Registration Nos: 33-45117
811-6529
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
Pre-Effective Amendment No. ______ [ ]
Post-Effective Amendment No. __8__ [ X ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. __10__ [ X ]
COLONIAL TRUST VI
(Exact Name of Registrant as Specified in Charter)
One Financial Center, Boston, Massachusetts 02111
(Address of Principal Executive Offices)
(617) 426-3750
(Registrant's Telephone Number, including Area Code)
Name and Address of Agent for Service: Copy to:
Arthur O. Stern, Esquire John M. Loder, Esquire
Colonial Management Associates, Inc. Ropes & Gray
One Financial Center One International Place
Boston, Massachusetts 02111 Boston, Massachusetts 02110-2624
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b).
[ ] on [date] pursuant to paragraph (b).
[ X ] 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 August 25, 1995, the Registrant
filed the Rule 24f-2 Notice for Registrant's fiscal year ended June 30, 1995.
<PAGE>
COLONIAL TRUST VI
Cross Reference Sheet (Colonial Small Stock Fund)
Item Number of Form N-1A Location or Caption in Prospectus
Part A
1. Cover Page
2. Summary of expenses
3. The Fund's financial history
4. Organization and history; How the Fund
pursues its objective; The Fund's
investment objective
5. Cover Page; How the Fund is managed;
Organization and history; The Fund's
investment objective
6. Organization and history;
Distributions and taxes; How to buy
shares
7. How to buy shares; How the Fund values
its shares; 12b-1 plans; Back cover
8. How to sell shares; How to exchange
shares; Telephone transactions
9. Not Applicable
January 2, 1996
COLONIAL SMALL STOCK FUND
PROSPECTUS
BEFORE YOU INVEST
Colonial Management Associates, Inc. (Adviser) and your full-service financial
adviser want you to understand both the risks and benefits of mutual fund
investing.
While mutual funds offer significant opportunities and are professionally
managed, they also carry risks including possible loss of principal. Unlike
savings accounts and certificates of deposit, mutual funds are not insured or
guaranteed by any financial institution or government agency.
Please consult your full-service financial adviser to determine how investing in
this mutual fund may suit your unique needs, time horizon and risk tolerance.
Colonial Small Stock Fund (Fund), a diversified portfolio of Colonial Trust VI
(Trust), an open-end management investment company, seeks long-term growth by
investing primarily in smaller capitalization equities. The Fund is managed by
the Adviser, an investment adviser since 1931.
This Prospectus explains concisely what you should know before investing in the
Class A, Class B or Class D shares of the Fund. Read it carefully and retain it
for future reference.
SS--196
More detailed information about the Fund is in the January 2, 1996 Statement of
Additional Information which has been filed with the Securities and Exchange
Commission and is obtainable free of charge by calling the Adviser at
1-800-248-2828. The Statement of Additional Information is incorporated by
reference in (which means it is considered to be a part of) this Prospectus.
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 for eight years and a
declining contingent deferred sales charge on redemptions made within six years
after purchase; and, beginning January 15, 1995, Class D shares, which will be
offered at net asset value plus a small initial sales charge, a contingent
deferred sales charge on redemptions made within one year after purchase and a
continuing distribution fee. Class B shares automatically convert to Class A
shares after approximately eight years. 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...................
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.
<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 annual expenses
for an investment in the Class A, Class B and Class D shares of the Fund. See
"How the Fund is managed" and "12b-1 plans" for more complete descriptions of
the Fund's various costs and expenses.
Shareholder Transaction Expenses (1)(2)
Class A Class B Class D
Maximum Initial Sales Charge Imposed on a Purchase
(as a % of offering price)(3) 5.75% 0.00%(5) 1.00%(5)
Maximum Contingent Deferred Sales Charge
(as a % of offering price)(3).................... 1.00%(4) 5.00% 1.00%
(1) For accounts less than $1,000 an annual fee of $10 may be deducted. See "How
to sell shares."
(2) Redemption proceeds exceeding $5,000 sent via federal funds wire will be
subject to a $7.50 charge per transaction.
(3) Does not apply to reinvested distributions.
(4) Only with respect to any portion of purchases of $1 million to $5 million
redeemed within approximately 18 months after purchase. See "How to buy shares."
(5) Because of the 0.75% distribution fee applicable to Class B and Class D
shares, long-term Class B and Class D shareholders may pay more in aggregate
sales charges than the maximum initial sales charge permitted by the National
Association of Securities Dealers, Inc. However, because the Fund's Class B
shares automatically convert to Class A shares after approximately 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
Management fee..........................0.60% 0.60% 0.60%
12b-1 fee...............................0.25 1.00 1.00
Other expenses..........................0.60 0.60 0.60
---- ---- ----
Total operating expenses................1.45% 2.20% 2.20%
==== ==== ====
Example
The following Example shows the cumulative expenses attributable to a
hypothetical $1,000 investment in the Class A, Class B and Class D shares of the
Fund for the periods specified, assuming a 5% annual return and, unless
otherwise noted, redemption at period end. The 5% return and expenses used in
this Example should not be considered indicative of actual or expected Fund
performance or expenses, both of which will vary.
Class A Class B Class D
Period: (6) (7) (6) (7)
1 year................................ $ 71 $ 72 $ 22 $ 42 $ 32
3 years............................... $101 $ 99 $ 69 $ 78 $ 78
5 years............................... $132 $138 $118 $127 $127
10 years.............................. $221 $235(8) $235(8) $261 $261
(6) Assumes redemption.
(7) Assumes no redemption.
(8) Class B shares convert to Class A shares after approximately 8 years;
therefore, years 9 and 10 reflect Class A share expenses.
<PAGE>
THE FUND'S FINANCIAL HISTORY(a)
The following schedule of financial highlights for a share outstanding
throughout each period has been audited by Price Waterhouse LLP, independent
accountants. Their unqualified report is included in the Fund's 1995 Annual
Report, and is incorporated by reference into the Statement of Additional
Information. The Fund adopted the objective of seeking long-term growth and
became actively managed on November 2, 1992. The data presented for the Fund
prior to November 2, 1992, represent operations under earlier objectives and
policies of the Fund's predecessor, Colonial Small Stock Index Trust. As of June
30, 1995, no Class D shares had been issued.
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------------------------------------
Year ended June 30
-----------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 (b)
---- ---- ---- ---- ---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value - Beginning of period $16.670 $15.860 $12.330 $11.570 $13.560 $13.540 $12.940 $13.810 $12.140
-------- -------- -------- -------- -------- -------- -------- -------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.002 (0.047) (0.083) (0.127) 0.045 0.048 0.061 0.066 (c) 0.057(c)
Net realized and unrealized gain (loss)
on investments 5.588 0.857 3.613 0.887 (1.992) 0.017 0.929 (0.357) 1.643
------ ------ ------ ------ ------- ------ ------ ------- -----
Total from investment operations 5.590 0.810 3.530 0.760 (1.947) 0.065 0.990 (0.291) 1.700
------ ------ ------ ------ ------- ------ ------ ------- -----
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income 0.000 0.000 0.000 0.000 (0.043) (0.045) (0.060) (0.074) (0.030)
From net realized gain on investments 0.000 0.000 0.000 0.000 0.000 0.000 (0.330) (0.505) 0.000
------ ------ ------ ------ ------ ------ ------- ------- -----
Total distributions declared to
shareholders 0.000 0.000 0.000 0.000 (0.043) (0.045) (0.390) (0.579) (0.030)
------ ------ ------ ------ ------- ------- ------- ------- -------
Net asset value - End of period $22.260 $16.670 $15.860 $12.330 $11.570 $13.560 $13.540 $12.940 $13.810
======== ======== ======== ======== ======== ======== ======== ======== =======
Total return(d) 33.53% 5.11% 28.63% 6.57% (14.34)% 0.49% 8.07% (2.18)%(e) 14.04%(e)
====== ===== ====== ===== ======== ===== ===== ======= ======
RATIOS TO AVERAGE NET ASSETS
Expenses 1.45% 1.56% 1.88% 2.13% 1.91% 1.67% 1.69% 1.48% 1.33%
Interest expense 0.00% 0.00% 0.01% 0.06% 0.03% 0.02% 0.00% 0.01% 0.02%
Net investment income (loss) 0.01% (0.27)% (0.60)% (0.91)% 0.33% 0.35% 0.48% 0.54% 0.61%
Fees and expenses waived or or borne
by the Adviser 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.23% 0.66%
Portfolio turnover 64% 35% 29% 0% 79% 17% 25% 42% 34%
Net assets at end of period (000) $40,661 $24,760 $23,716 $22,002 $28,943 $42,888 $46,415 $44,596 $38,193
- ---------------------------------
</TABLE>
(a) Per share data were calculated using average shares outstanding during the
period.
(b) Investment operations commenced July 25, 1986 and ratios for the period are
annualized
(c) Net of fees and expenses waived or borne by the Adviser which amounted to
$0.028 and $0.062 in fiscal 1988 and 1987, respectively.
(d) Total return at net asset value assuming all distributions reinvested and
no initial or contingent deferred sales charges.
(e) Had the Adviser not waived or borne certain expenses, the Fund's total
return would have been lower.
<PAGE>
THE FUND'S FINANCIAL HISTORY(a)(CONT'D)
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------
Year ended June 30
----------------------------------------------------
1995 1994 1993 (b)
---- ---- --------
<S> <C> <C> <C>
Net asset value - Beginning of period $16.470 $15.790 $13.010
-------- -------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.139) (0.176) (0.100)
Net realized and unrealized gain (loss) on 5.509 0.856 2.880
------ ------ -----
investments
Total from investment operations 5.370 0.680 2.780
------ ------ -----
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income 0.000 0.000 0.000
From net realized gain on investments 0.000 0.000 0.000
------ ------ -----
Total distributions declared to shareholders 0.000 0.000 0.000
------ ------ -----
Net asset value - End of period $21.840 $16.470 $15.790
======== ======== =======
Total return(c) 32.60% 4.31% 21.37% (d)
====== ===== ======
RATIOS TO AVERAGE NET ASSETS
Expenses 2.20% 2.31% 2.63% (e)
Interest expense 0.00% 0.00% 0.01% (e)
Net investment income (loss) (0.74)% (1.02)% (1.35)% (e)
Portfolio turnover 64% 35% 29% (d)
Net assets at end of period (000) $29,458 $8,489 $1,655
- ---------------------------------
</TABLE>
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Class B shares were initially offered on November 9, 1992. Per share
amounts and total return (not annualized) reflect activity from that date.
(c) Total return at net asset value assuming all distributions reinvested and
no initial or contingent deferred sales charges.
(d) Not annualized.
(e) Annualized.
Further performance information is contained in the Fund's Annual Report to
shareholders, which is obtainable free of charge by calling 1-800-248-2828.
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks long-term growth by investing primarily in smaller capitalization
equities.
HOW THE FUND PURSUES ITS OBJECTIVE
The Fund normally invests at least 65% of its total assets in U.S. common stocks
selected from the universe of stocks traded on the New York Stock Exchange,
American Stock Exchange and the Nasdaq Stock Market with market values between
$20 million and $1 billion (Small Stocks). In selecting investments, the Adviser
uses a disciplined process intended to create a diversified portfolio whose
performance (before expenses) will exceed the Small Stock universe's while
maintaining risk characteristics that are generally consistent with the
universe. However, there is no assurance that the portfolio's performance will
match that of the universe, or that the Fund will achieve its objective.
Small Stocks may offer greater opportunities for capital appreciation than the
securities of 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. Small Stocks may trade less
frequently, in smaller volumes, and fluctuate more sharply in value than
securities of larger companies.
Other Investment Practices. The Fund may engage in the following investment
practices, some of which are described in more detail in the Statement of
Additional Information.
Index Futures. The Fund may purchase and sell U.S. stock index futures
contracts. Such transactions will be entered into to invest cash temporarily in
anticipation of a market advance, but not to hedge against 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 may not precisely achieve the goal of gaining market exposure to the
extent there is an imperfect correlation between 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 purchased the futures contract.
Temporary/Defensive Investments. Temporarily available cash may be invested in
certificates of deposit, bankers' acceptances, high quality commercial paper,
Treasury bills and repurchase agreements. Some or all of the Fund's assets also
may be invested in such investments during periods of unusual market conditions.
Under a repurchase agreement, the Fund buys a security from a bank or dealer,
which is obligated to buy it back at a fixed price and time. The security is
held in a separate account at the Fund's custodian, and constitutes the Fund's
collateral for the bank's or dealer's repurchase obligation. Additional
collateral 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 right to the collateral in
a bankruptcy proceeding. Not more than 15% of the Fund's net assets will be
invested in repurchase agreements maturing in more than 7 days and other
illiquid assets.
Other. The Fund's investment objective and non-fundamental policies may be
changed without shareholder approval. The Fund will notify investors at least 30
days prior to any material change in the Fund's investment objective. If there
is a change in the investment objective, shareholders should consider whether
the Fund remains an appropriate investment in light of their then current
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 investment 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 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 the average annual total return only
in that they may relate to different time periods, may represent aggregate as
opposed to average annual total returns, and may not reflect the initial or
contingent deferred sales charges.
