COLONIAL TRUST II /, 485BPOS, 1995-12-11

COLONIAL TRUST II /
485BPOS, 1995-12-11

Previous: FMR CORP, SC 13G/A, 1995-12-11

Next: CARDINAL GOVERNMENT SECURITIES TRUST, 497, 1995-12-11

Registration Numbers: 2-66976
811-3009

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]

Pre-Effective Amendment No. [ ]

Post-Effective Amendment No. 24 [ X ]

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]

Amendment No. 24 [ X ]

COLONIAL TRUST II
(Exact Name of Registrant as Specified in Charter)

One Financial Center, Boston, Massachusetts 02111
(Address of Principal Executive Offices)

(617) 426-3750
(Registrant's Telephone Number, Including Area Code)

Name and Address of Agent for Service: Copy to:

Arthur O. Stern, Esquire Peter MacDougall, Esquire
Colonial Management Associates, Inc. Ropes & Gray
One Financial Center One International Place
Boston, Massachusetts 02111 Boston,Massachusetts 02110

It is proposed that this filing will become effective (check
appropriate box):

[ ] immediately upon filing pursuant to paragraph (b)
[ X ] on December 29, 1995 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on [date] pursuant to paragraph (a)(1) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485

If appropriate check the following box:
[ ] this post-effective amendment designates a new
effective date for a previously filed post-effective amendment.

DECLARATION

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 and on or
about October 30, 1995, the Registrant filed the Rule 24f-2
Notice for the Registrant's most recent fiscal year ended
August 31, 1995.

COLONIAL TRUST II

Cross Reference Sheet (Colonial Government Money Market Fund)

Item Number of Form N-1A Prospectus Location or Caption

Part A

1. Cover page

2. Summary of expenses

3. The Fund's financial
history

4. Organization and history;
The Fund's investment
objective; How the Fund
pursues its objective

5. Cover page; The Fund's
investment objective; How
the Fund is managed;
Organization and history;
Back cover

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

December 29, 1995

COLONIAL GOVERNMENT MONEY MARKET FUND

PROSPECTUS

BEFORE YOU INVEST

Colonial Management Associates, Inc. (Adviser) 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.

Contents Page
Summary of expenses.....................................
The Fund's financial history............................
The Fund's investment objective.........................
How the Fund pursues its objective......................
How the Fund measures its performance...................
How the Fund is 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 plans.............................................
Organization and history................................

MM-XX-XX

Colonial Government Money Market Fund (Fund), a diversified portfolio of
Colonial Trust II (Trust), an open-end management investment company, seeks
current income, consistent with capital preservation and liquidity, by investing
exclusively in short-term U.S. government securities.

The Fund is managed by the Adviser, an investment adviser since 1931.

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 December 29, 1995 Statement of Additional
Information which has been filed with the Securities and Exchange Commission and
is obtainable free of charge by calling the Adviser 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 three classes of shares. Class A shares are offered at net asset
value; Class B shares are offered at net asset value, and, in addition, are
subject to an annual distribution fee, an annual service fee, and a

- --------------------------------------------------------------------------------

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.

declining contingent deferred sales charge on redemptions made within six years
after purchase; and Class D shares are offered at net asset value plus a small
initial sales charge, a contingent deferred sales charge on redemptions made
within one year after purchase and continuing service and distribution fee.
Class B shares automatically convert to Class A shares after approximately eight
years. See "How to buy shares."

Class B and Class D shares of the Fund are only for temporary investment while,
for example, considering investments in other Colonial funds. Unlike shares of
most money market funds, investments in the Fund's Class B shares are subject to
declining contingent deferred sales charges, investments in Class D shares are
subject to initial sales charges and Class B and Class D shares are subject to
distribution and service fees.

SUMMARY OF EXPENSES

Expenses are one of several factors to consider when investing in the Fund. The
following tables summarize your maximum transaction costs and your annual
expenses for an investment in each Class of the Fund's shares. See "How the Fund
is managed" and "12b-1 plans" for more complete descriptions of the Fund's
various costs and expenses.

Shareholder Transaction Expenses(1)(2)

Class A Class B Class D
Maximum Initial Sales
Charge Imposed on a
Purchase (as a % of
offering price)(3) 0.00% 0.00%(4) 1.00%(4)

Maximum Contingent
Deferred Sales Charge (as
a % of offering price)(3) 0.00% 5.00%(4) 1.00%(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 and Class D
shares, long-term Class B and Class D shareholders may pay more in
aggregate sales charges than the maximum initial sales charge permitted by
the National Association of Securities Dealers, Inc. However, because the
Fund's Class B shares automatically convert to Class A shares after
approximately eight years, this is less likely for Class B shares than for
a class without a conversion feature.

Annual Operating Expenses (as a % of average net assets)

Class A Class B Class D

Management fee(5) 0.30% 0.30% 0.30%
12b-1 fees 0.00 1.00 1.00
Other expenses 0.39 0.39 0.39
------ ------ ------
Total operating expenses 0.69% 1.69% 1.69%
======= ======= =======

(5) Effective October 17, 1994, the contractual management fee was
voluntarily reduced by the Adviser from 0.50% to 0.30%.

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 Class D
Period: (6) (7) (6) (7)
1 year $7 $67 $17 $37 $27
3 years 22 83 53 63 63
5 years 39 112 92 101 101
10 years 86 174(8) 174(8) 208 208

(6) Assumes redemption.
(7) Assumes no redemption.
(8) Class B shares convert to Class A shares after approximately eight years;
therefore, years 9 and 10 reflect Class A share expenses.

- --------------------------------------------------------------
THE FUND'S FINANCIAL HISTORY

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 1995 Annual
Report and is incorporated by reference into the Statement of Additional
Information. The Fund adopted its current objective and policies effective
October 17, 1994. The data presented below prior to October 17, 1994 represents
operations under earlier objectives and policies.

