COLONIAL CALIFORNIA TAX-EXEMPT FUND
COLONIAL CONNECTICUT TAX-EXEMPT FUND
COLONIAL FLORIDA TAX-EXEMPT FUND
COLONIAL MASSACHUSETTS TAX-EXEMPT FUND
COLONIAL MICHIGAN TAX-EXEMPT FUND
COLONIAL MINNESOTA TAX-EXEMPT FUND
COLONIAL NEW YORK TAX-EXEMPT FUND
COLONIAL NORTH CAROLINA TAX-EXEMPT FUND
COLONIAL OHIO TAX-EXEMPT FUND
Supplement to the May 29, 1998 Prospectus
The Funds' Prospectus is amended as follows:
(1) At a Special Meeting of Shareholders held on October 30, 1998, the
shareholders of Colonial California Tax-Exempt Fund approved changing the Fund
from a diversified fund to a non-diversified fund.
(2) A new paragraph is added to the front cover of the Prospectus below th
Table of Contents as follows:
This Prospectus is also available on-line at our Web site
(http://www.libertyfunds.com). The Securities and Exchange Commission maintains
a Web site (http://www.sec.gov) that contains the Statement of Additional
Information, materials that are incorporated by reference into this Prospectus
and the Statement of Additional Information, and other information regarding the
Funds.
(3) The following tables under the sub-caption Annual Operating Expenses on page
2 of the Prospectus are revised in their entireties as follows:
Florida
Class A Class B Class C
Management fee (after waiver) 0.41% 0.41% 0.41%
12b-1 fees (7)(8) 0.17 0.92 0.62
Other expenses (after waiver) 0.34 0.34 0.34
---- ---- ----
Total operating expenses
(after waiver)(9) 0.92% 1.67% 1.37%
==== ==== ====
Michigan
Class A Class B Class C
Management fee 0.50% 0.50% 0.50%
12b-1 fees (7)(8) 0.15 0.90 0.60
Other expenses (after waiver) 0.38 0.38 0.38
---- ---- ----
Total operating expenses
(after waiver) 1.03% 1.78% 1.48%
==== ==== ====
Minnesota
Class A Class B Class C
Management fee 0.50% 0.50% 0.50%
12b-1 fees (7)(8) 0.16 0.91 0.61
Other expenses (after waiver) 0.36 0.36 0.36
---- ---- ----
Total operating expenses
(after waiver) 1.02% 1.77% 1.47%
==== ==== ====
North Carolina
Class A Class B Class C
Management fee 0.50% 0.50% 0.50%
12b-1 fees (7)(8) 0.16 0.91 0.61
Other expenses (after waiver) 0.48 0.48 0.48
---- ---- ----
Total operating expenses
(after waiver) 1.14% 1.89% 1.59%
==== ==== ====
Ohio
Class A Class B Class C
Management fee 0.50% 0.50% 0.50%
12b-1 fees (7)(8) 0.14 0.89 0.59
Other expenses (after waiver) 0.30 0.30 0.30
---- ---- ----
Total operating expenses
(after waiver) 0.94% 1.69% 1.39%
==== ==== ====
(4) The Class A and Class B tables for the Michigan, Minnesota, North Carolina
and Ohio Funds under the sub-caption Annual Operating Expenses on page 3 of the
Prospectus are deleted.
(5) The following tables under the sub-caption Examples on page 3 of the
Prospectus are revised in their entireties as follows:
Florida
Class A Class B Class C
Period: (10) (11) (10) (11)
1 year $ 56 $ 67 $ 17 $24 $14
3 years 75 83 53 43(12) 43
5 years 96 111 91 75 75
10 years 155 178(13) 178(13) 165 165
Michigan
Class A Class B Class C
Period: (10) (11) (10) (11)
1 year $ 58 $ 68 $ 18 $25 $15
3 years 79 86 56 47(12) 47
5 years 102 116 96 81 81
10 years 167 190(13) 190(13) 177 177
Minnesota
Class A Class B Class C
Period: (10) (11) (10) (11)
1 year $ 57 $ 68 $ 18 $25 $15
3 years 78 86 56 46(12) 46
5 years 101 116 96 80 80
10 years 166 189(13) 189(13) 176 176
North Carolina
Class A Class B Class C
Period: (10) (11) (10) (11)
1 year $ 59 $ 69 $ 19 $26 $16
3 years 82 89 59 50(12) 50
5 years 107 122 102 87 87
10 years 180 202(13) 189 189
202(13)
Ohio
Class A Class B Class C
Period: (10) (11) (10) (11)
1 year $ 57 $ 67 $ 17 $24 $14
3 years 76 83 53 44(12) 44
5 years 97 112 92 76 76
10 years 157 180(13) 180(13) 167 167
(10) Assumes redemption at period end.
