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. __7__ [ X ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. __9__ [ 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).
[ X ] on October 20, 1995 pursuant to paragraph (b).
[ ] 60 days after filing pursuant to paragraph (a)(i).
[ ] on [date] pursuant to paragraph (a)(i) of Rule 485.
[ ] 75 days after filing pursuant to paragraph (a)(ii).
[ ] on [date] pursuant to paragraph (a)(ii) 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.
COLONIAL TRUST VI
Cross Reference Sheet (Colonial U.S. Fund for Growth)
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
October 20, 1995
COLONIAL U.S. FUND
FOR GROWTH
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 U.S. Fund for Growth (Fund), a diversified portfolio of
Colonial Trust VI (Trust), an open-end management investment company,
seeks growth exceeding the S&P 500 Index (Standard & Poor's Index of
500 common stocks) performance.
The Fund is managed by the Adviser, an investment adviser since 1931.
Portfolio management has been delegated to State Street Global
Advisors, a division of State Street Bank and Trust Company (Sub-
Adviser).
This Prospectus explains concisely what you should know before
investing in the Fund. Read it carefully and retain it for future
reference. More detailed information about the Fund is in the October
20, 1995 Statement of Additional Information which has been filed with
the Securities and Exchange Commission and is obtainable free of
charge by calling the Adviser at 1-800-248-2828. The Statement
Additional Information is incorporated by reference in (which means it
is considered to be a part of) this Prospectus.
The Fund offers three classes of shares. Class A shares are offered
at net asset value plus a sales charge imposed at the time of
purchase; Class B shares are offered at net asset value and, in
addition, are subject to an annual distribution fee and a declining
contingent deferred sales charge on redemptions made within six years
after purchase; and Class D shares are offered at net asset value plus
a small initial sales charge, a contingent deferred sales charge on
redemptions made within one year after purchase and 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 expense
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.
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 each Class of the Fund's
shares. See "How the Fund is managed" and "12b-1 plans" for more
complete descriptions of the Fund's various costs and expenses.
Shareholder Transaction Expenses(1)(2)
Class A Class B Class D
Maximum Initial Sales Charge Imposed on a
purchase (as a % of offering price)(3) 5.75% 0.00%(5) 1.00%(5)
Maximum Contingent Deferred Sales Charge
(as a % 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 eight years, this is
less likely for Class B shares than for a class without a
conversion feature.
Annual Operating Expenses (as a % of average net assets)
Class A Class B Class D
Management fee 0.80% 0.80% 0.80%
12b-1 fees 0.25 1.00 1.00
Other expenses 0.41 0.41 0.41
---- ---- ----
Total operating expenses 1.46% 2.21% 2.21%
==== ==== ====
Total expenses, excluding brokerage, interest, taxes, 12b-1
distribution fees and extraordinary expenses, are, until further
notice, voluntarily limited by the Adviser to 1.50% of average net
assets.
Example
The following Example shows the cumulative expenses attributable to a
hypothetical $1,000 investment in each Class of shares of the Fund for
the periods specified, assuming a 5% annual return, and, unless
otherwise noted, redemption at period end. The 5% return and expenses
used in this Example should not be considered indicative of actual or
expected Fund performance or expenses, both of which will vary:
Class A Class B Class D
Period: (6) (7) (6) (7)
1 year $ 72 $ 73 $ 23 $42 $32
3 years 101 100 70 78 78
5 years 133 140 120 127 127
10 years 222 237(8) 237(8) 262 262
(6) Assumes redemption.
(7) Assumes no redemption.
(8) Class B shares convert to Class A shares after approximately
eight years; therefore, years 9 and 10 reflect Class A share expenses.
THE FUND'S FINANCIAL HISTORY (a)
The following schedule of financial highlights for a share
outstanding throughout each year 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.
<TABLE>
<CAPTION>
Year ended June 30
---------------------------------------------------------------------
1995 1994 1993(b)
----------------------------- ----------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A Class B Class D(c) Class A Class B Class A Class B
Net asset value - Beginning of period $11.460 $11.400 $11.460 $11.820 $11.770 $10.000 $10.000
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.165 0.075 0.074 0.142 0.053 0.103 (d) 0.020 (d)
Net realized and unrealized
gain (loss) 2.530 2.513 2.534 (0.119) (0.122) 1.784 1.763
Total from Investment Operations 2.695 2.588 2.608 0.023 (0.069) 1.887 1.783
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.160) (0.073) (0.093) (0.138) (0.056) (0.067) (0.013)
From net realized gains (0.735) (0.735) (0.735) (0.245) (0.245) --- ---
Total Distributions Declared
to Shareholders (0.895) (0.808) (0.828) (0.383) (0.301) (0.067) (0.013)
Net asset value - End of period $13.260 $13.180 $13.240 $11.460 $11.400 $11.820 $11.770
Total return(e) 24.84% 23.94% 24.01% 0.05% (0.71)% 18.90%(f) 17.84%(f)
RATIOS TO AVERAGE NET ASSETS
Expenses 1.46% 2.21% 2.21% 1.49% 2.24% 1.50% 2.25%
Fees waived by the Adviser --- --- --- --- --- 0.01% 0.01%
Net investment income 1.37% 0.62% 0.62% 1.19% 0.44% 0.93% 0.18%
Portfolio turnover 84% 84% 84% 117% 117% 98% 98%
Net assets at end of period (000) $124,171 $218,201 $3,028 $97,180 $150,121 $44,009 $89,737
_________________________________
</TABLE>
(a) Per share data was calculated using average shares
outstanding during the period.
(b) The Fund commenced investment operations on July 1, 1992.
(c) Class D shares were initially offered on July 1, 1994. Per
share amounts reflect activity from that date.
(d) Net of fees and expenses waived or borne by the Adviser which
amounted to $0.001 and $0.001, respectively.
(e) Total return at net asset value assuming all distributions
reinvested and no initial or contingent deferred sales charges.
(f) Had the Adviser not waived or reimbursed a portion of expenses,
total return would have been reduced.
Further performance information is contained in the Fund's Annual
Report to shareholders, which is obtainable free of charge by calling
1-800-248-2828.
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks growth exceeding the S&P 500 Index performance.
HOW THE FUND PURSUES ITS OBJECTIVE
The Fund normally invests at least 65% of its total assets in U.S.
common stocks (and up to 10% in American Depository Receipts (ADRs))
that the Sub-Adviser believes have superior earnings and value
characteristics selected from a universe which meets certain
guidelines for liquidity and available investment information.
Quantitative standards, designed to identify above average intrinsic
value relative to price and favorable earnings trends, are used to
select securities. The State Street Bank Stock Valuation Universe
consists of about 1,000 securities that the Sub-Adviser believes have
the highest capitalization and liquidity and are followed by the
largest number of analysts in the U.S. The Fund intends to invest in
approximately 100 of the securities in the State Street Bank Stock
Valuation Universe ranked highest by the Sub-Adviser based on the
criteria of "Value" and momentum of Wall Street "Sentiment." "Value"
compares a company's assets, projected income growth and cash flow
growth, while "Sentiment" ranks the stocks by the strength and
consistency of changes in Wall Street analysts' earning estimates.
The S&P 500 Index is a market-value weighted index of 500 common
stocks publicly traded in the open stock market chosen on the basis of
market value and industry diversification. Standard & Poor's
Corporation and the S&P 500 Index are not affiliated with, nor do they
sponsor or recommend, the Fund or the Trust. The Fund will not
concentrate more than 25% of its total assets in any one industry.
The Fund's investments are not limited to securities in the S&P 500
Index and will not precisely match the composition of the S&P 500
Index, but may be managed to correlate with the sectors,
capitalization and volatility of the S&P Index. Portfolio securities
may be sold without regard to time held, causing a portfolio turnover
rate substantially higher than that of most funds, resulting in higher
brokerage commissions and custodian fees, and potential tax
consequences to shareholders from capital gain distributions.
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.
Foreign Investments. The Fund may invest in foreign securities by
purchasing ADRs, which are certificates issued by U.S. banks
representing the right to foreign securities deposited with those
banks or correspondent banks. While most ADRs that the Fund will buy
are "sponsored" by the issuers of the foreign securities, the Fund may
invest in unsponsored ADRs. ADRs have special risks related to
political, economic and legal considerations outside of the U.S.As a
result, the prices of ADRs may fluctuate substantially more than the
prices of securities of issuers based in the U.S. Special risks
associated with ADRs include the possibility of unfavorable currency
exchange rates, the existence of less liquid markets, the
unavailability of reliable information about issuers, the existence
(or potential imposition) of exchange control regulations (including
currency blockage), and political and economic instability, among
others. Some foreign issuers are subject to less comprehensive
auditing, accounting and disclosure requirements than similar U.S.
issuers.
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 total assets
will be invested in repurchase agreements maturing in more than 7 days
and other illiquid assets.
Generally the Fund will maintain less than 5% of total assets in cash
equivalents to meet current cash flow needs. The Fund may also invest
temporarily available cash in money market investment companies,
subject to the limits of the Investment Company Act of 1940. This
will involve the duplicative payment of a portion of the expenses,
including advisory fees, of such investment companies.
The Fund may lend securities to certain institutions (that the Sub-
Adviser considers qualified) to increase income. The loans will not
exceed 30% of total assets. Securities lending involves the risk of
loss to the Fund if the borrower defaults. The Fund will place in a
segregated account with its custodian cash or high quality, liquid
debt securities having a value at least equal to the amount of
collateral received on the loan.
The Statement of Additional Information describes other investment
techniques that the Fund may use, but currently has no intention of
using for the foreseeable future.
Other. The Fund may not always achieve its investment objective. The
Fund's investment objective and non-fundamental policies may be
changed without shareholder approval. The Fund will notify investors
at least 30 days prior to any material change in the Fund's investment
objective. If there is a change in the investment objective,
shareholders should consider whether the Fund remains an appropriate
investment in light of their 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 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 accounting and administrative
personnel and services, office space and other equipment and services,
and oversees the activities of the Sub-Adviser, for a fee at the
annual rate of 0.80% of the Fund's average daily net assets annually.
The fee is higher than that of most mutual funds. Under a separate
sub-advisory agreement, the Sub-Adviser is entitled to be paid a
monthly fee by the Adviser at the annual rate of 0.50% of average
daily net assets. The Sub-Adviser has voluntarily agreed to waive a
portion of its fee so that its actual annual fee will not exceed 0.50%
of the first $50 million of the Fund's average daily net assets, 0.40%
of the next $150 million and 0.35% of any excess over $200 million.
This waiver does not reduce the amounts payable by the Fund to the
Adviser. See the Statement of Additional Information for more
information.
The Sub-Adviser, subject to the supervision of the Trustees and the
Adviser, directs the investments of the Fund in accordance with the
Fund's investment objective, policies and restrictions. Jeffrey P.
Adams, Assistant Vice President of the Sub-Adviser, is primarily
responsible for the day-to-day management and investment decisions for
the Fund and is supported by a group of other investment professionals
that assist in the management of the Fund. Mr. Adams joined the Sub-
Adviser in 1989.
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 out-of-pocket expenses.
Each of the foregoing fees is subject to any reimbursement or fee
waiver to which the Adviser may agree.
The Sub-Adviser places all orders for the purchase and sale of
portfolio securities. In selecting broker-dealers, the Adviser and
the Sub-Adviser may consider research and brokerage services furnished
to them and their affiliates. Subject to seeking best execution, the
Adviser and the Sub-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 their fair value following procedures adopted by
the Trustees.
DISTRIBUTIONS AND TAXES
The Fund intends to qualify as a "regulated investment company" under
the Internal Revenue Code and to distribute to shareholders virtually
all net income and any net realized gain, at least annually. The Fund
generally makes income distributions semiannually. Distributions are
invested in additional shares of the same Class of the Fund at net
asset value unless the shareholder elects to receive cash. Regardless
of the shareholder's election, distributions of $10 or less will not
be paid in cash to shareholders but will be invested in additional
shares of the same Class of the Fund at net asset value. To change
your election, call the Transfer Agent for information.
Whether you receive distributions in cash or in additional Fund
shares, you must report them as taxable income unless you are a tax-
exempt institution. If you buy shares shortly before a distribution
is declared, the distribution will be taxable although it is in effect
a partial return of the amount invested. Each January, information on
the amount and nature of distributions for the prior year is sent to
shareholders.
HOW TO BUY SHARES
Shares are offered continuously. Orders received in good form prior
to 4:00 p.m. Eastern time (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.
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
After Deferred
Purchase Sales Charge
0-1 5.00%
1-2 4.00%
2-3 3.00%
3-4 3.00%
4-5 2.00%
5-6 1.00%
More than 6 0.00%
Year one ends one year after the end of the month in which the
purchase was accepted and so on. The Distributor pays financial
service firms a commission of 4.00% on Class B share purchases.
Class D Shares. Class D shares are offered at net asset value plus a
1.00% initial sales charge, subject to a 0.75% annual distribution
fee, a 0.25% annual service fee and a 1.00% contingent deferred sales
charge on redemptions made within one year from the first day of the
month after purchase.
The Distributor pays financial service firms an initial commission of
1.85% on purchases of Class D shares and an ongoing commission of
0.65% annually. Payment of the ongoing commission is conditioned on
receipt by the Distributor of the 0.75% 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, including "How to Buy Shares" and
"Investor Services" with respect to special purchase plans.
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.
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.
Special Purchase Plans. 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."
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 before 4:00 p.m. Eastern time 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 the exchange will go before submitting the
request. Call 1-800-248-2828 to receive a prospectus and an exchange
authorization form. Call 1-800-422-3737 to exchange shares by
telephone. An exchange is a taxable capital transaction. The
exchange service may be changed, suspended or eliminated on 60 days'
written notice.
Class A Shares. An exchange from a money market fund into a non-money
market fund will be at the applicable offering price next determined
(including sales charge), except for amounts on which an initial sales
charge was paid. Non-money market fund shares must be held for five
months before qualifying for exchange to a fund with a higher sales
charge, after which exchanges are made at the net asset value next
determined.
Class B Shares. Exchanges of Class B shares are not subject to the
contingent deferred sales charge. However, if shares are redeemed
within six years after the original purchase, a contingent deferred
sales charge will be assessed using the schedule of the fund into
which the original investment was made.
Class D Shares. Exchanges of Class D shares will not be subject to
the contingent deferred sales charge. However, if shares are redeemed
within one year after the original purchase, a 1.00% contingent
deferred sales charge will be assessed.
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
be 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 is a Massachusetts business trust organized in 1991. 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.
Investment Adviser
Colonial Management Associates, Inc.
One Financial Center
Boston, MA 02111-2621
Sub-Adviser
State Street Bank and Trust Company
Two International Place
Boston, MA 02110
Distributor
Colonial Investment Services, Inc.
One Financial Center
Boston, MA 02111-2621
Custodian
Boston Safe Deposit and Trust Company
One Boston Place
Boston, MA 02108-2624
Shareholder Services and Transfer Agent
Colonial Investors Service Center, Inc.
One Financial Center
Boston, MA 02111-2621
1-800-345-6611
Independent Accountants
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110-2624
Legal Counsel
Ropes & Gray
One International Place
Boston, MA 02110-2624
Your financial service firm is:
Printed in U.S.A.