CLASS A
--------------------------------------------------------------------------------------

Year ended Period ended Year ended
August 31 August 31 December 31
------------------------------------------- -------------- ----------------------
1995 1994 1993 1992(b) 1991 1990

<S> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning period $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
====== ====== ====== ====== ====== ======
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a) 0.050 0.028 0.023 0.022 0.053 0.074
----- ----- ----- ----- ----- -----
LESS DISTRIBUTORS DECLARED TO
SHAREHOLDERS:
From net investment income (0.050) (0.028) (0.023) (0.022) (0.053) (0.074)
------- ------- ------- ------- ------- -------
Net asset value - End of period $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
====== ====== ====== ====== ====== ======
Total return(c)(d) 5.14% 2.85% 2.28% 2.18% (e) 5.38% 7.64%
==== ==== ==== ==== ==== ====
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.69% 0.73% 0.88% 1.00% (f) 0.85% 0.77%
Fees and expenses waived or
borne by the Adviser 0.04% 0.20% 0.20% 0.38% (f) 0.20% 0.13%
Net investment income 4.96% 3.01% 2.26% 3.23% (f) 5.32% 7.38%
Net assets at end of period (000) $83,086 $97,115 $44,693 $47,885 $56,198 $79,771
_________________________________

</TABLE>

CLASS A
----------------------------------------------------------
Year ended December 31
----------------------------------------------------------
1989 1988 1987 1986 1985
---- ---- ---- ---- ----

<S> <C> <C> <C> <C> <C>
Net asset value - Beginning of period $1.000 $1.000 $1.000 $1.000 $1.000
======= ======= ======= ======= ======
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a) 0.082 0.065 0.057 0.059 0.072
------ ------ ------ ------ -----
LESS DISTRIBUTORS DECLARED TO
SHAREHOLDERS:
From net investment income (0.082) (0.065) (0.057) (0.059) (0.072)
------- ------- ------- ------- -------
Net asset value - End of period $1.000 $1.000 $1.000 $1.000 $1.000
======= ======= ======= ======= ======
Total return(c)(d) 8.50% 6.66% 5.83% 5.98% 7.39%
===== ===== ===== ===== =====
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.74% 0.67% 0.77% 1.01% 1.08%
Fees and expenses waived or
borne by the Adviser --- --- --- 0.63% 1.13%
Net investment income 8.20% 6.49% 5.82% 5.59% 7.20%
Net assets at end of period (000) $75,301 $95,262 $104,649 $23,313 $11,039
- ---------------------------------

</TABLE>

(a) Net of fees and expenses waived or borne by the Adviser which amounted
to $0.000, $0.002, $0.002, $0.003, $0.002, $0.001, $0.000, $0.000, $0.000,
$0.007 and $0.011, respectively.

(b) The Fund changed its fiscal year end from December 31 to August 31, 1992.

(c) Total return at net asset value assuming all distributions reinvested
and no initial sales charge or contingent deferred sales charge.

(d) Had the Adviser not waived or reimbursed a portion of expenses, total
return would have been reduced.
(e) Not annualized.
(f) Annualized.

THE FUND'S FINANCIAL HISTORY (CONT.)
<TABLE>
<CAPTION>

CLASS B CLASS D
---------------------------------------------------------- -----------------------------
Period ended Year ended Period ended
Year ended August 31 August 31 August 31 August 31
------------------------------------------- -------------- -----------------------------
1995 1994 1993 1992(b)(c) 1995 1994(d)
---- ---- ---- ---------- ---- -------

<S> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of period $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
======= ======= ======= ======= ======= ======
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a) 0.040 0.018 0.013 0.004 0.040 0.005
------ ------ ------ ------ ------ -----
LESS DISTRIBUTIONS DECLARED TO
SHAREHOLDERS:
From net investment income (0.040) (0.018) (0.013) (0.004) (0.040) (0.005)
------- ------- ------- ------- ------- -------
Net asset value - End of period $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
======= ======= ======= ======= ======= ======
Total return(e)(f) 4.08% 1.82% 1.27% 0.43% (g) 4.07% 0.45% (g)
===== ===== ===== ===== ===== =====
RATIOS TO AVERAGE NET ASSETS:
Expenses 1.69% 1.73% 1.88% 2.00% (h) 1.69% 1.73% (h)
Fees and expenses waived or borne by the Adviser 0.04% 0.20% 0.20% 0.38% (h) 0.04% 0.20% (h)
Net investment income 3.96% 2.01% 1.26% 2.23% (h) 3.96% 2.01% (h)
Net assets at end of period (000) $55,441 $54,535 $10,890 $14,096 $625 $518
- ---------------------------------

</TABLE>

(a) Net of fees and expenses waived or borne by the Adviser which amounted to
$0.000, $0.002, $0.002, $0.001, $0.000, and $0.002, respectively.
(b) The Fund changed its fiscal year end from December 31 to August 31, 1992.
(c) Class B shares were initially offered on June 8, 1992. Per share
amounts reflect activity from that date.
(d) Class D shares were initially offered on July 1, 1994. Per share amounts
reflect activity from that date.
(e) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.

(f) Had the Adviser not waived or reimbursed a portion of expenses, total return
would have been reduced.

(g) Not annualized.
(h) 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.

- -------------------------------------------------------------
THE FUND'S INVESTMENT OBJECTIVE

The Fund seeks current income, consistent with capital preservation and
liquidity, by investing exclusively in short-term U.S. government securities.

HOW THE FUND PURSUES ITS OBJECTIVE

The Fund invests exclusively in short-term securities issued or guaranteed by
the U.S. government or its subdivisions, agencies, authorities and
instrumentalities, as well as repurchase agreements collateralized by such
securities. The Fund may purchase U.S. government securities with floating or
variable rates of interest that are eligible, based on the Securities and
Exchange Commission requirements, for investment by money market funds. The Fund
will not purchase inverse floating rate instruments, so-called "range floaters"
(securities the interest rate on which is allowed to float only within a certain
range), structured notes, futures contracts or other derivative securities. All
the Fund's investments have remaining maturities of 397 days or less (except
securities subject to repurchase agreements). The dollar weighted average
maturity of the Fund's investments will be 90 days or less. All securities
purchased will be determined by the Adviser, under procedures established by the
Trustees, to present minimal credit risk.

