Registration Nos: 33-41559
811-6347
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF / X /
1933
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 10 / X /
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY / X /
ACT OF 1940
Amendment No. 13 / X /
COLONIAL TRUST VII
(formerly known as Liberty Financial Trust)
(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
Michael H. Koonce Peter MacDougall, Esq.
Colonial Management Associates, Inc. Ropes & Gray
One Financial Center One International Place
Boston, MA 02111 Boston, MA 02110-2624
It is proposed that this filing will become effective (check
appropriate box):
/ / immediately upon filing pursuant to paragraph (b).
/ X / on April 29, 1996 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 PURSUANT TO RULE 24f-2
The Registrant has registered an indefinite number of its shares
of beneficial interest under the Securities Act of 1933 pursuant
to Rule 24f-2 under the Investment Company Act of 1940. On
December 29, 1995, the Registrant filed a Rule 24f-2 Notice in
respect of the fiscal year ended October 31, 1995 for series' of
the Registrant which were terminated on March 27, 1995 and for
the Colonial Newport Tiger Fund series for the period from April
3, 1995 (date of consummation of its reorganization as a series
of the Registrant) through October 31, 1995. A subsequennt Rule
24f-2 Notice in respect of the period from November 1, 1995
through Colonial Newport Tiger Fund series' fiscal year ended
December 31, 1995, was filed on February 27, 1996.
COLONIAL TRUST VII
Cross Reference Sheet
(Colonial Newport Tiger Fund)
(Classes A,B,D,T)
Item Number of Form N1A Location or Caption in
Prospectus
Part A
1. Cover Page
2. Summary of Expenses
3. The Funds' Financial History
4. The Funds' Investment Objective;
Organization and History; How the
Fund Pursues its Objective and
Certain Risk Factors
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. Cover Page; Summary of Expenses;
How to Buy Shares; How the Fund
Values its Shares; 12b-1 Plans;
Back Cover
8. Summary of Expenses; How to Sell
Shares; How to Exchange Shares;
Telephone Transactions
9. Not Applicable
April 29, 1996
COLONIAL NEWPORT TIGER FUND
PROSPECTUS
BEFORE YOU INVEST
Colonial Management Associates, Inc. (Administrator) and your full-
service financial adviser want you to understand both the risks and
benefits of mutual fund investing.
While mutual funds offer significant opportunities and are professionally
managed, they also carry risks including possible loss of principal. Unlike
savings accounts and certificates of deposit, mutual funds are not insured or
guaranteed by any financial institution or government agency.
Please consult your full-service financial adviser to determine how investing in
this mutual fund may suit your unique needs, time horizon and risk tolerance.
Colonial Newport Tiger Fund (Fund), a diversified portfolio of Colonial Trust
VII (Trust), an open-end management investment company, seeks capital
appreciation by investing primarily in equity securities of companies located in
the nine Tigers of Asia (Hong Kong, Singapore, South Korea, Taiwan, Malaysia,
Thailand, Indonesia, China and the
Philippines).
The Fund is managed by Newport Fund Management, Inc. (Adviser), an
investment adviser since 1984 and an affiliate of the Administrator.
The Fund is the successor by merger to the Newport Tiger Fund. The merger
occurred on March 24, 1995. All references to the Fund as of a time prior to
such date are to the Newport Tiger Fund.
This Prospectus explains concisely what you should know before
investing in shares of the Fund. Read it carefully and retain it for
future reference. More detailed information about the Fund is in the April 29,
1996 Statement of Additional Information, which has been filed with the
Securities and Exchange Commission and is obtainable free of charge by calling
the Administrator at 1-800-248-2828. The Statement of Additional Information is
incorporated by reference in (which means it is considered to be a part of) this
Prospectus.
NT-01/860A-0495
The Fund offers multiple 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 six years after purchase; Class D shares are offered at net asset
value plus a small initial sales charge and are subject to a contingent deferred
sales charge on redemptions made within one year after purchase and an annual
distribution fee. Class B shares automatically convert to Class A shares after
approximately eight years. Class T shares may be purchased only by shareholders
of the Newport Tiger Fund as of March 24, 1995, who paid a sales charge when
they purchased shares of that fund and who continue to hold Class T shares at
the time of purchase. See "How to Buy Shares."
Contents Page
Summary of Expenses
The Fund's Financial History
The Fund's Investment Objective
How the Fund Pursues its Objective
and Certain Risk Factors
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
FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED, ENDORSED OR
INSURED BY, ANY BANK OR GOVERNMENT AGENCY. THESE SECURITIES HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
SUMMARY OF EXPENSES
Expenses are one of several factors to consider when investing in the Fund. The
following tables summarize your maximum transaction costs and your annual
operating expenses for an investment in Class A, B, D and T shares of the Fund.
See "How the Fund is Managed" and "12b-1 Plans" for a more complete description
of the Fund's various costs and expenses.
Shareholder Transaction Expenses (1)(2)
Class A Class B Class Class
D T
Maximum Initial Sales Charge
Imposed on a Purchase (as a % of
offering price)(3) 5.75% 0.00%(5) 1.00%(5) 5.75%
Maximum Contingent Deferred Sales
Charge(as a % of offering price) (3) 1.00%(4) 5.00% 1.00% 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) 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 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 8 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 Class T
Management fee(6) 0.77% 0.77% 0.77% 0.77%
12b-1 fees 0.25 1.00 1.00 0.00
Other expenses 0.76 0.76 0.76 0.76
---- ---- ---- ----
Total operating expenses 1.78% 2.53% 2.53% 1.53%
==== ==== ==== ====
(6) For fiscal year 1995, the management fee was 0.79% and does not reflect the
current fees of the Fund.
(7) Other expenses reflect the current fees of the Fund and do not reflect the
prior year's operating results. The Fund operated under different
contracts during a part of the prior year.
Example
The following Example shows the cumulative expenses attributable to a
hypothetical $1,000 investment in Classes A, B, D and T shares of the Fund for
the periods specified, assuming a 5% annual return, and 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 Class T
Period: (8) (9) (8) (9)
1 year $ 75 $ 76 $ 26 $ 45 $ 35 $ 72
3 years $110 $109 $ 79 $ 88 $ 88(10) $103
5 years $148 $154 $134 $143 $143 $136
10 years $254 $268(9)$268(9) $293 $293 $229
(8) Assumes redemption at period end.
(9) Assumes no redemption.
(10) Class B shares automatically convert to Class A shares after
approximately 8 years; therefore, years 9 and 10 reflect Class A share
expenses.
(11) Class D shares do not incur a contingent deferred sales charge on
redemptions made after one year.
THE FUND'S FINANCIAL HISTORY
The following schedules of financial highlights for a share outstanding
throughout the year ended December 31, 1995 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 information presented for each period throughout
December 31, 1994 has been audited by Tait, Weller and Baker, independent
accountants, whose report expressed an unqualified opinion on the financial
highlights. The information presented includes Class Z shares offered by the
Fund through a separate Prospectus. The Fund's current multi-class structure was
not in operation prior to March 24 1995.
<TABLE>
<CAPTION>
Year ended December 31
--------------------------------------------------------------------------
1995
Class A (a) Class B (a) Class D (a) Class T (b) Class Z (b)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value - Beginning of period $10.860 $10.860 $10.860 $10.800 $10.800
-------- -------- -------- -------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.067 (0.003) (0.003) 0.099(c) 0.099(c)
Net realized and unrealized gain (loss) 1.617 1.594 1.615 1.656 1.656
----- ----- ----- ----- -----
Total from Investment Operations 1.684 1.591 1.612 1.755 1.755
----- ----- ----- ----- -----
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.060) (0.037) (0.038) (0.081) (0.081)
From net realized gains (0.024) (0.024) (0.024) (0.024) (0.024)
------ ------ ------ ------ ------
Total Distributions Declared to Shareholders (0.084) (0.061) (0.062) (0.105) (0.105)
------- ------- ------- ------- -------
Net asset value - End of period $12.460 $12.390 $12.410 $12.450 $12.450
======== ======== ======== ======== =======
Total return(d) 15.52%(e) 14.65%(e) 14.85%(e) 16.28% 16.28%
===== ===== ===== ====== ======
RATIOS TO AVERAGE NET ASSETS:
Expenses 1.37%(e) (f) 1.93% (e)(f) 1.93% (e)(f) 1.60%(f) 1.60 (f)
Net investment income 0.28%(e) (f) (0.28)%(e)(f) (0.28)%(e)(f) 0.75% 0.75%
Portfolio turnover 4% 4% 4% 4% 4%
Net assets at end of period (000) $196,870 $112,588 $21,420 $195,986 $345,583
- ---------------------------------
</TABLE>
(a) Class A, Class B, and Class D shares were initially offered on April 1,
1995. Per share data reflects activity from that date and was calculated
using average shares outstanding during the period.
(b) Newport Tiger Fund was reorganized as Colonial Newport Tiger Fund on April
1, 1995. Under the plan of reorganization, existing shareholders of Newport
Tiger Fund received Class T or Class Z shares of Colonial Newport Tiger
Fund. The financial highlights for Classes T and Z are presented as if the
reorganization had occurred on January 1, 1995.
(c) Includes distribution from Taiwan Fund which amounted to $0.013 per share.
(d) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(e) Not annualized.
(f) The benefits derived from custody credits and directed brokerage
arrangements had an impact of 0.07% on Class A, Class B and Class D and
0.11% on Class T and Class Z. Prior year ratios are net of benefits
received, if any.
THE FUND'S FINANCIAL HISTORY (CONT'D)
<TABLE>
<CAPTION>
May 31(f)
Year ended December 31 to
----------------------------------------------------------- December 31
1994 1993 (b) 1992 (b) 1991 (b) 1990 (b) 1989 (b)
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of period $12.440 $7.120 $5.860 $4.650 $5.540 $5.000
-------- ------- ------- ------- ------- ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income $0.060 $0.040 $0.020 ($0.020) $0.010 $0.040
Net realized and unrealized gain (loss) ($1.550) $5.330 $1.270 $1.230 ($0.840) $0.500
-------- ------- ------- ------- -------- ------
Total from Investment Operations ($1.490) $5.370 $1.290 $1.210 ($0.830) $0.540
-------- ------- ------- ------- -------- ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income ($0.040) ($0.040) ($0.020) ---- ($0.030) ----
From net realized gains ($0.110) ($0.010) ---- ---- ---- ----
In excess of net investment income ---- ---- (0.010) ---- ---- ----
From capital paid in ---- ---- ---- ---- ($0.030) ----
------- -------- -------- ------- -------- -------
Total Distributions Declared to Shareholders ($0.150) ($0.050) ($0.030) ---- ($0.060) ----
-------- -------- -------- ------- -------- -------
Net asset value - End of period $10.800 $12.440 $7.120 $5.860 $4.650 $5.540
======== ======== ======= ======= ======= ======
Total return(e) (11.96)% 75.45% 22.02% 26.02% (15.77)% 10.80%
RATIOS TO AVERAGE NET ASSETS:
Expenses 1.29% 1.56% 1.85% 2.49% 2.88%(c) 3.30%(a)(c)
Net investment income 0.57% 0.59% 0.36% (0.40)% 0.05%(d) 2.01%(a)(d)
Portfolio turnover 8% 11% 17% 59% 58% 5%
Net assets at end of period (000) $456,241 $394,883 $98,836 $26,401 $15,000 $4,000
- ---------------------------------
</TABLE>
(a) Annualized.
(b) Reflects 2 for 1 stock split effective November 29, 1993.
(c) 3.34% and 4.97% (annualized) before expense reimbursement for 1990 and
1989, respectively.
(d) (0.41%) and 0.34% (annualized) before expense reimbursement for 1990 and
1989, respectively.
(e) Exclusive of sales charge.
(f) Commencement of operations.
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 capital appreciation by investing primarily in equity securities
of companies located in the nine Tigers of Asia (Hong Kong, Singapore, South
Korea, Taiwan, Malaysia, Thailand, Indonesia, China
and the Philippines).
HOW THE FUND PURSUES ITS OBJECTIVE AND CERTAIN RISK FACTORS
The Fund invests primarily in equity securities of companies located in the nine
Tigers of Asia (Hong Kong, Singapore, South Korea, Taiwan, Malaysia, Thailand,
Indonesia, China and the Philippines). Normally, the Fund will remain fully
invested in equity securities of larger, well-established companies located in
the Tiger countries. Investments in foreign securities, particularly securities
issued by companies located in the Tiger countries, involve special risks. See
"Foreign Investments" below. Dividend income will not be considered in choosing
the investments of the Fund.
Equity Securities. Equity securities include common and preferred stock,
warrants (rights) to purchase stock, debt securities convertible into stock,
sponsored and unsponsored American Depository Receipts (receipts issued in the
U.S. by banks or trust companies evidencing ownership of underlying foreign
securities), Global Depository Receipts (receipts issued by foreign banks or
trust companies) and shares of closed-end investment companies that invest
primarily in the foregoing securities.
Foreign Investments. Investments in foreign securities, American Depository
Receipts and Global Depository Receipts have special risks related to political,
economic and legal conditions outside of the U.S. As a result, the prices of
such securities and, therefore, the net asset value of Fund shares, may
fluctuate substantially more than the prices of securities of issuers based in
the U.S. Special risks associated with foreign securities include the
possibility of unfavorable movements in currency exchange rates, difficulties in
enforcing judgments abroad, the existence of less liquid and less regulated
markets, the unavailability of reliable information about issuers, the existence
of different accounting, auditing and federal standards in foreign countries,
the existence (or potential imposition) of exchange control regulations
(including currency blockage) and political and economic instability, among
others. In addition, transactions in foreign securities may be more costly due
to currency conversion costs and higher brokerage and custodial costs. See
"Foreign Securities" and "Foreign Currency Transactions" in the Statement of
Additional Information for more information about foreign investments.
Substantially all of the Fund's investments will consist of securities issued by
companies located in countries whose economies or securities markets are not yet
highly developed. Special risks associated with these investments (in addition
to the considerations regarding foreign investments generally) may include,
among others, greater political uncertainties, an economy's dependence on
revenues from particular commodities or on international aid or development
assistance, highly limited numbers of potential buyers for such securities,
heightened volatility of security prices, restrictions on repatriation of
capital invested abroad and delays and disruptions in securities settlement
procedures.
Investments in companies located in Hong Kong may be particularly subject to
risks associated with uncertainty over future political, economic and legal
developments due to the anticipated transfer of sovereignty over Hong Kong from
the United Kingdom to China in 1997. A substantial amount of the Fund's
investments have been and may continue to be in companies located in Hong Kong.
Similarly, although securities markets of the Tiger countries, especially China,
have grown and evolved rapidly over the last several years, political, legal,
economic and regulatory systems continue to lag behind those of more developed
countries. Accordingly, the risks that restrictions on repatriation of Fund
investments may be imposed unexpectedly or other limitations on the Fund's
ability to realize on its investments may be instituted are greater with respect
to investments in the Tiger countries.
Other Investment Companies. Up to 10% of the Fund's total assets may be invested
in other investment companies. Such investments will involve the payment of
duplicative fees through the indirect payment of a portion of the expenses,
including advisory fees, of such other investment companies.
Futures Contracts and Foreign Currency Transactions. The Fund may purchase and
sell futures contracts on foreign stock indexes (i) to gain exposure to a
particular market pending investment in individual securities, or (ii) to hedge
against anticipated market declines. A futures contract creates an obligation by
the seller to deliver and the buyer to take delivery of a type of instrument at
the time and in the amount specified in the contract. A sale of a futures
contract can be terminated in advance of the specified delivery date by
subsequently purchasing a similar contract; a purchase of a futures contract can
be terminated by a subsequent sale. Gain or loss on a contract generally is
realized upon such termination. Transactions in futures contracts may not
precisely achieve the goals of hedging or gaining market exposure to the extent
there is an imperfect correlation between the price movements of the contracts
and of the underlying securities. In addition, if the Adviser's prediction on
stock market movements is inaccurate, the Fund may be worse off than if it had
not hedged.
In connection with its investments in foreign securities, the Fund may purchase
and sell foreign currencies on a spot or forward basis. Such transactions will
be entered into (i) to lock in a particular foreign exchange rate pending
settlement of a purchase or sale of a foreign security or pending the receipt of
interest, principal or dividend payments on a foreign security held by the Fund,
or (ii) to hedge against a decline in the value, in U.S. dollars or in another
currency, of a foreign currency in which securities held by the Fund are
denominated. The Fund will not attempt, nor would it be able, to eliminate all
foreign currency risk. Further, although hedging may lessen the risk of loss if
the hedged currency's value declines, it limits the potential gain from currency
value increases. See the Statement of Additional Information for information
relating to the Fund's obligations in entering into such transactions.
Leverage. The purchase and sale of foreign currencies on a forward basis may
present additional risks associated with the use of leverage. Leverage may
magnify the effect on Fund shares of fluctuations in the values of the
securities underlying these transactions. In accordance with Securities and
Exchange Commission pronouncements, to reduce (but not necessarily eliminate)
leverage, the Fund will either "cover" its obligations under such transactions
by holding the currency (or rights to acquire the currency) it is obligated to
deliver under such contracts, or deposit and maintain in a segregated account
with its custodian high quality liquid debt securities, or equity securities
denominated in the particular currency, equal in value to the Fund's obligations
under such contracts.
Temporary/Defensive Investments. Temporarily available cash may be invested in
U.S. or foreign currency denominated cash equivalents and short-term debt
obligations, including certificates of deposit, time deposits, bankers'
acceptances, commercial paper, Treasury bills and repurchase agreements. Some or
all of the Fund's assets also may be invested in such investments or in
investment grade U.S. or foreign debt securities during periods of unusual
market conditions. The values of debt securities generally fluctuate inversely
with changes in interest rates. 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 segregated by the Fund's custodian, and
constitutes the Fund's collateral for the bank's or dealer's repurchase
obligation. Additional collateral may 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 rights
to the collateral in a bankruptcy proceeding.
Other. The Fund may not always achieve its investment objective. The Fund's
non-fundamental policies may be changed without shareholder approval. The Fund's
investment objective and 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. 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 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 5.75% on Class A and Class T
shares, 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
rather than 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 year's distribution by the maximum offering price of
that Class at the end of the year. 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. 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 an indirect subsidiary of Liberty Financial Companies, Inc.
(Liberty Financial), which in turn is an indirect subsidiary of Liberty Mutual
Insurance Company.
The Administrator is a subsidiary of The Colonial Group, Inc., which in turn is
a direct subsidiary of Liberty Financial. Liberty Mutual is considered to be the
controlling entity of the Adviser, the Administrator and their affiliates.
Liberty Mutual is an underwriter of workers' compensation insurance and a
property and casualty insurer in the U.S.
Colonial Investment Services, Inc. (Distributor), is a subsidiary of
the Administrator 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 Adviser furnishes the Fund with investment management services at the
Adviser's expense. For these services, the Fund pays the Adviser a monthly fee
at the annual rates of 1.00% of the Fund's average daily net assets up to $100
million and 0.75% of net assets over such amount. For these services, the Fund
paid the Adviser 0.79% of the Fund's average daily net assets for fiscal year
1995. This fee is higher than that paid by most other investment companies,
although it is comparable to that paid by many investment companies investing in
foreign securities.
John M. Mussey and Thomas R. Tuttle, President and Senior Vice
President, respectively, of the Adviser, co-manage the Fund. Messrs.
Mussey and Tuttle have each co-managed the Fund since 1989 and 1995,
respectively. Messrs. Mussey and Tuttle also are President and
Director, and Senior Vice President, respectively, of Newport Pacific
Management, Inc. (Newport Pacific), the Adviser's immediate parent,
and have each managed other funds or accounts on their behalf since
1983. See "Management of the Fund" in the Statement of Additional
Information for more information.
The Administrator provides certain administrative services to the Fund, for
which the Fund pays the Administrator a monthly fee at the annual rate of 0.25%
of the Fund's average daily net assets for such services. The Administrator 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 monthly fee at the annual rate of 0.25% of average daily net assets plus
certain out-of-pocket expenses.
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.
Brown Brothers Harriman & Co. provides custodial services to the Fund.
The fees payable to the Adviser, the Administrator and their affiliates are
subject to any reimbursement or fee waiver to which the Adviser or the
Administrator may agree.
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. In certain
countries, the Fund may hold foreign designated shares. If the foreign share
prices are not readily available as a result of limited share activity, the
securities are valued at the last sale price of the local shares in the
principal market in which such securities are normally traded. Korean equity
securities that have reached the limit for aggregate foreign ownership and for
which premiums to the local exchange prices may be paid by foreign investors are
valued by applying a broker quoted premium to the local share price. 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 annually in December. 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. If you
buy shares shortly before a distribution is declared, the distribution will be
taxable although it is in effect a partial return of the amount invested. Each
January, information on the amount and nature of distributions for the prior
year is sent to shareholders.
HOW TO BUY SHARES
Shares of the Fund are offered continuously. Orders received in good form prior
to the time at which the Fund values its shares (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; 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 Classes B, D or T shares and there are
some limitations on the issuance of Class A share 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
0.25% annual service fee, plus an initial or a contingent deferred sales charge
as follows:
Initial Sales Charge
--------------------
Retained
by Financial
Service
Firm
as % of as % of
-------
Amount Offering Offering
Amount Purchase Invested Price Price
Less than $50,000 6.10% 5.75% 5.00%
$50,000 to less than
$100,000 4.71% 4.50% 3.75%
$100,000 to less
than $250,000 3.63% 3.50% 2.75%
$250,000 to less
than $500,000 2.56% 2.50% 2.00%
$500,000 to less
than $1,000,000 2.04% 2.00% 1.75%
$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 0.75% annual distribution fee for
approximately eight years (at which time they automatically 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. 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
After Deferred
Purchase Sales Charge
0-1 5.00%
1-2 4.00%
2-3 3.00%
3-4 3.00%
4-5 2.00%
5-6 1.00%
More than 6 0.00%
Year one ends one year after the end of the month in which the purchase was
accepted and so on. The Distributor pays financial service firms a commission of
4.00% on Class B share purchases.
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.
Class T Shares. Class T shares may be purchased only by shareholders of the
Newport Tiger Fund as of March 24, 1995, who paid a sales charge when they
purchased their shares of the Fund and who continue to hold Class T shares at
the time of purchase. Class T shares are offered at net asset value plus an
initial or 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 $50,000 6.10% 5.75% 5.00%
$50,000 to less than $100,000 4.71% 4.50% 3.75%
$100,000 to less than $250,000 3.63% 3.50% 2.75%
$250,000 to less than $500,000 2.56% 2.50% 2.00%
$500,000 to less than $1,000,000 2.04% 2.00% 1.75%
$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.
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 charges, 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.
Each Class's performance may differ due to differences in sales charges and Rule
12b-1 fees. Which Class is more beneficial to an investor depends on the amount
and intended length of the investment. Large investments, qualifying for a
reduced Class A sales charge, avoid the distribution fee applicable to Classes B
and D. Investments in Class B shares have 100% of the purchase invested
immediately, but are subject to the 0.75% annual distribution fee. Investors
investing for a relatively short period of time might consider Class D shares.
Purchases of $250,000 or more must be for Classes A, D or T shares. Purchases of
$500,000 or more must be for Classes A or T shares. Class T shares may be
purchased only by certain shareholders of the Newport Tiger Fund as of March 24,
1995. Consult your financial service firm.
The Fund also offers Class Z shares, which are offered through a separate
Prospectus only to (i) certain shareholders of the Newport Tiger Fund as of
March 24, 1995, who purchased their shares of that fund at net asset value, (ii)
employees of the Administrator and its affiliates and (iii) certain institutions
and defined benefit retirement plans investing a minimum of $5 million of the
Fund. Class Z shares have no initial or contingent deferred sales charge and no
Rule 12b-1 fee. Otherwise, the Class Z share expenses are the same as Classes A,
B, D and T. Class Z shares are exchangeable only for Class A shares of the other
Colonial funds.
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. Investors may be
charged a fee if they effect transactions in fund shares through a broker or
agent
Special Purchase Programs. The Fund allows certain investors or
groups of investors to purchase shares at a reduced, or without an,
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 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 at which 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. 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 all classes, so you may not be able
to exchange into all of the other Colonial funds. Shares will continue to age
without regard to the exchange for purposes of conversion and in determining the
contingent deferred sales charge, if any, upon redemption. Carefully read the
prospectus of the fund into which the exchange will go before submitting the
request. Call 1-800-248-2828 to receive a prospectus and an exchange
authorization form. Call 1-800-422-3737 to exchange shares by telephone. An
exchange is a taxable capital transaction. The exchange service may be changed,
suspended or eliminated on 60 days' written notice.
Class A Shares. An exchange from a money market fund into a non-money market
fund will be at the applicable offering price next determined (including sales
charge), except for amounts on which an initial sales charge was paid. Non-money
market fund shares must be held for five months before qualifying for exchange
to a fund with a higher sales charge, after which exchanges are made at the net
asset value next determined.
Class B Shares. Exchanges of Class B shares are not subject to the contingent
deferred sales charge. However, if shares are redeemed within six years after
the original purchase, a contingent deferred sales charge will be assessed using
the schedule of the fund 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.
Class T Shares. No other Colonial fund offers Class T shares. Class T shares of
the Fund may be exchanged into the Class A shares of any other Colonial fund.
However, if a Class T shareholder exchanges into the Class A shares of another
fund and then exchanges back to the Fund, the latter exchange will be made into
the Fund's Class A shares.
TELEPHONE TRANSACTIONS
All shareholders and/or their financial advisers are automatically eligible to
exchange Fund shares by telephone and may 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 Transfer Agent will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine and, if it does
not, may be liable for any losses due to unauthorized or fraudulent telephone
transactions. 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 Administrator, 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 an annual service fee of 0.25%
of the Fund's average net assets attributed to Classes A, B and D shares. The
Fund also pays the Distributor an annual distribution fee of 0.75% of the
average net assets attributed to Classes B and D shares. Because Classes B and D
shares bear additional distribution fees, their dividends will be lower than the
dividends of Class A shares. Dividends on Class A shares will be lower than the
dividends of Class T shares since Class T shares do not bear a service fee.
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 opinions of
counsel or 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 and the Administrator) which may be construed to be indirect financing
of sales of Fund shares.
ORGANIZATION AND HISTORY
The Fund is the successor by merger to the Newport Tiger Fund, which commenced
operations in 1989. The Fund was organized in 1994 as a separate portfolio of
the Trust, which is a Massachusetts business trust organized in 1991.
The Trust is not required to hold annual shareholder meetings, but special
meetings may be called for certain purposes. Shareholders receive one vote for
each Fund share. 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 Trust. However, the Trust's
Declaration of Trust (Declaration) disclaims shareholder liability for acts or
obligations of the Fund and the Trust 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 (which are considered remote) in which the Fund would
be unable to meet its obligations and the disclaimer was inoperative. The risk
of a particular fund incurring financial loss on account of another fund of the
Trust is also believed to be remote because it would be limited to circumstances
in which the disclaimer was inoperative and the other fund was unable to meet
its obligations.
Investment Adviser
Newport Fund Management, Inc.
580 California Street, Suite 1960
San Francisco, CA 94104
Administrator
Colonial Management Associates, Inc.
One Financial Center
Boston, MA 02111-2621
Distributor
Colonial Investment Services, Inc.
One Financial Center
Boston, MA 02111-2621
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109
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.
April 29, 1996
COLONIAL NEWPORT TIGER FUND
PROSPECTUS
Colonial Newport Tiger Fund seeks capital appreciation by investing primarily in
equity securities of companies located in the nine Tigers of Asia (Hong Kong,
Singapore, South Korea, Taiwan, Malaysia, Thailand, Indonesia, China and the
Philippines).
For more detailed information about the Fund, call the Administrator at
1-800-248-2828 for the April 29, 1996 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, & 7.
To apply for special services for a new or existing account, complete sections
4, 5, 6, or 8 as appropriate.
___ Please check here if this is a revision.
1-----------Account Ownership--------------
Please choose one of the following.
__Individual: Print your name, Social Security #, U.S. citizen status.
__Joint Tenant: Print all names, the Social Security # for the first person,
and his/her U.S. citizen status.
__Uniform Gift to Minors: Name of custodian and minor, minor's Social Security
#, minor's U.S. citizen status.
__Corporation, Association, Partnership: Include full name, Taxpayer I.D. #.
__Trust: Name of trustee, trust title & date, and trust's Taxpayer I.D. #.
______________________________________
Name of account owner
______________________________________
Name of joint account owner
______________________________________
Street address
______________________________________
Street address
______________________________________
City, State, and Zip
______________________________________
Daytime phone number
______________________________________
Social Security # or Taxpayer I.D. #
Are you a U.S. citizen? Yes___ No___
______________________________________
If no, country of permanent residence
______________________________________
Owner's date of birth
______________________________________
Account number (if existing account)
2 -----Colonial Fund(s) You Are Purchasing--------
Your investment will be made in Class A shares if no class is indicated.
Certificates are not available for Class B 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 Fund Fund
1_______________ 2__________________ 3____________________
$_______________ $__________________ $____________________
Amount Amount Amount
Class
___ A Shares ___ B Shares (less than $250,000) ___ C Shares (Adjustable Rate
U.S. Government Fund only)
___ D Shares (less than $500,000, available on certain funds; see prospectus)
Method of Payment
Choose one
___Check payable to the Fund
___Bank wired on (Date) ____/____/____
Wire confirmation #
___Wire/Trade confirmation #___________________
Ways to Receive Your Distributions
Choose one
___Reinvest dividends and capital gains
___Dividends and capital gains in cash
___Dividends in cash; reinvest capital gains
___Automatic Dividend Diversification See section 5A, inside
___Direct Deposit via Colonial Cash Connection Complete Bank Information
in section 4B. I understand that my bank must be a member of the
Automated Clearing House (ACH).
Distributions of $10.00 or less will automatically be reinvested in additional
fund shares.
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.
You must cross out item 2a, b or c below only if you have been notified by the
Internal Revenue Service (IRS) that you are currently subject to back-up
withholding because of under-reporting interest or dividends on you tax return.
2. I am not subject to back-up withholding because: (a) I am exempt from back-
up withholding, or (b) I have not been notified by the IRS that I am
subject to back-up withholding as a result of a failure to report all
interest or dividends, or (c) the IRS has notified me that I am no longer
subject to back-up 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. If you receive your SWP payment via ACH, you
may request it to be processed any day of the month. Withdrawals in excess of
12% annually of your current account value will not be accepted. Redemptions
made in addition to SWP 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 _____/_____ (day/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 _____/_____ (day/month).
Payment Instructions
Send the payment to (choose one):
__My address of record.
__My bank account via Colonial Cash Connection (through electronic funds
transfer). Please complete the Bank Information section below. All ACH
transactions will be made two business days after the processing date
My bank must be a member of the Automated Clearing House (ACH) system.
__The payee listed at right. If more than one payee, provide the name,
address, payment amount, and frequency for other payees (maximum of 5) on
a separate sheet. If you are adding this service to an existing account,
please sign below and have your signature(s) guaranteed.
______________________________________________
Name of payee
______________________________________________
Address of payee
______________________________________________
City
______________________________________________
State Zip
______________________________________________
Payee's bank account number, if applicable
B. Telephone Withdrawal Options
All telephone transaction calls are recorded. These options are not available
for retirement accounts. Please sign below and have your signature(s)
guaranteed.
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 of record. For your protection, this service is only available on
accounts that have not had an address change within 30 days of the redemption
request.
2. Telephone Redemption
__I would like the Telephone Redemption privilege either by federal fund wire
or ACH. Telephone redemptions over $1,000 will be sent via federal fund wire,
usually on hte next business day ($7.50 will be deducted). Redemptions of
$1,000 or less will be sent by check to your designated bank.
3. On-Demand ACH Redemption
__I would like the On-Demand ACH Redemption Privilege. Proceeds paid via ACH
will be credited to your bank account two business days after the process
date. You or your financial adviser may withdraw shares from you fund acount
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.
Bank Information (For Sections A and B 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)
X__________________________________
Signature of account owner(s)
X__________________________________
Signature of account owner(s) Place signature guarantee here.
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. Accounts must be identically registered. I have
carefully read the prospectus for the fund(s) listed below.
1____________________________
From fund
____________________________
Account number (if existing)
____________________________
To fund
____________________________
Account number (if existing)
2____________________________
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 exchanged into the same share
class of up to four other identically registered Colonial accounts, on a
monthly basis. The minimum amount for each exchange is $100. Please complete
the section below.
____________________________________
Fund from which shares will be sold
$_________________________
Amount to redeem monthly
1____________________________________
Fund to invest shares in
$_________________________
Amount to invest monthly
2____________________________________
Fund to invest shares in
$_________________________
Amount to invest monthly
C. Fundamatic/On-Demand ACH Purchase
Fundamatic automatically transfers the specified amount from your bank
checking account to your Colonial fund account. The On-Demand ACH Purchase
program moves money from you bank checking account to your Colonial Fund
account by electronic funds transfer on any specified day of the month.
You will receive the applicable price two business days after the receipt
of your request. 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.
1____________________________________
Fund name
_________________________________
Account number
$_____________________ _________________
Amount to transfer Month to start
2___________________________________
Fund name
$_____________________ _________________
Amount to transfer Month to start
Frequency
__Monthly or __Quarterly
Check one:
__ACH (Any day of the month)
__Paper Draft
(Choose either the 5th__ or 20th__ day of the month)
Authorization to honor checks drawn by Colonial Investors Service Center,
Inc. Do Not Detach. Make sure all depositors on the bank account sign to
the far right. Please attach a blank check marked "VOID" here. See reverse
for bank instructions.
I authorize Colonial to draw on my bank account, by check or electronic funds
transfer, for an investment in a Colonial fund. Colonial and my bank are not
liable for any loss arising from delays or dishonored draws. If a draw is not
honored, I understand that notice may not be given and Colonial may reverse
the purchase and charge my account $15.
______________________________________
Bank name
______________________________________
Bank street address
______________________________________
Bank street address
______________________________________
City State Zip
______________________________________
Bank account number
______________________________________
Bank routing #
X_____________________________________
Depositor's Signature(s)
Exactly as appears on bank records
X_____________________________________
Depositor's Signature(s)
Exactly as appears on bank records
6------------Ways to Reduce Your Sales Charges------------
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 any other 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.
1_____________________________________
Name on account
_____________________________________
Account number
2_____________________________________
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.
7-------------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, Inc., of any purchase made under a Statement
of Intent, Right of Accumulation, or Sponsored Arrangement. We guarantee the
signatures on this application and the legal capacity of the signers.
_____________________________________
Representative's name
_____________________________________
Representative's number
_____________________________________
Representative's phone number
_____________________________________
Account # for client at financial
service firm
_____________________________________
Branch office address
_____________________________________
City
_____________________________________
State Zip
_____________________________________
Branch office number
_____________________________________
Name of financial service firm
_____________________________________
Main office address
_____________________________________
Main office address
_____________________________________
City
_____________________________________
State Zip
X____________________________________
Authorized signature
8----------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. Please
indicate accounts to be linked.______________________
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 Investment Services, 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-224B-1295
COLONIAL TRUST VII
Cross Reference Sheet
(Colonial Newport Tiger Fund)
(Class Z)
Item Number of Form N1A Location or Caption in
Prospectus
Part A
1. Cover Page
2. Summary of Expenses
3. The Funds' Financial History
4. The Funds' Investment Objective;
Organization and History; How the
Fund Pursues its Objective and
Certain Risk Factors
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. Cover Page; Summary of Expenses;
How to Buy Shares; How the Fund
Values its Shares; Back Cover
8. Summary of Expenses; How to Sell
Shares; How to Exchange Shares;
Telephone Transactions
9. Not Applicable
April 29, 1996
COLONIAL NEWPORT TIGER FUND
CLASS Z SHARES
PROSPECTUS
BEFORE YOU INVEST
Colonial Management Associates, Inc. (Administrator) and your full-service
financial adviser want you to understand both the risks and benefits of mutual
fund investing.
While mutual funds offer significant opportunities and are professionally
managed, they also carry risk 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
and Certain Risk Factors
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
Organization and History
NT-XX-0496
Colonial Newport Tiger Fund (Fund), a diversified portfolio of Colonial Trust
VII (Trust), an open-end management investment company, seeks capital
appreciation by investing primarily in equity securities of companies located in
the nine Tigers of Asia (Hong Kong, Singapore, South Korea, Taiwan, Malaysia,
Thailand, Indonesia, China and the Philippines).
The Fund is managed by Newport Fund Management, Inc. (Adviser), an investment
adviser since 1984 and an affiliate of the Administrator.
The Fund is the successor by merger to the Newport Tiger Fund. The merger
occurred on March 24, 1995. All references to the Fund as of a time prior to
such date are to the Newport Tiger Fund.
This Prospectus explains concisely what you should know before investing in
Class Z shares of the Fund. Read it carefully and retain it for future
reference. More detailed information about the Fund is in theApril 29, 1996
Statement of Additional Information, which has been filed with the Securities
and Exchange Commission and is obtainable free of charge by calling the
Administrator at 1-800-248-2828. The Statement of Additional Information is
incorporated by reference in (which means it is considered to be a part of) this
Prospectus.
Class Z shares may be purchased only by (i) those shareholders of the Newport
Tiger Fund as of March 24, 1995, who purchased their shares of that fund at net
asset value and who continue to hold Class Z shares and (ii) employees of the
Administrator and its affiliates. Class Z shares of the Fund may be purchased by
certain institutions (including certain insurance companies and banks investing
for their own account, trusts, endowment funds, foundations and investment
companies) and defined benefit retirement plans investing a minimum of $5
million in the Fund. Colonial Investment Services, Inc. (the Distributor), a
subsidiary of the Administrator, may pay financial service firms a finder's fee
on such purchases, payable in quarterly installments during the first year after
purchase. Each installment will equal 1/4 of 0.15% of the value of the shares at
the time the installment is calculated. Class Z shares of the Fund also may be
purchased by clients of investment advisers whose clients' aggregate investment
in the Fund equals or exceeds $5 million.
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.
<PAGE>
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 Class Z shares of the Fund. See "How the Fund is
Managed" for a more complete description of the Fund's various costs and
expenses.
Shareholder Transaction Expenses (1)(2)
Maximum Initial Sales Charge Imposed on a Purchase
(as a % of offering price) 0.00%
Maximum Contingent Deferred Sales Charge
(as a % of offering price) 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.
Annual Operating Expenses (as a % of average net assets)
Management fee(3) 0.77%
12b-1 fees 0.00%
Other expenses 0.76%
-----
Total operating expenses 1.53%
=====
(3) For fiscal year 1995, the management fee was 0.79% and does not reflect the
current fees of the Fund.
(4) Other expenses reflect the current fees of the Fund and do not reflect the
prior year's operating results. The Fund operated under different
contracts during a part of the prior year.
The Adviser and the Administrator have voluntarily agreed until March 31, 1997,
to waive or bear certain Fund expenses to the extent necessary to limit the
Fund's expenses to 1.55% per annum of average daily net assets.
Example
The following Example shows the cumulative expenses attributable to a
hypothetical $1,000 investment in Class Z shares of the Fund for the periods
specified, assuming a 5% annual return with or without 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:
1 year $ 16
3 years $ 48
5 years $ 83
10 years $182
THE FUND'S FINANCIAL HISTORY
The following schedules of financial highlights for a share outstanding
throughout the year ended December 31, 1995, 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 information presented for each period
through December 31, 1994 has been audited by Tait, Weller and Baker,
independent accountants, whose report expressed an opinion on the financial
highlights. The information presented includes other classes of shares offered
by the Fund. The Fund's current multi-class structure was not in operation prior
to March 24, 1995.
<TABLE>
<CAPTION>
Year ended December 31
--------------------------------------------------------------------------
1995
Class A (a) Class B (a) Class D (a) Class T (b) Class Z (b)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value - Beginning of period $10.860 $10.860 $10.860 $10.800 $10.800
-------- -------- -------- -------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.067 (0.003) (0.003) 0.099(c) 0.099(c)
Net realized and unrealized gain (loss) 1.617 1.594 1.615 1.656 1.656
----- ----- ----- ----- -----
Total from Investment Operations 1.684 1.591 1.612 1.755 1.755
----- ----- ----- ----- -----
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.060) (0.037) (0.038) (0.081) (0.081)
From net realized gains (0.024) (0.024) (0.024) (0.024) (0.024)
------ ------ ------ ------ ------
Total Distributions Declared to Shareholders (0.084) (0.061) (0.062) (0.105) (0.105)
------- ------- ------- ------- -------
Net asset value - End of period $12.460 $12.390 $12.410 $12.450 $12.450
======== ======== ======== ======== =======
Total return(d) 15.52%(e) 14.65%(e) 14.85%(e) 16.28% 16.28%
===== ===== ===== ====== ======
RATIOS TO AVERAGE NET ASSETS:
Expenses 1.37%(e) (f) 1.93% (e)(f) 1.93% (e)(f) 1.60%(f) 1.60 (f)
Net investment income 0.28%(e) (f) (0.28)%(e)(f) (0.28)%(e)(f) 0.75% 0.75%
Portfolio turnover 4% 4% 4% 4% 4%
Net assets at end of period (000) $196,870 $112,588 $21,420 $195,986 $345,583
- ---------------------------------
</TABLE>
(a) Class A, Class B, and Class D shares were initially offered on April 1,
1995. Per share data reflects activity from that date and was calculated
using average shares outstanding during the period.
(b) Newport Tiger Fund was reorganized as Colonial Newport Tiger Fund on April
1, 1995. Under the plan of reorganization, existing shareholders of Newport
Tiger Fund received Class T or Class Z shares of Colonial Newport Tiger
Fund. The financial highlights for Classes T and Z are presented as if the
reorganization had occurred on January 1, 1995.
(c) Includes distribution from Taiwan Fund which amounted to $0.013 per share
(d) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(e) Not annualized.
(f) The benefits derived from custody credits and directed brokerage
arrangements had an impact of 0.07% on Class A, Class B and Class D and
0.11% on Class T and Class Z. Prior year ratios are net of benefits
received, if any.
<PAGE>
THE FUND'S FINANCIAL HISTORY (CONT'D)
<TABLE>
<CAPTION>
May 31(f)
Year ended December 31 to
----------------------------------------------------------- December 31
1994 1993 (b) 1992 (b) 1991 (b) 1990 (b) 1989 (b)
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of period $12.440 $7.120 $5.860 $4.650 $5.540 $5.000
-------- ------- ------- ------- ------- ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income $0.060 $0.040 $0.020 ($0.020) $0.010 $0.040
Net realized and unrealized gain (loss) ($1.550) $5.330 $1.270 $1.230 ($0.840) $0.500
-------- ------- ------- ------- -------- ------
Total from Investment Operations ($1.490) $5.370 $1.290 $1.210 ($0.830) $0.540
-------- ------- ------- ------- -------- ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income ($0.040) ($0.040) ($0.020) ---- ($0.030) ----
From net realized gains ($0.110) ($0.010) ---- ---- ---- ----
In excess of net investment income ---- ---- (0.010) ---- ---- ----
From capital paid in ---- ---- ---- ---- ($0.030) ----
------- -------- -------- ------- -------- -------
Total Distributions Declared to Shareholders ($0.150) ($0.050) ($0.030) ---- ($0.060) ----
-------- -------- -------- ------- -------- -------
Net asset value - End of period $10.800 $12.440 $7.120 $5.860 $4.650 $5.540
======== ======== ======= ======= ======= ======
Total return(e) (11.96)% 75.45% 22.02% 26.02% (15.77)% 10.80%
RATIOS TO AVERAGE NET ASSETS:
Expenses 1.29% 1.56% 1.85% 2.49% 2.88%(c) 3.30%(a)(c)
Net investment income 0.57% 0.59% 0.36% (0.40)% 0.05%(d) 2.01%(a)(d)
Portfolio turnover 8% 11% 17% 59% 58% 5%
Net assets at end of period (000) $456,241 $394,883 $98,836 $26,401 $15,000 $4,000
- ---------------------------------
</TABLE>
(a) Annualized.
(b) Reflects 2 for 1 stock split effective November 29, 1993.
(c) 3.34% and 4.97% (annualized) before expense reimbursement for 1990 and
1989, respectively.
(d) (0.41%) and 0.34% (annualized) before expense reimbursement for 1990 and
1989, respectively.
(e) Exclusive of sales charge.
(f) Commencement of operations.
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.
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks capital appreciation by investing primarily in equity securities
of companies located in the nine Tigers of Asia (Hong Kong, Singapore, South
Korea, Taiwan, Malaysia, Thailand, Indonesia, China and the Philippines).
HOW THE FUND PURSUES ITS OBJECTIVE AND CERTAIN RISK FACTORS
The Fund invests primarily in equity securities of companies located in the nine
Tigers of Asia (Hong Kong, Singapore, South Korea, Taiwan, Malaysia, Thailand,
Indonesia, China and the Philippines). Normally, the Fund will remain fully
invested in equity securities of companies located in the Tiger countries.
Investments in foreign securities, particularly securities issued by larger,
well-established companies located in the Tiger countries, involve special
risks. See "Foreign Investments" below. Dividend income will not be considered
in choosing the investments of the Fund.
Equity Securities. Equity securities include common and preferred stock,
warrants (rights) to purchase stock, debt securities convertible into stock,
sponsored and unsponsored American Depository Receipts (receipts issued in the
U.S. by banks or trust companies evidencing ownership of underlying foreign
securities), Global Depository Receipts (receipts issued by foreign banks or
trust companies) and shares of closed-end investment companies that invest
primarily in the foregoing securities.
Foreign Investments. Investments in foreign securities, American Depository
Receipts and Global Depository Receipts have special risks related to political,
economic and legal conditions outside of the U.S. As a result, the prices of
such securities and therefore, the net asset value of Fund shares, may fluctuate
substantially more than the prices of securities of issuers based in the U.S.
Special risks associated with foreign securities include the possibility of
unfavorable movements in currency exchange rates, difficulties in enforcing
judgments abroad, the existence of less liquid and less regulated markets, the
unavailability of reliable information about issuers, the existence of different
accounting, auditing and financial standards in foreign countries, the existence
(or potential imposition) of exchange control regulations (including currency
blockage) and political and economic instability, among others. In addition,
transactions in foreign securities may be more costly due to currency conversion
costs and higher brokerage and custodial costs. See "Foreign Securities" and
"Foreign Currency Transactions" in the Statement of Additional Information for
more information about foreign investments.
Substantially all of the Fund's investments will consist of securities issued by
companies located in countries whose economies or securities markets are not yet
highly developed. Special risks associated with these investments (in addition
to the considerations regarding foreign investments generally) may include,
among others, greater political uncertainties, an economy's dependence on
revenues from particular commodities or on international aid or development
assistance, highly limited numbers of potential buyers for such securities,
heightened volatility of security prices, restrictions on repatriation of
capital invested abroad and delays and disruptions in securities settlement
procedures.
Investments in companies located in Hong Kong may be particularly subject to
risks associated with uncertainty over future political, economic and legal
developments due to the anticipated transfer of sovereignty over Hong Kong from
the United Kingdom to China in 1997. A substantial amount of the Fund's
investments have been and may continue to be in companies located in Hong Kong.
Similarly, although securities markets of the Tiger countries, especially China,
have grown and evolved rapidly over the last several years, political, legal,
economic and regulatory systems continue to lag behind those of more developed
countries. Accordingly, the risks that restrictions on repatriation of Fund
investments may be imposed unexpectedly or other limitations on the Fund's
ability to realize on its investments may be instituted are greater with respect
to investments in the Tiger countries.
Other Investment Companies. Up to 10% of the Fund's total assets may be invested
in other investment companies. Such investments will involve the payment of
duplicative fees through the indirect payment of a portion of the expenses,
including advisory fees, of such other investment companies.
Futures Contracts and Foreign Currency Transactions. The Fund may purchase and
sell futures contracts on foreign stock indexes (i) to gain exposure to a
particular market pending investment in individual securities, or (ii) to hedge
against anticipated market declines. A futures contract creates an obligation by
the seller to deliver and the buyer to take delivery of a type of instrument at
the time and in the amount specified in the contract. A sale of a futures
contract can be terminated in advance of the specified delivery date by
subsequently purchasing a similar contract; a purchase of a futures contract can
be terminated by a subsequent sale. Gain or loss on a contract generally is
realized upon such termination. Transactions in futures contracts may not
precisely achieve the goals of hedging or gaining market exposure to the extent
there is an imperfect correlation between the price movements of the contracts
and of the underlying securities. In addition, if the Adviser's prediction on
stock market movements is inaccurate, the Fund may be worse off than if it had
not hedged.
In connection with its investments in foreign securities, the Fund may purchase
and sell foreign currencies on a spot or forward basis. Such transactions will
be entered into (i) to lock in a particular foreign exchange rate pending
settlement of a purchase or sale of a foreign security or pending the receipt of
interest, principal or dividend payments on a foreign security held by the Fund,
or (ii) to hedge against a decline in the value, in U.S. dollars or in another
currency, of a foreign currency in which securities held by the Fund are
denominated. The Fund will not attempt, nor would it be able, to eliminate all
foreign currency risk. Further, although hedging may lessen the risk of loss if
the hedged currency's value declines, it limits the potential gain from currency
value increases. See the Statement of Additional Information for information
relating to the Fund's obligations in entering into such transactions.
Leverage. The purchase and sale of foreign currencies on a forward basis may
present additional risks associated with the use of leverage. Leverage may
magnify the effect on Fund shares of fluctuations in the values of the
securities underlying these transactions. In accordance with Securities and
Exchange Commission pronouncements, to reduce (but not necessarily eliminate)
leverage, the Fund will either "cover" its obligations under such transactions
by holding the currency (or rights to acquire the currency) it is obligated to
deliver under such contracts, or deposit and maintain in a segregated account
with its custodian high quality liquid debt securities, or equity securities
denominated in the particular currency, equal in value to the Fund's obligations
under such contracts.
Temporary/Defensive Investments. Temporarily available cash may be invested in
U.S. or foreign currency denominated cash equivalents and short-term debt
obligations, including certificates of deposit, time deposits, bankers'
acceptances, commercial paper, Treasury bills and repurchase agreements. Some or
all of the Fund's assets also may be invested in such investments or in
investment grade U.S. or foreign debt securities during periods of unusual
market conditions. The values of debt securities generally fluctuate inversely
with changes in interest rates. 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 segregated by the Fund's custodian, and
constitutes the Fund's collateral for the bank's or dealer's repurchase
obligation. Additional collateral may 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 rights
to the collateral in a bankruptcy proceeding.
Other. The Fund may not always achieve its investment objective. The Fund's
non-fundamental policies may be changed without shareholder approval. The Fund's
investment objective and 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. 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. 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. Average annual
total returns are calculated in accordance with the Securities and Exchange
Commission's formula and assume the reinvestment of all distributions. Other
total returns differ from average annual total return only in that they may
relate to different time periods and may represent aggregate as opposed to
average annual total returns.
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. Distribution rate is calculated by dividing the most
recent year's distributions by the net asset value at the end of the year.
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. 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 an indirect subsidiary of Liberty Financial Companies, Inc.
(Liberty Financial), which in turn is an indirect subsidiary of Liberty Mutual
Insurance Company.
The Administrator is a subsidiary of The Colonial Group, Inc., which in turn is
a direct subsidiary of Liberty Financial. Liberty Mutual is considered to be the
controlling entity of the Adviser, the Administrator and their affiliates.
Liberty Mutual is an underwriter of workers' compensation insurance and a
property and casualty insurer in the U.S.
The Distributor 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 Adviser furnishes the Fund with investment management services at the
Adviser's expense. For these services, the Fund pays the Adviser a monthly fee
at the annual rates of 1.00% of the Fund's average daily net assets up to $100
million and 0.75% of net assets over such amount. For these services, the Fund
paid the Adviser 0.79% of the Fund's average daily net assets for fiscal year
1995. This fee is higher than that paid by most other investment companies,
although it is comparable to that paid by many other investment companies
investing in foreign securities.