October 20, 1995
COLONIAL U.S. FUND
FOR GROWTH
PROSPECTUS
Colonial U.S. Fund for Growth seeks growth exceeding the S&P 500 Index
(Standard & Poor's Index of 500 common stocks) performance.
For more detailed information about the Fund, call the Adviser at
1-800-248-2828 for the October 20, 1995 Statement of Additional
Information.
FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED,
ENDORSED OR INSURED BY, ANY BANK OR GOVERNMENT AGENCY.
[COLONIAL FLAG LOGO]
Colonial Mutual Funds
_________________________________________________________________
Please send your completed application to:
Colonial Mutual Funds
P.O. Box 1722
Boston, Massachusetts 02105-1722
New Account Application/Revision to Existing Account
To open a new account, complete sections 1, 2, 3, & 8.
To apply for special services for a new or existing account, complete sections
4, 5, 6, 7, or 9 as appropriate.
___ Please check here if this is a revision.
1-----------Account Ownership--------------
Please choose one of the following.
__Individual: Print your name, Social Security #, U.S. citizen status.
__Joint Tenant: Print all names, the Social Security # for the first person,
and his/her U.S. citizen status.
__Uniform Gift to Minors: Name of custodian and minor, minor's Social Security
#, minor's U.S. citizen status.
__Corporation, Association, Partnership: Include full name, Taxpayer I.D. #.
__Trust: Name of trustee, trust title & date, and trust's Taxpayer I.D. #.
______________________________________
Name of account owner
______________________________________
Name of joint account owner
______________________________________
Street address
______________________________________
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.
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
October 20, 1995
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 or Class B shares of the Fund. Read it
carefully and retain it for future reference.
SS-XX/XXXX-1095
More detailed information about the Fund is in the October 20, 1995
Statement of Additional Information which has been filed with the
Securities and Exchange Commission and is obtainable free of charge by
calling the Adviser at 1-800-248-2828. The Statement of Additional
Information is incorporated by reference in (which means it is
considered to be a part of) this Prospectus.
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. 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.
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 and Class B
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
Maximum Initial Sales Charge Imposed on a Purchase
(as a % of offering price)(3) 5.75% 0.00%(5)
Maximum Contingent Deferred Sales Charge
(as a % of offering price)(3) 1.00%(4) 5.00%
(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
shares, long-term Class B 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
Management fee 0.60% 0.60%
12b-1 fee 0.25 1.00
Other expenses 0.60 0.60
---- ----
Total expenses 1.45% 2.20%
==== ====
Example
The following Example shows the cumulative expenses attributable to a
hypothetical $1,000 investment in the Class A and Class B 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
Period: (6) (7)
1 year $ 71 $ 72 $ 22
3 years $101 $ 99 $ 69
5 years $132 $138 $118
10 years $221 $235(8) $235(8)
(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.
THE FUND'S FINANCIAL HISTORY(a)
The following schedule of financial highlights for a share outstanding
throughout each period has been examined 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 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.
<TABLE>
<CAPTION> CLASS A
Year ended June 30
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Net asset value - Beginning of period $16.670 $15.860 $12.330 $11.570 $13.560
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.002 (0.047) (0.083) (0.127) 0.045
Net realized and unrealized gain (loss) on investments 5.588 0.857 3.613 0.887 (1.992)
----- ----- ----- ----- -----
Total from investment operations 5.590 0.810 3.530 0.760 (1.947)
----- ----- ----- ----- -----
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income 0.000 0.000 0.000 0.000 (0.043)
From net realized gain on investments 0.000 0.000 0.000 0.000 0.000
----- ----- ----- ----- -----
Total distributions declared to shareholders 0.000 0.000 0.000 0.000 (0.043)
----- ----- ----- ----- -------
Net asset value - End of period $22.260 $16.670 $15.860 $12.330 $11.570
====== ====== ====== ====== ======
Total return(d) 33.53% 5.11% 28.63% 6.57% (14.34)%
===== ==== ===== ==== =====
RATIOS TO AVERAGE NET ASSETS
Expenses 1.45% 1.56% 1.88% 2.13% 1.91%
Interest expense 0.00% 0.00% 0.01% 0.06% 0.03%
Net investment income (loss) 0.01% (0.27)% (0.60)% (0.91)% 0.33%
Fees and expenses waived or or borne by the Adviser 0.00% 0.00% 0.00% 0.00% 0.00%
Portfolio turnover 64% 35% 29% 0% 79%
Net assets at end of period (000) $40,661 $24,760 $23,716 $22,002 $28,943
_________________________________
</TABLE>
<TABLE>
<CAPTION>
CLASS A
Year ended June 30
1990 1989 1988 1987 (b)
<S> <C> <C> <C> <C>
Net asset value - Beginning of period $13.540 $12.940 $13.810 $12.140
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.048 0.061 0.066 (c 0.057 (c)
Net realized and unrealized gain (loss) on investments 0.017 0.929 (0.357) 1.643
----- ----- ----- -----
Total from investment operations 0.065 0.990 (0.291)(c) 1.700 (c)
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.045) (0.060) (0.074) (0.030)
From net realized gain on investments 0.000 (0.330) (0.505) 0.000
----- ----- ----- -----
Total distributions declared to shareholders (0.045) (0.390) (0.579) (0.030)
----- ----- -----
Net asset value - End of period $13.560 $13.540 $12.940 $13.810
====== ====== ====== ======
Total return(d) 0.49% 8.07% (2.18)%(e) 14.04%(e)
==== ==== ==== =====
RATIOS TO AVERAGE NET ASSETS
Expenses 1.67% 1.69% 1.48%(c) 1.33%(c)
Interest expense 0.02% 0.00% 0.01% 0.02%
Net investment income (loss) 0.35% 0.48% 0.54%(c) 0.61%(c)
Fees and expenses waived or or borne by the Adviser 0.00% 0.00% 0.23% 0.66%
Portfolio turnover 17% 25% 42% 34%
Net assets at end of period (000) $42,888 $46,415 $44,596 $38,193
_________________________________
(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, 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.
THE FUND'S FINANCIAL HISTORY(a) (CONT'D)
</TABLE>
<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 investments 5.509 0.856 2.880
----- ----- -----
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
----- ----- -----
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%
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.
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 total 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 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 and the contingent deferred sales charge
applicable to the time period quoted on Class B 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 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. 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. To change your election, call the Transfer Agent for
information. 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 4:00 p.m. Eastern time (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 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 and B. 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.
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 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, including "How to Buy
Shares" and "Investor Services" with respect to special purchase
plans.
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. Purchases of $250,000 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 groups 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 Plans . 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 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 before 4:00 p.m. Eastern time 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. 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 be 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.
TELEPHONE TRANSACTIONS
All shareholders and/or their financial advisers may redeem up to
$50,000 of Fund shares by telephone and may elect telephone redemption
privileges for larger amounts on the account application. All
exchanges may be accomplished by telephone. See the Statement of
Additional Information for more information. The Adviser,
Administrator, 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. 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. 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. All telephone transactions
are recorded. 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 the Class A
and Class B shares of the Fund. The Fund also pays the Distributor an
annual distribution fee of 0.75% of the average net assets attributed
to its Class B shares. Because the Class B 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. 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.
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.
October 20, 1995
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 October 20, 1995 Statement of Additional
Information.
FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED,
ENDORSED OR INSURED BY, ANY BANK OR GOVERNMENT AGENCY.
[COLONIAL FLAG LOGO]
Colonial Mutual Funds
_________________________________________________________________
Please send your completed application to:
Colonial Mutual Funds
P.O. Box 1722
Boston, Massachusetts 02105-1722
New Account Application/Revision to Existing Account
To open a new account, complete sections 1, 2, 3, & 8.
To apply for special services for a new or existing account,
complete sections 4, 5, 6, 7, or 9 as appropriate.
___ Please check here if this is a revision.
1-----------Account Ownership--------------
Please choose one of the following.
__Individual: Print your name, Social Security #, U.S. citizen status.
__Joint Tenant: Print all names, the Social Security # for the first person,
and his/her U.S. citizen status.
__Uniform Gift to Minors: Name of custodian and minor, minor's Social Security
#, minor's U.S. citizen status.
__Corporation, Association, Partnership: Include full name, Taxpayer I.D. #.
__Trust: Name of trustee, trust title & date, and trust's Taxpayer I.D. #.
______________________________________
Name of account owner
______________________________________
Name of joint account owner
______________________________________
Street address
______________________________________
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 shares. If no distribution option
is selected, distributions will be reinvested in additional Fund shares. Please
consult with your financial adviser to determine which class of shares best
suits your needs.
Fund Choice(s)
1______________________________________________
Fund
___ A Shares ___ B Shares (less than $250,000)
$______________________________________________
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)
2______________________________________________
Fund
___ A Shares ___ B Shares (less than $250,000)
$______________________________________________
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)
3______________________________________________
Fund
___ A Shares ___ B Shares (less than $250,000)
$______________________________________________
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.
1____________________________
From fund
____________________________
Account number (if existing)
____________________________
To fund
____________________________
Account number (if existing)
2____________________________
From fund
____________________________
Account number (if existing)
____________________________
To fund
____________________________
Account number (if existing)
3____________________________
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
1____________________________________
Fund name
$_________________________
Amount to invest monthly
2____________________________________
Fund name
$_________________________
Amount to invest monthly
3____________________________________
Fund name
$_________________________
Amount to invest monthly
4____________________________________
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).
1____________________________________
Fund name
$_____________________ _________________
Amount to transfer Month to start
Frequency
__Monthly or __Quarterly
Date
__5th or __20th of the month
2____________________________________
Fund name
$_____________________ _________________
Amount to transfer Month to start
Frequency
__Monthly or __Quarterly
Date
__5th or __20th of the month
3____________________________________
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 or B shares in other
Colonial funds, you may be eligible for a reduced sales charge. The combined
value of your accounts must be $50,000 or more. Class A shares of money market
funds are not eligible unless purchased by exchange from another Colonial fund.
The sales charge for your purchase will be based on the sum of the purchase
added to the value of all shares in other Colonial funds at the previous day's
public offering price.
__Please link the accounts listed below for Right of Accumulation privileges,
so that this and future purchases will receive any discount for which they
are eligible.
1_____________________________________
Name on account
_____________________________________
Account number
2_____________________________________
Name on account
_____________________________________
Account number
B. Statement of Intent
If you agree in advance to invest at least $50,000 within 13 months, you'll
pay a lower sales charge on every dollar you invest. If you sign a Statement
of Intent within 90 days after you establish your account, you can receive a
retroactive discount on prior investments. The amount required to receive a
discount varies by fund; see the sales charge table in the "How to Buy Shares"
section of your fund prospectus.
__I want to reduce my sales charge.
I agree to invest $ _______________ over a 13-month period starting
______/______/ 19______ (not more than 90 days prior to this application).
I understand an additional sales charge must be paid if I do not complete this
Statement of Intent.
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-903A-0595
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; Back cover
8. How to sell shares; How to exchange
shares; Telephone transactions
9. Not Applicable
October 20, 1995
COLONIAL SMALL STOCK FUND
CLASS Z SHARES
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 Z shares of the Fund.
SS-XX/XXXX-1095
Class Z shares may be purchased only by (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.
Read this Prospectus carefully and retain it for future reference.
More detailed information about the Fund is in the October 20, 1995,
Statement of Additional Information which has been filed with the
Securities and Exchange Commission and is obtainable free of charge by
calling the Adviser at 1-800-248-2828. The Statement of Additional
Information is incorporated by reference in (which means it is
considered to be a part of) this Prospectus.
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
Organization and history
FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED,
ENDORSED OR INSURED BY, ANY BANK OR GOVERNMENT AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
SUMMARY OF EXPENSES
Expenses are one of several factors to consider when investing in the
Fund. The following tables summarize your maximum transaction costs
and annual expenses for an investment in Class Z shares of the Fund.
See "How the Fund is managed" for a more complete description of the
Fund's various costs and expenses.
Shareholder Transaction Expenses (1)(2)
Maximum Initial Sales Charge Imposed on a Purchase
(as a % of offering price) 0.00%
Maximum Contingent Deferred Sales Charge
(as a % of offering price) 0.00%
(1)For accounts less than $1,000 an annual fee of $10 may be deducted.
See "How to sell shares."
(2)Redemption proceeds exceeding $5,000 sent via federal funds wire
will be subject to a $7.50 charge per transaction.
Annual Operating Expenses (as a % of net assets)
Management fee 0.60%
12b-1 fee 0.00
Other expenses 0.60
----
Total expenses 1.20%
=====
Example
The following Example shows the cumulative expenses attributable to a
hypothetical $1,000 investment in the Class Z shares of the Fund for
the periods specified, assuming a 5% annual return with or without
redemption at period end. The 5% return and expenses used in this
Example should not be considered indicative of actual or expected Fund
performance or expenses, both of which will vary.
Period:
1 year $ 12
3 years $ 38
5 years $ 66
10 years $144
THE FUND'S FINANCIAL HISTORY(a)
The following schedule of financial highlights for a share outstanding
throughout each period has been examined 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 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. The information presented is for other
classes of shares offered by the Fund. As of June 30 1995, no Class Z
shares had been issued.
<TABLE>
<CAPTION>
CLASS A
Year ended June 30
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Net asset value - Beginning of period $16.670 $15.860 $12.330 $11.570 $13.560
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.002 (0.047) (0.083) (0.127) 0.045
Net realized and unrealized gain (loss) on investments 5.588 0.857 3.613 0.887 (1.992)
----- ----- ----- ----- -------
Total from investment operations 5.590 0.810 3.530 0.760 (1.947)
----- ----- ----- ----- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income 0.000 0.000 0.000 0.000 (0.043)
From net realized gain on investments 0.000 0.000 0.000 0.000 0.000
----- ----- ----- ----- -----
Total distributions declared to shareholders 0.000 0.000 0.000 0.000 (0.043)
----- ----- ----- ----- -------
Net asset value - End of period $22.260 $16.670 $15.860 $12.330 $11.570
======= ======= ======= ======= =======
Total return(d) 33.53% 5.11% 28.63% 6.57% (14.34)%
====== ===== ====== ===== ========
RATIOS TO AVERAGE NET ASSETS
Expenses 1.45% 1.56% 1.88% 2.13% 1.91%
Interest expense 0.00% 0.00% 0.01% 0.06% 0.03%
Net investment income (loss) 0.01% (0.27)% (0.60)% (0.91)% 0.33%
Fees and expenses waived or or borne by the Adviser 0.00% 0.00% 0.00% 0.00% 0.00%
Portfolio turnover 64% 35% 29% 0% 79%
Net assets at end of period (000) $40,661 $24,760 $23,716 $22,002 $28,943
_________________________________
</TABLE>
<TABLE>
<CAPTION>
CLASS A
Year ended June 30
1990 1989 1988 1987 (b)
<S> <C> <C> <C> <C>
Net asset value - Beginning of period $13.540 $12.940 $13.810 $12.140
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.048 0.061 0.066 (c) 0.057 (c)
Net realized and unrealized gain (loss) on investmen 0.017 0.929 (0.357) 1.643
----- ----- ------- -----
Total from investment operations 0.065 0.990 (0.291)(c) 1.700 (c)
----- ----- ------- -----
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.045) (0.060) (0.074) (0.030)
From net realized gain on investments 0.000 (0.330) (0.505) 0.000
----- ------- ------- -----
Total distributions declared to shareholders (0.045) (0.390) (0.579) (0.030)
------- ------- ------- -------
Net asset value - End of period $13.560 $13.540 $12.940 $13.810
======= ======= ======= =======
Total return(d) 0.49% 8.07% (2.18)%(e) 14.04%(e)
===== ===== ======= ======
RATIOS TO AVERAGE NET ASSETS
Expenses 1.67% 1.69% 1.48%(c) 1.33%(c)
Interest expense 0.02% 0.00% 0.01% 0.02%
Net investment income (loss) 0.35% 0.48% 0.54%(c) 0.61%(c)
Fees and expenses waived or or borne by the Adviser 0.00% 0.00% 0.23% 0.66%
Portfolio turnover 17% 25% 42% 34%
Net assets at end of period (000) $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, respectively.