Each Class's yield, which differs from total return because it does not consider
changes in net asset value, is calculated in accordance with the Securities and
Exchange Commission's formula. Each Class's distribution rate is calculated by
dividing the most recent twelve months' distributions by the maximum offering
price of that Class at the end of the period. Each Class's performance may be
compared to various indices. Quotations from various publications may be
included in sales literature and advertisements. See "Performance Measures" in
the Statement of Additional Information for more information.
All performance information is historical and does not predict future results.
HOW THE FUND IS MANAGED
The Trustees formulate the Fund's general policies and oversee the Fund's
affairs as conducted by the Adviser.
The Adviser is a subsidiary of The Colonial Group, Inc. Colonial Investment
Services, Inc. (Distributor) is a subsidiary of the Adviser and serves as the
distributor for the Fund's shares. Colonial Investors Service Center, Inc.
(Transfer Agent), an affiliate of the Adviser, serves as the shareholder
services and transfer agent for the Fund. The Colonial Group, Inc. is a direct
subsidiary of Liberty Financial Companies, Inc. which in turn is an indirect
subsidiary of Liberty Mutual Insurance Company (Liberty Mutual). Liberty Mutual
is considered to be the controlling entity of the Adviser and its affiliates.
Liberty Mutual is an underwriter of worker's compensation insurance and a
property and casualty insurer in the U.S.
The Adviser furnishes the Fund with investment management, accounting and
administrative personnel and services, office space and other equipment and
services at the Adviser's expense. For these services, the Fund paid the Adviser
0.60% of the Fund's average net assets for fiscal year 1995.
James P. Haynie, Vice President of the Adviser, has managed the Fund since 1993.
Prior to joining the Adviser in 1993, Mr. Haynie was a Vice President at
Massachusetts Financial Services Company and a Portfolio Manager at Trinity
Investment Management.
The Adviser also provides pricing and bookkeeping services to the Fund for a
monthly fee of $2,250 plus a percentage of the Fund's average net assets over
$50 million. The Transfer Agent provides transfer agency and shareholder
services to the Fund for a fee of 0.25% annually of average net assets plus
certain out-of-pocket expenses.
Each of the foregoing fees is subject to any reimbursement or fee waiver to
which the Adviser may agree.
The Adviser places all orders for the purchase and sale of portfolio securities.
In selecting broker-dealers, the Adviser may consider research and brokerage
services furnished to it and its affiliates. Subject to seeking best execution,
the Adviser may consider sales of shares of the Fund (and of certain other
Colonial funds) in selecting broker-dealers for portfolio security transactions.
HOW THE FUND VALUES ITS SHARES
Per share net asset value is calculated by dividing the total value of each
Class's net assets by its number of outstanding shares. Shares are valued as of
the close of the New York Stock Exchange (Exchange) each day the Exchange is
open. Portfolio securities for which market quotations are readily available are
valued at market. Short-term investments maturing in 60 days or less are valued
at amortized cost when it is determined, pursuant to procedures adopted by the
Trustees, that such cost approximates market value. All other securities and
assets are valued at fair value following procedures adopted by the Trustees.
DISTRIBUTIONS AND TAXES
The Fund intends to qualify as a "regulated investment company" under the
Internal Revenue Code and to distribute to shareholders virtually all net income
and any net realized gain at least annually.
The Fund generally declares and pays distributions semi-annually in June and
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. To
change your election, call the Transfer Agent for information. 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. Whether you receive your 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 are offered continuously. Orders received in good form prior to the time
shares are valued (or placed with a financial service firm before such time and
transmitted by the financial service firm before the Fund processes that day's
share transactions) will be processed based on that day's closing net asset
value, plus any applicable initial sales charge.
The minimum initial investment is $1,000; subsequent investments may be as small
as $50. The minimum initial investment for the Colonial Fundamatic program is
$50 and the minimum initial investment for a Colonial retirement account is $25.
Certificates will not be issued for Class B or Class D shares and there are some
limitations on the issuance of Class A certificates. The Fund may refuse any
purchase order for its shares. See the Statement of Additional Information for
more information.
The Fund also offers Class Z shares which are offered through a separate
Prospectus only to (i) 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 and (ii) the Adviser and its
affiliates. Class Z shares have no initial or contingent deferred sales charge
and no Rule 12b-1 fee. Otherwise, Class Z expenses are the same as for Classes
A, B and D. Class Z shares may be exchanged at net asset value into the Class A
shares of any other Colonial fund.
Class A Shares. Class A 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. Class A
shares are also subject to a 0.25% annual service fee.
Class B Shares. Class B shares are offered at net asset value, without an
initial sales charge, subject to a 0.75% annual distribution fee for
approximately eight years (at which time they convert to Class A shares not
bearing a distribution fee), a 0.25% annual service fee and a 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 Deferred
After 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% distribution fee referred to above. The commission may be reduced or
eliminated if the distribution fee paid by the Fund is reduced or eliminated for
any reason.
General. 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.
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. Investments in Class B shares have
100% of the purchase invested immediately. Investors investing for a relatively
short period of time might consider Class D shares. Purchases of $250,000 or
more must be for Class A or Class D shares. Purchases of $500,000 or more must
be for Class A shares. Consult your financial service firm.
Financial service firms may receive different compensation rates for selling
different classes of shares. The Distributor may pay additional compensation to
financial service firms which have made or may make significant sales. 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.
Special Purchase Programs. The Fund allows certain investors or groups of
investors to purchase shares and be subject to reduced or no initial or
contingent deferred sales charge. These programs are described in the Statement
of Additional Information under "Programs for Reducing or Eliminating Sales
Charges" and "How to Sell Shares."
Shareholder Services. A variety of shareholder services are available. For more
information about these services or your account, call 1-800-345-6611. Some
services are described in the attached account application. A shareholder's
manual explaining all available services will be provided upon request.
HOW TO SELL SHARES
Shares of the Fund may be sold on any day the Exchange is open, either directly
to the Fund or through your financial service firm. Sale proceeds generally are
sent within seven days (usually on the next business day after your request is
received in good form). However, for shares recently purchased by check, the
Fund will send proceeds only after the check has cleared (which may take up to
15 days).
Selling Shares Directly To The Fund. Send a signed letter of instruction or
stock power form to the Transfer Agent, along with any certificates for shares
to be sold. The sale price is the net asset value (less any applicable
contingent deferred sales charge) next calculated after the Fund receives the
request in proper form. Signatures must be guaranteed by a bank, a member firm
of a national stock exchange or another eligible guarantor institution. Stock
power forms are available from financial service firms, the Transfer Agent and
many banks. Additional documentation is required for sales by corporations,
agents, fiduciaries, surviving joint owners and individual retirement account
holders. For details contact:
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Selling Shares Through Financial Service Firms. Financial service firms must
receive requests prior to the time the Fund values its shares to receive that
day's price, are responsible for furnishing all necessary documentation to the
Transfer Agent and may charge for this service.
General. The sale of shares is a taxable transaction for income tax purposes and
may be subject to a contingent deferred sales charge. The contingent deferred
sales charge may be waived under certain circumstances. See the Statement of
Additional Information for more information. Under unusual circumstances, the
Fund may suspend repurchases or postpone payment for up to seven days or longer,
as permitted by federal securities law. In June of any year, the Fund may deduct
$10 (payable to the Transfer Agent) from accounts valued at less than $1,000
unless the account value has dropped below $1,000 solely as a result of share
value depreciation. Shareholders will receive 60 days' written notice to
increase the account value before the fee is deducted.
HOW TO EXCHANGE SHARES
Exchanges at net asset value may be made among the same class of shares of most
Colonial funds. Not all Colonial funds offer Class D shares. Shares will
continue to age without regard to the exchange for purposes of conversion and
determining the contingent deferred sales charge, if any, upon redemption.
Carefully read the prospectus of the fund into which you are exchanging 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 in which the original investment was made.
Class D Shares. Exchanges of Class D shares will not be subject to the
contingent deferred sales charge. However, if shares are redeemed within one
year after the original purchase, a 1.00% contingent deferred sales charge will
be assessed.
TELEPHONE TRANSACTIONS
All shareholders and/or their financial advisers are automatically eligible to
exchange Fund shares and redeem up to $50,000 of Fund shares by calling
1-800-422-3737 toll free any business day between 9:00 a.m. and the close of
trading of the Exchange (normally 4:00 p.m. Eastern time). Telephone redemption
privileges for larger amounts may be elected on the account application.
Proceeds and confirmations of telephone transactions will be mailed or sent to
the address of record. Telephone redemptions are not available on accounts with
an address change in the preceding 30 days. The Adviser, the Transfer Agent and
the Fund will not be liable when following telephone instructions reasonably
believed to be genuine and a shareholder may suffer a loss from unauthorized
transactions. The Transfer Agent will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine. All telephone
transactions are recorded. Shareholders and/or their financial advisers are
required to provide their name, address and account number. Financial advisers
are also required to provide their broker number. Shareholders and/or their
financial advisers wishing to redeem or exchange shares by telephone may
experience difficulty in reaching the Fund at its toll free telephone number
during periods of drastic economic or market changes. In that event,
shareholders and/or their financial advisers should follow the procedures for
redemption or exchange by mail as described above under "How to sell shares."
The Adviser, the Transfer Agent and the Fund reserve the right to change,
modify, or terminate the telephone redemption or exchange services at any time
upon prior written notice to shareholders. Shareholders are not obligated to
transact by telephone.
12B-1 PLANS
Under 12b-1 Plans, the Fund pays the Distributor an annual service fee of 0.25%
of the Fund's average net assets attributed to each Class of shares. The Fund
also pays the Distributor an annual distribution fee of 0.75% of the average net
assets attributed to its Class B and Class D shares. Because the Class B and
Class D shares bear the additional distribution fee, their dividends will be
lower than the dividends of Class A shares. Class B shares automatically convert
to Class A shares, approximately eight years after the Class B shares were
purchased. Class D shares do not convert. The multiple class structure could be
terminated should certain Internal Revenue Service rulings be rescinded. See the
Statement of Additional Information for more information. The Distributor uses
the fees to defray the cost of commissions and service fees paid to financial
service firms which have sold Fund shares, and to defray other expenses such as
sales literature, prospectus printing and distribution, shareholder servicing
costs and compensation to wholesalers. Should the fees exceed the Distributor's
expenses in any year, the Distributor would realize a profit. The Plans also
authorize other payments to the Distributor and its affiliates (including the
Adviser) which may be construed to be indirect financing of sales of Fund
shares.
ORGANIZATION AND HISTORY
The Trust was organized in 1991 as a Massachusetts business trust. The Fund
represents the entire interest in a separate portfolio of the Trust.
The Trust is not required to hold annual shareholder meetings, but special
meetings may be called for certain purposes. You receive one vote for each of
your Fund shares. Shares of the Trust vote together except when required by law
to vote separately by fund or by class. Shareholders owning in the aggregate ten
percent of Trust shares may call meetings to consider removal of Trustees. Under
certain circumstances, the Trust will provide information to assist shareholders
in calling such a meeting. See the Statement of Additional Information for more
information.
Under Massachusetts law, shareholders could, under certain circumstances, be
held personally liable for the obligations of the Fund. However, the Declaration
of Trust for the Trust (Declaration) disclaims shareholder liability for acts or
obligations of the Fund and requires that notice of such disclaimer be given in
each agreement, obligation, or instrument entered into or executed by the Fund
or the Trust's Trustees. The Declaration provides for indemnification out of
Fund property for all loss and expense of any shareholder held personally liable
for the obligations of the Fund. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to circumstances
in which the Fund would be unable to meet its obligations. The likelihood of
such circumstances is remote because it would be limited to circumstances in
which the disclaimer was inoperative and the Trust was unable to meet its
obligations. The risk of a particular fund incurring financial loss on account
of unsatisfied liability of another fund of the Trust is also believed to be
remote, because it would be limited to claims to which the disclaimer did not
apply and to circumstances in which the other fund was unable to meet its
obligations.
<PAGE>
Investment Adviser
Colonial Management Associates, Inc.
One Financial Center
Boston, MA 02111-2621
- -----------------------------------------------------
Distributor
Colonial Investment Services, Inc.
One Financial Center
Boston, MA 02111-2621
- -----------------------------------------------------
Custodian
Boston Safe Deposit and Trust Company
One Boston Place
Boston, MA 02108-2624
- -----------------------------------------------------
Shareholder Services and Transfer Agent
Colonial Investors Service Center, Inc.
One Financial Center
Boston, MA 02111-2621
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.
January 2, 1996
COLONIAL SMALL
STOCK FUND
PROSPECTUS
Colonial Small Stock Fund seeks long-term growth by investing primarily in
smaller capitalization equities.
For more detailed information about the Fund, call the Adviser at 1-800-248-2828
for the January 2, 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, & 8.
To apply for special services for a new or existing account, complete sections
4, 5, 6, 7, or 9 as appropriate.
___ Please check here if this is a revision.
1-----------Account Ownership--------------
Please choose one of the following.
__Individual: Print your name, Social Security #, U.S. citizen status.
__Joint Tenant: Print all names, the Social Security # for the first person,
and his/her U.S. citizen status.
__Uniform Gift to Minors: Name of custodian and minor, minor's Social Security
#, minor's U.S. citizen status.
