COLONIAL HIGH YIELD MUNICIPAL FUND
Supplement to the March 30, 1998 Prospectus
The Fund's Prospectus is amended as follows:
(1) A new paragraph is added to the front cover of the Prospectus below the
Table of Contents as follows:
This Prospectus is also available on-line at the Web site
http://www.libertyfunds.com. The SEC maintains a Web site
(http://www.sec.gov) that contains the Statement of Additional Information,
materials that are incorporated by reference into this Prospectus and the
Statement of Additional Information, and other information regarding the
Fund.
(2) The paragraph Borrowing of Money under the caption HOW THE FUND PURSUES ITS
OBJECTIVE AND CERTAIN RISK FACTORS is revised in its entirety as follows:
Borrowing of Money. The Fund may borrow money from banks, other affiliated
funds and other entities to the extent permitted by law for temporary or
emergency purposes up to 33 1/3% of its total assets.
(3) A new caption is added after the caption HOW THE FUND IS MANAGED entitled
YEAR 2000 as follows:
The Fund's Advisor, Distributor and Transfer Agent (Liberty Companies) are
actively managing Year 2000 readiness for the Fund. The Liberty Companies
are taking steps that they believe are reasonably designed to address the
Year 2000 problem and are communicating with vendors who provide services,
software and systems to the Fund to provide that date-related information
and data can be properly processed and calculated on and after January 1,
2000. Many Fund service providers and vendors, including the Liberty
Companies, are in the process of making Year 2000 modifications to their
software and systems and believe that such modifications will be completed
on a timely basis prior to January 1, 2000. The Fund will not pay the cost
of these modifications. However, no assurances can be given that all
modifications required to ensure proper data processing and calculation on
and after January 1, 2000 will be timely made or that services to the Fund
will not be adversely affected.
(4) Liberty Financial Investments, Inc., the Fund's distributor, has changed
its name to Liberty Funds Distributor, Inc. (Distributor). The new name
does not affect the investment management of, or services to, the Fund. The
Distributor continues to offer selected investment products managed by
subsidiaries of Liberty Financial Companies, Inc. (NYSE:L), the indirect
parent of the Distributor.
(5) Colonial Investors Service Center, Inc. (Transfer Agent), the Fund's
transfer agent, has changed its name to Liberty Funds Services, Inc. The
new name does not affect the services that the Transfer Agent provides to
the Fund.
(6) The last sentence under the caption HOW THE FUND VALUES ITS SHARES is
revised in its entirety as follows:
In addition, if the values of foreign securities have been materially
affected by events occurring after the closing of a foreign market, the
foreign securities may be valued at their fair value.
(7) The last sentence in the first paragraph under the caption HOW TO SELL
SHARES is revised in its entirety as follows:
To avoid delay in payment, investors are advised to purchase shares
unconditionally, such as by federal fund wire or other immediately
available funds.
(8) The following sentence is added to the end of the paragraph Class A Shares
under the caption HOW TO EXCHANGE SHARES:
Exchanges of Class A shares are not subject to a contingent deferred sales
charge. However, in determining whether a contingent deferred sales charge
is applicable to redemptions, the schedule of the fund into which the
original investment was made should be used.
(9) Under the caption TELEPHONE TRANSACTIONS the first sentence in the first
paragraph is revised in its entirety and a new second and third sentence
are added as follows:
All shareholders and/or their financial advisors are automatically eligible
to exchange Fund shares and to redeem up to $100,000 of Fund shares by
calling 1-800-422-3737 toll-free any business day between 9:00 a.m. Eastern
time and the time at which the Fund values it shares. Telephone redemptions
are limited to a total of $100,000 in a 30-day period. Redemptions that
exceed $100,000 may be done by placing a wire order trade through a broker,
or furnishing a signature guaranteed request.
(10) Price Waterhouse LLP, the Fund's independent accountants, changed its name
to PricewaterhouseCoopers LLP. The new name will not affect the services
provided by PricewaterhouseCoopers LLP to the Fund.
HM-36/225G-1198 October 30, 1998
<PAGE>
COLONIAL HIGH YIELD MUNICIPAL FUND
Supplement to the March 30, 1998 Statement of Additional Information
Colonial High Yield Municipal Fund's (Fund) Statement of Additional Information
(SAI) is amended as follows:
(1) A Special Meeting of Shareholders of the Fund was held on October 30, 1998,
the Fund's shareholders approved a number of proposals. As a result of
these approvals, the Fund's SAI is amended as follows:
(a) The first and sixth fundamental investment policies under the caption
FUNDAMENTAL INVESTMENT POLICIES are revised in their entirety as
follows:
The Fund may:
1. Borrow from banks, other affiliated funds and other entities to the
extent permitted by applicable law, provided that the Fund's borrowings
shall not exceed 33 1/3% of the value of its assets (including the
amount borrowed) less liabilities (other than borrowings) or such other
percentage permitted by law.
6. Make loans (a) through lending of securities, (b) through the purchase
of debt instruments or similar evidences of indebtedness typically sold
privately to financial institutions, (c) through an interfund lending
program with other affiliated funds provided that no such loan may be
made if, as a result, the aggregate of such loans would exceed 33 1/3%
of the value of its total assets (taken at market value at the time of
such loans) and (d) through repurchase agreements.
(a) The third fundamental investment policy under the caption FUNDAMENTAL
INVESTMENT POLICIES is deleted.