(d) Net of fees and expenses waived or borne by the Adviser which
amounted to $0.028 and $0.062, respectively.
(e) Total return at net asset value assuming all distributions
reinvested and no initial or contingent deferred sales charges.
(f) Had the Adviser not waived or borne certain expenses, the
Fund's total return would have been lower.
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 investments 5.509 0.856 2.880
----- ----- -----
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
----- ----- -----
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%
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 were 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.
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 exceed 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 total 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 investment objective,
shareholders should consider whether the Fund remains an appropriate
investment in light of their then current financial position and
needs. 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.
Average annual total returns are calculated in accordance with the
Securities and Exchange Commission's formula and assume the
reinvestment of all distributions. Other total returns differ from
the average annual total return only in that they may relate to
different time periods and may represent aggregate as opposed to
average annual total returns.
Yield, which differs from total return because it does not consider
changes in net asset value, is calculated in accordance with the
Securities and Exchange Commission's formula. Distribution rate is
calculated by dividing the most recent twelve months' distributions by
the net asset value at the end of the period. 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 is in turn 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 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 net
asset value attributable to Class Z shares by the number of Class Z
shares outstanding. 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 their fair value
following procedures adopted by the Trustees.
DISTRIBUTIONS AND TAXES
The Fund intends to qualify as a "regulated investment company" under
the Internal Revenue Code and to distribute to shareholders virtually
all net income and any net realized gain at least annually.
The Fund generally declares and pays distributions semi-annually in
June and December. Distributions are invested in additional Class Z
shares at net asset value unless the shareholder elects to receive
cash. Regardless of the shareholder's election, distributions of $10
or less will not be paid in cash but will be invested in additional
Class Z shares at net asset value. To change your election, call the
Transfer Agent for information. Whether you receive 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
Class Z shares are offered continuously at net asset value without a
sales charge. Orders received in good form prior to the time at which
the Fund values its shares (or placed with a financial service firm
before such time and transmitted by the financial service firm before
the Fund processes that day's share transactions) will be processed
based on that day's closing net asset value. Certificates will not be
issued for Class Z shares. The Fund may refuse any purchase order for
its shares. See the Statement of Additional Information.
Special Purchase Plans . 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. A shareholder's manual explaining all available
services will be provided upon request.
Other Classes of Shares. In addition to Class Z shares, the Fund
offers two other classes of shares through a separate Prospectus.
Class A shares are offered at net asset value plus a maximum 5.75%
sales charge imposed at the time of purchase, and are subject to an
ongoing 0.25% annual Rule 12b-1 fee and a 1.00% contingent deferred
sales charge on certain redemptions made within 18 months after
purchase. Class B shares are offered at net asset value and are
subject to a 1.00% annual Rule 12b-1 fee and a contingent deferred
sales charge on redemptions made within six years after purchase. The
contingent deferred sales charge is 5.00% on redemptions made in year
one, and declines to 0% after six years. Class B shares convert to
Class A after approximately eight years (at which time they convert to
Class A shares not bearing a distribution fee). The maximum purchase
amount allowed for Class B shares is $250,000.
Other than the sales charges and Rule 12b-1 fees described above, the
fees and expenses relating to Classes A and B are the same as those
for Class Z shares.
Classes A and B are exchangeable into the same class of any other
Colonial fund offering such class.
Which Class is more beneficial to an investor depends on the amount
and intended length of the investment. In general, anyone eligible to
purchase Class Z shares should do so in preference over other classes.
Financial service firms may receive different compensation rates for
selling different classes of shares. The Distributor may pay
additional compensation to financial service firms which have made or
may make significant sales. Initial or contingent deferred sales
charges may be reduced or eliminated for certain persons or
organizations purchasing Fund shares alone or in combination with
certain other Colonial funds. See the Statement of Additional
Information for more information.
HOW TO SELL SHARES
Shares 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 next calculated after the Fund receives the request in proper
form. Signatures must be guaranteed by a bank, a member firm of a
national stock exchange or another eligible guarantor institution.
Stock power forms are available from financial service firms, the
Transfer Agent and many banks. Additional documentation is required
for sales by corporations, agents, fiduciaries, surviving joint owners
and individual retirement account holders. For details contact:
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Selling Shares Through Financial Service Firms. Financial service
firms must receive requests before the time at which the Fund's shares
are valued to receive that day's price, are responsible for furnishing
all necessary documentation to the Transfer Agent and may charge for
this service.
General. The sale of shares is a taxable transaction for income tax
purposes. See the Statement of Additional Information for more
information. Under unusual circumstances, the Fund may suspend
repurchases or postpone payment for up to seven days or longer, as
permitted by federal securities law. In June of any year, the Fund
may deduct $10 (payable to the Transfer Agent) from accounts valued at
less than $1,000 unless the account value has dropped below $1,000
solely as a result of share value depreciation. Shareholders will
receive 60 days' written notice to increase the account value before
the fee is deducted.
HOW TO EXCHANGE SHARES
Class Z shares may be exchanged at net asset value into the Class A
shares of any other Colonial fund.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.
TELEPHONE TRANSACTIONS
All shareholders and/or their financial advisers may redeem up to
$50,000 of Fund shares by telephone and may elect telephone redemption
privileges for larger amounts on the account application. All
exchanges may be accomplished by telephone. See the Statement of
Additional Information for more information. The Adviser,
Administrator, 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. 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. 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. All telephone transactions
are recorded. Shareholders are not obligated to transact by
telephone.
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.
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.
October 20, 1995
COLONIAL SMALL
STOCK FUND
CLASS Z SHARES
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 October 20, 1995, Statement of Additional
Information.
FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED,
ENDORSED OR INSURED BY, ANY BANK OR GOVERNMENT AGENCY.
COLONIAL TRUST VI
Cross Reference Sheet (Colonial U.S. Fund for Growth)
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;
Sub-Adviser
17. Fund Charges and Expenses;
Management of the Colonial Funds;
Sub-Adviser
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 U.S. FUND FOR GROWTH
Statement of Additional Information
October 20, 1995
This Statement of Additional Information (SAI) contains information
which may be useful to investors but which is not included in the
Prospectus of Colonial U.S. Fund for Growth (Fund). This SAI is not a
prospectus and is authorized for distribution only when accompanied or
preceded by the Prospectus of the Fund dated October 20, 1995. This
SAI should be read together with the Prospectus. Investors may obtain
a free copy of the Prospectus from Colonial Investment Services, Inc.,
One Financial Center, Boston, MA 02111-2621.
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
Sub-Adviser
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
Part 1
COLONIAL U.S. FUND FOR GROWTH
Statement of Additional Information
October 20, 1995
DEFINITIONS
"Trust" Colonial Trust VI
"Fund" Colonial U.S. Fund for Growth
"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
"State Street" State Street Bank and Trust Company, the Fund's
Sub-Adviser
INVESTMENT OBJECTIVE AND POLICIES
The Fund's Prospectus describes the Fund's investment objective and
policies. 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:
Repurchase Agreements
Money Market Instruments
Securities Loans
Short-Term Trading
Foreign Securities
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, the Fund 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;
the value of such real estate may not exceed 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 do not
exceed 5% of its total assets;
4. Underwrite securities issued by others only when disposing of
portfolio securities;
5. Make loans (i) through lending of securities not exceeding 30% of
total assets, (ii) through the purchase of debt instruments or
similar evidences of indebtedness typically sold privately to
financial institutions and (iii) 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 such 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 the Fund 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 securities of any company if the Fund 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 the 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 exceeds 5% of its total assets;
9. Invest more than 15% of its net assets in illiquid assets (i.e.,
assets which may not be sold in the ordinary course at
approximately the price at which they are valued by the Fund); 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, would exceed 5% of the value
of the Fund's net assets. Included within that amount, but not to
exceed 2% of the value of the Fund's net assets, may be warrants
which are not listed on the New York Stock Exchange or the American
Stock Exchange. Warrants acquired by the Fund in units or attached
to securities will be deemed to be without value for this purpose.
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
The Fund cannot accurately predict portfolio turnover rate, but the
Adviser and State Street anticipate that it will not exceed 250%. A
100% turnover rate would occur if all of the securities in the
portfolio were sold and either repurchased or replaced within one
year. High portfolio turnover involves correspondingly greater
brokerage commission and other transaction costs, which will be borne
directly by the Fund.
Year ended June 30
1995 1994
84% 117%
FUND CHARGES AND EXPENSES
Under the Fund's management agreement, the Fund pays the Adviser a
monthly fee based on the average net assets of the Fund, determined at
the close of each business day during the month, at the annual rate of
0.80%.
Recent Fees paid to the Adviser, CISI and CISC (dollars in thousands)
Year ended June 30
1995 1994 1993
Management fee $2,266 $1,626 $552
Bookkeeping fee 109 81 37
Shareholder service and 864 598 161
transfer agent fee
12b-1 fees:
Service fee (Classes A, B
and D) 707 511(a) 173(a)
Distribution fee (Class B) 1,319 957 33
Distribution fee (Class D) 11 0 0
Fees and expenses waived or
borne by the Adviser 0 0 0
(a) Applicable to Class A and Class B shares only. Class D shares
were initially offered on July 1, 1994.
Brokerage Commissions (dollars in thousands)
Year ended June 30
1995 1994 1993
Total commissions $ 576 $ 608 $ 367
Directed transactions(b) 16,594 13,253 1,730
Commissions on directed 29 16 2
transactions
(b) See "Management of the Colonial Funds - Portfolio Transactions -
Brokerage and research services" in Part 2 of this SAI.
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:
Total
Compensation
From Trust
and Fund
Complex Paid
Aggregate Pension to the
Compensation or Trustees
From Retirement Estimated For The
Fund For Benefits Annual Calendar
The Fiscal Accured Benefits Year Ended
Year Ended As Part of Upon December 31,
Trustee June 30, 1995 Fund Expense Retirement 1994(d)
Robert J. Birnbaum(h) $ 868 $0 $0 $0
Tom Bleasdale 2,529(c) 0 0 101,000(e)
Lora S. Collins 2,761 0 0 95,000
James E. Grinnell(h) 870 0 0 0
William D. Ireland, Jr. 2,787 0 0 110,000
Richard W. Lowry(h) 871 0 0 0
William E. Mayer 2,318 0 0 89,752
John A. McNeice, Jr. 0 0 0 0
James L. Moody, Jr. 2,724(f) 0 0 109,000
John J. Neuhauser 2,359 0 0 95,000
George L. Shinn 2,934 0 0 112,000
Robert L. Sullivan 2,589 0 0 104,561
Sinclair Weeks, Jr. 2,871 0 0 116,000
(c) Includes $1,371 payable in later years as deferred compensation.
(d) At December 31, 1994, the Colonial Funds complex consisted of
31 open-end and 5 closed-end management investment company
portfolios.
(e) Includes $49,000 payable in later years as deferred compensation.
(f) Includes $1,477 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 (Liberty Funds) for
service during the calendar year ended December 31, 1994:
Total
Compensation
From Liberty
Pension or Estimated Funds for
Retirement Annual The Calendar
Benefits Accrued Benefits Year Ended
Trustee As Part of Fund Upon December 31,
Expense Retirement 1994(g)
Robert J. Birnbaum(h) $0 $0 $ 0
James E. Grinnell(h) 0 0 31,032
Richard W. Lowry(h) 0 0 31,282
(g) 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 and are advised by
Liberty Asset Management Company (LAMCO). Stein Roe and
LAMCO 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.
(h) Elected as trustee of the Colonial Funds complex on April
21, 1995.
Ownership of the Fund
At September 14, 1995, the Trustees and officers of the Fund as a
group owned approximately 305,852 Class A shares representing 3.16% of
the outstanding Class A shares of the Fund. Messrs. Scoon, Silver and
Stern, who are officers of the Trust, held 271,413 Class A shares,
representing 2.80% of the then outstanding shares. This holding
consisted entirely of shares held by them as Co-Trustees of The
Colonial Group, Inc. Profit Sharing Plan with respect to which they
share voting and investment power.
At September 14, 1995, Merrill Lynch, Pierce, Fenner & Smith, Inc.,
4800 Deer Lake Drive, East, Jacksonville, FL 32216 owned 572,262
Class A shares and 1,821,166 Class B shares representing 5.92% and
10.57%, respectively, of the total outstanding Class A and Class B
shares of the Fund.
At September 14, 1995 there were 10,887 Class A, 21,558 Class B and
311 Class D record holders of the Fund.
Sales Charges (dollars in thousands)
Class A Shares Class D Shares
Year ended June 30 Year ended June 30
1995 1994 1993 1994
Aggregate initial sales
charges on Fund share sales $601 $976 $1,746 $XX,XXX
Initial sales charges
retained by CISI 75 97 85 0
Class B Shares Class D Shares
Year ended June 30 Year ended June 30
1995 1994 1993 1995
Aggregate contingent
deferred sales charges
(CDSC) on Fund redemptions $501 $289 $65 $3
SUB-ADVISER
Under a Sub-Advisory Agreement (Agreement) among State Street, the
Adviser and the Trust, State Street subject to the Adviser's and the
Trustees' supervision, directs the investment of the Fund in
accordance with the Fund's investment objective, policies and
restrictions. For these services, State Street is entitled to receive
from the Adviser a monthly fee at an annual rate of 0.50% of the first
$50 million of the Fund's average daily net assets, 0.40% of the next
$150 million of average daily net assets and 0.35% of average daily
net assets in excess of $200 million. For the fiscal year ended June
30, 1995, the Sub-Adviser received 0.40% of the Fund's average daily
net assets.
The Agreement provides that State Street shall not be subject to any
liability to the Trust or the Fund, or to any shareholder of the Trust
or the Fund for any act or omission in the course of or connected with
rendering services to the Trust or the Fund in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
duties on the part of State Street.
The Agreement may be terminated at any time on 60 days' written notice
to State Street 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 or
on 60 days' written notice to the Adviser and the Trust by State
Street. 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.
PORTFOLIO TRANSACTIONS
Investment decisions. State Street is the largest provider of
securities processing and recordkeeping services for U.S. mutual funds
and pension funds. State Street is a wholly-owned subsidiary of State
Street Boston Corporation, a publicly held bank holding company.