John M. Mussey and Thomas R. Tuttle, President and Senior Vice President,
respectively, of the Adviser, co-manage the Fund. Messrs. Mussey and Tuttle have
each co-managed the Fund since 1989 and 1995, respectively. Messrs. Mussey and
Tuttle also are President and Director, and Senior Vice President, respectively,
of Newport Pacific Management, Inc. (Newport Pacific), the Adviser's immediate
parent, and have each managed other funds or accounts on their behalf since
1983. See "Management of the Fund" in the Statement of Additional Information
for more information.
The Administrator provides certain administrative services to the Fund, for
which the Fund pays the Administrator a monthly fee at the annual rate of 0.25%
of the Fund's average daily net assets for such services. The Administrator 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 monthly fee at the annual rate of 0.25% of average daily net assets plus
certain out-of-pocket expenses.
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.
Brown Brothers Harriman & Co. provides custodial services to the Fund.
The fees payable to the Adviser, Administrator and their affiliates are subject
to any reimbursement or fee waiver to which the Adviser or the Administrator may
agree.
HOW THE FUND VALUES ITS SHARES
Per share net asset value is calculated by dividing the total net asset value
attributable to Class Z shares by the number of Class Z shares outstanding.
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. In certain countries, the Fund may hold foreign designated shares.
If the foreign share prices are not readily available as a result of limited
share activity, the securities are valued at the last sale price of the local
shares in the principal market in which such securities are normally traded.
Korean equity securities that have reached the limit for aggregate foreign
ownership and for which premiums to the local exchange prices may be paid by
foreign investors are valued by applying a broker quoted premium to the local
share price. 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 annually in December. Distributions are invested in
additional Class Z shares 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
Class Z shares 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. If you
buy shares shortly before a distribution is declared, the distribution will be
taxable although it is in effect a partial return of the amount invested. Each
January, information on the amount and nature of distributions for the prior
year is sent to shareholders.
HOW TO BUY SHARES
Class Z shares are offered continuously at net asset value without a sales
charge. Orders received in good form prior to the time at which the Fund values
its shares (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. Certificates will not be issued for Class Z shares. The Fund may refuse
any purchase order for its shares. See the Statement of Additional Information
for more information.
Class Z shares may be purchased only by (i) those shareholders of the Newport
Tiger Fund as of March 24, 1995 who purchased shares of that Fund at net asset
value and who continue to hold Class Z shares, (ii) employees of the
Administrator and its affiliates and (iii) certain institutions (including
certain insurance companies and banks investing for their own account, trusts,
endowment funds, foundations and investment companies) and defined benefit
retirement plans investing a minimum of $5 million in the Fund. The Distributor
may pay financial service firms a finder's fee on such purchases, payable in
quarterly installments during the first year after purchase. Each installment
will equal 1/4 of 0.15% of the value of the shares at the time the installment
is calculated. Class Z shares also may be purchased by clients of investment
advisers whose clients' aggregate investment in the Fund equals or exceeds $5
million.
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.
Other Classes of Shares. In addition to Class Z shares, the Fund offers four
other classes of shares through a separate Prospectus. Class A shares are
offered at net asset value plus a maximum 5.75% sales charge imposed at the time
of purchase, and are subject to an ongoing 0.25% annual Rule 12b-1 fee and a
1.00% contingent deferred sales charge on certain redemptions made within 18
months after purchase. Class B shares are offered at net asset value, and are
subject to a 1.00% annual Rule 12b-1 fee and a contingent deferred sales charge
on redemptions made within six years after purchase. The contingent deferred
sales charge is 5.00% on redemptions made in year one, and declines to 1.00% in
year six. Class B shares automatically convert to Class A after approximately
eight years. Class D shares are offered at net asset value plus a 1.00% sales
charge imposed at the time of purchase, and are subject to an ongoing 1.00%
annual Rule 12b-1 fee and a 1.00% contingent deferred sales charge on
redemptions made within one year after purchase. The maximum purchase amount
allowed for Class B shares is $250,000 and for Class D shares is $500,000. Class
T shares are offered at net asset value plus a maximum 5.75% sales charge
imposed at the time of purchase, and are subject to a 1.00% contingent deferred
sales charge on certain redemptions made within 18 months after purchase. Class
T shares may be purchased only by certain shareholders of the Newport Tiger Fund
as of March 24, 1995.
Other than the sales charges and Rule 12b-1 fees described above, the fees and
expenses relating to Classes A, B, D and T are the same as those for Class Z.
Classes A, B and D are exchangeable into the same class of any other Colonial
fund offering such class. Class T and Z shares are exchangeable into the Class A
shares of the other Colonial funds.
Which Class is more beneficial to an investor depends on the amount and intended
length of the investment. In general, anyone eligible to purchase Class Z shares
should do so.
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. Initial
or contingent deferred sales charges may be reduced or eliminated for certain
persons or organizations purchasing Fund shares alone or in combination with
certain other Colonial funds. See the Statement of Additional Information for
more information.
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 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 before the time at which the Fund's shares are valued 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.
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
No other Colonial fund offers Class Z shares. Class Z shares may be exchanged at
net asset value into the Class A shares of any other Colonial fund. If a Class Z
shareholder exchanges into another Colonial fund and then exchanges back to the
Fund, the latter exchange may be made into the Fund's Class Z shares only if the
shareholder continues to own Class Z shares at the time. If not, the latter
exchange will be made into Class A shares. 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.
TELEPHONE TRANSACTIONS
All shareholders and/or their financial advisers are automatically eligible to
exchange Fund shares by telephone and may 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 Transfer Agent will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine and, if it does
not, may be liable for any losses due to unauthorized or fraudulent telephone
transactions. 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 Administrator, 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.
ORGANIZATION AND HISTORY
The Fund is the successor by merger to the Newport Tiger Fund, which commenced
operations in 1989. The Fund was organized in 1994 as a separate portfolio of
the Trust, which is a Massachusetts business trust organized in 1991. The Trust
is not required to hold annual shareholder meetings, but special meetings may be
called for certain purposes. Shareholders receive one vote for each Fund share.
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 Trust. However, the Trust's
Declaration of Trust (Declaration) disclaims shareholder liability for acts or
obligations of the Fund and the Trust 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 (which are considered remote) in which the Fund would
be unable to meet its obligations and the disclaimer was inoperative. The risk
of a particular fund incurring financial loss on account of another fund of the
Trust is also believed to be remote because it would be limited to circumstances
in which the disclaimer was inoperative and the other fund was unable to meet
its obligations.
Investment Adviser
Newport Fund Management Inc.
580 California Street, Suite 1960
San Francisco, CA 94104
Administrator
Colonial Management Associates, Inc.
One Financial Center
Boston, MA 02111-2621
Distributor
Colonial Investment Services, Inc.
One Financial Center
Boston, MA 02111-2621
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109
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.
April 29, 1996
COLONIAL NEWPORT TIGER FUND
CLASS Z SHARES
PROSPECTUS
Colonial Newport Tiger Fund seeks capital appreciation by investing primarily in
equity securities of companies located in the nine Tigers of Asia (Hong Kong,
Singapore, South Korea, Taiwan, Malaysia, Thailand, Indonesia, China and the
Philippines).
For more detailed information about the Fund, call the Administrator at
1-800-248-2828 for the April 29, 1996 Statement of Additional Information.
FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED, ENDORSED OR
INSURED BY, ANY BANK OR GOVERNMENT AGENCY.
COLONIAL TRUST VII
Cross Reference Sheet
(Colonial Newport Tiger Fund)
Item Number of Form N1A Location or Caption in
Statement of Additional
Information
Part B
10. Cover Page
11. Table of Contents
12. Not Applicable
13. Investment Objective and
Policies; Fundamental Investment
Policies; Other Investment
Policies; Miscellaneous
Investment Practices; Portfolio
Turnover
14. Fund Charges and Expenses;
Management of the Colonial Funds
15. Fund Charges and Expenses
16. Fund Charges and Expenses;
Management of the Colonial Funds
17. Fund Charges and Expenses;
Management of the Colonial Funds
18. Shareholder Meetings
19. How to Buy Shares; Determination
of Net Asset Value; Suspension of
Redemptions; Special Purchase
Programs/Investor Services;
Programs for Reducing or
Eliminating Sales Charges; How to
Sell Shares; How to Exchange
Shares
20. Taxes
21. Fund Charges and Expenses;
Management of the Colonial Funds
22. Fund Charges and Expenses;
Investment Performance;
Performance Measures
23. Independent Accountants
COLONIAL NEWPORT TIGER FUND
Statement of Additional Information
April 29, 1996
This Statement of Additional Information (SAI) contains information which may be
useful to investors but which is not included in the Prospectus of Colonial
Newport Tiger Fund (Fund). This SAI is not a prospectus and is authorized for
distribution only when accompanied or preceded by the Prospectus of the Fund
dated April 29, 1996. This SAI should be read together with the Prospectus.
Investors may obtain a free copy of the Prospectus from Colonial Investment
Services, Inc., One Financial Center, Boston, MA 02111-2621.
The Fund is the successor by merger to the Newport Tiger Fund. This merger
occurred on March 24, 1995. All references to the Fund as of a time prior to
such date shall be deemed to refer to the Newport Tiger Fund.
Part 1 of this SAI contains specific information about the Fund. Part 2 includes
information about the Colonial funds generally and additional information about
certain securities and investment techniques described in the Fund's Prospectus.
TABLE OF CONTENTS
Part 1 Page
Definitions
Investment Objective and Policies
Fundamental Investment Policies
Other Investment Policies
Portfolio Turnover
Fund Charges and Expenses
Investment Performance
Custodian
Independent Accountants
Management of the Fund
Part 2
Miscellaneous Investment Practices
Taxes
Management of the Colonial Funds
Determination of Net Asset Value
How to Buy Shares
Special Purchase Programs/Investor Services
Programs for Reducing or Eliminating Sales Charges
How to Sell Shares
Distributions
How to Exchange Shares
Suspension of Redemptions
Shareholder Meetings
Performance Measures
Appendix I
Appendix II
NT-095C-0496
<PAGE>
COLONIAL NEWPORT TIGER FUND
Statement of Additional Information
April 29, 1996
DEFINITIONS
"Trust" Colonial Trust VII
"Fund" Colonial Newport Tiger Fund
"Adviser" Newport Fund Management, Inc., the Fund's
investment manager
"Administrator" Colonial Management Associates, Inc., the
Fund's manager
"CISI" Colonial Investment Services, Inc., the Fund's
distributor
"CISC" Colonial Investors Service Center, Inc., the
Fund's shareholder services and transfer agent
INVESTMENT OBJECTIVES AND POLICIES
The Fund's Prospectus describes its investment objective and policies. Part 1 of
this SAI includes additional information concerning, among other things, the
fundamental investment policies of the Fund. Part 2 contains additional
information about the following securities and investment techniques that are
described or referred to in the Prospectus:
American Depository Receipts
Foreign Securities
Foreign Currency Transactions
Repurchase Agreements
Futures Contracts and Related Options
Except as described under "Fundamental Investment Policies," the Fund's
investment policies are not fundamental, and the Trustees may change the
policies without shareholder approval.
FUNDAMENTAL INVESTMENT POLICIES
The investments of the Fund are subject to investment limitations which may not
be changed without the vote of at least a majority of the Fund's outstanding
voting securities as defined in the Investment Company Act of 1940 (Act).
These investment restrictions specifically provide that the Fund may not:
1. As to 75% of the Fund's assets, purchase the securities of any issuer
(other than obligations issued or guaranteed as to principal and
interest by the Government of the United States or any agency or
instrumentality thereof) if, as a result of such purchase, more than 5%
of the Fund's total assets would be invested in the securities of such
issuer;
2. Purchase stock or securities of an issuer (other than obligations of the
United States or any agency or instrumentality thereof) if such purchase
would cause the Fund to own more than 10% of any class of the
outstanding stock or securities or more than 10% of any class of voting
securities of such issuer;
3. Act as an underwriter of securities of other issuers, except that the
Fund may invest up to 10% of the value of its total assets (at time of
investment) in portfolio securities which it might not be free to sell
to the public without registration of such securities under the
Securities Act of 1933 or any foreign law restricting distribution of
securities in a country of a foreign issuer (restricted securities);
4. Buy or sell commodities or commodity contracts, provided, however, that
the Fund may utilize not more than 1.00% of its assets for deposits or
commissions required to enter into forward foreign currency contracts
for hedging purposes as described under "Miscellaneous Investment
Practices";
5. Borrow amounts in excess of 5% of the Fund's net asset value, and only
from banks as a temporary measure for extraordinary or emergency
purposes and not for investment in securities. To avoid the untimely
disposition of assets to meet redemptions, the Fund may borrow up to 20%
of the value of its assets to meet redemptions. The Fund will not make
other investments while such borrowings are outstanding. The Fund will
not mortgage, pledge or in any other manner transfer, as security for
indebtedness, any of its assets. (Short-term credits necessary for the
clearance of purchases or sales of securities will not be deemed to be
borrowings by the Fund);
6. Make loans, except that the Fund may: (a) acquire for investment a
portion of an issue of bonds, debentures, notes or other evidences of
indebtedness of a corporation or government; (b) enter into repurchase
agreements, secured by U.S. government or Agency securities;
7. Invest in companies for the purpose of exercising control;
8. Invest in securities of other investment companies except by purchase
in the open market involving only customary broker's commissions, or as
part of a merger, consolidation, or acquisition of assets;
9. Issue senior securities;
10. Concentrate the Fund's investments in any industry;
11. Participate on a joint or a joint and several basis in any securities
trading account;
12. Write or trade in put or call options;
13. Purchase securities on margin, but the Fund may utilize such short-term
credits as may be necessary for clearance of purchases or sales of
securities;
14. Engage in short sales;
15. Purchase or sell real estate provided that liquid securities of
companies which deal in real estate or interests therein will not be
deemed to be investments in real estate;
16. Invest in interests in oil, gas or other mineral exploration or
development programs, including leases.
Percentage limitations in the "Fundamental Investment Policies" and "Other
Investment Policies" sections are determined at the time the Fund makes a
purchase or loan subject to such percentage. Total assets and net assets are
determined at current value for purposes of compliance with investment
restrictions and policies. For the purpose of the Act's diversification
requirement, an issuer is the entity whose revenues support the security.
The Act provides that a "vote of a majority of the outstanding voting
securities" means the affirmative vote of the lesser of (1) more than 50% of the
outstanding shares of the Fund, or (2) 67% or more of the shares present at a
meeting if more than 50% of the outstanding shares are represented at the
meeting in person or by proxy.
OTHER INVESTMENT POLICIES
As non-fundamental investment policies which may be changed without a
shareholder vote, the Fund may not:
1. Own securities of any company if the Trust knows that officers and
Trustees of the Trust or officers and directors of the Adviser and the
Administrator who individually own more than 0.5% of such securities
together own more than 5% of such securities;
2. Purchase any security resulting in the Fund having more than 5% of its
total assets invested in securities of companies (including predecessors)
less than three years old;
3. Purchase any security if, as a result of such purchase, more than 10% of
its total assets would be invested in securities which are restricted as
to disposition;
4. Invest more than 10% of the Fund's net assets in illiquid assets;
5. Invest in warrants if, immediately after giving effect to any such
investment, the Fund's aggregate investment in warrants, valued at the
lower of cost or market, would exceed 5% of the value of the Fund's net
assets. Included within that amount, but not to exceed 2% of the value of
the Fund's net assets, may be warrants which are not listed on the New
York Stock Exchange or the American Stock Exchange. Warrants acquired by
the Fund in units or attached to securities will be deemed to be without
value;
6. Purchase the securities of foreign issuers which are not listed on a
recognized domestic or foreign securities exchange, restricted securities
and issues which are not readily marketable, if such purchase would cause
the Fund to own such securities in excess of 15% of its net assets;
7. Engage in arbitrage transactions.
PORTFOLIO TURNOVER
1995 1994
---- ----
4% 8%
FUND CHARGES AND EXPENSES
Under the Fund's management agreement, the Fund pays the Adviser a monthly fee
based on the average daily net assets of the Fund at the annual rate of 1.00% up
to $100 million and 0.75% thereafter (subject to reductions that the Adviser may
agree to periodically). Under the Fund's administration agreement, the Fund pays
the Administrator a monthly fee at the annual rate of 0.25% of average daily net
assets and a monthly pricing and bookkeeping fee of $2,250 plus the following
percentages of the Fund's average net assets over $50 million:
0.035% on the next $950 million
0.025% on the next $1 billion
0.015% on the next billion
0.001% on the excess over $3 billion
Under the Fund's transfer agency and shareholder servicing agreement, the Fund
pays CISC a monthly fee at the annual rate of 0.25% of average daily net assets,
plus certain out-of-pocket expenses.
Recent Fees paid to the Adviser, the Administrator (a), CISI (b) and CISC (c)
(for the fiscal year ended December 31) (in thousands)
1995 1994 1993
----
Management fee $4,820 $3,284 $1,729
Administration fee(a) $1,442 $ 803 $ 451
Bookkeeping fee (b) $ 165 --- ---
Transfer agent fee(c) $1,814 $ 410 $ 165
12b-1 fees(b):
Service fee (Class A) $ 160 --- ---
Service fee (Class B) $ 74 --- ---
Service fee (Class D) $ 14 --- ---
Distribution fee (Class B) $ 221 --- ---
Distribution fee (Class D) $ 41 --- ---
(a) Commonwealth Shareholder Services, Inc. was the Fund's administrator
prior to March 31, 1995, and received $203,700 for the period January
1, 1995 through March 31, 1995.
(b) Prior to April 30, 1995, the bookkeeping services were provided by Brown
Brothers Harriman & Co.and such fees were included in the custodian fee.
(c) Fund Services, Inc. was the Fund's transfer agent prior to March 31,
1995, and received $125,639 for the period January 1, 1995 through March
31, 1995.
(d) Newport Distributors, Inc. was the Fund's distributor prior to March 31,
1995. The 12b-1 plans were adopted on April 1, 1995.
Brokerage Commissions (for the fiscal years ended December 31) (in thousands)
1995 1994 1993
---- ----
Total commissions $2,011 $1,145 $972(e)
Directed transactions (f) 0 0 0
Commissions on directed transactions 0 0 0
(e) The increase in brokerage commissions during fiscal year 1993 reflects
the substantial growth of the Fund.
(f) See "Management of the Colonial Funds-Portfolio Transactions-Brokerage
and Research Services" in Part 2 of this SAI
Trustees Fees
For the year ended December 31, 1995, the Trustees received the following
compensation for serving as Trustees:
Total Compensation
Aggregate From Trust and Fund
Compensation From Complex Paid to the
Fund For The Trustees For The
Fiscal Year Ended Calendar Year Ended
Trustee December 31, 1995 December 31, 1995(g)
- ------- ----------------- --------------------
Robert J. Birnbaum(l) $ 954 $ 71,250
Tom Bleasdale 1,039 (h) $ 98,000 (i)
Lora S. Collins 962 $ 91,000
James E. Grinnell(l) 954 $ 71,250
William D. Ireland, Jr. 1,182 $ 113,000
Richard W. Lowry(l) 954 $ 71,250
William E. Mayer 960 $ 91,000
James L. Moody, Jr. 957 (j) $ 94,500 (k)
John J. Neuhauser 960 $ 91,000
George L. Shinn 966 $ 102,500
Robert L. Sullivan 1,081 $ 101,000
Sinclair Weeks, Jr. 1,199 $ 112,000
(g) At December 31, 1995, the Colonial Funds complex consisted of 33
open-end and 5 closed-end management investment company portfolios.
(h) Includes $682 payable in later years as deferred compensation.
(i) Total compensation of $957 for the fiscal year ended December 31,
1995, will be payable in later years as deferred compensation.
(j) Payable in later years as deferred compensation.
(k) Total compensation of $94,500 for the calendar year ended December 31,
1995, will be payable in later years as deferred compensation.
(l) Elected as a Trustee of the Colonial Funds complex on April 21, 1995.
The following table sets forth the amount of compensation paid to Messrs.
Birnbaum, Grinnell and Lowry in their capacities as Trustees or Directors of the
Liberty All-Star Equity Fund and Liberty All-Star Growth Fund, Inc. (formerly
known as The Charles Allmon Trust, Inc.) (together, Liberty Funds I) for service
during the calendar year ended December 31, 1995, and of Liberty Financial Trust
(now known as Colonial Trust VII) and LFC Utilities Trust (together, Liberty
Funds II) for the period January 1, 1995 through March 26, 1995 (m):
Total Compensation Total Compensation
From Liberty Funds I For From Liberty Funds II
The Period January 1, 1995 For The Calendar Year
Trustee through March 26, 1995 Ended December 31, 1995(n)
- ------- ---------------------- ---------------------
Robert J. Birnbaum $2,900 $16,675
James E. Grinnell 2,900 22,900
Richard W. Lowry 2,900 26,250 (o)
(m) On March 27, 1995, four of the portfolios in the Liberty Financial Trust
(now known as Colonial Trust VII) were merged into existing Colonial
funds and a fifth was reorganized into a new portfolio of Colonial Trust
III. Prior to their election as Trustees of the Colonial Funds, Messrs.
Birnbaum, Grinnell and Lowry served as Trustees of Liberty Funds II;
they continue to serve as Trustees or Directors of Liberty Funds I.
(n) At December 31, 1995, the Liberty Funds were advised by Liberty Asset
Management Company (LAMCO). LAMCO is an indirect wholly-owned
subsidiary of Liberty Financial Companies, Inc. (an intermediate parent
of the Adviser).
(o) Includes $3,500 paid to Mr. Lowry for service as Trustee of Liberty
Newport World Portfolio (formerly known as Liberty All-Star World
Portfolio) (Liberty Newport) during the calendar year ended December 31,
1995. At December 31, 1995, Liberty Newport was managed by Newport
Pacific Management, Inc. and Stein Roe & Farnham Incorporated, each an
affiliate of the Adviser.
Ownership of the Fund
At March 31, 1996, the officers and Trustees of the Trust as a group owned
less than 1% of the outstanding shares of the Fund. At March 31, 1996,the
following shareholders owned more than 5% of the Fund's outstanding shares:
Charles Schwab & Co., Inc. (multiple accounts), 101 Montgomery Street, San
Francisco, CA 94104, owned 24.60% and Merrill Lynch Pierce Fenner & Smith
(multiple accounts), Attn. Book Entry, Mutual Fund Operations, 4800 Deer
Lake Dr. E 3rd Fl, Jacksonville, FL 32246, owned 11.77%.
At March 31, 1996, there were 21,676 Class A, 25,274 Class B, 3,033 Class
D, 15,752 Class T and 1,974 Class Z shareholders of record of the Fund.
Sales Charges (for the fiscal years ended December 31)(in thousands)
Class A Shares
Period April 1, 1995
(commencement of investment operations)
through December 31, 1995
Aggregate initial sales charges
on Fund share sales Initial
sales charges retained by CISI(p) $ 3,602
358
Class B Shares
Period April 1, 1995
(commencement of investment operations)
through December 31, 1995
Aggregate contingent deferred
sales charges (CDSC)on Fund
redemptions retained by CISI $39
Class D Shares
Period April 1, 1995
(commencement of investment operations)
through December 31, 1995
Aggregate CDSC on Fund redemptions
retained by CISI
$5
Class T Shares
1995 1994 1993
---- ---- ----
Aggregate initial sales
charges on Fund share
sales $455 $3,722 $2,929
Initial sales charges
retained by CISI(p) 151(p) $1,517 $1,253
(p) Newport Distributors, Inc. was the Fund's distributor prior to March 31,
1995, and received $99,117 for the period January 1, 1995 through March
31, 1995.
12b-1 Plans, CDSCs and Conversion of Shares
The Fund offers five classes of shares - Class A, Class B, Class D, Class T and
Class Z. The Fund may in the future offer other classes of shares. The Trustees
have approved 12b-1 Plans pursuant to Rule 12b-1 under the Act. Under the Plans,
the Fund pays CISI a service fee at an annual rate of 0.25% of average net
assets attributed to Classes A, B and D shares. The Fund also pays CISI a 0.75%
annual distribution fee attributed to its Class B and Class D shares. CISI may
use the entire amount of such fees to defray the costs of commissions and
service fees paid to financial service firms (FSFs) and for certain other
purposes. Since the distribution and service fees are payable regardless of the
amount of CISI's expenses, CISI may realize a profit from the fees.
The Plans authorize any other payments by the Fund to CISI and its affiliates
(including the Administrator and the Adviser) to the extent that such payments
might be construed to be indirectly financing the distribution of Fund shares.
The Trustees believe the Plans could be a significant factor in the growth and
retention of Fund assets resulting in a more advantageous expense ratio and
increased investment flexibility which could benefit each class of Fund
shareholders. The Plans will continue in effect from year to year so long as
continuance is specifically approved at least annually by a vote of the
Trustees, including the Trustees who are not interested persons of the Trust and
have no direct or indirect financial interest in the operation of the Plans or
in any agreements related to the Plans (independent Trustees), cast in person at
a meeting called for the purpose of voting on the Plans. The Plans may not be
amended to increase the fee materially without approval by vote of a majority of
the outstanding voting securities of the relevant class of shares and all
material amendments of the Plans must be approved by the Trustees in the manner
provided in the foregoing sentence. The Plans may be terminated at any time by
vote of a majority of the independent Trustees or by vote of a majority of the
outstanding voting securities of the relevant class of shares. The continuance
of the Plans will only be effective if the selection and nomination of the
Trustees who are non-interested Trustees is effected by such non-interested
Trustees.
Class A and Class T shares are offered at net asset value plus varying sales
charges which may include a CDSC. Class B shares are offered at net asset value
and are subject to a CDSC if redeemed within six years after purchase. Class D
shares are offered at net asset value plus a 1.00% initial sales charge and are
subject to a 1.00% CDSC on redemptions within one year after purchase. Class Z
shares are offered at net asset value and are not subject to any CDSC. The CDSCs
are described in the Prospectus.
No CDSC will be imposed on shares derived from reinvestment of distributions or
on amounts representing capital appreciation. In determining the applicability
and rate of any CDSC, it will be assumed that a redemption is made first of
shares representing capital appreciation, next of shares representing
reinvestment of distributions and finally of other shares held by the
shareholder for the longest period of time.
Approximately eight years after the end of the month in which a Class B share is
purchased, such share and a pro rata portion of any shares issued on the
reinvestment of distributions will be automatically converted into Class A
shares having an equal value, which are not subject to a distribution fee.
Sales-related expenses (in thousands) of CISI (q) relating to the Fund for the
fiscal year ended December 31, 1995, were:
<TABLE>
<CAPTION>
Class A Class B Class D
<S> <C> <C> <C>
Fees to FSFS $590 $3,979 $184
Cost of sales material relating to the Fund
(including printing and mailing expenses) $880 $393 $88
Allocated travel, entertainment and other promotional
expenses (including advertising) $1,088 $435 $88
</TABLE>
(q) Newport Distributors, Inc. was the Fund's distributor prior to March 31,
1995.
INVESTMENT PERFORMANCE
The Fund's yields for the month ended December 31, 1995, were as follows:
Class A 0.30%
Class B (0.42)%
Class D (0.42)%
Class T 0.30%
Class Z 0.30%
The Fund's Class A average annual total returns at December 31, 1995, were as
follows:
<TABLE>
<CAPTION>
May 31, 1989(r)
(Class A shares initially offered)
1 year 5 years through December 31, 1995
------ ------- -------------------------
<S> <C> <C> <C>
With sales charge of 5.75% 9.58% 21.07% 14.54%
Without sales charge 16.27% 22.51% 15.57%
</TABLE>
The Fund's Class B total returns at December 31, 1995, were as follows:
April 1, 1995
(Class B shares initially offered)
through December 31, 1995
With applicable CDSC 9.65% (5.00% CDSC)
Without sales charge 14.65%
The Fund's Class D total returns at December 31, 1995, were as follows:
April 1, 1995
(Class D shares initially offered)
through December 31, 1995
With CDSC of 1.00% 12.70%
Without CDSC 14.85%
The Fund's Class T average annual total returns at December 31, 1995, were as
follows:
May 31, 1989(r)
(Class T shares
1 year 5 years initially offered)
------ ------- through
December 31, 1995
With CDSC of 1.00% 9.59% 21.07% 14.54%
Without CDSC 16.28% 22.51% 15.57%
The Fund's Class Z average annual total returns at December 31, 1995, were as
follows:
May 31, 1989(r)
(Class Z shares initially offered)
1 year 5 years through December 31, 1995
------ ------- -------------------------
16.28% 22.51% 15.57%
(r) Performance since shares were initially offered on May 31, 1989, are
assigned to Class A, Class T and Class Z shares.
The Fund's distribution rates at December 31, 1995, based on the previous
calendar quarter's distributions, annualized, and the maximum offering price at
the end of the quarter, were as follows:
Class A 0.46%
Class B 0.30%
Class D 0.30%
Class T 0.54%
Class Z 0.57%
See Part 2 of this SAI, "Performance Measures," for how calculations are made.
CUSTODIAN
Brown Brothers Harriman & Co. is the Fund's custodian. The custodian is
responsible for safeguarding the Fund's cash and securities, receiving and
delivering securities and collecting the Fund's interest and dividends.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP are the Fund's independent accountants providing audit and
tax return preparation services and assistance and consultation in connection
with the review of various SEC filings. The financial statements incorporated by
reference in this SAI and the financial highlights included in the Prospectus as
of and for the year ended December 31, 1995, have been so included, in reliance
upon the report of Price Waterhouse LLP given on the authority of said firm as
experts in accounting and auditing. The Statement of Charges in Net Assets for
the year ended December 31, 1994, and the Financial Highlights for the periods
prior to January 1, 1995, have been incorporated into this SAI. Tait, Weller
and Baker served as the Fund's independent public accountants prior to March 31,
1995.
The Financial Statements and Report of Independent Accountants appearing on
pages 6 through 22 of the December 31, 1995 Annual Report, are incorporated into
the SAI by reference.
<TABLE>
<CAPTION>
MANAGEMENT OF THE FUND
Officers of the Fund.
Principal Occupation
Name Age Position with Fund During Past Five Years
<S> <C> <C> <C>
Lynda Couch(s) 55 Vice President Vice President of the Adviser and Newport Pacific
Management, Inc. (Newport Pacific) since 1995
and 1994, respectively
Pamela Frantz(s) 48 Vice President Executive Vice President, Treasurer and Secretary
of the Adviser and Newport Pacific since 1988 and
1983, respectively
John M. Mussey(s) 54 Vice President President of the Adviser since 1988 and President
and Director of Newport Pacific since 1983
Thomas R. Tuttle(s) 54 Vice President Senior Vice President of the Adviser and Newport
Pacific since 1995 and 1983, respectively
</TABLE>
Trustees of the Fund and officers of the Administrator are described under
"Management of the Colonial Funds."
(s) The address of each officer is 580 California Street, Suite 1960, San
Francisco, CA 94104.
STATEMENT OF ADDITIONAL INFORMATION
PART 2
The following information applies generally to most Colonial funds. "Colonial
funds" or "funds" include each series of Colonial Trust I, Colonial Trust II,
Colonial Trust III, Colonial Trust IV, Colonial Trust V, Colonial Trust VI and
Colonial Trust VII. In certain cases, the discussion applies to some but not all
of the Colonial funds, and you should refer to your Fund's Prospectus and to
Part 1 of this SAI to determine whether the matter is applicable to your Fund.
You will also be referred to Part 1 for certain data applicable to your Fund.
MISCELLANEOUS INVESTMENT PRACTICES
Part 1 of this Statement lists on page b which of the following investment
practices are available to your Fund.
Short-Term Trading
In seeking the fund's investment objective, the Adviser will buy or sell
portfolio securities whenever it believes it is appropriate. The Adviser's
decision will not generally be influenced by how long the fund may have owned
the security. From time to time the fund will buy securities intending to seek
short-term trading profits. A change in the securities held by the fund is known
as "portfolio turnover" and generally involves some expense to the fund. These
expenses may include brokerage commissions or dealer mark-ups and other
transaction costs on both the sale of securities and the reinvestment of the
proceeds in other securities. If sales of portfolio securities cause the fund to
realize net short-term capital gains, such gains will be taxable as ordinary
income. As a result of the fund's investment policies, under certain market
conditions the fund's portfolio turnover rate may be higher than that of other
mutual funds. The fund's portfolio turnover rate for a fiscal year is the ratio
of the lesser of purchases or sales of portfolio securities to the monthly
average of the value of portfolio securities, excluding securities whose
maturities at acquisition were one year or less. The fund's portfolio turnover
rate is not a limiting factor when the Adviser considers a change in the fund's
portfolio.
Lower Rated Bonds
Lower rated bonds are those rated lower than Baa by Moody's, BBB by S&P, or
comparable unrated securities. Relative to comparable securities of higher
quality:
1. the market price is likely to be more volatile because:
a. an economic downturn or increased interest rates may have a more
significant effect on the yield, price and potential for default;
b. the secondary market may at times become less liquid or respond
to adverse publicity or investor perceptions, increasing the
difficulty in valuing or disposing of the bonds;
c. existing legislation limits and future legislation may further
limit (i) investment by certain institutions or (ii) tax
deductibility of the interest by the issuer, which may adversely
affect value; and
d. certain lower rated bonds do not pay interest in cash on a current
basis. However, the fund will accrue and distribute this interest
on a current basis, and may have to sell securities to generate
cash for distributions.
2. the fund's achievement of its investment objective is more
dependent on the Adviser's credit analysis.
3. lower rated bonds are less sensitive to interest rate changes, but
are more sensitive to adverse economic developments.
Small Companies
Smaller, less well established companies may offer greater opportunities for
capital appreciation than larger, better established companies, but may also
involve certain special risks related to limited product lines, markets, or
financial resources and dependence on a small management group. Their securities
may trade less frequently, in smaller volumes, and fluctuate more sharply in
value than securities of larger companies.
<PAGE>
Foreign Securities
The fund may invest in securities traded in markets outside the United States.
Foreign investments can be affected favorably or unfavorably by changes in
currency rates and in exchange control regulations. There may be less publicly
available information about a foreign company than about a U.S. company, and
foreign companies may not be subject to accounting, auditing and financial
reporting standards comparable to those applicable to U.S. companies. Securities
of some foreign companies are less liquid or more volatile than securities of
U.S. companies, and foreign brokerage commissions and custodian fees may be
higher than in the United States. Investments in foreign securities can involve
other risks different from those affecting U.S. investments, including local
political or economic developments, expropriation or nationalization of assets
and imposition of withholding taxes on dividend or interest payments. Foreign
securities, like other assets of the fund, will be held by the fund's custodian
or by a subcustodian or depository. See also "Foreign Currency Transactions"
below.
The fund may invest in certain Passive Foreign Investment Companies (PFICs)
which may be subject to U.S. federal income tax on a portion of any "excess
distribution" or gain (PFIC tax) related to the investment. The PFIC tax is the
highest ordinary income rate, and it could be increased by an interest charge on
the deemed tax deferral.
The fund may possibly elect to include in its income its pro rata share of the
ordinary earnings and net capital gain of PFICs. This election requires certain
annual information from the PFICs which in many cases may be difficult to
obtain. An alternative election would permit the fund to recognize as income any
appreciation (but not depreciation) on its holdings of PFICs as of the end of
its fiscal year.
Zero Coupon Securities (Zeros)
The fund may invest in debt securities which do not pay interest, but instead
are issued at a deep discount from par. The value of the security increases over
time to reflect the interest accreted. The value of these securities may
fluctuate more than similar securities which are issued at par and pay interest
periodically. Although these securities pay no interest to holders prior to
maturity, interest on these securities is reported as income to the fund and
distributed to its shareholders. These distributions must be made from the
fund's cash assets or, if necessary, from the proceeds of sales of portfolio
securities. The fund will not be able to purchase additional income producing
securities with cash used to make such distributions and its current income
ultimately may be reduced as a result.
Step Coupon Bonds (Steps)
The fund may invest in debt securities which do not pay interest for a stated
period of time and then pay interest at a series of different rates for a series
of periods. In addition to the risks associated with the credit rating of the
issuers, these securities are subject to the volatility risk of zero coupon
bonds for the period when no interest is paid.
Pay-In-Kind (PIK) Securities
The fund may invest in securities which pay interest either in cash or
additional securities at the issuer's option. These securities are generally
high yield securities and in addition to the other risks associated with
investing in high yield securities are subject to the risks that the interest
payments which consist of additional securities are also subject to the risks of
high yield securities.
Money Market Instruments
Government obligations are issued by the U.S. or foreign governments, their
subdivisions, agencies and instrumentalities. Supranational obligations are
issued by supranational entities and are generally designed to promote economic
improvements. Certificates of deposits are issued against deposits in a
commercial bank with a defined return and maturity. Banker's acceptances are
used to finance the import, export or storage of goods and are "accepted" when
guaranteed at maturity by a bank. Commercial paper are promissory notes issued
by businesses to finance short-term needs (including those with floating or
variable interest rates, or including a frequent interval put feature).
Short-term corporate obligations are bonds and notes (with one year or less to
maturity at the time of purchase) issued by businesses to finance long-term
needs. Participation Interests include the underlying securities and any related
guaranty, letter of credit, or collateralization arrangement which the fund
would be allowed to invest in directly.
Securities Loans
The fund may make secured loans of its portfolio securities amounting to not
more than the percentage of its total assets specified in Part 1 of this SAI,
thereby realizing additional income. The risks in lending portfolio securities,
as with other extensions of credit, consist of possible delay in recovery of the
securities or possible loss of rights in the collateral should the borrower fail
financially. As a matter of policy, securities loans are made to banks and
broker-dealers pursuant to agreements requiring that loans be continuously
secured by collateral in cash or short-term debt obligations at least equal at
all times to the value of the securities on loan. The borrower pays to the fund
fund an amount equal to any dividends or interest received on securities lent.
The fund retains all or a portion of the interest received on investment of the
cash collateral or receives a fee from the borrower. Although voting rights, or
rights to consent, with respect to the loaned securities pass to the borrower,
the fund retains the right to call the loans at any time on reasonable notice,
and it will do so in order that the securities may be voted by the fund if the
holders of such securities are asked to vote upon or consent to matters
materially affecting the investment. The fund may also call such loans in order
to sell the securities involved.
Forward Commitments
The fund may enter into contracts to purchase securities for a fixed price at a
future date beyond customary settlement time ("forward commitments" and "when
issued securities") if the fund holds until the settlement date, in a segregated
account, cash or high-grade debt obligations in an amount sufficient to meet the
purchase price, or if the fund enters into offsetting contracts for the forward
sale of other securities it owns. Forward commitments may be considered
securities in themselves, and involve a risk of loss if the value of the
security to be purchased declines prior to the settlement date. Where such
purchases are made through dealers, the fund relies on the dealer to consummate
the sale. The dealer's failure to do so may result in the loss to the fund of an
advantageous yield or price. Although the fund will generally enter into forward
commitments with the intention of acquiring securities for its portfolio or for
delivery pursuant to options contracts it has entered into, the fund may dispose
of a commitment prior to settlement if the Adviser deems it appropriate to do
so. The fund may realize short-term profits or losses upon the sale of forward
commitments.
Mortgage Dollar Rolls
In a mortgage dollar roll, the fund sells a mortgage-backed security and
simultaneously enters into a commitment to purchase a similar security at a
later date. The fund either will be paid a fee by the counterparty upon entering
into the transaction or will be entitled to purchase the similar security at a
discount. As with any forward commitment, mortgage dollar rolls involve the risk
that the counterparty will fail to deliver the new security on the settlement
date, which may deprive the fund of obtaining a beneficial investment. In
addition, the security to be delivered in the future may turn out to be inferior
to the security sold upon entering into the transaction. Also, the transaction
costs may exceed the return earned by the fund from the transaction.
Repurchase Agreements
The fund may enter into repurchase agreements. A repurchase agreement is a
contract under which the fund acquires a security for a relatively short period
(usually not more than one week) subject to the obligation of the seller to
repurchase and the fund to resell such security at a fixed time and price
(representing the fund's cost plus interest). It is a fund's present intention
to enter into repurchase agreements only with commercial banks and registered
broker-dealers and only with respect to obligations of the U.S. government or
its agencies or instrumentalities. Repurchase agreements may also be viewed as
loans made by the fund which are collateralized by the securities subject to
repurchase. The Adviser will monitor such transactions to determine that the
value of the underlying securities is at least equal at all times to the total
amount of the repurchase obligation, including the interest factor. If the
seller defaults, the fund could realize a loss on the sale of the underlying
security to the extent that the proceeds of sale including accrued interest are
less than the resale price provided in the agreement including interest. In
addition, if the seller should be involved in bankruptcy or insolvency
proceedings, the fund may incur delay and costs in selling the underlying
security or may suffer a loss of principal and interest if the fund is treated
as an unsecured creditor and required to return the underlying collateral to the
seller's estate.
Reverse Repurchase Agreements
In a reverse repurchase agreement, the fund sells a security and agrees to
repurchase the same security at a mutually agreed upon date and price. A reverse
repurchase agreement may also be viewed as the borrowing of money by the fund
and, therefore, as a form of leverage. The fund will invest the proceeds of
borrowings under reverse repurchase agreements. In addition, the fund will enter
into a reverse repurchase agreement only when the interest income expected to be
earned from the investment of the proceeds is greater than the interest expense
of the transaction. The fund will not invest the proceeds of a reverse
repurchase agreement for a period which exceeds the duration of the reverse
repurchase agreement. The fund may not enter into reverse repurchase agreements
exceeding in the aggregate one-third of the market value of its total assets,
less liabilities other than the obligations created by reverse repurchase
agreements. Each fund will establish and maintain with its custodian a separate
account with a segregated portfolio of securities in an amount at least equal to
its purchase obligations under its reverse repurchase agreements. If interest
rates rise during the term of a reverse repurchase agreement, entering into the
reverse repurchase agreement may have a negative impact on a money market fund's
ability to maintain a net asset value of $1.00 per share.
Options on Securities
Writing covered options. The fund may write covered call options and covered put
options on securities held in its portfolio when, in the opinion of the Adviser,
such transactions are consistent with the fund's investment objective and
policies. Call options written by the fund give the purchaser the right to buy
the underlying securities from the fund at a stated exercise price; put options
give the purchaser the right to sell the underlying securities to the fund at a
stated price.
The fund may write only covered options, which means that, so long as the fund
is obligated as the writer of a call option, it will own the underlying
securities subject to the option (or comparable securities satisfying the cover
requirements of securities exchanges). In the case of put options, the fund will
hold cash and/or high-grade short-term debt obligations equal to the price to be
paid if the option is exercised. In addition, the fund will be considered to
have covered a put or call option if and to the extent that it holds an option
that offsets some or all of the risk of the option it has written. The fund may
write combinations of covered puts and calls on the same underlying security.
The fund will receive a premium from writing a put or call option, which
increases the fund's return on the underlying security if the option expires
unexercised or is closed out at a profit. The amount of the premium reflects,
among other things, the relationship between the exercise price and the current
market value of the underlying security, the volatility of the underlying
security, the amount of time remaining until expiration, current interest rates,
and the effect of supply and demand in the options market and in the market for
the underlying security. By writing a call option, the fund limits its
opportunity to profit from any increase in the market value of the underlying
security above the exercise price of the option but continues to bear the risk
of a decline in the value of the underlying security. By writing a put option,
the fund assumes the risk that it may be required to purchase the underlying
security for an exercise price higher than its then-current market value,
resulting in a potential capital loss unless the security subsequently
appreciates in value.
The fund may terminate an option that it has written prior to its expiration by
entering into a closing purchase transaction in which it purchases an offsetting
option. The fund realizes a profit or loss from a closing transaction if the
cost of the transaction (option premium plus transaction costs) is less or more
than the premium received from writing the option. Because increases in the
market price of a call option generally reflect increases in the market price of
the security underlying the option, any loss resulting from a closing purchase
transaction may be offset in whole or in part by unrealized appreciation of the
underlying security.
If the fund writes a call option but does not own the underlying security, and
when it writes a put option, the fund may be required to deposit cash or
securities with its broker as "margin" or collateral for its obligation to buy
or sell the underlying security. As the value of the underlying security varies,
the fund may have to deposit additional margin with the broker. Margin
requirements are complex and are fixed by individual brokers, subject to minimum
requirements currently imposed by the Federal Reserve Board and by stock
exchanges and other self-regulatory organizations.
Purchasing put options. The fund may purchase put options to protect its
portfolio holdings in an underlying security against a decline in market value.
Such hedge protection is provided during the life of the put option since the
fund, as holder of the put option, is able to sell the underlying security at
the put exercise price regardless of any decline in the underlying security's
market price. For a put option to be profitable, the market price of the
underlying security must decline sufficiently below the exercise price to cover
the premium and transaction costs. By using put options in this manner, the fund
will reduce any profit it might otherwise have realized from appreciation of the
underlying security by the premium paid for the put option and by transaction
costs.
Purchasing call options. The fund may purchase call options to hedge against an
increase in the price of securities that the fund wants ultimately to buy. Such
hedge protection is provided during the life of the call option since the fund,
as holder of the call option, is able to buy the underlying security at the
exercise price regardless of any increase in the underlying security's market
price. In order for a call option to be profitable, the market price of the
underlying security must rise sufficiently above the exercise price to cover the
premium and transaction costs. These costs will reduce any profit the fund might
have realized had it bought the underlying security at the time it purchased the
call option.
Over-the-Counter (OTC) options. The Staff of the Division of Investment
Management of the Securities and Exchange Commission has taken the position that
OTC options purchased by the fund and assets held to cover OTC options written
by the fund are illiquid securities. Although the Staff has indicated that it is
continuing to evaluate this issue, pending further developments, the fund
intends to enter into OTC options transactions only with primary dealers in U.S.
Government Securities and, in the case of OTC options written by the fund, only
pursuant to agreements that will assure that the fund will at all times have the
right to repurchase the option written by it from the dealer at a specified
formula price. The fund will treat the amount by which such formula price
exceeds the amount, if any, by which the option may be "in-the-money" as an
illiquid investment. It is the present policy of the fund not to enter into any
OTC option transaction if, as a result, more than 15% (10% in some cases, refer
to your fund's Prospectus) of the fund's net assets would be invested in (i)
illiquid investments (determined under the foregoing formula) relating to OTC
options written by the fund, (ii) OTC options purchased by the fund, (iii)
securities which are not readily marketable, and (iv) repurchase agreements
maturing in more than seven days.
Risk factors in options transactions. The successful use of the fund's options
strategies depends on the ability of the Adviser to forecast interest rate and
market movements correctly.
When it purchases an option, the fund runs the risk that it will lose its entire
investment in the option in a relatively short period of time, unless the fund
exercises the option or enters into a closing sale transaction with respect to
the option during the life of the option. If the price of the underlying
security does not rise (in the case of a call) or fall (in the case of a put) to
an extent sufficient to cover the option premium and transaction costs, the fund
will lose part or all of its investment in the option. This contrasts with an
investment by the fund in the underlying securities, since the fund may continue
to hold its investment in those securities notwithstanding the lack of a change
in price of those securities.
The effective use of options also depends on the fund's ability to terminate
option positions at times when the Adviser deems it desirable to do so. Although
the fund will take an option position only if Colonialthe Adviser believes there
is a liquid secondary market for the option, there is no assurance that the fund
will be able to effect closing transactions at any particular time or at an
acceptable price.
If a secondary trading market in options were to become unavailable, the fund
could no longer engage in closing transactions. Lack of investor interest might
adversely affect the liquidity of the market for particular options or series of
options. A marketplace may discontinue trading of a particular option or options
generally. In addition, a market could become temporarily unavailable if unusual
events -- such as volume in excess of trading or clearing capability -- were to
interrupt normal market operations.
A marketplace may at times find it necessary to impose restrictions on
particular types of options transactions, which may limit the fund's ability to
realize its profits or limit its losses.
Disruptions in the markets for the securities underlying options purchased or
sold by the fund could result in losses on the options. If trading is
interrupted in an underlying security, the trading of options on that security
is normally halted as well. As a result, the fund as purchaser or writer of an
option will be unable to close out its positions until options trading resumes,
and it may be faced with losses if trading in the security reopens at a
substantially different price. In addition, the Options Clearing Corporation
(OCC) or other options markets may impose exercise restrictions. If a
prohibition on exercise is imposed at the time when trading in the option has
also been halted, the fund as purchaser or writer of an option will be locked
into its position until one of the two restrictions has been lifted. If a
prohibition on exercise remains in effect until an option owned by the fund has
expired, the fund could lose the entire value of its option.
Special risks are presented by internationally-traded options. Because of time
differences between the United States and various foreign countries, and because
different holidays are observed in different countries, foreign options markets
may be open for trading during hours or on days when U.S. markets are closed. As
a result, option premiums may not reflect the current prices of the underlying
interest in the United States.
Futures Contracts and Related Options
Upon entering into futures contracts, in compliance with the SEC's requirements,
cash, cash equivalents or high-grade debt securities, equal in value to the
amount of the fund's obligation under the contract (less any applicable margin
deposits and any assets that constitute "cover" for such obligation), will be
segregated with the fund's custodian. For example, if a fund investing primarily
in foreign equity securities enters into a contract denominated in a foreign
currency, the fund will segregate cash, cash equivalents or high-grade debt
securities equal in value to the difference between the fund's obligation under
the contract and the aggregate value of all readily marketable equity securities
denominated in the applicable foreign currency held by the fund.
A futures contract sale creates an obligation by the seller to deliver the type
of instrument called for in the contract in a specified delivery month for a
stated price. A futures contract purchase creates an obligation by the purchaser
to take delivery of the type of instrument called for in the contract in a
specified delivery month at a stated price. The specific instruments delivered
or taken at settlement date are not determined until on or near that date. The
determination is made in accordance with the rules of the exchanges on which the
futures contract was made. Futures contracts are traded in the United States
only on commodity exchange or boards of trade -- known as "contract markets" --
approved for such trading by the Commodity Futures Trading Commission (CFTC),
and must be executed through a futures commission merchant or brokerage firm
which is a member of the relevant contract market.
Although futures contracts by their terms call for actual delivery or acceptance
of commodities or securities, the contracts usually are closed out before the
settlement date without the making or taking of delivery. Closing out a futures
contract sale is effected by purchasing a futures contract for the same
aggregate amount of the specific type of financial instrument or commodity with
the same delivery date. If the price of the initial sale of the futures contract
exceeds the price of the offsetting purchase, the seller is paid the difference
and realizes a gain. Conversely, if the price of the offsetting purchase exceeds
the price of the initial sale, the seller realizes a loss. Similarly, the
closing out of a futures contract purchase is effected by the purchaser's
entering into a futures contract sale. If the offsetting sale price exceeds the
purchase price, the purchaser realizes a gain, and if the purchase price exceeds
the offsetting sale price, the purchaser realizes a loss.
Unlike when the fund purchases or sells a security, no price is paid or received
by the fund upon the purchase or sale of a futures contract, although the fund
is required to deposit with its custodian in a segregated account in the name of
the futures broker an amount of cash and/or U.S. Government Securities. This
amount is known as "initial margin". The nature of initial margin in futures
transactions is different from that of margin in security transactions in that
futures contract margin does not involve the borrowing of funds by the fund to
finance the transactions. Rather, initial margin is in the nature of a
performance bond or good faith deposit on the contract that is returned to the
fund upon termination of the futures contract, assuming all contractual
obligations have been satisfied. Futures contracts also involve brokerage costs.
Subsequent payments, called "variation margin", to and from the broker (or the
custodian) are made on a daily basis as the price of the underlying security or
commodity fluctuates, making the long and short positions in the futures
contract more or less valuable, a process known as "marking to market."
The fund may elect to close some or all of its futures positions at any time
prior to their expiration. The purpose of making such a move would be to reduce
or eliminate the hedge position then currently held by the fund. The fund may
close its positions by taking opposite positions which will operate to terminate
the fund's position in the futures contracts. Final determinations of variation
margin are then made, additional cash is required to be paid by or released to
the fund, and the fund realizes a loss or a gain. Such closing transactions
involve additional commission costs.
