime in the future.
Baa bonds are considered as medium grade, neither highly protected nor
poorly secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds
lack outstanding investment characteristics and in fact, have speculative
characteristics as well.
Ba bonds are judged to have speculative elements: their future cannot be
considered as well secured. Often, the protection of interest and
principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes these bonds.
B bonds generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other
terms of the contract over any long period of time may be small.
Caa bonds are of poor standing. They may be in default or there may be
present elements of danger with respect to principal or interest.
Ca bonds are speculative in a high degree, often in default or having other
marked shortcomings.
C bonds are the lowest rated class of bonds and can be regarded as having
extremely poor prospects of ever attaining any real investment standing.
Conditional Ratings. Bonds for which the security depends upon the
completion of some act or the fulfillment of some condition are rated
conditionally. These are bonds secured by (a) earnings of projects under
construction, (b) earnings of projects unseasoned in operating experience,
(c) rentals which being when facilities are completed, or (d) payments to
which some other limiting conditions attaches. Parenthetical rating
denotes probable credit stature upon completion of construction or
elimination of basis of condition.
Note: Those bonds in the Aa, A, Baa, Ba, and B groups which Moody's
believes possess the strongest investment attributes are designated by the
symbols Aa 1, A 1, Baa 1, Ba 1, and B 1.
Municipal Notes:
MIG 1. This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG 2. This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
MIG 3. This designation denotes favorable quality. All security elements
are accounted for but there is lacking the undeniable strength of the
preceding grades. Liquidity and cash flow protection may be narrow and
market access for refinancing is likely to be less well established.
Demand Feature of Variable Rate Demand Securities:
Moody's may assign a separate rating to the demand feature of a variable
rate demand security. Such a rating may include:
VMIG 1. This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
VMIG 2. This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
VMIG 3. This designation denotes favorable quality. All security elements
are accounted for but there is lacking the undeniable strength of the
preceding grades. Liquidity and cash flow protection may be narrow and
market access for refinancing is likely to be less well established.
Commercial Paper:
Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment capacity of rated
issuers:
Prime-1 Highest Quality
Prime-2 Higher Quality
Prime-3 High Quality
If an issuer represents to Moody's that its Commercial Paper obligations
are supported by the credit of another entity or entities, Moody's, in
assigning ratings to such issuers, evaluates the financial strength of the
indicated affiliated corporations, commercial banks, insurance companies,
foreign governments, or other entities, but only as one factor in the total
rating assessment.
Corporate Bonds:
The description of the applicable rating symbols (Aaa, Aa, A) and their
meanings is identical to that of its Municipal Bond ratings as set forth
above, except for the numerical modifiers. Moody's applies numerical
modifiers 1, 2, and 3 in the Aa and A classifications of its corporate bond
rating system. The modifier 1 indicates that the security ranks in the
higher end of its generic rating category; the modifier 2 indicates a
midrange ranking; and the modifier 3 indicates that the issuer ranks in the
lower end of its generic rating category.
APPENDIX II
1994
SOURCE CATEGORY RETURN
(%)
Donoghue Tax-Free Funds 2.25
Donoghue U.S. Treasury Funds 3.34
Dow Jones Industrials 5.03
Morgan Stanley Capital 8.06
International EAFE Index
Morgan Stanley Capital 8.21
International EAFE GDP Index
Libor Six-month Libor 6.9375
Lipper Adjustable Rate Mortgage -2.20
Lipper California Municipal Bond -7.52
Funds
Lipper Connecticut Municipal Bond -7.04
Funds
Lipper Closed End Bond Funds -6.86
Lipper Florida Municipal Bond Funds -7.76
Lipper General Bond Fund -5.98
Lipper General Municipal Bonds -6.53
Lipper General Short-Term Tax-Exempt -0.28
Bonds
Lipper Global Flexible Portfolio -3.03
Funds
Lipper Growth Funds -2.15
Lipper Growth & Income Funds -0.94
Lipper High Current Yield Bond Funds -3.83
Lipper High Yield Municipal Bond Debt -4.99
Lipper Fixed Income Funds -3.62
Lipper Insured Municipal Bond -6.47
Average
Lipper Intermediate Muni Bonds -3.53
Lipper Intermediate (5-10) U.S. -3.72
Government Funds
Lipper Massachusetts Municipal Bond -6.35
Funds
Lipper Michigan Municipal Bond Funds -5.89
Lipper Mid Cap Funds -2.05
Lipper Minnesota Municipal Bond -5.87
Funds
Lipper U.S. Government Money Market 3.58
Funds
Lipper Natural Resources -4.20
Lipper New York Municipal Bond Funds -7.54
Lipper North Carolina Municipal Bond -7.48
Funds
Lipper Ohio Municipal Bond Funds -6.08
Lipper Small Company Growth Funds -0.73
Lipper Specialty/Miscellaneous Funds -2.29
Lipper U.S. Government Funds -4.63
Shearson Lehman Composite -3.37
Government Index
Shearson Lehman -3.51
Government/Corporate Index
Shearson Lehman Long-term -7.73
Government Index
S&P 500 S&P 1.32
S&P Utility Index S&P -7.94
Bond Buyer Bond Buyer Price Index -18.10
First Boston High Yield Index -0.97
Swiss Bank 10 Year U.S. Government -6.39
(Corporate Bond)
Swiss Bank 10 Year United Kingdom -5.29
(Corporate Bond)
Swiss Bank 10 Year France (Corporate -1.37
Bond)
Swiss Bank 10 Year Germany (Corporate 4.09
Bond)
Swiss Bank 10 Year Japan (Corporate 7.95
Bond)
Swiss Bank 10 Year Canada (Corporate -14.10
Bond)
Swiss Bank 10 Year Australia (Corporate 0.52
Bond)
Morgan Stanley Capital 10 Year Hong Kong (Equity) -28.90
International
Morgan Stanley Capital 10 Year Belgium (Equity) 9.43
International
Morgan Stanley Capital 10 Year Spain (Equity) -3.93
International
SOURCE CATEGORY RETURN
(%)
Morgan Stanley Capital 10 Year Austria (Equity) -6.05
International
Morgan Stanley Capital 10 Year France (Equity) -4.70
International
Morgan Stanley Capital 10 Year Netherlands (Equity) 12.66
International
Morgan Stanley Capital 10 Year Japan (Equity) 21.62
International
Morgan Stanley Capital 10 Year Switzerland (Equity) 4.18
International
Morgan Stanley Capital 10 Year United Kingdom -1.63
International (Equity)
Morgan Stanley Capital 10 Year Germany (Equity) 5.11
International
Morgan Stanley Capital 10 Year Italy (Equity) 12.13
International
Morgan Stanley Capital 10 Year Sweden (Equity) 18.80
International
Morgan Stanley Capital 10 Year United States 2.00
International (Equity)
Morgan Stanley Capital 10 Year Australia (Equity) 6.48
International
Morgan Stanley Capital 10 Year Norway (Equity) 24.07
International
Inflation Consumer Price Index 2.67
FHLB-San Francisco 11th District Cost-of-Funds 4.367
Index
Federal Reserve Six-Month Treasury Bill 6.49
Federal Reserve One-Year Constant-Maturity 7.14
Treasury Rate
Federal Reserve Five-Year Constant-Maturity 7.78
Treasury Rate
*in U.S. currency
Part B of Post-Effective Amendment No. 40 filed with the
Commission on March 20, 1995 (Colonial High Yield Municipal Fund,
Colonial Tax-Exempt Insured Fund, Colonial Tax-Exempt Fund,
Colonial Short-Term Tax-Exempt Fund, Colonial Intermediate Tax-
Exempt Fund and Colonial Utilities Fund), is incorporated herein
in its entirety by reference.