State Street Global Advisors, established in 1978, specializes in
quantitative investment products and is the largest U.S. manager of
international pension assets. State Street Global Advisors, with over
$156.8 billion (U.S.) under management, provides complete global
investment management services from offices in the United States,
London, Sydney, Hong Kong, Tokyo, Toronto, Luxembourg, Melbourne,
Montreal and Paris.
Clients advised by the Sub-Adviser sometimes invest in securities in
which the Fund also invests. If the Fund and such other clients
desire to buy or sell the same portfolio securities, 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 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 Sub-Adviser as sub-adviser to the Fund
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 Sub-Adviser may consider
sales of shares of the Fund as a factor in the selection of broker-
dealers to execute securities transactions for the Fund.
The Sub-Adviser places the transactions of the Fund with broker-
dealers selected by the Sub-Adviser and, if applicable, negotiates
commissions. Broker-dealers may receive brokerage commissions on
portfolio transactions, including the effecting of closing purchase
and sale transactions. The Fund from time to time also executes
portfolio transactions with such broker-dealers acting as principals.
The Fund does 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 Sub-Adviser's policy
always to seek best execution, which is to place the Fund's
transactions where the Fund 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 Fund may be executed by broker-dealers who also
provide research services (as defined below) to the Sub-Adviser and
the Fund. The Adviser may use all, some or none of such research
services in providing investment advisory services to each of its
clients, including the Fund. To the extent that such services are
used by the Sub-Adviser, they tend to reduce the Sub-Adviser's
expenses. In the Sub-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 Sub-
Adviser may cause the Fund to pay a broker-dealer which provides
brokerage and research services to the Sub-Adviser an amount of
commission for effecting a securities transaction, including a closing
purchase transaction, for the Fund 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 Sub-
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 Sub-Adviser's overall
responsibilities to the Fund and all its other clients.
STATE STREET REPRESENTATIVE CLIENT LIST*
Aluminum Company of America
Amoco Corporation
AT&T
BellSouth Corporation
California Public Employees' Retirement System
Chevron Corporation
Consolidated Rail Corporation (Conrail)
The Dow Chemical Company
Glaxo, Inc.
Hartford Municipal Employees' Retirement Fund
The Interpublic Group of Companies, Inc.
Kellogg Company
Maine State Retirement System
Massachusetts Pensions Reserve Investment Management Board
Minneapolis Employees' Retirement Fund
Minnesota State Board of Investment
New York City Retirement Systems
North Dakota Public Employees' Retirement System
Northern California UFCW Retail Clerks Specialty Stores
Pension Fund
Northwest Airlines, Inc.
Ohio Edison Company
Pacific Telesis Group
J.C. Penney Company, Inc.
Pennsylvania Municipal Retirement Board
Pension Benefit Guaranty Corporation
Pepsico, Inc.
Perdue Farms, Inc.
Philip Morris Inc.
Pitney Bowes Inc.
Polaroid Corporation
Richmond Retirement System
Seattle City Employees' Retirement System
Southern California UFCW & Food Employer Joint Trust Fund
State of Connecticut Trust Funds
Tenneco, Inc.
Texaco Inc.
University of Colorado Foundation
Wellesley College Pension Plan
Wisconsin Electric Power Company
The World Bank
Xerox Corporation
Yale New Haven Hospital
* This is a partial representative client list from a client list
published in The Money Market Directory of Pension Funds, 1995. It is
not known whether the foregoing clients approve of State Street or the
advisory services provided. Clients were included based on name
recognition and their willingness to allow the use of their names.
12b-1 Plans, CDSC and Conversion of Shares
The Fund offers three classes of shares - Class A, Class B and Class
D. 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 each Class of shares
and a distribution fee at an annual rate of 0.75% of average net
assets attributed to Class B and Class D shares. CISI may use the
entire amount of such fees to defray the costs of commissions and
service fees paid to financial service firms (FSFs) and for certain
other purposes. Since the distribution and service fees are payable
regardless of the amount of CISI's expenses, CISI may realize a profit
from the fees.
The Plans authorize any other payments by the Fund to the Adviser to
the extent that such payments might be construed to be indirect
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 of the Plans must be approved by the Trustees in the
manner provided in the foregoing sentence. The Plans may be
terminated at any time by vote of a majority of the independent
Trustees or by vote of a majority of the outstanding voting
securities of the relevant class of shares. The continuance of the
Plans will only be effective if the selection and nomination of the
Trustees who are 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%
initial sales charge and subject to a 1% CDSC on redemptions within
one year after purchase. 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
distribution fee.
Sales-related expenses (for the fiscal year ended June 30, 1995)
(dollars in thousands) of CISI relating to the Fund, were as follows:
Class A Class B Class D
Shares Shares Shares
Fees to FSFs $268 $7,878 $25
Cost of sales material relating
to the Fund (including
printing and mailing expenses) 75 176 12
Allocated travel, entertainment
and other promotional (including
advertisting) 115 259 18
INVESTMENT PERFORMANCE
The Fund's Class A and Class B yields for the month ended June 30,
1995 were:
Class A Shares Class B Shares Class D Shares
1.13% 0.45% 0.44%
The Fund's average annual total returns at June 30, 1995, were:
Class A Shares
Period July 1, 1992
(commencement of operations)
1 Year through June 30, 1995
With sales charge 17.67% 11.86%
of 5.75%
Without sales charge 24.84% 14.09%
Class B Shares Class D Shares
Period July 1, 1992 Period July 1, 1994
(commencement of (commencement of
1 Year operations) operations)
through June 30, 1995 through June 30, 1995
With CDSC of 5.00% 18.94% 12.40% 21.77%
Without CDSC 23.94% 13.19% 24.01%
The Fund's Class A, Class B and Class D distribution rates at June 30,
1995, which are based on distributions for the twelve-months then
ended and the maximum offering price (net asset value for Class B and
Class D), were 1.14%, 0.56% and 0.70%, respectively.
See Part 2 of this SAI, "Performance Measures," 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 Trust'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 to 21 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.5
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 regulation
(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 LFC Utilities Trust and LFC
Utilities Trust in which Colonial Global Utilities Fund is
invested (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 Adviseracts 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 administrated 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 administrated 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 and each other 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) 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 the 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.
An exchange is a taxable capital transaction for federal and state
tax purposes.
You may terminate your program, change the amount of the exchange
(subject to the $100 minimum), or change your selection of funds, by
telephone or in writing; if in writing by mailing 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). 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 Telephone Redemption Statement of Intent
Plan
Sponsored Arrangements Colonial Cash Share Certificates
Connection
$50,000 Fast Cash Reduced Sales Exchange Privilege
Charges
for any "person"
Right of Accumulation Automatic Dividend
Diversification
*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 administrated
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 current
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.
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
Debt
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
SOURCE CATEGORY RETURN
(%)
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
INVESTMENT PORTFOLIO
JUNE 30, 1995 (IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCKS - 96.3% SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
CONSTRUCTION - 0.2%
HEAVY CONSTRUCTION-NON BUILDING CONSTRUCTION - 0.2%
Halliburton Co. 23 $ 837
-------
- --------------------------------------------------------------------------------
FINANCE, INSURANCE & REAL ESTATE - 11.2%
DEPOSITORY INSTITUTIONS - 5.5%
Banc One Corp. 43 1,400
Bank of New York Co., Inc. 1 32
BankAmerica Corp. 88 4,636
Corestates Financial Corp. 1 24
First Bank System, Inc. 43 1,747
First Union Corp. 163 7,371
NBD Bancorp, Inc. 2 64
Star Banc Corp. (a) 23
Wachovia Corp. 89 3,189
Wilmington Trust Corp. 20 559
-------
19,045
-------
INSURANCE CARRIERS - 3.8%
Aflac, Inc. 136 5,963
American General Corp. 165 5,555
Geico Corp. 16 889
St. Paul Cos., Inc. 18 872
-------
13,279
-------
SECURITY BROKERS & DEALERS - 1.9%
Bear Stearns Co., Inc. 203 4,348
Franklin Resources, Inc. 16 694
Salomon, Inc. 33 1,340
-------
6,382
-------
- --------------------------------------------------------------------------------
MANUFACTURING - 53.4%
CHEMICALS - 14.4%
Abbott Laboratories 41 1,664
Bristol-Myers Squibb Co. 11 736
Clorox Co. 20 1,325
E.I. DuPont De Nemours & Co. 152 10,443
Goodrich (B.F.) Co. 22 1,158
Johnson & Johnson 107 7,216
Merck & Co., Inc. 225 11,005
Morton International, Inc. 144 4,200
Procter & Gamble Co. 30 2,178
Schering-Plough Corp. 159 6,998
Sherwin-Williams Co. 74 2,651
-------
49,574
-------
</TABLE>
6
<PAGE>
Investment Portfolio/June 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ELECTRONIC & ELECTRICAL EQUIPMENT - 5.7%
General Electric Co. 107 $ 6,026
Intel Corp. 168 10,662
Texas Instruments, Inc. 22 2,905
-------
19,593
-------
FABRICATED METAL - 1.4%
Newell Co. 192 4,696
Parker-Hannifin Corp. 3 109
-------
4,805
-------
FOOD & KINDRED PRODUCTS - 8.0%
Anheuser Busch Cos., Inc. 3 165
Archer Daniels Midland Co. 172 3,198
CPC International, Inc. 3 216
Campbell Soup Co. 6 313
Coca Cola Co. 44 2,786
Hormel Foods Corp. 123 3,208
Kellogg Co. 19 1,392
Lancaster Colony Corp. 88 3,135
PepsiCo, Inc. 210 9,595
Philip Morris Cos., Inc. 47 3,511
-------
27,519
-------
FURNITURE & FIXTURES - 1.2%
Leggett & Platt, Inc. 92 4,052
-------
MACHINERY & COMPUTER EQUIPMENT - 4.4%
Brunswick Corp. (a) 3
Cabletron Systems, Inc. (b) (a) 5
Cummins Engine Co., Inc. 8 362
Dover Corp. 42 3,077
Hewlett-Packard Co. 145 10,773
International Business Machines Corp. 7 662
Pall Corp. 10 227
Timken Co. 5 235
-------
15,344
-------
MEASURING & ANALYZING INSTRUMENTS - 2.9%
Emerson Electric Co. 31 2,188
Johnson Controls, Inc. 9 491
Litton Industries, Inc. (b) 9 332
Millipore Corp. 97 6,561
Raytheon Co. 6 458
-------
10,030
-------
PAPER & PAPER MILLS - 2.8%
Champion International Corp. 132 6,881
Longview Fibre Co. 71 1,207
Minnesota Mining & Manufacturing Co. 30 1,694
-------
9,782
-------
PETROLEUM REFINING - 7.1%
Amoco Corp. 72 4,770
Atlantic Richfield Co. 44 4,884
</TABLE>
7
<PAGE>
Investment Portfolio/June 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCKS - CONT. SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
MANUFACTURING - CONT.
PETROLEUM REFINING - CONT.
Exxon Corp. 199 $14,083
Louisiana Land and Exploration Co. 2 60
Mobil Corp. 9 874
-------
24,671
-------
PRIMARY METAL - 0.6%
Lukens, Inc. 14 442
Reynolds Metals Co. 10 497
Worthington Industries, Inc. 57 1,173
-------
2,112
-------
PRINTING & PUBLISHING - 1.8%
Belo (A.H.) Corp., Series A 16 502
Gannett Co., Inc. 65 3,505
Tribune Co. 36 2,185
-------
6,192
-------
TRANSPORTATION EQUIPMENT - 3.1%
Dana Corp. 36 1,031
Eaton Corp. 25 1,471
Echlin, Inc. 18 639
General Dynamics Corp. 62 2,755
OEA, Inc. 37 1,108
PACCAR, Inc. 52 2,412
Rockwell International Corp. 16 741
TRW, Inc. 1 112
Textron, Inc. 5 308
-------
10,577
-------
- --------------------------------------------------------------------------------
RETAIL TRADE - 6.3%
FOOD STORES - 1.0%
Albertson's, Inc. 118 3,499
-------
GENERAL MERCHANDISE STORES - 2.4%
Sears, Roebuck & Co. 136 8,143
-------
MISCELLANEOUS RETAIL - 2.3%
Medicine Shoppe International, Inc. 5 165
Rite Aid Corp. 45 1,151
Walgreen Co. 129 6,486
-------
7,802
-------
RESTAURANTS - 0.6%
Luby's Cafeterias, Inc. 42 854
McDonald's Corp. 33 1,272
-------
2,126
-------
- --------------------------------------------------------------------------------
SERVICES - 3.8%
AMUSEMENT & RECREATION - 0.2%
Mirage Resorts, Inc. (b) 1 31
The Walt Disney Co. 10 528
-------
559
-------
</TABLE>
8
<PAGE>
Investment Portfolio/June 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
BUSINESS SERVICES - 3.6%
Automatic Data Processing, Inc. 116 7,268
Ecolab, Inc. 46 1,122
Equifax, Inc. 11 377
Honeywell, Inc. 2 82
Interpublic Group of Cos., Inc. 72 2,685
Kelly Services, Inc., Class A 7 167
Omnicom Group, Inc. 14 837
-------
12,538
-------
- --------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES -19.8%
AIR TRANSPORTATION - 0.7%
AMR Corp. (b) 12 925
Delta Air Lines, Inc. 12 893
Federal Express Corp. (b) 9 565
-------
2,383
-------
COMMUNICATIONS - 9.0%
Alltel Corp. 25 627
Ameritech Corp. 175 7,714
BellSouth Corp. 29 1,810
Capital Cities ABC, Inc. 72 7,765
Century Telephone Enterprises, Inc. 102 2,889
Cincinnati Bell, Inc. 3 76
GTE Corp. (a) 7
SBC Communications, Inc. 188 8,973
Sprint Corp. 41 1,382
-------
31,243
-------
ELECTRIC SERVICES - 3.6%
Atlantic Energy, Inc. 135 2,546
Boston Edison Co. 10 256
Central & South West Corp. 182 4,765
Consolidated Edison Co. of New York, Inc. 22 649
General Public Utilities Corp. 19 574
Kansas City Power & Light Co. 10 231
Northeast Utilities 28 630
Northern States Power Co. 5 231
Ohio Edison Co. 81 1,837
San Diego Gas & Electric Co. 40 830
-------
12,549
-------
GAS SERVICES - 3.2%
Consolidated Natural Gas Co. 9 347
Panhandle Eastern Corp. 138 3,369
Williams Companies, Inc. 206 7,174
-------
10,890
-------
MOTOR FREIGHT & WAREHOUSING - 0.6%
Consolidated Freightways, Inc. 88 1,947
-------
</TABLE>
9
<PAGE>
Investment Portfolio/June 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCKS - CONT. SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - CONT.