Options on futures contracts. The fund will enter into written options on
futures contracts only when, in compliance with the SEC's requirements, cash or
equivalents equal in value to the commodity value (less any applicable margin
deposits) have been deposited in a segregated account of the fund's custodian.
The fund may purchase and write call and put options on futures contracts it may
buy or sell and enter into closing transactions with respect to such options to
terminate existing positions. The fund may use such options on futures contracts
in lieu of writing options directly on the underlying securities or purchasing
and selling the underlying futures contracts. Such options generally operate in
the same manner as options purchased or written directly on the underlying
investments.
As with options on securities, the holder or writer of an option may terminate
his position by selling or purchasing an offsetting option. There is no
guarantee that such closing transactions can be effected.
The fund will be required to deposit initial margin and maintenance margin with
respect to put and call options on futures contracts written by it pursuant to
brokers' requirements similar to those described above.
Risks of transactions in futures contracts and related options. Successful use
of futures contracts by the fund is subject to the Adviser `s ability to predict
correctly movements in the direction of interest rates and other factors
affecting securities markets.
Compared to the purchase or sale of futures contracts, the purchase of call or
put options on futures contracts involves less potential risk to the fund
because the maximum amount at risk is the premium paid for the options (plus
transaction costs). However, there may be circumstances when the purchase of a
call or put option on a futures contract would result in a loss to the fund when
the purchase or sale of a futures contract would not, such as when there is no
movement in the prices of the hedged investments. The writing of an option on a
futures contract involves risks similar to those risks relating to the sale of
futures contracts.
There is no assurance that higher than anticipated trading activity or other
unforeseen events might not, at times, render certain market clearing facilities
inadequate, and thereby result in the institution, by exchanges, of special
procedures which may interfere with the timely execution of customer orders.
To reduce or eliminate a hedge position held by the fund, the fund may seek to
close out a position. The ability to establish and close out positions will be
subject to the development and maintenance of a liquid secondary market. It is
not certain that this market will develop or continue to exist for a particular
futures contract. Reasons for the absence of a liquid secondary market on an
exchange include the following: (i) there may be insufficient trading interest
in certain contracts or options; (ii) restrictions may be imposed by an exchange
on opening transactions or closing transactions or both; (iii) trading halts,
suspensions or other restrictions may be imposed with respect to particular
classes or series of contracts or options, or underlying securities; (iv)
unusual or unforeseen circumstances may interrupt normal operations on an
exchange; (v) the facilities of an exchange or a clearing corporation may not at
all times be adequate to handle current trading volume; or (vi) one or more
exchanges could, for economic or other reasons, decide or be compelled at some
future date to discontinue the trading of contracts or options (or a particular
class or series of contracts or options), in which event the secondary market on
that exchange (or in the class or series of contracts or options) would cease to
exist, although outstanding contracts or options on the exchange that had been
issued by a clearing corporation as a result of trades on that exchange would
continue to be exercisable in accordance with their terms.
Use by tax-exempt funds of U.S. Treasury security futures contracts and options.
The fund investing in tax-exempt securities issued by a governmental entity may
purchase and sell futures contracts and related options on U.S. Treasury
securities when, in the opinion of the Adviser, price movements in Treasury
security futures and related options will correlate closely with price movements
in the tax-exempt securities which are the subject of the hedge. U.S. Treasury
securities futures contracts require the seller to deliver, or the purchaser to
take delivery of, the type of U.S. Treasury security called for in the contract
at a specified date and price. Options on U.S. Treasury security futures
contracts give the purchaser the right in return for the premium paid to assume
a position in a U.S. Treasury futures contract at the specified option exercise
price at any time during the period of the option.
In addition to the risks generally involved in using futures contracts, there is
also a risk that price movements in U.S. Treasury security futures contracts and
related options will not correlate closely with price movements in markets for
tax-exempt securities.
Index futures contracts. An index futures contract is a contract to buy or sell
units of an index at a specified future date at a price agreed upon when the
contract is made. Entering into a contract to buy units of an index is commonly
referred to as buying or purchasing a contract or holding a long position in the
index. Entering into a contract to sell units of an index is commonly referred
to as selling a contract or holding a short position. A unit is the current
value of the index. The fund may enter into stock index futures contracts, debt
index futures contracts, or other index futures contracts appropriate to its
objective(s). The fund may also purchase and sell options on index futures
contracts.
There are several risks in connection with the use by the fund of index futures
as a hedging device. One risk arises because of the imperfect correlation
between movements in the prices of the index futures and movements in the prices
of securities which are the subject of the hedge. The Adviser will attempt to
reduce this risk by selling, to the extent possible, futures on indices the
movements of which will, in its judgment, have a significant correlation with
movements in the prices of the fund's portfolio securities sought to be hedged.
Successful use of the index futures by the fund for hedging purposes is also
subject to the Adviser's ability to predict correctly movements in the direction
of the market. It is possible that, where the fund has sold futures to hedge its
portfolio against a decline in the market, the index on which the futures are
written may advance and the value of securities held in the fund's portfolio may
decline. If this occurs, the fund would lose money on the futures and also
experience a decline in the value in its portfolio securities. However, while
this could occur to a certain degree, the Adviser believes that over time the
value of the fund's portfolio will tend to move in the same direction as the
market indices which are intended to correlate to the price movements of the
portfolio securities sought to be hedged. It is also possible that, if the fund
has hedged against the possibility of a decline in the market adversely
affecting securities held in its portfolio and securities prices increase
instead, the fund will lose part or all of the benefit of the increased valued
of those securities that it has hedged because it will have offsetting losses in
its futures positions. In addition, in such situations, if the fund has
insufficient cash, it may have to sell securities to meet daily variation margin
requirements.
In addition to the possibility that there may be an imperfect correlation, or no
correlation at all, between movements in the index futures and the securities of
the portfolio being hedged, the prices of index futures may not correlate
perfectly with movements in the underlying index due to certain market
distortions. First, all participants in the futures markets are subject to
margin deposit and maintenance requirements. Rather than meeting additional
margin deposit requirements, investors may close futures contracts through
offsetting transactions which would distort the normal relationship between the
index and futures markets. Second, margin requirements in the futures market are
less onerous than margin requirements in the securities market, and as a result
the futures market may attract more speculators than the securities market.
Increased participation by speculators in the futures market may also cause
temporary price distortions. Due to the possibility of price distortions in the
futures market and also because of the imperfect correlation between movements
in the index and movements in the prices of index futures, even a correct
forecast of general market trends by the Adviser may still not result in a
successful hedging transaction.
Options on index futures. Options on index futures are similar to options on
securities except that options on index futures give the purchaser the right, in
return for the premium paid, to assume a position in an index futures contract
(a long position if the option is a call and a short position if the option is a
put), at a specified exercise price at any time during the period of the option.
Upon exercise of the option, the delivery of the futures position by the writer
of the option to the holder of the option will be accompanied by delivery of the
accumulated balance in the writer's futures margin account which represents the
amount by which the market price of the index futures contract, at exercise,
exceeds (in the case of a call) or is less than (in the case of a put) the
exercise price of the option on the index future. If an option is exercised on
the last trading day prior to the expiration date of the option, the settlement
will be made entirely in cash equal to the difference between the exercise price
of the option and the closing level of the index on which the future is based on
the expiration date. Purchasers of options who fail to exercise their options
prior to the exercise date suffer a loss of the premium paid.
Options on indices. As an alternative to purchasing call and put options on
index futures, the fund may purchase call and put options on the underlying
indices themselves. Such options could be used in a manner identical to the use
of options on index futures.
Foreign Currency Transactions
The fund may engage in currency exchange transactions to protect against
uncertainty in the level of future currency exchange rates.
The fund may engage in both "transaction hedging" and "position hedging". When
it engages in transaction hedging, the fund enters into foreign currency
transactions with respect to specific receivables or payables of the fund
generally arising in connection with the purchase or sale of its portfolio
securities. The fund will engage in transaction hedging when it desires to "lock
in" the U.S. dollar price of a security it has agreed to purchase or sell, or
the U.S. dollar equivalent of a dividend or interest payment in a foreign
currency. By transaction hedging the fund attempts to protect itself against a
possible loss resulting from an adverse change in the relationship between the
U.S. dollar and the applicable foreign currency during the period between the
date on which the security is purchased or sold, or on which the dividend or
interest payment is declared, and the date on which such payments are made or
received.
The fund may purchase or sell a foreign currency on a spot (or cash) basis at
the prevailing spot rate in connection with the settlement of transactions in
portfolio securities denominated in that foreign currency. The fund may also
enter into contracts to purchase or sell foreign currencies at a future date
("forward contracts") and purchase and sell foreign currency futures contracts.
For transaction hedging purposes the fund may also purchase exchange-listed and
over-the-counter call and put options on foreign currency futures contracts and
on foreign currencies. Over-the-counter options are considered to be illiquid by
the SEC staff. A put option on a futures contract gives the fund the right to
assume a short position in the futures contract until expiration of the option.
A put option on currency gives the fund the right to sell a currency at an
exercise price until the expiration of the option. A call option on a futures
contract gives the fund the right to assume a long position in the futures
contract until the expiration of the option. A call option on currency gives the
fund the right to purchase a currency at the exercise price until the expiration
of the option.
When it engages in position hedging, the fund enters into foreign currency
exchange transactions to protect against a decline in the values of the foreign
currencies in which its portfolio securities are denominated (or an increase in
the value of currency for securities which the fund expects to purchase, when
the fund holds cash or short-term investments). In connection with position
hedging, the fund may purchase put or call options on foreign currency and
foreign currency futures contracts and buy or sell forward contracts and foreign
currency futures contracts. The fund may also purchase or sell foreign currency
on a spot basis.
The precise matching of the amounts of foreign currency exchange transactions
and the value of the portfolio securities involved will not generally be
possible since the future value of such securities in foreign currencies will
change as a consequence of market movements in the value of those securities
between the dates the currency exchange transactions are entered into and the
dates they mature.
It is impossible to forecast with precision the market value of portfolio
securities at the expiration or maturity of a forward or futures contract.
Accordingly, it may be necessary for the fund to purchase additional foreign
currency on the spot market (and bear the expense of such purchase) if the
market value of the security or securities being hedged is less than the amount
of foreign currency the fund is obligated to deliver and if a decision is made
to sell the security or securities and make delivery of the foreign currency.
Conversely, it may be necessary to sell on the spot market some of the foreign
currency received upon the sale of the portfolio security or securities if the
market value of such security or securities exceeds the amount of foreign
currency the fund is obligated to deliver.
Transaction and position hedging do not eliminate fluctuations in the underlying
prices of the securities which the owns or intends to purchase or sell. They
simply establish a rate of exchange which one can achieve at some future point
in time. Additionally, although these techniques tend to minimize the risk of
loss due to a decline in the value of the hedged currency, they tend to limit
any potential gain which might result from the increase in value of such
currency.
Currency forward and futures contracts. Upon entering into such contracts, in
compliance with the SEC's requirements, cash, cash equivalents or high-grade
debt securities, equal in value to the amount of the fund's obligation under the
contract (less any applicable margin deposits and any assets that constitute
"cover" for such obligation), will be segregated with the fund's custodian. For
example, if a fund investing primarily in foreign equity securities enters into
a contract denominated in a foreign currency, the fund will segregate cash, cash
equivalents or high-grade debt securities equal in value to the difference
between the fund's obligation under the contract and the aggregate value of all
readily marketable equity securities denominated in the applicable foreign
currency held by the fund.
A forward currency contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract as agreed by the parties, at a price set at the time of
the contract. In the case of a cancelable contract, the holder has the
unilateral right to cancel the contract at maturity by paying a specified fee.
The contracts are traded in the interbank market conducted directly between
currency traders (usually large commercial banks) and their customers. A
contract generally has no deposit requirement, and no commissions are charged at
any stage for trades. A currency futures contract is a standardized contract for
the future delivery of a specified amount of a foreign currency at a future date
at a price set at the time of the contract. Currency futures contracts traded in
the United States are designed and traded on exchanges regulated by the CFTC,
such as the New York Mercantile Exchange.
Forward currency contracts differ from currency futures contracts in certain
respects. For example, the maturity date of a forward contract may be any fixed
number of days from the date of the contract agreed upon by the parties, rather
than a predetermined date in a given month. Forward contracts may be in any
amounts agreed upon by the parties rather than predetermined amounts. Also,
forward contracts are traded directly between currency traders so that no
intermediary is required. A forward contract generally requires no margin or
other deposit.
At the maturity of a forward or futures contract, the fund may either accept or
make delivery of the currency specified in the contract, or at or prior to
maturity enter into a closing transaction involving the purchase or sale of an
offsetting contract. Closing transactions with respect to forward contracts are
usually effected with the currency trader who is a party to the original forward
contract. Closing transactions with respect to futures contracts are effected on
a commodities exchange; a clearing corporation associated with the exchange
assumes responsibility for closing out such contracts.
Positions in currency futures contracts may be closed out only on an exchange or
board of trade which provides a secondary market in such contracts. Although the
fund intends to purchase or sell currency futures contracts only on exchanges or
boards of trade where there appears to be an active secondary market, there is
no assurance that a secondary market on an exchange or board of trade will exist
for any particular contract or at any particular time. In such event, it may not
be possible to close a futures position and, in the event of adverse price
movements, the fund would continue to be required to make daily cash payments of
variation margin.
Currency options. In general, options on currencies operate similarly to options
on securities and are subject to many similar risks. Currency options are traded
primarily in the over-the-counter market, although options on currencies have
recently been listed on several exchanges. Options are traded not only on the
currencies of individual nations, but also on the European Currency Unit
("ECU"). The ECU is composed of amounts of a number of currencies, and is the
official medium of exchange of the European Economic Community's European
Monetary System.
The fund will only purchase or write currency options when the Adviser believes
that a liquid secondary market exists for such options. There can be no
assurance that a liquid secondary market will exist for a particular option at
any specified time. Currency options are affected by all of those factors which
influence exchange rates and investments generally. To the extent that these
options are traded over the counter, they are considered to be illiquid by the
SEC staff.
The value of any currency, including the U.S. dollars, may be affected by
complex political and economic factors applicable to the issuing country. In
addition, the exchange rates of currencies (and therefore the values of currency
options) may be significantly affected, fixed, or supported directly or
indirectly by government actions. Government intervention may increase risks
involved in purchasing or selling currency options, since exchange rates may not
be free to fluctuate in respect to other market forces.
The value of a currency option reflects the value of an exchange rate, which in
turn reflects relative values of two currencies, the U.S. dollar and the foreign
currency in question. Because currency transactions occurring in the interbank
market involve substantially larger amounts than those that may be involved in
the exercise of currency options, investors may be disadvantaged by having to
deal in an odd lot market for the underlying currencies in connection with
options at prices that are less favorable than for round lots. Foreign
governmental restrictions or taxes could result in adverse changes in the cost
of acquiring or disposing of currencies.
There is no systematic reporting of last sale information for currencies and
there is no regulatory requirement that quotations available through dealers or
other market sources be firm or revised on a timely basis. Available quotation
information is generally representative of very large round-lot transactions in
the interbank market and thus may not reflect exchange rates for smaller odd-lot
transactions (less than $1 million) where rates may be less favorable. The
interbank market in currencies is a global, around-the-clock market. To the
extent that options markets are closed while the markets for the underlying
currencies remain open, significant price and rate movements may take place in
the underlying markets that cannot be reflected in the options markets.
Settlement procedures. Settlement procedures relating to the fund's investments
in foreign securities and to the fund's foreign currency exchange transactions
may be more complex than settlements with respect to investments in debt or
equity securities of U.S. issuers, and may involve certain risks not present in
the fund's domestic investments, including foreign currency risks and local
custom and usage. Foreign currency transactions may also involve the risk that
an entity involved in the settlement may not meet its obligations.
Foreign currency conversion. Although foreign exchange dealers do not charge a
fee for currency conversion, they do realize a profit based on the difference
(spread) between prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to the fund at one rate,
while offering a lesser rate of exchange should the fund desire to resell that
currency to the dealer. Foreign currency transactions may also involve the risk
that an entity involved in the settlement may not meet its obligation.
Participation Interests
The fund may invest in municipal obligations either by purchasing them directly
or by purchasing certificates of accrual or similar instruments evidencing
direct ownership of interest payments or principal payments, or both, on
municipal obligations, provided that, in the opinion of counsel to the initial
seller of each such certificate or instrument, any discount accruing on such
certificate or instrument that is purchased at a yield not greater than the
coupon rate of interest on the related municipal obligations will be exempt from
federal income tax to the same extent as interest on such municipal obligations.
The fund may also invest in tax-exempt obligations by purchasing from banks
participation interests in all or part of specific holdings of municipal
obligations. Such participations may be backed in whole or part by an
irrevocable letter of credit or guarantee of the selling bank. The selling bank
may receive a fee from the fund in connection with the arrangement. The fund
will not purchase such participation interests unless it receives an opinion of
counsel or a ruling of the Internal Revenue Service that interest earned by it
on municipal obligations in which it holds such participation interests is
exempt from federal income tax.
Stand-by Commitments
When the fund purchases municipal obligations it may also acquire stand-by
commitments from banks and broker-dealers with respect to such municipal
obligations. A stand-by commitment is the equivalent of a put option acquired by
the fund with respect to a particular municipal obligation held in its
portfolio. A stand-by commitment is a security independent of the municipal
obligation to which it relates. The amount payable by a bank or dealer during
the time a stand-by commitment is exercisable, absent unusual circumstances
relating to a change in market value, would be substantially the same as the
value of the underlying municipal obligation. A stand-by commitment might not be
transferable by the fund, although it could sell the underlying municipal
obligation to a third party at any time.
The fund expects that stand-by commitments generally will be available without
the payment of direct or indirect consideration. However, if necessary and
advisable, the fund may pay for stand-by commitments either separately in cash
or by paying a higher price for portfolio securities which are acquired subject
to such a commitment (thus reducing the yield to maturity otherwise available
for the same securities.) The total amount paid in either manner for outstanding
stand-by commitments held in the fund portfolio will not exceed 10% of the value
of the fund's total assets calculated immediately after each stand-by commitment
is acquired. The fund will enter into stand-by commitments only with banks and
broker-dealers that, in the judgment of the Trust's Board of Trustees, present
minimal credit risks.
Inverse Floaters
Inverse floaters are derivative securities whose interest rates vary inversely
to changes in short-term interest rates and whose values fluctuate inversely to
changes in long-term interest rates. The value of certain inverse floaters will
fluctuate substantially more in response to a given change in long-term rates
than would a traditional debt security. These securities have investment
characteristics similar to leverage, in that interest rate changes have a
magnified effect on the value of inverse floaters.
TAXES
All discussions of taxation at the shareholder level relate to federal taxes
only. Consult your tax adviser for state and local tax considerations and for
information about special tax considerations that may apply to shareholders that
are not natural persons.
Dividends Received Deductions. Distributions will qualify for the corporate
dividends received deduction only to the extent that dividends earned by the
fund qualify. Any such dividends are, however, includable in adjusted current
earnings for purposes of computing corporate AMT.
Return of Capital Distributions. To the extent that a distribution is a return
of capital for federal tax purposes, it reduces the cost basis of the shares on
the record date and is similar to a partial return of the original investment
(on which a sales charge may have been paid). There is no recognition of a gain
or loss, however, unless the return of capital reduces the cost basis in the
shares to below zero.
Funds that invest in U.S. Government Securities. Many states grant tax-free
status to dividends paid to shareholders of mutual funds from interest income
earned by the fund from direct obligations of the U.S. government. Investments
in mortgage-backed securities (including GNMA, FNMA and FHLMC Securities) and
repurchase agreements collateralized by U.S. government securities do not
qualify as direct federal obligations in most states. Shareholders should
consult with their own tax advisers about the applicability of state and local
intangible property, income or other taxes to their fund shares and
distributions and redemption proceeds received from the fund.
Distributions from Tax-Exempt Funds. Each tax-exempt fund will have at least 50%
of its total assets invested in tax-exempt bonds at the end of each quarter so
that dividends from net interest income on tax-exempt bonds will be exempt from
Federal income tax when received by a shareholder. The tax-exempt portion of
dividends paid will be designated within 60 days after year-end based upon the
ratio of net tax-exempt income to total net investment income earned during the
year. That ratio may be substantially different than the ratio of net tax-exempt
income to total net investment income earned during any particular portion of
the year. Thus, a shareholder who holds shares for only a part of the year may
be allocated more or less tax-exempt dividends than would be the case if the
allocation were based on the ratio of net tax-exempt income to total net
investment income actually earned while a shareholder.
The Tax Reform Act of 1986 makes income from certain "private activity bonds"
issued after August 7, 1986, a tax preference item for the alternative minimum
tax (AMT) at the maximum rate of 28% for individuals and 20% for corporations.
If the fund invests in private activity bonds, shareholders may be subject to
the AMT on that part of the distributions derived from interest income on such
bonds. Other provisions of the Tax Reform Act affect the tax treatment of
distributions for corporations, casualty insurance companies and financial
institutions; interest on all tax-exempt bonds is included in corporate adjusted
current earnings when computing the AMT applicable to corporations. Seventy-five
percent of the excess of adjusted current earnings over the amount of income
otherwise subject to the AMT is included in a corporation's alternative minimum
taxable income.
Dividends derived from any investments other than tax-exempt bonds and any
distributions of short-term capital gains are taxable to shareholders as
ordinary income. Any distributions of net long-term gains will in general be
taxable to shareholders as long-term capital gains regardless of the length of
time fund shares are held.
Shareholders receiving social security and certain retirement benefits may be
taxed on a portion of those benefits as a result of receiving tax-exempt income,
including tax-exempt dividends from the fund.
Special Tax Rules Applicable to Tax-Exempt Funds. Income distributions to
shareholders who are substantial users or related persons of substantial users
of facilities financed by industrial revenue bonds may not be excludable from
their gross income if such income is derived from such bonds. Income derived
from the fund's investments other than tax-exempt instruments may give rise to
taxable income. The fund's shares must be held for more than six months in order
to avoid the disallowance of a capital loss on the sale of fund shares to the
extent of tax-exempt dividends paid during that period. A shareholder that
borrows money to purchase the fund's shares will not be able to deduct the
interest paid with respect to such borrowed money.
Sales of Shares. In general, any gain or loss realized upon a taxable
disposition of shares by a shareholder will be treated as long-term capital gain
or loss if the shares have been held for more than twelve months, and otherwise
as short-term capital gain or loss assuming such shares are held as a capital
asset. However, any loss realized upon a taxable disposition of shares held for
six months or less will be treated as long-term, rather than short-term, capital
loss to the extent of any long-term capital gain distributions received by the
shareholder with respect to those shares. All or a portion of any loss realized
upon a taxable disposition of shares will be disallowed if other shares are
purchased within 30 days before or after the disposition. In such a case, the
basis of the newly purchased shares will be adjusted to reflect the disallowed
loss.
Backup Withholding. Certain distributions and redemptions may be subject to a
31% backup withholding unless a taxpayer identification number and certification
that the shareholder is not subject to the withholding is provided to the Ffund.
This number and form may be provided by either a Form W-9 or the accompanying
application. In certain instances, CISC may be notified by the Internal Revenue
Service that a shareholder is subject to backup withholding.
Excise Tax. To the extent that the Fund does not annually distribute
substantially all taxable income and realized gains, it is subject to an excise
tax. The Adviser, intends to avoid this tax except when the cost of processing
the distribution is greater than the tax.
Tax Accounting Principles. To qualify as a "regulated investment company," the
fund must (a) derive at least 90% of its gross income from dividends, interest,
payments with respect to securities loans, gains from the sale or other
disposition of securities or foreign currencies or other income (including but
not limited to gains from options, futures or forward contracts) derived with
respect to its business of investing in such securities or currencies; (b)
derive less than 30% of its gross income from the sale or other disposition of
certain assets held less than three months; (c) diversify its holdings so that,
at the close of each quarter of its taxable year, (i) at least 50% of the value
of its total assets consists of cash, cash items, U.S. Government securities,
and other securities limited generally with respect to any one issuer to not
more than 5% of the total assets of the fund and not more than 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of the
value of its assets is invested in the securities of any issuer (other than U.S.
Government securities).
Futures Contracts. Accounting for futures contracts will be in accordance with
generally accepted accounting principles. The amount of any realized gain or
loss on the closing out of a futures contract will result in a capital gain or
loss for tax purposes. In addition, certain futures contracts held by the fund
(so-called "Section 1256 contracts") will be required to be "marked-to-market"
(deemed sold) for federal income tax purposes at the end of each fiscal year.
Sixty percent of any net gain or loss recognized on such deemed sales or on
actual sales will be treated as long-term capital gain or loss, and the
remainder will be treated as short-term capital gain or loss.
However, if a futures contract is part of a "mixed straddle" (i.e., a straddle
comprised in part of Section 1256 contracts), a fund may be able to make an
election which will affect the character arising from such contracts as
long-term or short-term and the timing of the recognition of such gains or
losses. In any event, the straddle provisions described below will be applicable
to such mixed straddles.
Special Tax Rules Applicable to "Straddles". The straddle provisions of the Code
may affect the taxation of the fund's options and futures transactions and
transactions in securities to which they relate. A "straddle" is made up of two
or more offsetting positions in "personal property," including debt securities,
related options and futures, equity securities, related index futures and, in
certain circumstances, options relating to equity securities, and foreign
currencies and related options and futures.
The straddle rules may operate to defer losses realized or deemed realized on
the disposition of a position in a straddle, may suspend or terminate the fund's
holding period in such positions, and may convert short-term losses to long-term
losses in certain circumstances.
Foreign Currency-Denominated Securities and Related Hedging Transactions. The
fund's transactions in foreign currency-denominated debt securities, certain
foreign currency options, futures contracts and forward contracts may give rise
to ordinary income or loss to the extent such income or loss results from
fluctuations in the value of the foreign currency concerned.
If more than 50% of the fund's total assets at the end of its fiscal year are
invested in securities of foreign corporate issuers, the fund may make an
election permitting its shareholders to take a deduction or credit for federal
tax purposes for their portion of certain foreign taxes paid by the fund. The
Adviser will consider the value of the benefit to a typical shareholder, the
cost to the fund of compliance with the election, and incidental costs to
shareholders in deciding whether to make the election. A shareholder's ability
to claim such a foreign tax credit will be subject to certain limitations
imposed by the Code, as a result of which a shareholder may not get a full
credit for the amount of foreign taxes so paid by the fund. Shareholders who do
not itemize on their federal income tax returns may claim a credit (but no
deduction) for such foreign taxes.
Certain securities are considered to be Passive Foreign Investment Companies
(PFICS) under the Code, and the fund is liable for any PFIC-related taxes.
MANAGEMENT OF THE COLONIAL FUNDS (in this section, and the following sections
entitled "Trustees and Officers," "The Management Agreement," "Administration
Agreement," "The Pricing and Bookkeeping Agreement," "Portfolio Transactions,"
"Investment decisions," and "Brokerage and research services," the "Adviser"
refers to Colonial Management Associates, Inc.) The Adviser is the investment
adviser to each of the Colonial funds (except for Colonial Municipal Money
Market Fund, Colonial Global Utilities Fund and Colonial Newport Tiger Fund -see
Part I of each Fund's respective SAI for a description of the investment
adviser). The Adviser is a subsidiary of The Colonial Group, Inc. (TCG), One
Financial Center, Boston, MA 02111. TCG is a direct subsidiary of Liberty
Financial Companies, Inc. (Liberty Financial), which in turn is a direct
subsidiary of LFC Holdings, Inc., which in turn is a direct subsidiary of
Liberty Mutual Equity Corporation, which in turn is a wholly-owned subsidiary of
Liberty Mutual Insurance Company (Liberty Mutual). Liberty Mutual is an
underwriter of workers' compensation insurance and a property and casualty
insurer in the U.S. Liberty Financial's address is 600 Atlantic Avenue, Boston,
MA 02210. Liberty Mutual's address is 175 Berkeley Street, Boston, MA 02117.
<PAGE>
Trustees and Officers (this section applies to all of the Colonial funds)
<TABLE>
<CAPTION>
Position with
Name and Address Age Fund Principal Occupation During Past Five Years
- ---------------- --- ---- -------------------------------------------
<S> <C> <C> <C>
Robert J. Birnbaum(1) (2) 68 Trustee Retired since 1994 (formerly Special Counsel, Dechert
313 Bedford Road Price & Rhoads from September, 1988 to December, 1993)
Ridgewood, NJ 07450
Tom Bleasdale 65 Trustee Retired since 1993 (formerly Chairman of the Board and
1508 Ferncroft Tower Chief Executive Officer, Shore Bank & Trust Company from
Danvers, MA 01923 1992-1993), is a Director of The Empire Company since
June, 1995 (3)
Lora S. Collins 60 Trustee Attorney with Kramer, Levin, Naftalis, Nessen, Kamin &
919 Third Avenue Frankel since September, 1986 (3)
New York, NY 10022
James E. Grinnell (1) (2) 66 Trustee Private Investor since November, 1988
22 Harbor Avenue
Marblehead, MA 01945
William D. Ireland, Jr. 72 Trustee Retired since 1990, is a Trustee of certain charitable
103 Springline Drive and non-charitable organizations since February, 1990 (3)
Vero Beach, FL 32963
Richard W. Lowry (1) (2) 59 Trustee Private Investor since August, 1987
10701 Charleston Drive
Vero Beach, FL 32963
William E. Mayer* 55 Trustee Dean, College of Business and Management, University of
College Park, MD 20742 Maryland since October, 1992 (formerly Dean, Simon
Graduate School of Business, University of Rochester from
October, 1991 to July, 1992 (3)
James L. Moody, Jr. 64 Trustee Chairman of the Board, Hannaford Bros., Co. since May,
1984 (formerly Chief Executive Officer, Hannaford Bros.
Co. from May, 1984 to May, 1992) (3)
John J. Neuhauser 52 Trustee Dean, Boston College School of Management since 1978 (3)
140 Commonwealth Avenue
Chestnut, Hill MA 02167
George L. Shinn 73 Trustee Financial Consultant since 1989 (formerly Chairman, Chief
The First Boston Corp. Executive Officer and Consultant, The First Boston
Tower Forty Nine Corporation from 1983 to July, 1991) (3)
12 East 49th Street
New York, NY 10017
Robert L. Sullivan 68 Trustee Self-employed Management Consultant since January, 1989
7121 Natelli Woods Lane (3)
Bethesda, MD 20817
<PAGE>
Sinclair Weeks, Jr. 72 Trustee Chairman of the Board, Reed & Barton Corporation since
Bay Colony Corporate Ctr. 1987 (3)
Suite 4550
1000 Winter Street
Waltham, MA 02154
Harold W. Cogger 59 President President of Colonial funds since March, 1996
(formerly Vice (formerly Vice President from July, 1993 to March,
President) 1996); is President since July, 1993, Chief Executive
Officer since March,
1995 and Director
since March, 1984 of
the Adviser
(formerly Executive
Vice President of
the Adviser from
October, 1989 to
July, 1993);
President since
October, 1994, Chief
Executive Officer
since March, 1995
and Director since
October, 1981 of
TCG; Executive Vice
President and
Director, Liberty
Financial (3)
Peter L. Lydecker 41 Controller Controller of Colonial funds since June, 1993 (formerly
(formerly Assistant Controller from March, 1985 to June, 1993);
Assistant Vice President of the Adviser since June, 1993
Controller) (formerly Assistant Vice President of the Adviser from
August, 1988 to June, 1993) (3)
Davey S. Scoon 49 Vice President Vice President of Colonial funds since June, 1993, is
Executive Vice President since July, 1993 and Director
since March, 1985 of the Adviser (formerly Senior Vice
President and Treasurer of the Adviser from March, 1985
to July, 1993); Executive Vice President and Chief
Operating Officer, TCG since March, 1995 (formerly Vice
President - Finance and Administration of TCG from
November, 1985 to March, 1995) (3)
Richard A. Silver 49 Treasurer and Treasurer and Chief Financial Officer of Colonial funds
Chief Financial since July, 1993 (formerly Controller from July, 1980
Officer to July, 1993), is Senior Vice President and Director
(formerly since April, 1988 and Treasurer and Chief Financial
Controller) Officer since July, 1993 of the Adviser (formerly
Assistant Treasurer
from January, 1978
to July, 1993);
Treasurer and Chief
Financial Officer of
TCG since July, 1993
(formerly Assistant
Treasurer of TCG
from January, 1985
to July, 1993) (3)
Arthur O. Stern 56 Secretary Secretary of Colonial funds since 1985, is Director
since 1985, Executive Vice President since July, 1993,
General Counsel, Clerk and Secretary since March, 1985
of the Adviser; Executive Vice President, Legal since
March, 1995 and Clerk since March, 1985 of TCG
(formerly Executive Vice President, Compliance from
March, 1995 to March, 1996 and Vice President - Legal
of TCG from March, 1985 to March, 1995) (3)
</TABLE>
(1) Elected to the Colonial Funds complex on April 21, 1995.
(2) On April 3, 1995, and in connection with the merger of TCG with a
subsidiary of into Liberty Financial which occurred on March 27, 1995,
Liberty Financial Trust (LFT) changed its name to Colonial Trust VII.
Prior to the merger, each of Messrs. Birnbaum, Grinnell, and Lowry was
a Trustee of LFT. Mr. Birnbaum has been a Trustee of LFT since
November, 1994. Each of Messrs. Grinnell and Lowry has been a Trustee
of LFT since August, 1991. Each of Messrs. Grinnell and Lowry continue
to serve as Trustees under the new name, Colonial Trust VII, along with
each of the other Colonial Trustees named above. The Colonial Trustees
were elected as Trustees of Colonial Trust VII effective April 3, 1995.
(3) Elected as a Trustee or officer of the LFC Utilities Trust, the master
fund in Colonial Global Utilities Fund, a series of Colonial Trust III
(LFC Portfolio) on March 27, 1995 in connection with the merger of TCG
with a subsidiary of Liberty Financial.
* Trustees who are "interested persons" (as defined in the Investment
Company Act of 1940) of the fund or the Adviser.
The address of the officers of each Colonial Fund is One Financial Center,
Boston, MA 02111.
The Trustees serve as trustees of all Colonial funds for which each Trustee will
receive an annual retainer of $45,000 and attendance fees of $7,500 for each
regular joint meeting and $1,000 for each special joint meeting. Committee
chairs receive an annual retainer of $5,000. Committee members receive an annual
retainer of $1,000 and $1,000 for each special meeting attended. Two-thirds of
the Trustee fees are allocated among the Colonial funds based on the fund's
relative net assets and one-third of the fees are divided equally among the
Colonial funds.
The Adviser and/or its affiliate, Colonial Advisory Services, Inc. (CASI), has
rendered investment advisory services to investment company, institutional and
other clients since 1931. The Adviser currently serves as investment adviser and
administrator for 30 open-end and 5 closed-end management investment company
portfolios, and is the administrator for 3 open-end management investment
company portfolios (collectively, Colonial funds). Trustees and officers of the
Trust, who are also officers of the Adviser or its affiliates will benefit from
the advisory fees, sales commissions and agency fees paid or allowed by the
Trust. More than 30,000 financial advisers have recommended Colonial funds to
over 800,000 clients worldwide, representing more than $15.5 billion in assets.
The Agreement and Declaration of Trust (Declaration) of the Trust provides that
the Trust will indemnify its Trustees and officers against liabilities and
expenses incurred in connection with litigation in which they may be involved
because of their offices with the Trust but that such indemnification will not
relieve any officer or Trustee of any liability to the Trust or its shareholders
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of his or her duties. The Trust, at its expense, provides liability
insurance for the benefit of its Trustees and officers.
The Management Agreement (this section does not apply to the Colonial Municipal
Money Market Fund, Colonial Global Utilities Fund or Colonial Newport Tiger
Fund) Under a Management Agreement (Agreement), the Adviser has contracted to
furnish each fund with investment research and recommendations or fund
management, respectively, and accounting and administrative personnel and
services, and with office space, equipment and other facilities. For these
services and facilities, each Colonial fund pays a monthly fee based on the
average of the daily closing value of the total net assets of each fund for such
month.
The Adviser's compensation under the Agreement is subject to reduction in any
fiscal year to the extent that the total expenses of each fund for such year
(subject to applicable exclusions) exceed the most restrictive applicable
expense limitation prescribed by any state statute or regulatory authority in
which the Trust's shares are qualified for sale. The most restrictive expense
limitation applicable to a Colonial fund is 2.5% of the first $30 million of the
Trust's average net assets for such year, 2% of the next $70 million and 1.5% of
any excess over $100 million.
Under the Agreement, any liability of the Adviser to the fund and its
shareholders is limited to situations involving the Adviser's own willful
misfeasance, bad faith, gross negligence or reckless disregard of duties.
The Agreement may be terminated with respect to the fund at any time on 60 days'
written notice by the or by the Trustees of the Trust or by a vote of a majority
of the outstanding voting securities of the fund. The Agreement will
automatically terminate upon any assignment thereof and shall continue in effect
from year to year only so long as such continuance is approved at least annually
(i) by the Trustees of the Trust or by a vote of a majority of the outstanding
voting securities of the fund and (ii) by vote of a majority of the Trustees who
are not interested persons (as such term is defined in the 1940 Act) of the
Adviser or the Trust, cast in person at a meeting called for the purpose of
voting on such approval.
The Adviser pays all salaries of officers of the Trust. The Trust pays all
expenses not assumed by the Adviser including, but not limited to, auditing,
legal, custodial, investor servicing and shareholder reporting expenses. The
Trust pays the cost of typesetting for its Prospectuses and the cost of printing
and mailing any Prospectuses sent to shareholders. CISI pays the cost of
printing and distributing all other Prospectuses.
The Agreement provides that the Adviser shall not be subject to any liability to
the Trust or to any shareholder of the Trust for any act or omission in the
course of or connected with rendering services to the Trust in the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of its
duties on the part of the Adviser.
Administration Agreement (this section applies only to the Colonial Municipal
Money Market Fund, Colonial Global Utilities Fund and Colonial Newport Tiger
Fund and their respective Trusts)
Under an Administration Agreement with each Fund, Adviser, in its capacity as
the Administrator to each Fund, has contracted to perform the following
administrative services:
(a) providing office space, equipment and clerical personnel;
(b) arranging, if desired by the respective Trust, for its
Directors, officers and employees to serve as Trustees,
officers or agents of each Fund;
(c) preparing and, if applicable, filing all documents required
for compliance by each Fund with applicable laws and
regulations;
(d) preparation of agendas and supporting documents for and
minutes of meetings of Trustees, committees of Trustees and
shareholders;
(e) coordinating and overseeing the activities of each Fund's
other third-party service providers; and
(f) maintaining certain books and records of each Fund.
With respect to the Colonial Municipal Money Market Fund, the Administration
Agreement for this Fund provides for the following services in addition to the
services referenced above:
(g) monitoring compliance by the Fund with Rule 2a-7 under the
Investment Company Act of 1940 (the "1940 Act") and
reporting to the Trustees from time to time with respect
thereto; and
(h) monitoring the investments and operations of the SR&F
Municipal Money Market Portfolio (Municipal Money Market
Portfolio) in which Colonial Municipal Money Market Fund
is invested and the LFC Portfolio and reporting to the
Trustees from time to time with respect thereto.
The Administration Agreement has a one year term. The Adviser is paid a monthly
fee at the annual rate of average daily net assets set forth in Part 1 of this
Statement of Additional Information.
The Pricing and Bookkeeping Agreement
The Adviser provides pricing and bookkeeping services to each Colonial fund
pursuant to a Pricing and Bookkeeping Agreement. The Pricing and Bookkeeping
Agreement has a one-year term. The Adviser, in its capacity as the Administrator
to each of Colonial Municipal Money Market Fund and Colonial Global Utilities
Fund, is paid an annual fee of $18,000, plus 0.0233% of average daily net assets
in excess of $50 million. For each of the other Colonial funds (except for
Colonial Newport Tiger Fund), the Adviser is paid monthly a fee of $2,250 by
each fund, plus a monthly percentage fee based on net assets of the fund equal
to the following:
1/12 of 0.000% of the first $50 million;
1/12 of 0.035% of the next $950 million;
1/12 of 0.025% of the next $1 billion; 1/12
of 0.015% of the next $1 billion; and 1/12
of 0.001% on the excess over $3 billion
The Adviser provides pricing and bookkeeping services to Colonial Newport Tiger
Fund for an annual fee of $27,000, plus 0.035% of Colonial Newport Tiger Fund's
average net assets over $50 million.
Stein Roe & Farnham Incorporated, the investment adviser of each of the
Municipal Money Market Portfolio and LFC Portfolio, provides pricing and
bookkeeping services to each Portfolio for a fee of $25,000 plus 0.0025%
annually of average daily net assets of each Portfolio over $50 million.
Portfolio Transactions
The following sections entitled "Investment decisions" and "Brokerage and
research services" do not apply to Colonial Municipal Money Market Fund,
Colonial U.S. Fund for Growth ,and Colonial Global Utilities Fund,. For each of
these funds, see Part 1 of its respective SAI. The Adviser of Colonial Newport
Tiger Fund follows the same procedures as those set forth under "Brokerage and
research services."
Investment decisions. The Adviser acts as investment adviser to each of the
Colonial funds (except for the Colonial Municipal Money Market Fund, Colonial
Global Utilities Fund and Colonial Newport Tiger Fund, each of which is
administered by the Adviser, and Colonial U.S. Fund for Growth for which
investment decisions have been delegated by the Adviser to State Street Bank and
Trust Company, the fund's sub-adviser) (as defined under Management of the Fund
herein). The Adviser's affiliate, CASI, advises other institutional, corporate,
fiduciary and individual clients for which CASI performs various services.
Various officers and Trustees of the Trust also serve as officers or Trustees of
other Colonial funds and the other corporate or fiduciary clients of the
Adviser. The Colonial funds and clients advised by the Adviser or the funds
administered by the Adviser sometimes invest in securities in which the Fund
also invests and sometimes engage in covered option writing programs and enter
into transactions utilizing stock index options and stock index and financial
futures and related options ("other instruments"). If the Fund, such other
Colonial funds and such other clients desire to buy or sell the same portfolio
securities, options or other instruments at about the same time, the purchases
and sales are normally made as nearly as practicable on a pro rata basis in
proportion to the amounts desired to be purchased or sold by each. Although in
some cases these practices could have a detrimental effect on the price or
volume of the securities, options or other instruments as far as the Fund is
concerned, in most cases it is believed that these practices should produce
better executions. It is the opinion of the Trustees that the desirability of
retaining the Adviser as investment adviser to the Colonial funds outweighs the
disadvantages, if any, which might result from these practices.
The portfolio managers of Colonial International Fund for Growth, a series of
Colonial Trust III, will use the trading facilities of Stein Roe & Farnham
Incorporated, an affiliate of the Adviser, to place all orders for the purchase
and sale of this fund's portfolio securities, futures contracts and foreign
currencies.
Brokerage and research services. Consistent with the Rules of Fair Practice of
the National Association of Securities Dealers, Inc., and subject to seeking
"best execution" (as defined below) and such other policies as the Trustees may
determine, the Adviser may consider sales of shares of the Colonial funds as a
factor in the selection of broker-dealers to execute securities transactions for
a Colonial fund.
The Adviser places the transactions of the Colonial funds with broker-dealers
selected by the Adviser and, if applicable, negotiates commissions.
Broker-dealers may receive brokerage commissions on portfolio transactions,
including the purchase and writing of options, the effecting of closing purchase
and sale transactions, and the purchase and sale of underlying securities upon
the exercise of options and the purchase or sale of other instruments. The
Colonial funds from time to time also execute portfolio transactions with such
broker-dealers acting as principals. The Colonial funds do not intend to deal
exclusively with any particular broker-dealer or group of broker-dealers.
Except as described below in connection with commissions paid to a clearing
agent on sales of securities, it is Colonialthe Adviser's policy always to seek
best execution, which is to place the Colonial funds' transactions where the
Colonial funds can obtain the most favorable combination of price and execution
services in particular transactions or provided on a continuing basis by a
broker-dealer, and to deal directly with a principal market maker in connection
with over-the-counter transactions, except when it is believed that best
execution is obtainable elsewhere. In evaluating the execution services of,
including the overall reasonableness of brokerage commissions paid to, a
broker-dealer, consideration is given to, among other things, the firm's general
execution and operational capabilities, and to its reliability, integrity and
financial condition.
Subject to such practice of always seeking best execution, securities
transactions of the Colonial funds may be executed by broker-dealers who also
provide research services (as defined below) to the Adviser and the Colonial
funds. The Adviser may use all, some or none of such research services in
providing investment advisory services to each of its investment company and
other clients, including the fund. To the extent that such services are used by
the Adviser, they tend to reduce the Adviser's expenses. In the Adviser's
opinion, it is impossible to assign an exact dollar value for such services.
Subject to such policies as the Trustees may determine, the Adviser may cause
the Colonial funds to pay a broker-dealer which provides brokerage and research
services to the Adviser an amount of commission for effecting a securities
transaction, including the sale of an option or a closing purchase transaction,
for the Colonial funds in excess of the amount of commission which another
broker-dealer would have charged for effecting that transaction. As provided in
Section 28(e) of the Securities Exchange Act of 1934, "brokerage and research
services" include advice as to the value of securities, the advisability of
investing in, purchasing or selling securities and the availability of
securities or purchasers or sellers of securities; furnishing analyses and
reports concerning issues, industries, securities, economic factors and trends
and portfolio strategy and performance of accounts; and effecting securities
transactions and performing functions incidental thereto (such as clearance and
settlement). The Adviser must determine in good faith that such greater
commission is reasonable in relation to the value of the brokerage and research
services provided by the executing broker-dealer viewed in terms of that
particular transaction or the Adviser's overall responsibilities to the Colonial
funds and all its other clients.
The Trustees have authorized the Adviser to utilize the services of a clearing
agent with respect to all call options written by Colonial funds that write
options and to pay such clearing agent commissions of a fixed amount per share
(currently 1.25 cents) on the sale of the underlying security upon the exercise
of an option written by a fund. The Trustees may further authorize the Adviser
to depart from the present policy of always seeking best execution and to pay
higher brokerage commissions from time to time for other brokerage and research
services as described above in the future if developments in the securities
markets indicate that such would be in the interests of the shareholders of the
Colonial funds.
Principal Underwriter
CISI is the principal underwriter of the Trust's shares. CISI has no obligation
to buy the Colonial funds' shares, and purchases the Colonial funds shares only
upon receipt of orders from authorized FSFs or investors.
Investor Servicing and Transfer Agent
CISC is the Trust's investor servicing agent (transfer, plan and dividend
disbursing agent), for which it receives fees which are paid monthly by the
Trust. The fee paid to CISC is based on the average daily net assets of each
Colonial fund plus reimbursement for certain out-of-pocket expenses. See "Fund
Charges and Expenses" in Part 1 of this SAI for information on fees received by
CISC. The agreement continues indefinitely but may be terminated by 90 days'
notice by the Fund or Colonial funds to CISC or generally by 6 months' notice by
CISC to the Fund or Colonial funds. The agreement limits the liability of CISC
to the Fund or Colonial funds for loss or damage incurred by the Fund or
Colonial funds to situations involving a failure of CISC to use reasonable care
or to act in good faith in performing its duties under the agreement. It also
provides that the Fund or Colonial funds will indemnify CISC against, among
other things, loss or damage incurred by CISC on account of any claim, demand,
action or suit made on or against CISC not resulting from CISC's bad faith or
negligence and arising out of, or in connection with, its duties under the
agreement.
DETERMINATION OF NET ASSET VALUE
Each Colonial fund determines net asset value (NAV) per share for each Class as
of the close of the New York Stock Exchange (Exchange) (generally 4:00 p.m.
Eastern time, 3:00 p.m. Chicago time) each day the Exchange is open. Currently,
the Exchange is closed Saturdays, Sundays and the following holidays: New Year's
Day, Presidents' Day, Good Friday, Memorial Day, the Fourth of July, Labor Day,
Thanksgiving and Christmas. Funds with portfolio securities which are primarily
listed on foreign exchanges may experience trading and changes in NAV on days on
which such Fund does not determine NAV due to differences in closing policies
among exchanges. This may significantly affect the NAV of the Fund's redeemable
securities on days when an investor cannot redeem such securities. The net asset
value of the Municipal Money Market Portfolio will not be determined on days
when the Exchange is closed unless, in the judgment of the Municipal Money
Market Portfolio's Board of Trustees, the net asset value of the Municipal Money
Market Portfolio should be determined on any such day, in which case the
determination will be made at 3:00 p.m., Chicago time. Debt securities generally
are valued by a pricing service which determines valuations based upon market
transactions for normal, institutional-size trading units of similar securities.
However, in circumstances where such prices are not available or where the
Adviser deems it appropriate to do so, an over-the-counter or exchange bid
quotation is used. Securities listed on an exchange or on NASDAQ are valued at
the last sale price. Listed securities for which there were no sales during the
day and unlisted securities are valued at the last quoted bid price. Options are
valued at the last sale price or in the absence of a sale, the mean between the
last quoted bid and offering prices. Short-term obligations with a maturity of
60 days or less are valued at amortized cost pursuant to procedures adopted by
the Trustees. The values of foreign securities quoted in foreign currencies are
translated into U.S. dollars at the exchange rate for that day. Portfolio
positions for which there are no such valuations and other assets are valued at
fair value as determined in good faith under the direction of the Trust's
Trustees.
Generally, trading in certain securities (such as foreign securities) is
substantially completed each day at various times prior to the close of the
Exchange. Trading on certain foreign securities markets may not take place on
all business days in New York, and trading on some foreign securities markets
takes place on days which are not business days in New York and on which the
Fund's NAV is not calculated. The values of these securities used in determining
the NAV are computed as of such times. Also, because of the amount of time
required to collect and process trading information as to large numbers of
securities issues, the values of certain securities (such as convertible bonds,
U.S. government securities, and tax-exempt securities) are determined based on
market quotations collected earlier in the day at the latest practicable time
prior to the close of the Exchange. Occasionally, events affecting the value of
such securities may occur between such times and the close of the Exchange which
will not be reflected in the computation of each Colonial fund's NAV. If events
materially affecting the value of such securities occur during such period, then
these securities will be valued at their fair value following procedures
approved by the Trust's Trustees.
(The following two paragraphs are applicable only to Colonial Newport Tiger Fund
- - "Adviser" in these two paragraphs refers to the Fund's Adviser which is
Newport Fund Management, Inc.)
Trading in securities on stock exchanges and over -the-counter markets in the
Far East is normally completed well before the close of the business day in New
York. Trading on Far Eastern securities markets may not take place on all
business days in New York, and trading on some Far Eastern securities markets
does take place on days which are not business days in New York and on which the
Fund's NAV is not calculated.
The calculation of the Fund's NAV accordingly may not take place
contemporaneously with the determination of the prices of the Fund's portfolio
securities used in such calculations. Events affecting the values of portfolio
securities that occur between the time their prices are determined and the close
of the Exchange (when the Fund's NAV is calculated) will not be reflected in the
Fund's calculation of NAV unless the Adviser, acting under procedures
established by the Board of Trustees of the Trust, deems that the particular
event would materially affect the Fund's NAV, in which case an adjustment will
be made. Assets or liabilities initially expressed in terms of foreign
currencies are translated prior to the next determination of the NAV of the
Fund's shares into U.S. dollars at prevailing market rates.
Amortized Cost for Money Market Funds (this section currently applies only to
Colonial Government Money Market Fund, a series of Colonial Trust II- see
"Amortized Cost for Money Market Funds" under "Other Information Concerning the
Portfolio" in Part 1 of the SAI of Colonial Municipal Money Market Fund for
information relating to the Municipal Money Market Portfolio)
Money market funds generally value their portfolio securities at amortized cost
according to Rule 2a-7 under the 1940 Act.
Portfolio instruments are valued under the amortized cost method, whereby the
instrument is recorded at cost and thereafter amortized to maturity. This method
assures a constant NAV but may result in a yield different than that of the same
portfolio under the market value method. The Trust's Trustees have adopted
procedures intended to stabilize a money market fund's NAV per share at $1.00.