Part C OTHER INFORMATION
Item 24.Financial Statements and Exhibits
(a) Financial Statements:
Included in Part A
Summary of expenses (Colonial Municipal Money
Market Fund, currently known as Colonial Tax-
Exempt Money Market Fund)
Summary of expenses (for Colonial High Yield
Municipal Fund, Colonial Tax-Exempt Insured
Fund, Colonial Tax-Exempt Fund, Colonial Short-
Term Tax-Exempt Fund, Colonial Intermediate Tax-
Exempt Fund and Colonial Utilities Fund,
incorporated by reference to Part A of Post-
Effective Amendment No. 40 filed with the
Commission on March 20, 1995)
The Fund's financial history (Colonial Municipal
Money Market Fund, currently known as Colonial
Tax-Exempt Money Market Fund)
The Fund's financial history (for Colonial High
Yield Municipal Fund, Colonial Tax-Exempt
Insured Fund, Colonial Tax-Exempt Fund, Colonial
Short-Term Tax-Exempt Fund, Colonial
Intermediate Tax-Exempt Fund and Colonial
Utilities Fund, incorporated by reference to
Part A of Post-Effective Amendment No. 40 filed
with the Commission on March 20, 1995)
Included in Part B
Colonial Tax-Exempt Fund (CTEF) (incorporated by
reference to Part B of Post-Effective Amendment
No. 40 filed with the Commission on March 20,1995)
Investment portfolio, November 30, 1994
Statement of assets and liabilities, November 30, 1994
Statement of operations, Year ended November 30, 1994
Statement of changes in net assets, Years ended
November 30, 1994 and 1993
Notes to Financial Statements
Financial Highlights
Report of Independent Accountants
Colonial Tax-Exempt Insured Fund (CTEIF)
(incorporated by reference to Part B of Post-
Effective Amendment No. 40 filed with the
Commission on March 20, 1995)
Investment portfolio, November 30, 1994
Statement of assets and liabilities, November 30, 1994
Statement of operations, Year ended November 30, 1994
Statement of changes in net assets, Years ended
November 30, 1994 and 1993
Notes to Financial Statements
Financial Highlights
Report of Independent Accountants
Colonial Municipal Money Market Fund (CMMMF)
(currently known as Colonial Tax-Exempt Money
Market Trust (CTEMMF)) (incorporated by
reference to Part B of Post-Effective Amendment
No. 40 filed with the Commission on March 20, 1995)
Investment portfolio, November 30, 1994
Statement of assets and liabilities, November 30, 1994
Statement of operations, Year ended November 30, 1994
Statement of changes in net assets, Years ended
November 30, 1994 and 1993
Notes to Financial Statements
Financial Highlights
Report of Independent Accountants
Colonial Utilities Fund (CUF) (incorporated by
reference to Part B of Post-Effective Amendment
No. 40 filed with the Commission on March 20,
1995)
Investment portfolio, November 30, 1994
Statement of assets and liabilities, November 30, 1994
Statement of operations, Year ended November 30, 1994
Statement of changes in net assets, Years ended
November 30, 1994 and 1993
Notes to Financial Statements
Financial Highlights
Report of Independent Accountants
Colonial High Yield Municipal Fund (CHYMF)
(incorporated by reference to Part B of Post-
Effective Amendment No. 40 filed with the
Commission on March 20, 1995)
Investment portfolio, November 30, 1994
Statement of assets and liabilities, November 30, 1994
Statement of operations, Year ended November 30, 1994 and 1993
Statement of changes in net assets, Year ended
November 30, 1994 and 1993
Notes to Financial Statements
Financial Highlights
Report of Independent Accountants
Colonial Intermediate Tax-Exempt Fund (CITEF)
(incorporated by reference to Part B of Post-
Effective Amendment No. 40 filed with the
Commission on March 20, 1995)
Investment portfolio, November 30, 1994
Statement of assets and liabilities, November 30, 1994
Statement of operations, Year ended November 30, 1994
Statement of changes in net assets, Year ended
November 30, 1994 and Period ended November 30, 1993
Notes to Financial Statements
Financial Highlights
Report of Independent Accountants
Colonial Short-Term Tax-Exempt Fund (CSTTEF)
(incorporated by reference to Part B of Post-
Effective Amendment No. 40 filed with the
Commission on March 20, 1995)
Investment portfolio, November 30, 1994
Statement of assets and liabilities, November 30, 1994
Statement of operations, Year ended November 30, 1994
Statement of changes in net assets, Year ended
November 30, 1994 and Period ended November 30, 1993
Notes to Financial Statements
Financial Highlights
Report of Independent Accountants
(b) Exhibits:
1. Amendment No. 4 to the Agreement and
Declaration of Trust (f)
2. Amended By-Laws (10/9/92) (i)
3. Not Applicable
4. Form of Specimen of Share Certificate (f)
5.
(a)(1) Management Agreement (CTEF, CTEIF) (h)
(a)(2) Form of Proposed Management Agreement
between CUF and Colonial Management
Associates, Inc. (f)
(a)(3) Form of Management Agreement between CTEMMF
and Colonial Management Associates, Inc.
(a)(4) Form of Management Agreement between CITEF
and Colonial Management Associates, Inc.
(i)
(a)(5) Form of Management Agreement between CSTTEF
and Colonial Management Associates, Inc.
(i)
(a)(6) Management Agreement filed as Exhibit
5(a)(1), in Part C, Item 24(b) of Post-
Effective Amendment No. 32 to the
Registration Statement 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 (CHYMF)
(b) Form of Pricing and Bookkeeping Agreement
(h)
(b)(1) Form of Pricing and Bookkeeping Agreement
between Colonial Trust IV, on behalf of
CMMMF, and Colonial Management Associates,
Inc.
6. (a) Distributor's Contract with Colonial
Investment Services, Inc.
(b) Form of Selling Agreement - filed as
Exhibit 6(b) in Part C, Item 24(b) of Post-
Effective Amendment No. 87 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 Bank and Bank Affiliated Selling
Agreement - filed as Exhibit 6(c) in Part
C, Item 24(b) of Post-Effective Amendment
No. 5 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
(d) Mutual Fund Agreement between NCNB
Securities, Inc. and Colonial Investment
Services, Inc. - filed as Exhibit 6(f) in
Part C, Item 24(b) of Post-Effective
Amendment No. 3 to the Registration
Statement on Form N-1A of Colonial
Massachusetts Tax-Exempt Trust (File Nos.
33-12109 & 811-5030) and is hereby
incorporated by reference and made a part
of this Registration Statement (e)
(e) Form of Asset Retention Agreement - filed
as Exhibit 6(e) in Part C, Item 24(b) of
Post-Effective Amendment No. 5 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
7. Not Applicable
8. (a) Forms of Safekeeping Agreement, Procedural
Agreement and Customer Agreement - filed as
Exhibit 8(iii) in Part C, Item 24(b) of Post-
Effective Amendment No. 28 to the
Registration Statement on Form N-1A of
Colonial High Yield Securities Trust (File
Nos. 2-41251 & 811-2214) and is hereby
incorporated by reference and made a part of
this Registration Statement (c)
(b) Sub-Custodian Agreement between State Street
Bank and Trust Company and The First National
Bank of Boston - filed as Exhibit 8(b) in
Part C, Item 24(b) of Post-Effective
Amendment No. 1 to the Registration Statement
on Form N-1A of Colonial Massachusetts Tax-
Exempt Trust (File Nos. 33-12109 & 811-5030)
and is hereby incorporated by reference and
made a part of this Registration Statement
(CTEF, CTEIF, CITEF, CSTTEF and CTEMMF) (d)
(c) Sub-Custodian Agreement between State Street
Bank and Trust Company and Irving Trust
Company - filed as Exhibit 8(c) in Part C,
Item 24(b) of Post-Effective Amendment No. 2
to the Registration Statement of Colonial
California Tax-Exempt Trust (File Nos. 33-
2640 & 811-4557) and is hereby incorporated
by reference and made a part of this
Registration Statement (CTEF, CTEIF and
CTEMMF) (d)
(e) Proposed form of Custodian Agreement with
United Missouri Bank (CTEF, CTEMMF, CTEIF,
CHYMF, CSTTEF, CITEF) (j)
(k) Proposed form of Custodian Agreement with
Boston Safe Deposit and Trust Company filed
as Exhibit 8 in Part C, Item 24(b) of Post-
Effective Amendment No. 19 to the
Registration Statement on Form N-1A of
Colonial Trust II (File Nos. 2-66976 and 811-
3009) and is hereby incorporated by reference
and made a part of this Registration
Statement (CUF)
9. (a) Amended and Restated Shareholders' Servicing
and Transfer Agent Agreement as amended -
filed as Exhibit 9(a) in Part C, Item 24(b)
of Post-Effective Amendment No. 5 to the
Registration Statement on Form N-1A of
Colonial Trust VI (File Nos. 33-45117 & 811-
6529) and is hereby incorpoarated by
reference and made a part of this
Registration Statement
(b) Form of Agreement and Plan of Reorganization
(CTEMMF and CUF) (g)
(c) Form of Administration Agreement between
Colonial Trust IV, on behalf of CMMMF, and
Colonial Management Associates, Inc.
(d) Form of Indemnification Agreement between
Colonial Trust IV, on behalf of CMMMF, and
SR&F Base Trust, on behalf of SR&F Municipal
Money Portfolio.
10. Opinion and Consent of Counsel (CTEF) (a)
(a) Opinion and Consent of Messrs. Ropes & Gray
filed as Exhibit 10 in Part C, Item 24(b) of
Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-1A of CUF
(File Nos. 2-71242 & 811-3148) and is hereby
incorporated by reference and made a part of
this Registration Statement (CUF)
(b) Opinion and Consent of Counsel filed as
Exhibit 10. in Part C, Item 24(b) of Pre-
Effective Amendment No. 1 to the Registration
Statement on Form N-1A of CTEMMF (File Nos.
33-13922 & 811-5138) and is hereby
incorporated by reference and made a part of
this Registration Statement (CTEMMF)
11.(a) Consent of Independent Accountants (CTEF,
CTEIF, CTEMMF, CUF, CHYMF, CITEF, CSTTEF) (1)
(b) Commodity Futures Trading Commission No-
Action Letter dated 11/1/84 (b)
12. Not Applicable
13. Not Applicable
(a) Investment letter of Colonial Management
Associates, Inc. filed as Exhibit 13. in Part
C, Item 24(b) of Pre-Effective Amendment No.
1 to the Registration Statement on Form N-1A
of CTEMMF (File Nos. 33-13922 & 811-5138) and
is hereby incorporated by reference and made
a part of this Registration Statement
(CTEMMF)
14.(a) Form of Colonial Group of Mutual Funds Money
Purchase Pension and Profit Sharing Plan
Document and Trust Agreement - filed as
Exhibit 14(a) in Part C, Item 24(b) of Post-
Effective Amendment No. 5 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
(b) Form of Colonial Group of Mutual Funds Money
Purchase Pension and Profit Sharing
Establishment Book - filed as Exhibit 14(b)
in Part C, Item 24(b) of Post-Effective
Amendment No. 5 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
(c) Form of Colonial Group Funds Individual
Retirement Account and Application - filed as
Exhibit 14(c) in Part C, Item 24(b) of Post-
Effective Amendment No. 5 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
(d) Form of Colonial Mutual Funds Simplified
Employee Plan and Salary Reduction Simplified
Employee Plan - filed as Exhibit 14(d) in
Part C, Item 24(b) of Post-Effective
Amendment No. 5 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
(e) Form of Colonial of Mutual Funds 401(k) Plan
Document and Trust Agreement - filed as
Exhibit 14(e) in Part C, Item 24(b) of Post-
Effective Amendment No. 5 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) Form of Colonial Mutual Funds 401(k) Plan
Establishment Booklet - filed as Exhibit
14(f) in Part C, Item 24(b) of Post-Effective
Amendment No. 5 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 Mutual Funds 401(k) Employee
Reports Booklet - filed as Exhibit 14(g) in
Part C, Item 24(b) of Post-Effective
Amendment No. 5 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
15. Distribution Plan adopted pursuant to Section
12b-1 of the Investment Company Act of 1940,
incorporated by reference to the
Distributor's Contract
16.