Under a repurchase agreement, the Fund buys a security from a bank or dealer,
which it is obligated to buy back at a fixed price and time. The security is
held in a separate account at the Fund's custodian and constitutes the Fund's
collateral for the bank's or dealer's repurchase obligation. Additional
collateral will be added so that the obligation will at all times be fully
collateralized. . However, if the bank or dealer defaults or enters into
bankruptcy, the Fund may experience costs and delays in liquidating collateral,
and may experience a loss if it is unable to demonstrate its right to the
collateral in a bankruptcy proceeding. Not more than 10% of the Fund's net
assets will be invested in repurchase agreements maturing in more than 7 days
and other illiquid assets.

The Fund intends to qualify as an eligible investment for federal credit unions
and national banks. The Fund's investments will be strictly limited to
investments and investment transactions that are legal for federal credit unions
under regulations adopted by the National Credit Union Administration.

The Fund may borrow money, by issuing senior securities, from banks for
temporary or emergency purposes up to 10% of its net assets. However, the Fund
will not purchase additional portfolio securities while borrowings exceed 5% of
net assets.

Other. If the Fund disposes of securities prior to maturity, it may realize a
loss or gain. The Fund may not always achieve its investment objective. The
Fund's investment objective and non-fundamental policies may be changed without
shareholder approval. The Fund will notify investors at least 30 days prior to
any material change in the Fund's investment objective. If there is a change in
the investment objective, shareholders should consider whether the Fund remains
an appropriate investment in light of their financial position and needs.
Shareholders may incur a contingent deferred sales charge if shares are redeemed
in response to a change in the objective. The Fund's fundamental policies listed
in the Statement of Additional Information cannot be changed without the
approval of a majority of the Fund's outstanding voting securities. Additional
information concerning certain of the securities and investment techniques
described above is contained in the Statement of Additional Information.

HOW THE FUND MEASURES ITS PERFORMANCE

Performance may be quoted in sales literature and advertisements. Each Class's
average annual total returns are calculated in accordance with the Securities
and Exchange Commission's formula and assume the reinvestment of all
distributions, the maximum initial sales charge of 1.00% on Class D shares and
the contingent deferred sales charge applicable to the time period quoted on
Class B and Class D shares. Other total returns differ from average annual total
return only in that they may relate to different time periods, may represent
aggregate as opposed to average annual total returns and may not reflect the
contingent deferred sales charge.

Each Class's yield is 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 for more 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.

All performance information is historical and does not reflect future results.

HOW THE FUND IS MANAGED
The Trustees formulate the Fund's general policies and oversee the Fund's
affairs as conducted by the Adviser.

The Adviser is a subsidiary of The Colonial Group, Inc. Colonial Investment
Services, Inc. (Distributor) is a subsidiary of the Adviser, and serves as the
distributor for the Fund's shares. Colonial Investors Service Center, Inc.
(Transfer Agent), an affiliate of the Adviser, serves as the shareholder
services and transfer agent for the Fund. The Colonial Group, Inc. is a direct
subsidiary of Liberty Financial Companies, Inc. which in turn is an indirect
subsidiary of Liberty Mutual Insurance Company (Liberty Mutual). Liberty Mutual
is considered to be the controlling entity of the Adviser and its affiliates.
Liberty Mutual is an underwriter of worker's compensation insurance and a
property and casualty insurer in the U.S.

The Adviser furnishes the Fund with investment management, accounting and
administrative personnel and services, office space and other equipment and
services at the Adviser's expense for an annual fee of 0.30% of Fund average net
assets.

The Adviser also provides pricing and bookkeeping services to the Fund for a
monthly fee of $2,250 plus a percentage of the Fund's average net assets over
$50 million. The Transfer Agent provides transfer agency and shareholder
services to the Fund for a fee of 0.20% annually of average net assets plus
certain out-of-pocket expenses.

Each of the foregoing fees is subject to any reimbursement or fee waiver to
which the Adviser may agree.

The Adviser places all orders for the purchase and sale of portfolio securities.
In selecting broker-dealers, the Adviser may consider research and brokerage
services furnished to it and its affiliates. Subject to seeking best execution,
the Adviser may consider sales of shares of the Fund (and of certain other
Colonial funds) in selecting broker-dealers for portfolio security transactions.

HOW THE FUND VALUES ITS SHARES

Per share net asset value is calculated by dividing the total value of each
Class's net assets by its number of outstanding shares. Shares of the Fund are
valued as of the close of the New York Stock Exchange (Exchange) each day the
Exchange is open. Portfolio securities are valued using the "amortized cost"
method (when such value is determined to represent market value in accordance
with procedures adopted by the Trustees), which does not consider the effect of
fluctuating interest rates on the value of assets. The Fund intends 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 them in cash.
Regardless of the shareholder's election, distributions of $10 or less will not
be paid in cash to shareholders 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.

Whether you receive distributions in cash or in additional Fund shares,
you must report them astaxable 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

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. The Fund may refuse any purchase order for
its shares. See the Statement of Additional Information for more information.
Purchases of $250,000 or more must be for Class A or Class D shares. Purchases
of $500,000 or more must be for Class A shares.

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 for
approximately eight years (at which time they convert to Class A shares not
bearing a distribution fee, a 0.25% annual service fee and a declining
contingent deferred sales charge) if redeemed within six years after purchase.
The Distributor pays financial service firms a commission of 4.00% on Class B
share purchases.

Class D Shares. Class D shares are offered at net asset value plus a 1.00%
initial sales charge, subject to a 0.75% annual distribution fee, a 0.25% annual
service fee and a 1.00% contingent deferred sales charge on redemptions made
within one year from the first day of the month after purchase.

The Distributor pays financial service firms an initial commission of 1.85% on
purchases of Class D shares and an ongoing commission of 0.65% annually. Payment
of the ongoing commission is conditioned on receipt by the Distributor of the
0.75% annual distribution fee referred to above. The commission may be reduced
or eliminated if the distribution fee paid by the Fund is reduced or eliminated
for any reason.