(b) The following non-fundamental investment policy is added under the
caption OTHER INVESTMENT POLICIES:
The Fund may not:
3. Invest more than 15% of its net assets in illiquid securities.
(d) The following policy is added after the non-fundamental policies:
Notwithstanding the investment policies of the Fund, the Fund may invest
substantially all of its investable assets in another investment company
that has substantially the same investment objective, policies and
restrictions as the Fund.
(e)John Carberry, Salvatore Macera, Thomas E. Stizel and Anne-Lee Verville
were elected as new trustees. As a result, the following information is
added to the section MANAGEMENT OF THE FUNDS:
John Carberry(1), Age 51, is Senior Vice President of Liberty Financial
Companies, Inc. (formerly Managing Director, Salomon Brothers (investment
banking) from January 1988 to January 1998).
Salvatore Macera, Age 67, is a Private Investor (formerly Executive Vice
President of Itek Corp. and President of Itek Optical & Electronic Industries,
Inc. (electronics)). Trustee: Liberty Variable Investment Trust, Stein Roe
Variable Investment Trust.
Thomas E. Stitzel, Age 58, is Professor of Finance, College of Business, Boise
State University (higher education); Business consultant and author.
Trustee: Liberty Variable Investment Trust, Stein Roe Variable Investment Trust.
Anne-Lee Verville, Age 51, is a Consultant (formerly General Manager, Global
Education Industry from 1994 to 1997, and President, Applications Solutions
Division from 1991 to 1994, IBM Corporation (global education and global
applications)).
The following table sets forth the compensation paid to Mr. Macera and Mr.
Stitzel in their capacities as Trustees of Liberty Variable Investment Trust
(LVIT), which offers nine funds: Colonial Growth and Income Fund, Variable
Series; Stein Roe Global Utilities Fund, Variable Series; Colonial International
Fund for Growth, Variable Series; Colonial U.S. Stock Fund, Variable Series;
Colonial Strategic Income Fund, Variable Series; Newport Tiger Fund, Variable
Series; Liberty All-Star Equity Fund, Variable Series; Colonial Small Cap Value
Fund, Variable Series; and Colonial High Yield Securities Fund, Variable Series,
for serving during the fiscal year ended December 31, 1997:
Total Compensation From the LVIT
and Investment Companies which
Trustee Aggregate 1997 Compensation(2) are Series of LVIT in 1997(3)
- ------- --------------------------- ---------------
Salvatore Macera $12,500 $33,500
Thomas E. Stitzel 12,500 33,500
(2) Stephen E. Gibson is President of the Funds. He replaces Harold W. Cogger.
He is 45 years old and has been President of the Funds since June, 1998,
Chairman of the Board since July, 1998, Chief Executive Officer and
President since December 1996, Director, since July 1996 of the Advisor
(formerly Executive Vice President from July, 1996 to December, 1996);
Director, Chief Executive Officer and President of TCG since December, 1996
(formerly Managing Director of Marketing of Putnam Investments, June, 1992
to July, 1996).
(3) Nancy L. Conlin is Secretary of the Funds. She replaces Michael H. Koonce.
She is 44 years old and has been Secretary of the Funds since April, 1998
(formerly Assistant Secretary from July, 1994 to April, 1998), is Director,
Senior Vice President, General Counsel, Clerk and Secretary of the Advisor
since April, 1998 (formerly Vice President, Counsel, Assistant Secretary
and Assistant Clerk from July, 1994 to April, 1998), Vice President
- Legal, General Counsel and Clerk of TCG since April, 1998 (formerly
Assistant Clerk from July, 1994 to April, 1998).
(4) The following paragraph is added to the MANAGEMENT OF THE FUNDS section:
The Trustees have the authority to convert the Funds into a master
fund/feeder fund structure. Under this structure, a Fund may invest all or
a portion of its investable assets in investment companies with
substantially the same investment objectives, policies and restrictions as
the Fund. The primary reason to use the master fund/feeder fund structure
is to provide a mechanism to pool, in a single master fund, investments of
different investor classes, resulting in a larger portfolio, investment and
administrative efficiencies and economies of scale.
(5) Liberty Financial Investments, Inc., the Fund's distributor, has changed
its name to Liberty Funds Distributor, Inc. (Distributor). The new name
does not affect the investment management of, or services to, the Fund. The
Distributor continues to offer selected investment products managed by
subsidiaries of Liberty Financial Companies, Inc. (NYSE:L), the indirect
parent of the Distributor.
(6) Colonial Investors Service Center, Inc., the Fund's transfer agent, has
changed its name to Liberty Funds Services, Inc. The new name will not
affect services to the Fund.
(7) Price Waterhouse LLP, the Fund's independent accountants, changed its name
to PricewaterhouseCoopers LLP. The new name will not affect services to the
Fund.
(8) William D. Ireland, Jr., George L. Shinn and Sinclair Weeks, Jr. retired
as Trustees of the Trust effective April 24, 1998.
HM-39/252G-1198 October 30, 1998
- --------
1 Mr. Carberry is an "interested person," as defined in the Investment Company
Act of 1940 (1940 Act), because of his affiliation with Liberty Financial
Companies, Inc., an indirect majority-owned subsidiary of Liberty Mutual
Insurance Company.
2 Consists of Trustee fees in the amount of (i) a $5,000 annual retainer, (ii)
a $1,500 meeting fee for each meeting attended in person and (iii) a $500
meeting fee for each telephone meeting.
3 Includes Trustee fees paid by LVIT and by Stein Roe Variable Investment Trust.