(11) Assumes no redemption.
(12) Class C shares do no incur a contingent deferred sales charge
on redemptions made after one year. (13) Class B shares automatically convert
to Class A shares after approximately 8 years; therefore years 9 and 10 reflect
Class A share expenses.
(6) Footnote (9) on page 4 of the Prospectus is revised in its entirety as
follows:
(9) The Advisor agreed to waive its fees and bear expenses (exclusive of 12b-1
fees, brokerage commissions, interest, taxes and extraordinary expenses, if
any) to the extent such expenses would otherwise exceed the following
annual percentages of average net assets. The Advisor may terminate the fee
waivers at any time without shareholder approval:
Connecticut Massachusetts
California New York Florida
0.80% 0.60% 0.75%
(7) The first paragraph under the caption HOW THE FUNDS PURSUE THEIR OBJECTIVE
AND CERTAIN RISK FACTORS is revised in its entirety as follows:
Each Fund invests primarily 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 pursuing its after-tax total return objective, the Florida Fund may
invest in securities that are not exempt from the Florida intangibles tax;
however, under normal circumstances, these securities will not be held by the
Florida Fund at December 31, when the Florida intangibles tax is imposed. This
strategy could result in higher portfolio turnover and related transaction costs
and may adversely affect the Florida Fund's total return.
(8) The paragraph Borrowing of Money under the caption HOW THE FUNDS PURSUE
THEIR OBJECTIVE AND CERTAIN RISK FACTORS is revised in its entirety as follows:
Borrowing of Money. Each Fund may borrow money from banks, other affiliated
funds and other entities to the extent permitted by law for temporary or
emergency purposes up to 33 1/3% of its total assets.
(9) Effective July 1, 1998, Maureen G. Newman no longer served as manager of
the Colonial Massachusetts Tax-Exempt Fund.
(10) Effective July 1, 1998, the seventh paragraph under the caption HOW THE
FUNDS ARE MANAGED was revised in its entirety as follows:
Gary Swayze, Vice President of the Advisor, has managed the New York Fund since
September 1997, the California Fund since October 1997, the Connecticut Fund
since November 1997 and the Massachusetts Fund since July 1998. Prior to joining
the Advisor in 1997, Mr. Swayze was a portfolio manager and group leader at
Fidelity Management and Research Company and the writer and editor of a bond
market newsletter.
(11) A new caption is added after HOW THE FUNDS ARE MANAGED entitled YEAR 2000
as follows:
The Fund's Advisor, Distributor and Transfer Agent (Liberty Companies) are
actively managing Year 2000 readiness for the Fund. The Liberty Companies are
taking steps that they believe are reasonably designed to address the Year 2000
problem and are communicating with vendors who provide services, software and
systems to the Fund to provide that date-related information and data can be
properly processed and calculated on and after January 1, 2000. Many Fund
service providers and vendors, including the Liberty Companies, are in the
process of making Year 2000
modifications to their software and systems and believe that such modifications
will be completed on a timely basis prior to January 1, 2000. The Fund will not
pay the cost of these modifications. However, no assurances can be given that
all modifications required to ensure proper data processing and calculation on
and after January 1, 2000 will be timely made or that services to the Fund will
not be adversely affected.
(12) The last sentence of the first paragraph under the caption HOW TO SELL
SHARES is revised in its entirety as follows:
To avoid delay in payment, investors are advised to purchase shares
unconditionally, such as by federal fund wire or other immediate available
funds.