When a money market fund's market value deviates from the amortized cost of
$1.00, and results in a material dilution to existing shareholders, the Trust's
Trustees will take corrective action to: realize gains or losses; shorten the
portfolio's maturity; withhold distributions; redeem shares in kind; or convert
to the market value method (in which case the NAV per share may differ from
$1.00). All investments will be determined pursuant to procedures approved by
the Trust's Trustees to present minimal credit risk.
See the Statement of Assets and Liabilities in the shareholder report of the
Colonial Government Money Market Fund for a specimen price sheet showing the
computation of maximum offering price per share of Class A shares.
HOW TO BUY SHARES
The Prospectus contains a general description of how investors may buy shares of
the Fund and tables of charges. This SAI contains additional information which
may be of interest to investors.
The Fund will accept unconditional orders for shares to be executed at the
public offering price based on the NAV per share next determined after the order
is placed in good order. The public offering price is the NAV plus the
applicable sales charge, if any. In the case of orders for purchase of shares
placed through FSFs, the public offering price will be determined on the day the
order is placed in good order, but only if the FSF receives the order prior to
the time at which shares are valued and transmits it to the Fund before the Fund
processes that day's transactions. If the FSF fails to transmit before the Fund
processes that day's transactions, the customer's entitlement to that day's
closing price must be settled between the customer and the FSF. If the FSF
receives the order after the time at which the Fund values its shares, the price
will be based on the NAV determined as of the close of the Exchange on the next
day it is open. If funds for the purchase of shares are sent directly to CISC,
they will be invested at the public offering price next determined after receipt
in good order. Payment for shares of the Fund must be in U.S. dollars; if made
by check, the check must be drawn on a U.S. bank.
The Fund receives the entire NAV of shares sold. For shares subject to an
initial sales charge, CISI's commission is the sales charge shown in the Fund's
Prospectus less any applicable FSF discount. The FSF discount is the same for
all FSFs, except that CISI retains the entire sales charge on any sales made to
a shareholder who does not specify a FSF on the Investment Account Application
("Application"). CISI generally retains 100% of any asset-based sales charge
(distribution fee) or contingent deferred sales charge. Such charges generally
reimburse CISI for any up-front and/or ongoing commissions paid to FSFs.
Checks presented for the purchase of shares of the Fund which are returned by
the purchaser's bank or checkwriting privilege checks for which there are
insufficient funds in a shareholder's account to cover redemption will subject
such purchaser or shareholder to a $15 service fee for each check returned.
Checks must be drawn on a U.S. bank and must be payable in U.S. dollars.
CISC acts as the shareholder's agent whenever it receives instructions to carry
out a transaction on the shareholder's account. Upon receipt of instructions
that shares are to be purchased for a shareholder's account, the designated FSF
will receive the applicable sales commission. Shareholders may change FSFs at
any time by written notice to CISC, provided the new FSF has a sales agreement
with CISI.
Shares credited to an account are transferable upon written instructions in good
order to CISC and may be redeemed as described under "How to Sell Shares" in the
Prospectus. Certificates will not be issued for Class A shares unless
specifically requested and no certificates will be issued for Class B, C, D, T
or Z shares. The Colonial money market funds will not issue certificates.
Shareholders may send any certificates which have been previously acquired to
CISC for deposit to their account.
SPECIAL PURCHASE PROGRAMS/INVESTOR SERVICES
The following special purchase programs/investor services may be changed or
eliminated at any time.
Fundamatic Program. As a convenience to investors, shares of most Colonial funds
may be purchased through the Colonial Fundamatic Program. Preauthorized monthly
bank drafts or electronic funds transfer for a fixed amount of at least $50 are
used to purchase a Colonial fund's shares at the public offering price next
determined after CISI receives the proceeds from the draft (normally the 5th or
the 20th of each month, or the next business day thereafter). If your
fFundamatic purchase is by electronic funds transfer, you may request the
Fundamatic purchase for any day. Further information and application forms are
available from FSFs or from CISI.
Automated Dollar Cost Averaging (Classes A, B and D). Colonial's Automated
Dollar Cost Averaging program allows you to exchange $100 or more on a monthly
basis from any Colonial fund in which you have a current balance of at least
$5,000 into the same class of shares of up to four other Colonial funds.
Complete the Automated Dollar Cost Averaging section of the Application. The
designated amount will be exchanged on the third Tuesday of each month. There is
no charge for exchanges made pursuant to the Automated Dollar Cost Averaging
program. Exchanges will continue so long as your Colonial fund balance is
sufficient to complete the transfers. Your normal rights and privileges as a
shareholder remain in full force and effect. Thus you can buy any fund, exchange
between the same Class of shares of funds by written instruction or by telephone
exchange if you have so elected and withdraw amounts from any fund, subject to
the imposition of any applicable CDSC.
Any additional payments or exchanges into your Colonial fund will extend the
time of the Automated Dollar Cost Averaging program.
An exchange is a capital sale transaction for federal income tax purposes.
You may terminate your program, change the amount of the exchange (subject to
the $100 minimum), or change your selection of funds, by telephone or in
writing; if in writing by mailing your instructions to Colonial Investors
Service Center, Inc. P.O. Box 1722, Boston, MA 02105-1722.
You should consult your FSF or investment adviser to determine whether or not
the Automated Dollar Cost Averaging program is appropriate for you.
CISI offers several plans by which an investor may obtain reduced initial or
contingent deferred sales charges . These plans may be altered or discontinued
at any time. See "Programs For Reducing or Eliminating Sales Charges" for more
information.
Tax-Sheltered Retirement Plans. CISI offers prototype tax-qualified plans,
including Individual Retirement Accounts, and Pension and Profit-Sharing Plans
for individuals, corporations, employees and the self-employed. The minimum
initial Retirement Plan investment in these funds is $25. The First National
Bank of Boston is the Trustee and charges a $10 annual fee. Detailed information
concerning these Retirement Plans and copies of the Retirement Plans are
available from CISI.
Consultation with a competent financial and tax adviser regarding these Plans
and consideration of the suitability of fund shares as an investment under the
Employee Retirement Income Security Act of 1974 or otherwise is recommended.
Telephone Address Change Services. By calling CISC, shareholders or their FSF of
record may change an address on a recorded telephone line. Confirmations of
address change will be sent to both the old and the new addresses. Telephone
redemption privileges are suspended for 30 days after an address change is
effected.
Colonial cash connection. Dividends and any other distributions, including
Systematic Withdrawal Plan (SWP) payments, may be automatically deposited to a
shareholder's bank account via electronic funds transfer. Shareholders wishing
to avail themselves of this electronic transfer procedure should complete the
appropriate sections of the Application.
Automatic dividend diversification. The automatic dividend diversification
reinvestment program (ADD) generally allows shareholders to have all
distributions from a fund automatically invested in the same class of shares of
another Colonial fund. An ADD account must be in the same name as the
shareholder's existing Open Account with the particular fund. Call CISC for more
information at 1-800- 422-3737.
PROGRAMS FOR REDUCING OR ELIMINATING SALES CHARGES
Right of Accumulation and Statement of Intent (Class A and Class T shares only)
(Class T shares can only be purchased by the shareholders of Colonial Newport
Tiger Fund who already own Class T shares). Reduced sales charges on Class A and
T shares can be effected by combining a current purchase with prior purchases of
Class A, B, C, D, T and Z shares of the Colonial funds. The applicable sales
charge is based on the combined total of:
1. the current purchase; and
2. the value at the public offering price at the close of business on
the previous day of all Colonial funds' Class A shares held by the
shareholder (except shares of any Colonial money market fund, unless
such shares were acquired by exchange from Class A shares of another
Colonial fund other than a money market fund and Class B, C, D, T
and Z shares).
CISI must be promptly notified of each purchase which entitles a shareholder to
a reduced sales charge. Such reduced sales charge will be applied upon
confirmation of the shareholder's holdings by CISC. A Colonial fund may
terminate or amend this Right of Accumulation.
Any person may qualify for reduced sales charges on purchases of Class A and T
shares made within a thirteen-month period pursuant to a Statement of Intent
("Statement"). A shareholder may include, as an accumulation credit toward the
completion of such Statement, the value of all Class A, B, C D, T and Z shares
held by the shareholder on the date of the Statement in Colonial funds (except
shares of any Colonial money market fund, unless such shares were acquired by
exchange from Class A shares of another non-money market Colonial fund). The
value is determined at the public offering price on the date of the Statement.
Purchases made through reinvestment of distributions do not count toward
satisfaction of the Statement.
During the term of a Statement, CISC will hold shares in escrow to secure
payment of the higher sales charge applicable to Class A or T shares actually
purchased. Dividends and capital gains will be paid on all escrowed shares and
these shares will be released when the amount indicated has been purchased. A
Statement does not obligate the investor to buy or a fund to sell the amount of
the Statement.
If a shareholder exceeds the amount of the Statement and reaches an amount which
would qualify for a further quantity discount, a retroactive price adjustment
will be made at the time of expiration of the Statement. The resulting
difference in offering price will purchase additional shares for the
shareholder's account at the applicable offering price. As a part of this
adjustment, the FSF shall return to CISI the excess commission previously paid
during the thirteen-month period.
If the amount of the Statement is not purchased, the shareholder shall remit to
CISI an amount equal to the difference between the sales charge paid and the
sales charge that should have been paid. If the shareholder fails within twenty
days after a written request to pay such difference in sales charge, CISC will
redeem that number of escrowed Class A shares to equal such difference. The
additional amount of FSF discount from the applicable offering price shall be
remitted to the shareholder's FSF of record.
Additional information about and the terms of Statements of Intent are available
from your FSF, or from CISC at 1-800- 345-6611.
Colonial Asset Builder Investment Program (this section currently applies only
to the Class A shares of Colonial Growth Shares Fund and The Colonial Fund, each
a series of Colonial Trust III). A reduced sales charge applies to a purchase of
certain Colonial funds' Class A shares under a statement of intent for the
Colonial Asset Builder Investment Program. The Program offer may be withdrawn at
any time without notice. A completed Program may serve as the initial investment
for a new Program, subject to the maximum of $4,000 in initial investments per
investor. Shareholders in this program are subject to a 5% sales charge. CISC
will escrow shares to secure payment of the additional sales charge on amounts
invested if the Program is not completed. Escrowed shares are credited with
distributions and will be released when the Program has ended. Shareholders are
subject to a 1% fee on the amount invested if they do not complete the Program.
Prior to completion of the Program, only scheduled Program investments may be
made in a Colonial fund in which an investor has a Program account. The
following services are not available to Program accounts until a Program has
ended:
Systematic Withdrawal Plan Share Certificates
Sponsored Arrangements Exchange Privilege
$50,000 Fast Cash Colonial Cash Connection
Right of Accumulation Automatic Dividend Diversification
Telephone Redemption Reduced Sales Charges for any "person"
Statement of Intent
*Exchanges may be made to other Colonial funds offering the Program.
Because of the unavailability of certain services, this Program may not be
suitable for all investors.
The FSF receives 3% of the investor's intended purchases under a Program at the
time of initial investment and 1% after the 24th monthly payment. CISI may
require the FSF to return all applicable commissions paid with respect to a
Program terminated within six months of inception, and thereafter to return
commissions in excess of the FSF discount applicable to shares actually
purchased.
Since the Asset Builder plan involves continuous investment regardless of the
fluctuating prices of funds shares, investors should consult their FSF to
determine whether it is appropriate. The Plan does not assure a profit nor
against loss in declining markets.
Reinstatement Privilege. An investor who has redeemed Class A, B, D or T shares
may, upon request, reinstate within one year a portion or all of the proceeds of
such sale in shares of the same Class of any Colonial fund at the NAV next
determined after CISC receives a written reinstatement request and payment. Any
CDSC paid at the time of the redemption will be credited to the shareholder upon
reinstatement. The period between the redemption and the reinstatement will not
be counted in aging the reinstated shares for purposes of calculating any CDSC
or conversion date. Investors who desire to exercise this privilege should
contact their FSF or CISC. Shareholders may exercise this Privilege an unlimited
number of times. Exercise of this privilege does not alter the Federal income
tax treatment of any capital gains realized on the prior sale of fund shares,
but to the extent any such shares were sold at a loss, some or all of the loss
may be disallowed for tax purposes. Consult your tax adviser.
Privileges of Colonial Employees or Financial Service Firms (in this section,
the "Adviser" refers to Colonial Management Associates, Inc.) i. Class A shares
of certain funds may be sold at NAV to the following individuals whether
currently employed or retired: Trustees of funds advised or administered by the
Adviser ; directors, officers and employees of the the Adviser , CISI and other
companies affiliated with the Adviser l; registered representatives and
employees of FSFs (including their affiliates) that are parties to dealer
agreements or other sales arrangements with CISI; and such persons' families and
their beneficial accounts.
Sponsored Arrangements. Class A and Class T shares (Class T shares can only be
purchased by the shareholders of Colonial Newport Tiger Fund who already own
Class T shares) of certain funds may be purchased at reduced or no sales charge
pursuant to sponsored arrangements, which include programs under which an
organization makes recommendations to, or permits group solicitation of, its
employees, members or participants in connection with the purchase of shares of
the fund on an individual basis. The amount of the sales charge reduction will
reflect the anticipated reduction in sales expense associated with sponsored
arrangements. The reduction in, sales expense, and therefore the reduction in
sales charge will vary depending on factors such as the size and stability of
the organization's group, the term of the organization's existence and certain
characteristics of the members of its group. The Colonial funds reserve the
right to revise the terms of or to suspend or discontinue sales pursuant to
sponsored plans at any time.
Class A and Class T shares (Class T shares can only be purchased by the
shareholders of Colonial Newport Tiger Fund who already own Class T shares) of
certain funds may also be purchased at reduced or no sales charge by clients of
dealers, brokers or registered investment advisers that have entered into
agreements with CISI pursuant to which the Colonial funds are included as
investment options in programs involving fee-based compensation arrangements.
Net Asset Value Exchange Privilege (in this section, the "Adviser" refers to
Colonial Management Associates, Inc.). Class A shares of certain funds may also
be purchased at reduced or no sales charge by investors moving from another
mutual fund complex or a discretionary account and by participants in certain
retirement plans. In lieu of the commissions described in the Prospectus, the
Adviser will pay the FSF a quarterly service fee which is the service fee
established for each applicable Colonial fund .
Waiver of Contingent Deferred Sales Charges (CDSCs) (in this section, the
"Adviser" refers to Colonial Management Associates, Inc.) (Classes A, B, and D)
CDSCs may be waived on redemptions in the following situations with the proper
documentation:
1. Death. CDSCs may be waived on redemptions within one year
following the death of (i) the sole shareholder on an
individual account, (ii) a joint tenant where the surviving
joint tenant is the deceased's spouse, or (iii) the
beneficiary of a Uniform Gifts to Minors Act (UGMA), Uniform
Transfers to Minors Act (UTMA) or other custodial account.
If, upon the occurrence of one of the foregoing, the account
is transferred to an account registered in the name of the
deceased's estate, the CDSC will be waived on any redemption
from the estate account occurring within one year after the
death. If the Class B shares are not redeemed within one
year of the death, they will remain subject to the
applicable CDSC, when redeemed from the transferee's
account. If the account is transferred to a new registration
and then a redemption is requested, the applicable CDSC will
be charged.
2. Systematic Withdrawal Plan (SWP). CDSCs may be waived on
redemptions occurring pursuant to a monthly,
quarterly or semi-annual
SWP established with the Adviser , to the extent the
redemptions do not exceed, on an annual basis, 12% of the
account's value, so long as at the time of the first SWP
redemption the account had had distributions reinvested for
a period at least equal to the period of the SWP (e.g., if
it is a quarterly SWP, distributions must have been
reinvested at least for the three month period prior to the
first SWP redemption); otherwise CDSCs will be charged on
SWP redemptions until this requirement is met; this
requirement does not apply if the SWP is set up at the time
the account is established, and distributions are being
reinvested. See below under "Investors Services" -
Systematic Withdrawal Plan.
3. Disability. CDSCs may be waived on redemptions occurring
within one year after the sole shareholder on an individual
account or a joint tenant on a spousal joint tenant account
becomes disabled (as defined in Section 72(m)(7) of the
Internal Revenue Code). To be eligible for such waiver, (i)
the disability must arise after the purchase of shares and
(ii) the disabled shareholder must have been under age 65 at
the time of the initial determination of disability. If the
account is transferred to a new registration and then a
redemption is requested, the applicable CDSC will be
charged.
4. Death of a trustee. CDSCs may be waived on redemptions
occurring upon dissolution of a revocable living or grantor
trust following the death of the sole trustee where (i) the
grantor of the trust is the sole trustee and the sole life
beneficiary, (ii) death occurs following the purchase and
(iii) the trust document provides for dissolution of the
trust upon the trustee's death. If the account is
transferred to a new registration (including that of a
successor trustee), the applicable CDSC will be charged upon
any subsequent redemption.
5. Returns of excess contributions. CDSCs may be waived on
redemptions required to return excess contributions made to
retirement plans or individual retirement accounts, so long
as the FSF agrees to return the applicable portion of any
commission paid by Colonial.
6. Qualified Retirement Plans. CDSCs may be waived on
redemptions required to make distributions from qualified
retirement plans following (i) normal retirement (as stated
in the Plan document) or (ii) separation from service. CDSCs
also will be waived on SWP redemptions made to make required
minimum distributions from qualified retirement plans that
have invested in Colonial funds for at least two years.
The CDSC also may be waived where the FSF agrees to return all or an agreed upon
portion of the commission earned on the sale of the shares being redeemed.
HOW TO SELL SHARES
Shares may also be sold on any day the Exchange is open, either directly to the
Fund or through the shareholder's . 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).
To sell shares directly to the Fund, send a signed letter of instruction or
stock power form to CISC, 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 FSFs, CISC, and many banks. Additional documentation is required
for sales by corporations, agents, fiduciaries, surviving joint owners and
individual retirement account holders. Call CISC for more information
1-800-345-6611.
FSFs must receive requests before the time at which the Fund's shares are valued
to receive that day's price, are responsible for furnishing all necessary
documentation to CISC and may charge for this service.
Systematic Withdrawal Plan
If a shareholder's Account Balance is at least $5,000, the shareholder may
establish a (SWP). A specified dollar amount or percentage of the then current
net asset value of the shareholder's investment in any Colonial fund designated
by the shareholder will be paid monthly, quarterly or semi-annually to a
designated payee. The amount or percentage the shareholder specifies generally
may not, on an annualized basis, exceed 12% of the value, as of the time the
shareholder makes the election of the shareholder's investment. Withdrawals from
Class B and Class D shares of the fund under a SWP will be treated as
redemptions of shares purchased through the reinvestment of fund distributions,
or, to the extent such shares in the shareholder's account are insufficient to
cover Plan payments, as redemptions from the earliest purchased shares of such
fund in the shareholder's account. No CDSCs apply to a redemption pursuant to a
SWP of 12% or less, even if, after giving effect to the redemption, the
shareholder's Account Balance is less than the shareholder's base amount.
Qualified plan participants who are required by Internal Revenue Code regulation
to withdraw more than 12%, on an annual basis, of the value of their Class B and
Class D share account may do so but will be subject to a CDSC ranging from 1% to
5% of the amount withdrawn. If a shareholder wishes to participate in a SWP, the
shareholder must elect to have all of the shareholder's income dividends and
other fund distributions payable in shares of the fund rather than in cash.
A shareholder or a shareholder's FSF of record may establish a SWP account by
telephone on a recorded line. However, SWP checks will be payable only to the
shareholder and sent to the address of record. SWPs from retirement accounts
cannot be established by telephone.
A shareholder may not establish a SWP if the shareholder holds shares in
certificate form. Purchasing additional shares (other than through dividend and
distribution reinvestment) while receiving SWP payments is ordinarily
disadvantageous because of duplicative sales charges. For this reason, a
shareholder may not maintain a plan for the accumulation of shares of the fund
(other than through the reinvestment of dividends) and a SWP at the same time.
SWP payments are made through share redemptions, which may result in a gain or
loss for tax purposes, may involve the use of principal and may eventually use
up all of the shares in a shareholder's account.
A fund may terminate a shareholder's SWP if the shareholder's Account Balance
falls below $5,000 due to any transfer or liquidation of shares other than
pursuant to the SWP. SWP payments will be terminated on receiving satisfactory
evidence of the death or incapacity of a shareholder. Until this evidence is
received, CISC will not be liable for any payment made in accordance with the
provisions of a SWP.
The cost of administering SWPs for the benefit of shareholders who participate
in them is borne by the fund as an expense of all shareholders.
Shareholders whose positions are held in "street name" by certain FSFs may not
be able to participate in a SWP. If a shareholder's Fund shares are held in
"street name", the shareholder should consult his or her FSF to determine
whether he or she may participate in a SWP.
Telephone Redemptions. All shareholders and/or their financial advisers are
automatically eligible to redeem up to $50,000 of the fund's shares by calling
1-800-422-3737 toll free any business day between 9:00 a.m. and the close of
trading of the Exchange (normally 4:00 p.m. Eastern time). Telephone redemption
privileges for larger amounts may be elected on the Application. CISC will
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine. Telephone redemptions are not available on accounts with
an address change in the preceding 30 days and proceeds and confirmations will
only be mailed or sent to the address of record. Shareholders and/or their
financial advisers will be required to provide their name, address and account
number. Financial advisers will also be required to provide their broker number.
All telephone transactions are recorded. A loss to a shareholder may result from
an unauthorized transaction reasonably believed to have been authorized. No
shareholder is obligated to execute the telephone authorization form or to use
the telephone to execute transactions.
Checkwriting (in this section, the "Adviser" refers to Colonial Management
Associates, Inc.) (Available only on the Class A and Class C shares of certain
Colonial funds) Shares may be redeemed by check if a shareholder completed an
Application and Signature Card. The Adviser will provide checks to be drawn on
The First National Bank of Boston (the "Bank"). These checks may be made payable
to the order of any person in the amount of not less than $500 nor more than
$100,000. The shareholder will continue to earn dividends on shares until a
check is presented to the Bank for payment. At such time a sufficient number of
full and fractional shares will be redeemed at the next determined net asset
value to cover the amount of the check. Certificate shares may not be redeemed
in this manner.
Shareholders utilizing checkwriting drafts will be subject to the Bank's rules
governing checking accounts. There is currently no charge to the shareholder for
the use of checks. The shareholder should make sure that there are sufficient
shares in his or her open account to cover the amount of any check drawn since
the net asset value of shares will fluctuate. If insufficient shares are in the
shareholder's Open Account, the check will be returned marked "insufficient
funds" and no shares will be redeemed; the shareholder will be charged a $15
service fee for each check returned. It is not possible to determine in advance
the total value of an open account because prior redemptions and possible
changes in net asset value may cause the value of an open account to change.
Accordingly, a check redemption should not be used to close an open account.
Non cash Redemptions. For redemptions of any single shareholder within any
90-day period exceeding the lesser of $250,000 or 1% of a Colonial fund's net
asset value, a Colonial fund may make the payment or a portion of the payment
with portfolio securities held by that Colonial fund instead of cash, in which
case the redeeming shareholder may incur brokerage and other costs in selling
the securities received.
DISTRIBUTIONS
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,
but will be invested in additional shares of the same Class of the Fund at net
asset value. Undelivered distribution checks returned by the post office will be
invested in your account.
Shareholders may reinvest all or a portion of a recent cash distribution without
a sales charge. A shareholder request must be received within 30 calendar days
of the distribution. A shareholder may exercise this privilege only once. No
charge is currently made for reinvestment.
Shares of most funds that pay daily dividends will normally earn dividends
starting with the date the fund receives payment for the shares and will
continue through the day before the shares are redeemed, transferred or
exchanged. The daily dividends for Colonial Municipal Money Market Fund will be
earned starting with the day after that fund receives payments for the shares.
HOW TO EXCHANGE SHARES
Shares of the Fund may be exchanged for the same class of shares of the other
continuously offered Colonial funds (with certain exceptions) on the basis of
the NAVs per share at the time of exchange. Class T and Z shares may be
exchanged for Class A shares of the other Colonial funds. The prospectus of each
Colonial fund describes its investment objective and policies, and shareholders
should obtain a prospectus and consider these objectives and policies carefully
before requesting an exchange. Shares of certain Colonial funds are not
available to residents of all states. Consult CISC before requesting an
exchange.
By calling CISC, shareholders or their FSF of record may exchange among accounts
with identical registrations, provided that the shares are held on deposit.
During periods of unusual market changes and shareholder activity, shareholders
may experience delays in contacting CISC by telephone to exercise the telephone
exchange privilege. Because an exchange involves a redemption and reinvestment
in another Colonial fund, completion of an exchange may be delayed under unusual
circumstances, such as if the fund suspends repurchases or postpones payment for
the fund shares being exchanged in accordance with federal securities law. CISC
will also make exchanges upon receipt of a written exchange request and, share
certificates, if any. If the shareholder is a corporation, partnership, agent,
or surviving joint owner, CISC will require customary additional documentation.
Prospectuses of the other Colonial funds are available from the Colonial
Literature Department by calling 1-800-248-2828.
A loss to a shareholder may result from an unauthorized transaction reasonably
believed to have been authorized. No shareholder is obligated to use the
telephone to execute transactions.
You need to hold your Class A and Class T shares for five months before
exchanging to certain funds having a higher maximum sales charge. Consult your
FSF or CISC. In all cases, the shares to be exchanged must be registered on the
records of the fund in the name of the shareholder desiring to exchange.
Shareholders of the other Colonial open-end funds generally may exchange their
shares at NAV for the same class of shares of the fund.
An exchange is a capital sale transaction for federal income tax purposes. The
exchange privilege may be revised, suspended or terminated at any time.
SUSPENSION OF REDEMPTIONS
A Colonial fund may not suspend shareholders' right of redemption or postpone
payment for more than seven days unless the Exchange is closed for other than
customary weekends or holidays, or if permitted by the rules of the SEC during
periods when trading on the Exchange is restricted or during any emergency which
makes it impracticable for the fund to dispose of its securities or to determine
fairly the value of its net assets, or during any other period permitted by
order of the SEC for protection of investors.
SHAREHOLDER MEETINGS
As described under the caption "Organization and History" in the Prospectus of
each Colonial fund, the fund will not hold annual shareholders' meetings. The
Trustees may fill any vacancies in the Board of Trustees except that the
Trustees may not fill a vacancy if, immediately after filling such vacancy, less
than two-thirds of the Trustees then in office would have been elected to such
office by the shareholders. In addition, at such times as less than a majority
of the Trustees then in office have been elected to such office by the
shareholders, the Trustees must call a meeting of shareholders. Trustees may be
removed from office by a written consent signed by a majority of the outstanding
shares of the Trust or by a vote of the holders of a majority of the outstanding
shares at a meeting duly called for the purpose, which meeting shall be held
upon written request of the holders of not less than 10% of the outstanding
shares of the Trust. Upon written request by the holders of 1% of the
outstanding shares of the Trust stating that such shareholders of the Trust, for
the purpose of obtaining the signatures necessary to demand a shareholder's
meeting to consider removal of a Trustee, request information regarding the
Trust's shareholders, the Trust will provide appropriate materials (at the
expense of the requesting shareholders). Except as otherwise disclosed in the
Prospectus and this SAI, the Trustees shall continue to hold office and may
appoint their successors.
At any shareholders' meetings that may be held, shareholders of all series would
vote together, irrespective of series, on the election of Trustees or the
selection of independent accountants, but each series would vote separately from
the others on other matters, such as changes in the investment policies of that
series or the approval of the management agreement for that series.
PERFORMANCE MEASURES
Total Return
Standardized average annual total return. Average annual total return is the
actual return on a $1,000 investment in a particular class of shares of the
fund, made at the beginning of a stated period, adjusted for the maximum sales
charge or applicable CDSC for the class of shares of the fund and assuming that
all distributions were reinvested at NAV, converted to an average annual return
assuming annual compounding.
Nonstandardized total return. Nonstandardized total returns differ from
standardized average annual total returns only in that they may relate to
nonstandardized periods, represent aggregate rather than average annual total
returns or in that the sales charge or CDSC is not deducted.
Yield
Money market. A money market fund's yield and effective yield is computed in
accordance with the SEC's formula for money market fund yields.
Non money market. The yield for each class of shares is determined by (i)
calculating the income (as defined by the SEC for purposes of advertising yield)
during the base period and subtracting actual expenses for the period (net of
any reimbursements), and (ii) dividing the result by the product of the average
daily number of shares of the Colonial fund entitled to dividends for the period
and the maximum offering price of the fund on the last day of the period, (iii)
then annualizing the result assuming semi-annual compounding. Tax-equivalent
yield is calculated by taking that portion of the yield which is exempt from
income tax and determining the equivalent taxable yield which would produce the
same after tax yield for any given federal and state tax rate, and adding to
that the portion of the yield which is fully taxable. Adjusted yield is
calculated in the same manner as yield except that expenses voluntarily borne or
waived by Colonial have been added back to actual expenses.
Distribution rate. The distribution rate for each class of shares is calculated
by annualizing the most current period's distributions and dividing by the
maximum offering price on the last day of the period. Generally, the fund 's
distribution rate reflects total amounts actually paid to shareholders, while
yield reflects the current earning power of the fund's portfolio securities (net
of the fund's expenses). The fund's yield for any period may be more or less
than the amount actually distributed in respect of such period.
The fund may compare its performance to various unmanaged indices published by
such sources as listed in Appendix II.
The fund may also refer to quotations, graphs and electronically transmitted
data from sources believed by Colonialthe Adviser to be reputable, and
publications in the press pertaining to a fund's performance or to the Adviser
or its affiliates , including comparisons with competitors and matters of
national and global economic and financial interest. Examples include Forbes,
Business Week, MONEY Magazine, The Wall Street Journal, The New York Times, The
Boston Globe, Barron's National Business & Financial Weekly, Financial Planning,
Changing Times, Reuters Information Services, Wiesenberger Mutual Funds
Investment Report, Lipper Analytical Services Corporation, Morningstar, Inc.,
Sylvia Porter's Personal Finance Magazine, Money Market Directory, SEI Funds
Evaluation Services, FTA World Index and Disclosure Incorporated.
All data is based on past performance and does not predict future results.
<PAGE>
APPENDIX I
DESCRIPTION OF BOND RATINGS
S&P
AAA The highest rating assigned by S&P indicates an extremely strong capacity to
repay principal and interest. AA bonds also qualify as high quality. Capacity to
repay principal and pay interest is very strong, and in the majority of
instances, they differ from AAA only in small degree. A bonds have a strong
capacity to repay principal and interest, although they are somewhat more
susceptible to the adverse effects of changes in circumstances and economic
conditions. BBB bonds are regarded as having an adequate capacity to repay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to repay principal and interest than for bonds in the A
category. BB, B, CCC, and CC bonds are regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and principal in accordance
with the terms of the obligation. BB indicates the lowest degree of speculation
and CC the highest degree. While likely to have some quality and protection
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions. C ratings are reserved for income bonds on
which no interest is being paid. D bonds are in default, and payment of interest
and/or principal is in arrears. Plus(+) or minus (-) are modifiers relative to
the standing within the major rating categories.
Provisional Ratings. The letter "p" indicates that the rating is provisional. A
provisional rating assumes the successful completion of the project being
financed by the debt being rated and indicates that payment of debt service
requirements is largely or entirely dependent upon the successful and timely
completion of the project. This rating, however, although addressing credit
quality subsequent to completion of the project, makes no comments on the
likelihood of, or the risk of default upon failure of, such completion. The
investor should exercise his own judgment with respect to such likelihood and
risk.
Municipal Notes:
SP-1. Notes rated SP-1 have very strong or strong capacity to pay principal and
interest. Those issues determined to possess overwhelming safety characteristics
are designated as SP-1+.
SP-2. Notes rated SP-2 have satisfactory capacity to pay principal and interest.
Notes due in three years or less normally receive a note rating. Notes maturing
beyond three years normally receive a bond rating, although the following
criteria are used in making that assessment:
Amortization schedule (the larger the final maturity relative to other
maturities, the more likely the issue will be rated as a note).
Source of payment (the more dependent the issue is on the market for
its refinancing, the more likely it will be rated as a note).
Demand Feature of Variable Rate Demand Securities:
S&P assigns dual ratings to all long-term debt issues that have as part of their
provisions a demand feature. The first rating addresses the likelihood of
repayment of principal and interest as due, and the second rating addresses only
the demand feature. The long-term debt rating symbols are used for bonds to
denote the long-term maturity, and the commercial paper rating symbols are
usually used to denote the put (demand) option (for example, AAA/A-1+).
Normally, demand notes receive note rating symbols combined with commercial
paper symbols (for example, SP-1+/A-1+).
Commercial Paper:
A. Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are further refined with
the designations 1, 2, and 3 to indicate the relative degree to safety.
A-1. This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are designed A-1+.
Corporate Bonds:
The description of the applicable rating symbols and their meanings is
substantially the same as the Municipal Bond ratings set forth above.
<PAGE>
MOODY'S
Aaa bonds are judged to be of the best quality. They carry the smallest degree
of investment risk and are generally referred to as "gilt edge". Interest
payments are protected by a large or by an exceptionally stable margin and
principal is secure. While various protective elements are likely to change,
such changes as can be visualized are most unlikely to impair a fundamentally
strong position of such issues.
Aa bonds are judged to be of high quality by all
standards. Together with Aaa bonds they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risk appear somewhat larger than in Aaa
securities. Those bonds in the Aa through B groups that Moody's believes possess
the strongest investment attributes are designated by the symbol Aa1, A1 and
Baa1. A bonds possess many of the favorable investment attributes and are to be
considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present that
suggest a susceptibility to impairment sometime in the future.
Baa bonds are considered as medium grade, neither highly protected nor
poorly secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact, have speculative
characteristics as well.
Ba bonds are judged to have speculative elements: their future cannot be
considered as well secured. Often, the protection of interest and principal
payments may be very moderate, and thereby not well safeguarded during both
good and bad times over the future. Uncertainty of position characterizes
these bonds.
B bonds generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other
terms of the contract over any long period of time may be small.
Caa bonds are of poor standing. They may be in default or there may be
present elements of danger with respect to principal or interest.
Ca bonds are speculative in a high degree, often in default or having
other marked shortcomings.
C bonds are the lowest rated class of bonds and can be regarded as
having extremely poor prospects of ever
attaining any real investment standing.
Conditional Ratings. Bonds for which the security depends upon the completion of
some act or the fulfillment of some condition are rated conditionally. These are
bonds secured by (a) earnings of projects under construction, (b) earnings of
projects unseasoned in operating experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting
conditions attach. Parenthetical rating denotes probable credit stature upon
completion of construction or elimination of basis of condition.
Note: Those bonds in the Aa, A, Baa, Ba, and B groups which Moody's believes
possess the strongest investment attributes are designated by the symbols Aa 1,
A 1, Baa 1, Ba 1, and B 1.
Municipal Notes:
MIG 1. This designation denotes best quality. There is present strong protection
by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.
MIG 2. This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
MIG 3. This designation denotes favorable quality. All security elements are
accounted for, but there is lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well established.
Demand Feature of Variable Rate Demand Securities:
Moody's may assign a separate rating to the demand feature of a variable rate
demand security. Such a rating may include:
VMIG 1. This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.
VMIG 2. This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
VMIG 3. This designation denotes favorable quality. All security elements are
accounted for, but there is lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well established.
Commercial Paper:
Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment capacity of rated issuers:
Prime-1 Highest Quality
Prime-2 Higher Quality
Prime-3 High Quality
If an issuer represents to Moody's that its Commercial Paper obligations are
supported by the credit of another entity or entities, Moody's, in assigning
ratings to such issuers, evaluates the financial strength of the indicated
affiliated corporations, commercial banks, insurance companies, foreign
governments, or other entities, but only as one factor in the total rating
assessment.
Corporate Bonds:
The description of the applicable rating symbols (Aaa, Aa, A) and their meanings
is identical to that of the Municipal Bond ratings as set forth above, except
for the numerical modifiers. Moody's applies numerical modifiers 1, 2, and 3 in
the Aa and A classifications of its corporate bond rating system. The modifier 1
indicates that the security ranks in the higher end of its generic rating
category; the modifier 2 indicates a midrange ranking; and the modifier 3
indicates that the issuer ranks in the lower end of its generic rating category.
<PAGE>
APPENDIX II
1994
<TABLE>
<CAPTION>
SOURCE CATEGORY RETURN (%)
<S> <C> <C>
Donoghue Tax-Free Funds 2.25
Donoghue U.S. Treasury Funds 3.34
Dow Jones Industrials 5.03
Morgan Stanley Capital International EAFE Index 8.06
Morgan Stanley Capital International EAFE GDP Index 8.21
Libor Six-month Libor 6.9375
Lipper Adjustable Rate Mortgage -2.20
Lipper California Municipal Bond Funds -7.52
Lipper Connecticut Municipal Bond Funds -7.04
Lipper Closed End Bond Funds -6.86
Lipper Florida Municipal Bond Funds -7.76
Lipper General Bond Fund -5.98
Lipper General Municipal Bonds -6.53
Lipper General Short-Term Tax-Exempt Bonds -0.28
Lipper Global Flexible Portfolio Funds -3.03
Lipper Growth Funds -2.15
Lipper Growth & Income Funds -0.94
Lipper High Current Yield Bond Funds -3.83
Lipper High Yield Municipal Bond Debt -4.99
Lipper Fixed Income Funds -3.62
Lipper Insured Municipal Bond Average -6.47
Lipper Intermediate Muni Bonds -3.53
Lipper Intermediate (5-10) U.S. Government Funds -3.72
Lipper Massachusetts Municipal Bond Funds -6.35
Lipper Michigan Municipal Bond Funds -5.89
Lipper Mid Cap Funds -2.05
Lipper Minnesota Municipal Bond Funds -5.87
Lipper U.S. Government Money Market Funds 3.58
Lipper Natural Resources -4.20
Lipper New York Municipal Bond Funds -7.54
Lipper North Carolina Municipal Bond Funds -7.48
Lipper Ohio Municipal Bond Funds -6.08
Lipper Small Company Growth Funds -0.73
Lipper Specialty/Miscellaneous Funds -2.29
Lipper U.S. Government Funds -4.63
Shearson Lehman Composite Government Index -3.37
Shearson Lehman Government/Corporate Index -3.51
Shearson Lehman Long-term Government Index -7.73
S&P 500 S&P 1.32
S&P Utility Index S&P -7.94
Bond Buyer Bond Buyer Price Index -18.10
First Boston High Yield Index -0.97
Swiss Bank 10 Year U.S. Government (Corporate Bond) -6.39
Swiss Bank 10 Year United Kingdom (Corporate Bond) -5.29
Swiss Bank 10 Year France (Corporate Bond) -1.37
Swiss Bank 10 Year Germany (Corporate Bond) 4.09
Swiss Bank 10 Year Japan (Corporate Bond) 7.95
Swiss Bank 10 Year Canada (Corporate Bond) -14.10
Swiss Bank 10 Year Australia (Corporate Bond) 0.52
Morgan Stanley Capital International 10 Year Hong Kong (Equity) -28.90
Morgan Stanley Capital International 10 Year Belgium (Equity) 9.43
Morgan Stanley Capital International 10 Year Spain (Equity) -3.93
SOURCE CATEGORY RETURN (%)
Morgan Stanley Capital International 10 Year Austria (Equity) -6.05
Morgan Stanley Capital International 10 Year France (Equity) -4.70
Morgan Stanley Capital International 10 Year Netherlands (Equity) 12.66
Morgan Stanley Capital International 10 Year Japan (Equity) 21.62
Morgan Stanley Capital International 10 Year Switzerland (Equity) 4.18
Morgan Stanley Capital International 10 Year United Kingdom (Equity) -1.63
Morgan Stanley Capital International 10 Year Germany (Equity) 5.11
Morgan Stanley Capital International 10 Year Italy (Equity) 12.13
Morgan Stanley Capital International 10 Year Sweden (Equity) 18.80
Morgan Stanley Capital International 10 Year United States (Equity) 2.00
Morgan Stanley Capital International 10 Year Australia (Equity) 6.48
Morgan Stanley Capital International 10 Year Norway (Equity) 24.07
Inflation Consumer Price Index 2.67
FHLB-San Francisco 11th District Cost-of-Funds Index 4.367
Federal Reserve Six-Month Treasury Bill 6.49
Federal Reserve One-Year Constant-Maturity Treasury Rate 7.14
Federal Reserve Five-Year Constant-Maturity Treasury Rate 7.78
Bloomberg NA NA
Credit Lyonnais NA NA
Lipper Pacific Region Funds -12.07
Statistical Abstract of the U.S. NA NA
World Economic Outlook NA NA
</TABLE>
*in U.S. currency
<PAGE>
INVESTMENT PORTFOLIO
DECEMBER 31, 1995 (IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCKS - 92.9% COUNTRY SHARES VALUE
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
AGRICULTURE, FORESTRY & FISHING - 1.2%
AGRICULTURE
Sime Darby Berhad Ma 4,000 $ 10,634
--------
- ---------------------------------------------------------------------------------------
CONSTRUCTION - 3.9%
HEAVY CONSTRUCTION - NON BUILDING CONSTRUCTION
Citic Pacific Ltd. HK 10,000 34,206
--------
- ---------------------------------------------------------------------------------------
FINANCE, INSURANCE & REAL ESTATE - 48.5%
DEPOSITORY INSTITUTIONS - 22.2%
Bank of Ayudhya Ltd. Th 2,566 14,363
Development Bank of Singapore Ltd. Si 2,300 28,622
Guoco Group Ltd. HK 5,200 25,084
HSBC Holdings PLC HK 2,000 30,262
Hang Seng Bank HK 3,800 34,032
Oversea-Chinese Banking Corp. Ltd Si 2,091 26,169
Public Bank Berhad Ma 4,420 8,460
Public Bank Berhad Si 2,500 4,808
Thai Farmers Bank Ltd. Th 2,164 21,822
--------
193,622
--------
HOLDING & OTHER INVESTMENT COMPANIES - 4.5%
Hutchison Whampoa Ltd. HK 3,000 18,274
Singapore Technologies
Industrial Corp. Si 8,000 18,101
Taiwan Fund, Inc. Tw 128 2,614
--------
38,989
--------
NONDEPOSITORY CREDIT INSTITUTIONS - 0.8%
Manhattan Card Co. Ltd. HK 16,500 7,042
--------
REAL ESTATE - 21.0%
Cheung Kong Holdings Ltd. HK 5,500 33,501
City Developments Ltd. Si 4,500 32,772
Filinvest Development Corp. Ph 4,000 2,669
Land and House Co. Ltd. Th 800 13,148
Shun Tak Holdings Ltd. HK 20,000 14,096
Sun Hung Kai Properties Ltd. HK 4,000 32,719
Swire Pacific Ltd., Series A HK 3,600 27,934
Wharf Holdings HK 8,000 26,641
--------
183,480
--------
</TABLE>
6
<PAGE>
Investment Portfolio/December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------
MANUFACTURING - 12.9%
CHEMICALS & ALLIED PRODUCTS - 1.1%
Pt Kalbe Farma Reg In 1,669 $ 5,657
Pt Darya Varia Laboratoria In 2,000 3,630
-------
9,287
-------
ELECTRONIC & ELECTRICAL EQUIPMENT - 1.1%
Nylex Malaysia Berhad Ma 3,000 9,098
-------
FABRICATED METAL - 1.2%
Kian Joo Can Factory Berhad Ma 2,600 10,752
-------
FOOD & KINDRED PRODUCTS - 1.4%
Pt Mayora Indah Reg In 17,133 12,364
-------
MEASURING & ANALYZING INSTRUMENTS - 1.7%
China Hong Kong Photo Product HK 7,000 3,961
Pt Modern Photo Film Reg In 1,915 11,097
-------
15,058
-------
PRIMARY METAL - 1.1%
China Steel Corp., GDS (a) Ch 100 1,737
Pohang Iron & Steel Co. Ltd. ADR Ko 377 8,247
-------
9,984
-------
PRINTING & PUBLISHING - 3.7%
Singapore Press Holdings Ltd. Si 1,800 31,818
-------
STONE, CLAY, GLASS & CONCRETE - 1.6%
Siam Cement Co. Ltd. Th 258 14,298
-------
- ---------------------------------------------------------------------------------
RETAIL TRADE - 4.1%
AUTO DEALERS & GAS STATIONS - 2.1%
Cycle & Carriage Ltd. Si 1,865 18,593
-------
APPAREL & ACCESSORY STORES - 2.0%
Giordano International Ltd. HK 20,068 17,129
-------
- ---------------------------------------------------------------------------------
SERVICES - 3.8%
HOTELS, CAMPS & LODGING - 2.3%
Genting Berhad Ma 2,401 20,044
-------
MISCELLANEOUS REPAIR SERVICES - 1.5%
Keppel Corp. Si 1,500 13,364
-------
- ---------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 18.5%
COMMUNICATIONS - 9.1%
Advanced Information Services Th 800 14,164
</TABLE>
7
<PAGE>
Investment Portfolio/December 31, 1995
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
COMMON STOCKS - CONT. COUNTRY SHARES VALUE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - CONT
COMMUNICATIONS - CONT
Hong Kong Telecommunications Ltd. HK 15,500 $ 27,662
Pt Indosat In 2,500 9,075
Philippine Long Distance Telephone, ADR Ph 100 5,413
Telekom Malaysia Berhad Ma 2,900 22,615
---------
78,929
---------
ELECTRIC SERVICES - 4.9%
Hong Kong Electric Holdings Ltd. HK 8,500 27,866
Korea Electric Power Corp. Ko 347 15,000
---------
42,866
---------
GAS SERVICES - 4.5%
Hong Kong and China Gas Co. Ltd. HK 20,000 32,202
Petronas Gas Berhad Ma 2,090 7,120
---------
39,322
---------
TOTAL COMMON STOCKS (cost of $634,561)(b) 810,879
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM OBLIGATIONS - 6.8% PAR
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase agreement with Chase Securities, Inc.,
dated 12/29/95 due 1/02/96 at 5.500% collateralized
by U.S. Treasury notes with various maturities
to 1999, market value $5,629 (repurchase
proceeds $5,505) $ 5,502 5,502
Repurchase agreement with JP Morgan Securities,
Inc., dated 12/29/95 due 1/02/96 at 5.625% collateralized
by U.S. Treasury notes with various maturities
to 1998, market value $54,486 (repurchase
proceeds $53,383) 53,350 53,350
---------
TOTAL SHORT-TERM OBLIGATIONS 58,852
---------
FORWARD CURRENCY CONTRACTS (c) - 0.0% (2)
- ------------------------------------------------------------------------------------------------------
OTHER ASSETS & LIABILITIES, NET - 0.3% 2,718
- ------------------------------------------------------------------------------------------------------
NET ASSETS - 100% $ 872,447
---------
</TABLE>
8
<PAGE>
Investment Portfolio/December 31, 1995
- --------------------------------------------------------------------------------
NOTES TO INVESTMENT PORTFOLIO:
- --------------------------------------------------------------------------------
(a) Non-income producing.
(b) Cost for federal income tax purposes is the same.
(c) As of December 31, 1995, the Fund had entered into the following forward
currency exchange contracts:
<TABLE>
<CAPTION>
Net Unrealized
Contracts In Exchange Settlement Depreciation
to Receive For Date (US $)
- ---------- ----- ---- ------
<S> <C> <C> <C> <C> <C>
MR 4,214 US $1,661 01/03/96 $2
SD 609 US $ 431 01/02/96 0
SD 666 US $ 471 01/03/96 0
--
$2
--
</TABLE>
<TABLE>
<CAPTION>
Summary of Securities
by Country Country Value % of Total
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Hong Kong HK $392,611 48.4
Singapore (SD) Si 174,247 21.5
Malaysia (MR) Ma 88,723 10.9
Thailand Th 77,795 9.6
Indonesia In 41,823 5.2
Korea Ko 23,247 2.9
Philippine Ph 8,082 1.0
Taiwan Tw 2,614 0.3
China Ch 1,737 0.2
-------- -----
$810,879 100.0
-------- -----
</TABLE>
Certain securities are listed by country of underlying exposure but may trade
predominantly on other exchanges.
Acronym Name
----------- --------
ADR American Depository Receipt
GDS Global Depository Shares
See notes to financial statements.
9
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
DECEMBER 31, 1995
(in thousands except for per share amounts and footnotes)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value (cost $634,561) $810,879
Short-term obligations 58,852
--------
869,731
Cash including foreign currencies (cost $225) 225
Receivable for:
Fund shares sold 9,974
Dividends 949
Interest 28
Other 39 11,215
----- --------
Total Assets 880,946
LIABILITIES
Unrealized depreciation on forward
currency contracts 2
Payable for:
Fund shares repurchased 3,054
Investments purchased 2,651
Distributions 1,300
Accrued:
Management fee 542
Administration fee 173
Service fee - Class A, Class B, Class D 63
Distribution fee - Class B, Class D 74
Transfer agent fee 173
Bookkeeping fee 25
Other 442
-----
Total Liabilities 8,499
--------
NET ASSETS $872,447
--------
</TABLE>
10
<PAGE>
STATEMENT OF ASSETS & LIABILITIES - CONT.
<TABLE>
<S> <C>
Net asset value & redemption price per share -
Class A ($196,870/15,803) $ 12.46
--------
Maximum offering price per share - Class A
($12.46/0.9425) $13.22(a)
--------
Net asset value & offering price per share -
Class B ($112,588/9,085) $12.39(b)
--------
Net asset value & redemption price per share -
Class D ($21,420/1,726) $12.41(b)
--------
Maximum offering price per share - Class D
($12.41/0.9900) $ 12.54
--------
Net asset value & redemption price per share -
Class T ($195,986/15,738) $ 12.45
--------
Maximum offering price per share - Class T
($12.45/0.9425) $ 13.21(a)
--------
Net asset value, offering & redemption price
per share - Class Z ($345,583/27,755) $ 12.45
--------
COMPOSITION OF NET ASSETS
Capital paid in $697,194
Undistributed net investment income 110
Accumulated net realized loss (1,175)
Net unrealized appreciation 176,318
--------
$872,447
--------
</TABLE>
(a) On sales of $50,000 or more the offering price is reduced.
(b) Redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
See notes to financial statements.
11
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
(in thousands)
<S> <C> <C>
INVESTMENT INCOME
Dividends $11,642
Special distribution from Taiwan Fund 791
Interest 1,856
-------
Total Investment Income (net of nonrebatable
foreign taxes withheld at source which
amounted to $880) 14,289
EXPENSES
Management fee $ 4,820
Administration fee 1,442
Service fee - Class A 160
Service fee - Class B 74
Service fee - Class D 14
Distribution fee - Class B 221
Distribution fee - Class D 41
Transfer agent fee 1,814
Bookkeeping fee 165
Trustees fee 16
Custodian fee 1,058
Audit fee 41
Legal fee 85
Registration fee 175
Reports to shareholders 21
Other 108
-------
10,255
Custodian and bookkeeping credits earned (666) 9,589
------- -------
Net Investment Income 4,700
-------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized gain (loss) on:
Investments 452
Foreign currency transactions (123)
-------
Net Realized Gain 329
Net unrealized appreciation (depreciation)
during the period on:
Investments 90,371
Foreign currency transactions (6)
-------
Net Unrealized Appreciation 90,365
-------
Net Gain 90,694
-------
Net Increase in Net Assets from Operations $95,394
-------
</TABLE>
See notes to financial statements.