__Corporation, Association, Partnership: Include full name, Taxpayer I.D. #.
__Trust: Name of trustee, trust title & date, and trust's Taxpayer I.D. #.
- --------------------------------------
Name of account owner
- --------------------------------------
Name of joint account owner
- --------------------------------------
Street address
- --------------------------------------
Street address
- --------------------------------------
City, State, and Zip
- --------------------------------------
Daytime phone number
- --------------------------------------
Social Security # or Taxpayer I.D. #
Are you a U.S. citizen? Yes___ No___
- --------------------------------------
If no, country of permanent residence
- --------------------------------------
Owner's date of birth
- --------------------------------------
Account number (if existing account)
2 -----Colonial Fund(s) You Are Purchasing--------
Your investment will be made in Class A shares if no class is indicated.
Certificates are not available for Class B or D shares. If no distribution
option is selected, distributions will be reinvested in additional Fund shares.
Please consult your financial adviser to determine which class of shares best
suits your needs.
Fund Choice(s)
Fund
___ A Shares ___ B Shares (less than $250,000) ___ D Shares (less than $500,000)
$----------------------------------------------
Amount
Method of Payment
Choose one for each fund
___Check payable to the Fund, enclosed
___Bank wired on (Date) ____/____/____
Wire confirmation #
___Dealer purchased on (Date) ____/____/____
Trade confirmation #
Ways to Receive Your Distributions
Choose one for each fund
___Reinvest dividends and capital gains
___Dividends in cash; reinvest capital gains
___Dividends and capital gains in cash
___Automatic Dividend Diversification See section 5A, inside
___Direct Deposit via Colonial Cash Connection See section 4B, inside
Fund Choice(s)
Fund
___ A Shares ___ B Shares (less than $250,000) ___ D Shares (less than $500,000)
$----------------------------------------------
Amount
Method of Payment
Choose one for each fund
___Check payable to the Fund, enclosed
___Bank wired on (Date) ____/____/____
Wire confirmation #
___Dealer purchased on (Date) ____/____/____
Trade confirmation #
Ways to Receive Your Distributions
Choose one for each fund
___Reinvest dividends and capital gains
___Dividends in cash; reinvest capital gains
___Dividends and capital gains in cash
___Automatic Dividend Diversification See section 5A, inside
___Direct Deposit via Colonial Cash Connection See section 4B, inside
Fund Choice(s)
Fund
___ A Shares ___ B Shares (less than $250,000) ___ D Shares (less than $500,000)
$----------------------------------------------
Amount
Method of Payment
Choose one for each fund
___Check payable to the Fund, enclosed
___Bank wired on (Date) ____/____/____
Wire confirmation #
___Dealer purchased on (Date) ____/____/____
Trade confirmation #
Ways to Receive Your Distributions
Choose one for each fund
___Reinvest dividends and capital gains
___Dividends in cash; reinvest capital gains
___Dividends and capital gains in cash
___Automatic Dividend Diversification See section 5A, inside
___Direct Deposit via Colonial Cash Connection See section 4B, inside
3---Your Signature & Taxpayer I.D. Number Certification----
Each person signing on behalf of an entity represents that his/her actions are
authorized.
I have received and read each appropriate Fund prospectus and understand that
its terms are incorporated by reference into this application. I understand that
this application is subject to acceptance. I understand that certain redemptions
may be subject to a contingent deferred sales charge. I certify, under penalties
of perjury, that:
1. The Social Security # or Taxpayer I.D. # provided is correct.
Cross out 2(a) or 2(b) if either is not true in your case.
2. I am not subject to 31% backup withholding because (a) I have not been
notified that I am subject to backup withholding or (b) the Internal Revenue
Service has notified me that I am no longer subject to backup withholding.
It is agreed that the Fund, all Colonial companies and their officers,
directors, agents, and employees will not be liable for any loss, liability,
damage, or expense for relying upon this application or any instruction believed
genuine.
X______________________________________________
Signature
- -----------------------------------------------
Capacity, if applicable Date
X______________________________________________
Signature
- -----------------------------------------------
Capacity, if applicable Date
4--------Ways to Withdraw from Your Fund-------
It may take up to 30 days to activate the following features. Complete only the
section(s) that apply to the features you would like.
A. Systematic Withdrawal Plan (SWP)
You can receive monthly, quarterly, or semiannual checks from your account in
any amount you select, with certain limitations. Your redemption checks can be
sent to you at the address of record for your account, to your bank account, or
to another person you choose. The value of the shares in your account must be at
least $5,000 and you must reinvest all of your distributions. Checks will be
processed on the 10th calendar day of the month or the following business day.
Withdrawals in excess of 12% annually of your current account value will not be
accepted. Redemptions made in addition to Plan payments may be subject to a
contingent deferred sales charge for Class B or Class D shares. Please consult
your financial or tax adviser before electing this option.
Funds for Withdrawal:
1______________________________________________
Name of fund
Withdrawal Amount
Redeem shares from account as follows:
Dollar amount of payment $___________ or
Total annual %_________
Frequency (choose one)
__Monthly __Quarterly __Semiannually
I would like payments to begin _________________ (month).
2______________________________________________
Name of fund
Withdrawal Amount
Redeem shares from account as follows:
Dollar amount of payment $___________ or
Total annual %_________
Frequency (choose one)
__Monthly __Quarterly __Semiannually
I would like payments to begin _________________ (month).
3______________________________________________
Name of fund
Withdrawal Amount
Redeem shares from account as follows:
Dollar amount of payment $___________ or
Total annual %_________
Frequency (choose one)
__Monthly __Quarterly __Semiannually
I would like payments to begin _________________ (month).
Payment Instructions Send the payment to (choose one):
__My address of record.
__My bank account via Colonial Cash Connection. Please complete Section 4B and
the Bank Information section below.
__The payee listed at right.
- ----------------------------------------------
Name of payee
- ----------------------------------------------
Address of payee
- ----------------------------------------------
City
- ----------------------------------------------
State Zip
- ----------------------------------------------
Payee's bank account number, if applicable
X_____________________________________________
Signature of account owner(s)
X_____________________________________________
Signature of account owner(s)
Signatures of all owners must be guaranteed. Provide the name, address,
payment amount, and frequency for other payees (maximum of 5) on a separate
sheet.
B. Direct Deposit via Colonial Cash Connection
You can arrange to have distributions from your Colonial fund account(s) or
Systematic Withdrawal Plan checks automatically deposited directly into your
bank checking account. Distribution deposits will be made 2 days after the
Fund's payable date. Please complete Bank Information below and attach a blank
check marked "VOID."
Please deposit my:
__Dividend distributions only
__Dividend and capital gain distributions
__Systematic Withdrawal Plan payments
I understand that my bank must be a member of the Automated Clearing House
system.
C. Telephone Withdrawal Options
All telephone transaction calls are recorded. These options are not available
for retirement accounts.
1. Fast Cash
You are automatically eligible for this service. You or your financial adviser
can withdraw up to $50,000 from your account and have it sent to your address on
our records. For your protection, this service is only available on accounts
that have not had an address change within 60 days of the redemption request.
2. Telephone Redemption
__I would like the Telephone Redemption privilege. You may withdraw shares from
your fund account by telephone and send your money to your bank account. If
you are adding this service to an existing account, complete the Bank
Information section below and have all shareholder signatures guaranteed.
Colonial's and the Fund's liability is limited when following telephone
instructions; a shareholder may suffer a loss from an unauthorized transaction
reasonably believed by Colonial to have been authorized. Telephone redemptions
exceeding $5,000 will be sent via Federal Fund Wire, usually on the next
business day ($7.50 will be deducted). Redemptions of $5,000 or less will be
sent by check to your designated bank.
Bank Information (For A, B, or C Above) I authorize deposits to the following
bank account:
- ------------------------------------------------------------
Bank name City Bank account number
- ------------------------------------------------------------
Bank street address State Zip Bank routing # (your bank
can provide this)
5-----Ways to Make Additional Investments--------
These services involve continuous investments regardless of varying share
prices. Please consider your ability to continue purchases through periods of
price fluctuations. Dollar cost averaging does not assure a profit or protect
against loss in declining markets.
A. Automatic Dividend Diversification
Please diversify my portfolio by investing fund distributions in another
Colonial fund. These investments will be made in the same share class and
without sales charges. I have carefully read the prospectus for the fund(s)
listed below.
- ----------------------------
From fund
- ----------------------------
Account number (if existing)
- ----------------------------
To fund
- ----------------------------
Account number (if existing)
- ----------------------------
From fund
- ----------------------------
Account number (if existing)
- ----------------------------
To fund
- ----------------------------
Account number (if existing)
- ----------------------------
From fund
- ----------------------------
Account number (if existing)
- ----------------------------
To fund
- ----------------------------
Account number (if existing)
B. Automated Dollar Cost Averaging
This program allows you to automatically have money from any Colonial fund in
which you have a balance of at least $5,000 transferred into the same share
class of up to four other Colonial funds, on a monthly basis. The minimum amount
for each transfer is $100. Please complete the section below.
- ------------------------------------
Fund from which shares will be sold
$-------------------------
Amount to redeem monthly
- ------------------------------------
Fund name
$-------------------------
Amount to invest monthly
- ------------------------------------
Fund name
$-------------------------
Amount to invest monthly
- ------------------------------------
Fund name
$-------------------------
Amount to invest monthly
C. Fundamatic
Fundamatic automatically transfers the specified amount from your bank checking
account to your Colonial fund account. Your bank needs to be a member of the
Automated Clearing House system. Please attach a blank check marked "VOID."
Also, complete the section below and Fundamatic Authorization (Section 6).
- ------------------------------------
Fund name
$--------------------- -----------------
Amount to transfer Month to start
Frequency
__Monthly or __Quarterly
Date
__5th or __20th of the month
- ------------------------------------
Fund name
$--------------------- -----------------
Amount to transfer Month to start
Frequency
__Monthly or __Quarterly
Date
__5th or __20th of the month
- ------------------------------------
Fund name
$--------------------- -----------------
Amount to transfer Month to start
Frequency
__Monthly or __Quarterly
Date
__5th or __20th of the month
6 -------------Fundamatic Authorization--------------------
Authorization to honor checks drawn by Colonial Investors Service Center,
Inc. Do Not Detach. Make sure all depositors on the bank account sign to
the far right. Please attach a blank check marked "VOID" here. See reverse
for bank instructions.
I authorize Colonial to draw on my bank account, by check or electronic funds
transfer, for an investment in a Colonial fund. Colonial and my bank are not
liable for any loss arising from delays or dishonored draws. If a draw is not
honored, I understand that notice may not be given and Colonial may reverse the
purchase and charge my account $15.
- --------------------------------------
Bank name
- --------------------------------------
Bank street address
- --------------------------------------
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
7--Ways to Reduce Your Sales Charges for Class A Shares-- These services can
help you reduce your sales charge while increasing your share balance over the
long term.
A. Right of Accumulation
If you, your spouse or your children own Class A, B, or D shares in other
Colonial funds, you may be eligible for a reduced sales charge. The combined
value of your accounts must be $50,000 or more. Class A shares of money market
funds are not eligible unless purchased by exchange from another Colonial fund.
The sales charge for your purchase will be based on the sum of the purchase
added to the value of all shares in other Colonial funds at the previous day's
public offering price.
__Please link the accounts listed below for Right of Accumulation privileges, so
that this and future purchases will receive any discount for which they are
eligible.
- -------------------------------------
Name on account
- -------------------------------------
Account number
- -------------------------------------
Name on account
- -------------------------------------
Account number
B. Statement of Intent
If you agree in advance to invest at least $50,000 within 13 months, you'll pay
a lower sales charge on every dollar you invest. If you sign a Statement of
Intent within 90 days after you establish your account, you can receive a
retroactive discount on prior investments. The amount required to receive a
discount varies by fund; see the sales charge table in the "How to Buy Shares"
section of your fund prospectus.
__I want to reduce my sales charge.
I agree to invest $ _______________ over a 13-month period starting
______/______/ 19______ (not more than 90 days prior to this application). I
understand an additional sales charge must be paid if I do not complete this
Statement of Intent.
8-------------Financial Service Firm--------------------- To be completed by a
Representative of your financial service firm.
This application is submitted in accordance with our selling agreement with
Colonial Investment Services, Inc. (CISI), the Fund's prospectus, and this
application. We will notify CISI of any purchase made under a Statement of
Intent, Right of Accumulation, or Sponsored Arrangement. We guarantee the
signatures on this application and the legal capacity of the signers.
- -------------------------------------
Representative's name
- -------------------------------------
Representative's number
- -------------------------------------
Representative's phone number
- -------------------------------------
Account # for client at financial
service firm
- -------------------------------------
Branch office address
- -------------------------------------
City
- -------------------------------------
State Zip
- -------------------------------------
Branch office number
- -------------------------------------
Name of financial service firm
- -------------------------------------
Main office address
- -------------------------------------
Main office address
- -------------------------------------
City
- -------------------------------------
State Zip
X____________________________________
Authorized signature
9--Request for a Combined Quarterly Statement Mailing-- Colonial can mail all of
your quarterly statements in one envelope. This option simplifies your record
keeping and helps reduce fund expenses.