(13) The following sentence is added to the paragraph Class A Shares under the
caption HOW TO EXCHANGE SHARES:
Exchanges of Class A shares are not subject to a contingent deferred sales
charge. However, in determining whether a contingent deferred sales charge is
applicable to redemptions, the schedule of the fund into which the original
investment was made should be used.
(14) The first sentence under the caption TELEPHONE TRANSACTIONS is revised in
its entirety and new second, third, fourth and fifth sentences are added as
follows:
All shareholders and/or their financial advisors are automatically eligible to
exchange Fund shares and redeem up to $100,000 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 redemptions are limited to a total
of $100,000 in a 30-day period. Redemptions that exceed $100,000 may be done by
placing a wire order trade through a broker or furnishing a signature guaranteed
request. Redemptions may also be accomplished by writing a check against the
account for funds allowing checkwriting. Each check written against the account
is limited to a maximum of $100,000.
(15) Liberty Financial Investments, Inc., the Funds' distributor, changed its
name to Liberty Funds Distributor, Inc. (Distributor). The new name does not
affect the investment management of, or service to, the Funds. The Distributor
continues to offer selected investment products managed by subsidiaries of its
parent company, Liberty Financial Companies, Inc. (NYSE:L), the indirect parent
of the Distributor.
(16) Colonial Investors Service Center, Inc., the Funds' transfer agent, changed
its name to Liberty Funds Services, Inc. (Transfer Agent). The new name does not
affect the services the Transfer Agent provides to the Funds.
(17) Price Waterhouse LLP, the Funds' independent accountants, changed its name
to PricewaterhouseCoopers LLP. The new name will not affect the services
PricewaterhouseCoopers LLP provides to the Funds.
SP-36/219G-1198 October 30, 1998
<PAGE>
COLONIAL CALIFORNIA TAX-EXEMPT FUND
COLONIAL CONNECTICUT TAX-EXEMPT FUND
COLONIAL FLORIDA TAX-EXEMPT FUND
COLONIAL MASSACHUSETTS TAX-EXEMPT FUND
COLONIAL MICHIGAN TAX-EXEMPT FUND
COLONIAL MINNESOTA TAX-EXEMPT FUND
COLONIAL NEW YORK TAX-EXEMPT FUND
COLONIAL NORTH CAROLINA TAX-EXEMPT FUND
COLONIAL OHIO TAX-EXEMPT FUND
Supplement to May 29, 1998 Statement of Additional Information
The Funds' Statement of Additional Information (SAI) is amended as follows:
(1) At Special Meetings of Shareholders of the Funds were held on October 30,
1998, the Funds' shareholders approved a number of proposals. As a result of
these approvals, the Funds' SAI is amended as follows:
(a) The first, fifth and sixth fundamental investment policies under the caption
FUNDAMENTAL INVESTMENT POLICIES OF THE FUNDS are revised in their entirety as
follows:
Each Fund may:
1. Borrow from banks, other affiliated funds and other entities to the
extent permitted by applicable law, provided that each Fund's
borrowings shall not exceed 33 1/3% of the value of its total assets
(including the amount borrowed) less liabilities (other than
borrowings) or such other percentage permitted by law.
5. Make loans (a) through lending of securities, (b) through the purchase
of debt instruments or similar evidences of indebtedness typically
sold privately to financial institutions, (c) through an interfund
lending program with other affiliated funds provided that no such loan
may be made if, as a result, the aggregate of such loans would exceed
33 1/3% of the value of its total assets (taken at market value at the
time of such loans) and (d) through repurchase agreements.
6. Not concentrate more than 25% of its total assets in any one industry.
(b) The following policy is added after the non-fundamental investment policies:
Nothwithstanding the investment policies of the Funds, each Fund may invest
substantially all of its investable assets in another investment company that
has substantially the same investment objective, policies and restrictions as
each Fund.
(c) John Carberry, Salvatore Macera, Thomas E. Stitzel and Anne-Lee Verville are
new trustees. As a result, the following information is added to the section
MANAGEDMENT OF THE FUNDS:
John Carberry*, Age 51, is a Senior Vice President of Liberty Financial
Companies, Inc. (formerly Managing Director, Salomon Brothers (investment
banking) from January 1988 to January 1998).