12
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
(in thousands) Year ended December 31
----------------------------
INCREASE (DECREASE) IN NET ASSETS 1995 1994
<S> <C> <C>
Operations:
Net investment income $ 4,700 $ 2,281
Net realized gain 329 4,472
Net unrealized appreciation (depreciation) 90,365 (62,048)
--------- --------
Net Increase (Decrease) from Operations 95,394 (55,295)
--------- --------
Distributions:
From net investment income - (1,623)
From net realized gains - (4,463)
From net investment income - Class A (904) -
From net realized gains - Class A (356) -
From net investment income - Class B (308) -
From net realized gains - Class B (200) -
From net investment income - Class D (61) -
From net realized gains - Class D (38) -
From net investment income - Class T (1,295) -
From net realized gains - Class T (373) -
From net investment income - Class Z (2,234) -
From net realized gains - Class Z (657) -
--------- --------
88,968 (61,381)
--------- --------
Fund Share Transactions (a)(b):
Receipts for shares sold - Class A 303,747 -
Value of distributions reinvested - Class A 1,039 -
Cost of shares repurchased - Class A (116,002) -
--------- --------
188,784 -
--------- --------
Receipts for shares sold - Class B 119,409 -
Value of distributions reinvested - Class B 463 -
Cost of shares repurchased - Class B (11,187) -
--------- --------
108,685 -
--------- --------
Receipts for shares sold - Class D 21,584 -
Value of distributions reinvested - Class D 90 -
Cost of shares repurchased - Class D (985) -
--------- --------
20,689 -
--------- --------
Receipts for shares sold - Class T 38,724 -
Value of distributions reinvested - Class T 1,402 -
Cost of shares repurchased - Class T (67,684) -
--------- --------
(27,558) -
--------- --------
Receipts for shares sold - Class Z 247,737 -
Value of distributions reinvested - Class Z 2,257 -
Cost of shares repurchased - Class Z (213,356) -
--------- --------
36,638 -
--------- --------
</TABLE>
(a) Class A, Class B and Class D shares were initially offered on April 1, 1995.
(b) See Note 4 in Notes to Financial Statements.
Statement of Changes in Net Assets continued on following page.
See notes to financial statements.
13
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS - CONT.
<TABLE>
<CAPTION>
Year ended December 31
----------------------------
INCREASE (DECREASE) IN NET ASSETS 1995 1994
<S> <C> <C>
Fund Share Transactions (a)(b) - Cont.
Sold $ - $ 300,921
Reinvested - 4,992
Repurchased - (183,174)
-------- ---------
Net Increase from Fund Share Transactions 327,238 122,739
-------- ---------
Total Increase 416,206 61,358
NET ASSETS
Beginning of period 456,241 394,883
-------- ---------
End of period (including undistributed net
investment income of $110 and $658, respectively) $872,447 $ 456,241
-------- ---------
NUMBER OF FUND SHARES (a)(b)
Sold - Class A 25,291 -
Issued for distributions reinvested - Class A 84 -
Repurchased - Class A (9,572) -
-------- ---------
15,803 -
-------- ---------
Sold - Class B 9,978 -
Issued for distributions reinvested - Class B 38 -
Repurchased - Class B (931) -
-------- ---------
9,085 -
-------- ---------
Sold - Class D 1,802 -
Issued for distributions reinvested - Class D 7 -
Repurchased - Class D (83) -
-------- ---------
1,726 -
-------- ---------
Sold - Class T 3,591 -
Issued for distributions reinvested - Class T 116 -
Repurchased - Class T (6,016) -
-------- ---------
(2,309) -
-------- ---------
Sold - Class Z 22,635 -
Issued for distributions reinvested - Class Z 187 -
Repurchased - Class Z (19,250) -
-------- ---------
3,572 -
-------- ---------
Sold - 26,589
Reinvested - 468
Repurchased - (16,576)
-------- ---------
Net Increase in Shares Outstanding 27,877 10,481
-------- ---------
</TABLE>
(a) Class A, Class B and Class D shares were initially offered on April 1, 1995.
(b) See Note 4 in Notes to Financial Statements.
See notes to financial statements.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 1. ACCOUNTING POLICIES
...........................................................................
ORGANIZATION: Colonial Newport Tiger Fund (formerly Newport Tiger Fund)
(the Fund), a series of Colonial Trust VII, is a diversified portfolio of a
Massachusetts business trust, registered under the Investment Company Act
of 1940, as amended, as an open-end, management investment company. The
Fund seeks capital appreciation by investing primarily in equity securities
of companies located in the nine Tigers of Asia (Hong Kong, Singapore,
South Korea, Taiwan, Malaysia, Thailand, Indonesia, China and the
Philippines). The Fund may issue an unlimited number of shares. The Fund
offers five classes of shares: Class A, Class B, Class D, Class T and Class
Z. Class A shares are sold with a front-end sales charge and Class B shares
are subject to an annual distribution fee and a contingent deferred sales
charge. Class B shares will convert to Class A shares when they have been
outstanding approximately eight years. Class D shares are subject to a
reduced front-end sales charge, a contingent deferred sales charge on
redemptions made within one year after purchase and a continuing
distribution fee. Class T shares are sold with a front-end sales charge and
Class Z shares are offered continuously at net asset value. There are
certain restrictions on the purchase of Class T shares and Class Z shares,
please refer to a prospectus.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies that are
consistently followed by the Fund in the preparation of its financial
statements.
SECURITY VALUATION AND TRANSACTIONS: Equity securities are valued at the last
sale price or, in the case of unlisted or listed securities for which there were
no sales during the day, at current quoted bid prices. In certain countries, the
Fund may hold foreign designated shares. If the foreign share prices are not
readily available as a result of limited share activity, the securities are
valued at the last sale price of the local shares in the principal market in
which such securities are normally traded. Korean equity securities that have
reached the limit for aggregate foreign ownership and for which premiums to the
local exchange prices may be paid by foreign investors are valued by applying a
broker quoted premium to the local share price.
Forward currency contracts are valued based on the weighted value of the
exchange traded contracts with similar durations.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
The value of all assets and liabilities quoted in foreign currencies are
translated into U.S. dollars at that day's exchange rates. In certain countries,
the Fund may hold
15
<PAGE>
Notes to Financial Statements/December 31, 1995
- --------------------------------------------------------------------------------
NOTE 1. ACCOUNTING POLICIES - CONT.
................................................................................
portfolio positions which cannot be valued as set forth above are valued at fair
value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains and losses are based upon the first-in, first-out
basis for both financial statement and federal income tax purposes.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS: All income,
expenses (other than the Class A, Class B and Class D service fee and Class B
and Class D distribution fee), realized and unrealized gains (losses) are
allocated to each class proportionately on a daily basis for purposes of
determining the net asset value of each class.
Class A, Class B and Class D per share data was calculated using average shares
outstanding during the period. In addition, Class A, Class B and Class D net
investment income per share data reflects the service fee per share applicable
to Class A, Class B and Class D shares and the distribution fee applicable to
Class B and Class D shares only.
Class A, Class B and Class D ratios are calculated by adjusting the expense and
net investment income ratios for the Fund for the entire period by the service
fee applicable to Class A, Class B and Class D shares and the distribution fee
applicable to Class B and Class D shares only.
FEDERAL INCOME TAXES: Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
DISTRIBUTIONS TO SHAREHOLDERS: Distributions to shareholders are recorded on the
ex-date.
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryovers) under income tax regulations.
FOREIGN CURRENCY TRANSACTIONS: The Fund has adopted Statement of Position 93-4,
Foreign Currency Accounting and Financial Statement Presentation for Investment
Companies. Accordingly, net realized and unrealized gains (losses) on foreign
currency transactions includes the fluctuation in exchange rates on gains
(losses) between trade and settlement dates on securities transactions, gains
(losses) arising from the disposition of foreign currency, and currency gains
(losses) between the accrual and payment dates on dividends and interest income
and foreign withholding taxes.
The Fund does not distinguish that portion of gains (losses) on investments
which is due to changes in foreign exchange rates from that which is due to
changes in market prices of the investments. Such fluctuations are included with
the net realized and unrealized gains (losses) from investments.
16
<PAGE>
Notes to Financial Statements/December 31, 1995
- -------------------------------------------------------------------------------
FORWARD CURRENCY CONTRACTS: The Fund may enter into forward currency contracts
to purchase or sell foreign currencies at predetermined exchange rates in
connection with the settlement of purchases and sales of securities.
The Fund may also enter into forward currency contracts to hedge certain other
foreign currency denominated assets. The contracts are used to minimize the
exposure to foreign exchange rate fluctuations during the period between trade
and settlement date of the contracts. All contracts are marked-to-market daily,
resulting in unrealized gains (losses) which become realized at the time the
forward currency contracts are closed or mature. Realized and unrealized gains
(losses) arising from such transactions are included in net realized and
unrealized gains (losses) on foreign currency transactions. Forward currency
contracts do not eliminate fluctuations in the prices of the Fund's portfolio
securities. While the maximum potential loss from such contracts is the
aggregate face value in U.S. dollars at the time the contract is opened, the
actual exposure is typically limited to the change in value of the contract (in
U.S. dollars) over the period it remains open. Risks may also arise if
counterparties fail to perform their obligations under the contracts.
OTHER: Corporate actions are recorded on the ex-date (except for certain foreign
securities which are recorded as soon after ex-date as the Fund becomes aware of
such), net of nonrebatable tax withholdings. Where a high level of uncertainty
as to collection exists, income on securities is recorded net of all tax
withholdings with any rebates recorded when received.
The Fund's custodian takes possession through the federal book-entry system of
securities collateralizing repurchase agreements. Collateral is marked-to-
market daily to ensure that the market value of the underlying assets remains
sufficient to protect the Fund. The Fund may experience costs and delays in
liquidating the collateral if the issuer defaults or enters bankruptcy.
NOTE 2. FEES AND COMPENSATION PAID TO AFFILIATES
................................................................................
MANAGEMENT FEE: Newport Fund Management (the Adviser) is the investment Adviser
of the Fund and receives a monthly fee based on the Fund's average net assets as
follows:
<TABLE>
<CAPTION>
Average Net Assets Annual Fee Rate
- ---------------------------- ---------------------
<S> <C>
First $100 million.................. 1.00%
Over $100 million................... 0.75%
</TABLE>
ADMINISTRATION FEE: Under an administration agreement, Commonwealth Shareholder
Services Inc., ("CSS") provided administrative services to the Fund through
March 31, 1995. Administration fees paid during the period January 1 through
March 31, 1995 amounted to $203,700. Effective April 1, 1995, Colonial
Management Associates, Inc. (the Administrator) became the Administrator of the
Fund furnishing accounting and other services for a monthly fee equal to 0.25%
of the Fund's average net assets.
17
<PAGE>
Notes to Financial Statements/December 31, 1995
- --------------------------------------------------------------------------------
NOTE 2. FEES AND COMPENSATION PAID TO AFFILIATES - CONT.
................................................................................
BOOKKEEPING FEE: For the period ending April 30, 1995, the custodian provided
pricing and bookkeeping services for the Fund. Effective May 1, 1995, the
Administrator provides bookkeeping and pricing services for $27,000 per year
plus 0.035% of the Fund's average net assets over $50 million.
TRANSFER AGENT: During the period January 1 through March 31, 1995, Fund's
Services Inc. ("FSI"), provided transfer agency services to the Fund pursuant to
a service agreement with the Fund. Fees under this agreement for the period
ended March 31, 1995 amounted to $125,639. Effective April 1, 1995, Colonial
Investors Service Center, Inc., (the Transfer Agent), an affiliate of the
Administrator, provides shareholder services for a monthly fee equal to 0.25%
annually of the Fund's average net assets and receives a reimbursement for
certain out of pocket expenses.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES: Newport Distributors,
Inc. ("NDI"), a subsidiary of the Adviser, was the principal underwriter of the
Fund through March 31, 1995. The Fund has been advised that for the period
January 1, 1995 through March 31, 1995, NDI received $99,117 in aggregate
commissions from the Fund. Effective April 1, 1995, Colonial Investment
Services, Inc., (the Distributor), an affiliate of the Administrator, became the
Fund's principal underwriter. For the period April 1, 1995 through December 31,
1995 the Fund has been advised that the Distributor retained net underwriting
discounts of $406,643 on the sales of the Fund's Class A, Class D and Class T
shares and received contingent deferred sales charges of $38,726 and $4,637 on
Class B and Class D share redemptions, respectively.
The Fund has adopted a 12b-1 plan which requires it to pay the Distributor a
service fee equal to 0.25% annually on Class A, Class B and Class D net assets
as of the 20th of each month. The plan also requires the payment of a
distribution fee to the Distributor equal to 0.75% of the average net assets
attributable to Class B and Class D shares.
The CDSC and the fees received from the 12b-1 plan are used principally as
repayment to NDI and the Distributor for amounts paid by NDI and the Distributor
to dealers who sold such shares.
EXPENSE LIMITS: The Administrator has agreed, until further notice, to waive
fees and bear certain Fund expenses to the extent that total expenses (exclusive
of service fees, distribution fees, brokerage commissions, interest, taxes and
extraordinary expenses, if any) exceed 1.55% annually of the Fund's average net
assets
For the period ended December 31, 1995, the Fund's operating expenses did not
exceed the 1.55% expense limit.
OTHER: The Fund pays no compensation to its officers, all of whom are employees
of the Adviser or Administrator.
18
<PAGE>
Notes to Financial Statements/December 31, 1995
- --------------------------------------------------------------------------------
The Fund's Trustees may participate in a deferred compensation plan which may be
terminated at any time. Obligations of the plan will be paid solely out of the
the Fund's assets.
NOTE 3. PORTFOLIO INFORMATION
................................................................................
INVESTMENT ACTIVITY: During the year ended December 31, 1995, purchases and
sales of investments, other than short-term obligations, were $330,939,286 and
$33,518,878, respectively.
Unrealized appreciation (depreciation) at December 31, 1995, based on cost of
investments for both financial statement and federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation $ 193,059,588
Gross unrealized depreciation (16,741,675)
---------------
Net unrealized appreciation $ 176,317,913
---------------
</TABLE>
OTHER: There are certain additional risks involved when investing in foreign
securities that are not inherent with investments in domestic securities. These
risks may involve foreign currency exchange rate fluctuations, adverse political
and economic developments and the possible prevention of currency exchange or
other foreign governmental laws or restrictions.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
NOTE 4. REORGANIZATION
................................................................................
Newport Tiger Fund, a series of The World Funds, Inc., a Maryland Corporation,
was reorganized on April 1, 1995 as the Colonial Newport Tiger Fund, a series of
Colonial Trust VII (formerly Liberty Financial Trust) a Massachusetts business
trust. Under the plan of reorganization all of the Newport Tiger Fund's assets
were transferred, subject to its liabilities, in exchange for shares in the
Colonial Newport Tiger Fund. Under the plan, existing Newport Tiger Fund
shareholders received newly issued Class T or Class Z shares of Colonial Newport
Tiger Fund. The Financial Highlights and capital stock activity for Class T and
Class Z shares is presented as if the reorganization occurred on January 1,
1995.
19
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period
are as follows:
<TABLE>
<CAPTION>
Year ended December 31
----------------------------------------------------------------------------------
1995
Class A (a) Class B (a) Class D (a) Class T (b) Class Z (b)
---------- ---------- ---------- ---------- ----------
<C> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 10.860 $ 10.860 $ 10.860 $ 10.800 $ 10.800
-------- --------- ------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income 0.067 (0.003) (0.003) 0.099(d) 0.099(d)
Net realized and
unrealized gain(loss) 1.617 1.594 1.615 1.656 1.656
-------- --------- ------- -------- --------
Total from Investment
Operations 1.684 1.591 1.612 1.755 1.755
-------- --------- ------- -------- --------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS:
From net
investment income (0.060) (0.037) (0.038) (0.081) (0.081)
From net
realized gains (0.024) (0.024) (0.024) (0.024) (0.024)
In excess of net
investment income -- -- -- -- --
-------- --------- ------- -------- --------
Total Distributions
Declared to
Shareholders (0.084) (0.061) (0.062) (0.105) (0.105)
-------- --------- ------- -------- --------
Net asset value -
End of period $ 12.460 $ 12.390 $ 12.410 $ 12.450 $ 12.450
-------- --------- ------- -------- --------
Total return (e) 16.27%(f) 14.65%(f) 14.85%(f) 16.28% 16.28%
-------- --------- ------- -------- --------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.37%(f)(g) 1.93 %(f)(g) 1.93 %(f)(g) 1.60%(g) 1.60%(g)
Net investment income 0.28%(f)(g) (0.28)%(f)(g) (0.28)%(f)(g) 0.75% 0.75%
Portfolio turnover 4% 4 % 4 % 4% 4%
Net assets at end
of period (000) $196,870 $112,588 $21,420 $195,986 $345,583
</TABLE>
(a) Class A, Class B and Class D shares were initially offered on April 1, 1995.
Per share data reflects activity from that date and was calculated using
average shares outstanding during the period.
(b) Newport Tiger Fund was reorganized as Colonial Newport Tiger Fund on April
1, 1995. Under the plan of reorganization, existing shareholders of Newport
Tiger Fund received Class T or Class Z shares of Colonial Newport Tiger
Fund. The financial highlights for Classes T and Z are presented as if the
reorganization had occurred on January 1, 1995.
(c) Reflects 2 for 1 stock split effective November 29, 1993.
(d) Includes distribution from Taiwan Fund which amounted to $ 0.013 of per
share.
(e) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
20
<PAGE>
FINANCIAL STATEMENTS
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
Year ended December 31
--------------------------------------------------------------------
1994 1993(c) 1992(c) 1991
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
$ 12.440 $ 7.120 $ 5.860 $ 4.650
------------ ------------ ------------ ------------
0.060 0.040 0.020 (0.020)
(1.550) 5.330 1.270 1.230
------------ ------------ ------------ ------------
(1.490) 5.370 1.290 1.210
------------ ------------ ------------ ------------
(0.040) (0.040) (0.020) --
(0.110) (0.010) -- --
-- -- (0.010) --
------------ ------------ ------------ ------------
(0.150) (0.050) (0.030) --
------------ ------------ ------------ ------------
$ 10.800 $ 12.440 $ 7.120 $ 5.860
------------ ------------ ------------ ------------
(11.96)% 75.45% 22.02% 26.02%
------------ ------------ ------------ ------------
1.29% 1.56% 1.85% 2.49%
0.57% 0.59% 0.36% (0.40)%
8% 11% 17% 59%
$ 456,241 $ 394,883 $ 98,836 $ 26,401
</TABLE>
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements had an impact of 0.07% on Class A, Class B and Class D: 0.11%
on Class T and Class Z. Prior year ratios are net of benefits received, if
any.
21
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE TRUSTEES OF COLONIAL TRUST VII AND THE SHAREHOLDERS OF
COLONIAL NEWPORT TIGER FUND
In our opinion, the accompanying statement of assets and liabilities,
and the related statements of operations and of changes in net assets and the
financial highlights present fairly, in all material respects, the financial
position of Colonial Newport Tiger Fund (the "Fund") (a series of Colonial
Trust VII) at December 31, 1995, the results of its operations, the changes in
its net assets and the financial highlights for the year then ended, in
conformity with generally accepted accounting principles. These financial
statements and the financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audit. We
conducted our audit of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audit, which included confirmation of investments owned at December 31,
1995, provides a reasonable basis for the opinion expressed above. The
Statement of Changes in Net Assets for the year ended December 31, 1994 and the
Financial Highlights for each of the periods then ended were audited by another
Independent Accountant whose report, dated January 25, 1995, expressed an
unqualified opinion on those statements.
PRICE WATERHOUSE LLP
Boston, Massachusetts
February 9, 1996
Part C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial statements:
Included in Part A
Summary of Expenses
The Fund's Financial History
Included in Part B
Colonial Newport Tiger Fund (CNTF)
Investment portfolio, December 31, 1995
Statement of assets and liabilities, December 31, 1995
Statement of operations, Year ended December 31, 1995
Statement of changes in net assets, Years ended
December 31, 1995 and December 31, 1994
Notes to Financial Statements
Financial Highlights
Report of Independent Accountants
(b) Exhibits
1. (a) Declaration of Trust, as amended, of
Registrant
(b) Establishment and Designation of Colonial
Newport Tiger Fund
2. By-Laws of Registrant
3. Not applicable
4. Form of Specimen Share Certificate
5. Investment Management Agreement between
Colonial Trust VII on behalf of CNTF and
Newport Fund Management, Inc.
6. (a) Form of Distributor's Contract with
Colonial Investment Services, Inc.
(incorporated herein by reference to
Exhibit 6(i)(b) to Post-Effective
Amendment No. 39 to the Registration
Statement of Colonial Trust I,
Registration Nos. 811-2214 and 2-41251,
filed with the Commission on April 20,
1995)
(b) Form of Selling Agreement with Colonial
Investment Services (incorporated herein
by reference to Exhibit 6(b) to Post-
Effective Amendment No. 87 to the
Registration Statement of Colonial Trust
III, Registration Nos. 2-15184 and 811-
881, filed with the Commission on February
9, 1994)
(c) Investment Account Application
(incorporated by reference)
(d) Form of Bank and Bank Affiliated Selling
Agreement (incorporated herein by
reference to Exhibit 6(c) to Post-
Effective Amendment No. 5 to the
Registration Statement of Colonial Trust
VI, Registration Nos. 33-45117 & 811-6529,
filed with the Commission on October 11,
1994)
(e) Form of Asset Retention Agreement -
(incorporated herein by reference to
Exhibit 6(e) to Post-Effective Amendment
No. 5 to the Registration Statement of
Colonial Trust VI Registration Nos. 33-
45117 & 811-6529, filed with the
Commission on
October 11, 1994)
7. Not applicable
8. Form of Custodian Agreement between CNTF
and Brown Brothers Harriman & Co.(1)
9. (a) Administration Agreement between
Registrant and Colonial Management
Associates, Inc.
(b) Amended and Restated Shareholders'
Servicing and Transfer Agent Agreement
between Registrant and Colonial Investors
Service Center, Inc.
(c) Agreement and Plan of Reorganization dated
January 25, 1995 between The World Funds,
Inc. on behalf of Newport Tiger Fund and
Registrant on behalf of Colonial Newport
Tiger Fund
10. Opinion of Counsel (included with
Registrant's annual Rule 24f-2 Notice.
See Cover Page of this N-1A for details on
most recent filings.)
11. (a) Consent of Independent Accountants
(b) Consent of Independent Accountants
12. Not applicable
13. Not applicable
14. (a) Form of Colonial Group of Mutual Funds
Money Purchase Pension and Profit Sharing
Plan Document and Trust Agreement
(incorporated herein by reference to
Exhibit 14(a) to Post- Effective Amendment
No. 5 to the Registration Statement of
Colonial Trust VI, Registration Nos. 33-
45117 and 811-6529, filed with the
Commission on October 11, 1994)
(b) Form of Colonial Group of Mutual Funds
Money Purchase Pension and Profit Sharing
Establishment Book (incorporated herein by
reference to Exhibit 14(b) to Post-
Effective Amendment No. 5 to the
Registration Statement of Colonial Trust
VI Registration Nos. 33-45117 and 811-
6529, filed with the Commission on October
11, 1994)
(c) Form of Colonial Group of Mutual Funds
Individual Retirement Account
(incorporated herein by reference to
Exhibit 14(c) to Post-Effective Amendment
No. 5 to the Registration Statement of
Colonial Trust VI, Registration Nos. 3-
45117 and 811-6529, filed with the
Commission on October 11, 1994)
(d) Form of Colonial Group of Mutual Funds
Simplified Employee Plan and Salary
Reduction Simplified Employee Plan
(incorporated herein by reference to
Exhibit 14(d) to Post-Effective Amendment
No. 5 to the Registration Statement of
Colonial Trust VI, Registration Nos. 33-
45117 and 811-6529, filed with the
Commission on October 11, 1994)
(e) Form of Colonial Group of Mutual Funds
401(k) Plan Document and Trust Agreement
(incorporated herein by reference to
Exhibit 14(e) to Post-Effective Amendment
No. 5 to the Registration Statement of
Colonial Trust VI, Registration Nos. 33-
45117 and 811-6529, filed with the
Commission on October 11, 1994)
(f) Form of Colonial Group of Mutual Funds
401(k) Plan Establishment Booklet
(incorporated herein by reference to
Exhibit 14(f) to Post-Effective Amendment
No. 5 to the Registration Statement of
Colonial Trust VI, Registration Nos. 33-
45117 and 811-6529, filed with the
Commission on October 11, 1994)
(h) Form of Colonial Mutual Funds 401(k)
Employee Reports Booklet (incorporated
herein by reference to Exhibit 14(g) to
Post-Effective Amendment No. 5 to the
Registration Statement of Colonial Trust
VI, Registration Nos. 33-45117 and 811-
6529, filed with the Commission on October
11, 1994)
15. Distribution Plan adopted pursuant to
Section 12b-1 of the Investment Company
Act of 1940, incorporated by reference to
the Distributor's Contract filed as
Exhibit 6(i)(b) hereto
16. (a) Calculation of Performance Information
(b) Calculation of Yield
17. (a) Financial Data Schedule (Class A)
(b) Financial Data Schedule (Class B)
(c) Financial Data Schedule (Class D)
(d) Financial Data Schedule (Class T)
(e) Financial Data Schedule (Class Z)
18. Power of Attorney for: Robert J. Birnbaum,
Tom Bleasdale, Lora S. Collins, James E.
Grinnell, William D. Ireland, Jr., Richard
W. Lowry, William E. Mayer, John A.
McNeice, Jr., James L. Moody, Jr., John J.
Neuhauser, George L. Shinn, Robert L.
Sullivan and Sinclair Weeks, Jr.
(incorporated herein by reference to
Exhibit 18 to Post-Effective Amendment No.
42 to the Registration Statement of
Colonial Trust IV, Registration Nos. 2-
62492 and 811-2865, filed with the
Commission on March 22, 1996)
(1) Incorporated by reference to Post-Effective Amendment No.
8 filed with the Commission on December 16, 1994.
Item 25. Persons Controlled by our under Common Control with
Registrant
None
Item 26. Number of Holders of Securities
(1) (2)
Number of Record
Title of Class Holders as of 3/31/96
Shares of beneficial interest 21,676 Class A recordholders (CNTF)
25,274 Class B recordholders (CNTF)
3,033 Class D recordholders (CNTF)
15,752 Class T recordholders (CNTF)
1,974 Class Z recordholders (CNTF)
Item 27. Indemnification
See Article IV of the Agreement and Declaration of
Trust filed as Exhibit 1 hereto.
Item 28. Business and other Connections of Investment
Adviser
The following sets forth business and other
connections of each director and officer of
Colonial Management Associates, Inc. (see next
page):
The investment adviser for the Registrant's Colonial Newport Tiger Fund
Series, Newport Fund Management, Inc., is registered as an investment adviser
under the Investment Advisers Act of 1940 (1940 Act). As of the end of its
fiscal year, December 31, 1995, Newport Fund Management, Inc. was the
investment adviser to one mutual fund, the market value of which investment
company was approximately $869.8 million.
The following sets forth the business and other connections of each
director and officer of Newport Fund Management, Inc.:
(1) (2) (3) (4)
Name and principal
business
addresses* Affiliation
of officers and with Period is through 3/1/96. Other
directors of investment business, profession, vocation or
investment adviser adviser employment connection Affiliation
- ------------------ ---------- -------------------------------- -----------
Cook, Lindsay Sr. V.P.; Liberty Securities Corp. V.P.
Dir. Liberty Financial Companies, Inc. Sr. V.P.
Liberty Asset Management Company Sr. V.P.;
Dir.
Liberty Financial Advisors, Inc. Pres.
Newport Pacific Management, Inc. Sr. V.P.;
Dir.
Liberty Newport Holdings, Ltd. Sr. V.P.;
Dir.
Couch, Lynda V.P. Newport Pacific Management, Inc. V.P.
Frantz, Pamela Ex. V.P.; Newport Pacific Management, Inc. Ex. V.P.;
Treas.; Sec. Treas.;Sec.
Colonial Trust VII V.P.
Liberty Newport Holdings, Ltd. Treas; Sec.
Leibler, Kenneth Dir. Liberty Financial Companies, Inc. CEO; Pres.
Dir.
Liberty Asset Management Company Chairman
Newport Pacific Management, Inc. Dir.
Liberty Newport Holdings, Ltd. Dir.
Mussey, John Pres.; Dir Liberty Newport Holdings, Ltd. Pres.;Dir.
Newport Pacific Management, Inc. Pres.;Dir.
Newport Pacific Fund, Ltd. Pres.;Dir.
Newport International Mngmt., Ltd. Pres.;Dir.
Tiger Investment Company, Ltd. Dir.
Tiger Management, Ltd. Ex. Dir.
Colonial Trust VII V.P.
Rush, Gerald V.P.-Finance Liberty Financial Companies, Inc. V.P.-Fin.
Newport Pacific Management, Inc. V.P.-Fin.
Liberty Newport Holdings, Ltd. V.P.-Fin.
Tuttle, Thomas Sr. V.P. Newport Pacific Management, Inc. Sr. V.P.
The Lone Pine Group Sole Propr.
Liberty Newport Holdings, Ltd. Sr. V.P.;
Mngng. Dir.
Colonial Trust VII V.P.
- ------------------------------------------------
*The Principal address of each officer and director of the investment
adviser is: 580 California Street, San Francisco, CA 94104.
Item 29 Principal Underwriter
- ------- ---------------------
(a) Colonial Investment Services, Inc. a subsidiary of Colonial
Management Associates, Inc., Registrant's principal
underwriter, also acts in the same capacity to Colonial Trust I,
Colonial Trust II, Colonial Trust III, Colonial Trust IV, Colonial
Trust V and Colonial Trust VI; and
sponsor for Colony Growth Plans (public offering of which were
discontinued June 14, 1971).
(b) The table below lists each director or officer of the principal
underwriter named in the answer to Item 21.
(1) (2) (3)
Name and Principal Position and Offices Positions and
Business Address* with Principal Offices with
Underwriter Registrant
- ------------------ ------------------- --------------
Ballou, Rich Regional V.P. None
Balzano, Christine R. V.P. None
Barsokas, David Regional V.P. None
Cairns, David Regional V.P. None
Chrzanowski, Regional V.P. None
Daniel
Clapp, Elizabeth A. V.P. None
Daniszewski, V.P. None
Joseph J.
Davey, Cynthia Sr. V.P. None
Donovan, John Regional V.P. None
Eckelman, Bryan Sr. V.P. None
Eldridge, Kenneth Sr. V.P. None
Emerson, Kim P. Regional V.P. None
Erickson, Cynthia G. V.P. None
Evans, C. Frazier Sr. V.P. None
Feldman, David Regional V.P. None
Flaherty, Michael Regional V.P. None
Gerokoulis, Sr. V.P. None
Stephen A.
Goldberg, Matthew Regional V.P. None
Hannon, Lisa Regional V.P. None
Harasimowicz, V.P. None
Stephen
Hayes, Mary V.P. None
Elizabeth
Hodgkins, Joseph Regional V.P. None
Howard, Craig Sr. V.P. None
Karagiannis, Sr. V.P. None
Marilyn
Kavolius, Mark Regional V.P. None
Kelley, Terry M. Regional V.P. None
Kelson, David W. Sr. V.P. None
Kilkenny Ann R. Sr. V.P. None
Lloyd, Judith H. Sr. V.P. None
McGregor, Jeffrey L. Director, CEO, None
President, COO
Meriwether, Jan V.P.
Murphy, Robert F. Sr. V.P. None
O'Neill, Charles A. Exec. V.P. None
Palmer, Laura V.P. None
Penitsch, Marilyn L. Regional V.P. None
Potter, Cheryl Regional V.P. None
Reed, Christopher B. Regional V.P. None
Ross, Gary J. Regional V.P. None
Scott, Michael W. Sr. V.P. None
Silver, Richard A. Director, Treasurer, Treasurer, CFO
CFO
Sorrells, Sr. V.P. None
Elizabeth
Stern, Arthur O. Clerk and Secretary
Counsel, Dir.,
Chairman
VanEtten, Keith H. V.P. None
Villanova, Paul Regional V.P. None
Wallace, John V.P. None
- --------------------------
* The address for each individual is One Financial Center, Boston, MA
02111.
Item 30. Location of Accounts and Records
Registrant's accounts and records required to be
maintained by Section 31(a) of the Investment
Company Act of 1940 and the Rules thereunder are in
the physical possession of the following:
Registrant
Rule 31a-1 (b) (4)
Rule 31a-2 (a) (1)
Colonial Management Associates, Inc.
One Financial Center, Boston, MA 02111
Rule 31a-1 (b) (1), (2), (3), (5), (6), (7), (8),
(9), (10), (11), (12)
Rule 31a-1 (d), (f)
Rule 31a-1 (a) (1), (2), (c), (e)
Colonial Investment Services, Inc.
One Financial Center, Boston, MA 02111
Rule 31a-1(d)
Rule 31a-2(c)
Brown Brothers Harriman & Co.
40 Water Street, Boston, MA 02109
Rule 31a-1 (b), (2), (3)
Rule 31a-2 (a), (2)
Colonial Investors Service Center, Inc.
P.O. Box 1722, Boston, MA 02105-1722
Rule 31a-1 (b) (2)
Rule 31a-1 (a) (2)
Item 31. Management Services
See Item 5, Part A and Item 16, Part B
Item 32. Undertakings
Not Applicable
******************
NOTICE
A copy of the Agreement and Declaration of Trust, as amended, of
Colonial Trust VII is on file with the Secretary of The
Commonwealth of Massachusetts and notice is hereby given that the
instrument has been executed on behalf of the Trust by an officer
of the Trust as an officer and by its Trustees as trustees and
not individually and the obligations of or arising out of this
instrument are not binding upon any of the Trustees, officers or
shareholders individually but are binding only upon the assets
and property of the Trust.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant, Colonial
Trust VII, certifies that it meets all of the requirements for
effectiveness of the Registration Statement pursuant to Rule
485(b) and has duly caused this Post-Effective Amendment No. 10
to its Registration Statement under the Securities Act of 1933
and the Post-Effective Amendment No. 13 under the Investment
Company Act of 1940, to be signed in this City of Boston, and The
Commonwealth of Massachusetts on the 19th day of April, 1996.
COLONIAL TRUST VII
By: Harold W. Cogger
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment has been signed below by the following
persons in their capacities and on the date indicated.
SIGNATURES TITLE DATE
Harold W. Cogger President April 19, 1996
Richard A. Silver Treasurer and April 19, 1996
Chief
Financial Officer
Peter L. Lydecker Controller April 19, 1996
Robert J. Birnbaum* Trustee
Tom Bleasdale* Trustee
Lora S. Collins* Trustee
Janes E. Grinnell* Trustee
William D. Ireland,Jr.* Trustee
* Michael H. Koonce
Attorney-in-fact
Richard W. Lowry* Trustee April 19, 1996
William E. Mayer* Trustee
James L. Moody, Jr.* Trustee
John J. Neuhauser* Trustee
George L. Shinn* Trustee
Robert L. Sullivan* Trustee
Sinclair Weeks, Jr.* Trustee
Exhibit Index
1. (a) Declaration of Trust, as amended, of
Registrant
(b) Establishment and Designation of Colonial
Newport Tiger Fund
2. By-Laws of Registrant
5. Investment Management Agreement between
Colonial Trust VII on behalf of CNTF and
Newport Fund Management, Inc.
9. (a) Administration Agreement between
Registrant and Colonial Management
Associates, Inc.
(b) Amended and Restated Shareholders'
Servicing and Transfer Agent Agreement
between Registrant and Colonial Investors
Service Center, Inc.
(c) Agreement and Plan of Reorganization dated
January 25, 1995 between The World Funds,
Inc. on behalf of Newport Tiger Fund and
Registrant on behalf of Colonial Newport
Tiger Fund
11. (a) Consent of Independent Accountants
(b) Consent of Independent Accountants
16. (a) Calculation of Performance Information
(b) Calculation of Yield
17. (a) Financial Data Schedule (Class A)
(b) Financial Data Schedule (Class B)
(c) Financial Data Schedule (Class D)
(d) Financial Data Schedule (Class T)
(e) Financial Data Schedule (Class Z)
Retyped: 4/19/96
DECLARATION OF TRUST
OF
LIBERTY FINANCIAL TRUST
Federal Reserve Plaza
Boston, Massachusetts 02210
Dated July 3, 1991
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I - NAME AND DEFINITIONS...............................5
Section 1.1. Name..............................................5
Section 1.2 Definitions.......................................5
ARTICLE II - TRUSTEES..........................................7
Section 2.1. General Powers...................................7
Section 2.2. Investments......................................7
Section 2.3. Legal Title......................................9
Section 2.4. Issuance and Repurchase of Shares................9
Section 2.5. Delegation; Committees...........................9
Section 2.6. Collection and Payment...........................9
Section 2.7. Expenses........................................10
Section 2.8. Manner of Acting; By-laws.......................10
Section 2.9. Miscellaneous Powers............................10
Section 2.10. Principal Transactions..........................11
Section 2.11. Litigation......................................11
Section 2.12. Initial Trustee.................................11
Section 2.13. Number of Trustees..............................11
Section 2.14. Election and Term...............................11
Section 2.15. Resignation and Removal.........................11
Section 2.16. Vacancies.......................................12
Section 2.17. Delegation of Power to Other Trustees...........12
ARTICLE III - CONTRACTS....................................................12
Section 3.1. Distribution Contract...........................12
Section 3.2. Advisory of Management Contract.................12
Section 3.3. Administration Agreement........................13
Section 3.4. Transfer Agent..................................13
Section 3.5. Custodian.......................................13
Section 3.6. Affiliations of Trustees or Officers, Etc.......14
Section 3.7. Compliance with 1940 Act........................14
ARTICLE IV - LIMITATIONS OF LIABILITY OF SHAREHOLDERS, TRUSTEES AND OTHERS.14
Section 4.1. No Personal Liability of Shareholders,
Trustees, Etc.................................14
Section 4.2. Non-Liability of Trustees, Etc..................15
Section 4.3. Mandatory Indemnification.......................15
Section 4.4. No Bond Required of Trustees....................16
Section 4.5. No Duty of Investigation; Notice in Trust
Instruments, Etc..............................16
Section 4.6. Reliance on Experts, Etc........................17
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5999h/300
ARTICLE V - SHARES OF BENEFICIAL INTEREST..................................17
Section 5.1. Beneficial Interest.............................17
Section 5.2. Rights of Shareholders..........................17
Section 5.3. Trust Only......................................18
Section 5.4. Issuance or Shares..............................18
Section 5.5. Register of Shares..............................18
Section 5.6. Transfer of Shares..............................18
Section 5.7. Notices.........................................19
Section 5.8. Treasury Shares.................................19
Section 5.9. Voting Powers...................................19
Section 5.10. Meeting of Shareholders.........................19
Section 5.11. Series or Class Designation.....................20
Section 5.12. Assent to Declaration of Trust..................22
ARTICLE VI - REDEMPTION AND REPURCHASE OF SHARES...........................22
Section 6.1. Redemption of Shares............................22
Section 6.2. Price...........................................23
Section 6.3. Payment.........................................23
Section 6.4. Effect of Suspension of Determination
of Net Asset Value.........................23
Section 6.5. Repurchase of Agreement.........................23
Section 6.6. Redemption of Shareholder's Interest............23
Section 6.7. Redemption of Shares in Order to Qualify
as Regulated Investment Company;
Disclosure of Holding......................24
Section 6.8. Reductions in Number of Outstanding Shares
Pursuant to Net Asset Value Formula........24
Section 6.9. Suspension of Right of Redemption...............24
ARTICLE VII - DETERMINATION OF NET ASSET VALUE, NET INCOME AND
DISTRIBUTIONS...........................................25
Section 7.1. Net Asset Value.................................25
Section 7.2. Distributions to Shareholders...................25
Section 7.3. Determination of Net Income.....................26
Section 7.4. Power to Modify Foregoing Procedures............26
ARTICLE VIII - DURATION; TERMINATION OF TRUST OR A SERIES; AMENDMENT;
MERGERS, ETC............................................26
Section 8.1. Duration........................................26
Section 8.2. Termination of the Trust or a Series or a Class.27
Section 8.3. Amendment Procedure.............................28
Section 8.4. Merger, Consolidation and Sale of Assets........28
Section 8.5. Incorporation...................................28
<PAGE>
ARTICLE IX - REPORTS TO SHAREHOLDERS.......................................29
ARTICLE X - MISCELLANEOUS..................................................29
Section 10.1. Execution and Filing............................29
Section 10.2. Governing Law...................................29
Section 10.3. Counterparts....................................29
Section 10.4. Reliance by Third Parties.......................29
Section 10.5. Provisions in Conflict with Law or Regulations..29
-ii-
5999h/300
<PAGE>
DECLARATION OF TRUST
OF
LIBERTY FINANCIAL TRUST
Dated July __, 1991
DECLARATION OF TRUST made this ___ day of July, 1991 by John L.
Davenport, as trustee (so long as he continues in office in accordance with the
terms of Article II of this Declaration of Trust, and all other persons from
time to time duly elected, qualified and serving as Trustees in accordance with
the provisions of Article II hereof, the "Trustees");
WHEREAS, the Trustees desire to form a trust with transferable shares
under the laws of the Commonwealth of Massachusetts for the investment and
reinvestment of funds contributed thereto; and
WHEREAS, it is proposed that the beneficial interest in the trust
assets be divided into the transferable shares of beneficial interest which, in
the discretion of the Trustees, may be divided into separate Series as
hereinafter provided; and
WHEREAS, the Trustees hereby declare that all money and property
contributed to the trust established hereunder shall be held and managed in
trust for the benefit of the holders, from time to time, of the shares of
beneficial interest issued hereunder and subject to the provisions hereof.
ARTICLE I
NAME AND DEFINITIONS
Section 1.1. Name. The name of the trust created hereby is "Liberty
Financial Trust" (the "Trust").
Section 1.2. Definitions. Wherever they are used herein, the following
terms have the following respective meanings:
(a) "Administrator" means the party, other than the Trust, to the
contract described in Section 3.3 hereof.
(b) "By-laws" means the By-laws referred to in Section 2.8 hereof, as
from time to time amended.
(c) "Class" means any division of shares within a Series, which Class
is or has been established within such Series in accordance with the provisions
of Article V.
(d) The terms "Commission" and "Interested Person" have the meanings
given them in the 1940 Act. Except as otherwise defined by the Trustees in
conjunction with the establishment of any Series of Shares, the term "vote of a
majority of the Shares outstanding and entitled to vote" shall have the same
meaning as is assigned to the term "vote of a majority of the outstanding voting
securities" in the 1940 Act.
(e) "Custodian" means any Person other than the Trust who has custody
of any Trust Property as required by Section 17(f) of the 1940 Act, but does not
include a system for the central handling of securities described in said
Section 17(f).
(f) "Declaration" means this Declaration of Trust as amended from time
to time. Reference in this Declaration of Trust to "Declaration," "hereof,"
"herein," and "hereunder" shall be deemed to refer to this Declaration rather
than exclusively to the article or section in which such words appear.
(g) "Distributor" means the party, other than the Trust, to the
contract described in Section 3.1 hereof.
(h) "Fund" or "Funds" individually or collectively means the separate
Series of Shares of the Trust, together with the assets and liabilities assigned
thereto.
(i) "Fundamental Policies" means the investment policies and
restrictions set forth in the Prospectus and Statement of Additional Information
and designated as fundamental policies therein.
(j) "His" shall include the feminine and neuter, as well as the
masculine, genders.
(k) "Investment Advisor" means the party, other than the Trust, to the
contract described in Section 3.2 hereof.
(l) The "1940 Act" means the Investment Company Act of 1940, as amended
from time to time.
(m) "Person" means and includes individuals, corporations,
partnerships, trusts, associations, joint ventures and other entities, whether
or not legal entities, and governments and agencies and political subdivisions
thereof.
(n) "Prospectus" means the Prospectus and Statement of Additional
Information included in the Registration Statement of the Trust under the
Securities Act of 1933 as such Prospectus and Statement of Additional
Information may be amended or supplemented and filed with the Commission from
time to time.
(o) "Series" individually or collectively means the separately managed
component(s) of the Trust (or, if the Trust shall have only one such component,
then that one) as may be established and designated from time to time by the
Trustees pursuant to Section 5.11 hereof.
(p) "Shareholder" means a record owner of Outstanding Shares.
(q) "Shares" means the equal proportionate units of interest into which
the beneficial interest in the Trust shall be divided from time to time,
including the Shares of any and all Series or of any Class within any Series (as
the context may require) which may be established by the Trustees, and includes
fractions of Shares as well as whole Shares. "Outstanding" Shares means those
Shares shown from time to time on the books of the Trust or its Transfer Agent
as then issued and outstanding, but shall not include Shares which have been
redeemed or repurchased by the Trust and which are at the time held in the
treasury of the Trust.
(r) "Transfer Agent" means any Person other than the Trust who
maintains the Shareholders records of the Trust, such as the list of
Shareholders, the number of Shares credited to each account, and the like.
(s) "Trust" means Liberty Financial Trust.
(t) The "Trustees" means the person who has signed this Declaration, so
long as he shall continue in office in accordance with the terms hereof, and all
other persons who may from time to time be duly elected, qualified and serving
as Trustees in accordance with the provisions of Article II hereof, and
reference herein to a Trustee or the Trustees shall refer to such person or
persons in this capacity or their capacities as trustees hereunder.
(u) "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of the
Trust or the Trustees, including any and all assets of or allocated to any
Series or Class, as the context may require.
ARTICLE II
TRUSTEES
Section 2.1. General Powers. The Trustees shall have exclusive and
absolute control over the Trust Property and over the business of the Trust to
the same extent as if the Trustees were the sole owners of the Trust Property
and business in their own right, but with such powers of delegation as may be
permitted by this Declaration. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices both within and without the Commonwealth of Massachusetts,
in any and all states of the United States of America, in the District of
Columbia, and in any and all Commonwealths, territories, dependencies, colonies,
possessions, agencies or instrumentalities of the United States of America and
of foreign governments, and to do all such other things and execute all such
instruments as they deem necessary, proper or desirable in order to promote the
interests of the Trust although such things are not herein specifically
mentioned. Any determination as to what is in the interests of the Trust made by
the Trustees in good faith shall be conclusive. In construing the provisions of
this Declaration, the presumption shall be in favor of a grant of power to the
Trustees.
The enumeration of any specific power herein shall not be construed as
limiting the aforesaid powers. Such powers of the Trustees may be exercised
without order of or resort to any court.
Section 2.2. Investments. The Trustees shall have the power:
(a) To operate as and carry on the business of an investment company,
and exercise all the powers necessary and appropriate to the conduct of such
operations.
(b) To subscribe for, invest in, reinvest in, purchase or otherwise
acquire, hold, pledge, sell, assign, transfer, exchange, distribute or otherwise
deal in or dispose of United States and foreign currencies and related
instruments including options and futures contracts, forward foreign currency
exchange contracts; securities, including common, preferred and preference
stocks, warrants, subscription rights, profit-sharing interests or participation
and all other contracts for or evidence of equity interests; interests of any
sort in another investment company; bonds, debentures, time notes and all other
evidences of indebtedness; negotiable or non-negotiable instruments,
obligations, certificates of deposit or indebtedness, finance paper, bankers'
acceptances, commercial paper, repurchase agreements, reverse repurchase
agreements, convertible securities, forward contracts, options, futures
contracts, options on futures contracts; and other securities, including without
limitation, those issued, guaranteed or sponsored by any state, territory or
possessions of the United States and the District of Columbia and their
political subdivisions, agencies and instrumentailities, or by the United States
Government, any foreign government, or any agency, instrumentality or political
subdivision of the United States Government or any foreign government, or
international instrumentalities, or by any bank, savings institution,
corporation, trust, partnership or other entity organized under the laws of any
State or of the United States or under foreign laws; and the Trustees shall be
deemed to have the foregoing powers with respect to any additional securities in
which the Trust may invest should the Fundamental Policies be amended.
(c) To acquire (by purchase, subscription or otherwise), to hold, to
trade in and deal in, to acquire any rights or options to purchase or sell, to
sell or otherwise dispose of, to lend and to pledge any such securities, to
enter into repurchase agreements, reverse repurchase agreements, firm commitment
agreements, and forward foreign currency exchange contracts, to purchase and
sell options on securities, indices, currency or other financial assets, futures
contracts and options on futures contracts of all descriptions and to engage in
all types of hedging and risk management transactions.
(d) To exercise all rights, powers and privileges of ownership or
interest in all securities and repurchase agreements included in the Trust
Property, including the right to vote thereon and otherwise act with respect
thereto and to do all acts for the preservation, protection, improvement and
enhancement in value of all such securities and repurchase agreements.
(e) To acquire (by purchase, lease or otherwise) and to hold, use,
maintain, develop and dispose of (by sale or otherwise) any property, real or
personal, including cash or foreign currency, and any interest therein.
(f) To borrow money and in this connection issue notes or other
evidence of indebtedness; to secure borrowings by mortgaging, pledging or
otherwise subjecting as security the Trust property; and to endorse, guarantee,
or undertake the performance of any obligation or engagement of any other Person
and to lend Trust Property.
(g) To aid by further investment any corporation, company, trust,
partnership, association or firm, any obligation of or interest in which is
included in the Trust Property or in the affairs of which the Trustees have any
direct or indirect interest; to do all acts and things designed to protect,
preserve, improve or enhance the value of such obligation or interest; and to
guarantee or become surety on any or all of the contracts, stocks bonds, notes,
debentures and other obligations of any such corporation, company, trust,
partnership, association or firm.
(h) To enter into a plan of distribution and any related agreements
whereby the Trust may finance directly or indirectly any activity which is
primarily intended to result in sale of Shares.
(i) To adopt on behalf of the Trust or any Series thereof any plan
providing for the issuance of multiple Classes of Shares (as authorized herein
at Section 5.11).
(j) In general to carry on any other business in connection with or
incidental to any of the foregoing powers, to do everything necessary, suitable
or proper for the accomplishment of any purpose or the attainment of any object
or the furtherance of any power hereinbefore set forth, either alone or in
association with others, and to do every other act or thing incidental or
appurtenant to or arising out of or connected with the aforesaid business or
purposes, objects or powers.
The foregoing clauses shall be construed both as objects and powers,
and the foregoing enumeration of specific powers shall not be held to limit or
restrict in any manner the general powers of the Trustees.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust, nor shall the Trustees be limited
by any law limiting the investments which may be made by fiduciaries.
Section 2.3. Legal Title. Legal title to all the Trust Property shall
be vested in the Trustees as joint tenants except that the Trustees shall have
power to cause legal title to any Trust Property to be held by or in the name of
one or more of the Trustees, or in the name of the Trust or any Series of the
Trust, or in the name of any other Person as nominee, on such terms as the
Trustees may determine, provided that the interest of the Trust therein is
deemed appropriately protected. The right, title and interest of the Trustees in
the Trust Property and the Property of each Series of the Trust shall vest
automatically in each Person who may hereafter become a Trustee. Upon the
termination of the term of office, resignation, removal or death of a Trustee he
shall automatically cease to have any right, title or interest in any of the
Trust Property, and the right, title and interest of such Trustee in the Trust
Property shall vest automatically in the remaining Trustees. Such vesting and
cessation of title shall be effective whether or not conveyancing documents have
been executed and delivered.
Section 2.4. Issuance and Repurchase of Shares. The Trustees shall have
the power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold,
resell, reissue, dispose of, transfer, and otherwise deal in Shares and, subject
to the provisions set forth in Articles VI and VII and Section 5.11 hereof, to
apply to any such repurchase, redemption, retirement, cancellation or
acquisition of Shares any funds or property of the Trust, whether capital or
surplus or otherwise, to the full extent now or hereafter permitted by the laws
of the Commonwealth of Massachusetts governing business corporations.
Section 2.5. Delegation; Committees. The Trustees shall have power,
consistent with their continuing exclusive authority over the management of the
Trust and the Trust Property, to delegate from time to time to such of their
number or to officers, employees or agents of the Trust the doing of such things
and the execution of such instruments either in the name of the Trust or any
Series of the Trust or the names of the Trustees or otherwise as the Trustees
may deem expedient, to the same extent as such delegation is permitted by the
1940 Act.
Section 2.6. Collection and Payment. Subject to Section 5.11 hereof,
the Trustees shall have power to collect all property due to the Trust; to pay
all the claims, including taxes, against the Trust Property; to prosecute,
defend, compromise or abandon any claims relating to the Trust Property; to
foreclose any security interest securing any obligations, by virtue of which any
property is owed to the Trust; and to enter into releases, agreements and other
instruments.