__I want to receive a combined quarterly mailing for all my accounts.
Fundamatic (See Reverse Side)
Applications must be received before the start date for processing.
This program's deposit privilege can be revoked by Colonial without prior notice
if any check is not paid upon presentation. Colonial has no obligation to notify
the shareholder of non-payment of any draw. This program may be discontinued by
Colonial by written notice at least 30 business days prior to the due date of
any draw or by the shareholder at any time.
To the Bank Named on the Reverse Side:
Your depositor has authorized Colonial Investors Service Center, Inc. to collect
amounts due under an investment program from his/her personal checking account.
When you pay and charge the draws to the account of your depositor executing the
authorization payable to the order of Colonial Investors Service Center, Inc.,
Colonial Management Associates, Inc., hereby indemnifies and holds you harmless
from any loss (including reasonable expenses) you may suffer from honoring such
draw, except any losses due to your payment of any draw against insufficient
funds.
D-461L-594
<PAGE>
Part A of Post-Effective Amendment No. 7 as it relates to the Prospectus of
Colonial U.S. Fund for Growth and the Class Z Prospectus of Colonial Small
Stock Fund, filed with the Commission on October 11, 1995, is incorporated
herein by reference.
<PAGE>
COLONIAL TRUST VI
Cross Reference Sheet (Colonial Small Stock Fund)
Item Number of Form N-1A Location or Caption in the 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; Portfolio
Turnover; Miscellaneous Investment Practices
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 SMALL STOCK FUND
Statement of Additional Information
January 2, 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
Small Stock Fund (Fund). This SAI is not a prospectus and is authorized for
distribution only when accompanied or preceded by a Prospectus of the Fund dated
January 2, 1996 (Classes A, B and D) or October 20, 1995 (Class Z). The SAI
should be read together with a Prospectus. Investors may obtain a free copy of a
Prospectus from Colonial Investment Services, Inc., One Financial Center,
Boston, MA 02111-2621.
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
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
SS--0196
<PAGE>
PART 1
COLONIAL SMALL STOCK FUND
Statement of Additional Information
January 2, 1996
DEFINITIONS
"Trust" Colonial Trust VI
"Fund" Colonial Small Stock Fund
"Adviser" Colonial Management Associates, Inc., the Fund's
investment adviser
"CISI" Colonial Investment Services, Inc., the
Fund's distributor
"CISC" Colonial Investors Service Center, Inc., the Fund's
shareholder services and transfer agent
INVESTMENT OBJECTIVE AND POLICIES
The Fund's Prospectuses describe its investment objective and investment
policies. This Part 1 includes additional information concerning, among other
things, the fundamental investment policies of the Fund. Part 2 of this SAI
contains additional information about the following securities and investment
techniques that are described or referred to in the Prospectuses:
Small Companies
Short-Term Debt Instruments
Repurchase Agreements
Futures Contracts and Related Options (Index futures contracts.
Used only to invest cash in anticipation of market rise, not
to hedge against market decline)
Except as described below 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 Investment Company Act of 1940 (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. The following fundamental
investment policies can not be changed without such a vote.
The Fund may:
1. Issue senior securities only through borrowing money from banks for
temporary or emergency purposes up to 10% of its net assets; however, it
will not purchase additional portfolio securities while borrowings exceed
5% of net assets;
2. Only own real estate acquired as the result of owning securities and not
more than 5% of total assets;
3. Purchase and sell futures contracts and related options so long as the
total initial margin and premiums on the contracts does not exceed 5% of
its total assets;
4. Underwrite securities issued by others only when disposing of portfolio
securities;
5. Make loans through lending of securities not exceeding 30% of total
assets, through the purchase of debt instruments or similar evidences of
indebtedness typically sold privately to financial institutions and
through repurchase agreements; and
6. Not concentrate more than 25% of its total assets in any one industry or
with respect to 75% of total assets purchase any security (other than
obligations of the U.S. government and cash items including receivables)
if as a result more than 5% of its total assets would then be invested in
securities of a single issuer, or purchase voting securities of an issuer
if, as a result of purchase, the Fund would own more than 10% of the
outstanding voting shares of such issuer.
OTHER INVESTMENT POLICIES
As non-fundamental investment policies which may be changed without a
shareholder vote, the Fund may not:
1. Purchase securities on margin, but it may receive short-term credit to
clear securities transactions and may make initial or maintenance margin
deposits in connection with futures transactions;
2. Have a short securities position, unless the Fund owns, or owns rights
(exercisable without payment) to acquire, an equal amount of such
securities;
3. Own voting securities of any company if the Trust knows that officers and
Trustees of the Trust or officers and directors of the Adviser who
individually own more than 0.5% of such securities together own more than
5% of such securities;
4. Invest in interests in oil, gas or other mineral exploration or
development programs, including leases;
5. 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;
6. Pledge more than 33% of its total assets;
7. Purchase any security if, as a result of such purchase, more than 10%
of its total assets would then be invested in securities of issuers which
are restricted as to disposition;
8. Purchase or sell commodity contracts if the total initial margin and
premiums on the contracts would exceed 5% of its total assets;
9. Invest more than 15% of its net assets in illiquid assets; and
10. 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 value, would exceed 5% 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 without value.
Total assets and net assets are determined at current value for purposes of
compliance with investment restrictions and policies. All percentage limitations
will apply at the time of investment and are not violated unless an excess or
deficiency occurs as a result of such investment. For the purpose of the Act
diversification requirement, the issuer is the entity whose revenues support the
security.
PORTFOLIO TURNOVER
Year ended June 30
1995 1994
---- ----
64% 35%
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 0.60%
(subject to any reductions the Adviser may agree to periodically).
Recent Fees paid to the Adviser, CISI and CISC (in thousands)
Year ended June 30
1995 1994 1993
---- ---- ----
Management fee $279 $179 $137
Bookkeeping fee 28 27 27
Shareholder service and
transfer agent fee 154 96 119
12b-1 fees:
Service fee 118 75 57
Distribution fee *(Class B) 128 34 4
*As of June 30, 1995, no Class D shares had been issued.
Brokerage Commissions (in thousands)
1995 1994 1993
---- ---- ----
Total commissions $ 94 ---- $ 80
Directed transactions** $6,217 $4,807 $10,347
Commissions on directed transactions$ 17 $ 317 $ 72
** See "Management of the Colonial Funds-Portfolio Transactions-Brokerage and
research services" in Part 2 of this SAI.
Trustees and Trustees Fees
For the fiscal year ended June 30, 1995, and the calendar year ended December
31, 1994, the Trustees received the following compensation for serving as
Trustees:
<PAGE>
Total
Compensation
from Trust and
Aggregate Pension or Estimated Fund Complex
Compensation Retirement Annual Paid to the
from Fund for Benefits Benefits Trustees for
Fiscal Accrued As Part Upon the Calendar
Trustee Year of Fund Expense Retirement Year (b)
------- ----------- ------------ ------------ ------------
Robert J. Birnbaum $ 441 $ 0 $ 0 $ 0
Tom Bleasdale 1,303(a) 0 0 101,000(c)
Lora S. Collins 1,429 0 0 95,000
James E. Grinnell 441 0 0 0
William D. Ireland, Jr. 1,492 0 0 110,000
Richard W. Lowry 441 0 0 0
William E. Mayer 1,190 0 0 89,752
John A. McNeice, Jr. 0 0 0 0
James L. Moody, Jr. 1,352(d) 0 0 109,000
John J. Neuhauser 1,214 0 0 95,000
George L. Shinn 1,508 0 0 112,000
Robert L. Sullivan 1,336 0 0 104,561
Sinclair Weeks, Jr. 1,481 0 0 116,000
(a) Includes $544 payable in later years as deferred compensation.
(b) At December 31, 1994, the Colonial Funds Complex consisted of 31 open-end
and 5 closed-end management
investment company portfolios.
(c) Includes $49,000 payable in later years as deferred compensation.
(d) Includes $705 payable in later years as deferred compensation.
The following table sets forth the amount of compensation paid to Messrs.
Birnbaum, Grinnell and Lowry in their capacities as Trustees of the Liberty
All-Star Equity Fund, The Charles Allmon Trust, Inc., Liberty Financial Trust
and LFC Utilities Trust (together, Liberty Funds) for service during the
calendar year ended December 31, 1994:
Pension or Estimated Annual Total Compensation
Retirement Benefits Benefits Upon From Liberty Funds
Accrued As Part of Retirement for Calendar Year (e)
Trustee Fund Expense
-------- ----------------- --------------- ------------------
Robert J. Birnbaum(f) $0 $0 $ 0
James E. Grinnell(f) 0 0 31,032
Richard W. Lowry(f) 0 0 31,282
(e) At December 31, 1994, Liberty Financial Trust and LFC Utilities Trust
were advised by Stein Roe & Farnham Incorporated (Stein Roe), and
Liberty All-Star Equity Fund and The Charles Allmon Trust, Inc. were
advised by Liberty Asset Management Company (LAMCO). Stein Roe and LAMCO
were and are indirect wholly-owned subsidiaries of Liberty Financial
Companies, Inc. (an intermediate parent of the Adviser). 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 merged into a new portfolio of Colonial Trust III.
(f) Elected as trustee of the Colonial Funds Complex on April 21, 1995.
Ownership of the Fund
At November 1, 1995, the officers and Trustees as a group beneficially owned
approximately 110,577 Class A shares representing 4.89% of the then outstanding
shares. The largest single holding consisted of shares held by The Colonial
Group, Inc. Profit Sharing Plan, of which certain officers of the Trust are
trustees, which held approximately 94,370 shares or 4.17% of the then
outstanding shares. No Class B shares were held by Trustees or officers of the
Fund on November 1, 1995. All of the Class Z shares outstanding on November 1,
1995 (approximately 4,035 shares) were held by the Adviser.
Merrill Lynch Pierce Fenner & Smith, Attn. Book Entry, 4800 Deer Lake Drive
East, Jacksonville, FL 32216, owned of record approximately 373,729 Class B
shares or 20.39% of the Fund's then outstanding Class B shares on November 1,
1995.
At November 1, 1995, there were 5,503 Class A, 7,237 Class B and 1 Class Z
shareholders of record of the Fund.
<PAGE>
Sales Charges (in thousands) Class A Shares
Year ended June 30
1995 1994 1993
---- ----
Aggregate charges on Fund share sales $169 $69 $70
Sales charges retained by CISI $ 23 $10 $10
Class B Shares
Year ended June 30 November 9, 1992
(Class B shares initially
offered) through
1995 1994 through June 30, 1993
---- ---- ---------------------
Aggregate contingent deferred
sales charges (CDSC)
on Fund redemptions retained by CISI $77 $9 $1
12b-1 Plans, CDSC and Conversion of Shares
The Fund offers four classes of shares - Class A, Class B, Class D 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 and a distribution fee at an annual rate of
0.75% of average net assets attributed to Classes B and D. 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 the Adviser to the extent
that such payments might be construed to be indirectly financing of 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 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 to 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 not interested persons is effected by such non-interested
Trustees.
Class A 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 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 subject to 1.00% CDSC on
redemptions within one year after purchase. Class Z shares are offered at net
asset value and are not subject to a CDSC.
The CDSCs are described in the Prospectus.
No CDSC will be imposed on shares derived from reinvestment of distributions or
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.
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 the CDSC.
<PAGE>
Sales-related expenses for the fiscal year ended June 30, 1995, (in thousands)
of CISI relating to the Fund were as follows:
Year ended
June 30, 1995
Class A Shares Class B Shares
Fees to FSFs $93 $581
Cost of sales material relating to the
Fund (including printing and mailing
expenses) $41 $ 65
Allocated travel, entertainment
and other promotional
(including advertising) $42 $ 62
INVESTMENT PERFORMANCE
The Fund's Class A and Class B yields for the month ended June 30, 1995 were
- -0.08% and -0.83%, respectively.
The Fund's Class A average annual total returns at June 30, 1995 were as
follows:
Since Inception
1 year 5 years (July 25, 1986)
------ ------- ---------------
With sales charge of 5.75% 25.91% 9.22% 7.33%
Without sales charge 33.53% 10.51% 8.05%
Returns for 5 years and since inception were achieved in part under different
objectives and policies in effect before November 2, 1992.
The Fund's Class B average annual total returns at June 30, 1995 were as
follows:
November 9, 1992
(Class B shares initially offered)
1 Year through December 31, 1994
------ -------------------------
With CDSC of 5.00% 27.67% 20.86%
Without CDSC 32.60% 21.69%
The Fund's Class A and Class B distribution rates at June 30, 1995 based on the
latest twelve months' distributions, were 0.00% for each Class. See "Performance
Measures" in Part 2 of this SAI for how calculations are made.
CUSTODIAN
Boston Safe Deposit and Trust Company 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 have been so incorporated, and the schedule of financial
highlights included in the Prospectus has 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 financial statements and Report of Independent Accountants appearing on
pages 6 through 20 of the June 30, 1995 Annual Report, are incorporated in this
SAI by reference.
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. A 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. A 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 or
future legislation limits and 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.
Foreign Securities
A 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.
A 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.