(a)(1) Calculation of Performance Information (CTEF) (l)
(a)(2) Calculation of Yield (CTEF) (l)
(b)(1) Calculation of Performance Information (CTEIF) (l)
(b)(2) Calculation of Yield (CTEIF) (l)
(c)(1) Calculation of Performance Information (CUF) (l)
(c)(2) Calculation of Yield (CUF) (l)
(d)(1) Calculation of Performance Information (CTEMMF)
(d)(2) Calculation of Yield (CTEMMF)
(e)(1) Calculation of Performance Information (CHYMF) (l)
(e)(2) Calculation of Yield (CHYMF) (l)
(f)(1) Calculation of Performance (CITEF) (l)
(f)(2) Calculation of Yield (CITEF) (l)
(g)(1) Calculation of Performance (CSTTEF) (l)
(g)(2) Calculation of Yield (CSTTEF) (l)
17.(a) Financial Data Schedule (Class A) (CTEF)
(l)
(b) Financial Data Schedule (Class B) (CTEF)
(l)
(c) Financial Data Schedule (Class A)(CTEIF)
(l)
(d) Financial Data Schedule (Class B)(CTEIF)
(l)
(e) Financial Data Schedule (Class A)(CUF) (l)
(f) Financial Data Schedule (Class B)(CUF) (l)
(g) Financial Data Schedule (Class A)(CTEMMF)
(l)
(h) Financial Data Schedule (Class B)(CTEMMF)
(l)
(i) Financial Data Schedule (Class A)(CHYMF)
(l)
(j) Financial Data Schedule (Class B)(CHYMF)
(l)
(k) Financial Data Schedule (Class A)(CITEF)
(l)
(l) Financial Data Schedule (Class B)(CITEF)
(l)
(m) Financial Data Schedule (Class A)(CSTTEF)
(l)
18. Power of Attorney for: Tom Bleasdale, Lora
S. Collins, William D. Ireland, Jr.,
William E. Mayer, John A. McNeice, Jr.,
James L. Moody, Jr., John J. Neuhauser,
George L. Shinn, Robert L. Sullivan and
Sinclair Weeks, Jr.(k)
(a) Power of Attorney for: Robert J. Birnbaum,
James E. Grinnell and Richard W. Lowry -
filed as Exhibit 18(a) in Part C, Item
24(b) of Post-Effective Amendment No. 18 to
the Registration Statement on Form N-1A of
Colonial Trust V (File Nos. 811-5030 and 33-
12109) and is hereby incorporated by
reference and made a part of this
Registration Statement
_________________________________
(a) Incorporated by reference to Post-Effective
Amendment No. 2 filed on or about 10/20/78.
(b) Incorporated by reference to Post-Effective
Amendment No. 12 filed on or about
11/30/84.
(c) Incorporated by reference to Post-Effective
Amendment No. 17 filed on or about 1/29/87.
(d) Incorporated by reference to Post-Effective
Amendment No. 18 filed on or about 1/29/88.
(e) Incorporated by reference to Post-Effective
Amendment No. 20 filed on or about
11/13/89.
(f) Incorporated by reference to Post-Effective
Amendment No. 30 filed on or about
12/17/91.
(g) Incorporated by reference to Post-Effective
Amendment No. 31 filed on or about 2/13/92.
(h) Incorporated by reference to Post-Effective
Amendment No. 32 filed on or about 3/16/92.
(i) Incorporated by reference to Post-Effective
Amendment No. 33 filed on or about
10/20/92.
(j) Incorporated by reference to Post-Effective
Amendment No. 36 filed on or about 3/16/93.
(k) Incorporated by reference to Post-Effective
Amendment No. 38 filed on or about 3/11/94.
(l) Incorporated by reference to Post-Effective
Amendment No. 40 filed on or about 3/20/95.
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 Record Holders as of
6/30/95
Shares of beneficial 86,097 Class A record holders (CTEF)
interest 13,826 Class B record holders
Shares of beneficial 6,695 Class A record holders (CTEIF)
interest 1,231 Class B record holders
Shares of beneficial 25,346 Class A record holders (CUF)
interest 52,229 Class B record holders
Shares of beneficial 798 Class A record holders (CTEMMF)
interest 74 Class B record holders
Shares of beneficial 280 Class A record holders (CHYMF)
interest 3,819 Class B record holders
Shares of beneficial 131 Class A record holders (CSTTEF)
interest
Shares of beneficial 391 Class A record holders (CITEF)
interest 423 Class B record holders
Item 27. Indemnification
See Article VIII of Amendment No. 4 to the Agreement and
Declaration of Trust filed as Exhibit 1 hereto.
See the form of Indemnification Agreement entered into by
Registrant, on behalf of CMMMF, and the SR&F Base Trust
(Base Trust), on behalf of SR&F Municipal Money Portfolio
(Portfolio), relating to liability in connection with
information relating to the Base Trust and the Portfolio
contained in Part B of this Registration Statement and
filed as Exhibit 9.(d) hereto.
The Registrant's adviser, Colonial Management Associates,
Inc. (Colonial), has an ICI Mutual Insurance Company
Directors and Officers/Errors and Omissions Liability
insurance policy. The policy provides indemnification to
the Registrant's trustees and officers.
ITEM 28.
- --------
Registrant's investment adviser, Colonial Management Associates, Inc., is
registered as an investment adviser under the Investment Advisers Act of 1940
(1940 Act). Colonial Advisory Services, Inc. (CASI), an affiliate of Colonial
Management Associates, Inc., is also registered as an investment adviser under
the 1940 Act. As of the end of its fiscal year June 30, 1995, CASI had one
institutional, corporate or other accounts under management or supervision, the
market value of which was approximately $30.9 million. At June 30, 1995,
Colonial Management Associates, Inc. was the investment adviser to the 36 mutual
funds in the Colonial Group of Funds, the market value of which investment
companies was approximately $15,913.6 million. Colonial Investment Services,
Inc., a subsidiary of Colonial Management Associates, Inc., is the principal
underwriter and the national distributor of all of the funds in the Colonial
Group of Funds, including the Registrant.
The following sets forth the business and other connections of each
director and officer of Colonial Management Associates, Inc.:
(1) (2) (3) (4)
Name and principal
business Affiliation
addresses* with Period is through 3/1/95. Other
of officers and investment business, profession, vocation or
directors of adviser employment connection Affiliation
investment adviser ---------- -------------------------------- -----------
- ------------------
Archer, Joseph A. V.P.
Augustine, Jeffrey B. V.P.
Berliant, Allan V.P.
Bertelson, Lisa V.P.
Bissonette, Michael V.P.
Boatman, Bonny E. Dir.;
Sr.V.P.;
IPC Mbr.
Carnabucci, Dominick V.P.
Carroll, Sheila A. Sr.V.P.;
Dir.
Citrone, Frank V.P.
Cogger, Harold W. Dir.;Pres.; The Colonial Group, Inc. Dir.; Pres.;
CEO
CEO;IPC Mbr. Colonial Trusts I through VI V.P.
Exe. Cmte.
Colonial High Income Municipal V.P.
Trust
Colonial InterMarket Income V.P.
Trust I
Colonial Intermediate High Income V.P.
Fund
Colonial Investment Grade Municipal
Trust V.P.
Colonial Municipal Income Trust V.P.
Cogger (cont'd) Liberty Financial Exec V.P.;
Companies, Inc. Dir.
Collins, Anne V.P.
Conlin, Nancy V.P.; Colonial Investors Service Center, Asst. Clerk
Asst. Inc.
Sec.; The Colonial Group, Inc. Asst. Clerk
Asst.
Clerk and Colonial Advisory Services, Inc. Asst. Clerk
Counsel Colonial Investment Services, Inc. Asst. Clerk
Cordes, Susan V.P.
Daniszewski, V.P. Colonial Investment Services, Inc. V.P.
Joseph J.
DiSilva, Linda V.P.
Ericson, Carl C. V.P. Colonial Intermediate High Income V.P.
Fund
Evans, C. Frazier Dir.; Colonial Investment Services, Inc. Sr. V.P.
Sr.V.P.
Feingold, Andrea V.P. Colonial Intermediate High Income V.P.
Fund
Finnemore, Leslie W. V.P.
Gerokoulis, V.P. Colonial Investment Services, Inc. Sr. V.P.
Stephen A.
Harasimowicz, V.P.
Stephen
Hartford, Brian V.P.
Haynie, James P. V.P. Colonial Advisory Services, Inc. V.P.
Koonce, Michael H. V.P.; Colonial Trusts I through VI Asst. Sec.
Asst.
Sec.; Colonial High Income Municipal Asst. Sec.
Asst. Trust
Clerk & Colonial InterMarket Income Asst. Sec.
Counsel Trust I
Colonial Intermediate High Income Asst. Sec.
Fund
Colonial Investment Grade
Municipal Trust Asst. Sec.
Koonce (cont'd) Colonial Municipal Income Trust Asst. Sec.
Colonial Investment Services, Inc. Asst. Clerk
Colonial Investors Service Center, Asst. Clerk
Inc.
The Colonial Group, Inc. Asst. Clerk
Colonial Advisory Services, Inc. Asst. Clerk
Lennon, John E. V.P. Colonial Advisory Services, Inc. V.P.
Lenzi, Sharon V.P.
Lilienfeld, V.P.
Jonathan
Loring, William C. V.P.
Lydecker, Peter L. V.P.; Colonial Trusts I through VI Controller
Asst.