RAILROAD - 0.7%
Illinois Central Corp., Series A 71 $ 2,446
--------
SANITARY SERVICES - 1.0%
Browning Ferris Industries, Inc. 98 3,533
--------
WATER TRANSPORTATION - 1.0%
Tidewater, Inc. 140 3,510
--------
- --------------------------------------------------------------------------------
WHOLESALE TRADE - 1.6%
DURABLE GOODS - 1.6%
Genuine Parts Co. 145 5,503
Wyle Electronics Co. 2 56
--------
5,559
--------
TOTAL INVESTMENTS (cost of $284,285)(c) 332,521
--------
SHORT-TERM OBLIGATIONS - 3.4% PAR
- --------------------------------------------------------------------------------
Repurchase Agreement with Lehman Government
Securities, Inc., dated 06/30/95, due 07/03/95
at 6.210% collateralized by U.S. Treasury bills
and notes with various maturities to 1999, market
value $11,996 (repurchase proceeds $11,744) $ 11,738 11,738
--------
OTHER ASSETS & LIABILITIES, NET - 0.3% 1,141
- --------------------------------------------------------------------------------
NET ASSETS - 100.0% $345,400
--------
</TABLE>
NOTES TO INVESTMENT PORTFOLIO:
- --------------------------------------------------------------------------------
(a) Rounds to less than one.
(b) Non-income producing.
(c) Cost for federal income tax purposes is $284,385.
See notes to financial statements.
10
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
JUNE 30, 1995
(In thousands except for per share amounts and footnote)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value (cost $284,285) $332,521
Short-term obligations 11,738
--------
344,259
Receivable for:
Fund shares sold $ 1,045
Dividends 754
Investments sold 133
Interest 2
Other 50 1,984
-------- --------
Total Assets 346,243
LIABILITIES
Payable for:
Fund shares repurchased 565
Distributions 224
Accrued:
Deferred Trustees fees 3
Other 51
--------
Total Liabilities 843
--------
NET ASSETS $345,400
--------
Net asset value & redemption price per share - Class A
($124,171/9,363) $13.26
--------
Maximum offering price per share - Class A
($13.26/0.9425) $14.07 (a)
--------
Net asset value & offering price per share - Class B
($218,201/16,559) $13.18 (b)
--------
Net asset value per share - Class D
($3,028/229) $13.24 (b)
--------
Maximum offering price per share - Class D
($13.24/0.9900) $13.37
--------
COMPOSITION OF NET ASSETS
Capital paid in $284,914
Undistributed net investment income 32
Accumulated net realized gain 12,218
Net unrealized appreciation 48,236
--------
$345,400
--------
</TABLE>
(a) On sales of $50,000 or more the offering price is reduced.
(b) Redemption price per share is equal to net asset value less
any applicable contingent deferred sales charge.
See notes to financial statements.
11
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1995
(in thousands)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends $ 7,752
Interest 274
-------
8,026
EXPENSES
Management fee $ 2,266
Service fee 707
Distribution fee - Class B 1,319
Distribution fee - Class D 11
Transfer agent 864
Bookkeeping fee 109
Trustees fee 36
Custodian fee 15
Audit fee 32
Legal fee 9
Registration fee 71
Reports to shareholders 7
Amortization of deferred
organization expense 18
Other 16 5,480
------- -------
Net Investment Income 2,546
-------
NET REALIZED & UNREALIZED GAIN ON PORTFOLIO POSITIONS
Net realized gain 13,643
Net unrealized appreciation during
the period 47,177
-------
Net Gain 60,820
-------
Net Increase in Net Assets From Operations $63,366
-------
</TABLE>
See notes to financial statements.
12
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
(in thousands) Year ended June 30
----------------------
INCREASE (DECREASE) IN NET ASSETS 1995 1994
<S> <C> <C>
Operations:
Net investment income $ 2,546 $ 1,466
Net realized gain 13,643 18,065
Net unrealized appreciation (depreciation) 47,177 (24,112)
--------- ---------
Net Increase (Decrease) from Operations 63,366 (4,581)
Distributions:
From net investment income - Class A (1,420) (876)
From net realized gains - Class A (6,157) (1,098)
From net investment income - Class B (1,133) (644)
From net realized gains - Class B (10,279) (2,556)
From net investment income - Class D (16)
From net realized gains - Class D (76)
--------- ---------
44,285 (9,755)
--------- ---------
Fund Share Transactions: (a)
Receipts for shares sold - Class A 25,072 33,129
Receipts for shares issued in the merger
with Colonial U.S. Equity Index Trust 42,693
Value of distributions reinvested - Class A 7,015 1,860
Cost of shares repurchased - Class A (21,509) (20,534)
--------- ---------
10,578 57,148
--------- ---------
Receipts for shares sold - Class B 53,700 77,544
Value of distributions reinvested - Class B 10,796 3,057
Cost of shares repurchased - Class B (24,021) (14,439)
--------- ---------
40,475 66,162
--------- ---------
Receipts for shares sold - Class D 2,741
Value of distributions reinvested - Class D 90
Cost of shares repurchased - Class D (70)
--------- ---------
2,761
--------- ---------
Net Increase from Fund Share Transactions 53,814 123,310
--------- ---------
Total Increase 98,099 113,555
NET ASSETS
Beginning of period 247,301 133,746
--------- ---------
End of period (including undistributed net
investment income of $32 and $15, respectively) $ 345,400 $ 247,301
--------- ---------
</TABLE>
Continued on next page.
See notes to financial statements.
13
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(continued)
<TABLE>
<CAPTION>
Year ended June 30
------------------
1995 1994
<S> <C> <C>
NUMBER OF FUND SHARES (A)
Sold - Class A 2,049 2,762
Issued in the merger with Colonial U.S. Equity Index Trust 3,552
Issued for distributions reinvested - Class A 614 155
Repurchased - Class A (1,779) (1,713)
------ ------
884 4,756
------ ------
Sold - Class B 4,431 6,508
Issued for distributions reinvested - Class B 957 254
Repurchased - Class B (2,000) (1,218)
------ ------
3,388 5,544
------ ------
Sold - Class D 227
Issued for distributions reinvested - Class D 8
Repurchased - Class D (6)
------ ------
229
------ ------
</TABLE>
(a) Class D shares were initially offered on July 1, 1994.
See notes to financial statements.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995
NOTE 1. ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
ORGANIZATION: Colonial U.S. Fund for Growth (the Fund), a series of Colonial
Trust VI, is a Massachusetts business trust, registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end, management
investment company. The Fund may issue an unlimited number of shares. The Fund
offers three classes of shares: Class A, Class B and Class D. Class A shares are
sold with a front-end sales charge and Class B shares which are subject to an
annual distribution fee and a contingent deferred sales charge. Class B shares
will convert to Class A shares when they have been outstanding approximately
eight years. Class D shares are subject to a reduced front-end sales charge, a
contingent deferred sales charge on redemptions made within one year after
purchase, and a continuing distribution fee. The following significant
accounting policies are consistently followed by the Fund in the preparation of
its financial statements and conform to generally accepted accounting
principles.
SECURITY VALUATION AND TRANSACTIONS: Equity securities are valued at the last
sale price or, in the case of unlisted or listed securities for which there were
no sales during the day, at current quoted bid prices.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
Portfolio positions which cannot be valued as set forth above are valued at fair
value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are purchased
or sold.
Cost is determined and gains and losses are based upon the specific identifi-
cation method for both financial statement and federal income tax purposes.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS: All income,
expenses (other than the Class B and Class D distribution fee), realized and un-
realized gains (losses) are allocated to each class proportionately on a daily
basis for purposes of determining the net asset value of each class.
Per share data was calculated using the average shares outstanding during the
period. In addition, Class B and Class D net investment income per share data
reflects the distribution fee per share applicable to Class B and Class D shares
only.
Class B and Class D ratios are calculated by adjusting the expense and net
investment income ratios for the Fund for the entire period by the distribution
fee applicable to Class B and Class D shares only.
FEDERAL INCOME TAXES: Consistent with the fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
15
<PAGE>
Notes to Financial Statements/June 30, 1995
- --------------------------------------------------------------------------------
ACCOUNTING POLICIES - CONT.
DISTRIBUTIONS TO SHAREHOLDERS: Distributions to shareholders are recorded on the
ex-date.
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. The difference is primarily due to the characterization
of income.
DEFERRED ORGANIZATION EXPENSES: The Fund incurred expenses of $90,095 in
connection with its organization, initial registration with the Securities and
Exchange Commission and with various states, and the initial public offering of
its shares. These expenses were deferred and are being amortized on a
straight-line basis over five years.
OTHER: Corporate actions are recorded on the ex-date. Interest income is
recorded on the accrual basis.
The Fund's custodian takes possession through the federal book-entry system of
securities collateralizing repurchase agreements. Collateral is marked-to-
market daily to ensure that the market value of the underlying assets remains
sufficient to protect the Fund. The Fund may experience costs and delays in
liquidating the collateral if the issuer defaults or enters bankruptcy.
NOTE 2. FEES AND COMPENSATION PAID TO AFFILIATES
- --------------------------------------------------------------------------------
MANAGEMENT FEE: Colonial Management Associates, Inc. (the Adviser) oversees the
Fund's management and furnishes accounting and other services and office
facilities for a monthly fee equal to 0.80% annually of the Fund's average net
assets. State Street Bank and Trust Company (the sub-adviser) furnishes the Fund
with investment management and received an effective fee rate from the Adviser
of 0.40% for the year ended June 30, 1995.
BOOKKEEPING FEE: The Adviser provides bookkeeping and pricing services for
$27,000 per year plus 0.035% of the Fund's average net assets over $50 million.
TRANSFER AGENT: Colonial Investors Service Center, Inc., (the Transfer Agent),
an affiliate of the Adviser, provides shareholder services for a monthly fee
equal to 0.25% annually of the Fund's average net assets, and receives a
reimbursement for certain out of pocket expenses.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES: The Adviser, through
Colonial Investment Services, Inc., (the Distributor), is the Fund's principal
underwriter. For the year ended June 30, 1995, the Distributor retained net
underwriting discounts of $46,736 on sales of the Fund's Class A shares and
received contingent deferred sales charges (CDSC) of $501,453 and $2,578 on
Class B and Class D share redemptions, respectively.
16
<PAGE>
Notes to Financial Statements/June 30, 1995
- --------------------------------------------------------------------------------
The Fund has adopted a 12b-1 plan which requires it to pay the Distributor a
service fee equal to 0.25% annually of the Fund's net assets, as of the 20th of
each month. The plan also requires the payment of a distribution fee to the
Distributor equal to 0.75% annually of the average net assets attributable to
Class B shares and Class D shares, respectively.
The CDSC and the fees received from the 12b-1 plan are used principally as
repayment to the Distributor for amounts paid by the Distributor to dealers who
sold such shares.
EXPENSE LIMITS: The Adviser has agreed, until further notice, to waive fees and
bear certain Fund expenses to the extent that total expenses (exclusive of the
service fees, distribution fees, brokerage commissions, interest, taxes and
extraordinary expenses, if any) exceed 1.25% annually of the Fund's average net
assets.
For the year ended June 30, 1995, the Fund's operating expenses did not exceed
the 1.25% expense limit.
OTHER: The Fund pays no compensation to its officers, all of whom are employees
of the Adviser.
The Fund's Trustees may participate in a deferred compensation plan which may be
terminated at any time. Obligations of the plan will be paid solely out of the
Fund's assets.
NOTE 3. PORTFOLIO INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT ACTIVITY: During the year ended June 30, 1995, purchases and sales of
investments, other than short-term obligations, were $262,701,539 and
$235,086,911, respectively.
Unrealized appreciation (depreciation) at June 30, 1995, based on cost of
investments for federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation $ 49,871,107
Gross unrealized depreciation ( 1,734,681)
-----------------
Net unrealized appreciation $ 48,136,426
-----------------
</TABLE>
OTHER: The Fund may focus its investments in certain industries, subjecting it
to greater risk than a fund that is more diversified.
NOTE 4. MERGER INFORMATION
- --------------------------------------------------------------------------------
On December 17, 1993, Colonial U.S. Equity Index Trust (CUSEIT) was merged into
the Fund by a non-taxable exchange of 3,552,164 shares of the Fund (valued at
$42,692,626) for the 1,885,911 of CUSEIT's shares then outstanding. The assets
of CUSEIT acquired included unrealized appreciation of $13,953,550. The
aggregate net assets of the Fund and CUSEIT immediately after the merger were
$227,715,458.
17
<PAGE>
Notes to Financial Statements/June 30, 1995
- --------------------------------------------------------------------------------
NOTE 5. RESULTS OF SPECIAL SHAREHOLDER MEETING (UNAUDITED)
- --------------------------------------------------------------------------------
On February 15, 1995, a special meeting of shareholders was held and a new
Management Agreement between the Trust and Colonial Management Associates, Inc.
was approved that became effective upon the completion of the merger of The
Colonial Group, Inc. and Apple Merger Corporation, a subsidiary of Liberty
Financial Companies, Inc. on March 24, 1995. Out of the shares of beneficial
interest outstanding on December 9, 1994, 14,532,714 voted for the new
Management Agreement, 239,814 voted against and 495,477 abstained. Of the shares
of beneficial interest outstanding that abstained, 80,676 represented broker
non-votes.
Also, a new Sub-advisory agreement was approved between Colonial Management
Associates, Inc., and State Street Bank and Trust Company that became effective
upon completion of the merger. Out of the shares outstanding on December 9,
1994, 14,500,528 voted for the new Sub-Advisory Agreement, 233,365 voted against
and 534,111 abstained. Of the shares of beneficial interest outstanding that
abstained, 293,147 represented broker non-votes.
18
<PAGE>
FINANCIAL HIGHLIGHTS (a)
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
Year ended June 30
----------------------------------
1995
Class A Class B Class D (b)
--------- --------- ----------
<S> <C> <C> <C>
Net asset value -
Beginning of period $ 11.460 $ 11.400 $ 11.460
--------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.165 0.075 0.074
Net realized and unrealized gain 2.530 2.513 2.534
--------- --------- ---------
Total from Investment Operations 2.695 2.588 2.608
--------- --------- ---------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.160) (0.073) (0.093)
From net realized gains (0.735) (0.735) (0.735)
--------- --------- ---------
Total Distributions
Declared to Shareholders (0.895) (0.808) (0.828)
--------- --------- ---------
Net asset value -
End of period $ 13.260 $ 13.180 $ 13.240
--------- --------- ---------
Total return (c) 24.84% 23.94% 24.01%
--------- --------- ---------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.46% 2.21% 2.21%
Net investment income 1.37% 0.62% 0.62%
Portfolio turnover 84% 84% 84%
Net assets at end of period (000) $ 124,171 $218,201 $ 3,028
</TABLE>
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Class D shares were initially offered on July 1, 1994. Per share amounts
reflect activity from that date.
(c) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
19
<PAGE>
FINANCIAL HIGHLIGHTS (a) - continued
<TABLE>
<CAPTION>
Year ended June 30
-----------------------------------------------
1994 1993 (b)
Class A Class B Class A Class B
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 11.820 $ 11.770 $ 10.000 $ 10.000
--------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.142 0.053 0.103 (c) 0.020 (c)
Net realized and unrealized gain (0.119) (0.122) 1.784 1.763
--------- --------- --------- ---------
Total from Investment Operations 0.023 (0.069) 1.887 1.783
--------- --------- --------- ---------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.138) (0.056) (0.067) (0.013)
--------- --------- --------- ---------
From net realized gains (0.245) (0.245) --- ---
--------- --------- --------- ---------
Total Distributions
Declared to Shareholders (0.383) (0.301) (0.067) (0.013)
--------- --------- --------- ---------
Net asset value -
End of period $ 11.460 $ 11.400 $ 11.820 $ 11.770
--------- --------- --------- ---------
Total return (d) 0.05% (0.71)% 18.90% (e) 17.84% (e)
--------- --------- --------- ---------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.49% 2.24% 1.50% 2.25%
Fees waived by the adviser 0.01% 0.01%
Net investment income 1.19% 0.44% 0.93% 0.18%
Portfolio turnover 117% 117% 98% 98%
Net assets at end of period (000) $ 97,180 $ 150,121 $ 44,009 $ 89,737
</TABLE>
(a) Per share data was calculated using average shares outstanding during the
period.