A 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)
A 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. A 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)
A 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
A 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
A 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
an amount equal to any dividends or interest received on securities lent. A 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. A fund may also call such loans in order to
sell the securities involved.
Forward Commitments
A 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. A fund may realize short-term profits or losses upon the sale of forward
commitments.
Repurchase Agreements
A 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. A 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. A fund will not invest the proceeds of a reverse repurchase
agreement for a period which exceeds the duration of the reverse repurchase
agreement. A 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. A 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.
A 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. A fund may
write combinations of covered puts and calls on the same underlying security.
A 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.
A 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. A 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. A 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. A 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. A 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 the 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
A fund will enter into futures contracts only when, in compliance with the SEC's
requirements, cash or cash equivalents, (or, in the case of the fund investing
primarily in foreign equity securities, such equity securities), equal in value
to the commodity value (less any applicable margin deposits) have been deposited
in a segregated account of the fund's custodian.
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."
A 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. A 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. A 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. A
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. A 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.
A 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.
A 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. A 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
A fund may engage in currency exchange transactions to protect against
uncertainty in the level of future currency exchange rates.
A 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. A 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.
A 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. A 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. A 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 fund 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. A fund will enter into such 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. 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.
A 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
A 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. A 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. A 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.
A 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 a fund portfolio will not exceed 10% of the value
of the fund's total assets calculated immediately after each stand-by commitment
is acquired. A 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 and state 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 a 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 a fund's investments other than tax-exempt instruments may give rise to
taxable income. A 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 a 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 fund.
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
Colonial Management Associates, Inc. (CMA) 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 this SAI
for a description of the Adviser to these funds) CMA is a subsidiary of The
Colonial Group, Inc. (TCG), One Financial Center, Boston, MA 02111. TCG is a
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 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 worker's 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.
Trustees and Officers (this section applies to all of the Colonial funds)
Robert J. Birnbaum(Age 68), Trustee of all Colonial funds since April, 1995 (1),
is a Trustee of LFC Utilites Trust in which Colonial Global Utilities Fund is
invested (LFC Portfolio) since November, 1994, is a Trustee of certain
charitable and non-charitable organizations since December, 1993 (formerly
Special Counsel, Dechert Price & Rhoads from September, 1988 to December, 1993;
President and Chief Operating Officer, New York Stock Exchange, Inc. from May,
1985 to June, 1988), 313 Bedford Road, Ridgewood, NJ 07450
Tom Bleasdale (Age 65), Trustee of all Colonial funds since November, 1987 (2),
is a Trustee of certain charitable and non-charitable organizations since 1993
(formerly Chairman of the Board and Chief Executive Officer, Shore Bank & Trust
Company from 1992-1993), 1508 Ferncroft Tower, Danvers, MA 01923
Lora S. Collins (Age 59), Trustee of all Colonial funds since August, 1980 (2),
is an Attorney with Kramer, Levin, Naftalis, Nessen, Kamin & Frankel since
September, 1986, 919 Third Avenue, New York, NY 10022
James E. Grinnell(Age 66), Trustee of all Colonial funds since April, 1995 (1),
is a Private Investor since November, 1988, is a Trustee of the LFC Portfolio
since August, 1991 (formerly Senior Vice President-Operations, The Rockport
Company from May, 1986 to November, 1988), 22 Harbor Avenue, Marblehead, MA
01945
William D. Ireland, Jr. (Age 71), Trustee of all Colonial funds since November,
1969 (2), is a Trustee of certain charitable and non-charitable organizations
since February, 1990 (formerly Chairman of the Board, Bank of New England, -
Worcester from August, 1987 to February, 1990), 103 Springline Drive, Vero
Beach, FL 32963
Richard W. Lowry(Age 59), Trustee of all Colonial funds since April, 1995 (1),
is a Trustee of the LFC Portfolio since August, 1991, is a Private Investor
since August, 1987 (formerly Chairman and Chief Executive Officer, U.S. Plywood
Corporation from 1985 to August, 1987), 10701 Charleston Drive, Vero Beach, FL
32963
William E. Mayer (Age 55), Trustee of all Colonial funds since February, 1994
(2), is Dean, College of Business and Management, University of Maryland since
October, 1992 (formerly Dean, Simon Graduate School of Business, University of
Rochester from October, 1991 to July, 1992; formerly Chairman and Chief
Executive Officer, C.S. First Boston Merchant Bank from January, 1990 to
January, 1991; and formerly President and Chief Executive Officer, The First
Boston Corporation from September, 1988 to January, 1990), College Park, MD
20742
John A. McNeice, Jr. (3)(Age 63), Trustee and President of all Colonial funds
since February, 1975 (2), is Chairman of the Board and Director, TCG since
November, 1984 ,and of CMA since November, 1983, Director, Liberty Financial
since March, 1995 (formerly Chief Executive Officer, CMA and TCG from November,
1983 to March, 1995)
James L. Moody, Jr. (Age 63), Trustee of all Colonial funds since May, 1986 (2),
is Chairman of the Board, Hannaford Bros., Co. since May, 1984 (formerly Chief
Executive Officer, Hannaford Bros. Co. from May, 1984 to May, 1992), P.O. Box
1000, Portland, ME 04104
John J. Neuhauser (Age 51), Trustee of all Colonial funds since January, 1984
(2), is Dean, Boston College School of Management since 1978, 140 Commonwealth
Avenue, Chestnut Hill, MA 02167
George L. Shinn (Age 72), Trustee of all Colonial funds since May, 1984 (2), is
a Financial Consultant since 1989 (formerly Chairman, Chief Executive Officer
and Consultant, The First Boston Corporation from 1983 to July, 1991), The First
Boston Corporation, Tower Forty Nine, 12 East 49th Street, New York, NY 10017
Robert L. Sullivan (Age 67), Trustee of all Colonial funds since September, 1987
(2), is a self-employed Management Consultant since January, 1989 (formerly
Management Consultant, Saatchi and Saatchi Consulting Ltd. from December, 1987
to January, 1989 and formerly Principal and International Practice Director,
Management Consulting, Peat Marwick Main & Co. over five years), 7121 Natelli
Woods Lane, Bethesda, MD 20817
Sinclair Weeks, Jr. (Age 72), Trustee of all Colonial funds since October, 1968
(2), is Chairman of the Board, Reed & Barton Corporation since 1987, Bay Colony
Corporate Center, Suite 4550, 1000 Winter Street, Waltham, MA 02154
Harold W. Cogger (Age 59), Vice President since July, 1993, is President since
July, 1993, Chief Executive Officer since March, 1995 and Director since March,
1984, CMA (formerly Executive Vice President, CMA from October, 1989 to July,
1993); President since October, 1994, Chief Executive Officer since March, 1995
and Director since October, 1981, TCG; Executive Vice President and Director,
Liberty Financial since March, 1995
Peter L. Lydecker (Age 41), Controller since June, 1993 (formerly Assistant
Controller from March, 1985 to June, 1993), is Vice President, CMA since June,
1993 (formerly Assistant Vice President, CMA from August, 1988 to June, 1993)
Davey S. Scoon (Age 48), Vice President since June, 1993, is Executive Vice
President since July, 1993 and Director since March, 1985, CMA (formerly Senior
Vice President and Treasurer from March, 1985 to July, 1993, CMA); Executive
Vice President and Chief Operating Officer, TCG since March, 1995 (formerly Vice
President - Finance and Administration, TCG from November, 1985 to March, 1995)
Richard A. Silver (Age 48), Treasurer and Chief Financial Officer since July,
1993 (formerly Controller from July, 1980 to June, 1993), is Senior Vice
President and Director since April, 1988, Treasurer and Chief Financial Officer
since July, 1993, CMA; Treasurer and Chief Financial Officer, TCG since July,
1993 (formerly Assistant Treasurer, TCG from January, 1985 to July, 1993)
Arthur O. Stern (Age 56),Secretary since 1985, is Director since 1985, Executive
Vice President since July, 1993, General Counsel, Clerk and Secretary since
March, 1985, CMA; Executive Vice President, Legal and Compliance since March,
1995 and Clerk since March, 1985, TCG (formerly Vice President - Legal, TCG from
March, 1985 to March, 1995)
(1) On April 3, 1995, and in connection with the merger of The Colonial
Group, Inc. 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.
(2) Elected as a Trustee of the LFC Portfolio on March 27, 1995.
(3) Trustees who are "interested persons" (as defined in the 1940 Act) of
the fund or CMA.
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
(except Mr. McNeice) 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.
CMA and/or its affiliate, Colonial Advisory Services, Inc. (CASI), has rendered
investment advisory services to investment company, institutional and other
clients since 1931. CMA 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 CMA 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-See Part I of this SAI)) 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 Adviser 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, CMA, 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) monitoring compliance by the Fund (only applicable to Colonial Municipal
Money Market 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;
(f) monitoring the investments and operations of the SR&F Municipal Money Market
Portfolio in which Colonial Municipal Money Market Fund is invested (Municipal
Money Market Portfolio) and the LFC Portfolio and reporting to the Trustees from
time to time with respect thereto;
(g) coordinating and overseeing the activities of each Fund's other third-party
service providers; and
(h) maintaining certain books and records of each Fund.
The Pricing and Bookkeeping Agreement
CMA 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 fundCMA, 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), CMA 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
CMA 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.
The 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, Colonial Newport Tiger Fund or Colonial Global
Utilities Fund. For each of Colonial Municipal Money Market Fund, Colonial U.S.
Fund for Growth and Colonial Global Utilities Fund, see Part 1 of each fund's
respective SAI.
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) and its 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.
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 which
it advises 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 the 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 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. 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. 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.
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'sTrustees 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 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 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 an 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 an 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. A
shareholder may send any certificates which have been previously acquired to
CISC for deposit to their account.
SPECIAL PURCHASE PROGRAMS/INVESTOR SERVICES
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 fundamatic
is by electronic funds transfer, you may request the fundamatic 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 the 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 funds,
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.
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 it 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.
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. The $50,000
Fast Cash privilege is 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
the other Colonial funds. 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 applies only to 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 Telephone Redemption Statement of Intent
Sponsored Arrangements Colonial Cash Connection Share Certificates
$50,000 Fast Cash Reduced Sales Charges Automatic Dividend
Right of Accumulation for any "person" Diversification
Exchange Privilege
*Exchanges may be made to other Colonial funds offering the Program.
Because of the unavailability of certain services, the 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
protect against loss in declining markets.
Reinstatement Privilege. An investor who has redeemed Class A, B, or D 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. Class A shares of
certain funds may be sold at NAV to the following current and retired
individuals: Trustees of funds advised or administered by CMA; directors,
officers and employees of CMA, CISI and other companies affiliated with CMAl;
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 applies only
to 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 organizations
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 applies only to 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. 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, CMAl
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) (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 CMA , 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. HOW TO SELL SHARES
Shares may also 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).
To sell shares directly to the Fund, send a signed letter of instruction or
stock power form to CISC, along with any certificates for share 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, 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.
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 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 open account.
A Colonial 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 (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. 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.
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 my exercise this privilege only once. No
charge is currently made for reinvestment.
Shares of 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.
Undelivered distribution checks returned by the post office will be invested in
your account.
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. 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 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 a 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 a 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). A fund's yield for any period may be more or less than
the amount actually distributed in respect of such period.
A fund may compare its performance to various unmanaged indices published by
such sources as listed in Appendix II.
A fund may also refer to quotations, graphs and electronically transmitted data
from sources believed by the 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 its Municipal Bond ratings set forth above.
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 being when
facilities are completed, or (d) payments to which some other limiting
conditions attaches. 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 its 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.