General. As shown above, financial service firms may receive different
compensation rates for selling different classes of shares. The Distributor may
pay additional compensation to financial service firms which have made or may
make significant sales. See the Statement of Additional Information for more
information.

Special Purchase Programs. The Fund allows certain investors or groups of
investors to purchase shares with a reduced or no initial or contingent deferred
sales charge. These programs are described in the Statement of Additional
Information under "Programs for Reducing or Eliminating Sales Charges" and "How
to Sell Shares."

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 business 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 only after 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. The sale price that you receive 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 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 net asset value (less any applicable contingent deferred sales charge),
are responsible for furnishing all necessary documentation to the Transfer Agent
and may charge for this service.

Contingent Deferred Sales Charges. As stated above, Class B and Class D shares
may be subject to a contingent deferred sales charge. As shown below, the
contingent deferred sales charge applicable to Class B shares depends on the
number of years after purchase that the 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.

Sales of Class D shares made within one year from the first day of the month
following the purchase will be subject to a 1.00% contingent deferred sales
charge.

General. The sale of shares is a taxable transaction for income tax purposes and
may be subject to a contingent deferred sales charge. The contingent deferred
sales charge may be waived under certain circumstances. All contingent deferred
sales charges are deducted from the amount redeemed, 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 contingent deferred sales charge was paid and any
exempt redemptions). 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 the same class of shares of most
Colonial funds. Not all Colonial funds offer Class D shares. Shares will
continue to age without regard to the exchange for purposes of conversion and
determining the contingent deferred sales charge, if any, upon redemption.
Carefully read the prospectus of the fund into which the exchange will go before
submitting the request. Call 1-800-248-2828 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 any
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 $1,000,000 or more of other Colonial funds' Class A shares who
exchange their shares for Class A shares of the Fund and redeem those Fund
shares within one year 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, the contingent deferred sales charge will be assessed
using the schedule of the fund into which the original investment was made.

Class D Shares. Exchanges of Class D shares will not be subject to the
contingent deferred sales charge. However, if shares are redeemed within one
year after the original purchase, a 1.00% contingent deferred sales charge will
be assessed.

TELEPHONE TRANSACTIONS

All shareholders and/or their financial advisers are automatically eligible to
exchange Fund shares and redeem up to $50,000 of Fund shares by calling
1-800-422-3737 toll-free any business day between 9:00 a.m. and the time at
which the Fund values its shares. Telephone redemption privileges for larger
amounts may be elected on the account application. 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 30 days. The Adviser, 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. All telephone transactions are recorded.
Shareholders and/or their financial advisers are required to provide their name,
address and account number. Financial advisers are also required to provide
their broker number. Shareholders and/or their financial advisers wishing to
redeem or exchange shares by telephone may experience difficulty in reaching the
Fund at its toll-free telephone number during periods of drastic economic or
market changes. In that event, shareholders and/or their financial advisers
should follow the procedures for redemption or exchange by mail as described
above under "How to sell shares." The Adviser, the Transfer Agent and the Fund
reserve the right to change, modify, or terminate the telephone redemption or
exchange services at any time upon prior written notice to shareholders.
Shareholders and/or their financial advisers are not obligated to transact by
telephone.

12B-1 PLANS

Under 12b-1 Plans, 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 and Class D shares. Because the Class B and Class D shares bear
these 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. Class D shares do not
convert. 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
distribution expenses, including the cost of commissions paid to financial
service firms which have sold Fund shares and expenses associated with providing
certain shareholder services. Should the fees exceed the Distributor's expenses
in any year, the Distributor would realize a profit. The Plans also authorize
other payments to the Distributor and its affiliates (including the Adviser)
which may be construed to be indirect financing of sales of Fund shares.

ORGANIZATION AND HISTORY

The Trust is a Massachusetts business trust organized in 1980. 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.

Under Massachusetts law, shareholders could, under certain circumstances, be
held personally liable for the obligations of the Fund. However, the Declaration
of Trust for the Trust (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 Trust's Trustees. The Declaration provides for indemnification out of
Fund property for all loss and expense of any shareholder held personally liable
for the obligations of the Fund. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to circumstances
in which the Fund would be unable to meet its obligations. The likelihood of
such circumstances is remote because it would be limited to circumstances in
which the disclaimer was inoperative and the Trust was unable to meet its
obligations.

The risk of a particular fund incurring financial loss on account of an
unsatisfied liability of another fund of the Trust is also believed to be
remote, because it would be limited to claims to which the disclaimer did not
apply and to circumstances in which the other fund was unable to meet its
obligations.

- ------------------------------------------------------------

[THIS PAGE INTENTIONALLY LEFT BLANK.]

- --------------------------------------------------------------
Investment Adviser
Colonial Management Associates, Inc.
One Financial Center
Boston, MA 02111-2621

Distributor

Colonial Investment Services, Inc.

One Financial Center
Boston, MA 02111-2621

Custodian
Boston Safe Deposit and Trust Company
One Boston Place
Boston, MA 02108-2624

Shareholder Services and Transfer Agent
Colonial Investors Service Center, Inc.
One Financial Center
Boston, MA 02111-2621
1-800-345-6611

Independent Accountants
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110-2624

Legal Counsel
Ropes & Gray
One International Place
Boston, MA 02110-2624

Your financial service firm is:

Printed in U.S.A.

December 29, 1995

COLONIAL GOVERNMENT MONEY MARKET FUND

PROSPECTUS

Colonial Government Money Market Fund seeks current income, consistent with
capital preservation and liquidity, by investing exclusively in short-term U.S.
government securities.

For more detailed information about the Fund, call 1-800-248-2828 for the
December 29, 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 FLAG LOGO]

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

______________________________________
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 or D 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)
___ D Shares (less than $500,000)

$______________________________________________
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)
___ D Shares (less than $500,000)

$______________________________________________
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)
___ D Shares (less than $500,000)

$______________________________________________
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
or Class D shares. Please consult your financial or tax adviser before
electing this option.