Section 2.7. Expenses. Subject to Section 5.11 hereof, the Trustees
shall have the power to incur and pay any expenses which in the opinion of the
Trustees are necessary or incidental to carry out any of the purposes of this
Declaration, and to pay reasonable compensation from the funds of the Trust to
themselves as Trustees. The Trustees shall fix the compensation of all officers,
employees and Trustees.
Section 2.8. Manner of Acting; By-laws. Except as otherwise provided
herein or in the By-laws, any action to be taken by the Trustees may be taken by
a majority of the Trustees present at a meeting of Trustees (a quorum being
present), including any meeting held by means of a conference telephone circuit
or similar communications equipment by means of which all persons participating
in the meeting can hear each other, or by written consents of the entire number
of Trustees then in office. The Trustees may adopt By-laws not inconsistent with
this Declaration to provide for the conduct of the business of the Trust and may
amend or repeal such By-laws to the extent such power is not reserved to the
Shareholders.
Notwithstanding the foregoing provisions of this Section 2.8 and in
addition to such provisions or any other provision of this Declaration or of the
By-laws, a majority of the Trustees may by resolution appoint a committee
consisting of less than the whole number of Trustees then in office, which
committee may be empowered to act for and bind the Trustees and the Trust, as if
the acts of such committee were the acts of all the Trustees then in office,
with respect to the institution, prosecution, dismissal, settlement, review or
investigation of any action, suit or proceeding which shall be pending or
threatened to be brought before any court, administrative agency or other
adjudicatory body.
Section 2.9. Miscellaneous Powers. Subject to Section 5.11 hereof, the
Trustees shall have the power to: (a) employ or contract with such Persons as
the Trustees may deem desirable for the transaction of the business of the Trust
or any Series thereof; (b) enter into joint ventures, partnerships and any other
combinations or associations; (c) remove Trustees or fill vacancies in or add to
their number, elect and remove such officers and appoint and terminate such
agents or employees as they consider appropriate, and appoint from their own
number, and terminate, any one or more committees which may exercise some or all
of the power and authority of the Trustees as the Trustees may determine; (d)
purchase, and pay for out of Trust Property or the Property of the appropriate
Series of the Trust, insurance policies insuring the Shareholders, Trustees,
officers, employees, agents, investment advisers, administrators, distributors,
selected dealers or independent contractors of the Trust against all claims
arising by reason of holding any such position or by reason of any action taken
or omitted by any such Person in such capacity, whether or not constituting
negligence, or whether or not the Trust would have the power to indemnify such
Person against such liability; (e) establish pension, profit-sharing, share
purchase, and other retirement, incentive and benefit plans for any Trustees,
officers, employees and agents of the Trust; (f) to the extent permitted by law,
indemnify any person with whom the Trust or any Series thereof has dealings,
including the Investment Adviser, Administrator, Distributor, Transfer Agent and
selected dealers, to such extent as the Trustees shall determine; (g) guarantee
indebtedness or contractual obligations of others; (h) determine and change the
fiscal year of the Trust or any Series thereof and the method by which its
accounts shall be kept; and (i) adopt a seal for the Trust, but the absence of
such seal shall not impair the validity of any instrument executed on behalf of
the Trust.
Section 2.10. Principal Transactions. Except in transactions not
permitted by the 1940 Act or rules and regulations adopted by the Commission,
the Trustees may, on behalf of the Trust, buy any securities from or sell any
securities to, or lend any assets of the Trust or any Series thereof, to any
Trustee or officer of the Trust or any firm of which any such Trustee or officer
is a member acting as principal, or have any such dealings with the Investment
Adviser, Distributor or Transfer Agent or with any Interested Person of such
person; and the Trust or a Series thereof may employ any such Person, or firm or
company in which such Person is an Interested Person, as broker, legal counsel,
registrar, transfer agent, dividend disbursing agent or custodian upon customary
terms.
Section 2.11. Litigation. The Trustees shall have the power to engage
in and to prosecute, defend, compromise, abandon, or adjust by arbitration, or
otherwise, any actions, suits, proceedings, disputes, claims, and demands
relating to the Trust, and out of the assets of the Trust or any Series thereof
to pay or to satisfy any debts, claims or expenses incurred in connection
therewith, including those of litigation, and such power shall include without
limitation the power of the Trustees or any appropriate committee thereof, in
the exercise of their or its good faith business judgment, to dismiss any
action, suit, proceeding, dispute, claim, or demand, derivative or otherwise,
brought by any person, including a Shareholder in its own name or the name of
the Trust, whether or not the Trust or any of the Trustees may be named
individually therein or the subject matter arises by reason of business for or
on behalf or the Trust.
Section 2.12. Initial Trustee. Upon his execution of this Declaration
or a counterpart hereof, John L. Davenport shall become a Trustee
hereunder.
Section 2.13. Number of Trustees. The number of Trustees shall
initially be one (1), and thereafter shall be such number as shall be fixed from
time to time by a written instrument signed by a majority of the Trustees,
provided, however, that the subsequent number of Trustees shall not be less than
three (3) nor more than fifteen (15).
Section 2.14. Election and Term. Except for the Trustees named herein
or appointed to fill vacancies pursuant to Section 2.16 hereof, the Trustees may
succeed themselves and shall be elected by the Shareholders owning of record a
plurality of the Shares voting at a meeting of Shareholders on a date fixed by
the Trustees. Except in the event of resignation or removals pursuant to Section
2.15 hereof, each Trustee shall hold office until such time as less than a
majority of the Trustees holding office have been elected by Shareholders. In
such event the Trustees then in office will call a Shareholders' meeting for the
election of Trustees. Except for the foregoing circumstances, the Trustees shall
continue to hold office and may appoint successor Trustees.
Section 2.15. Resignation and Removal. Any Trustee may resign his trust
(without the need for any prior or subsequent accounting) by an instrument in
writing signed by him and delivered to the other Trustees and such resignation
shall be effective upon such delivery, or at a later date according to the terms
of the instrument. Any of the Trustees may be removed (provided the aggregate
number of Trustees after such removal shall not be less than three) with cause,
by the action of two-thirds of the remaining Trustees or by the action of
two-thirds of the outstanding Shares of the Trust (for purposes of determining
the circumstances and procedures under which any such removal by the
Shareholders may take place, the provisions of Section 16(a) of the 1940 Act
shall be applicable to the same extent as if the Trust were subject to the
provisions of that Section). Upon the resignation or removal of a Trustee, or
his otherwise ceasing to be a Trustee, he shall execute and deliver such
documents as the remaining Trustees shall require for the purpose of conveying
to the Trust or the remaining Trustees any Trust Property held in the name of
the resigning or removed Trustee. Upon the incapacity or death of any Trustee,
his legal representative shall execute and deliver on his behalf such documents
as the remaining Trustees shall require as provided in the preceding sentence.
Section 2.16. Vacancies. The term of office of a Trustee shall
terminate and a vacancy shall occur in the event of his death, retirement,
resignation, removal, bankruptcy, adjudicated incompetence or other incapacity
to perform the duties of the office of a Trustee. No such vacancy shall operate
to annul the Declaration or to revoke any existing agency created pursuant to
the terms of the Declaration. In the case of an existing vacancy, including a
vacancy existing by reason of an increase in the number of Trustees, subject to
the provisions of Section 16 (a) of the 1940 Act, the remaining Trustees shall
fill such vacancy by the appointment of such other person as they in their
discretion shall see fit, made by a written instrument signed by a majority of
the Trustees then in office. Any such appointment shall not become effective,
however, until the person named in the written instrument of appointment shall
have accepted in writing such appointment and agreed in writing to be bound by
the terms of the Declaration. An appointment of a Trustee may be made in
anticipation of a vacancy to occur at a later date by reason of retirement,
resignation or increase in the number of Trustees, provided that such
appointment shall not become effective prior to such retirement, resignation or
increase in the number of Trustees. Whenever a vacancy in the number of Trustees
shall occur, until such vacancy is filled as provided in this Section 2.16, the
Trustees in office, regardless of their number, shall have all the powers
granted to the Trustees and shall discharge all the duties imposed upon the
Trustees by the Declaration. A written instrument certifying the existence of
such vacancy signed by a majority of the Trustees in office shall be conclusive
evidence of the existence of such vacancy.
Section 2.17. Delegation of Power to Other Trustees. Any Trustee may,
by power of attorney, delegate his power for a period not exceeding six (6)
months at any one time to any other Trustee or Trustees; provided that in no
case shall fewer than two (2) Trustees personally exercise the powers granted to
the Trustees under this Declaration except as herein otherwise expressly
provided.
ARTICLE III
CONTRACTS
Section 3.1. Distribution Contract. The Trustees may in their
discretion from time to time enter into an exclusive or non-exclusive
distribution contract or contracts providing for the sale of the Shares to net
the Trust or the applicable Series of the Trust not less than the amount
provided for in Section 7.1 of Article VII hereof, whereby the Trustees may
either agree to sell the Shares to the other party to the contract or appoint
such other party as their sales agent for the Shares, and in either case on such
terms and conditions, if any, as may be prescribed in the By-laws, and such
further terms and conditions as the Trustees may in their discretion determine
not inconsistent with the provisions of this Article III or of the By-laws; and
such contract may also provide for the repurchase of the Shares by such other
party as agent of the Trustees.
Section 3.2. Advisory or Management Contract. Subject to approval by a
vote of a majority of the Shares outstanding and entitled to vote, the Trustees
may in their discretion from time to time enter into one or more investment
advisory or management contracts or, if the Trustees establish multiple Series,
separate investment advisory or management contracts with respect to one or more
Series whereby the other party or parties to any such contracts shall undertake
to furnish the Trust or such Series management, investment advisory,
administration, accounting, legal, statistical and research facilities and
services, promotional or marketing activities, and such other facilities and
services, if any, as the Trustees shall from time to time consider desirable and
all upon such terms and conditions as the Trustees may in their discretion
determine. Notwithstanding any provisions of the Declaration, the Trustees may
authorize the Investment Advisers, or any of them, under any such contracts
(subject to such general or specific instructions as the Trustees may from time
to time adopt) to effect purchases, sales, loans or exchanges of portfolio
securities and other investments of the Trust on behalf of the Trustees or may
authorize any officer, employee or Trustee to effect such purchases, sales,
loans or exchanges pursuant to recommendations of such Investment Advisers, or
any of them (and all without further action by the Trustees). Any such
purchases, sales, loans and exchanges shall be deemed to have been authorized by
all of the Trustees. The Trustees may, in their sole discretion, call a meeting
of Shareholders in order to submit to a vote of Shareholders at such meeting the
approval or continuance of any such investment advisory or management contract.
If the Shareholders of any one or more of the Series of the Trust should fail to
approve any such investment advisory or management contract, the Investment
Adviser may nonetheless serve as Investment Adviser with respect to any Series
whose Shareholders approve such contract.
Section 3.3. Administration Agreement. The Trustees may in their
discretion from time to time enter into an administration agreement or, if the
Trustees establish multiple Series or Classes separate administration agreements
with respect to each Series or Class, whereby the other party to such agreement
shall undertake to manage the business affairs of the Trust or of a Series or
Class of the Trust and furnish the Trust or a Series or a Class thereof with
office facilities, and shall be responsible for the ordinary clerical,
bookkeeping and recordkeeping services at such office facilities, and other
facilities and services, and all upon such terms and conditions as the Trustees
may in their discretion determine.
Section 3.4. Transfer Agent. The Trustees may in their discretion from
time to time enter into a transfer agency and shareholder service contract
whereby the other party to such contract shall undertake to furnish transfer
agency and shareholder services to the Trust, The contract shall have such terms
and conditions as the Trustees may in their discretion determine not
inconsistent with the Declaration. Such services may be provided by one or more
Persons.
Section 3.5. Custodian. The Trustees may appoint or otherwise engage
one or more banks or trust companies, each having an aggregate capital, surplus
and undivided profits (as shown in its last published report) of not less than
two million dollars ($2,000,000) to serve as Custodian with authority as its
agent, but subject to such restrictions, limitations and other requirements, if
any, as may be contained in the By-laws of the Trust. The Trustees may also
authorize the Custodian to employ one or more sub-custodians, including such
foreign banks and securities depositories as meet the requirements of applicable
provisions of the 1940 Act, and upon such terms and conditions as may be agreed
upon between the Custodian and such sub-custodian, to hold securities and other
assets of the Trust and to perform the acts and services of the Custodian,
subject to applicable provisions of law and resolutions adopted by the Trustees.
<PAGE>
Section 3.6. Affiliations of Trustees or Officers, Etc.
The fact that:
(i) any of the Shareholders, Trustees or Officers of the Trust
or any Series thereof is a shareholder, director, officer, partner, trustee,
employee, manager, adviser or distributor of or for any partnership,
corporation, trust, association, or other organization of or for any parent of
affiliate of any organization, with which a contract of the character described
in Sections 3.1, 3.2 or 3.3 above or for services as Custodian, Transfer Agent
or disbursing agent or for related services as Custodian, Transfer Agent or
disbursing agent or for related services may have been or may hereafter be made,
or that any such organization, or any parent or affiliate thereof, is a
Shareholder of or has an interest in the Trust, or that
(ii) any partnership, corporation, trust, association or other
organization with which a contract of the character described in Sections 3.1,
3.2 or 3.3 above or for services as Custodian, Transfer Agent or disbursing
agent or for related services may have been or may hereafter be made also has
any one or more of such contracts with one or more other partnerships,
corporations, trusts, associations or other organizations, or has other business
or interests, shall not affect the validity of any such contract or disqualify
any Shareholder, Trustee or Officer of the Trust from voting upon or executing
the same or create any liability or accountability to the Trust or its
Shareholders.
Section 3.7. Compliance with 1940 Act. Any contract entered into
pursuant to Sections 3.1 or 3.2 shall be consistent with and subject to the
requirements of Section 15 of the 1940 Act (including any amendment thereof or
other applicable Act of Congress hereafter enacted), as modified by any
applicable order or orders of the Commission, with respect to its continuance in
effect, its termination and the method of authorization and approval of such
contract or renewal thereof.
ARTICLE IV
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS
Section 4.1. No Personal Liability of Shareholders, Trustees, Etc. No
Shareholder shall be subject to any personal liability whatsoever to any Person
in connection with Trust Property or the acts, obligations or affairs of the
Trust or any Series thereof. No Trustee, officer, employee or agent of the Trust
or any Series thereof shall be subject to any personal liability whatsoever to
any Person, other than to the Trust or its Shareholders, in connection with
Trust Property or the affairs of the Trust, save only that arising from bad
faith, willful misfeasance, gross negligence or reckless disregard of his duties
with respect to such Person; and all such Persons shall look solely to the Trust
Property, or to the Property of one or more specific Series of the Trust if the
claim arises from the conduct of such Trustee, officer, employee or agent with
respect to only such Series, for satisfaction of claims of any nature arising in
connection with the affairs of the Trust. If any Shareholder, Trustee, officer,
employee or agent, as such, of the Trust or any Series thereof, is made a party
to any suit or proceeding to enforce any such liability of the Trust or any
Series thereof, he shall not, on account thereof, be held to any personal
liability. The Trust shall indemnify and hold each Shareholder harmless from and
against all claims and liabilities to which such Shareholder may become subject
by reason of his being or having been a Shareholder, and shall reimburse such
Shareholder or former Shareholder (or his or her heirs, executors,
administrators or other legal representatives or in the case or a corporation or
other entity, its corporate or other general successor) out of the Trust
Property for all legal and other expenses reasonably incurred by him in
connection with any such claim or liability. The indemnification and
reimbursement required by the preceding sentence shall be made only out of
assets of the one or more Series whose Shares were held by said Shareholder at
the time the act or event occurred which gave rise to the claim against or
liability of said Shareholder. The rights accruing to a Shareholder under this
Section 4.1 shall not impair any other right to which such Shareholder may be
lawfully entitled, nor shall anything herein contained restrict the right of the
Trust or any Series thereof to indemnify or reimburse a Shareholder in any
appropriate situation even though not specifically provided herein.
Section 4.2. Non-Liability of Trustees, Etc. No Trustee, officer,
employee or agent of the Trust or any Series thereof shall be liable to the
Trust, its Shareholders, or to any Shareholder, Trustee, officer, employee, or
agent thereof for any action of failure to act (including without limitation the
failure to compel in any way any former or acting Trustee to redress any breach
of trust) except for his own bad faith, willful misfeasance, gross negligence or
reckless disregard of the duties involved in the conduct of his office.
Section 4.3. Mandatory Indemnification. (a) Subject to the exceptions
and limitations contained in paragraph (b) below:
(i) every person who is, or has been, a Trustee, officer,
employee or agent of the Trust (including any individual who serves at its
request as director, officer, partner, trustee or the like of another
organization in which it has any interest as a shareholder, creditor or
otherwise) shall be indemnified by the Trust, or by one or more Series thereof
if the claim arises from his or her conduct with respect to only such Series, to
the fullest extent permitted by law against all liability and against all
expenses reasonably incurred or paid by him in connection with any claim,
action, suit or proceeding in which he becomes involved as a party or otherwise
by virtue of his being or having been a Trustee or officer and against amounts
paid or incurred by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding"
shall apply to all claims, actions, suits or proceedings (civil, criminal, or
other, including appeals), actual or threatened; and the words "liability" and
"expenses" shall include, without limitation, attorneys' fees, costs, judgments,
amounts paid in settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Trustee or
officer:
(i) against any liability to the Trust, a Series thereof or
the Shareholders by reason of willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of his office;
(ii) with respect to any matter as to which he shall have been
finally adjudicated not to have acted in good faith in the reasonable belief
that his action was in the best interest of the Trust or a Series thereof;
(iii) in the event of a settlement or other disposition not
involving a final adjudication as provided in paragraph (b)(ii) resulting in a
payment by a Trustee or officer, unless there has been a determination that such
Trustee or officer did not engage in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office:
(A) by the court or other body approving the settlement or other
disposition;
(B) based upon a review of readily available facts (as opposed to a
full trial-type inquiry) by (x) vote of a majority of the Non-interested
Trustees acting on the matter (provided that a majority of the
Non-interested Trustees then in office act on the matter) or (y) written
opinion of independent legal counsel; or
(C) a Majority Shareholder Vote (excluding Shares owned of record or
beneficially by such individual).
(c) The rights of indemnification herein provided may be
insured against by policies maintained by the Trust, shall be severable, shall
not affect any other rights to which any Trustee or officer may now or hereafter
be entitled, shall continue as to a person who has ceased to be such Trustee or
officer and shall inure to the benefit of the heirs, executors, administrators
and assigns of such a person. Nothing contained herein shall affect any rights
to indemnification to which personnel of the Trust or any Series thereof other
than Trustees and officers may be entitled by contract or otherwise under law.
(d) Expenses of preparation and presentation of a defense to
any claim, action, suit or proceeding of the character described in paragraph
(a) of this Section 4.3 may be advanced by the Trust or a Series thereof prior
to final disposition thereof upon receipt of an undertaking by or on behalf of
the recipient to repay such amount if it is ultimately determined that he is not
entitled to indemnification under this Section 4.3, provided that either:
(i) such undertaking is secured by a surety bond or some other
appropriate security provided by the recipient, or the Trust or Series
thereof shall be insured against losses arising out of any such advances;
or
(ii) a majority of the Non-interested Trustees acting on the matter
(provided that a majority of the Non-interested Trustees act on the matter)
or an independent legal counsel in a written opinion shall determine, based
upon a review of readily available facts (as opposed to a full trial-type
inquiry), that there is reason to believe that the recipient ultimately
will be found entitled to indemnification.
As used in this Section 4.3, a "Non-interested Trustee" is one who (i)
is not an "Interested Person" of the Trust (including anyone who has been
exempted from being an "Interested Person" by any rule, regulation or order of
the Commission), and (ii) is not involved in the claim, action, suit or
proceeding.
Section 4.4. No Bond Required of Trustees. No Trustee shall be
obligated to give any bond or other security for the performance of any of his
duties hereunder.
Section 4.5. No Duty of Investigation; Notice in Trust Instruments,
Etc. No purchaser, lender, transfer agent or other Person dealing with the
Trustees or any officer, employee or agent of the Trust or a Series thereof
shall be bound to make any inquiry concerning the validity of any transaction
purporting to be made by the Trustees or by said officer, employee or agent or
be liable for the application of money or property paid, loaned, or delivered to
or on the order of the Trustees or of said officers employee or agent. Every
obligation, contract, instrument, certificate, Share, other security of the
Trust or a Series thereof or undertaking, and every other act or thing
whatsoever executed in connection with the Trust shall be conclusively presumed
to have been executed or done by the executors thereof only in their capacity as
Trustees under this Declaration or in their capacity as officers, employees or
agents of the Trust or a Series thereof. Every written obligation, contract,
instrument, certificate, Share, other security of the Trust or a Series thereof
or undertaking make or issued by the Trustees may recite that the same is
executed or made by them not individually, but as Trustees under the
Declaration, and that the obligations of the Trust or a Series thereof under any
such instrument are not binding upon any of the Trustees or Shareholders
individually, but bind only the Trust Property or the Trust Property of the
applicable Series, and may contain any further recital which they may deem
appropriate, but the omission of such recital shall not operate to bind the
Trustees individually. The Trustees shall at all times maintain insurance for
the protection of the Trust Property or the Trust Property of the applicable
Series, its Shareholders, Trustees, officers, employees and agents in such
amount as the Trustees shall deem adequate to cover possible tort liability, and
such other insurance as the Trustees in their sole judgment shall deem
advisable.
Section 4.6. Reliance on Experts, Etc. Each Trustee, officer or
employee of the Trust or a Series thereof shall, in the performance of his
duties, be fully and completely justified and protected with regard to any act
or any failure to act resulting from reliance in good faith upon the books of
account or other records of the Trust or a Series thereof, upon an opinion of
counsel, or upon reports made to the Trust or a Series thereof by any of its
officers or employees or by the Investment Adviser, the Administrator, the
Distributor, Transfer Agent, selected dealers, accountants, appraisers or other
experts or consultants selected with reasonable care by the Trustees, officers
or employees of the Trust, regardless of whether such counsel or expert may also
be a Trustee.
ARTICLE V
SHARES OF BENEFICIAL INTEREST
Section 5.1. Beneficial Interest. The interest of the beneficiaries
hereunder shall be divided into transferable Shares of beneficial interest
without par value. The number of such shares of beneficial interest authorized
hereunder is unlimited. The Trustees shall have the authority to establish and
designate one or more Series of shares and one or more Classes thereof. Each
Share or any Series shall represent an equal proportionate Share in the assets
of that Series with each other Share in that Series. The Trustees may divide or
combine the Shares of any Series into a greater or lesser number of Shares in
that Series without thereby changing the proportionate interests in the assets
of that Series. Subject to the provisions of Section 5.11 hereof, the Trustees
may also authorize the creation of additional Series of Shares (the proceeds of
which may be invested in separate, independently managed portfolios) and
additional Classes of Shares within any Series. All Shares issued hereunder
including, without limitation, Shares issued in connection with a dividend in
Shares or a split in Shares, shall be fully paid and nonassessable.
Section 5.2. Rights of Shareholders. The ownership of the Trust
Property of every description and the right to conduct any business hereinbefore
described are vested exclusively in the Trustees, and the Shareholders shall
have no interest therein other than the beneficial interest conferred by their
Shares, and they shall have no right to call for any partition or division of
any property, profits, rights or interests of the Trusts nor can they be called
upon to share or assume any losses of the Trust or suffer an assessment of any
kind by virtue of their ownership of Shares. The Shares shall be personal
property giving only the rights specifically set forth in this Declaration. The
Shares shall not entitle the holder to preference, preemptive, appraisal,
conversion or exchange rights, except as the Trustees may determine with respect
to any Series of Class of Shares.
Section 5.3. Trust Only. It is the intention of the Trustees to create
only the relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to create
a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a trust.
Nothing in this Declaration of Trust shall be construed to make the
Shareholders, either by themselves or with the Trustees, partners or members of
a joint stock association.
Section 5.4. Issuance of Shares. The Trustees in their discretion may,
from time to time without a vote of the Shareholders, issue Shares, in addition
to the then issued and outstanding Shares and Shares held in the treasury, to
such party or parties or for such amount and type of consideration, including
cash or property, at such time or times and on such terms as the Trustees may
deem best, except that only Shares previously contracted to be sold may be
issued during any period when the right of redemption is suspended pursuant to
Section 6.9 hereof, and may in such manner acquire other assets (including the
acquisition of assets subject to, and in connection with the assumption of,
liabilities) and businesses. In connection with any issuance of Shares, the
Trustees may issue fractional Shares and Shares held in the treasury. The
Trustees may from time to time divide or combine the Shares of the Trust or, if
the Shares be divided into Series or Classes, of any Series or any Class thereof
of the Trust, into a greater or lesser number without thereby changing the
proportionate beneficial interests in the Trust or in the Trust Property
allocated or belonging to such Series or Class. Contributions to the Trust or
Series thereof may be accepted for, and Shares shall be redeemed as, whole
Shares and/or 1/1,000ths of a Share or integral multiples thereof.
Section 5.5. Register of Shares. A register shall be kept at the
principal office of the Trust or an office of the Transfer Agent which shall
contain the names and addresses of the Shareholders and the number of Shares
held by them respectively and a record of all transfers thereof. Such register
shall be conclusive as to who are the holders of the Shares and who shall be
entitled to receive dividends or distributions, or otherwise to exercise or
enjoy the rights of Shareholders. No Shareholder shall be entitled to receive
payment of any dividend or distribution, nor to have notice given to him as
provided herein or in the By-laws, until he has given his address to the
Transfer Agent or such other officer or agent of the Trustees as shall keep the
said register for entry thereon. It is not contemplated that certificates will
be issued for the Shares; however, the Trustees, in their discretion, may
authorize the issuance of share certificates and promulgate appropriate rules
and regulations as to their use.
Section 5.6. Transfer of Shares. Shares shall be transferable on the
records of the Trust only by the record holder thereof or by his agent thereunto
duly authorized in writing, upon delivery to the Trustees or the Transfer Agent
of a duly executed instrument of transfer, together with such evidence of the
genuineness of each such execution and authorization and of other matters as may
reasonably be required. Upon such delivery the transfer shall be recorded on the
register of the Trust. Until such record is made, the Shareholder of record
shall be deemed to be the holder of such Shares for all purposes hereunder and
neither the Trustees nor any transfer agent or registrar nor any officer,
employee or agent of the Trust shall be affected by any notice of the proposed
transfer.
Any person becoming entitled to any Shares in consequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation of
law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the proper evidence thereof to the Trustees or the Transfer
Agent, but until such record is made, the Shareholder of record shall be deemed
to be the holder of such Shares for all purposes hereunder and neither the
Trustees nor any Transfer Agent or registrar nor any officer or agent of the
Trust shall be affected by any notice of such death, bankruptcy or incompetence,
or other operation of law.
Section 5.7. Notices. Any and all notices to which any Shareholder may
be entitled and any and all communications shall be deemed duly served or given
if mailed, postage pre-paid, addressed to any Shareholder of record at his last
known address as recorded on the register of the Trust.
Section 5.8. Treasury Shares. Shares held in the treasury shall, until
resold pursuant to Section 5.4, not confer any voting rights on the Trustees,
nor shall such Shares be entitled to any dividends or other distributions
declared with respect to the Shares.
Section 5.9. Voting Powers. The Shareholders shall have power to vote
only (i) for the election of Trustees as provided in Section 2.14; (ii) with
respect to any investment advisory contract entered into pursuant to Section
3.2; (iii) with respect to termination of the Trust or a Series thereof as
provided in Section 8.2; (iv) with respect to any amendment of this Declaration
to the extent and as provided in Section 8.3; (v) with respect to any merger,
consolidation or sale of assets as provided in Section 8.4; (vi) with respect to
incorporation of the Trust to the extent and as provided in Section 8.5; (vii)
to the same extent as the stockholders of a Massachusetts business corporation
as to whether or not a court action, proceeding or claim should or should not be
brought or maintained derivatively or as a class action on behalf of the Trust
or a Series thereof or the Shareholders of either; (viii) with respect to any
plan adopted pursuant to Rule 12b-1 (or any successor rule) under the 1940 Act,
and related matters; and (ix) with respect to such additional matters relating
to the Trust as may be required by this Declaration, the By-laws or any
registration of the Trust as an investment company under the 1940 Act with the
Commission (or any successor agency) or as the Trustees may consider necessary
or desirable. Each whole Share shall be entitled to one vote as to any matter on
which it is entitled to vote and each fractional Share shall be entitled to a
proportionate fractional vote. On any matter submitted to a vote of
Shareholders, all Shares shall be voted by individual Series except (1) when
required by the 1940 Act, Shares shall be voted in the aggregate and not by
individual Series; and (2) when the Trustees have determined that the matter
affects only the interests of one or more Series or Class thereof, then only the
Shareholders of such Series or Class thereof shall be entitled to vote thereon.
The Trustees may, in conjunction with the establishment of any further Series or
any Classes of Shares, establish conditions under which the several Series or
Classes of Shares shall have separate voting rights or no voting rights. There
shall be no cumulative voting in the election of Trustees, Until Shares are
issued, the Trustees may exercise all rights of Shareholders and may take any
action required by law, this Declaration or the By-laws to be taken by
Shareholders. The By-laws may include further provisions for Shareholders' votes
and meetings and related matters.
Section 5.10. Meetings of Shareholders. Meetings of the Shareholders of
the Trust may be called at any time by the Chairman of the Board, President, or
any Vice-President of the Trust, and shall be called by the President or the
Secretary at the request, in writing or by resolution, of a majority of the
Trustees, or at the written request of the holder or holders of ten percent
(10%) or more of the total number of Shares then issued and outstanding of the
Trust entitled to vote at such meeting. Meetings of the Shareholders of any
Series of the Trust shall be called by the President or the Secretary at the
written request of the holder or holders of ten percent (10%) or more of the
total number of Shares then issued and outstanding of such Series of the Trust
entitled to vote at such meeting. Any such request shall state the purpose of
the proposed meeting.
Section 5.11. Series or Class Designation. (a) Without limiting the
authority of the Trustees set forth in Section 5.1 to establish and designate
any further Series, it is hereby confirmed that the Trust consists of the
presently Outstanding Shares of a single Series: Liberty Financial Utilities
Fund. (b) Without limiting the authority of the Trustees set forth in Section
5.1 to establish and designate any further Classes, it is hereby confirmed that
the Trust presently consists of one Class of Shares: The Outstanding Shares of
Liberty Financial Utilities Fund. Each Outstanding Share of any Series shall be
of the existing Class unless the Trustees, with the consent of the holder of the
Share (which consent shall be evidenced by the holder's subscription of Shares
of a specified Class or by any other action prescribed by the Trustees),
determines that such Share is or shall be of some other Class. (c) The Shares of
the existing Series and such Classes thereof herein established and designated
and any Shares of any further Series and Classes thereof that may from time to
time be established and designated by the Trustees shall be established and
designated, and the variations in the relative rights and preferences as between
the different Series shall be fixed and determined, by the Trustees (unless the
Trustees otherwise determine with respect to further Series or Classes at the
time of establishing and designating the same); provided, that all Shares shall
be identical except that there may be variations so fixed and determined between
different Series or Classes thereof as to investment objective, policies and
restrictions, purchase price, payment obligations, distribution expenses, right
of redemption, special and relative rights as to dividends and on liquidation,
conversion rights, exchange rights, and conditions under which the several
Series shall have separate voting rights, all of which are subject to the
limitations set forth below. All references to Shares in this Declaration shall
be deemed to be Shares of any or all Series or Classes as the context may
require. (d) As to any existing Series and Classes, both heretofore and herein
established and designated , and any further division of Shares of the Trust
into additional Series or Classes, the following provisions shall be applicable:
(i) The number of authorized Shares and the number of Shares of each
Series of Class thereof that may be issued shall be unlimited. The Trustees may
classify or reclassify any unissued Shares or any Shares previously issued and
reacquired of any Series or Class into one or more Series or one or more Classes
that may be established and designated from time to time. The Trustees may hold
as treasury shares (of the same or some other Series or Class), reissue for such
consideration and on such terms as they may determine, or cancel any Shares of
any Series or Class reacquired by the Trust at their discretion from time to
time.
(ii) All consideration received by the Trust for the issue or sale of
Shares of a particular Series or Class, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that Series or Class for all purposes, subject only to the
rights of creditors of such Series or Class and except as may otherwise by
required by applicable tax laws, and shall be so recorded upon the books of
account of the Trust. In the event that there are any assets, income, earnings,
profits, and proceeds thereof, funds, or payments which are not readily
identifiable as belonging to any particular Series or Class, the Trustees shall
allocate them among any one or more of the Series or Classes established and
designated from time to time in such manner and on such basis as they, in their
sole discretion, deem fair and equitable. Each such allocation by the Trustees
shall be conclusive and binding upon the Shareholders of all Series or Classes
for all purposes. No holder of Shares of any Series shall have any claim on or
right to any assets allocated or belonging to any other Series.
(iii) The assets belonging to each particular Series shall be charged
with the liabilities of the Trust in respect of that Series or the appropriate
Class or Classes thereof and all expenses, costs, charges and reserves
attributable to that Series or Class or Classes thereof, and any general
liabilities, expenses, costs, charges or reserves of the Trust which are not
readily identifiable as belonging to any particular Series or Class or Classes
thereof shall be allocated and charged by the Trustees to and among any one or
more of the Series or Class or Classes thereof established and designated from
time to time in such manner and on such basis as the Trustees in their sole
discretion deem fair and equitable. Each allocation of liabilities, expenses,
costs, charges and reserves by the Trustees shall be conclusive and binding upon
the Shareholders of all Series and Classes for all purposes. The Trustees shall
have full discretion, to the extent not inconsistent with the 1940 Act, to
determine which items are capital; and each such determination and allocation
shall be conclusive and binding upon the Shareholders. The assets of a
particular Series or Class of the Trust shall, under no circumstances, be
charged with liabilities attributable to any other Series or Class of the Trust.
All persons extending credit to, or contracting with or having any claim against
a particular Series or Class of the Trust shall look only to the assets of that
particular Series or Class for payment of such credit, contract or claim.
(iv) The power of the Trustees to pay dividends and make distributions
shall be governed by Section 7.2 of this Declaration with respect to any one or
more Series or Classes which represents the interests in the assets of the Trust
immediately prior to the establishment of two or more Series or Classes. With
respect to any other Series or Class, dividends and distributions on Shares of a
particular Series or Class may be paid with such frequency as the Trustees may
determine, which may be daily or otherwise, pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the Trustees may
determine, to the holders of Shares of that Series or Class, from such of the
income and capital gains, accrued or realized, from the assets belonging to that
Series or Class, as the Trustees may determine, after providing for actual and
accrued liabilities belonging to that Series or Class. All dividends and
distributions on Shares of a particular Series or Class shall be distributed pro
rata to the Shareholders of that Series or Class in proportion to the number of
Shares of that Series or Class held by such Shareholders at the time of record
established for the payment of such dividends or distribution.
(v) Each Share of a Series of the Trust shall represent a beneficial
interest in the net assets of such Series. Each holder of Shares of a Series or
Class thereof shall be entitled to receive his pro rata share of distributions
of income and capital gains made with respect to such Series or Class. Upon
redemption of his Shares or indemnification for liabilities incurred by reason
of his being or having been a Shareholder of a Series or Class, such Shareholder
shall be paid solely out of the funds and property of such Series or Class of
the Trust. Upon liquidation or termination of a Series or Class of the Trust,
Shareholders of such Series or Class shall be entitled to receive a pro rata
share of the net assets of such Series or Class. A Shareholder of a particular
Series of the Trust shall not be entitled to participate in a derivative or
class action on behalf of any other Series or the Shareholders of any other
Series of the Trust.
(vi) On each matter submitted to a vote of Shareholders, all Shares of
all Series and Classes shall vote as a single class; provided, however, that (1)
as to any matter with respect to which a separate vote of any Series of Class is
required by the 1940 Act or is required by attributes applicable to any Class,
such requirements as to a separate vote by that Series or Class shall apply, (2)
to the extent that a matter referred to in (1) above, affects more than one
Class or Series and the interests of each such Class or Series in the matter are
identical, then, subject to (3) below, the Shares of all such affected Classes
or Series shall vote as a single Class; (3) as to any matter which does not
affect the interests of a particular Series or Class, only the holders of Shares
of the one or more affected Series or Classes shall be entitled to vote; and (4)
the provisions of the following sentence shall apply. On any matter that
pertains to a Rule 12b-1 distribution plan, which matter is submitted to a vote
of Shareholders, Shareholders of a Class of a Series shall have exclusive voting
rights with respect to the Rule 12b-1 distribution plan applicable to their
respective Classes of Shares and to the extent that such matter does not affect
Shares of a particular Class of such Series, said Shares shall not be entitled
to vote (except where otherwise required by law or permitted by the Board of
Trustees acting in its sole discretion) even though the matter is submitted to a
vote of the Shareholders of any other Class or Series.
(vii) Except as otherwise provided in this Article V, the Trustees
shall have the power to determine the designations, preferences, privileges,
payment obligations, limitations and rights, including voting and dividend
rights, of each Class and Series of Shares. Subject to compliance with the
requirement of the 1940 Act, the Trustees shall have the authority to provide
that the holders of Shares of any Series or Class shall have the right to
convert or exchange said Shares into Shares of one or more Series or Classes of
Shares in accordance with such requirements and procedures as may be established
by the Trustees; provided however, that any conversion of Shares is subject to
the continuing availability of an opinion of counsel or an Internal Revenue
Service Ruling that such conversion is a non-taxable event.
(viii) The establishment and designation of any Series or Classes of
Shares shall be effective upon the execution by a majority of the then Trustees
of an instrument setting forth such establishment and designation and the
relative rights and preferences of such Series or Classes, or as otherwise
provided in such instrument. At any time that there are no shares outstanding of
any particular Series or Class previously established and designated, the
Trustees may buy an instrument executed by a majority of their number abolish
that Series or Class and the establishment and designation thereof. Each
instrument referred to in this section shall have the status of an amendment to
this Declaration.
Section 5.12. Assent to Declaration of Trust. Every Shareholder, by
virtue of having become a Shareholder, shall be held to have expressly assented
and agreed to the terms hereof and to have become a party hereto.
ARTICLE VI
REDEMPTION AND REPURCHASE OF SHARES
Section 6.1. Redemption of Shares. (a) All Shares of the Trust shall be
redeemable, at the redemption price determined in the manner set out in this
Declaration. Redeemed or repurchased Shares may be resold by the Trust. The
Trust may require any Shareholder to pay a sales charge to the Trust, the
underwriter, or any other person designated by the Trustees upon redemption or
repurchase of Shares in such amount and upon such conditions as shall be
determined from time to time by the Trustees.
(b) The Trust shall redeem the Shares of the Trust or any Series or
Class thereof at the price determined as hereinafter set forth, upon the
appropriately verified written application of the record holder thereof (or upon
such other form of request a the Trustees may determine) at such office or
agency as may be designated from time to time for that purpose by the Trustees.
The Trustees may from time to time specify additional conditions, not
inconsistent with the 1940 Act, regarding the redemption of Shares in the
Trust's then effective Prospectus.
Section 6.2. Price. Shares shall be redeemed at a price based on their
net asset value determined as set forth in Section 7.1 hereof as of such time as
the Trustees shall have theretofore prescribed by resolution. In the absence of
such resolution, the redemption price of Shares deposited shall be based on the
net asset value of such Shares next determined as set forth in Section 7.1
hereof after receipt of such application. The amount of any contingent deferred
sales charge or redemption fee payable upon redemption of Shares may be deducted
from the proceeds of such redemption.
Section 6.3. Payment. Payment of the redemption price of Shares of the
Trust or any Series or Class thereof shall be made in cash or in property to the
Shareholder at such time and in the manner, not inconsistent with the 1940 Act
or other applicable laws, as may be specified from time to time in the Trust's
then effective Prospectus, subject to the provisions of Section 6.4 hereof.
Section 6.4. Effect of Suspension of Determination of Net Asset Value.
If, pursuant to Section 6.9 hereof, the Trustees shall declare a suspension of
the determination of net asset value with respect to Shares of the Trust or of
any Series or Class thereof, the rights of Shareholders (including those who
shall have applied for redemption pursuant to Section 6.1 hereof but who shall
not yet have received payment) to have Shares redeemed and paid for by the Trust
or a Series or Class thereof shall be suspended until the termination of such
suspension is declared. Any record holder who shall have his redemption right so
suspended may, during the period of such suspension, by appropriate written
notice of revocation at the office or agency where application was made, revoke
any application for redemption not honored and withdraw any Share certificates
on deposit. The redemption price of Shares for which redemption applications
have not been revoked shall be based on the net asset value of such Shares next
determined as set forth in Section 7.1 after the termination of such suspension,
and payment shall be made within seven (7) days after the date upon which the
application was made plus the period after such application during which the
determination of net asset value was suspended.
Section 6.5. Repurchase by Agreement. The Trust may repurchase Shares
directly, or through the Distributor or another agent designated for the
purpose, by agreement with the owner thereof at a price not exceeding the net
asset value per share determined as of the time when the purchase or contract of
purchase is made or the net asset value as of any time which may be later
determined pursuant to Section 7.1 hereof, provided payment is not made for the
Shares prior to the time as of which such net asset value is determined.
Section 6.6. Redemption of Shareholder's Interest. The Trustees, in
their sole discretion, may cause the Trust to redeem all of the Shares of one or
more Series or Class thereof held by any Shareholder if the value of such Shares
held by such Shareholder is less than the minimum amount established from time
to time by the Trustees.
Section 6.7. Redemption of Shares in Order to Qualify as Regulated
Investment Company; Disclosure of Holding. (a) If the Trustees shall, at any
time and in good faith, be of the opinion that the direct or indirect ownership
of Shares or other securities of the Trust has or may become concentrated in any
Person to an extent which would disqualify the Trust or any Series of the Trust
as a regulated investment company under the Internal Revenue Code, then the
Trustees shall have the power by lot or other means deemed equitable by them (i)
to call for redemption by any such Person a number, or principal amount, of
Shares or other securities of the Trust or any Series of the Trust sufficient to
maintain or bring the direct or indirect ownership of Shares or other securities
of the trust or any Series of the Trust into conformity with the requirements
for such qualification and (ii) to refuse to transfer or issue Shares or other
securities of the Trust or any Series of the Trust to any Person whose
acquisition of the Shares or other securities of the Trust or any Series of the
Trust in question would result in such disqualification. The redemption shall be
effected at the redemption price and in the manner provided in Section 6.1.
(b) The holders of Shares or other securities of the Trust shall upon
demand disclose to the Trustees in writing such information with respect to
direct and indirect ownership of Shares or other securities of the Trust as the
Trustees deem necessary to comply with the provisions of the Internal Revenue
Code, or to comply with the requirements of any other taxing authority.
Section 6.8. Reductions in Number of Outstanding Shares Pursuant to Net
Asset Value Formula. The Trust may also reduce the number of outstanding Shares
of the Trust or of any Series of the Trust pursuant to the provisions of Section
7.3.
Section 6.9. Suspension of Right of Redemption. The Trust may declare a
suspension of the right of redemption or postpone the date of payment or
redemption for the whole or any part of any period (i) during which the New York
Stock Exchange is closed other than customary weekend and holiday closings, (ii)
during which trading on the New York Stock Exchange is restricted, (iii) during
which an emergency exists as a result of which disposal by the Trust or a Series
thereof of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Trust or a Series thereof fairly to determine the
value of its net assets, or (iv) during any other period when the Commission may
for the protection of Shareholders of the Trust by order permit suspension of
the right of redemption or postponement of the date of payment or redemption;
provided that applicable rules and regulations of the Commission shall govern as
to whether the conditions prescribed in (ii), (iii), or (iv) exist. Such
suspension shall take effect at such time as the Trust shall specify but not
later than the close of business on the business day next following the
declaration of suspension, and thereafter there shall be no right of redemption
or payment on redemption until the Trust shall declare the suspension at the
end, except that the suspension shall terminate in any event on the first day on
which said stock exchange shall have reopened or the period specified in (ii) or
(iii) shall have expired ( as to which in the absence of an official ruling by
the Commission, the determination of the Trust shall be conclusive). In the case
of a suspension of the right of redemption, a Shareholder may either withdraw
his request for redemption or receive payment based on the net asset value
existing after the termination of the suspension.
<PAGE>
ARTICLE VII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS
Section 7.1. Net Asset Value. The net asset value of each outstanding
Share of each Series or Class thereof of the Trust shall be determined on such
days and at such time or times as the Trustees may determine. The value of the
assets of the Trust may be determined (i) by a pricing service which utilizes
electronic pricing techniques based on general institutional trading, (ii) by
appraisal of the securities owned by the Trust or any Series of the Trust, (iii)
in certain cases, at amortized cost, or (iv) by such other method as shall be
deemed to reflect the fair value thereof, determined in good faith by or under
the direction of the Trustees. From the total value of said assets, there shall
be deducted all indebtedness, interest, taxes, payable or accrued including
estimated taxes on unrealized book profits, expenses and management charges
accrued to the appraisal date, net income determined and declared as a
distribution and all other items in the nature of liabilities which shall be
deemed appropriate, as incurred by or allocated to any Series or Class of the
Trust. The resulting amount which shall represent the total net assets of the
Trust or Series or Class thereof shall be divided by the number of Shares of the
Trust or Series or Class thereof outstanding at the time and the quotient so
obtained shall be deemed to be the net asset value of the Shares of the Trust or
Series or Class thereof. The net asset value of the Shares shall be determined
at least once on each business day, as of the close of trading on the New York
Stock Exchange or as of such other time or times as the Trustees shall
determine. The power and duty to make the daily calculations may be delegated by
the Trustees to the Investment Adviser, the Administrator, the Custodian, the
Transfer Agent or such other Person as the Trustees by resolution may determine.
The Trustees may suspend the daily determination of net asset value to the
extent permitted by the 1940 Act. It shall not be a violation of any provision
of this Declaration of Trust if Shares are sold, redeemed or repurchased by the
Trust at a price other than one based on net asset value if the net asset value
is affected by one or more errors inadvertently made in the pricing of portfolio
securities or in accruing income, expenses or liabilities.
Section 7.2. Distributions to Shareholders. (a) The Trustees shall from
time to time distribute ratably among the Shareholders of the Trust or of a
Series or Class thereof such proportion of the net profits, surplus (including
paid-in surplus), capital, or assets of the Trust or such Series or Class held
by the Trustees as they may deem proper. Such distributions may be made in cash
or property (including without limitation any type of obligations of the Trust
or Series or Class or any assets thereof), and the Trustees may distribute
ratably among the Shareholders of the Trust or Series or Class thereof
additional Shares of the Trust or Series or Class thereof issuable hereunder in
such manner, at such times, and on such terms as the Trustees may deem proper.
Such distributions may be among the Shareholders of the Trust or Series or Class
thereof at the time of declaring a distribution or among the Shareholders of the
Trust or Series or Class thereof at such other date or time or dates or times as
the Trustees shall determine. The Trustees may in their discretion determine
that, solely for the purposes of such distributions, Outstanding Shares shall
exclude Shares for which orders have been placed subsequent to a specified time
on the date the distribution is declared or on the next preceding day if the
discretion is declared as of a day on which Boston banks are not open for
business, all as described in the then effective prospectus under the Securities
Act of 1933. The Trustees may always retain from the net profits such amount as
they may deem necessary to pay the debts or expenses of the Trust or a Series or
Class thereof or to meet obligations of the Trust or a Series or Class thereof,
or as they may deem desirable to use in the conduct of its affairs or to retain
for future requirements or extensions of the business. The Trustees may adopt
and offer to Shareholders such dividend reinvestment plans, cash dividend payout
plans or related plans as the Trustees shall deem appropriate. The Trustees may
in their discretion determine that an account administration fee or other
similar charge may be deducted directly from the income and other distributions
paid on Shares to a Shareholder's account in each Series or Class.
(b) Inasmuch as the computation of net income and gains for Federal
income tax purposes may vary from the computation thereof on the books, the
above provisions shall be interpreted to give the Trustees the power in their
discretion to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional amounts sufficient to
enable the Trust or a Series or Class thereof to avoid or reduce liability for
taxes.
Section 7.3. Determination of Net Income. Subject to Section 5.11
hereof, the net income of the Series and Classes of the Trust shall be
determined in such manner as the Trustees shall provide by resolution. Expenses
of the Trust or of a Series or Class thereof, including the advisory or
management fee, shall be accrued each day. Each Class shall bear only expenses
relating to its Shares and an allocable share of Series expenses in accordance
with such policies as may be established by the Trustees from time to time and
as are not inconsistent with the provisions of this Declaration of Trust or of
any applicable document filed by the Trust with the Commission or of the
Internal Revenue Code of 1986, as amended. Such net income may be determined by
or under the direction of the Trustees as of the close of trading on the New
York Stock Exchange on each day on which such market is open or as of such other
time or times as the Trustees shall determine, and, except as provided herein,
all the net income of any Series or Class of the Trust, as so determined, may be
declared as a dividend on the Outstanding Shares of such Series. The Trustees
shall have full discretion to determine whether any cash or property received
shall be treated as income or as principal and whether any item of expense shall
be charged to the income or the principal account, and their determination made
in good faith shall be conclusive upon the Shareholders. In the case of stock
dividends received, the Trustees shall have full discretion to determine, in the
light of the particular circumstances, how much if any of the value thereof
shall be treated as income, the balance, if any, to be treated as principal.
Section 7.4. Power to Modify Foregoing Procedures. Notwithstanding any
of the foregoing provisions of this Article VII, but subject to Section 5.11
hereof, the Trustees may prescribe, in their absolute discretion, such other
bases and times for determining the per Share net asset value of the Shares of
the Trust or a Series or Class thereof or net income of the Trust or a Series or
Class thereof, or the declaration and payment of dividends and distributions as
they may deem necessary or desirable. Without limiting the generality of the
foregoing, the Trustees may establish several Series or Classes of Shares in
accordance with Section 5.11, and declare dividends thereon in accordance with
Section 5.11(d)(iv).
ARTICLE VIII
DURATION; TERMINATION OF TRUST OR A SERIES;
AMENDMENT; MERGERS, ETC.
Section 8.1. Duration. The Trust shall continue without limitation of
time but subject to the provisions of this Article VIII.
Section 8.2. Termination of the Trust or a Series or a Class. The Trust
or any Series or Class thereof may be terminated by (i) the affirmative vote of
the holders of not less than two-thirds of the Shares outstanding and entitled
to vote at any meeting of Shareholders of the Trust or the appropriate Series or
Class thereof, (ii) by an instrument or instruments in writing without a
meeting, consented to by the holders of two-thirds of the Shares of the Trust or
a Series or Class thereof; provided, however, that, if such termination is
recommended by the Trustees, the vote or written consent of the holders of a
majority of the Shares of the Trust or a Series or Class thereof outstanding and
entitled to vote shall be sufficient authorization, or (iii) notice to
Shareholders by means of an instrument in writing signed by a majority of the
Trustees, stating that a majority of the Trustees has determined that the
continuation of the Trust or a Series or a Class thereof is not in the best
interest of such Series or a Class, the Trust or their respective shareholders
as a result of such factors or events adversely affecting the ability of such
Series or a Class or the Trust to conduct its business and operations in an
economically viable manner. Such factors and events ma include the inability of
a Series or Class or the Trust to maintain its assets at an appropriate size,
changes in laws or regulations governing the Series or Class or the Trust or
affecting assets of the type in which such Series or Class or the Trust invests
or economic developments or trends having a significant adverse impact on the
business or operations of such Series or Class or the Trust. Upon the
termination of the Trust or the Series or Class,
(i) The Trust, Series or Class shall carry on no business except
for the purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the Trust,
Series or Class and all of the powers of the Trustees under this Declaration
shall continue until the affairs of the Trust shall have been wound up,
including the power to fulfill or discharge the contracts of the Trust, Series
or Class, collect its assets, sell, convey, assign, exchange, transfer or
otherwise dispose of all or any part of the remaining Trust Property or Trust
Property allocated or belonging to such Series or Class to one or more persons
at public or private sale for consideration which may consist in whole or in
part of cash, securities or other property of any kind, discharge or pay its
liabilities, and do all other acts appropriate to liquidate its business;
provided that any sale, conveyance, assignment, exchange, transfer or other
disposition of all or substantially all the Trust Property or Trust Property
allocated or belonging to such Series or Class that requires Shareholder
approval in accordance with Section 8.4 hereof shall receive the approval so
required.