(b) The Fund commenced investment operations on July 1, 1992.
(c) Net of fees and expenses waived or borne by the adviser which amounted to
$0.001 and $0.001, respectively.
(d) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(e) Had the adviser not waived or reimbursed a portion of expenses, total return
would have been reduced.
20
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
T0 THE TRUSTEES OF COLONIAL TRUST VI AND THE SHAREHOLDERS OF
COLONIAL U.S. FUND FOR GROWTH
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Colonial U.S. Fund for Growth (a
series of Colonial Trust VI) at June 30, 1995, the results of its operations,
the changes in its net assets and the financial highlights for the periods
indicated, in conformity with generally accepted accounting principles. These
financial statements and the financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of portfolio positions
at June 30, 1995 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PRICE WATERHOUSE LLP
- --------------------
PRICE WATERHOUSE LLP
Boston, Massachusetts
August 11, 1995
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
October 20, 1995
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 October 20, 1995. 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-XXXX-1095
PART 1
COLONIAL SMALL STOCK FUND
Statement of Additional Information
October 20, 1995
DEFINITIONS
"Trust" Colonial Trust VI
"Small Stock 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:
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.
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 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.
PORTFOLIO TURNOVER
Year ended June 30
1995 1994
64% 35%
FUND CHARGES AND EXPENSES
Under the Fund's management contract, 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
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:
Total
Compensation
Pension or Estimated from Trust
Aggregate Retirement Annual and Fund Complex
Compensation Benefits Accrued Benefits Paid to the
from Fund for As Part of Upon Trustees for the
Trustee Fiscal Year Fund Expense Retirement Calendar 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
Retirement Estimated Total
Benefits Annual Compensation
Accrued As Benefits From Liberty
Part of Upon Funds for
Trustee Fund Expense Retirement Calendar Year (e)
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 September 14, 1995, the officers and Trustees as a group
beneficially owned approximately 105,700 Class A shares
representing 4.84% 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 89,300 shares or 4.09% of
the then outstanding shares. No Class B shares were held by
Trustees or officers of the Fund on September 14, 1995. All of
the Class Z shares outstanding on September 14, 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 5.48%
and 19.38% of the Fund's outstanding Class A and Class B shares,
respectively, on September 14, 1995.
At September 14, 1995, there were 5,065 Class A, 6,318 Class B
and 1 Class Z shareholders of record of the Fund.
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)
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 three classes of shares - Class A, Class B and
Class Z. The Fund may in the future offer other classes of
shares. The Trustees have approved plans for the Fund pursuant
to Rule 12b-1 under the Act whereby Classes A and B pay CISI a
service fee at an annual rate of 0.25% of average net assets for
certain services and Class B shares pay CISI a 0.75% annual
distribution fee. CISI may pay the entire amount of such fees to
financial service firms (FSFs) pursuant to dealer agreements with
such FSFs, and to the extent such fees are not paid to FSFs may
use the fees for other purposes. The distribution and service
fees are payable regardless of whether CISI's expenses are more
or less than the amount of the fee. CISI may in some cases
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
indirect 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 contingent deferred sales charge
(CDSC). Class B shares are offered at net asset value subject to
a CDSC if redeemed within six years 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.
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 33.59% 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 32.67% 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 Part 2 of this SAI, "Performance
Measures," 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.
<PAGE>
INVESTMENT PORTFOLIO
JUNE 30, 1995 (IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCKS - 88.5% SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
CONSTRUCTION - 0.3%
BUILDING CONSTRUCTION - 0.3%
Schuler Homes, Inc. (a) 19 $ 234
------
- -------------------------------------------------------------------------------------
FINANCE, INSURANCE & REAL ESTATE - 11.2%
DEPOSITORY INSTITUTIONS - 2.2%
First Bank System, Inc. 12 484
First Federal Michigan Corp. 6 171
Peoples Heritage Financial Group, Inc. 27 407
TCF Financial Corp. 10 489
------
1,551
------
HOLDING & OTHER INVESTMENT COMPANIES - 2.2%
CCB Financial Corp. 7 292
MGI Properties, Inc. 12 181
Mercer International, Inc. (a) 50 1,050
------
1,523
------
INSURANCE AGENTS & BROKERS - 0.6%
US Facilities Corp. 25 406
------
INSURANCE CARRIERS - 3.0%
American Bankers Insurance Group, Inc. 23 743
Capital RE Corp. 15 380
Selective Insurance Group, Inc. 1 33
United American Healthcare Corp. (a) 15 257
Vesta Insurance Group, Inc. 20 687
------
2,100
------
NONDEPOSITORY CREDIT INSTITUTIONS - 1.9%
Foothill Group, Inc., Class A 26 671
The Money Store, Inc. 19 670
------
1,341
------
REAL ESTATE - 0.0%
Vista Properties, Inc., Class A (a) (b) (b)
SECURITY BROKERS & DEALERS - 1.3%
Advest Group, Inc. (a) 25 196
Alex Brown, Inc. 7 282
Morgan Keegan, Inc. 36 444
------
922
------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/June 30, 1995
- -------------------------------------------------------------------------------------
<S> <C> <C>
MANUFACTURING - 52.4%
APPAREL - 2.0%
Cyrk International, Inc. (a) 10 $ 89
Nautica Enterprises, Inc. (a) 14 507
Norton McNaughton, Inc. (a) 27 419
Oxford Industries, Inc. 23 418
-------
1,433
-------
CHEMICALS - 1.0%
Cytec Industries, Inc. (a) 8 323
Helene Curtis Industries, Inc. 10 274
ICN Pharmaceuticals, Inc. (a) 8 132
-------
729
-------
ELECTRONIC & ELECTRICAL EQUIPMENT - 15.0%
California Microwave, Inc. (a) 10 251
Cascade Communications Corp. (a) 8 346
Duracraft Corp. (a) 25 655
HADCO Corp. (a) 55 1,368
Hutchinson Technology, Inc. (a) 15 637
Lattice Semiconductor Corp. (a) 15 516
OPTI, Inc. (a) 20 455
Pacific Scientific Co. 10 182
Pairgain Technologies, Inc. (a) 5 96
Park Electrochemical Corp. 16 820
Photronics, Inc. (a) 14 434
Proteon, Inc. (a) 120 705
Sanmina Corp. (a) 20 760
Silicon Valley Group, Inc. (a) 22 812
Standard Motor Products, Inc. 15 304
U.S. Robotics, Corp. (a) 12 1,253
Unitrode Corp. (a) 11 301
Watkins-Johnson Co. 15 645
-------
10,540
-------
FABRICATED METAL - 2.3%
Amcast Industrial Corp. 10 186
BMC Industries, Inc. 25 638
Butler Manufacturing Co. 8 349
Ekco Group, Inc. 27 161
Shelter Components Corp. 21 251
-------
1,585
-------
FOOD & KINDRED PRODUCTS - 0.9%
Hudson Foods, Inc. 44 612
-------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/June 30, 1995
- -------------------------------------------------------------------------------------
COMMON STOCKS - CONT. SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
MANUFACTURING - CONT.
FURNITURE & FIXTURES - 0.2%
Pulaski Furniture Co. 9 $ 161
-------
LEATHER - 1.2%
Vista Resources, Inc. (a) 7 150
Wolverine World Wide, Inc. 35 717
-------
867
-------
LUMBER & WOOD PRODUCTS - 0.4%
Oakwood Homes Corp. 11 282
-------
MACHINERY & COMPUTER EQUIPMENT - 10.1%
Digital Link Corp. (a) 6 170
Electroglas, Inc. (a) 6 344
Esterline Technologies Corp. (a) 43 964
Exabyte Corp. (a) 33 458
Hunt Manufacturing Co. 18 275
Indresco, Inc. (a) 30 465
JLG Industries, Inc. 33 874
J. Ray McDermott, S.A. (a) 11 239
Kulicke & Soffa Industries, Inc. (a) 3 166
Kysor Industrial Corp. 7 145
Mylex Corp. (a) 20 265
Optical Data Systems, Inc. (a) 32 840
Proxima Corp. (a) 15 358
S3, Inc. (a) 5 180
Scotsman Industries, Inc. 23 427
Toro Co. 19 518
Wynn's International, Inc. 7 160
Xircom, Inc. (a) 20 201
-------
7,049
-------
MEASURING & ANALYZING INSTRUMENTS - 8.3%
Amsco International, Inc. (a) 25 347
Bio-Rad Laboratories, Inc.
Class A (a) 20 720
Credence Systems Corp. (a) 32 953
Fossil, Inc. (a) 18 339
Innovex, Inc. 30 405
Mentor Corp. 18 502
Oak Industries, Inc. (a) 7 183
Perceptron, Inc. (a) 20 425
Puritan-Bennett Corp. 35 1,352
Quickturn Design Systems, Inc. (a) 39 350
Tech-Sym Corp. (a) 8 211
-------
5,787
-------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/June 30, 1995
- -------------------------------------------------------------------------------------
<S> <C> <C>
MISCELLANEOUS MANUFACTURING - 0.5%
Anthony Industries, Inc. 17 $ 319
-------
PAPER & PAPER MILLS - 1.7%
Chesapeake Corp. 16 498
Longview Fibre Co. 25 425
Shorewood Packaging Corp. (a) 16 234
-------
1,157
-------
PRIMARY METAL - 2.9%
Mueller Industries, Inc. (a) 15 739
Texas Industries, Inc. 6 233
Titan Wheel International, Inc. 42 1,081
-------
2,053
-------
PRINTING & PUBLISHING - 0.4%
Devon Group, Inc. (a) 10 295
-------
RUBBER & PLASTIC - 1.4%
Applied Extrusion Technologies, Inc. (a) 48 714
Carlisle Cos., Inc. 6 237
-------
951
-------
STONE, CLAY, GLASS & CONCRETE - 1.0%
Southdown, Inc. (a) 35 669
-------
TEXTILE MILL PRODUCTS - 1.4%
Fieldcrest Cannon, Inc. 17 370
Guilford Mills, Inc. 8 195
Johnston Industrial, Inc. 4 28
Masland Corp. 29 373
Signal Apparel Co. (a) 6 33
-------
999
-------
TRANSPORTATION EQUIPMENT - 1.7%
Automotive Industries Holdings, Class A (a) 10 271
Coachmen Industries, Inc. 9 140
Thor Industries, Inc. 11 221
Varlen Corp. 25 595
-------
1,227
-------
- -------------------------------------------------------------------------------------
RETAIL TRADE - 4.2%
APPAREL & ACCESSORY STORES - 0.6%
Claire's Stores, Inc. 25 453
-------
GENERAL MERCHANDISE STORES - 1.2%
Mac Frugals Bargains Close-Outs, Inc. (a) 50 875
-------
</TABLE>
9
<PAGE>
Investment Portfolio/June 30, 1995
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
COMMON STOCKS - CONT. SHARES VALUE
- -------------------------------------------------------------------------------------
<S> <C> <C>
RETAIL TRADE - CONT.
HOME FURNISHINGS & EQUIPMENT - 0.2%
Rex Stores Corp. (a) 8 $ 113
------
MISCELLANEOUS RETAIL - 2.2%
Big B, Inc. 35 499
Blair Corp. 6 210
Damark International, Inc. (a) 40 237
Medicine Shoppe International, Inc. 17 597
------
1,543
------
- -------------------------------------------------------------------------------------
SERVICES - 12.4%
AMUSEMENT & RECREATION - 0.3%
Anchor Gaming (a) 10 223
------
BUSINESS SERVICES - 7.3%
America Online, Inc. (a) 4 158
FTP Software, Inc. (a) 20 600
FileNet Corp. (a) 24 973
Logicon, Inc. 16 703
Norrell Corp. 26 494
PHH Corporation 10 445
Software Spectrum, Inc. (a) 35 726
Sterling Software, Inc. (a) 23 887
Wall Data, Inc. (a) 10 153
------
5,139
------
HEALTH SERVICES - 4.8%
Apria Healthcare Group, Inc. (a) 27 771
Community Health Systems, Inc. (a) 15 508
Maxicare Health Plans, Inc. (a) 30 465
Regency Health Services, Inc. (a) 70 735
Rotech Medical Corp. (a) 33 916
------
3,395
------
- -------------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 3.9%
AIR TRANSPORTATION - 1.4%
Comair Holdings, Inc. 25 958
------
ELECTRIC SERVICES - 0.3%
Commonwealth Energy System Cos. 6 238
------
SANITARY SERVICES - 0.5%
Southern California Water Co. 18 349
------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio/June 30, 1995
- -------------------------------------------------------------------------------------
<S> <C> <C>
TRANSPORTATION SERVICES - 1.7%
Air Express International Corp. 25 $ 597
GATX Corp. 12 565
-------
1,162
-------
- -------------------------------------------------------------------------------------
WHOLESALE TRADE - 4.1%
DURABLE GOODS - 3.4%
Bell Industries, Inc. 31 654
CellStar Corp. (a) 12 281
Pioneer Standard Electronics, Inc. 28 680
Wyle Electronics Co. 27 762
-------
2,377
-------
NONDURABLE GOODS - 0.7%
Bindley Western Industries, Inc. 29 459
-------
TOTAL COMMON STOCKS (cost of $46,008) 62,076
-------
RIGHTS & WARRANTS (a) - 0.0%
- -------------------------------------------------------------------------------------
United States Home Corp., expires
6/21/98 (cost of $16) 2 18
-------
TOTAL INVESTMENTS - 88.5% (cost of $46,024) (c) 62,094
-------
SHORT-TERM OBLIGATIONS - 10.8% PAR
- -------------------------------------------------------------------------------------
Repurchase agreement with Lehman Government
Securities, Inc., dated 06/30/95 due 07/03/95 at
6.210%, collateralized by U.S. Treasury bills and
notes with various maturities to 1999, market
value $7,703 (repurchase proceeds $7,542) $ 7,538 7,538
-------
OTHER ASSETS & LIABILITIES, NET - 0.7% 487
- -------------------------------------------------------------------------------------
NET ASSETS - 100.0% $70,119
-------
NOTES TO INVESTMENT PORTFOLIO:
- -------------------------------------------------------------------------------------
</TABLE>
(a) Non-income producing.
(b) Rounds to less than one.
(c) Cost for federal income tax purposes is $46,075.
See notes to financial statements.