Treasurer Colonial High Income Municipal Controller
Trust
Colonial InterMarket Income Trust Controller
I
Colonial Intermediate High Income Controller
Fund
Colonial Investment Grade
Municipal Trust Controller
Colonial Municipal Income Trust Controller
MacKinnon, Donald S. Dir.;
Sr.V.P.
McCue, Gerard A. V.P. Colonial Advisory Services, Inc. V.P.
McGregor, Jeffrey L. Dir.; Colonial Investment Services, Inc. Pres.; CEO;
Sr.V.P. Dir.
McNeice, Jr., John A. Chrmn.; Boston College Trustee
Dir.; Boston College High School Trustee
Exe. Carney Hospital Foundation Mbr. of the
Cmte. Carney Fund
Chm.;
Colonial Advisory Services, Inc. Dir.; Chm.;
CEO & Pres.
Colonial High Income Municipal Trustee;
Trust Pres.
Colonial InterMarket Income Trust Trustee;
I Pres.
Colonial Intermediate High Income Trustee;
Fund Pres.
McNeice (cont'd) Colonial Investment Grade
Municipal Trust Trustee;
Pres.
Colonial Municipal Income Trust Trustee;
Pres.
The Colonial Group, Inc. Trustee;
Pres.
Colonial Trusts I through VI Trustee;
Pres.
Colonial Investors Service Center, Trustee;
Inc. Pres.
Nativity Preparatory School Chm., Bd. of
Trustees
Northeastern University Corp. Bd.
Mbr.
Wentworth Institute of Technology Corp. Bd.
Mbr.
Colonial Investment Services, Inc. Dir.; Chm.
of the Bd.
Board of Visitors - Peter Drucker
Graduate Center Board Member
St. John's Seminary Board Member
Third Century Foundation Trustee;
Pres.
Peter F. Drucker Foundation Dir.
United Way of Mass Bay Board Member
American Ireland Fund Board Member
Catholic Charities -
Archdiocese of Boston Board Member
Liberty Financial Companies, Inc. Dir.
O'Neill, Charles A. Sr.V.P.; Colonial Investment Services, Inc. Exec. V.P.
Dir.
Peters, Helen F. Dir.;
Sr.V.P.;
IPC Mbr.
Rie, Daniel Sr.V.P.; Colonial Advisory Services, Inc. Sr. V.P.
IPC Mbr.;
Dir.
Scoon, Davey S. Dir.; Colonial Advisory Services, Inc. Treasurer
Exe.V.P.; Colonial High Income Municipal V.P.
Trust
IPC Mbr. Colonial InterMarket Income Trust V.P.
I
Colonial Intermediate High Income V.P.
Fund
Scoon (cont'd) Colonial Investment Grade
Municipal Trust V.P.
Colonial Municipal Income Trust V.P.
Colonial Trusts I through VI V.P.
Colonial Investors Service Center, Treasurer
Inc.
The Colonial Group, Inc. COO
Seibel, Sandra L. V.P.
Shore, Janet V.P. and Colonial High Income Municipal Asst. Sec.
Compliance Trust
Offr.; Colonial InterMarket Income Trust Asst. Sec.
IPC Mbr. I
Colonial Intermediate High Income Asst. Sec.
Fund
Colonial Investment Grade
Municipal Trust Asst. Sec.
Colonial Municipal Income Trust Asst. Sec.
Colonial Trusts I through VI Asst. Sec.
Colonial Investment Services, Inc. Asst. Clerk
Silver, Richard A. Dir.; Colonial Advisory Services, Inc. Controller
Sr.V.P.; Colonial High Income Municipal Treasurer &
Treasurer Trust CFO
& CFO Colonial InterMarket Income Trust Treasurer &
I CFO
Colonial Intermediate High Income Treasurer &
Fund CFO
Colonial Investment Grade Treasurer &
Municipal Trust CFO
Colonial Municipal Income Trust Treasurer &
CFO
Colonial Trusts I through VI Treasurer &
CFO
Colonial Investors Service Center, Asst.
Inc. Treasurer
The Colonial Group, Inc. Treasurer &
CFO
Colonial Investment Services, Inc. Treasurer &
CFO
Stern, Arthur O. Exe.V.P.; Colonial Advisory Services, Inc. Clerk
Dir.; Colonial High Income Municipal Secretary
Sec.; Trust
Clrk. & Colonial InterMarket Income Trust Secretary
Gnrl. I
Counsel; Colonial Intermediate High Income Secretary
IPC Mbr. Fund
Colonial Investment Grade
Municipal Trust Secretary
Colonial Municipal Income Trust Secretary
Stern (cont'd) Colonial Trusts I through VI Secretary
Colonial Investors Service Center, Clerk
Inc.
The Colonial Group, Inc. Clerk;
V.P.Lgl.
Colonial Investment Services, Inc. Clrk;
Counsel
Waas, Robert S. V.P.
Wallace, John V.P.- Corp.
Finance and
Controller
Yacovoni, V.P.
Priscilla
- ------------------------------------------------
*The Principal address of all of the officers and
directors of the investment adviser is One Financial
Center, Boston, MA 02111.
Item 28. Business and Other Connections of Investment Adviser
(only with respect to Colonial Municipal Money
Market Fund (formerly known as Colonial Tax-Exempt
Money Market Fund), which invests all of its assets
in the SR&F Municipal Money Market Portfolio
(Portfolio), which is managed by Stein Roe &
Farnham Incorporated).
Stein Roe & Farnham Incorporated (Manager), the investment
manager of the Portfolio, 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 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
Portfolio, it also acts as investment adviser to other investment
companies having different investment policies.
During the past two years, neither the Manager nor any of its
directors or officers, except for Gary L. Countryman, Kenneth R.
Leibler and N. Bruce Callow, have been engaged in any business,
profession, vocation, or employment of a substantial nature
either on their own account or in the capacity of director,
officer, partner or trustee, other than as an officer or
associate of the Manager. Mr. Countryman is President of LMIC
and Liberty Mutual Fire Insurance Company; Mr. Leibler is
President and Chief Executive Officer of LFCI; Mr. Callow was
Senior Vice President of the Trust and Financial Services for The
Northern Trust prior to June 1994.
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 Financial Trust is Federal Reserve Plaza, 600
Atlantic Avenue, Boston, MA 02110).
Position Formerly
Current Position Held Within Past
Two Years
SteinRoe Services,
Inc.
Gary A. Anetsberger Vice President
Timothy K. Armour Vice President
Jilaine Hummel Bauer Vice President;
Secretary
Gary L. Countryman Director; Chairman
Kenneth J. Kozanda Vice President;
Treasurer
Alfred F. Kugel Vice President
Kenneth R. Leibler Director
Keith J. Rudolf Vice President
Hans P. Ziegler Director; President;
Vice Chairman
SR&F Base Trust
Gary A. Anetsberger Sr. V.P.; Controller
Timothy K. Armour Pres.; Trustee
Jilaine Hummel Bauer Executive Vice Vice President
President; Secretary
Ann H. Benjamin Vice President
N. Bruce Callow Executive Vice
President
Michael T. Kennedy Vice President
Stephen P. Lautz Vice President
Lynn C. Maddox Vice President
Jane M. Naeseth Vice President
Thomas P. Sorbo Vice President
Lisa N. Wilhelm Vice President
Hans P. Ziegler Executive Vice
President
SteinRoe Income Trust
Gary A. Anetsberger Sr. V.P.; Controller
Timothy K. Armour President; Trustee
Jilaine Hummel Bauer Executive Vice Vice President
President; Secretary
Ann H. Benjamin Vice President
Thomas W. Butch Vice President
N. Bruce Callow Executive Vice
President
Michael T. Kennedy Vice President
Stephen P. Lautz Vice President
Steven P. Luetger Vice President
Lynn C. Maddox Vice President
Jane M. Naeseth Vice President
Thomas P. Sorbo Vice President
Lisa N. Wilhelm Vice President
Hans P. Ziegler Executive Vice
President
Anthony G. Zulfer, Jr. Trustee Emeritus Trustee
SteinRoe Investment Trust
Gary A. Anetsberger Sr. V.P.; Controller
Timothy K. Armour President; Trustee
Jilaine Hummel Bauer Executive Vice Vice President
President; Secretary
Thomas W. Butch Vice President
N. Bruce Callow Executive Vice
President
Daniel K. Cantor Vice President
Robert A. Christensen Vice President
E. Bruce Dunn Vice President
Erik P. Gustafson Vice President
Harvey B. Hirschhorn Vice President
Alfred F. Kugel Emeritus Trustee Trustee
Stephen P. Lautz Vice President
Lynn C. Maddox Vice President
Richard B. Peterson Vice President
Gloria J. Santella Vice President
Thomas P. Sorbo Vice President
Hans P. Ziegler Executive Vice
President
SteinRoe Municipal
Trust
Gary A. Anetsberger Sr. V.P.; Controller Vice President
Timothy K. Armour President
Jilaine Hummel Bauer Executive Vice Vice President
President; Secretary
Thomas W. Butch Vice President
N. Bruce Callow Executive Vice
President
Joanne T. Costopoulos Vice President
Stephen P. Lautz Vice President
Lynn C. Maddox Vice President
M. Jane McCart Vice President
Thomas P. Sorbo Vice President
Hans P. Ziegler Executive Vice
President
Anthony G. Zulfer, Jr. Trustee Emeritus Trustee
SteinRoe Variable Investment Trust
Gary A. Anetsberger Treasurer
Timothy K. Armour Vice President
Jilaine Hummel Bauer Vice President
Ann H. Benjamin Vice President
Robert A. Christensen 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
Liberty Financial Trust
Robert A. Christensen Vice President
Michael T. Kennedy Vice President
M. Jane McCart Vice President
Item 29 Principal Underwriter
- ------- ---------------------
(a) Colonial Investment Services, Inc. a subsidiary of Colonial
Management Associates, Inc., Registrant's principal
underwriter, also acts in the same capacity to Colonial Trust
I, Colonial Trust II, Colonial Trust III, Colonial Trust V,
Colonial Trust VI and Colonial Trust VII:
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)
Name and Principal Position and Offices Positions and
Business Address* with Principal Offices with
Underwriter Registrant
- ------------------ ------------------- --------------
Ballou, Rich Regional V.P. None
Balzano, Christine R. V.P. None
Barsokas, David Regional V.P. None
Buckley, Anne P. Compliance Officer None
Cairns, David Regional V.P. None
Chrzanowski, Regional V.P. None
Daniel
Clapp, Elizabeth A. V.P. None
Daniszewski, V.P. None
Joseph J.