(iii) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and refunding
agreements as they deem necessary for their protection, the Trustees may
distribute the remaining Trust Property or the remaining property of the
terminated Series or Class, in cash or in kind or partly each, among the
Shareholders of the Trust or the Series or Class according to their respective
rights.
(b) After termination of the Trust, Series or Class and distribution to
the Shareholders as herein provided, a majority of the Trustees shall execute
and lodge among the records of the Trust and file with the Office of the
Secretary of the Commonwealth of Massachusetts an instrument in writing setting
forth the fact of such termination, and the Trustees shall thereupon be
discharged from all further liabilities and duties with respect to the Trust or
the terminated Series or Class, and the rights and interests of all Shareholders
of the Trust or the terminated Series or Class shall thereupon cease.
Section 8.3. Amendment Procedure. (a) This Declaration may be amended
by a vote of the holders of a majority of the Shares outstanding and entitled to
vote or by any instrument in writing, without a meeting, signed by a majority of
the Trustees and consented to by the holders of a majority of the Shares
outstanding and entitled to vote. The Trustees may amend this Declaration
without the vote or consent of Shareholders if they deem it necessary to conform
this Declaration to the requirements of applicable federal or state laws or
regulations or the requirements of the regulated investment company provisions
of the Internal Revenue Code, but the Trustees shall not be liable for failing
so to do. The Trustees may also amend this Declaration without the vote or
consent of Shareholders if they deem it necessary or desirable to change the
name of the Trust or to make any other changes in the Declaration which do not
adversely affect the rights of Shareholders hereunder.
(b) No amendment may be made under this Section 8.3 which would change
any rights with respect to any Shares of the Trust of Series or Class thereof by
reducing the amount payable thereon upon liquidation of the Trust or Series or
Class thereof or by diminishing or eliminating any voting rights pertaining
thereto, except with the vote or consent of the holders of two-thirds of the
Shares of the Trust or such Series or Class outstanding and entitled to vote.
Nothing contained in this Declaration shall permit the amendment of this
Declaration to impair the exemption from personal liability of the Shareholders,
Trustees, officers, employees and agents of the Trust or to permit assessments
upon Shareholders.
(c) A certificate signed by a majority of the Trustees setting forth an
amendment and reciting that it was duly adopted by the Shareholders or by the
Trustees as aforesaid or a copy of the Declaration, as amended, and executed by
a majority of the Trustees, shall be conclusive evidence of such amendment when
lodged among the records of the Trust.
Section 8.4. Merger, Consolidation and Sale of Assets. The Trust or any
Series thereof may merge or consolidate with any other corporation, association,
trust or other organization or may sell, lease or exchange all or substantially
all of the Trust Property or Trust Property allocated or belonging to such
Series, including its good will, upon such terms and conditions and for such
consideration when and as authorized at any meeting of Shareholders called for
the purpose by the affirmative vote of the holders of two-thirds of the shares
of the Trust or such Series outstanding and entitled to vote, or by an
instrument or instruments in writing without a meeting, consented to by the
holders of two-thirds of the shares of the Trust or such Series; provided,
however, that, if such merger, consolidation, sale, lease or exchange is
recommended by the Trustees, the vote or written consent of the holders of a
majority of the shares of the Trust or such Series outstanding and entitled to
vote shall be sufficient authorization; and any such merger, consolidation,
sale, lease or exchange shall be deemed for all purposes to have been
accomplished under and pursuant to Massachusetts law.
Section 8.5. Incorporation. With the approval of the holders of a
majority of the Shares of the Trust or a Series thereof outstanding and entitled
to vote, the Trustees may cause to be organized or assist in organizing a
corporation or corporations under the laws of any jurisdiction or any other
trust, partnership, association or other organization to take over all of the
Trust Property or the Trust Property allocated or belonging to such Series or to
carry on any business in which the Trust shall directly or indirectly have any
interest, and to sell, convey and transfer the Trust Property or the Trust
Property allocated or belonging to such Series to any such corporation, trust,
association or organization in exchange for the shares or securities thereof or
otherwise, and to lend money to, subscribe for the shares or securities of, and
enter into any contracts with any such corporation, trust, partnership,
association or organization, or any corporation, partnership, trust, association
or organization in which the Trust or such Series holds or is about to acquire
shares of any other interest. The Trustees may also cause a merger or
consolidation between the Trust or any successor thereto and any such
corporation, trust, partnership, association or other organization if and to the
extent permitted by law, as provided under the law then in effect. Nothing
contained herein shall be construed as requiring approval of Shareholders for
the Trustees to organize or assist in organizing one or more corporations,
trusts, partnerships, associations or other organizations and selling, conveying
or transferring a portion of the Trust Property to such organization or
entities.
ARTICLE IX
REPORTS TO SHAREHOLDERS
The Trustees shall at least semi-annually submit to the Shareholders of
each Series a written financial report of the transactions of the Trust,
including financial statements which shall at least annually be certified by
independent public accountants.
ARTICLE X
MISCELLANEOUS
Section 10.1. Execution and Filing. This Declaration and any amendment
hereto shall be filed in the office of the Secretary of The Commonwealth of
Massachusetts and in such other places as may be required under the laws of
Massachusetts and may also be filed or recorded in such other places as the
Trustees deem appropriate. Each amendment so filed shall be accompanied by a
certificate signed and acknowledged by a Trustee stating that such action was
duly taken in a manner provided herein, and unless such amendment or such
certificate sets forth some later time for the effectiveness of such amendment,
such amendment shall be effective upon its execution. A restated Declaration,
integrating into a single instrument all of the provisions of the Declaration
which are then in effect and operative, may be executed from time to time by a
majority of the Trustees and filed with the Secretary of the Commonwealth of
Massachusetts. A restated Declaration shall, upon execution, be conclusive
evidence of all amendments contained therein and may hereafter be referred to in
lieu of the original Declaration and the various amendments thereto.
Section 10.2. Governing Law. This Declaration is executed by the
Trustees and delivered in The Commonwealth of Massachusetts and with reference
to the laws thereof, and the rights of all parties and the validity and
construction of every provision hereof shall be subject to and construed
according to the laws of said Commonwealth.
Section 10.3. Counterparts. This Declaration may be simultaneously
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts, together, shall constitute one and the same
instrument, which shall be sufficiently evidenced by any such original
counterpart.
Section 10.4. Reliance by Third Parties. Any certificate executed by an
individual who, according to the records of the Trust appears to be a Trustee
hereunder, certifying (a) the number or identity of Trustees or Shareholders,
(b) the due authorization of the execution of any instrument or writing, (c) the
form of any vote passed at a meeting of Trustees or Shareholders, (d) the fact
that the number of Trustees or Shareholders present at any meeting or executing
any written instrument satisfies the requirements of this Declaration, (e) the
form of any By-laws adopted by or the identity of any officers elected by the
Trustees, or (f) the existence of any fact or facts which in any manner relate
to the affairs of the Trust, shall be conclusive evidence as to the matters so
certified in favor of any Person dealing with the Trustees and their successors.
Section 10.5. Provisions in Conflict with Law or Regulations. (a) The
provisions of this Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the regulated investment company provisions of the
Internal Revenue Code or with other applicable laws and regulations, the
conflicting provision shall be deemed never to have constituted a part of this
Declaration; provided, however, that such determination shall not affect any of
the remaining provisions of this Declaration or render invalid or improper any
action taken or omitted prior to such determination.
(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provisions in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
3rd day of July, 1991.
John L. Davenport, as Trustee and
not individually
63 Burditt Avenue
Hingham, MA 02043
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
SUFFOLK COUNTY MASSACHUSETTS
July 3, 1991
Then personally appeared the above-named person, John L. Davenport, who
acknowledged the foregoing instrument to be his free act and deed.
Before me,
John A. Benning
Notary Public
My commission expires:
12/28/95
<PAGE>
Instrument of Amendment
to
Declaration of Trust
of
Liberty Financial Trust
Pursuant to Section 8.3 of the Declaration of Trust dated July 3, 1991
of Liberty Financial Trust, the first paragraph of Section 8.2 of said
Declaration of Trust is hereby amended to read in its entirety as follows:
"Section 8.2. Termination of the Trust or a Series or a Class.
The Trust or any Series or Class thereof may be terminated by (i) the
affirmative vote of the holders of not less than two-thirds of the Shares
outstanding and entitled to vote at any meeting of Shareholders of the Trust or
the appropriate Series or Class thereof, or (ii) by an instrument or instruments
in writing without a meeting, consented to by the holders of two-thirds of the
Shares of the Trust or a Series or Class thereof; provided however, than if such
termination is recommended by the Trustees, the vote or written consent of the
holders of a majority of the Shares of the Trust or a Series or Class thereof
outstanding and entitled to vote shall be sufficient authorization. Upon the
termination of the Trust or the Series or Class," (balance unchanged)
IN WITNESS WHEREOF this Instrument of Amendment has been executed by or
on behalf of (i) all the Trustees of the Trust, and (ii) the holders of all the
outstanding shares of beneficial interest in the Trust this 8th day of October,
1991.
LIBERTY FINANCIAL UTILITIES FUND
Richard I. Roberts, Trustee
By: LIBERTY FINANCIAL TRUST
Richard R. Christensen, Trustee
By: Richard I. Roberts, James E. Grinnell, Trustee
President
Harold Krensky, Trustee
Richard W. Lowry, Trustee
Utility\Amendment.Dot
<PAGE>
Instrument of Amendment
of
Declaration of Trust
of
Liberty Financial Trust
Pursuant to Section 8.3 of the Declaration of Trust dated July 3, 1991
of Liberty Financial Trust (the "Trust"), as amended to date, said Declaration
of Trust be and it hereby is amended to change the name of the Trust to:
Colonial Trust VII
IN WITNESS WHEREOF, this Instrument of Amendment has been executed by
all or a majority of the Trustees of the Trust this 3rd day of April, 1995.
Richard I. Roberts Richard W. Lowry
James E. Grinnell Robert J. Birnbaum
LIBERTY FINANCIAL TRUST
Establishment and Designation of Series
and
Establishment and Designation of Classes
The undersigned, being a majority of the Trustees of Liberty Financial
Trust, a Massachusetts business trust (the "Trust"), acting pursuant to Section
5.1 of the Declaration of Trust dated July 3, 1991, as amended (the
"Declaration") of the Trust, do hereby further divide the shares of beneficial
interest of the Trust, without par value ("Shares"), to create an additional
separate Series, within the meaning of said Section 5.1, as follows:
1. Such new Series is separate from the Trust's existing Series entitled
Liberty Financial Utilities Fund, Liberty Financial Growth and Income Fund,
Liberty Financial U.S. Government Securities Fund, Liberty Financial Tax-Free
Bond Fund and Liberty Financial Insured Municipals Fund which were previously
designated, and such new Series is designated as Colonial Newport Tiger Fund
(each such existing and additional Series being herein referred to as a "Fund").
2. Shares of each Fund shall be entitled to all of the rights and
preferences accorded to Shares under the Declaration.
3. The purchase price of Shares of each Fund, the method of determination
of net asset value of each Fund, the price terms and manner of redemption of
Shares of each Fund, and the relative dividend rights of holders of Shares of
each Fund shall be established by the Trustees of the Trust in accordance with
the provisions of the Declaration and shall be set forth in the currently
effective prospectus and statement of additional information of the Trust
relating to shares of each Fund, as amended from time to time, under the
Securities Act of 1993, as amended.
<PAGE>
The undersigned, being a majority of the Trustees of the Trust, acting
pursuant to Section 5.1 of the Declaration of Trust, do hereby divide the shares
of beneficial interest of the Colonial Newport Tiger Fund series of the Trust to
create five classes of shares, within the meaning of said Section 5.1, as
follows:
1. The five classes of shares are designated "Class A Shares," "Class B
Shares," "Class D Shares", Class T Shares" and "Class Z Shares."
2. Class A Shares, Class B Shares, Class D Shares, Class T Shares and Class
Z Shares shall be entitled to all of the rights and preferences accorded to
Shares under the Declaration of Trust.
3. The purchase price, the method of determination of net asset value, the
price, terms and manner of redemption, and the relative dividend rights of
holders of Class A Shares, Class B Shares, Class D Shares, Class T Shares and
Class Z Shares shall be established by the Trustees of the Trust in accordance
with the provisions of the Declaration of Trust and shall be set forth in the
currently effective prospectus and statement of additional information of the
Trust relating to the Colonial Newport Tiger Fund series of the Trust, as
amended from time to time, contained in the Trust's registration statement under
the Securities Act of 1933, as amended.
4. Class A Shares, Class B Shares, Class D Shares, Class T Shares and Class
Z Shares shall vote together as a single class except that shares of a class may
vote separately on matters affecting only that class and shares of a class not
affected by a matter will not vote on that matter.
5. A class of shares of the Colonial Newport Tiger Fund series of the Trust
may be terminated by the Trustees by written notice to the Shareholders of the
class.
<PAGE>
IN WITNESS WHEREOF, the undersigned have signed this instrument in
duplicate original counterparts and have caused a duplicate original to be
lodged among the records of the Trust this ____ day of January, 1995.
- ------------------------------ ------------------------------
Richard I. Roberts Richard W. Lowry
1275 West Southwinds Blvd. 10710 Charleston Drive
Vero Beach, FL 32963 Vero Beach, FL 32963
- ------------------------------ ------------------------------
Richard R. Christensen Robert J. Birnbaum
600 Atlantic Avenue 313 Bedford Road
Boston, MA 02210-2214 Ridgewood, NJ 07405
- ------------------------------
James E. Grinnell
2850 South Ocean Boulevard
Palm Beach, FL 33480
The Declaration of Trust establishing Liberty Financial Trust, dated July
3, 1991, a copy of which, together with all amendments thereto (the
"Declaration"), is on file in the office of the Secretary of the Commonwealth of
Massachusetts, provides that the name of "Liberty Financial Trust" refers to the
Trustees under the Declaration collectively as Trustees, but not as individuals
or personally; and no Trustee, shareholder, officer, employee or agent of
Liberty Financial Trust shall be held to any personal liability, nor shall
resort be had to their private property for the satisfaction of any obligation
or claim or otherwise in connection with the affairs of said Trust but the Trust
Property only shall be liable.
Restated: 10/20/95
Amended Section 3.1, paragraph 2: 2/16/96
BY-LAWS
OF
COLONIAL TRUST VII
Section 1. Agreement and Declaration of Trust and Principal
Office
1.1 Agreement and Declaration of Trust. These By-Laws
shall be subject to the Agreement and Declaration of
Trust, as from time to time in effect (the "Declaration
of Trust"), of Colonial Trust VII, a Massachusetts
business trust established by the Declaration of Trust
(the "Trust").
1.2 Principal Office of the Trust. The principal office of
the Trust shall be located in Boston, Massachusetts.
Section 2. Shareholders
2.1 Shareholder Meetings. A meeting of the shareholders of
the Trust or of any one or more series or classes of
shares may be called at any time by the Trustees, by
the president or, if the Trustees and the president
shall fail to call any meeting of shareholders for a
period of 30 days after written application of one or
more shareholders who hold at least 10% of all
outstanding shares of the Trust, if shareholders of all
series are required under the Declaration of Trust to
vote in the aggregate and not by individual series at
such meeting, or of any series or class, if
shareholders of such series or class are entitled under
the Declaration of Trust to vote by individual series
or class at such meeting, then such shareholders may
call such meeting. If the meeting is a meeting of the
shareholders of one or more series or classes of
shares, but not a meeting of all shareholders of the
Trust, then only the shareholders of such one or more
series or classes shall be entitled to notice of and to
vote at the meeting. Each call of a meeting shall
state the place, date, hour and purpose of the meeting.
2.2 Place of Meetings. All meetings of the shareholders
shall be held at the principal office of the Trust, or,
to the extent permitted by the Declaration of Trust, at
such other place within the United States as shall be
designated by the Trustees or the president of the
Trust.
2.3 Notice of Meetings. A written notice of each meeting
of shareholders, stating the place, date and hour and
the purposes of the meeting, shall be given at least
seven days before the meeting to each shareholder
entitled to vote thereat by leaving such notice with
him or her or at his or her residence or usual place of
business or by mailing it, postage prepaid, and
addressed to such shareholder at his or her address as
it appears in the records of the Trust. Such notice
shall be given by the secretary or an assistant
secretary or by an officer designated by the Trustees.
No notice of any meeting of shareholders need be given
to a shareholder if a written waiver of notice,
executed before or after the meeting by such
shareholder or his or her attorney thereunto duly
authorized, is filed with the records of the meeting.
2.4 Ballots. No ballot shall be required for any election
unless requested by a shareholder present or
represented at the meeting and entitled to vote in the
election.
2.5 Proxies. Shareholders entitled to vote may vote either
in person or by proxy in writing dated not more than
six months before the meeting named therein, which
proxies shall be filed with the secretary or other
person responsible to record the proceedings of the
meeting before being voted. Unless otherwise
specifically limited by their terms, such proxies shall
entitle the holders thereof to vote at any adjournment
of such meeting but shall not be valid after the final
adjournment of such meeting. The placing of a
shareholder's name on a proxy pursuant to telephonic or
electronically transmitted instructions obtained
pursuant to procedures reasonably designed to verify
that such instructions have been authorized by such
shareholder shall constitute execution of such proxy by
or on behalf of such shareholder.
2.6 Quorum. Thirty percent (30%) of the shares entitled to
vote shall be a quorum for the transaction of business
at a shareholders' meeting, except that where any
provision of law or of the Trust's Declaration of Trust
permits or requires that holders of any series or class
shall vote as a series or class, then thirty percent
(30%) of the aggregate number of shares of that series
or class entitled to vote shall be necessary to
constitute a quorum for the transaction of business by
that series or class. Any lesser number, however,
shall be sufficient for adjournments.
Section 3. Trustees
3.1 Committees and Advisory Board. The Trustees may
appoint from their number an executive committee and
other committees. Except as the Trustees may otherwise
determine, any such committee may make rules for
conduct of its business. The Trustees may appoint an
advisory board to consist of not less than two nor more
than five members. The members of the advisory board
shall be compensated in such manner as the Trustees may
determine and shall confer with and advise the Trustees
regarding the investments and other affairs of the
Trust. Each member of the advisory board shall hold
office until the first meeting of the Trustees
following the next meeting of the shareholders and
until his or her successor is elected and qualified, or
until he or she sooner dies, resigns, is removed or
becomes disqualified, or until the advisory board is
sooner abolished by the Trustees.
In addition, the Trustees may appoint a dividend
committee of not less than three persons, who may (but
need not) be Trustees.
No special compensation shall be payable to members of
the Dividend Committee. Each member of the Dividend
Committee will hold office until the successors are
elected and qualified or until the member dies,
resigns, is removed, becomes disqualified or until the
Committee is abolished by the Trustees.
3.2 Regular Meetings. Regular meetings of the Trustees may
be held without call or notice at such places and at
such times as the Trustees may from time to time
determine, provided that notice of the first regular
meeting following any such determination shall be given
to absent Trustees.
3.3 Special Meetings. Special meetings of the Trustees may
be held at any time and at any place designated in the
call of the meeting, when called by the president or
the treasurer or by two or more Trustees, sufficient
notice thereof being given to each Trustee by the
secretary or an assistant secretary or by the officer
or one of the Trustees calling the meeting.
3.4 Notice. It shall be sufficient notice to a Trustee to
send notice by mail at least forty-eight hours or by
telegram at least twenty-four hours before the meeting
addressed to the Trustee at his or her usual or last
known business or residence address or to give notice
to him or her in person or by telephone at least twenty-
four hours before the meeting. Notice of a meeting
need not be given to any Trustee if a written waiver of
notice, executed by him or her before or after the
meeting, is filed with the records of the meeting, or
to any Trustee who attends the meeting without
protesting prior thereto or at its commencement the
lack of notice to him or her. Neither notice of a
meeting nor a waiver of a notice need specify the
purposes of the meeting.
3.5 Quorum. At any meeting of the Trustees one-third of
the Trustees then in office shall constitute a quorum;
provided, however, a quorum shall not be less than two.
Any meeting may be adjourned from time to time by a
majority of the votes cast upon the question, whether
or not a quorum is present, and the meeting may be held
as adjourned without further notice.
Section 4. Officers and Agents
4.1 Enumeration; Qualification. The officers of the Trust
shall be a president, a treasurer, a secretary and such
other officers, if any, as the Trustees from time to
time may in their discretion elect or appoint. The
Trust may also have such agents, if any, as the
Trustees from time to time may in their discretion
appoint. Any officer may be but none need be a Trustee
or shareholder. Any two or more offices may be held by
the same person.
4.2 Powers. Subject to the other provisions of these By-
Laws, each officer shall have, in addition to the
duties and powers herein and in the Declaration of
Trust set forth, such duties and powers as are commonly
incident to his or her office as if the Trust were
organized as a Massachusetts business corporation and
such other duties and powers as the Trustees may from
time to time designate, including without limitation
the power to make purchases and sales of portfolio
securities of the Trust pursuant to recommendations of
the Trust's investment adviser in accordance with the
policies and objectives of that series of shares set
forth in its prospectus and with such general or
specific instructions as the Trustees may from time to
time have issued.
4.3 Election. The president, the treasurer and the
secretary shall be elected annually by the Trustees.
Other elected officers are elected by the Trustees.
Assistant officers are appointed by the elected
officers.
4.4 Tenure. The president, the treasurer and the secretary
shall hold office until their respective successors are
chosen and qualified, or in each case until he or she
sooner dies, resigns, is removed or becomes
disqualified. Each other officer shall hold office at
the pleasure of the Trustees. Each agent shall retain
his or her authority at the pleasure of the Trustees.
4.5 President and Vice Presidents. The president shall be
the chief executive officer of the Trust. The
president shall preside at all meetings of the
shareholders and of the Trustees at which he or she is
present, except as otherwise voted by the Trustees.
Any vice president shall have such duties and powers as
shall be designated from time to time by the Trustees.
4.6 Treasurer and Controller. The treasurer shall be the
chief financial officer of the Trust and subject to any
arrangement made by the Trustees with a bank or trust
company or other organization as custodian or transfer
or shareholder services agent, shall be in charge of
its valuable papers and shall have such other duties
and powers as may be designated from time to time by
the Trustees or by the president. Any assistant
treasurer shall have such duties and powers as shall be
designated from time to time by the Trustees.
The controller shall be the chief accounting officer of
the Trust and shall be in charge of its books of
account and accounting records. The controller shall
be responsible for preparation of financial statements
of the Trust and shall have such other duties and
powers as may be designated from time to time by the
Trustees or the president.
4.7 Secretary and Assistant Secretaries. The secretary
shall record all proceedings of the shareholders and
the Trustees in books to be kept therefor, which books
shall be kept at the principal office of the Trust. In
the absence of the secretary from any meeting of
shareholders or Trustees, an assistant secretary, or if
there be none or he or she is absent, a temporary clerk
chosen at the meeting shall record the proceedings
thereof in the aforesaid books.
Section 5. Resignations and Removals
Any Trustee, officer or advisory board member may resign at
any time by delivering his or her resignation in writing to
the president, the treasurer or the secretary or to a
meeting of the Trustees. The Trustees may remove any
officer elected by them with or without cause by the vote of
a majority of the Trustees then in office. Except to the
extent expressly provided in a written agreement with the
Trust, no Trustee, officer, or advisory board member
resigning, and no officer or advisory board member removed
shall have any right to any compensation for any period
following his or her resignation or removal, or any right to
damages on account of such removal.
Section 6. Vacancies
A vacancy in any office may be filled at any time. Each
successor shall hold office for the unexpired term, and in
the case of the presidents, the treasurer and the secretary,
until his or her successor is chosen and qualified, or in
each case until he or she sooner dies, resigns, is removed
or becomes disqualified.
Section 7. Shares of Beneficial Interest
7.1 Share Certificates. No certificates certifying the
ownership of shares shall be issued except as the
Trustees may otherwise authorize. In the event that
the Trustees authorize the issuance of share
certificates, subject to the provisions of Section 7.3,
each shareholder shall be entitled to a certificate
stating the number of shares owned by him or her, in
such form as shall be prescribed from time to time by
the Trustees. Such certificate shall be signed by the
president or a vice president and by the treasurer or
an assistant treasurer. Such signatures may be
facsimiles if the certificate is signed by a transfer
agent or by a registrar, other than a Trustee, officer
or employee of the Trust. In case any officer who has
signed or whose facsimile signature has been placed on
such certificate shall have ceased to be such officer
before such certificate is issued, it may be issued by
the Trust with the same effect as if he or she were
such officer at the time of its issue.
In lieu of issuing certificates for shares, the
Trustees or the transfer agent may either issue
receipts therefor or keep accounts upon the books of
the Trust for the record holders of such shares, who
shall in either case be deemed, for all purposes
hereunder, to be the holders of certificates for such
shares as if they had accepted such certificates and
shall be held to have expressly assented and agreed to
the terms hereof.
7.2 Loss of Certificates. In the case of the alleged loss
or destruction or the mutilation of a share
certificate, a duplicate certificate may be issued in
place thereof, upon such terms as the Trustees may
prescribe.
7.3 Discontinuance of Issuance of Certificates. The
Trustees may at any time discontinue the issuance of
share certificates and may, by written notice to each
shareholder, require the surrender of share
certificates to the Trust for cancellation. Such
surrender and cancellation shall not affect the
ownership of shares in the Trust.
Section 8. Record Date and Closing Transfer Books
The Trustees may fix in advance a time, which shall not be
more than 90 days before the date of any meeting of
shareholders or the date for the payment of any dividend or
making of any other distribution to shareholders, as the
record date for determining the shareholders having the
right to notice and to vote at such meeting and any
adjournment thereof or the right to receive such dividend or
distribution, and in such case only shareholders of record
on such record date shall have such right, notwithstanding
any transfer of shares on the books of the Trust after the
record date; or without fixing such record date the Trustees
may for any of such purposes close the transfer books for
all or any part of such period.
Section 9. Seal
The seal of the Trust shall, subject to alteration by the
Trustees, consist of a flat-faced circular die with the word
"Massachusetts" together with the name of the Trust and the
year of its organization, cut or engraved thereon; but,
unless otherwise required by the Trustees, the seal shall
not be necessary to be placed on, and its absence shall not
impair the validity of, any document, instrument or other
paper executed and delivered by or on behalf of the Trust.
Section 10. Execution of Papers
Except as the Trustees may generally or in particular cases
authorize the execution thereof in some other manner, all
deeds, leases, transfers, contracts, bonds, notes, checks,
drafts and other obligations made, accepted or endorsed by
the Trust shall be signed, and all transfers of securities
standing in the name of the Trust shall be executed, by the
president or by one of the vice presidents or by the
treasurer or by whomsoever else shall be designated for that
purpose by the vote of the Trustees and need not bear the
seal of the Trust.
Section 11. Fiscal Year
Except as from time to time otherwise provided by the
Trustees, President, Secretary, Controller or Treasurer, the
fiscal year of the Trust shall end on December 31.
Section 12. Amendments
These By-Laws may be amended or repealed, in whole or in
part, by a majority of the Trustees then in office at any
meeting of the Trustees, or by one or more writings signed
by such a majority.
S:\FUNDS\GENERAL\BYLAWS-7.DOC
INVESTMENT MANAGEMENT AGREEMENT
Investment Management Agreement dated April 3, 1995, by and
between COLONIAL TRUST VII (formerly called Liberty Financial
Trust), a Massachusetts business trust (the "Trust"), and NEWPORT
FUND MANAGEMENT, INC., a Virginia corporation (the "Investment
Manager"), a registered investment corporation (the "Investment
Manager"), a registered investment adviser under the Investment
Advisers Act of 1940, as amended.
WHEREAS, the Trust is registered as a diversified, open-end,
management investment company under the Investment Company Act of
1940, as amended (the "1940 Act"); and
WHEREAS, the Trust desires to retain the Investment Manager
to furnish investment advisory and a management services to a
certain portfolio of the Trust, and the Investment Manager is
willing to so furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, and intending to be bound, it is
agreed between the parties hereto as follows:
1. Appointment. The Trust hereby appoints the
Investment Manager to act as investment manager to the
Colonial Newport Tiger Fund series of the Trust (the
"Portfolio") for the period and on the terms set forth in
this Agreement. The Investment Manager accepts such
appointment and agrees to furnish the services herein set
forth, for the compensation herein provided.
2. Delivery of Documents. The Trust has furnished
(or will furnish when available) the Investment Manager with
copies properly certified or authenticated of each of the
following:
(a) The Trust's Declaration of Trust dated July
3, 1991, as amended to date;
(b) The Trust's By-Laws, as amended to date;
(c) Resolutions of the Trust's Board of Trustees
approving this Agreement;
(d) The Trust's Registration Statement on Form N-
1A (or any successor form adopted by the Securities and
Exchange Commission (the "SEC") under the 1940 Act and
under the Securities Act of 1933 as amended (the "1933
Act"), relating to shares of beneficial interest in the
Portfolio (herein called the "Shares") as filed with
the SEC, and all amendments thereto;
(e) The Trust's Prospectus and Statement of
Additional Information for the Portfolio, as currently
in effect (such Prospectus and Statement of Additional
Information as presently in effect and all amendments
and supplements thereto are herein called the
"Prospectus" and "Statement of Additional Information",
respectively").
The Trust will furnish the Investment Manager from time to
time with copies, properly certified or authenticated, of all
amendments of or supplements to the foregoing.
3. Management. Subject to the supervision of the
Trust's Board of Trustees, the Investment Manager will
provide a continuous investment program for the Portfolio,
including investment research and management with respect to
all securities and investments and cash and cash equivalents
in the Portfolio. The Investment Manager will determine
from time to time what securities and other investments will
be purchased, retained or sold by the Portfolio. The
Investment Manager will provide the services under this
Agreement in accordance with the Portfolio's investment
objective, policies and restrictions as stated in the
Prospectus and Statement of Additional Information. The
Investment Manager further agrees that it:
(a) will conform with all applicable Rules and
Regulations of the SEC and will, in addition, conduct
its activities under this Agreement in accordance with
regulations of any other Federal and State agencies
which may now or in the future have jurisdiction over
its activities;
(b) will place orders pursuant to its investment
determinations for the Portfolio either directly with
the issuer or with any broker or dealer. In placing
orders with brokers or dealers, the Investment Manager
will attempt to obtain the best net price and the most
favorable execution of its orders. Consistent with
this obligation, when the execution and price offered
by two or more brokers or dealers are comparable, the
Investment Manager, may, in its description, purchase
and sell portfolio securities to and from brokers and
dealers who provide the Investment Manager or the
Portfolio with research advice and other services, or
who sell Portfolio shares, as permitted by law,
including but not limited to Section 28(e) of the
Securities Exchange Act of 1934, as amended. In no
instance will portfolio securities be purchased from or
sold to the Investment Manager or any affiliated person
of the Investment Manager as principal;
(c) will provide, or cause its affiliates to
provide, all necessary executive personnel for the
Fund, the salaries and expenses of such personnel to be
borne by the Investment Managers or its affiliates;
(d) will provide, or cause its affiliates to
provide, at its or their own cost, all office space and
facilities necessary for the activities of the Trust.
Notwithstanding the foregoing, the Investment Manager may
obtain the services of one or more investment counsel to act as a
sub-advisor to the Portfolio. The cost of employing such
counselor or sub-advisor will be paid by the Investment Manager
and not by the Portfolio.
4. Services Not Exclusive. The investment management
services furnished by the Investment Manager hereunder are
not to be deemed exclusive, and the Investment Manager shall
be free to furnish similar services to others so long as its
services under this Agreement are not impaired thereby.
5. Books and Records. In compliance with the
requirements of the 1940 Act, the Investment Manager hereby
agrees that all records which it maintains for the Trust are
the property of the Trust, and further agrees to surrender
promptly to the Trust any of such records upon the Trust's
request. The Investment Manager further agrees to preserve
for the periods prescribed by the 1940 Act the records
required to be maintained by the 1940 Act.
6. Expenses. During the term of this Agreement, the
Investment Manager will pay all expenses incurred by it in
connection with its investment management of the Portfolio.
The Trust or the Portfolio as appropriate, shall bear all
expenses of its operations and business not specifically assumed
or agreed to be paid by the Investment Manager, its affiliates,
or other third parties. In particular, but without limiting the
generality of the foregoing, the Trust or the Portfolio, as
appropriate, shall pay:
(1) Taxes;
(2) Brokerage fees and commissions with regard to
portfolio transactions of the Portfolio;
(3) Interest charges, fees and expenses of the
custodian of
the Portfolio's securities;
(4) Fees and expenses of the Trust's transfer agent
and
administrator relating to the Portfolio;
(5) Auditing and legal expenses;
(6) Cost of maintenance of the Trust's existence;
(7) The proportionate share of compensation of
directors of the
Trust who are not interested persons of the
Investment
Manager as that term is defined by law;
(8) Costs of shareholder and trustee meetings of the
Trust;
(9) Federal and State registration fees expenses;
(10) Costs of printing and mailing Prospectuses and
Statements
of Additional Information for the Portfolio's
shares, reports
and notices to existing shareholders;
(11) The Investment Management fee payable to the
Investment Manager, as provided in paragraph 7
herein;
(12) Costs of recordkeeping and daily pricing, and;
(13) Distribution expenses in accordance with any
Distribution
Plan as and if approved by the shareholders of the
Portfolio.
At the request of the Trust, the Investment Manager may
arrange for any such services on behalf of the Trust. If the
Investment Manager makes any payment therefor, or incurs any cost
in connection therewith, the Trust shall promptly reimburse such
amounts to the Investment Manager.
If the expenses projected to be borne by the Portfolio
(exclusive of interest, brokerage commissions, taxes and
extraordinary items, but inclusive of investment management fee)
in any fiscal year are expected to exceed any applicable state
expense limitation provision to which the Portfolio is subject,
the Investment Management fee payable by the Portfolio to the
Investment Manager shall be reduced on each day such fee is
accrued to the extent of that day's portion of such excess
expenses. The amount of such reduction shall no exceed the
actual amount of the Investment Management fee otherwise payable
in such year. Any excess reduction accrued shall be payable to
the Investment Manager by the Trust on behalf of the Portfolio
within five (5) business days after the amount of such excess is
determined.
7. Compensation. For the services provided and the
expenses assumed by the Investment Manager pursuant to this
Agreement, the Portfolio will pay the Investment Manager and
the Investment Manager will accept as full compensation of
management fee, accrued daily and payable within five (5)
business days after the last business day of each month, at
an annual rate of one percent on the first $100 million of
the aggregate net assets of the Portfolio and 3/4 of one
percent on the Portfolio's net assets over $100 million.
8. Limitation of Liability. The Investment Manager
shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Trust or the Portfolio
in connection with the performance of this Agreement, except
a loss resulting from a breach of fiduciary duty with
respect to the receipt of compensation for services or a
loss resulting form willful misfeasance, bad faith or gross
negligence on the part of the Investment Manager in the
performance of its duties or from reckless disregard by it
of its obligations and duties under this Agreement.
9. Duration and Termination. This Agreement shall
become effective on the date first above written and, unless
sooner terminated as a provided herein, shall continue in
effect until April 3, 1997. Thereafter, this Agreement
shall be renewable for successive periods of one year each,
provided such continuance is specifically approved annually
(a) by the vote a majority of those members of the Trust's
Board of Trustees who are not parties to this Agreement or
interested persons of any such party (as that term is
defined in the 1940 Act), cast in person at a meeting called
for the purpose of voting on such approval, and (b) by vote
of either the Board of Trustees of the Trust or of a
majority of the outstanding voting securities (as that term
is defined in the 1940 Act) of the Portfolio.
Notwithstanding the foregoing, this Agreement may be
terminated by the Trust on behalf of the Portfolio or by the
Investment Manager at any time on sixty (60) days written
notice, without the payment of any penalty, provided that
termination by the Portfolio must be authorized either by
vote of the Trust's Board of Trustees or by vote of a
majority of the outstanding voting securities of the
Portfolio. This Agreement will automatically terminate in
the event of its assignment (as that term is defined in the
1940 Act).
10. Amendment of this Agreement. No provision of this
Agreement may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by the
party against which enforcement of the change, waiver,
discharge or termination is sought. Except as permitted by
the 1940 Act or any rule thereunder or any exemptive order
or no-action letter issued by the SEC thereunder, no
material amendment of this Agreement shall be effective
until approved by vote of the holders of a majority of the
Portfolio's outstanding voting securities (as defined in the
1940 Act).
11. Limitation of Liability of Trust. The term
"Colonial Trust VII" means and refers to the trustees from
time to time serving under the Declaration of Trust dated
July 3, 1991 as the same may subsequently thereto have been,
or subsequently hereto be, amended. It is expressly agreed
that the obligations of the Trust hereunder shall not be
binding upon any of the trustees, shareholders, nominees,
officers, agents or employees of the Trust personally, but
shall bind only the trust property of the Trust, as provided
in the Declaration of Trust of the Trust. The execution and
delivery of this Agreement have been authorized by the
trustees of the Trust and this Agreement has been signed by
an authorized officer of the Trust acting as such, and
neither such authorization by such trustees nor such
execution and delivery by such officer shall be deemed to
have been made by any of them but shall bind only the trust
property of the Trust as provided in its Declaration of
Trust.
12. Miscellaneous. The captions in this Agreement are
included for convenience of reference only and in no way
define or limit any of the provisions hereof or otherwise
affect their construction or effect. If any provision of
this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. This Agreement
shall be binding and shall inure to the benefit of the
parties hereto and their respective successors.
13. Use of Name. The Trust and the Portfolio may use
the names "Liberty", "Liberty Financial", "Colonial" or
"Newport" only for so long as this Agreement or any
extension, renewal or amendment hereof remains in effect,
including any similar agreement with any organization which
shall have succeeded to the business of the Investment
Manager as investment adviser.
14. Notice. Any notice to be given as required herein
may be given by personal notification or by first class
mail, postage prepaid, to the party specified at the address
stated below:
(a) To the Trust or the Portfolio at:
Colonial Trust VII
One Financial Center
Boston, Massachusetts 02111
(b) To the Investment Manager at:
Newport Pacific Management, Inc.
580 California Street, Suite 1960
San Francisco, CA 94104
15. Applicable Law. This Agreement shall be construed
in accordance with, and governed by, the laws of the
Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below as
of the day and year first above written.
NEWPORT FUND MANAGEMENT, INC.
By: John Mussey
COLONIAL NEWPORT TIGER FUND
By: COLONIAL TRUST VII
(Formerly Liberty Financial
Trust)
By: Ernest E. Dunbar
ADMINISTRATION AGREEMENT
AGREEMENT dated as of April 3, 1995, between
LIBERTY FINANCIAL TRUST, a Massachusetts business trust (the
"Trust"), with respect to Colonial Newport Tiger Fund (the
"Fund"), and COLONIAL MANAGEMENT ASSOCIATES, INC., a
Massachusetts corporation (the "Administrator").
In consideration of the promises and covenants herein, the
parties agree as follows:
1.Subject to the general direction and control of the Board
of Trustees of the Trust, the Administrator shall perform
such administrative services as may from time to time be
reasonably requested by the Trust, which shall include
without limitation: (a) providing office space,
equipment and clerical personnel necessary for
maintaining the organization of the Fund and for
performing the administrative functions herein set forth;
(b) arranging, if desired by the Trust, for Directors,
officers and employees of the Administrator to serve as
Trustees, officers or agents of the Fund if duly elected
or appointed to such positions and subject to their
individual consent and to any limitations imposed by law;
(c) preparing and, if applicable, filing all documents
required for compliance by the Fund with applicable laws
and regulations, including registration statements,
registration fee filings, semi-annual and annual reports
to shareholders, proxy statements and tax returns; (d)
preparation of agendas and supporting documents for and
minutes of meetings of Trustees, committees of Trustees
and shareholders; (e) coordinating and overseeing the
activities of the Fund's other third-party service
providers; and (f) maintaining books and records of the
Fund (exclusive of records required by Section 31(a) of
the 1940 Act). Notwithstanding the foregoing, the
Administrator shall not be deemed to have assumed or have
any responsibility with respect to functions specifically
assumed by any transfer agent or custodian of the Fund.
2.The Administrator shall be free to render similar
services to others so long as its services hereunder are
not impaired thereby.
3.The Fund shall pay the Administrator monthly a fee at the
annual rate of 0.25% of the average daily net assets of
the Fund.
4.This Agreement shall become effective as of the date of
its execution, and may be terminated without penalty by
the Board of Trustees of the Trust or by the
Administrator, in each case on sixty days' written notice
to the other party.
5.This Agreement may be amended only by a writing signed by
both parties.
6.In the absence of willful misfeasance, bad faith or gross
negligence on the part of the Administrator, or reckless
disregard of its obligations and duties hereunder, the
Administrator shall not be subject to any liability to
the Trust or Fund, to any shareholder of the Trust or the
Fund or to any other person, firm or organization, for
any act or omission in the course of, or connected with,
rendering services hereunder.
LIBERTY FINANCIAL TRUST
on behalf of Colonial Newport Tiger Fund
By: Ernest E. Dunbar
Title:
COLONIAL MANAGEMENT ASSOCIATES, INC.
By: Davey S. Scoon
Title: Executive Vice President
A copy of the document establishing the Trust is filed with
the Secretary of The Commonwealth of Massachusetts. This
Agreement is executed by officers not as individuals and is
not binding upon any of the Trustees, officers or
shareholders of the Trust individually but only upon the
assets of the Fund.
AMENDED AND RESTATED
SHAREHOLDERS' SERVICING AND TRANSFER AGENT AGREEMENT
Agreement made as of this 1st day of July, 1991, between
each of the Massachusetts business trusts listed on Appendix I
hereto (as the same may from time to time be amended to add one
or more additional investment companies advised by Colonial
Management Associates, Inc. or to delete one or more of such
trusts), each of such trusts acting severally on its own behalf
and not jointly with any of such other trusts (each of such
trusts being hereinafter referred to as the "Trust"), and Citadel
Service Company, Inc. ("CSC") (formerly, Colonial Investors
Service Center, Inc.) a Massachusetts corporation, and Colonial
Management Associates, Inc. ("CMA"), a Massachusetts corporation.
WHEREAS, the Trust is a registered investment company and
desires that CSC perform certain services for the Trust; and
WHEREAS, CSC is willing to perform such services upon the
terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and
covenants set forth herein, the parties hereto agree as follows:
1. Appointment. The Trust hereby appoints CSC to act as
Transfer Agent, Dividend Disbursing Agent and Shareholders'
Servicing Agent for the Trust and as agent for the Trust's
shareholders in connection with the shareholder plans described
in the Prospectus, and CSC accepts such appointments and will
perform the respective duties and functions of such offices in
the manner hereinafter set forth.
Notwithstanding such appointments, however, the parties
hereto agree that CMA may, upon thirty (30) days prior written
notice to the Trust, assume such duties and functions itself.
In such event, CMA shall have all of the rights and obligations
of CSC hereunder. However, whether or not CMA assumes such
duties and functions, CMA guarantees the performance of CSC
hereunder and shall be responsible financially and otherwise, to
the Trust for the performance by CSC of its obligations under
this Agreement.
2. Compensation. The Trust shall pay to CSC for its
services rendered and its costs incurred in connection with the
performance of its duties hereunder, such compensation and
reimbursement as may from time to time be approved by vote of the
Trustees of the Trust.
Schedule A attached hereto sets forth the compensation and
reimbursement arrangements to be effective July 1, 1991 and the
treatment of all interest earned with respect to balances in the
accounts maintained by CSC with the Trust's custodian (the
"Custodian"), referred to in paragraphs 6, 10 and 11 hereof, net
of any charges by the Custodian in connection with such accounts,
and all interest earned with respect to balances in the accounts
maintained by Colonial Investor Services (the "Distributor"), a
division of CMA, in connection with the sale and redemption of
shares of the Trust, net of any charges by the bank in connection
with such accounts.
3. Copies of Documents. The Trust will furnish CSC with
copies of the following documents: the Agreement and Declaration
of Trust of the Trust and all amendments thereto; the By-Laws of
the Trust, as amended from time to time; and the Trust's
Registration Statement as in effect on the date hereof under the
Securities Act of 1933, as amended, and the Investment Company
Act of 1940, as amended, and all amendments or supplements
thereto hereafter filed. Each Prospectus and Statement of
Additional Information contained in such Registration Statement,
as from time to time amended and supplemented, together are
herein collectively referred to as the "Prospectus."
4. Share Certificates. Unless the Trustees of the Trust
shall have resolved that all of the Trust's shares of beneficial
interest, or all of the shares of a particular series or class of
such shares, shall be issued in uncertificated form, CSC shall
maintain a sufficient supply of blank share certificates
representing such shares, in the form approved from time to time
by the Trustees of the Trust. Such blank share certificates
shall be properly signed, manually or by facsimile signature, by
the duly authorized officers of the Trust, and shall bear the
seal or facsimile thereof of the Trust; and not withstanding the
death, resignation or removal of any officer of the Trust
authorized to sign such share certificates, CSC may continue to
countersign certificates which bear the manual or facsimile
signature of such officer until otherwise directed by the Trust.
5. Lost or Destroyed Certificates. In case of the alleged
loss or destruction of any share certificate, no new certificate
shall be issued in lieu thereof, unless there shall first be
furnished to CSC an affidavit of loss or non-receipt by the
holder of shares with respect to which a certificate has been
lost or destroyed, supported by an appropriate bond satisfactory
to CSC and the Trust issued by a surety company satisfactory to
CSC.
6. Receipt of Funds for Investment. CSC will maintain one
or more accounts with the Custodian, into which it will deposit
funds payable to CSC as agent for, or otherwise identified as
being for the account of, the Trust or the Distributor, prior to
crediting such funds to the respective accounts of the Trust and
the Distributor. Thereafter, CSC will determine the amount of
any such funds due the Trust (equal to the number of Trust shares
sold by the Trust computed pursuant to paragraph 7 hereof,
multiplied by the net asset value of Trust share next determined
after receipt of such purchase order) and the Distributor (equal
to the sales charge applicable to such sale, computed pursuant to
paragraph 9 hereof), respectively, deposit the portion due the
Distributor in its account with such bank as may from time to
time be designated by the Distributor, deposit the net amount due
the Trust in its account with the Custodian, notify the
Distributor and the Custodian, respectively, (such notification
to the Distributor to include the amount of such sales charge to
be remitted by the Distributor to the dealer participating in the
sale, calculated pursuant to paragraph 9 hereof) of such
deposits, such notification to be given as soon as practicable on
the next business day stating the total amount deposited to said
accounts during the previous business day. Such notification
shall be confirmed in writing.
7. Shareholder Accounts. Upon receipt of any funds
referred to in paragraph 6 hereof, CSC will compute the number of
shares purchased by the shareholder according to the net asset
value of Trust shares next determined after such receipt less the
applicable sales charge, calculated pursuant to paragraph 9
hereof, and:
(a) In the case of a new shareholder, open and
maintain an open account for such shareholder in the name or
names set forth in the subscription application form;
(b) Unless the Trustees of the Trust have resolved
that all of the Trust's shares of beneficial interest, or all of
the shares of a particular series or class, shall be issued in
uncertificated form, and if specifically requested in writing by
the shareholder, countersign, issue and mail, by first class
mail, to the shareholder at his or her address as set forth in a
share certificate for full shares purchased;
(c) Send to the shareholder a confirmation indicating
the amount of full and fractional shares purchased (in the case
of fractional shares, rounded to three decimal places) and the
price per share; and
(d) In the case of a request to establish an
accumulation plan, withdrawal plan, group plan or other plan or
program being offered by the Trust's Prospectus, open and
maintain such plan or program for the shareholder in accordance
with the terms thereof;
all subject to any reasonable instructions which the Distributor
or the Trust may give to CSC with respect to rejection of orders
for shares.
8. Unpaid Checks. In the event that any check or other
order for payment of money on the account of any shareholder or
new investor is returned for any reason, CSC will:
(a) Give prompt notification to the Distributor of
such non-payment; and
(b) Take such other steps, including imposition of a
reasonable processing or handling fee, as CSC may, in CSC's
discretion, deem appropriate, or as the Trust of the Distributor
may instruct CSC.
9. Sales Charge. In computing the number of shares to
credit to the account of a shareholder pursuant to paragraph 7
hereof, CSC will calculate the total of the applicable
Distributor and representative sales charges, commission or other
amount, with respect to each purchase as set forth in the
Prospectus and in accordance with any notification filed with
respect to combined and accumulated purchases; CSC will also
determine the portion of each sales charge, commission or other
amount, payable by the Distributor to the dealer or other amount,
payable by the Distributor to the dealer participating in the
sale in accordance with such schedules as are from time to time
delivered by the Distributor to CSC.
10. Dividends and Distributions. The Trust will promptly
notify CSC of the declaration of any dividends or distribution
with respect to Trust shares, the amount of such dividend or
distribution, the date each such dividend or distribution shall
be paid, and the record date for determination of shareholders
entitled to receive such dividend or distribution. As Dividend
Disbursing Agent, CSC will, on or before the payment date of any
such dividend or distribution notify the Custodian of the
estimated amount of cash required to pay such dividend or
distribution, and the Trust agrees that on or before the mailing
date of such dividend or distribution it will instruct the
Custodian to make available to CSC sufficient funds therefor in
the dividend and distribution account maintained by CSC with the
Custodian. As Dividend Disbursing Agent, CSC will prepare and
distribute to shareholders any funds to which they are entitled
by reason of any dividend or distribution and, in the case of
shareholders entitled to receive additional shares by reason of
any such dividend or distribution, CSC will make appropriate
credits to their accounts and prepare and mail to shareholders a
confirmation statement and, if required, a certificate in respect
of such additional shares.
11. Repurchase and Redemptions. CSC will receive and stamp
with the date of receipt all certificates and requests delivered
to CSC for repurchase or redemption of shares and CSC will
process such repurchases as agent for the Distributor and such
redemptions as agent for the Trust as follows:
(a) If such certificate or request complies with
standards for repurchase or redemption approved from time to time
by the Trust, CSC will, on or prior to the seventh calendar day
succeeding the receipt of any such request for repurchase or
redemption in good order, deposit any contingent deferred sales
charge ("CDSC") due the Distributor in its account with such bank
as may from time to time be designated by the Distributor and pay
to the shareholder from funds deposited by the Trust from time to
time in the repurchase and redemption account maintained by CSC
with the Custodian, the appropriate repurchase or redemption
price, as the case may be, as set forth in the Prospectus;
(b) If such certificate or request does not comply
with said standards for repurchase or redemption as approved by
the Trust, CSC will promptly notify the shareholder of such fact,
together with the reason therefor, and shall effect such
repurchase or redemption at the price in effect at the time of
receipt of documents complying with said standards, or, in the
case of a repurchase, at such other time as the Distributor, as
agent for the Trust, shall so direct; and
(c) CSC shall notify the Trust and the Distributor as
soon as practicable on each business day of the total number of
Trust shares covered by requests for repurchase or redemption
which were received by CSC in proper form on the previous
business day, and shall notify the Distributor of deposits to its
account with respect to any CDSC, such notification to be
confirmed in writing.
12. Systematic Withdrawal Plans. CSC will administer
systematic withdrawal plans pursuant to the provisions of
withdrawal orders duly executed by shareholders and the Trust's
Prospectus. Payments upon such withdrawal orders shall be made
by CSC from the appropriate account maintained by the Trust with
the Custodian. Prior to the payment date CSC will withdraw from
a shareholder's account and present for repurchase or redemption
as many shares as shall be sufficient to make such withdrawal
payment pursuant to the provisions of the shareholder's
withdrawal plan and the Prospectus.