Salvatore Macera, Age 67, is a Private Investor (formerly Executive Vice
President of Itek Corp. and President of Itek Optical &
Electronic Industries, Inc. (electronics)). Trustee: Liberty Variable
Investment Trust, Stein Roe Variable Investment Trust.
Thomas E. Stitzel, Age 58, is a Professor of Finance, College of Business,
Boise State University (higher education); Business
consultant and author. Trustee: Liberty Variable Investment Trust, Stein Roe
Variable Investment Trust.
Anne-Lee Verville, Age 51, is a Consultant (formerly General Manager, Global
Education Industry from 1994 to 1997, and President, Applications Solutions
Division from 1991 to 1994, IBM Corporation (global education and global
applications)).
- -----------------------
*Mr. Carberry is an "interested person," as defined in the Investment Company
Act of 1940 (1940 Act), because of his affiliations with Liberty Financial
Companies, Inc., an indirect majority-owned subsidiary of Liberty Mutual
Insurance Company.
The following table sets forth the compensation paid to Messrs. Macera and
Stitzel in their capacities as Trustees of Liberty Variable Investment Trust
(LVIT), which offers nine funds: Colonial Growth and Income Fund, Variable
Series; Stein Roe Global Utilities Fund, Variable Series; Colonial International
Fund for Growth, Variable Series; Colonial U.S. Stock Fund, Variable Series;
Colonial Strategic Income Fund, Variable Series; Newport Tiger Fund, Variable
Series; Liberty All-Star Equity Fund, Variable Series; Colonial Small Cap Value
Fund, Variable Series and Colonial High Yield Securities Fund, Variable Series,
for serving during the fiscal year ended December 31, 1997:
Total Compensation From LVIT and
Aggregate Investment Companies which are
Trustee 1997 Compensation(a) Series of LVIT in 1997(b)
- ------- ---------------------- -------------------------
Salvatore Macera $12,500 $33,500
Thomas E. Stitzel 12,500 33,500
- -----------------------------
(a) Consists of Trustee fees in the amount of (i) a $5,000 annual
retainer, (ii) a $1,500 meeting fee for each meeting attended in
person and (iii) a $500 meeting fee for each telephone meeting.
(b) Includes Trustee fees paid by LVIT and Stein Roe Variable Investment
Trust.
(2) Stephen E. Gibson is President of the Funds. He replaces Harold W. Cogger.
He is 45 years old and has been President of the Funds since June, 1998,
Chairman of the Board since July, 1998, Chief Executive Officer and President
since December 1996, and; Director, since July 1996 of the Advisor (formerly
Executive Vice President from July, 1996 to December, 1996); Director, Chief
Executive Officer and President of TCG since December, 1996 (formerly Managing
Director of Marketing of Putnam Investments, June, 1992 to July, 1996).
(3) The following paragraph is added to the MANAGEMENT OF THE FUNDS section:
The Trustees have the authority to convert the Funds into a master fund/feeder
fund structure. Under this structure, a Fund may invest all or a portion of its
investable assets in investment companies with substantially the same investment
objectives, policies and restrictions as the Fund. The primary reason to use the
master fund/feeder fund structure is to provide a mechanism to pool, in a single
master fund, investments of different investor classes, resulting in a larger
portfolio, investment and administrative efficiencies and economies of scale.
(4) Liberty Financial Investments, Inc., the Funds' distributor, changed its
name to Liberty Funds Distributor, Inc. (LFDI). The new name does not affect the
investment management of, or service to, the Funds. LFDI continues to offer
selected investment products managed by subsidiaries of Liberty Financial
Companies, Inc. (NYSE:L), the indirect parent of LFDI.
(5) Colonial Investors Service Center, Inc., the Funds' transfer agent, changed
its name to Liberty Funds Services, Inc. (LFSI). The new name will not affect
the services LFSI provides to the Funds.
(6) Price Waterhouse LLP, the Funds' independent accountants, changed its name
to PricewaterhouseCoopers LLP. The new name will not affect the services
PricewaterhouseCoopers LLP provides to the Funds.
SP-39/254G-1198 October 30, 1998