Davey, Cynthia Sr. V.P. None
Eckelman, Bryan Sr. V.P. None
Eldridge, Kenneth Sr. V.P. None
Emerson, Kim P. Regional V.P. None
Erickson, Cynthia G. V.P. None
Evans, C. Frazier Sr. V.P. None
Feldman, David Regional V.P. None
Flaherty, Michael Regional V.P. None
Gerokoulis, Sr. V.P. None
Stephen A.
Goldberg, Matthew Regional V.P. None
Guillette, Andrew V.P. None
Hanselman, J. Regional V.P. None
Michael
Harasimowicz, V.P. None
Stephen
Hayes, Mary V.P. None
Elizabeth
Hodgkins, Joseph Regional V.P. None
Howard, Craig Sr. V.P. None
Karagiannis, Sr. V.P. None
Marilyn
Kelley, Terry M. Regional V.P. None
Kelson, David W. Sr. V.P. None
Kilkenny Ann R. Sr. V.P. None
Lloyd, Judith H. Sr. V.P. None
Mahoney, D. Scott Sr. V.P. None
McCabe, Joanne Regional V.P. None
McGregor, Jeffrey L. Director, CEO, None
President, COO
Meyer, Wayne Regional V.P. None
Murphy, Robert F. Sr. V.P. None
Norwood, Steve Regional V.P. None
O'Neill, Charles A. Exec. V.P. None
Penitsch, Marilyn L. Regional V.P. None
Potter, Cheryl Regional V.P. None
Reed, Christopher B. Regional V.P. None
Ross, Gary J. Regional V.P. None
Scott, Michael W. Sr. V.P. None
Silver, Richard A. Director, Treasurer, Treasurer, CFO
CFO
Sorrells, Sr. V.P. None
Elizabeth
Stern, Arthur O. Clerk and Secretary
Counsel,Dir.,
Chairman
VanEtten, Keith H. V.P. None
Villanova, Paul Regional V.P. None
Wallace, John V.P. None
- --------------------------
* The address for each individual is One Financial Center, Boston, MA
02111.
itm12995
Item 30. Location of Accounts and Records
Registrant's accounts and records required to be
maintained by Section 31(a) of the Investment
Company Act of 1940 and the Rules thereunder are in
the physical possession of the following:
Registrant
Rule 31a-1(b),(4)
Rule 31a-2(a),(1)
Colonial Management Associates, Inc.
One Financial Center, Boston, Massachusetts 02111
Rule 31a-1(b), (1), (2), (3), (5), (6), (7), (8),
(9), (10), (11), (12)
Rule 31a-1(d),(f)
Rule 31a-2(a),(1),(2),(c),(e)
Colonial Investment Services, Inc.
One Financial Center, Boston, Massachusetts 02111
Rule 31a-1(d)
Rule 31a-2(c)
UMB, n.a. (formerly United Missouri Bank, n.a.)
928 Grand Avenue, Kansas City, Missouri 64106
(CHYMF, CTEF, CTEIF, CTEMMF, CITEF, CSTTEF)
Rule 31a-1(b),(2),(3)
Rule 31a-2(a),(2)
Boston Safe Deposit and Trust Company
One Boston Place, Boston, Massachusetts 02108 (CUF)
Rule 31a-1(b),(2),(3)
Rule 31a-2(a),(2)
Colonial Investors Service Center, Inc.
P.O. Box 1722, Boston, Massachusetts 02105-1722
Rule 31a-1(b),(2)
Rule 31a-2(a),(2)
Item 31. Management Services
See Item 5(c), Part A and Item 16(d), Part B.
Item 32. Undertakings
(a) The Registrant hereby undertakes to file a post-
effective amendment using financial statements
which need not be certified, within four to six
months from the effective date of Registrant's
Registration Statement under the Securities Act
of 1933.
(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) [deleted]
(d) [deleted]
(e) [deleted]
Part C of Post-Effective Amendment No. 40 filed with the
Commission on March 20, 1995 (Colonial High Yield Municipal Fund,
Colonial Tax-Exempt Insured Fund, Colonial Tax-Exempt Fund,
Colonial Short-Term Tax-Exempt Fund, Colonial Intermediate Tax-
Exempt Fund and Colonial Utilities Fund), is incorporated herein
in its entirety by reference.
************
NOTICE
A copy of the Agreement and Declaration of Trust, as amended,
of Colonial Trust IV (Trust) is on file with the Secretary of
State of the Commonwealth of Massachusetts and notice is hereby
given that these Registration Statements 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 these Registration Statements
are not binding upon any of the Trustees, officers or
shareholders individually but are binding only upon the assets
and property of the Trust.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant, Colonial
Trust IV, has duly caused this Post-Effective Amendment No. 40 to
its Registration Statement under the Securities Act of 1933 and
Amendment No. 38 to its Registration Statement under the
Investment Company Act of 1940, to be signed in this City of
Boston and the Commonwealth of Massachusetts on this 27th of
July, 1995.
COLONIAL TRUST IV
By: /s/ JOHN A. MCNEICE, JR.
John A. McNeice, Jr.,
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.
SIGNATURES TITLE DATE
/s/ JOHN A. MCNEICE, JR. President July 27, 1995
John A. McNeice, Jr. and Trustee
/s/ RICHARD A. SILVER Treasurer and July 27, 1995
Richard A. Silver Chief
Financial Officer
/s/ PETER L. LYDECKER Controller July 27, 1995
Peter L. Lydecker
/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/ MICHAEL H. KOONCE
William D. Ireland, Jr. Michael H. Koonce
Attorney-in-fact
/s/ RICHARD W. LOWRY Trustee For each Trustee
Richard W. Lowry July 27, 1995
/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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the SR&F Base Trust has duly
caused this Post-Effective Amendment No. 40 to the Registration
Statement on Form N-1A of Colonial Trust IV, insofar as it
relates to Colonial Tax-Exempt Money Market Fund (to be known as
Colonial Municipal Money Market Fund) of said Trust under the
Securities Act of 1933 and Amendment No. 38 to its Registration
Statement under the Investment Company Act of 1940, to be signed
in the City of Chicago and the State of Illinois on this 27th of
July, 1995.
SR&F BASE TRUST
By: /s/ TIMOTHY K. ARMOUR
Timothy K. Armour,
President
Pursuant to the requirements of the Securities Act of 1933,
this Post-Effective Amendment to the Registration Statement on
Form N-1A of Colonial Trust IV has been signed below by the
following trustees and officers of SR&F Base Trust in their
capacities and on the date indicated.
SIGNATURES TITLE DATE
/s/ TIMOTHY K. ARMOUR President July 27, 1995
Timothy K. Armour (Principal
Executive Officer)
and
Trustee
/s/ GARY A. ANETSBERGER Senior Vice July 27, 1995
Gary A. Anetsberger President
and Controller
(Principal
Financial
and Accounting
Officer)
/s/ KENNETH L. BLOCK Trustee July 17, 1995
Kenneth L. Block
/s/ WILLIAM W. BOYD Trustee July 27, 1995
William W. Boyd
/s/ LINDSAY COOK Trustee July 1, 1995
Lindsay Cook
/s/ FRANCIS W. MORLEY Trustee July 27, 1995
Francis W. Morley
/s/ CHARLES R. NELSON Trustee July 27, 1995
Charles R. Nelson
/s/ GORDON R. WORLEY Trustee July 27, 1995
Gordon R. Worley
EXHIBIT INDEX
5.(a)(3) Form of Management Agreement between CTEMMF and
Colonial Management Associates, Inc.
5.(b)(1) Form of Pricing and Bookkeeping Agreement between
Colonial Trust IV, on behalf of CMMMF, and Colonial
Management Associates, Inc.
6.(a) Distributor's Contract with Colonial Investment
Services, Inc.
9.(c) Form of Administration Agreement between Colonial
Trust IV, on behalf of CMMMF, and Colonial Management
Associates, Inc.
9.(d) Form of Indemnification Agreement between Colonial
Trust IV, on behalf of CMMMF, and SR&F Base Trust, on
behalf of SR&F Municipal Money Portfolio
16.(d)(1) Calculation of Performance Information (CTEMMF)
16.(d)(2) Calculation of Yield (CTEMMF)
MANAGEMENT AGREEMENT
AGREEMENT dated as of March 27, 1995, between COLONIAL TRUST IV,
a Massachusetts business trust (Trust), with respect to COLONIAL
TAX-EXEMPT MONEY MARKET 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 0.50% 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 IV on behalf of
COLONIAL TAX-EXEMPT MONEY MARKET FUND
By: __________________________
Title: Controller
COLONIAL MANAGEMENT ASSOCIATES, INC.
By: __________________________
Title: Executive Vice President
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.
PRICING AND BOOKKEEPING AGREEMENT
AGREEMENT dated as of _________, 1995, between each
Massachusetts Business Trust (Trust) designated in
Appendix I from time to time, and Colonial Management
Associates, Inc. (Colonial), a Massachusetts corporation.