Funds for Withdrawal:

1______________________________________________
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).

2______________________________________________
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).

3______________________________________________
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)

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

______________________________________
City State Zip

______________________________________
Bank account number

______________________________________
Bank routing #

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

_____________________________________
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

COLONIAL TRUST II

Cross Reference Sheet (Colonial Adjustable Rate U.S. Government Fund)

Item Number of Form N-1A Prospectus Location or Caption

Part A

1. Cover page

2. Summary of expenses

3. The Fund's financial
history

4. Organization and history;
The Fund's investment
objective; How the Fund
pursues its objective

5. Cover page; How the Fund
is managed; Organization
and history; The Fund's
investment objective;
Back cover

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

December 29, 1995

COLONIAL
ADJUSTABLE RATE
U.S. GOVERNMENT
FUND

PROSPECTUS

BEFORE YOU INVEST

Colonial Management Associates, Inc. (Adviser) and your full-service financial
adviser want you to understand both the risks and benefits of mutual fund
investing.

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.

Contents Page
Summary of expenses
The Fund's financial history
The Fund's investment objective
How the Fund pursues its objective
How the Fund measures its performance
How the Fund is 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 plans
Organization and history

Colonial Adjustable Rate U.S. Government Fund (Fund), a diversified portfolio of
Colonial Trust II (Trust), an open-end management investment company, seeks as
high a level of current income as is consistent with very low volatility by
investing primarily in adjustable rate securities. The Fund is managed by the
Adviser, an investment adviser since 1931.

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 December 29, 1995 Statement
of Additional Information which has been filed with the Securities and Exchange
Commission and is obtainable free of charge by calling the Adviser 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.

The Fund offers three classes of shares. Class A shares are offered at net asset
value plus a sales charge imposed at the time of purchase; Class B shares are
offered at net asset value and, in addition, are subject to an annual
distribution fee and a declining contingent deferred sales charge on redemptions
made within four years after purchase; and Class C shares are offered at net
asset value plus a continuing annual distribution fee. Class B shares
automatically convert to Class A shares after approximately eight years. Class C
shares require an initial investment of at least $25,000. See "How to buy
shares."

FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED, ENDORSED OR
INSURED BY, ANY BANK OR GOVERNMENT AGENCY.

SUMMARY OF EXPENSES

Expenses are one of several factors to consider when investing in the Fund. The
following tables summarize your maximum transaction costs and your annual
expenses for an investment in each Class of the Fund's shares. Annual Operating
Expenses have been adjusted to reflect current fees. See "How the Fund is
managed" and "12b-1 plans" for more complete descriptions of the Fund's various
costs and expenses.

Shareholder Transaction Expenses (1)(2)
Class A Class B Class C
Maximum Initial Sales
Charge Imposed on
a Purchase (as a %
of offering
price)(3) 3.25% 0.00%(5) 0.00%(5)
Maximum Contingent
Deferred Sales
Charge (as a % of
offering
price)(3) 1.00%(4) 4.00% 0.00%

(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) Only with respect to any portion of purchases of $1
million to $5 million redeemed within approximately
18 months after purchase. See "How to buy shares."

(5) Because of the 0.65% distribution fee applicable to
Class B shares and the 0.15% distribution fee
applicable to Class C shares, long-term Class B and
Class C shareholders may pay more in aggregate sales
charges than the maximum initial sales charge
permitted by the National Association of Securities
Dealers, Inc. However, because the Fund's Class B
shares automatically convert to Class A shares after
approximately eight years, this is less likely
for Class B shares than for a class without a
conversion feature.

Annual Operating Expenses (as a % of average net assets)
Class A Class B Class C
Management fee
(after fee waiver) 0.00% 0.00% 0.00%
12b-1 fees 0.20 0.85 0.40
Other expenses
(after fee waiver) 0.30 0.30 0.30
---- ---- ----
Total operating expenses
(after fee waiver) 0.50% 1.15% 0.70%
==== ==== ====

The Adviser has voluntarily agreed to waive or bear certain Fund expenses until
further notice. Absent such agreement, the "Management fee" would have been
0.55% for each Class, "Other expenses" would have been 0.89% for each Class and
"Total operating expenses" would have been 1.64% for Class A, 2.29% for Class B
and 1.84% for Class C. See "How the Fund is managed" for other fees paid to the
Adviser.

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 Class C
Period:
(6) (7)
1 year $37 $ 12 $ 52 $ 7
3 years $48 $ 37 $ 57 $22
5 years $60 $ 64 $ 64 $39
10 years $93 $122(8) $122(8) $87

(6) Assumes no redemption.
(7) Assumes redemption.
(8) Class B shares convert to Class A shares after approximately 8 years;
therefore, years 9 and 10 reflect Class A share expenses.

Without voluntary fee reduction, the amounts in the Example would be $49, $82,
$119 and $220 for Class A shares for 1, 3, 5 and 10 years respectively; $23,
$71, $122 and $246 for Class B shares assuming no redemption for 1, 3, 5 and 10
years, respectively; $63, $91, $122 and $246 for Class B shares assuming
redemptions at 1, 3, 5 and 10 years respectively; and $19, $58, $99 and $215 for
Class C shares for 1, 3, 5 and 10 years, respectively. Class B shares convert to
Class A shares after approximately 8 years; therefore, years 9 and 10 reflect
Class A expenses.

