COLONIAL MINNESOTA TAX-EXEMPT FUND
COLONIAL NORTH CAROLINA TAX-EXEMPT FUND
Supplement to Prospectus dated May 31, 1995
The State of North Carolina recently repealed its Intangible
Personal Property Tax formerly applicable to shares of stock,
including shares of certain mutual funds. The repeal is effective
for taxable years beginning after 1994.
The third sentence of the fourth paragraph on page 1 is revised in
its entirety as follows:
The Florida and Michigan Funds' shares are intended to be exempt
from their respective state's intangibles tax.
The second sentence of the first paragraph under the caption THE
FUNDS' INVESTMENT OBJECTIVE is revised in its entirety as follows:
The Florida and Michigan Funds' shares are intended to be exempt
from their respective state's intangibles tax.
The first sentence of the first paragraph under the caption HOW THE
FUNDS PURSUE THEIR OBJECTIVE is revised in its entirety as follows:
Each Fund normally invests substantially all of its assets in
investment grade debt securities of any maturity, the interest on
which is exempt from federal income tax and that state's personal
income tax (if any), other than any alternative minimum tax (State
Bonds); in the case of the Florida and Michigan Funds, the State
Bonds are exempt from the state intangibles tax.
The eighth paragraph under the sub-caption State Fiscal Conditions
under the caption HOW THE FUNDS PURSUE THEIR OBJECTIVE is revised
in its entirety as follows:
Minnesota. The State of Minnesota's overall economic structure
closely parallels that of the nation as a whole, although
manufacturing is modestly more significant than construction,
finance and real estate. The State's strong natural resource base
is evidenced in its strong positions in food and forestry products,
and the State serves as a major regional commercial center. While
the recession has been less severe in the State than in the nation overall,
the State has not been immune to its impact as evidenced by slowdowns
in income and sales tax revenue growth. Because the State relies on a
progressive personal income tax and retail sales tax for general
fund revenue, the State's fiscal system is particularly sensitive
to economic conditions. As a result, the less than expected
revenue growth, combined with increased spending pressure, led to
budget deficits in fiscal years 1991 and 1992. The State
demonstrated its financial discipline by curing the deficits
through a variety of measures, including a sales tax rate increase
and spending cuts. An improved economy in 1993 and 1994 has led to
stronger revenues and a more favorable expectation for balanced
budget operations. Under recently enacted legislation, if a court
determines that Minnesota's taxation of interest on other state's
obligations, while not taxing interest on its own obligations,
discriminates against interstate commerce, the interest on certain
Minnesota obligations may become taxable. No federal court has
ruled that the taxation by a state of another state's obligations
discriminates against interstate commerce.
SP-36/024B-0695 July 14, 1995
COLONIAL MINNESOTA TAX-EXEMPT FUND
COLONIAL NORTH CAROLINA TAX-EXEMPT FUND
Supplement to Statement of Additional Information
dated May 31, 1995
The first paragraph under the caption MINNESOTA TAX
CONSIDERATIONS is revised in its entirety as follows:
On June 1, 1995, Minnesota enacted legislation which provides
that if an addition to federal taxable income under Minnesota
statutes of certain types of income (such as, for example,
interest on obligations of other states) is judicially determined
to discriminate against interstate commerce, the legislature
intends that the discrimination be remedied by adding interest on
obligations of Minnesota governmental units and Indian tribes to
federal taxable income. Since federal taxable income is
generally the starting point for the computation of Minnesota
taxable income, the remedy intended by the legislature would, in
the event a court found a constitutional violation as described
above, subject interest on obligations of Minnesota governmental
units and Indian tribes (and exempt-interest dividends that are
derived from any of such interest) to Minnesota taxation, in the
case of individuals, estates, and trusts. The legislation, which
applies to interest on existing obligations as well as to
interest on newly issued obligations, further provides that this
provision applies beginning with the taxable years that begin
during the calendar year in which the court's decision is final,
and that other remedies apply to previous taxable years.
The State of North Carolina recently repealed its Intangible Personal
Property Tax formerly applicable to shares of stock, including shares of
certain mutual funds. The repeal is effective for taxable years
beginning after 1994.
The third paragraph under the caption NORTH CAROLINA TAX
CONSIDERATIONS is deleted in its entirety.
SP-39/015B-0695 July 14, 1995