APPENDIX II
1994
SOURCE CATEGORY RETURN
(%)
Donoghue Tax-Free Funds 2.25
Donoghue U.S. Treasury Funds 3.34
Dow Jones Industrials 5.03
Morgan Stanley Capital 8.06
International EAFE Index
Morgan Stanley Capital 8.21
International EAFE GDP Index
Libor Six-month Libor 6.9375
Lipper Adjustable Rate Mortgage -2.20
Lipper California Municipal Bond -7.52
Funds
Lipper Connecticut Municipal Bond -7.04
Funds
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 -0.28
Bonds
Lipper Global Flexible Portfolio -3.03
Funds
Lipper Growth Funds -2.15
Lipper Growth & Income Funds -0.94
Lipper High Current Yield Bond Funds -3.83
Lipper High Yield Municipal Bond -4.99
DebtBondDebt
Lipper Fixed Income Funds -3.62
Lipper Insured Municipal Bond -6.47
Average
Lipper Intermediate Muni Bonds -3.53
Lipper Intermediate (5-10) U.S. -3.72
Government Funds
Lipper Massachusetts Municipal Bond -6.35
Funds
Lipper Michigan Municipal Bond Funds -5.89
Lipper Mid Cap Funds -2.05
Lipper Minnesota Municipal Bond -5.87
Funds
Lipper U.S. Government Money Market 3.58
Funds
Lipper Natural Resources -4.20
Lipper New York Municipal Bond Funds -7.54
Lipper North Carolina Municipal Bond -7.48
Funds
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 -3.37
Government Index
Shearson Lehman -3.51
Government/Corporate Index
Shearson Lehman Long-term -7.73
Government Index
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 -6.39
(Corporate Bond)
Swiss Bank 10 Year United Kingdom -5.29
(Corporate Bond)
Swiss Bank 10 Year France (Corporate -1.37
Bond)
Swiss Bank 10 Year Germany (Corporate 4.09
Bond)
Swiss Bank 10 Year Japan (Corporate 7.95
Bond)
Swiss Bank 10 Year Canada (Corporate -14.10
Bond)
Swiss Bank 10 Year Australia (Corporate 0.52
Bond)
Morgan Stanley Capital 10 Year Hong Kong (Equity) -28.90
International
Morgan Stanley Capital 10 Year Belgium (Equity) 9.43
International
Morgan Stanley Capital 10 Year Spain (Equity) -3.93
International
Morgan Stanley Capital 10 Year Austria (Equity) -6.05
International
Morgan Stanley Capital 10 Year France (Equity) -4.70
International
Morgan Stanley Capital 10 Year Netherlands (Equity) 12.66
International
Morgan Stanley Capital 10 Year Japan (Equity) 21.62
International
Morgan Stanley Capital 10 Year Switzerland (Equity) 4.18
International
Morgan Stanley Capital 10 Year United Kingdom -1.63
International (Equity)
Morgan Stanley Capital 10 Year Germany (Equity) 5.11
International
Morgan Stanley Capital 10 Year Italy (Equity) 12.13
International
Morgan Stanley Capital 10 Year Sweden (Equity) 18.80
International
Morgan Stanley Capital 10 Year United States 2.00
International (Equity)
Morgan Stanley Capital 10 Year Australia (Equity) 6.48
International
Morgan Stanley Capital 10 Year Norway (Equity) 24.07
International
Inflation Consumer Price Index 2.67
FHLB-San Francisco 11th District Cost-of-Funds 4.367
Index
Federal Reserve Six-Month Treasury Bill 6.49
Federal Reserve One-Year Constant-Maturity 7.14
Treasury Rate
Federal Reserve Five-Year Constant-Maturity 7.78
Treasury Rate
Bloomberg NA NA
Credit Lyonnais NA NA
Lipper Pacific Region Funds -12.07
Statistical Abstract of the NA NA
U.S.
World Economic Outlook NA NA
*in U.S. currency
<PAGE>
Part B of Post-Effective Amendment No. 7 as it relates to the Statement of
Additional Information and financial statements of Colonial U.S. Fund for Growth
and the financial statements of Colonial Small Stock Fund, filed with the
Commission on October 11, 1995, is incorporated herein by reference.
<PAGE>
Part C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Part A
Summary of Expenses (for Colonial U.S.
Fund for Growth and the Class Z
Prospectus of Colonial Small Stock Fund,
incorporated herein by reference to Part
A of Post-Effective Amendment No. 7 filed
with the Commission on October 11, 1995)
The Fund's financial history (for
Colonial U.S. Fund for Growth and the
Class Z Prospectus of Colonial Small
Stock Fund, incorporpated herein by
reference to Part A of Post-Effective
Amendment No. 7 filed with the Commission
on October 11, 1995)
Included in Part B
Colonial U.S. Fund for Growth
(CUSFFG)(incorporated herein by reference
to Part B of Post-Effective Amendment No.
7 filed with the Commission on October
11, 1995) Investment Portfolio, June 30,
1995 Statement of assets and liabilities,
June 30, 1995 Statement of operations,
Year ended June 30, 1995 Statement of
changes in net assets, Years ended June
30, 1995 and 1994 Notes to Financial
Statements Financial Highlights Report of
Independent Accountants
Colonial Small Stock Fund
(CSSF)(incorporated herein by reference
to Part B of Post-Effective Amendment No.
7 filed with the Commission on October
11, 1995) Investment Portfolio, June 30,
1995 Statement of assets and liabilities,
June 30, 1995 Statement of operations,
year ended June 30, 1995 Statement of
changes in net assets, Years ended June
30, 1995 and 1994 Notes to Financial
Statements Financial Highlights Report of
Independent Accountants
<PAGE>
(b) Exhibits:
1. Agreement and Declaration of Trust(a)
2. By-Laws as amended (8/14/92)(d)
2.(a) By-Laws as amended (10/9/92)(e)
3. Not Applicable
4. Not Applicable
5.(a) Form of Management Agreement (CUSFFG)(i)
5.(b) Form of Management Agreement (CSSF)(h)
5.(c) Form of Sub-Advisory Agreement(CUSFFG)(i)
6.(a) Form of Distributor's Contract with
Colonial Investment Services, Inc.
6.(b) Form of Selling Agreement (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)
6.(c) Form of Bank and Bank Affiliated Selling
Agreement(g)
6.(d) Form of Asset Retention Agreement(g)
7. Not Applicable
8. Custody Agreement with Boston Safe
Deposit and Trust Company(f)
9.(a) Amended and Restated Shareholders'
Servicing and Transfer Agent Agreement
as amended(g)
9.(b) Form of Pricing and Bookkeeping Agreement
with Colonial Management Associates,
Inc.(b)
10.(a) Opinion and Consent of Counsel
(CUSFFG)(b)
10.(b) Opinion and Consent of Counsel
(incorporated by reference to Exhibit 10
of Pre-Effective Amendment No. 1 to the
Registration Statement of Colonial Small
Stock Index Trust filed with the
Commission on June 20, 1986) (CSSF)
11. Consent of Independent Accountants (i)
12. Not Applicable
13.(a) Investment Letter of Colonial Management
Associates, Inc.(CUSFFG)(b)
13.(b) Investment Letter of Colonial Management
Associates, Inc. (incorporated by
reference to Exhibit 13 of Pre-Effective
Amendment No. 1 to the Registration
Statement of Colonial Small Stock Index
Trust filed with the Commission on June
20, 1986) (CSSF)
14.(a) Form of Colonial Mutual Funds Money
Purchase Pension and Profit Sharing Plan
Document and Trust Agreement(g)
14.(b) Form of Colonial Mutual Funds Money
Purchase Pension and Profit Sharing
Establishment Booklet(g)
14.(c) Form of Colonial Mutual Funds Individual
Retirement Account and Application(g)
14.(d) Form of Colonial Mutual Funds Simplified
Employee Plan and Salary Reduction
Simplified Employee Plan(g)
14.(e) Form of Colonial Mutual Funds 401(k) Plan
Document and Trust Agreement(g)
14.(f) Form of Colonial Mutual Funds 401(k) Plan
Establishment Booklet(g)
14.(g) Form of Colonial Mutual Funds 401(k)
Employee Reports Booklet(g)
15. Form of proposed 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(a) hereto)
16.(a) Calculation of Performance
Information (CUSFFG)(i)
16.(a)(i) Calculation of Performance
Information (CSSF)
16.(b) Calculation of Yield
Information (CUSFFG)(i)
16.(b)(i) Calculation of Yield
Information (CSSF)(i)
17.(a) Financial Data Schedule
(Class A) (CUSFFG)(i)
17.(b) Financial Data Schedule
(Class B) (CUSFFG)(i)
17.(c) Financial Data Schedule
(Class D) (CUSFFG)(i)
17.(d) Financial Data Schedule
(Class A) (CSSF)
17.(e) Financial Data Schedule
(Class B) (CSSF)
18.(a) Power of Attorney for: Tom Bleasdale,
Lora S. Collins, William D. Ireland,
Jr., 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 16 to Post-Effective Amendment
No. 38 to the Registration Statement of
Colonial Index Trust IV, Registration
Nos. 2-62492 and 811-2865, filed with the
Commission on March 11, 1994)
18.(b) Power of Attorney for: Robert J.
Birnbaum, James E. Grinnell and Richard
W. Lowry (incorporated herein by
reference to Exhibit 18(a) to Post-
Effective Amendment No. 18 to the
Registration Statement of Colonial
Trust V, Registration Nos. 811-5030 and
33-12109, filed with the Commission on
May 22, 1995)
(a) Incorporated by reference to the Registrant's initial
Registration Statement on Form N-1A, filed with the
Securities and Exchange Commission on January 15, 1992.
(b) Incorporated by reference to the Registrant's Pre-Effective
Amendment No. 1 on Form N-1A, filed with the Securities and
Exchange Commission on May 8, 1992.
(c) Incorporated by reference to the Registrant's Pre-Effective
Amendment No. 2 on Form N-1A, filed with the Securities and
Exchange Commission on June 12, 1992.
(d) Incorporated by reference to the Registrant's
Post-Effective Amendment No. 1 on Form N-1A, filed with the
Securities and Exchange Commission on September 1, 1992.
(e) Incorporated by reference to the Registrant's Post-
Effective Amendment No. 2 on Form N-1A, filed
with the Securities and Exchange Commission on November 19,
1992.
(f) Incorporated by reference to the Registrant's Post-
Effective Amendment No. 3 on Form N-1A, filed
with the Securities and Exchange Commission on
September 21, 1993.
(g) Incorporated by reference to the Registrant's Post-
Effective Amendment No. 5 on Form N-1A, filed
with the Securities and Exchange Commission on
October 11, 1994.
(h) Incorporated by reference to the Registrant's Post-
Effective Amendment No. 6 on Form N-1A, filed
with the Securities and Exchange Commission on
July 28, 1995.
(i) Incorporate by reference to the Registrant's Post-Effective
Amendment No. 7 on Form N-1A, filed with the Securities and
Exchange Commission on October 11, 1995.
Item 25. Persons Controlled by or Under Common Group Control with
Registrant
None
<PAGE>
Item 26. Number of Holders of Securities
(1) (2)
Title of Class Number of Record Holders as of 9/30/95
Shares of beneficial interest 11,063 Class A record holders (CUSFFG)
21,894 Class B record holders (CUSFFG)
323 Class D record holders (CUSFFG)
5,286 Class A record holders (CSSF)
6,604 Class B record holders (CSSF)
1 Class Z record holders (CSSF)
Item 27. Indemnification
See Article VIII 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):
ITEM 28
- --------
Registrant's investment adviser, Colonial Management Associates, Inc., is
registered as an investment adviser under the Investment Advisers Act of 1940
(1940 Act). Colonial Advisory Services, Inc. (CASI), an affiliate of Colonial
Management Associates, Inc., is also registered as an investment adviser under
the 1940 Act. As of the end of its fiscal year December 31, 1994, CASI had one
institutional, corporate or other accounts under management or supervision, the
market value of which was approximately $265.3 million. Colonial Management
Associates, Inc. was the investment adviser to the 36 mutual funds in the
Colonial Group of Funds, the market value of which investment companies was
approximately $13,327.8 million. Colonial Investment Services, Inc., a
subsidiary of Colonial Management Associates, Inc., is the principal underwriter
and the national distributor of all of the funds in the Colonial Group of Funds,
including the Registrant.
The following sets forth the business and other connections of each
director and officer of Colonial Management Associates, Inc.:
(1) (2) (3) (4)
Name and principal
business addresses Affiliation
of officers and with Period is through 3/1/95. Other
directors of investment business, profession, vocation or
investment adviser adviser employment connection Affiliation
- ------------------ --------- ---------------------------------- -----------
Archer, Joseph A. V.P.
Augustine, Jeffrey B. V.P.
Berliant, Allan V.P.
Bertelson, Lisa V.P.
Bissonette, Michael V.P.
Boatman, Bonny E. Dir.;
Sr.V.P.;
IPC Mbr.
Carnabucci, Dominick V.P.
Carroll, Sheila A. Sr.V.P.;
Dir.
Citrone, Frank V.P.
Cogger, Harold W. Dir.; The Colonial Group, Inc. Dir.;Pres.
Pres.; & CEO
CEO;IPC Colonial Trusts I through VI V.P.
Mbr;Exe. Colonial High Income Municipal
Cmte. Trust V.P.
Colonial InterMarket Income Trust I V.P.
Colonial Intermediate High Income
Fund V.P.
Colonial Investment Grade Municipal
Trust V.P.
Colonial Municipal Income Trust V.P.
Liberty Financial Companies, Inc. Exec V.P.;
Dir.
Collins, Anne V.P.
Conlin, Nancy V.P.; Colonial Investors Service Center,
Asst.Sec.; Inc. Asst. Clrk
Asst. The Colonial Group, Inc. Asst. Clrk
Clrk & Colonial Advisory Services, Inc. Asst. Clrk
Counsel Colonial Investment Services, Inc. Asst. Clrk
Cordes, Susan V.P.
Daniszewski, Joseph J. V.P. Colonial Investment Services, Inc. V.P.
DiSilva, Linda V.P.
Ericson, Carl C. V.P. Colonial Intermediate High Income
Fund V.P.
Evans, C. Frazier Dir.; Colonial Investment Services, Inc. Sr. V.P.
Sr.V.P.
Feingold, Andrea V.P. Colonial Intermediate High Income
Fund V.P.
Finnemore, Leslie W. V.P.
Gerokoulis, Stephen A. V.P. Colonial Investment Services, Inc. Sr. V.P.
Harasimowicz, Stephen V.P.
Hartford, Brian V.P.
Haynie, James P. V.P. Colonial Advisory Services, Inc. V.P.
Johnson, Gordon V.P.
Koonce, Michael H. V.P.; Colonial Trusts I through VI Asst. Sec.