<PAGE>

THE FUND'S FINANCIAL HISTORY

<TABLE>
<CAPTION>
Years ended Period ended
August 31 August 31
------------------------------------------------------------------------
1995 1994 1993
Class A Class B Class C(d) Class A Class B Class A(b) Class B(c)

<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of period $9.670 $9.670 $9.550 $9.950 $9.950 $10.00 $9.940
------- ------- ------- ------- ------- ------- ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(a) 0.514 0.451 0.334 0.473 0.409 0.434 0.237
Net realized and unrealized (loss) 0.152 0.152 0.280 (0.356) (0.356) (0.061) (0.003)
------ ------ ------ ------- ------- ------- -------
Total from Investment Operations 0.666 0.603 0.614 0.117 0.053 0.373 0.234
------ ------ ------ ------ ------ ------ -----
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.486) (0.423) (0.314) (0.397) (0.333) (0.406) (0.215)
In excess of net investment income ----- ----- ----- ----- ---- (0.015) (0.008)
From net realized gains ----- ----- ----- ----- ---- (0.002) (0.001)
------ ------- ------- ------- ------- ------- -------
Total Distributions Declared to
Shareholders (0.486) (0.423) (0.314) (0.397) (0.333) (0.423) (0.224)
------- ------- ------- ------- ------- ------- -------
Net asset value - End of period $9.850 $9.850 $9.850 $9.670 $9.670 $9.950 $9.950
======= ======= ======= ======= ======= ======= ======
Total return(e)(f) 7.08% 6.39% 6.50% (g) 1.20% 0.55% 3.82% (g) 2.38% (g)
===== ===== ===== ===== ===== ===== =====
RATIOS TO AVERAGE NET ASSETS
Expenses 0.50% 1.15% 0.70% (h) 0.50% 1.15% 0.50% (h) 1.15% (h)
Net investment income 5.50% 4.85% 5.30% (h) 4.84% 4.19% 4.70% (h) 4.05% (h)
Fees and expenses waived or borne by
the Adviser 1.14% 1.14% 1.14% 1.16% 1.16% 1.68% (h) 1.68% (h)
Portfolio turnover 36% 36% 36% 69% 69% 25% (h) 25% (h)
Net assets at end of period (000) $9,934 $3,968 $385 $16,168 $4,176 $7,866 $1,675

- ------------------------------------------
</TABLE>

(a) Net of fees and expenses waived or borne by the Adviser which amounted
to $0.107 $0.107 $0.107 $0.114 $0.114 $0.155 $0.092
(b) The Fund commenced investment operations on October 1, 1992. Class A per
share amounts reflect activity from that date.
(c) Class B shares were initially offered on February 1, 1993. Class B per
share amounts reflect activity from that date.
(d) Class C shares were initially offered on January 4, 1995. Class C per share
amounts reflect activity from that date.
(e) Total return at net asset value assuming all distributions reinvested and
no front-end sales charge or contingent deferred sales charge.
(f) Had the Adviser not waived or reimbursed a portion of expenses, total
return would have been reduced.
(g) Not annualized.
(h) Annualized.

Further performance information is contained in the Fund's Annual Report to
shareholders, which may be obtained without charge by calling 1-800-248-2828.

<PAGE>

THE FUND'S INVESTMENT OBJECTIVE

The Fund seeks as high a level of current income as is consistent with very low
volatility by investing primarily in adjustable rate securities.

HOW THE FUND PURSUES ITS OBJECTIVE

The Fund normally invests at least 65% of its assets in adjustable rate
securities that are issued or guaranteed by the U.S. government or its agencies
and instrumentalities (Agencies) which are supported by: (a) the full faith and
credit of the U.S. government, (b) the right of the issuer or guarantor to
borrow a limited amount from the U.S. Treasury, (c) the discretionary power of
the U.S. government to purchase obligations of the Agencies or (d) the credit of
the Agencies. The level of income derived from U.S. government or Agency
securities may not be as high as income derived from non-government securities.
The Fund may invest up to 35% of total assets in other debt instruments of the
U.S. government and its Agencies.

The values of debt securities, and therefore of Fund shares generally fluctuate
inversely with changes in interest rates. Although this effect is reduced for
adjustable rate securities, decreases in the interest rates paid on such
securities likely will translate into lower income distributions paid by the
Fund.

Agency obligations that the Fund may invest in include, among others, mortgage
participation certificates guaranteed by the Government National Mortgage
Association (GNMA), which are backed by the full faith and credit and taxing
authority of the U.S. government, and obligations of the Federal Home Loan
Mortgage Corporation and the Federal National Mortgage Association, which are
supported only by the credit of those corporations.

Mortgage securities evidence interests in a pool of mortgages. Interest rates on
variable rate securities change periodically based on some index or interest
rate change, reducing, but not eliminating, the securities' volatility. The
securities' value may fluctuate from changes in credit ratings and market
interest rates because the rate change may lag the market or there may be limits
on the rate change. The securities or the underlying mortgages are insured or
guaranteed by the U.S. government or its Agencies. The Fund may invest in Agency
issued or guaranteed collateralized mortgage obligations (CMOs), which are
obligations issued by special-purpose trusts, secured by mortgages. Principal on
mortgage securities may be prepaid if the underlying mortgages are prepaid. The
Fund may be able to invest prepaid principal only at lower yields.

The Fund may purchase "when-issued" securities, which are contracts to purchase
securities for a fixed price on a date beyond the customary settlement time with
no interest accruing until settlement. If made through a dealer, the contract is
dependent on the dealer's consummation of the transaction. The dealer's failure
could deprive the Fund of advantageous yields. These contracts also involve the
risk that the value of the underlying security may change prior to settlement.
The Fund currently will not purchase these securities more than 120 days before
settlement.

The Fund may invest in repurchase agreements with respect to any security that
the Fund may purchase. Under a repurchase agreement, the Fund buys a security
from a bank or dealer, which is obligated to buy it back at a fixed price and
time. The security is held in a separate account at the Fund's custodian and
constitutes the Fund's collateral for the bank's or dealer's repurchase
obligation. Additional collateral will be added so that the obligation will at
all times be fully collateralized. However, if the bank or dealer defaults or
enters bankruptcy, the Fund may experience costs and delays in liquidating the
collateral, and may experience a loss if it is unable to demonstrate its right
to the collateral in a bankruptcy proceeding. Not more than 15% of the Fund's
total assets will be invested in repurchase agreements maturing in more than 7
days and other illiquid assets.

The Fund may enter into reverse repurchase agreements, contracts under which the
Fund sells a security, subject to the requirement to buy it back at a fixed
price and time. The Fund will segregate with its custodian U.S. government
securities equal in value to the Fund's obligations under the reverse repurchase
agreements.