This Agreement replaces all Service Contracts relating to
the performance of similar services between Colonial and
each Trust's predecessor in interest. The Trust and
Colonial agree as follows:
1. Appointment. The Trust may offer an unlimited number
of series (Funds), each of which may have multiple classes
of shares (Shares). This Agreement will apply to each Fund
on the Effective Date set forth in Appendix I as amended
from time to time.
2. Services. Colonial shall (i) determine and timely
communicate to persons designated by the Trust the Fund's
net asset values and offering prices per Share; and (ii)
maintain and preserve in a secure manner the accounting
records of the Fund. All records shall be the property of
the Fund. Colonial will provide disaster planning to
minimize possible service interruption.
3. Audit, Use and Inspection. Colonial shall make
available on its premises during regular business hours all
records of a Fund for reasonable audit, use and inspection
by the Trust, its agents and any regulatory agency having
authority over the Fund.
4. Compensation. The Trust will pay Colonial for each
Fund a monthly fee of $1,500, plus a percentage fee on
assets equal to the following: 0% for the first $50 million
of Fund assets; a monthly fee of 1/12 of 0.0233% on the next
$950 million; 1/12 of 0.0167% on the next $1 billion; 1/12
of 0.0100% of the next $1 billion; and 1/12 of 0.0007% on
the excess over $3 billion of the average weekly net assets
of the Fund for such month.
5. Compliance. Colonial shall comply with applicable
provisions relating to pricing and bookkeeping of the
prospectus and statement of additional information of a Fund
and applicable laws and rules in the provision of services
under this Agreement.
6. Limitation of Liability. In the absence of willful
misfeasance, bad faith or gross negligence on the part of
Colonial, or reckless disregard of its obligations and
duties hereunder, Colonial shall not be subject to any
liability to the Trust or 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.
7. Amendments. The Trust shall submit to Colonial a
reasonable time in advance of filing with the Securities and
Exchange Commission copies of any changes in its
Registration Statements. If a change in documents or
procedures materially increases the cost to Colonial of
performing its obligations, Colonial shall be entitled to
receive reasonable additional compensation.
8. Duration and Termination, etc. This Agreement may be
changed only by writing executed by each party. This
Agreement: (a) shall continue in effect from year to year
so long as approved annually by vote of a majority of the
Trustees who are not affiliated with Colonial; (b) may be
terminated at any time without penalty by sixty days'
written notice to either party; and (c) may be terminated at
any time for cause by either party if such cause remains
unremedied for a reasonable period not to exceed ninety days
after receipt of written specification of such cause.
Paragraph 6 of this Agreement shall survive termination. If
the Trust designates a successor to any of Colonial's
obligations, Colonial shall, at the expense and direction of
the Trust, transfer to the successor all Trust records
maintained by Colonial.
9. Miscellaneous. This Agreement shall be governed by
the laws of The Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the day and year first above.
EACH TRUST DESIGNATED IN APPENDIX I
By:
Peter L. Lydecker, Controller
COLONIAL MANAGEMENT ASSOCIATES, INC.
By:
Arthur O. Stern, Executive Vice President
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.
APPENDIX I
Trust Series Effective Date
Colonial Trust IV Colonial Municipal Money Market Fund ______, 1995
By:
Peter L. Lydecker, Controller
By:
Richard A. Silver, Senior Vice President
Colonial Management Associates, Inc.
Dated: ___________, 1995
DISTRIBUTOR'S CONTRACT
Each Massachusetts Business Trust (Trust) designated in
Appendix 2 from time to time, acting severally, and Colonial
Investment Services, Inc. (CISI), a Massachusetts corporation,
agree effective June 16, 1995:
1. APPOINTMENT OF CISI. The Trust may offer an unlimited
number of separate investment series (Funds), each of which may
have multiple classes of shares (Shares). The Trust appoints
CISI as the principal underwriter and exclusive distributor of
Shares of Funds designated in Appendix 2. The Contract will
apply to each Fund as set forth on Appendix 2 as it may be
amended from time to time with the latest effective date and
signed.
2. SALE OF SHARES. CISI, acting as principal for its own
account and not as agent for the Trust, shall have the exclusive
right to purchase Shares and shall sell Shares in accordance with
a Fund's prospectus on a "best efforts" basis. CISI shall
purchase Shares at a price equal to the net asset value only as
needed to fill orders. CISI will receive all sales charges.
CISI will notify the Trust at the end of each business day of the
Shares of each Fund to be purchased. The Trust may at any time
refuse to sell Shares hereunder and may issue Shares directly to
shareholders as a stock split or dividend.
3. REDEMPTION OF SHARES. The Trust will redeem in accordance
with a Fund's prospectus all Shares tendered by CISI pursuant to
shareholder redemption requests. CISI will notify the Trust at
the end of each business day of the Shares of each Fund tendered.
4. COMPLIANCE. CISI will comply with applicable provisions
of the prospectus of a Fund and with applicable laws and rules
relating to the sale of Shares and indemnifies the Trust for any
damage or expense from unlawful acts by CISI and persons acting
under its direction or authority.
5. EXPENSES. The Trust will pay all expenses associated
with:
a. the registration and qualification of Shares for sale;
b. shareholder meetings and proxy solicitation;
c. Share certificates;
d. communications to shareholders; and
e. taxes payable upon the issuance of Shares to CISI.
CISI will pay all expenses associated with advertising and sales
literature including those of printing and distributing
prospectuses and shareholder reports, proxy materials and other
shareholder communications used as sales literature.
6. 12b-1 PLAN. Except as indicated in Appendix 1 which may
be revised from time to time, dated and signed, this Section 6
constitutes each Fund's distribution plan (Plan) adopted pursuant
to Rule 12b-1 (Rule) under the Investment Company Act of 1940
(Act).
A. The Fund* shall pay CISI monthly a service fee at the
annual rate of 0.25% of the net assets of its Class A and B
Shares on the 20th of each month and a distribution fee at an
annual rate of 0.75% of the average daily net assets of its
Class B Shares. Each of the Funds identified on Appendix 1 as
having a Class D share 12b-1 Plan shall pay CISI monthly a
service fee at the annual rate of 0.25% of the net assets of its
Class D shares on the 20th of each month and a distribution fee
at an annual rate of 0.75% of the average daily net assets of
its Class D shares. Each of the Funds identified on Appendix 1
as having a Class C share 12b-1 Plan shall pay CISI monthly a
service fee at the annual rate of 0.25% of the net assets of its
Class C shares on the 20th of each month and a distribution fee
at an annual rate of 0.15% of the average daily net assets of
its Class C shares. CISI may use the service and distribution
fees received from the Fund as reimbursement for commissions and
service fees paid to financial service firms which sold Fund
shares and to defray other CISI distribution and shareholder
servicing expenses, including its expenses set forth in
Paragraph 5. CISI shall provide to the Trust's Trustees, and
the Trustees shall review, at least quarterly, reports setting
forth all Plan expenditures, and the purposes for those
expenditures. Amounts payable under this paragraph are subject
to any limitations on such amounts prescribed by applicable laws
or rules.
____________________________________
* Except as indicated in Appendix 1.
B. Payments by the Trust to CMAI and its affiliates
other than any prescribed by Section 6A which may be
indirect financing of distribution costs are authorized
by this Plan.
C. The Plan shall continue in effect with respect
to a Class of shares only so long as specifically
approved for that Class at least annually as provided
in the Rule. The Plan may not be amended to increase
materially the service fee or distribution fee with
respect to a Class of shares without such shareholder
approval as is required by the Rule and any applicable
orders of the Securities and Exchange Commission, and
all material amendments of the Plan must be approved in
the manner described in the Rule. The Plan may be
terminated with respect to a Class of shares at any
time as provided in the Rule without payment of any
penalty. The continuance of the Plan shall be
effective only if the selection and nomination of the
Trust's Trustees who are not interested persons (as
defined under the Act) of the Trust is effected by such
non-interested Trustees as required by the Rule.
7. CONTINUATION, AMENDMENT OR TERMINATION. This
Contract (a) supersedes and replaces any contract or
agreement relating to the subject matter hereof in effect
prior to the date hereof, (b) shall continue in effect only
so long as specifically approved at least annually by the
Trustees or shareholders of the Trust and (c) may be amended
at any time by written agreement of the parties, each in
accordance with the Act. This Contract (a) shall terminate
immediately upon the effective date of any later dated
agreement relating to the subject matter hereof, and (b) may
be terminated upon 60 days notice without penalty by a vote
of the Trustees or by CMAI or otherwise in accordance with
the Act and will terminate immediately in the event of
assignment (as defined under the Act). Upon termination the
obligations of the parties under this Contract shall cease
except for unfulfilled obligations and liabilities arising
prior to termination. All notices shall be in writing and
delivered to the office of the other party.
8. AGREEMENT AND DECLARATION OF TRUST. A copy of the
document establishing the Trust is filed with the Secretary
of The Commonwealth of Massachusetts. This Contract 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.
Agreed:
EACH TRUST DESIGNATED IN APPENDIX 2 COLONIAL INVESTMENT SERVICES, INC.
By: BY:
Arthur O. Stern, Secretary For Each Trust Marilyn Karagiannis, Senior
Vice President
APPENDIX 1
THE FOLLOWING IS APPLICABLE TO THE DESIGNATED FUND'S 12b-1
PLAN:
1. For Colonial Goverment Money Market Fund and Colonial Tax-
Exempt Money Market Fund, the first sentence of Section
6A is replaced with: "The Fund shall pay CISI monthly a
service fee at an annual rate of 0.25% of the net assets
of its Class B Shares on the 20th of each month and a
distribution fee at an annual rate of 0.75% of the
average daily net assets of its Class B shares."