Asst.Sec.; Colonial High Income Municipal
Asst. Trust Asst. Sec.
Clrk & Colonial InterMarket Income Trust I Asst. Sec.
Counsel Colonial Intermediate High Income
Fund Asst. Sec.
Colonial Investment Grade Municipal
Trust Asst. Sec.
Colonial Municipal Income Trust Asst. Sec.
Colonial Investment Services, Inc. Asst. Clrk
Colonial Investors Service Center,
Inc. Asst. Clrk
The Colonial Group, Inc. Asst. Clrk
Colonial Advisory Services, Inc. Asst. Clrk
Lennon, John E. V.P. Colonial Advisory Services, Inc. V.P.
Lenzi, Sharon V.P.
Lilienfeld, Jonathan V.P.
Loring, William C. V.P.
Lydecker, Peter L. V.P.; Colonial Trusts I through VI Controller
Asst. Colonial High Income Municipal
Treas. Trust Controller
Colonial InterMarket Income Trust I Controller
Colonial Intermediate High Income
Fund Controller
Colonial Investment Grade Municipal
Trust Controller
Colonial Municipal Income Trust Controller
MacKinnon, Donald S. Dir.;
Sr.V.P.
McCue, Gerard A. V.P. Colonial Advisory Services, Inc. V.P.
McGregor, Jeffrey L. Dir.; Colonial Investment Services, Inc. Pres.;CEO;
Sr.V.P. Dir.
McNeice, Jr., John A. Chrmn.; Boston College Ttee
Dir.; Boston College High School Ttee
Exe.Cmte. Carney Hospital Foundation Mbr.-the
Chm. Carney Fnd
Colonial Advisory Services, Inc. Dir.;Chm.;
CEO & Pres
Colonial High Income Municipal
Trust Ttee; Pres
Colonial InterMarket Income Trust I Ttee; Pres
Colonial Intermediate High Income
Fund Ttee; Pres
Colonial Investment Grade Municipal
Trust Ttee; Pres
Colonial Municipal Income Trust Ttee; Pres
The Colonial Group, Inc. Ttee; Pres
Colonial Trusts I through VI Ttee; Pres
Colonial Investors Service Center,
Inc. Ttee; Pres
Nativity Preparatory School Chm., Bd.
of Ttees
Northeastern University Crp.Bd.Mbr
Wentworth Institute of Technology Crp.Bd.Mbr
Colonial Investment Services, Inc. Dir.; Chm.
of the Bd.
Board of Visitors - Peter Drucker
Graduate Center Bd. Mbr.
St. John's Seminary Bd. Mbr.
Third Century Foundation Ttee; Pres
Peter F. Drucker Foundation Dir.
United Way of Mass Bay Bd. Mbr.
American Ireland Fund Bd. Mbr.
Catholic Charities -
Archdiocese of Boston Bd. Mbr.
Liberty Financial Companies, Inc. Dir.
O'Neill, Charles A. Sr.V.P.; Colonial Investment Services, Inc. Exec. V.P.
Dir.
Palmer, Elizabeth V.P.
Peters, Helen F. Dir.;
Sr.V.P.;
IPC Mbr.
Rao, Gita V.P.
Rie, Daniel Sr.V.P.; Colonial Advisory Services, Inc. Sr. V.P.
IPC Mbr.;
Dir.
Scoon, Davey S. Dir.; Colonial Advisory Services, Inc. Treas.
Exe.V.P.; Colonial High Income Municipal
IPC Mbr. Trust V.P.
Colonial InterMarket Income Trust I V.P.
Colonial Intermediate High Income
Fund V.P.
Colonial Investment Grade Municipal
Trust V.P.
Colonial Municipal Income Trust V.P.
Colonial Trusts I through VI V.P.
Colonial Investors Service Center,
Inc. Treas.
The Colonial Group, Inc. COO
Seibel, Sandra V.P.
Shore, Janet V.P. and Colonial High Income Municipal
Compliance Trust Asst. Sec.
Offr.; Colonial InterMarket Income Trust I Asst. Sec.
IPC Mbr. Colonial Intermediate High Income
Fund Asst. Sec.
Colonial Investment Grade Municipal
Trust Asst. Sec.
Colonial Municipal Income Trust Asst. Sec.
Colonial Trusts I through VI Asst. Sec.
Colonial Investment Services, Inc. Asst. Clrk
Silver, Richard A. Dir.; Colonial Advisory Services, Inc. Controller
Sr.V.P.; Colonial High Income Municipal
Treas. Trust Treas; CFO
& CFO Colonial InterMarket Income Trust I Treas; CFO
Colonial Intermediate High Income
Fund Treas; CFO
Colonial Investment Grade Municipal
Trust Treas; CFO
Colonial Municipal Income Trust Treas; CFO
Colonial Trusts I through VI Treas; CFO
Colonial Investors Service Center,
Inc. Asst.Treas
The Colonial Group, Inc. Treas; CFO
Colonial Investment Services, Inc. Treas; CFO
Stern, Arthur O. Exe.V.P.; Colonial Advisory Services, Inc. Clerk
Dir.; Colonial High Income Municipal
Sec.; Trust Secretary
Clrk.& Colonial InterMarket Income Trust I Secretary
Gnrl. Colonial Intermediate High Income
Counsel; Fund Secretary
IPC Mbr. Colonial Investment Grade Municipal
Trust Secretary
Colonial Municipal Income Trust Secretary
Colonial Trusts I through VI Secretary
Colonial Investors Service Center,
Inc. Clerk
The Colonial Group, Inc. Clerk;
V.P. Lgl.
Colonial Investment Services, Inc. Clerk;
Counsel
Waas, Robert S. V.P.
Wallace, John V.P.-Corp.
Finance
and
Controller
- ----------------------
* The Principal address of all of the officers and directors of the investment
adviser is One Financial Center, Boston, MA 02111.
<PAGE>
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 and
Colonial Trust VI:
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 with Positions and Offices
Business Address* Principal Underwriter with Registrant
Ballou, Rich Regional V.P. None
Balzano, Christine R. V.P. None
Barsokas, David Regional V.P. None
Buckley, Anne P. Compliance Officer None
Cairns, David Regional V.P. None
Chrzanowski, Daniel Regional V.P. None
Clapp, Elizabeth A. V.P. None
Daniszewski, Joseph J. V.P. None
Davey, Cynthia Sr. 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, Stephen A. Sr. V.P. None
Goldberg, Matthew Regional V.P. None
Harasimowicz, Stephen V.P. None
Hayes, Mary Elizabeth V.P. None
Hodgkins, Joseph Regional V.P. None
Howard, Craig Sr. V.P. None
Karagiannis, Marilyn Sr. 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
Mahoney, D. Scott Sr. V.P. None
McCabe, Joanne Regional V.P. None
McGregor, Jeffrey L. Director, CEO, None
President
Meriwether, Jan V.P. None
Meyer, Wayne Regional V.P. None
Murphy, Robert F. Sr. V.P. None
O'Neill, Charles A. Exec. 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, Elizabeth Sr. V.P. None
Stern, Arthur O. Clerk and Counsel Secretary
Chairman of the Board
Director
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, Massachusetts 02111
Rule 31a-1(b),(1),(2),(3),(5),(6),(7),(8),(9),(10),
(11),(12)
Rule 31a-1(d),(f)
Rule 31a-2(a),(1),(2),(c),(e)
Colonial Investment Services, Inc.
One Financial Center, Boston, Massachusetts 02111
Rule 31a-1(d)
Rule 31a-2(c)
Boston Safe Deposit and Trust Company
One Boston Place, Boston, Massachusetts 02108
Rule 31a-1(b),(2),(3)
Rule 31a-2(a)(2)
Colonial Investors Service Center, Inc.
P.O. Box 1722, Boston, Massachusetts 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
(1) Registrant undertakes to call a meeting of shareholders for
the purpose of voting upon the question of the removal of a
Trustee or Trustees when requested in writing to do so by
the holders of at least 10% of any series' outstanding
shares and in connection with such meeting to comply with
the provisions of Section 16(c) of the Investment Company
Act of 1940 relating to shareholder communications
(CUSFFG).
(2) The Registrant hereby undertakes to furnish free of charge
to each person to whom a prospectus is delivered, a copy of
the applicable series' annual report to shareholders
containing the information required by Item 5A of Form
N-1A.
<PAGE>
************
NOTICE
A copy of the Agreement and Declaration of Trust of Colonial Trust VI (the
"Trust") 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 the Trust's Trustees as
trustees and not individually and the obligations of or arising out of the
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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, Colonial Trust VI has duly
caused this Post-Effective Amendment No. 8 to its Registration Statement under
the Securities Act of 1933 and Amendment No. 10 to its Registration Statement
under the Investment Company Act of 1940, to be signed in this City of Boston
and The Commonwealth of Massachusetts on this 31st day of October, 1995.
COLONIAL TRUST VI
By: John A. McNeice, Jr.
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
JOHN A. MCNEICE, JR. President (Chief Executive October 31, 1995
John A. McNeice, JR. Officer and Trustee)
RICHARD A. SILVER Treasurer (Principal October 31, 1995
Richard A. Silver Financial Officer)
PETER L. LYDECKER Controller (Principal October 31, 1995
Peter L. Lydecker Accounting Officer)
<PAGE>
\
/s/ ROBERT J. BIRNBAUM Trustee |
Robert J. Birnbaum |
|
|
|
|
/S/ TOM BLEASDALE Trustee |
Tom Bleasdale |
|
|
|
|
/S/ LORA S. COLLINS Trustee |
Lora S. Collins |
|
|
|
|
/S/ JAMES E. GRINNELL Trustee |
James E. Grinnell |
|
|
|
|
/S/ WILLIAM D. IRELAND, JR. Trustee |
William D. Ireland, Jr. |
|
|
|
/S/ RICHARD W. LOWRY Trustee |
Richard W. Lowry |
|
|
|
|
/S/ WILLIAM E. MAYER Trustee |
William E. Mayer |
|
|
|
/S/ JAMES L MOODY, JR. Trustee |
James L. Moody, Jr. |
MICHAEL H. KOONCE
Michael H. Koonce
Attorney-in-fact
October 31, 1995
/S/ JOHN J. NEUHAUSER Trustee |
John J. Neuhauser |
|
|
|
|
/S/ GEORGE L. SHINN Trustee |
George L. Shinn |
|
|
|
|
/S/ ROBERT L. SULLIVAN Trustee |
Robert L. Sullivan |
|
|
|
|
/S/ SINCLAIR WEEKS, JR. Trustee |
Sinclair Weeks, Jr. |
/
<PAGE>
EXHIBIT INDEX
EXHIBIT
6. (a) Form of Distributors Contract with Colonial Investment
Services, Inc.
16. (a)(i) Calculation of Performance Information(CSSF)
17. (d) Financial Data Schedule (Class A) (CSSF)
17. (e) Financial Data Schedule (Class B) (CSSF)
DISTRIBUTOR'S CONTRACT
Each Massachusetts Business Trust (Trust) designated in Appendix 2 from
time to time, acting severally, and Colonial Investment Services, Inc. (CIS), a
Massachusetts corporation, agree effective _________________:
1. APPOINTMENT OF CIS. The Trust may offer an unlimited number of separate
investment series (Funds), each of which may have multiple classes of shares
(Shares). The Trust appoints CIS as the principal underwriter and exclusive
distributor of Shares of Funds designated in Appendix 2. The Contract will apply
to each Fund as set forth on Appendix 2 as it may be amended from time to time
with the latest effective date and signed.
2. SALE OF SHARES. CIS, acting as principal for its own account and not as
agent for the Trust, shall have the exclusive right to purchase Shares and shall
sell Shares in accordance with a Fund's prospectus on a "best efforts" basis.
CIS shall purchase Shares at a price equal to the net asset value only as needed
to fill orders. CIS will receive all sales charges. CIS will notify the Trust at
the end of each business day of the Shares of each Fund to be purchased. The
Trust may at any time refuse to sell Shares hereunder and may issue Shares
directly to shareholders as a stock split or dividend.
3. REDEMPTION OF SHARES. The Trust will redeem in accordance with a Fund's
prospectus all Shares tendered by CIS pursuant to shareholder redemption
requests. CIS will notify the Trust at the end of each business day of the
Shares of each Fund tendered.
4. COMPLIANCE. CIS will comply with applicable provisions of the prospectus of a
Fund and with applicable laws and rules relating to the sale of Shares and
indemnifies the Trust for any damage or expense from unlawful acts by CIS and
persons acting under its direction or authority.
5. EXPENSES. The Trust will pay all expenses associated with:
a. the registration and qualification of Shares for sale;
b. shareholder meetings and proxy solicitation;
c. Share certificates;
d. communications to shareholders; and
e. taxes payable upon the issuance of Shares to CIS.
CIS will pay all expenses associated with advertising and sales literature
including those of printing and distributing prospectuses and shareholder
reports, proxy materials and other shareholder communications used as sales
literature.
6. 12b-1 PLAN. Except as indicated in Appendix 1 which may be revised from time
to time, dated and signed, this Section 6 constitutes each Fund's distribution
plan (Plan) adopted pursuant to Rule 12b-1 (Rule) under the Investment Company
Act of 1940 (Act).