The Fund intends to qualify as an eligible investment for federal credit unions
and national banks. The Fund's investments, including its investments in CMOs,
will be strictly limited to investments and investment transactions that are
legal for federal credit unions under regulations adopted by the National Credit
Union Administration.

The Fund may trade portfolio securities for short-term profits to take advantage
of price differentials. These trades involve transaction costs and are limited
by certain Internal Revenue Code requirements.

The Fund may borrow money from banks for temporary or emergency purposes up to
10% of its net assets. However, the Fund will not purchase additional portfolio
securities while borrowings exceed 5% of net assets.

The Fund may at some future time use other investment techniques which are
described in the Statement of Additional Information, but which are currently
not being used.

Other. The Fund may not always achieve its investment objective. The Fund's
investment objective and non-fundamental policies may be changed without
shareholder approval. The Fund will notify investors at least 30 days prior to
any material change in the Fund's investment objective. If there is a change in
investment objective, shareholders should consider whether the Fund remains an
appropriate investment in light of their financial position and needs.
Shareholders may incur a contingent deferred sales charge if shares are redeemed
in response to a change in objective. The Fund's fundamental policies listed in
the Statement of Additional Information cannot be changed without the approval
of a majority of the Fund's outstanding voting securities. Additional
information concerning certain of the securities and investment techniques
described above is contained in the Statement of Additional Information.

HOW THE FUND MEASURES ITS PERFORMANCE

Performance may be quoted in sales literature and advertisements. Each Class's
average annual total returns are calculated in accordance with the Securities
and Exchange Commission's formula and assume the reinvestment of all
distributions, the maximum initial sales charge of 3.25% on Class A shares 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 as
opposed to average annual total returns and may not reflect the initial or
contingent deferred sales charges.

Each Class's yield, which differs from total return because it does not consider
changes in net asset value, is calculated in accordance with the Securities and
Exchange Commission's formula. Each Class's distribution rate is calculated by
dividing the most recent month's distribution, annualized, by the maximum
offering price of that Class at the end of the month. Each Class's performance
may be compared to various indices. Quotations from various publications may be
included in sales literature and advertisements. See "Performance Measures" in
the Statement of Additional Information for more information All performance
information is historical and does not predict future results.

HOW THE FUND IS MANAGED

The Trustees formulate the Fund's general policies and oversee the Fund's
affairs as conducted by the Adviser.

The Adviser is a subsidiary of The Colonial Group, Inc. Colonial Investment
Services, Inc. (Distributor), is a subsidiary of the Adviser and serves as the
distributor for the Fund's shares. Colonial Investors Service Center, Inc.
(Transfer Agent), an affiliate of the Adviser, serves as the shareholder
services and transfer agent for the Fund. The Colonial Group, Inc. is a direct
subsidiary of Liberty Financial Companies, Inc. which in turn is an indirect
subsidiary of Liberty Mutual Insurance Company (Liberty Mutual). Liberty Mutual
is considered to be the controlling entity of the Adviser and its affiliates.
Liberty Mutual is an underwriter of workers compensation insurance and a
property and casualty insurer in the U.S.

The Adviser furnishes the Fund with investment management, accounting and
administrative personnel and services, office space and other equipment and
services at the Adviser's expense. For these services, the Fund pays the Adviser
a fee at the annual rate of 0.55% of the Fund's average net assets.

Leslie Finnemore, Vice President of the Adviser, has managed the Fund since its
inception and various other Colonial taxable income funds since 1987. Ann
Peterson, Assistant Vice President of the Adviser, has co-managed the Fund since
1993. Ms. Peterson has been a taxable income analyst with the Adviser since
1986.

The Adviser also provides pricing and bookkeeping services to the Fund for a
monthly fee of $2,250 plus a percentage of the Fund's average net assets over
$50 million. The Transfer Agent provides transfer agency and shareholder
services to the Fund for a fee of 0.18% annually of average net assets plus
certain out-of-pocket expenses.

Each of the foregoing fees is subject to any fee waiver or reimbursement to
which the Adviser may agree.

The Adviser places all orders for the purchase and sale of portfolio securities.
Subject to seeking best execution, the Adviser may consider research and
brokerage services furnished to it and its affiliates and sales of shares of the
Fund (and of certain other Colonial funds) in selecting broker-dealers for
portfolio security transactions.

HOW THE FUND VALUES ITS SHARES

Per share net asset value is calculated by dividing the total value of each
Class's net assets by its number of outstanding shares. Shares of the Fund are
valued as of the close of the New York Stock Exchange (Exchange) each day the
Exchange is open. Portfolio securities for which market quotations are readily
available are valued at market. Short-term investments maturing in 60 days or
less are valued at amortized cost when it is determined, pursuant to procedures
adopted by the Trustees, that such cost approximates market value. All other
securities and assets are valued at their fair value following procedures
adopted by the Trustees.

DISTRIBUTIONS AND TAXES

The Fund intends to qualify as a "regulated investment company" under the
Internal Revenue Code and to distribute to shareholders virtually all net income
and any net realized gain at least annually.

The Fund generally declares distributions daily and makes distributions 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. Regardless of the
shareholder's election, distributions of $10 or less will not be paid in
cash to shareholders 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. Whether you receive distributions 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, plus any applicable initial sales charge. The minimum initial investment
is $1,000 for Class A and Class B, and $25,000 for Class C; 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 Class B
or Class C shares and there are some limitations on the issuance of Class A
certificates. 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, subject to a
0.20% annual service fee, plus an initial sales charge or a contingent deferred
sales charge as follows:

Initial Sales Charge
Retained
by
Financial
Service
Firm as
% of
_____as % of_____
Amount Offering Offering
Amount Purchased Invested Price Price

Less than $100,000 3.36% 3.25% 3.00%

$100,000 to less than
$250,000 2.56% 2.50% 2.25%
$250,000 to less than
$500,000 2.04% 2.00% 1.75%
$500,000 to less than
$1,000,000 1.52% 1.50% 1.25%
$1,000,000 or more 0.00% 0.00% 0.00%

On purchases of $1 million or more, the Distributor pays the financial service
firm a cumulative commission as follows:

Amount Purchased Commission
First $3,000,000 1.00%
Next $2,000,000 0.50%
Over $5,000,000 0.25% (1)

(1) Paid over 12 months but only to the extent the shares remain outstanding.