11
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
JUNE 30, 1995
<TABLE>
<CAPTION>
(In thousands except for per share amounts and footnote)
<S> <C> <C>
ASSETS
Investments at value (cost $46,024) $62,094
Short-term obligations 7,538
-------
69,632
Receivable for:
Fund shares sold $1,627
Investments sold 811
Dividends 36
Interest 1
Other 17 2,492
------ -------
Total Assets 72,124
LIABILITIES
Payable for:
Investments purchased 1,828
Fund shares repurchased 164
Accrued:
Deferred Trustees fees 2
Other 11
------
Total Liabilities 2,005
-------
NET ASSETS $70,119
-------
Net asset value & redemption price per share -
Class A ($40,661/1,826) $22.26
-------
Maximum offering price per share - Class A
($22.26/0.9425) $23.62 (a)
-------
Net asset value & offering price per share -
Class B ($29,458/1,349) $21.84 (b)
-------
COMPOSITION OF NET ASSETS
Capital paid in $51,664
Accumulated net investment loss (1)
Accumulated net realized gain 2,386
Net unrealized appreciation 16,070
-------
$70,119
-------
</TABLE>
[FN]
(a) On sales of $50,000 or more the offering price is reduced.
(b) Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
See notes to financial statements.
12
<PAGE>
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
(In thousands)
<S> <C> <C>
INVESTMENT INCOME
Dividends $ 390
Interest 292
-------
Total Investment Income 682
EXPENSES
Management fee $ 279
Service fee 118
Distribution fee - Class B 128
Transfer agent 154
Bookkeeping fee 28
Trustees fee 2
Custodian fee 4
Audit fee 29
Legal fee 6
Registration fee 29
Reports to shareholders 5
Other 24 806
------- -------
Net Investment Loss (124)
NET REALIZED & UNREALIZED GAIN ON PORTFOLIO POSITIONS
Net realized gain 3,335
Net unrealized appreciation
during the period 11,220
-------
Net Gain 14,555
-------
Net Increase in Net Assets From Operations $14,431
-------
</TABLE>
See notes to financial statements.
13
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
(In thousands) Year ended June 30
------------------
INCREASE (DECREASE) IN NET ASSETS 1995 1994
<S> <C> <C>
Operations:
Net investment loss $ (124) $ (116)
Net realized gain 3,335 2,151
Net unrealized appreciation (depreciation) 11,220 (1,170)
------- -------
Net Increase from Operations 14,431 865
Fund Share Transactions:
Receipts for shares sold - Class A 16,058 9,439
Cost of shares repurchased - Class A (9,202) (9,547)
------- -------
6,856 (108)
------- -------
Receipts for shares sold - Class B 29,658 9,179
Cost of shares repurchased - Class B (14,075) (2,058)
------- -------
15,583 7,121
------- -------
Net Increase from Fund Share Transactions 22,439 7,013
------- -------
Total Increase 36,870 7,878
NET ASSETS
Beginning of period 33,249 25,371
------- -------
End of period (including undistributed net
investment losses of $1 and $12, respectively) $70,119 $33,249
------- -------
NUMBER OF FUND SHARES
Sold - Class A 823 545
Repurchased - Class A (483) (555)
------- -------
340 (10)
------- -------
Sold - Class B 1,587 530
Repurchased - Class B (753) (120)
------- -------
834 410
------- -------
</TABLE>
See notes to financial statements.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995
NOTE 1. ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
ORGANIZATION: Colonial Small Stock Fund, (the Fund), is a series of Colonial
Trust VI, a Massachusetts business trust, registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end, management
investment company. The Fund may issue an unlimited number of shares. The
Fund offers Class A shares sold with a front-end sales charge and Class B
shares which are subject to an annual distribution fee and a contingent
deferred sales charge. Class B shares will convert to Class A shares when
they have been outstanding approximately eight years. The following
significant accounting policies are consistently followed by the Fund in the
preparation of its financial statements and conform to generally accepted
accounting principles.
SECURITY VALUATION AND TRANSACTIONS: Equity securities are valued at the last
sale price or, in the case of unlisted or listed securities for which there were
no sales during the day, at current quoted bid prices.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
Portfolio positions which cannot be valued as set forth above are valued at fair
value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are purchased
or sold.
Cost is determined and gains and losses are based upon the specific
identification method for both financial statement and federal income tax
purposes.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS: All income,
expenses (other than the Class B distribution fee), realized and unrealized
gains (losses) are allocated to each class proportionately on a daily basis for
purposes of determining the net asset value of each class.
Per share data was calculated using the average shares outstanding during the
period. In addition, Class B net investment income per share data reflects the
distribution fee per share applicable to Class B shares only.
Class B ratios are calculated by adjusting the expense and net investment income
ratios for the Fund for the entire period by the distribution fee applicable to
Class B shares only.
FEDERAL INCOME TAXES: Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
DISTRIBUTIONS TO SHAREHOLDERS: Distributions to shareholders are recorded on the
ex-date.
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles.
15
<PAGE>
Notes to Financial Statements/June 30, 1995
- --------------------------------------------------------------------------------
OTHER: Corporate actions are recorded on the ex-date. Interest income is
recorded on the accrual basis.
The Fund's custodian takes possession through the federal book-entry system of
securities collateralizing repurchase agreements. Collateral is marked-to-market
daily to ensure that the market value of the underlying assets remains
sufficient to protect the Fund. The Fund may experience costs and delays in
liquidating the collateral if the issuer defaults or enters bankruptcy.
NOTE 2. FEES AND COMPENSATION PAID TO AFFILIATES
- --------------------------------------------------------------------------------
MANAGEMENT FEE: Colonial Management Associates, Inc. (the Adviser) is the
investment adviser of the Fund and furnishes accounting and other services and
office facilities for a monthly fee equal to 0.60% annually of the Fund's
average net assets.
BOOKKEEPING FEE: The Adviser provides bookkeeping and pricing services for
$27,000 per year plus 0.035% of the Fund's average net assets over $50 million.
TRANSFER AGENT: Colonial Investors Service Center, Inc., (the Transfer Agent),
an affiliate of the Adviser, provides shareholder services for a monthly fee
equal to 0.25% annually of the Fund's average net assets, and receives a
reimbursement for certain out of pocket expenses.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES: The Adviser, through
Colonial Investment Services, Inc., (the Distributor), is the Fund's principal
underwriter. For the year ended June 30, 1995, the Distributor retained net
underwriting discounts of $22,750 on sales of the Fund's Class A shares and
received contingent deferred sales charges (CDSC) of $77,729 on Class B share
redemptions.
The Fund has adopted a 12b-1 plan which requires it to pay the Distributor a
service fee equal to 0.25% annually of the Fund's net assets as of the 20th of
each month. The plan also requires the payment of a distribution fee to the
Distributor equal to 0.75% of the average net assets attributable to Class B
shares.
The CDSC and the fees received from the 12b-1 plan are used principally as
repayment to the Distributor for amounts paid by the Distributor to dealers who
sold such shares.
0THER: The Fund pays no compensation to its officers, all of whom are employees
of the Adviser.
The Fund's Trustees may participate in a deferred compensation plan which may be
terminated at any time. Obligations of the plan will be paid solely out of the
Fund's assets.
16
<PAGE>
Notes to Financial Statements/June 30, 1995
- --------------------------------------------------------------------------------
NOTE 3. PORTFOLIO INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT ACTIVITY: During the year ended June 30, 1995, purchases and sales of
investments, other than short-term obligations, were $45,781,421 and
$26,716,891, respectively.
Unrealized appreciation (depreciation) at June 30, 1995, based on cost of
investments for federal income tax purposes was:
<TABLE>
<S> <C>
Gross unrealized appreciation $18,049,368
Gross unrealized depreciation (2,030,569)
-----------
Net unrealized appreciation $16,018,799
-----------
</TABLE>
OTHER: The Fund may focus its investments in certain industries, subjecting it
to greater risk than a fund that is more diversified.
NOTE 4. RESULTS OF SPECIAL SHAREHOLDERS MEETING (UNAUDITED)
- --------------------------------------------------------------------------------
On February 15, 1995, a special meeting of shareholders was held and a new
Management Agreement between the Trust and Colonial Management Associates, Inc.
was approved that became effective upon the completion of the merger of The
Colonial Group, Inc. and Apple Merger Corporation, a subsidiary of Liberty
Financial Companies, Inc. on March 24, 1995. Out of the shares of beneficial
interest outstanding on December 9, 1994, 1,565,884 voted for the new Management
Agreement, 23,007 voted against and 58,484 abstained. Of the shares of
beneficial interest outstanding that abstained, 9,999 represented broker
non-votes.
17
<PAGE>
FINANCIAL HIGHLIGHTS (a)
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
Year ended June 30
----------------------------------------------
1995 1994
Class A Class B Class A Class B
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $16.670 $16.470 $15.860 $15.790
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.002 (0.139) (0.047) (0.176)
Net realized and unrealized gain 5.588 5.509 0.857 0.856
------- ------- ------- -------
Total from Investment Operations 5.590 5.370 0.810 0.680
------- ------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income -- -- -- --
------- ------- ------- -------
Net asset value -
End of period $22.260 $21.840 $16.670 $16.470
------- ------- ------- -------
Total return (c) 33.59% 32.67% 5.11% 4.31%
------- ------- ------- -------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.45% 2.20% 1.56% 2.31%
Interest expense -- -- -- --
Net investment income (loss) 0.01% (0.74)% (0.27)% (1.02)%
Portfolio turnover 64% 64% 35% 35%
Net assets at end of period (000) $40,661 $29,458 $24,760 $ 8,489
</TABLE>
[FN]
(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 data
reflects activity from that date.
(c) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(d) Not annualized.
(e) Annualized.
18
<PAGE>
FINANCIAL HIGHLIGHTS (a) - continued
<TABLE>
<CAPTION>
Year ended June 30
------------------------------------------------
1993 1992 1991
Class A Class B (b) Class A Class A
------- ----------- ------- -------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $12.330 $13.010 $11.570 $13.560
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.083) (0.100) (0.127) 0.045
Net realized and unrealized gain 3.613 2.880 0.887 (1.992)
------- ------- ------- -------
Total from Investment Operations 3.530 2.780 0.760 (1.947)
------- ------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income -- -- -- (0.043)
------- ------- ------- -------
Net asset value -
End of period $15.860 $15.790 $12.330 $11.570
------- ------- ------- -------
Total return (c) 28.63% 21.37% (d) 6.57% (14.34)%
------- ------- ------- -------
RATIOS TO AVERAGE NET ASSETS
Expenses 1.88% 2.63% (e) 2.13% 1.91%
Interest expense 0.01% 0.01% 0.06% 0.03%
Net investment income (loss) (0.60)% (1.35)% (0.91)% 0.33%
Portfolio turnover 29% 29% (e) -- 79%
Net assets at end of period (000) $23,716 $ 1,655 $22,002 $28,943
</TABLE>
[FN]
(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 data
reflects activity from that date.
(c) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(d) Not annualized.
(e) Annualized.
19
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
T0 THE TRUSTEES OF COLONIAL TRUST VI AND THE SHAREHOLDERS OF
COLONIAL SMALL STOCK FUND
In our opinion, the accompanying statement of assets and liabilities,
including the investment portfolio, and the related statements of operations and
of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Colonial Small Stock Fund (a series
of Colonial Trust VI) at June 30, 1995, the results of its operations, the
changes in its net assets and the financial highlights for the periods
indicated, in conformity with generally accepted accounting principles. These
financial statements and the financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of portfolio positions
at June 30, 1995 by correspondence with the custodian and brokers, and the
application of alternative auditing procedures where confirmations from brokers
were not received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
- --------------------
PRICE WATERHOUSE LLP
Boston, Massachusetts
August 11, 1995
20
<PAGE>
Part C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Part A
Summary of Expenses
The Fund's financial history
Included in Part B
Colonial U.S. Fund for Growth (CUSFFG)
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)
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
(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)
5.(b) Form of Management Agreement (CSSF)(h)
5.(c) Form of Sub-Advisory Agreement(CUSFFG)
6.(a) Distributor's Contract with Colonial
Investment Services (incorporated herein by
reference to Exhibit 6(a) to Post-Effective
Amendment No. 40 to the Registration
Statement of Colonial Trust IV, Registration
Nos. 2-62492 and 811-2865, filed with the
Commission on July 27, 1995)
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) Mutual Fund Agreement between NCNB
Securities, Inc. and Colonial Investment
Services (incorporated herein by reference
to Exhibit 6(f) to Post-Effective Amendment
No. 3 to the Registration Statement of
Colonial Massachusetts Tax-Exempt Trust,
Registration Nos. 33-12109 and 811-5030,
filed with the Commission on May 11, 1989)
6.(e) 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(b)(CUSFFG)
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
12. Not Applicable
13.(a) Investment Letter of Colonial Management
Associates, Inc.(b)(CUSFFG)
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)
16.(a)(i) Calculation of Performance Information
(CSSF)
16.(b) Calculation of Yield Information (CUSFFG)
16.(b)(i) Calculation of Yield Information (CSSF)
17.(a) Financial Data Schedule (Class A) (CUSFFG)
17.(b) Financial Data Schedule (Class B) (CUSFFG)
17.(c) Financial Data Schedule (Class D) (CUSFFG)
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.
Item 25. Persons Controlled by or Under Common Group Control
with Registrant
None
Item 26. Number of Holders of Securities
(1) (2)
Title of Class Number of Record Holders as of 9/14/95
Shares of beneficial interest 10,887 Class A record holders (CUSFFG)
21,558 Class B record holders (CUSFFG)
311 Class D record holders (CUSFFG)
5,065 Class A record holders (CSSF)
6,318 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. (and for CUSFFG, State
Street Bank & Trust Company) (see next page):
TEM 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 June 30, 1995, CASI had one
institutional, corporate or other accounts under management or supervision, the
market value of which was approximately $30.9 million. At June 30, 1995,
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 $15,913.6 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 Affiliation
addresses* with Period is through 3/1/95. Other
of officers and investment business, profession, vocation or
directors of adviser employment connection Affiliation
investment adviser ---------- -------------------------------- -----------
- ------------------
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.;Pres.; The Colonial Group, Inc. Dir.; Pres.;
CEO
CEO;IPC Mbr. Colonial Trusts I through VI V.P.
Exe. Cmte.
Colonial High Income Municipal V.P.
Trust
Colonial InterMarket Income V.P.
Trust I
Colonial Intermediate High Income V.P.
Fund
Colonial Investment Grade Municipal
Trust V.P.
Colonial Municipal Income Trust V.P.
Cogger (cont'd) Liberty Financial Exec V.P.;
Companies, Inc. Dir.
Collins, Anne V.P.
Conlin, Nancy V.P.; Colonial Investors Service Center, Asst. Clerk
Asst. Inc.
Sec.; The Colonial Group, Inc. Asst. Clerk
Asst.
Clerk and Colonial Advisory Services, Inc. Asst. Clerk
Counsel Colonial Investment Services, Inc. Asst. Clerk
Cordes, Susan V.P.
Daniszewski, V.P. Colonial Investment Services, Inc. V.P.
Joseph J.
DiSilva, Linda V.P.
Ericson, Carl C. V.P. Colonial Intermediate High Income V.P.
Fund
Evans, C. Frazier Dir.; Colonial Investment Services, Inc. Sr. V.P.
Sr.V.P.
Feingold, Andrea V.P. Colonial Intermediate High Income V.P.
Fund
Finnemore, V.P.
Leslie W.
Gerokoulis, V.P. Colonial Investment Services, Inc. Sr. V.P.