A. The Fund* shall pay CIS monthly a service fee at the annual rate of 0.25% of
the net assets of its Class A and B Shares on the 20th of each month and a
distribution fee at an annual rate of 0.75% of the average daily net assets of
its Class B Shares. Each of the Funds identified on Appendix 1 as having a Class
D share 12b-1 Plan shall pay CIS monthly a service fee at the annual rate of
0.25% of the net assets of its Class D shares on the 20th of each month and a
distribution fee at an annual rate of 0.75% of the average daily net assets of
its Class D shares. Each of the Funds identified on Appendix 1 as having a Class
C share 12b-1 Plan shall pay CIS monthly a service fee at the annual rate of
0.25% of the net assets of its Class C shares on the 20th of each month and a
distribution fee at an annual rate of 0.15% of the average daily net assets of
its Class C shares. CIS may use the service and distribution fees received from
the Fund as reimbursement for commissions and service fees paid to financial
service firms which sold Fund shares and to defray other CIS distribution and
shareholder servicing expenses, including its expenses set forth in Paragraph 5.
CIS shall provide to the Trust's Trustees, and the Trustees shall review, at
least quarterly, reports setting forth all Plan expenditures, and the purposes
for those expenditures. Amounts payable under this paragraph are subject to any
limitations on such amounts prescribed by applicable laws or rules.
- -----------------------------
* Except as indicated in Appendix 1.
<PAGE>
B. Payments by the Trust to CMAI and its affiliates other than any prescribed by
Section 6A which may be indirect financing of distribution costs are authorized
by this Plan.
C. The Plan shall continue in effect only so long as specifically approved at
least annually as provided in the Rule. The Plan may not be amended to increase
materially the service fee or distribution fee without such shareholder approval
as is required by the Rule and any applicable orders of the Securities and
Exchange Commission, and all material amendments of the Plan must be approved in
the manner described in the Rule. The Plan may be terminated at any time as
provided in the Rule without payment of any penalty. The continuance of the Plan
shall be effective only if the selection and nomination of the Trust's Trustees
who are not interested persons (as defined under the Act) of the Trust is
effected by such non-interested Trustees as required by the Rule.
7. CONTINUATION, AMENDMENT OR TERMINATION. This Contract (a) supersedes and
replaces any contract or agreement relating to the subject matter hereof in
effect prior to the date hereof, (b) shall continue in effect only so long as
specifically approved at least annually by the Trustees or shareholders of the
Trust and (c) may be amended at any time by written agreement of the parties,
each in accordance with the Act. This Contract (a) shall terminate immediately
upon the effective date of any later dated agreement relating to the subject
matter hereof, and (b) may be terminated upon 60 days notice without penalty by
a vote of the Trustees or by CMAI or otherwise in accordance with the Act and
will terminate immediately in the event of assignment (as defined under the
Act). Upon termination the obligations of the parties under this Contract shall
cease except for unfulfilled obligations and liabilities arising prior to
termination. All notices shall be in writing and delivered to the office of the
other party.
8. AGREEMENT AND DECLARATION OF TRUST. A copy of the document establishing the
Trust is filed with the Secretary of The Commonwealth of Massachusetts. This
Contract 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.
Agreed:
EACH TRUST DESIGNATED IN APPENDIX 2
By:_______________________________
Arthur O. Stern, Secretary For Each Trust
COLONIAL INVESTMENT SERVICES, INC.
By:_______________________________
Jeffrey L. McGregor, President
<PAGE>
APPENDIX 1
THE FOLLOWING IS APPLICABLE TO THE DESIGNATED FUND'S 12b-1 PLAN:
1. For Colonial Government Money Market Fund and Colonial Tax-Exempt Money
Market Fund, the first sentence of Section 6A is replaced with: "The Fund shall
pay CIS monthly a service fee at an annual rate of 0.25% of the net assets of
its Class B Shares on the 20th of each month and a distribution fee at an annual
rate of 0.75% of the average daily net assets of its Class B shares."
2. For Colonial California Tax-Exempt Fund, Colonial Connecticut Tax-Exempt
Fund, Colonial Florida Tax-Exempt Fund, Colonial Massachusetts Tax-Exempt Fund,
Colonial Michigan Tax-Exempt Fund, Colonial Minnesota Tax-Exempt Fund, Colonial
New York Tax-Exempt Fund, Colonial North Carolina Tax-Exempt Fund and Colonial
Ohio Tax-Exempt Fund the first sentence of Section 6A is replaced with: "The
Fund shall pay CIS monthly a service fee at an annual rate of 0.10% of the net
assets on the 20th of each month of its Class A and Class B Shares outstanding
on November 30, 1994, and 0.25% of the net assets on the 20th of each month of
its Class A and Class B Shares issued thereafter, and a distribution fee at an
annual rate of 0.75% of the average daily net assets of its Class B Shares.
3. For The Colonial Fund and Colonial Growth Shares Fund, the first sentence of
Section 6A is replaced with: "The Fund shall pay CIS monthly a service fee at an
annual rate of 0.15% of the net assets on the 20th of each month of its Class A
and B Shares outstanding which were issued prior to April 1, 1989, and 0.25% of
the net assets on the 20th of each month of its Class A and B Shares issued
thereafter, and a distribution fee at an annual rate of 0.75% of the average
daily net assets of its Class B Shares.
4. For Colonial Strategic Income Fund, the first sentence of Section 6A is
replaced with: "The Fund shall pay CIS monthly a service fee at an annual rate
of 0.15% of the net assets on the 20th of each month of its Class A and B Shares
outstanding which were issued prior to January 1, 1993, and 0.25% of the net
assets on the 20th of each month of its Class A and B Shares issued thereafter,
and a distribution fee at an annual rate of 0.75% of the average daily net
assets of its Class B Shares."
5. For Colonial Adjustable Rate U.S. Government Fund and Colonial Intermediate
Tax-Exempt Fund, the first sentence of Section 6A is replaced with: "The Fund
shall pay CIS monthly a service fee at an annual rate of 0.20% of the net assets
on the 20th of each month of its Class A and B Shares and a distribution fee at
an annual rate of 0.65% of the average daily net assets of its Class B Shares."
6. For Colonial Short-Term Tax-Exempt Fund, the first sentence of Section 6A is
replaced with: "The Fund shall pay CIS monthly a service fee at an annual rate
of 0.10% of the net assets on the 20th of each month of its Class A Shares.";
and the third sentence is replaced with: "CIS may use the service fee received
from the Fund as reimbursement for service fees paid to financial firms which
sold Fund shares and to defray other CIS shareholder servicing expenses,
including its expenses set forth in Paragragh 5."
7. For Colonial Strategic Balanced Fund and Colonial Newport Tiger Fund, the
first sentence of Section 6A is replaced with: "The Fund shall pay CIS monthly a
service fee at an annual rate of 0.25% of the net assets attributed to each
Class of shares on the 20th of each month. The Fund shall also pay the
Distributor an annual distribution fee not exceeding 0.30% of the average net
assets attributed to its Class A shares and 0.75% of the average net assets
attributed to its Class B and Class D shares."
8. The Funds with Class D share 12b-1 Plans are as follows: Colonial Strategic
Balanced Fund, Colonial International Fund for Growth, Colonial Government Money
Market Fund, Colonial U.S. Fund for Growth, Colonial Newport Tiger Fund,
Colonial High Yield Securities Fund and Colonial Small Stock Fund.
9. The Funds with Class C share 12b-1 Plans are as follows: Colonial Adjustable
Rate U.S. Government Fund.
By:______________________________________
Arthur O. Stern, Secretary For Each Trust
By:______________________________________
Jeffrey L. McGregor, President
Colonial Investment Services, Inc.
Dated:
<PAGE>
APPENDIX 2
Trust Series
Colonial Trust I
Colonial High Yield Securities Fund
Colonial Income Fund
Colonial Strategic Income Fund
Colonial Trust II
Colonial Government Money Market Fund
Colonial U.S. Government Fund
Colonial Adjustable Rate U.S. Government Fund
Colonial Trust III
Colonial Growth Shares Fund
The Colonial Fund
Colonial Federal Securities Fund
Colonial Global Equity Fund
Colonial Global Natural Resources Fund
Colonial International Fund for Growth
Colonial Strategic Balanced Fund
Colonial Trust IV
Colonial High Yield Municipal Fund
Colonial Intermediate Tax-Exempt Fund
Colonial Short-Term Tax-Exempt Fund
Colonial Tax-Exempt Fund
Colonial Tax-Exempt Insured Fund
Colonial Tax-Exempt Money Market Fund
Colonial Utilities Fund
Colonial Trust V
Colonial Massachusetts Tax-Exempt Fund
Colonial Connecticut Tax-Exempt Fund
Colonial California 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 Florida Tax-Exempt Fund
Colonial Trust VI
Colonial U.S. Fund for Growth
Colonial Small Stock Fund
Colonial Trust VII
Colonial Newport Tiger Fund
By:______________________________________
Arthur O. Stern, Secretary For Each Trust
By:______________________________________
Jeffrey L. McGregor, President
Colonial Investment Services, Inc.
Dated:___________________
<TABLE>
PERFORMANCE CALCULATION
COLONIAL SMALL STOCK FUND - CLASS A
Year End: 6/30/95
Inception Date: 7/25/86
<CAPTION>
SINCE INCEPTION
1 YEAR ENDED 6/30/95 5 YEARS ENDED 6/30/95 7/25/86 TO 6/30/95
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 $16.67 $16.67 $13.56 $13.56 $12.14 $12.14
Initial Shares 56.539 59.988 69.506 73.746 77.636 82.372
Shares From Dist. 0.000 0.000 0.270 0.287 6.893 7.315
End of Period NAV $22.26 $22.26 $22.26 $22.26 $22.26 $22.26
Total Return 25.86% 33.53% 55.32% 64.80% 88.16% 99.64%
Average Annual
Total Return 25.86% 33.53% 9.21% 10.51% 7.33% 8.04%
</TABLE>
PERFORMANCE CALCULATION
COLONIAL SMALL STOCK FUND - CLASS B
Year End: 6/30/95
Inception Date: 11/9/92
SINCE INCEPTION
1 YEAR ENDED 6/30/95 11/9/92 TO 6/30/95
Standard Non-Standard Standard Non-Standard
-------------- ------------------ ------------- --------------
Initial Inv. $1,000.00 $1,000.00 $1,000.00 $1,000.00
Amt. Invested $1,000.00 $1,000.00 $1,000.00 $1,000.00
Initial NAV $16.47 $16.47 $13.01 $13.01
Initial Shares 60.716 60.716 76.864 76.864
Shares From Dist. 0.000 0.000 0.000 0.000
End of Period NAV $21.84 $21.84 $21.84 $21.84
CDSC 5.00% 3.00%
Total Return 27.60% 32.60% 64.87% 67.87%
Average Annual
Total Return 27.60% 32.60% 20.84% 21.67%
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 SMALL STOCK FUND, CLASS A YEAR END JUN-30-1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS OF COLONIAL
SMALL STOCK FUND, CLASS A YEAR END JUN-30-1995.
</LEGEND>
<CIK> 0000883163
<NAME> COLONIAL TRUST VI
<SERIES>
<NUMBER> 2
<NAME> COLONIAL SMALL STOCK FUND, CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 53562
<INVESTMENTS-AT-VALUE> 69632
<RECEIVABLES> 2475
<ASSETS-OTHER> 17
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 72124
<PAYABLE-FOR-SECURITIES> 1828
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 177
<TOTAL-LIABILITIES> 2005
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 27358
<SHARES-COMMON-STOCK> 1826
<SHARES-COMMON-PRIOR> 1486
<ACCUMULATED-NII-CURRENT> (1)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2386
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 16070
<NET-ASSETS> 70119
<DIVIDEND-INCOME> 390
<INTEREST-INCOME> 292
<OTHER-INCOME> 0
<EXPENSES-NET> 806
<NET-INVESTMENT-INCOME> (124)
<REALIZED-GAINS-CURRENT> 3335
<APPREC-INCREASE-CURRENT> 11220
<NET-CHANGE-FROM-OPS> 14431
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 823
<NUMBER-OF-SHARES-REDEEMED> 483
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 36870
<ACCUMULATED-NII-PRIOR> (12)
<ACCUMULATED-GAINS-PRIOR> (814)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 279
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 806
<AVERAGE-NET-ASSETS> 29410
<PER-SHARE-NAV-BEGIN> 16.67
<PER-SHARE-NII> 0.002
<PER-SHARE-GAIN-APPREC> 5.588
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 22.26
<EXPENSE-RATIO> 1.45
<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 SMALL STOCK FUND, CLASS B YEAR END JUN-30-1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS OF COLONIAL
SMALL STOCK FUND, CLASS B YEAR END JUN-30-1995.
</LEGEND>
<CIK> 0000883163
<NAME> COLONIAL TRUST VI
<SERIES>
<NUMBER> 2
<NAME> COLONIAL SMALL STOCK FUND, CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 53562
<INVESTMENTS-AT-VALUE> 69632
<RECEIVABLES> 2475
<ASSETS-OTHER> 17
<OTHER-ITEMS-ASSETS> 0
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</TABLE>