Purchases of $1 million to $5 million are subject to a 1.00% contingent deferred
sales charge payable to the Distributor on redemptions within 18 months from the
first day of the month following the purchase. The contingent deferred sales
charge does not apply to the excess of any purchase over $5 million.

Class B Shares. Class B shares are offered at net asset value, without an
initial sales charge, subject to a 0.65% annual distribution fee for
approximately eight years (at which time they convert to Class A shares not
bearing a distribution fee), a 0.20% annual service fee and a declining
contingent deferred sales charge if redeemed within four years after purchase.
As shown below the amount of the contingent deferred sales charge depends on the
number of years after purchase that the redemption occurs:

Years Contingent Deferred
After Purchase Sales Charge
0-1 4.00%
1-2 3.00%
2-3 2.00%
3-4 1.00%
More than 4 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
3.00% on Class B share purchases.

Class C Shares. Class C shares are offered at net asset value without an initial
sales charge, subject to a 0.15% annual distribution fee and a 0.25% annual
service fee. Class C shares are not subject to any contingent deferred sales
charge.

The Distributor pays financial service firms an initial commission of 0.15% on
purchases of Class C shares, and an ongoing commission of 0.40% annually.
Payment of the commission is conditioned on receipt by the Distributor of the
fees referred to above. The commissions may be reduced or eliminated if the fees
paid by the Fund are reduced or eliminated for any reason.

General. All contingent deferred sales charges are deducted from the amount
redeemed, 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 (including initial sales charge, if any) in the account
reduced by prior redemptions on which a contingent 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. Investors purchasing less than $25,000 or more than $1
million might consider Class A. Investments in Class B shares have 100% of the
purchase invested immediately. Investors investing between $25,000 and $1
million should consider Class C shares. Consult your financial service firm.

Financial service firms may receive different compensation rates for selling
different classes of shares. The Distributor may pay additional compensation to
financial service firms which have made or may make significant sales. See the
Statement of Additional Information for more information.

HOW TO SELL SHARES

Shares 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 only after 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 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 income 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.

HOW TO EXCHANGE SHARES

Exchanges at net asset value may be made among the same class of shares of most
Colonial funds. No other fund currently offers Class C shares. As a result, no
exchange of Class C shares among other Colonial funds is possible at this time.

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.

TELEPHONE TRANSACTIONS

All shareholders and/or their financial advisers are automatically eligible to
exchange Fund shares and redeem up to $50,000 of Fund shares by calling
1-800-422-3737 toll free any business day between 9:00 a.m. and the time at
which the Fund values its shares. Telephone redemption privileges for larger
amounts may be elected on the account application. 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 30 days. The Adviser, 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. All telephone transactions are recorded.
Shareholders and/or their financial advisers are required to provide their name,
address and account number. Financial advisers are also required to provide
their broker number. Shareholders and/or their financial advisers wishing to
redeem or exchange shares by telephone may experience difficulty in reaching the
Fund at its toll free telephone number during periods of drastic economic or
market changes. In that event, shareholders and/or their financial advisers
should follow the procedures for redemption or exchange by mail as described
above under "How to sell shares." The Adviser, the Transfer Agent and the Fund
reserve the right to change, modify, or terminate the telephone redemption or
exchange services at any time upon prior written notice to shareholders.
Shareholders are not obligated to transact by telephone.

12B-1 PLANS

Under 12b-1 Plans, the Fund pays the Distributor an annual service fee of 0.20%
of average net assets attributed to Class A and Class B shares and 0.25% of
average net assets attributed to Class C shares. The Fund also pays the
Distributor an annual distribution fee of 0.65% of average net assets attributed
to Class B shares and 0.15% of average net assets attributed to Class C shares.
Because Class B and Class C shares bear an additional distribution fee, their
dividends will be lower than that of Class A shares. Class B shares
automatically convert to Class A shares, approximately eight years after the
Class B shares were purchased. Class C shares do not convert. 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 Plans also authorize other payments to the Distributor and its
affiliates (including the Adviser) which may be construed to be indirect
financing of sales of Fund shares.

ORGANIZATION AND HISTORY

The Trust is a Massachusetts business trust organized in 1980. 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 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.

Under Massachusetts law, shareholders could, under certain circumstances, be
held personally liable for the obligations of the Fund. However, the Declaration
of Trust for the Trust (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 Trust's Trustees. The Declaration provides for indemnification out of
Fund property for all loss and expense of any shareholder held personally liable
for the obligations of the Fund. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to circumstances
in which the disclaimer was inoperative and the Trust was unable to meet its
obligations.

<PAGE>

[This Page Intentionally Left Blank]

<PAGE>

Investment Adviser
Colonial Management Associates, Inc.
One Financial Center
Boston, MA 02111-2621

Distributor

Colonial Investment Services, Inc.

One Financial Center
Boston, MA 02111-2621

Custodian
Boston Safe Deposit and Trust Company
One Boston Place
Boston, MA 02108-2624

Shareholder Services and Transfer Agent
Colonial Investors Service Center, Inc.
One Financial Center
Boston, MA 02111-2621
1-800-345-6611

Independent Accountants
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110-2624

Legal Counsel
Ropes & Gray
One International Place
Boston, MA 02110-2624

Your financial service firm is:

Printed in U.S.A.

December 29, 1995

COLONIAL
ADJUSTABLE RATE
U.S. GOVERNMENT FUND

PROSPECTUS

Colonial Adjustable Rate U.S. Government Fund seeks as high a level of current
income as is consistent with very low volatility, by investing primarily in
adjustable rate securities.

For more information about the Fund, call the Adviser at 1-800-248-2828 for the
December 29, 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 FLAG LOGO]

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.