2. For Colonial California Tax-Exempt Fund, Colonial
Connecticut Tax-Exempt Fund, Colonial Florida Tax-Exempt
Fund, Colonial Massachusetts Tax-Exempt Fund, Colonial
Michigan Tax-Exempt Fund, Colonial Minnesota Tax-Exempt
Fund, Colonial New York Tax-Exempt Fund, Colonial North
Carolina Tax-Exempt Fund and Colonial Ohio Tax-Exempt
Fund the first sentence of Section 6A is replaced with:
"The Fund shall pay CISI monthly (i) a service fee at the
annual rate of (A) 0.10% of the net assets attributable
to its Class A and Class B shares outstanding as of the
20th day of each month which were issued prior to
December 1, 1994, and (B) 0.25% of the net assets
attributable to its Class A and Class B shares
outstanding as of the 20th day of each month which were
issued on or after December 1, 1994, and (ii) a
distribution fee at an annual rate of 0.75% of the
average daily net assets of its Class B shares."
3. For The Colonial Fund and Colonial Growth Shares Fund,
the first sentence of Section 6A is replaced with: "The
Fund shall pay CISI monthly a service fee at an annual
rate of 0.15% of the net assets on the 20th of each month
of its Class A and B Shares outstanding which were issued
prior to April 1, 1989, and 0.25% of the net assets on
the 20th of each month of its Class A and B Shares issued
thereafter, and a distribution fee at an annual rate of
0.75% of the average daily net assets of its Class B
Shares.
4. For Colonial Strategic Income Fund, the first sentence of
Section 6A is replaced with: "The Fund shall pay CISI
monthly a service fee at an annual rate of 0.15% of the
net assets on the 20th of each month of its Class A and B
Shares outstanding which were issued prior to January 1,
1993, and 0.25% of the net assets on the 20th of each
month of its Class A and B Shares issued thereafter, and
a distribution fee at an annual rate of 0.75% of the
average daily net assets of its Class B Shares."
5. For Colonial Adjustable Rate U.S. Government Fund and
Colonial Intermediate Tax-Exempt Fund, the first sentence
of Section 6A is replaced with: "The Fund shall pay CISI
monthly a service fee at an annual rate of 0.20% of the
net assets on the 20th of each month of its Class A and B
Shares and a distribution fee at an annual rate of 0.65%
of the average daily net assets of its Class B Shares."
6. For Colonial Short-Term Tax-Exempt Fund, the first
sentence of Section 6A is replaced with: "The Fund shall
pay CISI monthly a service fee at an annual rate of 0.10%
of the net assets on the 20th of each month of its Class
A Shares."; and the third sentence is replaced with:
"CISI may use the service fee received from the Fund as
reimbursement for service fees paid to financial firms
which sold Fund shares and to defray other CISI
shareholder servicing expenses, including its expenses
set forth in Paragragh 5."
7. For Colonial Strategic Balanced Fund, the following
sentence is added as the second sentence of Section 6A:
" The Fund shall also pay CISI an annual distribution fee
not exceeding 0.30% of the average net assets attributed
to its Class A shares."
8.The Funds with Class D share 12b-1 Plans are as follows:
Colonial Strategic Balanced Fund, Colonial International
Fund for Growth, Colonial Government Money Market Fund,
Colonial U.S. Fund for Growth, Colonial Global Utilities
Fund and Colonial Newport Tiger Fund.
9.The Funds with Class C share 12b-1 Plans are as follows:
Colonial Adjustable Rate U.S. Government Fund.
10.Colonial Newport Tiger Fund does not offer a 12b-1 plan
for Class T and Class Z shares.
By:
Arthur O. Stern, Secretary For Each Trust
By:
Marilyn Karagiannis, Senior Vice President
Colonial Investment Services, Inc.
Dated: June 16, 1995
APPENDIX 2
Trust Series
Colonial Trust I
Colonial High Yield Securities Fund
Colonial Income Fund
Colonial Strategic Income Fund
Colonial Trust II
Colonial Government Money Market Fund
Colonial U.S. Government Fund
Colonial Adjustable Rate U.S. Government Fund
Colonial Trust III
Colonial Growth Shares Fund
The Colonial Fund
Colonial Federal Securities Fund
Colonial Global Equity Fund
Colonial Global Natural Resources Fund
Colonial International Fund for Growth
Colonial Strategic Balanced Fund
Colonial Global Utilities Fund
Colonial Trust IV
Colonial High Yield Municipal Fund
Colonial Intermediate Tax-Exempt Fund
Colonial Short-Term Tax-Exempt Fund
Colonial Tax-Exempt Fund
Colonial Tax-Exempt Insured Fund
Colonial Tax-Exempt Money Market Fund
Colonial Utilities Fund
Colonial Trust V
Colonial Massachusetts Tax-Exempt Fund
Colonial Connecticut Tax-Exempt Fund
Colonial California Tax-Exempt Fund
Colonial Michigan Tax-Exempt Fund
Colonial Minnesota Tax-Exempt Fund
Colonial New York Tax-Exempt Fund
Colonial North Carolina Tax-Exempt Fund
Colonial Ohio Tax-Exempt Fund
Colonial Florida Tax-Exempt Fund
Colonial Trust VI
Colonial U.S. Fund for Growth
Colonial Small Stock Fund
Colonial Trust VII
Colonial Newport Tiger Fund
By:
Arthur O. Stern, Secretary For Each Trust
By:
Marilyn Karagiannis, Senior Vice President
Colonial Investment Services, Inc.
Dated: June 16, 1995
ADMINISTRATION AGREEMENT
AGREEMENT dated as of ________ ___, 1995, between COLONIAL
TRUST IV, a Massachusetts business trust (Trust), with
respect to Colonial Municipal Money Market Fund (Fund), and
COLONIAL MANAGEMENT ASSOCIATES, INC., a Massachusetts
corporation (Administrator).
In consideration of the promises and covenants herein, the
parties agree as follows:
1.Subject to the general direction and control of the Board
of Trustees of the Trust, the Administrator shall perform
such administrative services as may from time to time be
reasonably requested by the Trust, which shall include
without limitation: (a) providing office space,
equipment and clerical personnel necessary for
maintaining the organization of the Fund and for
performing the administrative functions herein set forth;
(b) 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;
(c) preparing and, if applicable, filing all documents
required for compliance by the Fund with applicable laws
and regulations, including registration statements,
registration fee filings, semi-annual and annual reports
to shareholders, proxy statements and tax returns; (d)
preparation of agendas and supporting documents for and
minutes of meetings of Trustees, committees of Trustees
and shareholders; (e) monitoring compliance by the Fund
with Rule 2a-7 under the Investment Company Act of 1940
(1940 Act) and reporting to the Trustees from time to
time with respect thereto; (f) monitoring the investments
and operations of any open-end investment company in
which the Fund may invest and reporting to the Trustees
from time to time with respect thereto; (g) coordinating
and overseeing the activities of the Fund's other third-
party service providers; and (h) maintaining books and
records of the Fund (exclusive of records required by
Section 31(a) of the 1940 Act). Notwithstanding the
foregoing, the Administrator shall not be deemed to have
assumed any duties with respect to, and shall not be
responsible for, the management of the Fund's assets or
the rendering of investment advice with respect thereto,
or of insuring that any investment company in which the
Fund may invest complies with Rule 2a-7 under the 1940
Act, nor shall the Administrator be deemed to have
assumed or have any responsibility with respect to
functions specifically assumed by any transfer agent or
custodian of the Fund.
2.The Administrator shall be free to render similar
services to others so long as its services hereunder are
not impaired thereby.
3.The Fund shall pay the Administrator monthly a fee at the
annual rate of 0.25% of the average daily net assets of
the Fund.
4.This Agreement shall become effective as of the date of
its execution, and may be terminated without penalty by
the Board of Trustees of the Trust or by the
Administrator, in each case on sixty days' written notice
to the other party.
5.This Agreement may be amended only by a writing signed by
both parties.
6.In the absence of willful misfeasance, bad faith or gross
negligence on the part of the Administrator, or reckless
disregard of its obligations and duties hereunder, the
Administrator shall not be subject to any liability to
the Trust or 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 IV
on behalf of Colonial Municipal Money Market Fund
By: _____________________________
Title: Controller
COLONIAL MANAGEMENT ASSOCIATES, INC.
By: _____________________________
Title: Executive Vice President
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.
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT dated as of July ____, 1995
by and between Colonial Trust IV (the "Colonial Trust"), a
Massachusetts business trust established under a Declaration of
Trust dated August 29, 1978, as amended, on behalf of Colonial
Municipal Money Market Fund (the "Colonial Fund"), a series of
the Colonial Trust, and SR&F Base Trust ("Base Trust"), a
Massachusetts trust established under a Declaration of Trust
dated June 30, 1994, as amended, on behalf of SR&F Municipal
Money Portfolio (the "Portfolio"), a series of the Base Trust.
WITNESSETH:
WHEREAS, the parties hereto wish to enter into a
master/feeder fund arrangement whereby the Colonial Fund will, at
its sole discretion, invest all or substantially all of its
assets in shares of beneficial interest in the Portfolio;
WHEREAS, the Registration Statement of the Colonial Trust
("Registration Statement") as filed with the Securities and
Exchange Commission pursuant to the Investment Company Act of
1940, as amended (the "1940 Act"), and the Securities Act of
1933, as amended (the "1933 Act," and together with the 1940 Act,
the "Acts"), will disclose information concerning the Portfolio
and the Base Trust; and
WHEREAS, both the Base Trust and the Colonial Trust and
their respective trustees and certain of their respective
officers will execute the Registration Statement;
NOW THEREFORE, the parties hereto agree as follows:
SECTION 1. The Colonial Trust, on behalf of the Colonial
Fund, agrees to indemnify and hold harmless each Base Trust
Indemnitee (which term as used in this Agreement shall mean each
of the Base Trust, each of its trustees, each of its officers who
signed the Registration Statement, the Portfolio and each person
who controls the Base Trust within the meaning of Section 15 of
the 1933 Act, as applicable) against any losses, claims,
expenses, damages or liabilities, joint or several, to which such
Base Trust Indemnitee may become subject, under the Acts or
otherwise, insofar as such losses, claims, expenses, damages or
liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of
any material fact contained in the Registration Statement, any
final prospectus or statement of additional information relating
to the shares offered thereby ("Final Prospectus") or any
amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they
were made, not misleading, but only to the extent that such
statement or omission does not relate to information relating to
the Base Trust or the Portfolio furnished in writing to the
Colonial Trust by the Base Trust; and agrees to reimburse each
Base Trust Indemnitee for any legal or other expenses reasonably
incurred by it in connection with investigating or defending and
such loss, claim, damage, liability or action.