13. Letters of Intent and Other Plans. CSC will process
such letters of intent for investing in shares as are provided
for in the Prospectus, and CSC will act as escrow agent pursuant
to the terms of such letters of intent duly executed by
shareholders. CSC will make appropriate deposits to the account
of the Distributor for the adjustment of sales charges as therein
provided and will currently report the same to the Distributor,
it being understood, however, that computations of any adjustment
of sales charge shall be the responsibility of the Distributor or
the Trust. CSC will process such accumulation plans, group
programs and other plans or programs for investing in shares as
are provided for in the Prospectus. In connection with any such
plan or program, and with withdrawal plans described in paragraph
12 hereof, CSC will act as plan agent for shareholders and in so
acting shall not be the agent of the Trust.
14. Tax Returns and Reports. CSC will prepare, file with
the Internal Revenue Service and any other federal, state or
local governmental agency which may require such filing, and, if
required, mail to shareholders such returns for reporting
dividends and distributions paid by the Trust as are required to
be so prepared, filed and mailed by applicable laws, rules and
regulations, and CSC will withhold such sums as are required to
be withheld under applicable Federal and state income tax laws,
rules and regulations.
15. Record Keeping. CSC will maintain records, which at
all times will be the property of the Trust and available for
inspection by the Trust and Distributor, showing for each
shareholder's account the following:
(a) Name, address and United States taxpayer
identification or Social Security number, if provided (or amounts
withheld with respect to dividends and distributions on shares if
a taxpayer identification or Social Security number is not
provided);
(b) Number of shares held and number of shares for
which certificates have been issued;
(c) Historical information regarding the account of
each shareholder, including dividends and distributions paid, if
any, and the date and price for all transactions on a
shareholder's account;
(d) Any stop or restraining order placed against a
shareholder's account;
(e) Information with respect to withholdings of taxes
on dividends paid to foreign accounts; and
(f) Any instruction as to letters of intent, record
address, and any correspondence or instructions relating to the
current maintenance of a shareholder's account.
In addition, CSC will keep and maintain on behalf of the Trust
all records which the Trust or CSC is required to keep and
maintain pursuant to any applicable statute, rule or regulation,
including without limitation, Rule 31(a)-1 under the Investment
Company Act of 1940, relating to the maintenance of records in
connection with the services to be provided hereunder. CSC shall
be obligated to maintain at its expense only those records
necessary to carry out its duties hereunder and the remaining
records will be preserved at the Trust's expense for the periods
prescribed by law.
16. Other Information Furnished. CSC will furnish to the
Trust and the Distributor such other information, including
shareholder lists and statistical information as may be agreed
upon from time to time between CSC and the Trust. CSC shall
notify the Trust of any request or demand to inspect the share
records books of the Trust and will act upon the instructions of
the Trust as to the permitting or refusing such inspection.
17. Shareholder Inquiries. CSC will respond promptly to
written correspondence from shareholders, registered
representatives of broker-dealers engaged in selling Trust
shares, the Trust and the Distributor relating to its duties
hereunder, and such other correspondence as may from time to time
be mutually agreed upon between CSC and the Trust. CSC also will
respond to telephone inquiries from shareholders with respect to
existing accounts.
18. Communications to Shareholders and Meetings. CSC will
determine all shareholders entitled to receive, and will address
and mail all communications by the Trust to its shareholders,
including quarterly and annual reports to shareholders, proxy
material for meetings of shareholders and periodic communications
to shareholders. CSC will receive, examine and tabulate return
proxy cards for meetings of shareholders and certify the vote to
the Trust.
19. Insurance. CSC will not reduce or allow to lapse any
of its insurance coverage from time to time in effect, including
but not limited to Errors and Omissions, Fidelity Bond and
Electronic Data Processing coverage, without the prior written
consent of the Trust.
20. Duty of Care and Indemnification. CSC will at all
times use reasonable care and act in good faith in performing its
duties hereunder. CSC will not be liable or responsible for
delays or errors by reason of circumstances beyond its control,
including without limitation, acts of civil or military
authority, national or state emergencies, labor difficulties,
fire, mechanical breakdown, flood or catastrophe, acts of God,
insurrection, war, riots or failure of transportation,
communication or power supply.
CSC may rely on certifications of the Secretary, any
Assistant Secretary, the President, any Vice President, the
Treasurer or any Assistant Treasurer of the Trust as to
proceedings or facts in connection with any action taken by the
shareholders or Trustees of the Trust, and upon instructions not
inconsistent with this Agreement from the President, any Vice
President, the Treasurer or any Assistant Treasurer of the Trust.
CSC may apply to counsel for the Trust, at the Trust's expense,
or to its own counsel for advice whenever it deems expedient.
With respect to any action taken on the basis of such
certifications or instructions or in accordance with the advice
of counsel for instructions or in accordance with the advice of
counsel for the Trust, the Trust will indemnify and hold harmless
CSC from any and all losses, claims, damages, liabilities and
expenses (including reasonable counsel fees and expenses).
The trust will indemnify CSC against and hold CSC harmless
from any and all losses, claims, damages, liabilities and
expenses (including reasonable counsel fees and expenses) in
respect to any claim, demand, action or suit not resulting from
CSC's bad faith or negligence and arising out of, or in
connection with, its duties on behalf of the Trust under this
Agreement.
CSC shall also be indemnified and held harmless by the Trust
against any loss, claim, damage, liability and expenses
(including reasonable counsel fees and expenses) by reason of any
act done by it in good faith and in reliance upon any instrument
or certificate for shares believed by it (a) to be genuine and
(b) to be signed, countersigned or executed by any person or
persons authorized to sign, countersign, or execute such
instrument or certificate.
In any case in which a party to this Agreement may be asked
to indemnify or hold harmless the other party hereto, the party
seeking indemnification shall advise the other party of all
pertinent facts concerning the situation giving rise to the claim
or potential claim for indemnification, and each party shall use
reasonable care to identify and notify the other promptly
concerning any situation which presents or appears likely to
present a claim for indemnification.
21. Employees. CSC is responsible for the employment,
control and conduct of its agents and employees and for injury to
such agents or employees or to others caused by such agents or
employees. CSC assumes full responsibility for its agents and
employees under applicable statutes and agrees to pay all
employer taxes thereunder.
CSC shall maintain at its own expense iinsurance against
public liability in a reasonable amount.
22. Renegotiation of Compensation. CSC agrees that if it
provides services comparable to those contemplated by this
Agreement to any other investment company or group of companies
on terms and conditions more favorable than the terms and
conditions applicable under this Agreement or in the event CMA
sells or licenses the CTRAN system to parties other than
investment companies advised by CMA that are parties to this
Agreement, the parties hereto agree to negotiate in good faith as
to whether some adjustment in the compensation arrangement
hereunder might be appropriate. CSC and CMA agree to notify the
Trustees of the Trust of any plans to provide shareholder
servicing and transfer agent services to other investment
companies or to sell or lease the CTRAN system and will disclose
to such Trustees all information concerning the terms and
conditions on which such services will be provided or such sale
or license is to be made.
23. Termination. This Agreement shall continue
indefinitely until terminated by not less than ninety (90) days'
written notice given by the Trust to CSC or, by six (6) months
written notice given by CSC to the Trust. Upon termination
hereof, the Trust shall pay such compensation as may be due to
CSC as of the date of such termination.
24. Successors. In the event that (i) in connection with
termination of this Agreement a successor to any of CSC's duties
or responsibilities hereunder is designated by the Trust by
written notice to CSC, or (ii) CMA exercises its prerogative
under paragraph 1 hereof to assume the duties and functions of
CSC hereunder, CSC shall promptly at the expense of the Trust,
transfer to such successor or CMA, as the case may be, a
certified list of the shareholders of the Trust (with name,
address and taxpayer identification or Social Security number),
and historical record of the account of each shareholder and the
status thereof, all other relevant books, records, correspondence
and other data established or maintained by CSC under this
Agreement in form reasonably acceptable to the Trust (if such
form differs from the form in which CSC has maintained the same,
the Trust shall pay any expenses associated with transferring the
same to such form), and will cooperate in the transfer of such
duties and responsibilities, including provision for assistance
from CSC's personnel in the establishment of books, records and
other data by such successor CMA. CSC shall be entitled to
reasonable compensation and reimbursement of its out-of-pocket
expenses in respect of assistance provided in accordance with the
preceding sentence. Also, in the event of the termination of
this Agreement, to the extent permitted by the agreements or
licenses described below, CSC and CMA shall, if requested by the
Trustees of the Trust, assign to any entity wholly owned,
directly or indirectly, by The Colonial Group, Inc. or by The
Colonial Group of funds collectively, or any of them, all of
their rights under any existing agreements to which either of
them is a party and pursuant to which either has a right to have
access to data processing capability in connection with the
services contemplated by this Agreement and under any licenses to
use third-party software in connection therewith, and in
connection with such assignment shall grant to the assignee an
irrevocable right and license or sublicenses, on a non-exclusive
basis, to use any software used in connection therewith and, on
an exclusive basis, any proprietary rights or interest which it
has under such agreements or licenses.
25. Miscellaneous. This Agreement shall be construed in
accordance with and governed by the laws of The Commonwealth of
Massachusetts.
The captions in this Agreement are included for convenience
of reference only and in no way define or limit any of the
provisions of this agreement or otherwise affect their
construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall
be deemed an original, but all of which taken together shall
constitute one and the same instrument.
A copy of the Declaration of Trust of the Trust is on file
with the Secretary of the Commonwealth of Massachusetts, and
notice is hereby given that this instrument is executed on behalf
of the Trustees of the Trust as Trustees and not individually and
that the obligations of or arising out of the instrument are not
binding upon any of the Trustees or officers or shareholders
individually, but binding only upon the assets and property of
the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
THE TRUSTS LISTED ON APPENDIX I
By: John A. McNeice
Title: President
CITADEL SERVICE COMPANY, INC.
By: Manuel R. Hernandez
Title: President
COLONIAL MANAGEMENT ASSOCIATES, INC.
By: C. Herbert Emilson
Title: President
s:\misc\t_agreem.doc
AMENDMENT NO. 1 TO
AMENDED AND RESTATED SHAREHOLDERS' SERVICING AND
TRANSFER AGENT AGREEMENT
The Amended and Restated Shareholders' Servicing and Transfer
Agent Agreement dated July 1, 1991 (Agreement), is amended as
follows:
1. Each Trust may offer an unlimited number of separate
investment series (Funds), each of which may have multiple
classes of shares. "Fund" shall be substituted for "Trust" in
the Agreement except when not applicable in context.
"Colonial Investor Services" in paragraph 2 of the Agreement
shall be "Colonial Investment Services".
2. Names of Trusts have been changed and Funds have been added in
Amendment No. 1 to Appendix I. The Agreement will apply to
each Trust and Fund set forth in Appendix I as it may be
amended from time to time with the latest effective date.
3. Amendment No. 1 to Schedule A replaces Schedule A in its
entirety effective November 1, 1991.
Agreed:
Effective Date: November 1, 1991
EACH TRUST ON BEHALF OF EACH FUND
DESIGNATED IN APPENDIX I FROM
TIME TO TIME
By: Arthur O. Stern
Arthur O. Stern, Secretary
CITADEL SERVICE COMPANY, INC.
By: Manuel R. Hernandez
Manuel R. Hernandez, President
COLONIAL MANAGEMENT ASSOCIATES, INC.
By: Arthur O. Stern
Arthur O. Stern, Senior Vice President
AMENDMENT NO. 6 TO SCHEDULE A
Terms used in the Schedule and not defined herein shall
have the meaning specified in the AMENDED AND RESTATED
SHAREHOLDERS' SERVICING AND TRANSFER AGENT AGREEMENT dated
July 1, 1991, and as amended from time to time (the
"Agreement"). Payments under the Agreement to CSC shall be
made in the first two weeks of the month following the month
in which a service is rendered or an expense incurred. This
Amendment No. 6 to Schedule A shall be effective as of March
31, 1996, and supersedes the original Schedule A and
Amendment Nos. 1, 2, 3, 4 and 5 to Schedule A.
1. Each Fund that is a series of the Trust shall pay
CSC for the services to be provided by CSC under the
Agreement an amount equal to the sum of the following:
(a) The Fund's Share of CSC Compensation
PLUS
(b) The Fund's Allocated Share of CSC
Reimbursable Out-of-Pocket Expenses.
In addition, CSC shall be entitled to retain as additional
compensation for its services all CSC revenues for
Distributor Fees, fees for wire, telephone, redemption and
exchange orders, IRA trustee agent fees and account
transcripts due CSC from shareholders of any Fund and
interest (net of bank charges) earned with respect to
balances in the accounts referred to in paragraph 2 of the
Agreement.
2. All determinations hereunder shall be in
accordance with generally accepted accounting principles and
subject to audit by the Fund's independent accountants.
3. Definitions
"Allocated Share" for any month means that
percentage of CSC Reimbursable Out-of-Pocket
Expenses which would be allocated to the Fund for
such month in accordance with the methodology
described in Exhibit 1 hereto.
"CSC Reimbursable Out-of-Pocket Expenses"
means (i) out-of-pocket expenses incurred on
behalf of the Fund by CSC for stationery, forms,
postage and similar items, (ii) networking account
fees paid to dealer firms by CSC on shareholder
accounts established or maintained pursuant to the
National Securities Clearing Corporation's
networking system, which fees are approved by the
Trustees from time to time and (iii) fees paid by
CSC or its affiliates to third-party dealer firms
or transfer agents that maintain omnibus accounts
with a Fund in respect of expenses similar to
those referred to in clause (i) above, to the
extent the Trustees have approved the
reimbursement by the Fund of such fees.
"Distributor Fees" means the amount due CSC
pursuant to any agreement with the Fund's
principal underwriter for processing, accounting
and reporting services in connection with the sale
of shares of the Fund.
"Fund" means each of the open-end investment
companies advised by CMA that are series of the
Trusts which are parties to the Agreement.
"Fund's Share of CSC Compensation" for any
month means 1/12 of the following applicable
percentage of the average daily closing value of
the total net assets of such Fund for such month:
Fund Percent
Equity Funds: 0.25
The Colonial Fund
Colonial Growth Shares Fund
Colonial U.S. Fund for Growth
Colonial Global Equity Fund
Colonial Global Natural Resources Fund
Colonial Small Stock Fund
Colonial International Fund for Growth
Colonial Aggressive Growth Fund
Colonial Equity Income Fund
Colonial International Equity Fund
Taxable Bond Funds: 0.18
Colonial U.S. Government Fund
Colonial Adjustable Rate U.S. Government Fund
Colonial Federal Securities Fund
Colonial Income Fund
Tax-Exempt Funds 0.14
Colonial Tax-Exempt Insured Fund
Colonial Tax-Exempt Fund
Colonial High Yield Municipal Fund
Colonial California Tax-Exempt Fund
Colonial Connecticut Tax-Exempt Fund
Colonial Florida Tax-Exempt Fund
Colonial Intermediate 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
Colonial Short-Term Tax-Exempt Fund
Money Market Funds: 0.20
Colonial Government Money Market Fund
Colonial Municipal Money Market Fund
Others:
Colonial High Yield Securities Fund 0.25
Colonial Strategic Income Fund 0.20
Colonial Utilities Fund 0.20
Colonial Strategic Balanced Fund 0.25
Colonial Global Utilities Fund 0.20
Colonial Newport Tiger Fund 0.25
Agreed:
EACH TRUST ON BEHALF OF EACH FUND DESIGNATED
IN APPENDIX I FROM TIME TO TIME
By: Arthur O. Stern
Arthur O. Stern, Secretary
COLONIAL INVESTORS SERVICE CENTER, INC.
By: Davey S. Scoon
Davey S. Scoon, President
COLONIAL MANAGEMENT ASSOCIATES, INC.
By: Arthur O. Stern
Arthur O. Stern, Executive Vice President
EXHIBIT 1
METHODOLOGY OF ALLOCATING CSC
REIMBURSABLE OUT-OF-POCKET EXPENSES
1. CSC Reimbursable Out-of-Pocket Expenses are allocated
to the Colonial Funds as follows:
A. Identifiable
Based on actual services
performed and invoiced to
a Fund.
B. Unidentifiable
Allocation will be based
on three evenly weighted
factors.
- number of shareholder
accounts
- number of transactions
- average assets
AMENDMENT NO. 6 TO SCHEDULE A
Terms used in the Schedule and not defined herein shall
have the meaning specified in the AMENDED AND RESTATED
SHAREHOLDERS' SERVICING AND TRANSFER AGENT AGREEMENT dated
July 1, 1991, and as amended from time to time (the
"Agreement"). Payments under the Agreement to CSC shall be
made in the first two weeks of the month following the month
in which a service is rendered or an expense incurred. This
Amendment No. 6 to Schedule A shall be effective as of March
31, 1996, and supersedes the original Schedule A and
Amendment Nos. 1, 2, 3, 4 and 5 to Schedule A.
1. Each Fund that is a series of the Trust shall pay
CSC for the services to be provided by CSC under the
Agreement an amount equal to the sum of the following:
(a) The Fund's Share of CSC Compensation
PLUS
(b) The Fund's Allocated Share of CSC
Reimbursable Out-of-Pocket Expenses.
In addition, CSC shall be entitled to retain as additional
compensation for its services all CSC revenues for
Distributor Fees, fees for wire, telephone, redemption and
exchange orders, IRA trustee agent fees and account
transcripts due CSC from shareholders of any Fund and
interest (net of bank charges) earned with respect to
balances in the accounts referred to in paragraph 2 of the
Agreement.
2. All determinations hereunder shall be in
accordance with generally accepted accounting principles and
subject to audit by the Fund's independent accountants.
3. Definitions
"Allocated Share" for any month means that
percentage of CSC Reimbursable Out-of-Pocket
Expenses which would be allocated to the Fund for
such month in accordance with the methodology
described in Exhibit 1 hereto.
"CSC Reimbursable Out-of-Pocket Expenses"
means (i) out-of-pocket expenses incurred on
behalf of the Fund by CSC for stationery, forms,
postage and similar items, (ii) networking account
fees paid to dealer firms by CSC on shareholder
accounts established or maintained pursuant to the
National Securities Clearing Corporation's
networking system, which fees are approved by the
Trustees from time to time and (iii) fees paid by
CSC or its affiliates to third-party dealer firms
or transfer agents that maintain omnibus accounts
with a Fund in respect of expenses similar to
those referred to in clause (i) above, to the
extent the Trustees have approved the
reimbursement by the Fund of such fees.
"Distributor Fees" means the amount due CSC
pursuant to any agreement with the Fund's
principal underwriter for processing, accounting
and reporting services in connection with the sale
of shares of the Fund.
"Fund" means each of the open-end investment
companies advised by CMA that are series of the
Trusts which are parties to the Agreement.
"Fund's Share of CSC Compensation" for any
month means 1/12 of the following applicable
percentage of the average daily closing value of
the total net assets of such Fund for such month:
Fund Percent
Equity Funds: 0.25
The Colonial Fund
Colonial Growth Shares Fund
Colonial U.S. Fund for Growth
Colonial Global Equity Fund
Colonial Global Natural Resources Fund
Colonial Small Stock Fund
Colonial International Fund for Growth
Colonial Aggressive Growth Fund
Colonial Equity Income Fund
Colonial International Equity Fund
Taxable Bond Funds: 0.18
Colonial U.S. Government Fund
Colonial Adjustable Rate U.S. Government Fund
Colonial Federal Securities Fund
Colonial Income Fund
Tax-Exempt Funds 0.14
Colonial Tax-Exempt Insured Fund
Colonial Tax-Exempt Fund
Colonial High Yield Municipal Fund
Colonial California Tax-Exempt Fund
Colonial Connecticut Tax-Exempt Fund
Colonial Florida Tax-Exempt Fund
Colonial Intermediate 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
Colonial Short-Term Tax-Exempt Fund
Money Market Funds: 0.20
Colonial Government Money Market Fund
Colonial Municipal Money Market Fund
Others:
Colonial High Yield Securities Fund 0.25
Colonial Strategic Income Fund 0.20
Colonial Utilities Fund 0.20
Colonial Strategic Balanced Fund 0.25
Colonial Global Utilities Fund 0.20
Colonial Newport Tiger Fund 0.25
Agreed:
EACH TRUST ON BEHALF OF EACH FUND DESIGNATED
IN APPENDIX I FROM TIME TO TIME
By: Arthur O. Stern
Arthur O. Stern, Secretary
COLONIAL INVESTORS SERVICE CENTER, INC.
By: Davey S. Scoon
Davey S. Scoon, President
COLONIAL MANAGEMENT ASSOCIATES, INC.
By: Arthur O. Stern
Arthur O. Stern, Executive Vice President
EXHIBIT 1
METHODOLOGY OF ALLOCATING CSC
REIMBURSABLE OUT-OF-POCKET EXPENSES
1. CSC Reimbursable Out-of-Pocket Expenses are allocated
to the Colonial Funds as follows:
A. Identifiable
Based on actual services
performed and invoiced to
a Fund.
B. Unidentifiable
Allocation will be based
on three evenly weighted
factors.
- number of shareholder
accounts
- number of transactions
- average assets
AMENDMENT NO. 12 TO APPENDIX I
Funds Custodian
Colonial Trust I
Colonial High Yield Securities Fund BSD&T
Colonial Income Fund BSD&T
Colonial Strategic Income Fund BSD&T
Colonial Trust II
Colonial Government Money Market Fund BSD&T
Colonial U.S. Government Fund BSD&T
Colonial Adjustable Rate U.S. Government Fund BSD&T
Colonial Trust III
Colonial Growth Shares Fund BSD&T
The Colonial Fund BSD&T
Colonial Federal Securities Fund BSD&T
Colonial Global Equity Fund BSD&T
Colonial Global Natural Resources Fund BSD&T
Colonial International Fund for Growth BSD&T
Colonial Strategic Balanced Fund BSD&T
Colonial Global Utilities Fund SSB&TC
Colonial Trust IV
Colonial High Yield Municipal Fund UMB
Colonial Intermediate Tax-Exempt Fund UMB
Colonial Short-Term Tax-Exempt Fund UMB
Colonial Tax-Exempt Fund UMB
Colonial Tax-Exempt Insured Fund UMB
Colonial Tax-Exempt Money Market Fund UMB
Colonial Utilities Fund BSD&T
Colonial Trust V
Colonial Massachusetts Tax-Exempt Fund UMB
Colonial Connecticut Tax-Exempt Fund UMB
Colonial California Tax-Exempt Fund UMB
Colonial Michigan Tax-Exempt Fund UMB
Colonial Minnesota Tax-Exempt Fund UMB
Colonial New York Tax-Exempt Fund UMB
Colonial North Carolina Tax-Exempt Fund UMB
Colonial Ohio Tax-Exempt Fund UMB
Colonial Florida Tax-Exempt Fund UMB
Colonial Trust VI
Colonial U.S. Fund for Growth BSD&T
Colonial Small Stock Fund BSD&T
Colonial Aggressive Growth Fund BSD&T
Colonial Equity Income Fund BSD&T
Colonial International Equity Fund BSD&T
Colonial Trust VII
Colonial Newport Tiger Fund Brown Brothers
Harriman & Co.
Effective Date: March 31, 1996
By: Arthur O. Stern
Arthur O. Stern, Secretary for Each Fund
COLONIAL MANAGEMENT ASSOCIATES, INC.
By: Arthur O. Stern
Arthur O. Stern, Executive Vice President
COLONIAL INVESTORS SERVICE CENTER, INC.
By: Davey S. Scoon
Davey S. Scoon, President
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION made this
25th day of January, 1995 by and between The World Funds,
Inc. ("World Funds"), a Maryland corporation, on behalf of
Newport Tiger Fund, a series of World Funds (the "Tiger
Fund"), and Liberty Financial Trust ("LFT"), a Massachusetts
business trust established under a Declaration of Trust
dated July 3, 1991, as amended, on behalf of Colonial
Newport Tiger Fund, a series of LFT (the "New Tiger Fund").
WHEREAS, the parties hereto intend to provide for the
reorganization of the Tiger Fund through the acquisition by
the New Tiger Fund of all of the assets, subject to all of
the liabilities, of the Tiger Fund in exchange for shares of
beneficial interest, without par value, of the New Tiger
Fund (the "New Tiger Fund Shares"), the distribution to
shareholders of the Tiger Fund of such New Tiger Fund
Shares, and the liquidation of the Tiger Fund, all pursuant
to the provisions of Section 368(a) of the Internal Revenue
Code of 1986 as amended (the "Code");
NOW, THEREFORE, in consideration of the mutual promises
herein contained, the parties hereto agree as follows:
1. Plan of Reorganization and Liquidation.
(a) World Funds, on behalf of the Tiger Fund,
shall assign, sell, convey, transfer and deliver to the New
Tiger Fund at the closing provided for in Section 2
(hereinafter called the "Closing") all of the then existing
assets of the Tiger Fund of every kind and nature. In
consideration therefor, LFT on behalf of the New Tiger Fund
shall at the Closing (i) assume all of the Tiger Fund's
liabilities then existing, whether absolute, accrued,
contingent or otherwise, and (ii) deliver to the Tiger Fund
(A) a number of full and fractional Class Z New Tiger Fund
Shares (as defined in paragraph 3(i) below) equal to the
number of full and fractional shares of the Tiger Fund ("No-
Load Tiger Fund Shares") then outstanding which are held by
shareholders of the Tiger Fund for whom the sales charge was
waived ("No Load Tiger Fund Shareholders"), and (B) a number
of full and fractional Class T New Tiger Fund Shares (as
defined in paragraph 3(i) below) equal to the number of full
and fractional shares of the Tiger Fund ("Load Tiger Fund
Shares") then outstanding which are held by shareholders of
the Tiger Fund (Load Tiger Fund Shareholders") other than
the No-Load Tiger Fund Shareholders. The respective numbers
of no-Load Tiger Fund Shares and Load Tiger Fund Shares
issued and outstanding and the respective numbers of Class Z
and Class T New Tiger Fund Shares to be issued to the Tiger
Fund shall be determined by the transfer agent of the Tiger
Fund (the "Transfer Agent"), as of the close of business on
the New York Stock Exchange on the Closing Date (as defined
in Section 2 hereof). The determination of the Transfer
Agent shall be conclusive and binding on the Tiger Fund, the
New Tiger Fund and their respective shareholders.
(b) Upon consummation of the transactions described in
paragraph (a) of this Section 1, World Funds on behalf of
the Tiger Fund shall distribute, in complete liquidation of
the Tiger Fund, (A) pro rata to the No-Load Tiger Fund
Shareholders of record as of the Closing Date the Class Z
New Tiger Fund Shares received by the Tiger Fund, and (B)
pro rata to the Load Tiger Fund Shareholders of record as of
the Closing Date the Class T New Tiger Fund Shares received
by the Tiger Fund. Such distribution shall be accomplished
by the establishment, at the expense of the New Tiger Fund,
(A) of an open account on the records of the New Tiger Fund
in the name of each No-Load Tiger Fund Shareholder
representing a number of Class Z New Tiger Fund Shares equal
to the number of shares of the Tiger Fund owned of record by
such shareholder at the Closing Date, and (B) of an open
account on the records of the New Tiger Fund in the name of
each Load Tiger Fund Shareholder representing a number of
Class T New Tiger Fund Shares equal to the number of shares
of the Tiger Fund owned of record by such shareholder at the
Closing Date. Certificates, if any, for shares of the Tiger
Fund issued prior to the reorganization and held by No-Load
Tiger Fund Shareholders and Load Tiger Fund Shareholders
shall represent the same number of outstanding Class Z or
Class T New Tiger Fund Shares, respectively, following the
reorganization. In the interest of economy and convenience,
certificates representing the New Tiger Fund Shares will not
be physically issued.
(c) As promptly as practicable after the Closing Date,
the Tiger Fund shall be terminated pursuant to the
provisions of the laws of the State of Maryland, and, after
the Closing Date, the Tiger Fund shall not conduct any
business except in connection with its liquidation.
2. Closing and Closing Date. The Closing shall occur
at the offices of LFT, Federal Reserve Plaza, 600 Atlantic
Avenue, 24th Floor, Boston, Massachusetts 02110 at 4:00
p.m. Boston time on the first business day after the
required approval by the shareholders of the Tiger Fund
specified in Section 3(c) hereof and the fulfillment (to the
extent not waived) of the other conditions precedent set
forth in Section 3(c), or at such later time and date as the
parties may mutually agree (the "Closing Date"). All acts
taking place at the Closing shall be deemed to take place
simultaneously as of the close of business on the Closing
Date unless otherwise provided.
3. Conditions Precedent. The obligation of World
Funds and LFT to effect the transactions contemplated
hereunder shall be subject to the satisfaction of each of
the following conditions:
(a) World Funds and LFT shall have received an opinion
of Bingham, Dana & Gould substantially to the effect that
for federal income tax purposes: (i) the acquisition of the
assets of the Tiger Fund by the New Tiger Fund in return for
its assumption of the liabilities of the Tiger Fund and
Class Z and Class T New Tiger Fund Shares followed by the
distribution of such shares to the No-Load Tiger Fund
Shareholders and the Load Tiger Fund Shareholders as
provided in paragraph 1(a) above will constitute a
"reorganization" within the meaning of Section 368(a) of the
Code, and the Tiger Fund and the New Tiger Fund will each be
"a party to a reorganization" within the meaning of Section
368(b) of the Code; (ii) no gain or loss will be recognized
by the Tiger Fund upon the exchange of its assets for New
Tiger Fund Shares and the assumption by the New Tiger Fund
of the liabilities of the Tiger Fund; (iii) the tax basis of
the assets of the Tiger Fund received by the New Tiger Fund
will be the same as the tax basis of such assets in the
hands of the Tiger Fund immediately prior to the transfer;
(iv) the New Tiger Fund's holding period for the assets
acquired from the Tiger Fund will include the period during
which such assets were held by the Tiger Fund; (v) no gain
or loss will be recognized by the New Tiger Fund upon the
receipt of the assets of the Tiger Fund in exchange for New
Tiger Fund Shares and the assumption by the New Tiger Fund
of the liabilities of the Tiger Fund; (vi) no gain or loss
will be recognized by the No-Load Tiger Fund Shareholders or
the Load Tiger Fund Shareholders upon the receipt of the
Class Z and Class T New Tiger Fund Shares, respectively, in
exchange for their shares in the Tiger Fund as part of the
transaction; (vii) the basis of the Class Z and Class T New
Tiger Fund Shares received by the shareholders of the Tiger
Fund will be the same as the basis of the shares of the
Tiger Fund exchanged therefor; and (viii) the holding period
of the Class Z and Class T New Tiger Fund Shares received by
the shareholders of the Tiger Fund will include the holding
period of the shares of the Tiger Fund exchanged therefor,
provided that at the time of the exchange the shares of the
Tiger Fund were held as capital assets; and as to such other
matters as World Funds and LFT may reasonably request;
(b) This Agreement and Plan of Reorganization and the
reorganization contemplated hereby shall have been approved
by the Board of Directors of World Funds and by the Board of
Trustees of LFT, and shall have been recommended for
approval to the shareholders of the Tiger Fund by Board of
Directors of World Funds;
(c) This Agreement and Plan of Reorganization and the
reorganization contemplated hereby shall have been adopted
and approved by the affirmative vote of the holders of
majority of the outstanding shares of the Tiger Fund
entitled to vote thereon;
(d) LFT on behalf of the New Tiger Fund shall have
entered into an Investment Management Agreement with Newport
Fund Management, Inc., and such Agreement shall have been
approved by the Trustees of LFT and, to the extent required
by law, by the Trustees of LFT who are not "interested
persons" of LFT as defined in the 1940 Act (the "Independent
Trustees"), as well as by the shareholders of the New Tiger
Fund (it being understood that the Tiger Fund, as sole
shareholder of the New Tiger Fund prior to the consummation
of the reorganization, hereby agrees and is authorized to
vote for such approval);
(e) LFT on behalf of the New Tiger Fund shall have
entered into an Administration Agreement with Colonial
Management Associates, Inc. or, in the alternative, Liberty
Investment Services, Inc., and such Agreement shall have
been approved by the Trustees of LFT and, to the extent
required by law, by the Independent Trustees of LFT;
(f) LFT on behalf of the New Tiger Fund shall have
entered into a Distributor's Contract, including
distribution plans (the "Plans") adopted for Class A, B and
D shares of the New Tiger Fund pursuant to Rule 12b-1 of
the rules and regulations under the 1940 Act, with Colonial
Investment Services, Inc. or, in the alternative, Liberty
Securities Corporation, and such Contract (including the
Plans) shall have been approved by the Trustees of LFT and,
to the extent required by law, by the Independent Trustees
of LFT, and the plans with respect to the Class A, B and D
shares of New Tiger Fund shall have been approved by the
holders of the Class A, B and D shares, respectively, of
New Tiger Fund;
(g) LFT on behalf of the New Tiger Fund shall have
entered into a Transfer Agency Agreement with the Colonial
Investors Service Center, Inc. or, in the alternative, State
Street Bank and Trust Company, and such Agreement shall have
been approved by the Trustees of LFT and, to the extent
required by law, by the Independent Trustees of LFT;
(h) LFT on behalf of the New Tiger Fund shall have
entered into a Custodian Agreement with Brown Brothers
Harriman & Co., and such Agreement shall have been approved
by the Trustees of LFT and, to the extent required by law,
by the Independent Trustees of LFT;
(i) The Class Z New Tiger Fund Shares shall have been
designated by the Trustees of LFT as a separate class of
shares of beneficial interest in the New Tiger Fund which
shall not be subject to any asset-based service charge or
distribution fee under Rule 12b-1 of the rules and
regulations under the 1940 Act and shall not be subject to
any deferred sales charge on redemption, and additional
Class Z shares may be purchased by the No-Load Tiger Fund
Shareholders without a sales charge; the Class T New Tiger
Fund Shares shall have been designated by the Trustees of
LFT as a separate class of shares of beneficial interest in
the New Tiger Fund which shall not be subject to an asset-
based service charge or distribution fee under such Rule 12b-
1 and shall not be subject to any deferred sales charge on
redemption, and additional Class T shares may be purchased
by Load Tiger Fund Shareholders at a sales charge to be
specified in the Prospectus for such Class T New Tiger Fund
Shares; and
(j) The transactions contemplated by the Stock
Acquisition and Fund Reorganization Agreement dated November
11, 1994 between John M. Mussey and Liberty Financial
Companies, Inc. and by the Stock Acquisition and Fund
Reorganization Agreement dated November 11, 1994 between
John Pasco III and Liberty Financial Companies, Inc. shall
have been consummated.
At any time prior to the Closing, any of the foregoing
conditions other than that set forth in (j) above may be
waived jointly by the Board of Directors of World Funds and
the Board of Trustees of LFT if, in their judgment, such
waiver will not have a material adverse effect on the
interests of the shareholders of the Tiger Fund and the New
Tiger Fund. If the transactions contemplated by this
Agreement and Plan of Reorganization have not been
substantially completed by April 30, 1995, this Agreement
and Plan of Reorganization shall automatically terminate on
that date unless a later date is agreed to by both World
Funds and LFT.
4. Amendment. This Agreement may be amended at any
time by the joint action of the Directors of the World Funds
and the Trustees of LFT, notwithstanding approval thereof by
the shareholders of the Tiger Fund, provided that no
amendment shall have a material adverse effect on the
interests of the shareholders of the Tiger Fund or the New
Tiger Fund.
5. Termination. The Directors of World Funds and the
Trustees of LFT may jointly terminate this Agreement and
abandon the reorganization contemplated hereby,
notwithstanding approval thereof by the shareholders of the
Tiger Fund, at any time prior to the Closing, if
circumstances should develop that, in their judgment, make
proceeding with the Agreement inadvisable.
6. No Broker's or Finder's Fee. World Funds and LFT
each represent that there is no person who has dealt with
it who by reason of such dealings is entitled to any
broker's, finder's or other similar fee or commission from
World Funds or LFT arising out of the transactions
contemplated by this Agreement and Plan of Reorganization.
7. No Survival of Covenants and Agreements. The
covenants and agreements of the parties contained herein
shall not survive the Closing Date, except for the
provisions of Section 1(c).
8. Reliance. All covenants and agreements made under
this Agreement and Plan of Reorganization shall be deemed to
have been material and relied upon by each of the parties
notwithstanding any investigation made by such party or on
its behalf.
9. Notices. All notices required or permitted under
this Agreement and Plan of Reorganization shall be given in
writing (i) to World Funds at 1500 Forest Avenue, Suite 233,
Richmond, Virginia 23229, and (ii) to LFT at Federal Reserve
Plaza, 600 Atlantic Avenue, 24th Floor, Boston,
Massachusetts 02110, or at such other place as shall be
specified in a written notice given by either party to the
other party to this Agreement and Plan of Reorganization,
and shall be validly given if mailed by first class mail,
postage prepaid.
10. Expenses. The Tiger Fund and the New Tiger Fund
shall each bear their own expenses relating to the
reorganization contemplated hereby to the extent such
expenses are not paid by others, provided, however, that if
the reorganization is consummated such expenses of the Tiger
Fund shall be assumed and borne by the New Tiger Fund. The
Tiger Fund is the beneficiary of the agreement of Liberty
Financial Companies, Inc. contained in the Stock Acquisition
and Fund Reorganization Agreements referred to in Section
3(j) above to bear certain expenses of the meeting of the
shareholders to be held to vote on approval of this
Agreement and Plan of Reorganization.
11. Miscellaneous Provisions. This Agreement and Plan
of Reorganization shall bind and inure to the benefit of the
parties and their respective successors and assigns. It
shall be governed by and carried out in accordance with the
laws of the State of Maryland. It is executed in several
counterparts, each of which shall be deemed an original, but
all of which taken together shall constitute one agreement.
The name "Liberty Financial Trust" is the designation
of the Trustees of LFT for the time being under a
Declaration of Trust dated July 3, 1991, as amended, and all
persons dealing with LFT must look solely to LFT's property
for the enforcement of any claim against LFT, as neither the
Trustees, officers, agents or shareholders of LFT assume any
personal liability for obligations entered into on behalf of
LFT. No series of LFT shall be liable for claims against
any other series of LFT.
IN WITNESS WHEREOF, the parties have hereunto caused
this Agreement and Plan of Reorganization to be executed and
delivered by their duly authorized officers as of the day
and year first written above.
THE WORLD FUNDS, INC.
(on behalf of Newport Tiger
Fund)
By: /s/ John Pasco III
ATTEST:
/s/ Mary L. Pasco
Secretary
LIBERTY FINANCIAL TRUST
(on behalf of Colonial
Newport Tiger Fund)
By: /s/ Ernest E. Dunbar
ATTEST:
/s/ John L. Davenport
Secretary
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in
the Prospectus and Statement of Additional Information
constituting parts of this Post-Effective Amendment No. 10
to the registration statement on Form N-1A (the
"Registration Statement") of our report dated February 9,
1996, relating to the financial statements and financial
highlights, for the year ended December 31, 1995, appearing
in the December 31, 1995 Annual Report to Shareholders of
Colonial Newport Tiger Fund, a series of Colonial Trust VII,
which are also incorporated by reference into the
Registration Statement. We also consent to the references
to us under the headings "The Fund's Financial History" in
the Prospectus and "Independent Accountants" in the
Statement of Additional Information.
Price Waterhouse LLP
Boston, Massachusetts
April 18, 1996
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the use of our report dated January 25,
1995 on the financial statements and financial highlights of
Colonial Newport Tiger Fund (formerly Newport Tiger Fund), a
series of shares of Colonial Trust VII. Such financial
statements and financial highlights appear in the 1994
Annual Report to Shareholders which are incorporated by
reference in the Statement of Additional Information filed
in the Post-Effective Amendment No. 10 to the Registration
Statement on Form N-1A of Colonial Trust VII. We also
consent to the references to our Firm in such Registration
Statement and Prospectus.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
April 18, 1996
<TABLE>
<CAPTION>
PERFORMANCE CALCULATION
COLONIAL NEWPORT TIGER FUND -CLASS A
Fiscal Year End: 12/31/95
Inception Date: 6/1/89
SINCE INCEPTION
1 YEAR ENDED 12/31/95 5 YEARS ENDED 12/31/95 6/1/89 TO 12/31/95
Standard Non-Standard Standard Non-Standard Standard Non-Standard
-------------- ------------ -------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Initial Inv. $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00
Max. Load 5.75% 5.75% 5.75%
Amt. Invested $942.50 $1,000.00 $942.50 $1,000.00 $942.50 $1,000.00
Initial NAV $10.80 $10.80 $4.65 $4.65 $5.00 $5.00
Initial Shares 87.269 92.593 202.688 215.054 188.500 200.000
Shares From Dist. 0.680 0.721 6.058 6.426 7.778 8.251
End of Period NAV $12.46 $12.46 $12.46 $12.46 $12.46 $12.46
Total Return 9.58% 16.27% 160.10% 175.96% 144.56% 159.48%
Average Annual
Total Return 9.58% 16.27% 21.07% 22.51% 14.54% 15.57%
</TABLE>
PERFORMANCE CALCULATION
COLONIAL NEWPORT TIGER FUND - CLASS B
Fiscal Year End: 12/31/95
Inception Date: 4/01/95
SINCE INCEPTION
4/01/95 TO 12/31/95
Standard Non-Standard
------------- ----------------
Initial Inv. $1,000.00 $1,000.00
Amt. Invested $1,000.00 $1,000.00
Initial NAV $10.86 $10.86
Initial Shares 92.081 92.081
Shares From Dist. 0.455 0.455
End of Period NAV $12.39 $12.39
CDSC 5.00%
Total Return 9.65% 14.65%
Average Annual
Total Return N/A N/A
PERFORMANCE CALCULATION
COLONIAL NEWPORT TIGER FUND - CLASS D
Fiscal Year End: 12/31/95
Inception Date: 4/01/95
SINCE INCEPTION
4/01/95 TO 12/31/95
Standard Non-Standard
------------- ------------------
Initial Inv. $1,000.00 $1,000.00
Max. Load 1.00%
Amt. Invested $990.00 $1,000.00
Initial NAV $10.86 $10.86
Initial Shares 91.160 92.081
Shares From Dist. 0.458 0.463
End of Period NAV $12.41 $12.41
CDSC 1.00%
Total Return 12.70% 14.85%
Average Annual
Total Return N/A N/A
<TABLE>
<CAPTION>
PERFORMANCE CALCULATION
COLONIAL NEWPORT TIGER FUND -CLASS T
Fiscal Year End: 12/31/95
Inception Date: 6/1/89
SINCE INCEPTION
1 YEAR ENDED 12/31/95 5 YEARS ENDED 12/31/95 6/1/89 TO 12/31/95
Standard Non-Standard Standard Non-Standard Standard Non-Standard
-------------- ----------------- ------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Initial Inv. $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00
Max. Load 5.75% 5.75% 5.75%
Amt. Invested $942.50 $1,000.00 $942.50 $1,000.00 $942.50 $1,000.00
Initial NAV $10.80 $10.80 $4.65 $4.65 $5.00 $5.00
Initial Shares 87.269 92.593 202.688 215.054 188.500 200.000
Shares From Dist. 0.758 0.804 6.243 6.623 7.952 8.436
End of Period NAV $12.45 $12.45 $12.45 $12.45 $12.45 $12.45
Total Return 9.59% 16.28% 160.12% 175.99% 144.58% 159.50%
Average Annual
Total Return 9.59% 16.28% 21.07% 22.51% 14.54% 15.57%
</TABLE>
<TABLE>
<CAPTION>
PERFORMANCE CALCULATION
COLONIAL NEWPORT TIGER FUND -CLASS Z
Fiscal Year End: 12/31/95
Inception Date: 6/1/89
SINCE INCEPTION
1 YEAR ENDED 12/31/95 5 YEARS ENDED 12/31/95 6/1/89 TO 12/31/95
Non-Standard Non-Standard Non-Standard
------------------- ------------------- -------------------
<S> <C> <C> <C>
Initial Inv. $1,000.00 $1,000.00 $1,000.00
Max. Load
Amt. Invested $1,000.00 $1,000.00 $1,000.00
Initial NAV $10.80 $4.65 $5.00
Initial Shares 92.593 215.054 200.000
Shares From Dist. 0.804 6.623 8.436
End of Period NAV $12.45 $12.45 $12.45
Total Return 16.28% 175.99% 159.50%
Average Annual
Total Return 16.28% 22.51% 15.57%
</TABLE>
COLONIAL NEWPORT TIGER FUND
FUND YIELD CALCULATION
(CALENDAR MONTH-END METHOD)
30-DAY BASE PERIOD ENDED 12/31/95
a-b 6
FUND YIELD = 2 ----- +1 -1
c-d
YIELD
a = dividends and interest earned during ---------
the month ................................ $1,295,207
b = expenses (exclusive of distribution fee)
accrued during the month.................. 1,073,162
c = average dividend shares outstanding
during the month ......................... 67,799,049
d = class A maximum offering price per share
on the last day of the month ............. $13.22
CLASS A YIELD ........................... 0.30%
=====
CLASS B YIELD ........................... -0.42%
=====
CLASS D YIELD ........................... -0.42%
=====
CLASS T YIELD ........................... 0.30%
=====
CLASS Z YIELD ........................... 0.30%
=====
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF COLONIAL NEWPORT TIGER FUND, CLASS A YEAR END DEC-31-1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS OF COLONIAL
NEWPORT TIGER FUND, CLASS A YEAR END DEC-31-1995
</LEGEND>
<CIK> 0000876980
<NAME> COLONIAL TRUST VII
<SERIES>
<NUMBER> 1
<NAME> COLONIAL NEWPORT TIGER FUND, CLASS A
<MULTIPLIER> 1,000
<S> <C>
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<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 693413
<INVESTMENTS-AT-VALUE> 869731
<RECEIVABLES> 10951
<ASSETS-OTHER> 39
<OTHER-ITEMS-ASSETS> 225
<TOTAL-ASSETS> 880946
<PAYABLE-FOR-SECURITIES> 2651
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5848
<TOTAL-LIABILITIES> 8499
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 188783
<SHARES-COMMON-STOCK> 15803
<SHARES-COMMON-PRIOR> 42230
<ACCUMULATED-NII-CURRENT> 110
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1175)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 176318
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<INTEREST-INCOME> 1856
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<NET-INVESTMENT-INCOME> 4700
<REALIZED-GAINS-CURRENT> 329
<APPREC-INCREASE-CURRENT> 90365
<NET-CHANGE-FROM-OPS> 95394
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 904
<DISTRIBUTIONS-OF-GAINS> 356
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 25291
<NUMBER-OF-SHARES-REDEEMED> 9572
<SHARES-REINVESTED> 84
<NET-CHANGE-IN-ASSETS> 327238
<ACCUMULATED-NII-PRIOR> 658
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<AVERAGE-NET-ASSETS> 85676
<PER-SHARE-NAV-BEGIN> 10.860
<PER-SHARE-NII> 0.067
<PER-SHARE-GAIN-APPREC> 1.617
<PER-SHARE-DIVIDEND> 0.060
<PER-SHARE-DISTRIBUTIONS> 0.24
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.46
<EXPENSE-RATIO> 1.37
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF COLONIAL NEWPORT TIGER FUND, CLASS B YEAR END DEC-31-1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS OF COLONIAL
NEWPORT TIGER FUND, CLASS B YEAR END DEC-31-1995
</LEGEND>
<CIK> 0000876980
<NAME> COLONIAL TRUST VII
<SERIES>
<NUMBER> 1
<NAME> COLONIAL NEWPORT TIGER FUND, CLASS B
<MULTIPLIER> 1,000
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<OVERDISTRIBUTION-GAINS> 0
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<EXPENSES-NET> 9589
<NET-INVESTMENT-INCOME> 4700
<REALIZED-GAINS-CURRENT> 329
<APPREC-INCREASE-CURRENT> 90365
<NET-CHANGE-FROM-OPS> 95394
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 308
<DISTRIBUTIONS-OF-GAINS> 200
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9978
<NUMBER-OF-SHARES-REDEEMED> 931
<SHARES-REINVESTED> 38
<NET-CHANGE-IN-ASSETS> 327238
<ACCUMULATED-NII-PRIOR> 658
<ACCUMULATED-GAINS-PRIOR> 9
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<GROSS-ADVISORY-FEES> 6262
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<GROSS-EXPENSE> 10255
<AVERAGE-NET-ASSETS> 39706
<PER-SHARE-NAV-BEGIN> 10.860
<PER-SHARE-NII> (0.003)
<PER-SHARE-GAIN-APPREC> 1.594
<PER-SHARE-DIVIDEND> 0.037
<PER-SHARE-DISTRIBUTIONS> 0.024
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.39
<EXPENSE-RATIO> 1.93
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF COLONIAL NEWPORT TIGER FUND, CLASS D YEAR END DEC-31-995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS OF COLONIAL
NEWPORT TIGER FUND, CLASS D YEAR END DEC-31-1995
</LEGEND>
<CIK> 0000876980
<NAME> COLONIAL TRUST VII
<SERIES>
<NUMBER> 1
<NAME> COLONIAL NEWPORT TIGER FUND, CLASS D
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<S> <C>
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<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 693413
<INVESTMENTS-AT-VALUE> 869731
<RECEIVABLES> 10951
<ASSETS-OTHER> 39
<OTHER-ITEMS-ASSETS> 225
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<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5848
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<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 20689
<SHARES-COMMON-STOCK> 1726
<SHARES-COMMON-PRIOR> 42230
<ACCUMULATED-NII-CURRENT> 110
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1175)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 176318
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<NET-CHANGE-FROM-OPS> 95394
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 61
<DISTRIBUTIONS-OF-GAINS> 38
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1802
<NUMBER-OF-SHARES-REDEEMED> 83
<SHARES-REINVESTED> 7
<NET-CHANGE-IN-ASSETS> 327238
<ACCUMULATED-NII-PRIOR> 658
<ACCUMULATED-GAINS-PRIOR> 9
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6262
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10255
<AVERAGE-NET-ASSETS> 7321
<PER-SHARE-NAV-BEGIN> 10860
<PER-SHARE-NII> (0.003)
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<PER-SHARE-DIVIDEND> 0.038
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<EXPENSE-RATIO> 1.93
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF COLONIAL NEWPORT TIGER FUND, CLASS T YEAR END DEC-31-1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS OF COLONIAL
NEWPORT TIGER FUND, CLASS T YEAR END DEC-31-1995
</LEGEND>
<CIK> 0000876980
<NAME> COLONIAL TRUST VII
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<NUMBER> 1
<NAME> COLONIAL NEWPORT TIGER FUND, CLASS T
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<S> <C>
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<ASSETS-OTHER> 39
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<SENIOR-LONG-TERM-DEBT> 0
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<PAID-IN-CAPITAL-COMMON> 131805
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<SHARES-COMMON-PRIOR> 42230
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<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1175)
<OVERDISTRIBUTION-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 3591
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<SHARES-REINVESTED> 116
<NET-CHANGE-IN-ASSETS> 327238
<ACCUMULATED-NII-PRIOR> 658
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10255
<AVERAGE-NET-ASSETS> 609537
<PER-SHARE-NAV-BEGIN> 10.80
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<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF COLONIAL NEWPORT TIGER FUND, CLASS Z YEAR END DEC-31-1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS OF
COLONIAL NEWPORT TIGER FUND, CLASS Z YEAR END DEC-31-1995
</LEGEND>
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<NAME> COLONIAL NEWPORT TIGER FUND, CLASS Z
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<NET-CHANGE-FROM-OPS> 92394
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<DISTRIBUTIONS-OF-INCOME> 2234
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<ACCUMULATED-GAINS-PRIOR> 9
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<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
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<AVERAGE-NET-ASSETS> 609537
<PER-SHARE-NAV-BEGIN> 10.80
<PER-SHARE-NII> 0.099
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<PER-SHARE-NAV-END> 12.45
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<AVG-DEBT-OUTSTANDING> 0
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</TABLE>