SECTION 2. The Base Trust, on behalf of the Portfolio,
agrees to indemnify and hold harmless each Colonial Indemnitee
(which term as used in this Agreement shall mean each of the
Colonial Trust, each of its trustees, each of its officers who
signed the Registration Statement, the Colonial Fund and each
person who controls the Colonial Trust within the meaning of
Section 15 of the 1933 Act, as applicable) against any losses,
claims, expenses, damages or liabilities, joint or several, to
which such Colonial Indemnitee may become subject, under the Acts
or otherwise insofar as such losses, claims, expenses, damages or
liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of
any material fact contained in the Registration Statement, any
Final Prospectus or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or
necesarry to make the statements therein, in light of the
circumstances in which they were made, not misleading, but only
to the extent that such statement or omission relates to
information relating to the Base Trust or the Portfolio furnished
in writing to the Colonial Trust by the Base Trust; and agrees to
reimburse each Colonial Indemnitee for any legal or other
expenses reasonably incurred by it in connection with
investigating or defending any such loss, claim, damage,
liability or action.
SECTION 3. Promptly after receipt by an indemnified party
under this Agreement of notice of the commencement of any action,
such indemnified party shall, if a claim in respect thereof is to
be made against the indemnifying party under this Agreement,
notify the indemnifying party in writing of the commencement
thereof but the omission to so notify the indemnifying party will
not relieve it from any liability which it may have against any
indemnified party otherwise than under this Agreement. In case
such action is brought against any indemnified party, and it
notified the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein, and,
to the extent that it may elect by written notice delivered to
the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified
party; provided, however, that if the defendants in any such
action include both the indemnified parties and the indemnifying
party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to
those available to the indemnifying party, the indemnified party
or parties shall have the right to select separate counsel to
assume such legal defenses and otherwise to participate in the
defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to
such indemnified party of the indemnifying party's election so to
assume the defense of such action and approval by the indemnified
party of counsel (which approval shall not be unreasonably
withheld), the indemnifying party will not be liable to such
indemnified party under this Agreement for any legal or other
expenses subsequently incurred by such indemnified party in
connection with the defense thereof unless (i) the indemnified
party shall have employed separate counsel in accordance with the
proviso to the immediately preceding sentence (it being
understood, however, that the indemnifying party shall not be
liable for the expenses of more than one separate counsel
approved by the indemnifying party, representing all the
indemnified parties under this Agreement who are parties to such
action), (ii) the indemnifying party shall not have employed
counsel reasonably satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after
notice of commencement of the action, or (iii) the indemnifying
party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party. In
no event shall any indemnifying party be liable in respect of any
amounts paid in settlement of any action unless the indemnifying
party shall have approved the terms of such settlement; provided,
however, that such consent shall not be unreasonably withheld.
SECTION 4. In order to provide for just and equitable
contribution in any action in which a claim for indemnification
is made pursuant to this Agreement but it is judicially
determined (by entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or
the denial of the last right of appeal) that such indemnification
may not be enforced in such case notwithstanding the fact that
this Agreement provides for indemnification in such case, all the
parties hereto shall contribute to the aggregate losses, claims,
damages or liabilities to which they may be subject (after
contribution from others) in such proportion so that the Colonial
Trust is responsible pro rata in proportion to the proportion of
aggregate losses, claims, expenses, damages or liabilities
relating to disclosure not relating to information relating to
the Portfolio or the Base Trust furnished in writing to the
Colonial Trust by the Base Trust and the Base Trust is
responsible pro rata in proportion to the proportion of aggregate
losses, claims, expenses, damages or liabilities relating to
information relating to the Base Trust or the Portfolio furnished
in writing to the Colonial Trust by the Base Trust, provided,
however, that no person guilty of a fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to a contribution from any person who is not guilty of
such fraudulent misrepresentation.
SECTION 5. The parties to this Agreement hereby acknowledge
that they are sophisticated business persons who were represented
by counsel during the negotiations regarding the provisions
hereof and are fully informed regarding said provisions. They
further acknowledge that the provisions of this Agreement fairly
allocate the risks in light of the ability of the parties to
assure that adequate disclosure is made in the Registration
Statement as required by the Acts. The parties are advised that
federal or state public policy, as interpreted by the courts in
certain jurisdictions, may be contrary to certain of the
provisions of this Agreement, and the parties hereto hereby
expressly waive and relinquish any right or ability to assert
such public policy as a defense to a claim under this Agreement
and further agree not to attempt to assert any such defense.
SECTION 6. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS.
SECTION 7. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same
instrument.
SECTION 8. No provision of this Agreement shall protect or
purport to protect any trustee or officer of a company (as
defined in the 1940 Act) against any liability to the company or
to its security holders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his
or her office.
SECTION 9. A copy of the Declaration of Trust of the
Colonial Trust is on file with the Secretary of the Commonwealth
of Massachusetts, and notice is hereby given that no trustee,
officer, agent, employee or shareholder of the Colonial Trust
shall have any personal liability under this Agreement and that
this Agreement is binding only upon the assets and properties of
the Colonial Fund and not other series of the Colonial Trust.
This Agreement is executed by the officer of the Base Trust on
behalf of the Base Trust and not individually and is binding only
upon the assets and property of the Portfolio and not the other
series of the Base Trust, nor on any trustee, officer, agent,
employee or shareholder of the Base Trust.
IN WITNESS WHEREOF, each of the parties hereto has caused
this Agreement to be executed as a sealed instrument by its
President or Vice President and its corporate seal to be affixed
hereto and attested by its Secretary or Assistant Secretary.
COLONIAL MUNICIPAL MONEY MARKET
FUND
BY: COLONIAL TRUST IV
ATTEST: BY:
SR&F MUNICIPAL MONEY PORTFOLIO
BY: SR&F BASE TRUST
ATTEST: BY:
l\common\funds\trustiv\cmmmf\indemagr.doc
<TABLE>
PERFORMANCE CALCULATION
COLONIAL TAX-EXEMPT MONEY MARKET FUND - CLASS A
Period End: 6/30/95
Inception Date: 6/16/87
<CAPTION>
PERIOD ENDED 11/30/94 SINCE INCEPTION
TO 6/30/95 5 YEARS ENDED 6/30/95 06/16/87 THRU 6/30/95
------------------------- ------------------------- -----------------------------
<S> <C> <C> <C>
Initial Investment $1,000.00 $1,000.00 $1,000.00
Maximum Load 0.00% 0.00% 0.00%
Amount Invested $1,000.00 $1,000.00 $1,000.00
Initial NAV $1.00 $1.00 $1.00
Initial Shares 1000.000 1000.000 1000.000
Shares from Distribution 17.951 153.818 358.399
End of Period NAV $1.00 $1.00 $1.00
Total Return 1.80% 15.38% 35.84%
Average Annual
Total Return N/A 2.90% 3.88%
</TABLE>
<TABLE>
PERFORMANCE CALCULATION
COLONIAL TAX-EXEMPT MONEY MARKET FUND - CLASS B
Period End: 6/30/95
Inception Date: 5/5/92
PERIOD ENDED 11/30/94 SINCE INCEPTION
TO 6/30/95 5/5/92 THROUGH 6/30/95
Standard Non-Standard Standard Non-Standard
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Initial Inv. $1,000.00 $1,000.00 $1,000.00 $1,000.00
Amt. Invested $1,000.00 $1,000.00 $1,000.00 $1,000.00
Initial NAV $1.00 $1.00 $1.00 $1.00
Initial Shares 1000.000 1000.000 1000.000 1000.000
Shares From Dist. 12.039 12.039 38.701 38.701
End of Period NAV $1.00 $1.00 $1.00 $1.00
CDSC 5.00% 3.00%
Total Return -3.80% 1.20% 0.87% 3.87%
Average Annual
Total Return N/A N/A 0.27% 1.21%
</TABLE>
COLONIAL TAX-EXEMPT MONEY MARKET FUND - CLASS A
YIELD CALCULATION
7-DAY PERIOD ENDED 6/30/95
1) 7 day yield = (a/b)(365/7)
a = change in value of account during
period, exclusive of capital changes.......... 0.0006607
b = value of account at beginning of period....... 1.00
7 day yield......................... 3.445%
Tax-equivalent yield................ 5.70%
365/7
2) 7 day effective yield = [1 + (a/b)] -1
7 day effective yield............... 3.504%
Tax-equivalent effective yield...... 5.80%
COLONIAL TAX-EXEMPT MONEY MARKET FUND - CLASS B
YIELD CALCULATION
7-DAY PERIOD ENDED 6/30/95
1) 7 day yield = (a/b)(365/7)
a = change in value of account during
period, exclusive of capital changes.......... 0.0004678
b = value of account at beginning of period....... 1.00
7 day yield......................... 2.439%
Tax equivalent yield 4.04%
365/7
2) 7 day effective yield = [1 + (a/b)] -1
7 day effective yield............... 2.469%
Tax equivalent yield 4.09%