Stephen A.
Harasimowicz, V.P.
Stephen
Hartford, Brian V.P.
Haynie, James P. V.P. Colonial Advisory Services, Inc. V.P.
Johnson, Gordon A. V.P.
Koonce, Michael H. V.P.; Colonial Trusts I through VI Asst. Sec.
Asst.
Sec.; Colonial High Income Municipal Asst. Sec.
Asst. Trust
Clerk & Colonial InterMarket Income Asst. Sec.
Counsel Trust I
Colonial Intermediate High Income Asst. Sec.
Fund
Colonial Investment Grade
Municipal Trust Asst. Sec.
Koonce (cont'd) Colonial Municipal Income Trust Asst. Sec.
Colonial Investment Services, Inc. Asst. Clerk
Colonial Investors Service Center, Asst. Clerk
Inc.
The Colonial Group, Inc. Asst. Clerk
Colonial Advisory Services, Inc. Asst. Clerk
Lennon, John E. V.P. Colonial Advisory Services, Inc. V.P.
Lenzi, Sharon V.P.
Lilienfeld, V.P.
Jonathan
Loring, William C. V.P.
Lydecker, Peter L. V.P.; Colonial Trusts I through VI Controller
Asst.
Treasurer Colonial High Income Municipal Controller
Trust
Colonial InterMarket Income Trust Controller
I
Colonial Intermediate High Income Controller
Fund
Colonial Investment Grade
Municipal Trust Controller
Colonial Municipal Income Trust Controller
MacKinnon, Dir.;
Donald S. Sr.V.P.
McCue, Gerard A. V.P. Colonial Advisory Services, Inc. V.P.
McGregor, Dir.; Colonial Investment Services, Inc. Pres.; CEO;
Jeffrey L. Sr.V.P.;Dir.
McNeice, Jr., Chrmn.; Boston College Trustee
John A. Dir.; Boston College High School Trustee
Exe. Carney Hospital Foundation Mbr. of the
Cmte. Carney Fund
Chm.;
Colonial Advisory Services, Inc. Dir.; Chm.;
CEO & Pres.
Colonial High Income Municipal Trustee;
Trust Pres.
Colonial InterMarket Income Trustee;
I Pres.
Colonial Intermediate High Income Trustee;
Fund Pres.
McNeice (cont'd) Colonial Investment Grade
Municipal Trust Trustee;
Pres.
Colonial Municipal Income Trust Trustee;
Pres.
The Colonial Group, Inc. Trustee;
Pres.
Colonial Trusts I through VI Trustee;
Pres.
Colonial Investors Service Center, Trustee;
Inc. Pres.
Nativity Preparatory School Chm., Bd. of
Trustees
Northeastern University Corp. Bd.
Mbr.
Wentworth Institute of Technology Corp. Bd.
Mbr.
Colonial Investment Services, Inc. Dir.; Chm.
of the Bd.
Board of Visitors - Peter Drucker
Graduate Center Board Member
St. John's Seminary Board Member
Third Century Foundation Trustee;
Pres.
Peter F. Drucker Foundation Dir.
United Way of Mass Bay Board Member
American Ireland Fund Board Member
Catholic Charities -
Archdiocese of Boston Board Member
Liberty Financial Companies, Inc. Dir.
O'Neill, Charles A. Sr.V.P.; Colonial Investment Services, Inc. Exec. V.P.
Dir.
Peters, Helen F. Dir.;
Sr.V.P.;
IPC Mbr.
Rie, Daniel Sr.V.P.; Colonial Advisory Services, Inc. Sr. V.P.
IPC Mbr.;
Dir.
Scoon, Davey S. Dir.; Colonial Advisory Services, Inc. Treasurer
Exe.V.P.; Colonial High Income Municipal V.P.
Trust
IPC Mbr. Colonial InterMarket Income Trust V.P.
I
Colonial Intermediate High Income V.P.
Fund
Scoon (cont'd) Colonial Investment Grade
Municipal Trust V.P.
Colonial Municipal Income Trust V.P.
Colonial Trusts I through VI V.P.
Colonial Investors Service Center, Treasurer
Inc.
The Colonial Group, Inc. COO
Seibel, Sandra L. V.P.
Shore, Janet V.P. and Colonial High Income Municipal Asst. Sec.
Compliance Trust
Offr.; Colonial InterMarket Income Trust Asst. Sec.
IPC Mbr. I
Colonial Intermediate High Income Asst. Sec.
Fund
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. Clerk
Silver, Richard A. Dir.; Colonial Advisory Services, Inc. Controller
Sr.V.P.; Colonial High Income Municipal Treasurer &
Treasurer Trust CFO
& CFO Colonial InterMarket Income Trust Treasurer &
I CFO
Colonial Intermediate High Income Treasurer &
Fund CFO
Colonial Investment Grade Treasurer &
Municipal Trust CFO
Colonial Municipal Income Trust Treasurer &
CFO
Colonial Trusts I through VI Treasurer &
CFO
Colonial Investors Service Center, Asst.
Inc. Treasurer
The Colonial Group, Inc. Treasurer &
CFO
Colonial Investment Services, Inc. Treasurer &
CFO
Stern, Arthur O. Exe.V.P.; Colonial Advisory Services, Inc. Clerk
Dir.; Colonial High Income Municipal Secretary
Sec.; Trust
Clrk. & Colonial InterMarket Income Trust Secretary
Gnrl. I
Counsel; Colonial Intermediate High Income Secretary
IPC Mbr. Fund
Colonial Investment Grade
Municipal Trust Secretary
Colonial Municipal Income Trust Secretary
Stern (cont'd) Colonial Trusts I through VI Secretary
Colonial Investors Service Center, Clerk
Inc.
The Colonial Group, Inc. Clerk;
V.P.Lgl.
Colonial Investment Services, Inc. Clrk;
Counsel
Waas, Robert S. V.P.
Wallace, John V.P.- Corp.
Finance and
Controller
Yacovoni, V.P.
Priscilla
- ------------------------------------------------
*The Principal address of all of the officers and
directors of the investment adviser is One Financial
Center, Boston, MA 02111.
Item 28. (APPLICABLE TO COLONIAL U.S. FUND FOR GROWTH ONLY)
State Street Global Advisors (Sub-Adviser), a division of State
Street Bank and Trust Company, is the Registrant's Sub-Adviser.
The Sub-Adviser specializes in quantitative investment products
and is the largest U.S. manager of international pension assets.
The Sub-Adviser, with over $156 billion (U.S.) under management,
provides complete global investment management services from
offices in the United States, London, Sydney, Hong Kong, Tokyo,
Toronto, Luxembourg, Melbourne, Montreal and Paris. The
following sets forth the business and other connections of each
director and officer of the Sub-Adviser:
Positions with Positions During the
Name State Street Past Two Years
Jeffrey Adams Vice President Same
Steven Esielonis Vice President Same
Gustaff V. Fish, Jr. Senior Vice Same
President
Douglas T. Holmes Senior Vice Same
President
Nicholas A. Lopardo Executive Vice Same
President
Ben Salm Vice President Same
Peter M. Stonberg Vice President Same
Tenley E. Albright, M.D. Director Chairman, Vital
Sciences, Inc.
Joseph A. Baute Director Consultant and
former Chief
Executive Officer,
Markem Corporation
L. MacAllister Booth Director Chairman, President
and Chief Executive
Officer, Polaroid
Corporation
Marshall N. Carter Director Chairman, President
and Chief Executive
Officer, State
Street Boston
Corporation and
State Street Bank
and Trust Company
James I. Cash, Jr. Director Professor of
Business
Administration,
Harvard Graduate
School of Business
Truman S. Casner Director Partner, Ropes &
Gray
Nader F. Darehshori Director Chairman, President
and Chief Executive
Officer, Houghton
Mifflin Company
Arthur L. Goldstein Director Chairman and Chief
Executive Officer,
Ionics, Incorporated
Lois D. Juliber Director President, Colgate
North America,
Colgate-Palmolive
Company
Charles F. Kaye Director President,
Transportation
Investments, Inc.
John M. Kucharski Director Chairman, President
and Chief Executive
Officer, EG & G Inc.
Charles R. LaMantia Director President and Chief
Executive Officer,
Arthur D. Little,
Inc.
David B. Perini Director Chairman and
President, Perini
Corporation
Dennis J. Picard Director Chairman and Chief
Executive Officer,
Raytheon Company
Alfred Poe Director President, Meal
Enhancement Group,
Campbell Soup
Company
Bernard W. Reznicek Director Chairman and Chief
Executive Officer,
Boston Edison
Company
David A. Spina Director Vice Chairman, State
Street Boston
Corporation and
State Street Bank
and Trust Company
Robert E. Weissman Director President and Chief
Executive Officer,
The Dun & Bradstreet
Corporation
The business address of each individual listed in the foregoing
table is c/o State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts 02110.
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 V,
Colonial Trust VI and Colonial Trust VII:
sponsor for Colony Growth Plans (public offering of which were
discontinued June 14, 1971).
(b) The table below lists each director or officer of the principal
underwriter named in the answer to Item 21.
(1) (2) (3)
Name and Principal Position and Offices Positions and
Business Address* with Principal Offices with
Underwriter Registrant
- ------------------ ------------------- --------------
Ballou, Rich Regional V.P. None
Balzano, Christine R. V.P. None
Barsokas, David Regional V.P. None
Buckley, Anne P. Compliance Officer None
Cairns, David Regional V.P. None
Chrzanowski, Regional V.P. None
Daniel
Clapp, Elizabeth A. V.P. None
Daniszewski, V.P. None
Joseph J.
Davey, Cynthia Sr. V.P. None
Eckelman, Bryan Sr. V.P. None
Eldridge, Kenneth Sr. V.P. None
Emerson, Kim P. Regional V.P. None
Erickson, Cynthia G. V.P. None
Evans, C. Frazier Sr. V.P. None
Feldman, David Regional V.P. None
Flaherty, Michael Regional V.P. None
Gerokoulis, Sr. V.P. None
Stephen A.
Goldberg, Matthew Regional V.P. None
Guillette, Andrew V.P. None
Hanselman, J. Regional V.P. None
Michael
Harasimowicz, V.P. None
Stephen
Hayes, Mary V.P. None
Elizabeth
Hodgkins, Joseph Regional V.P. None
Howard, Craig Sr. V.P. None
Karagiannis, Sr. V.P. None
Marilyn
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, COO
Meyer, Wayne Regional V.P. None
Murphy, Robert F. Sr. V.P. None
Norwood, Steve Regional 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, Sr. V.P. None
Elizabeth
Stern, Arthur O. Clerk and Secretary
Counsel,Dir.,
Chairman
VanEtten, Keith H. V.P. None
Villanova, Paul Regional V.P. None
Wallace, John V.P. None
- --------------------------
* The address for each individual is One Financial Center, Boston, MA
02111.
Item 30. Location of Accounts and Records
Registrant's accounts and records required to be
maintained by Section 31(a) of the Investment Company
Act of 1940 and the Rules thereunder are in the
physical possession of the following:
Registrant
Rule 31a-1(b),(4)
Rule 31a-2(a),(1)
Colonial Management Associates, Inc.
One Financial Center, Boston, Massachusetts 02111
Rule31a-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.
************
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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, Colonial Trust VI,
certifies that it meets all the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) and has duly caused this
Post-Effective Amendment No. 7 to its Registration Statement under the
Securities Act of 1933 and Amendment No. 9 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 11th day of
October, 1995.
COLONIAL TRUST VI
By: John A. McNeice, Jr.
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 11, 1995
John A. McNeice, JR. Officer and Trustee)
RICHARD A. SILVER Treasurer (Principal October 11, 1995
Richard A. Silver Financial Officer)
PETER L. LYDECKER Controller (Principal October 11, 1995
Peter L. Lydecker Accounting Officer)
/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 11, 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.
EXHIBIT INDEX
EXHIBIT
5. (a) Form of Management Agreement (CUSFFG)
5. (c) Form of Sub-Advisory Agreement (CUSFFG)
11. Consent of Independent Accountants
16. (a) Calculation of Performance (CUSFFG)
16. (a)(i) Calculation of Performance (CSSF)
16. (b) Calculation of Yield (CUSFFG)
16. (b)(i) Calculation of Yield (CSSF)
17. (a) Financial Data Schedule (Class A) (CUSFFG)
17. (b) Financial Data Schedule (Class B) (CUSFFG)
17. (c) Financial Data Schedule (Class D) (CUSFFG)
17. (d) Financial Data Schedule (Class A) (CSSF)
17. (e) Financial Data Schedule (Class B) (CSSF)
S:\FUNDS\TRUSTVI\N-1A_DOC\N-1A.DOC
MANAGEMENT AGREEMENT
AGREEMENT dated as of March 27, 1995, between COLONIAL TRUST VI,
a Massachusetts business trust (Trust), with respect to COLONIAL
U.S. FUND FOR GROWTH (Fund), and COLONIAL MANAGEMENT ASSOCIATES,
INC., a Massachusetts corporation (Adviser).
In consideration of the promises and covenants herein, the
parties agree as follows:
1. The Adviser will manage the investment of the assets of the
Fund in accordance with its prospectus and statement of
additional information and will perform the other services
herein set forth, subject to the supervision of the Board of
Trustees of the Trust. The Adviser may delegate its
investment responsibilities to a sub-adviser.
2. In carrying out its investment management obligations, the
Adviser shall:
(a) evaluate such economic, statistical and financial
information and undertake such investment research as it
shall believe advisable; (b) purchase and sell securities and
other investments for the Fund in accordance with the
procedures described in its prospectus and statement of
additional information; and (c) report results to the Board
of Trustees of the Trust.
3. The Adviser shall furnish at its expense the following:
(a) office space, supplies, facilities and equipment;
(b) executive and other personnel for managing the affairs
of the Fund (including preparing financial information of the
Fund and reports and tax returns required to be filed with
public authorities, but exclusive of those related to
custodial, transfer, dividend and plan agency services,
determination of net asset value and maintenance of records
required by Section 31(a) of the Investment Company Act of
1940, as amended, and the rules thereunder (1940 Act)); and
(c) compensation of Trustees who are directors, officers,
partners or employees of the Adviser or its affiliated
persons (other than a registered investment company).
4. The Adviser shall be free to render similar services to
others so long as its services hereunder are not impaired
thereby.
5. The Fund shall pay the Adviser monthly a fee at the annual
rate of 0.80% of the average daily net assets of the Fund.
6. If the operating expenses of the Fund for any fiscal year
exceed the most restrictive applicable expense limitation for
any state in which shares are sold, the Adviser's fee shall
be reduced by the excess but not to less than zero.
Operating expenses shall not include brokerage, interest,
taxes, deferred organization expenses, Rule 12b-1
distribution fees, service fees and extraordinary expenses,
if any. The Adviser may waive its compensation (and bear
expenses of the Fund) to the extent that expenses of the Fund
exceed any expense limitation the Adviser declares to be
effective.
7. This Agreement shall become effective as of the date of its
execution, and
(a) unless otherwise terminated, shall continue until two
years from its date of execution and from year to year
thereafter so long as approved annually in accordance with
the 1940 Act; (b) may be terminated without penalty on
sixty days' written notice to the Adviser either by vote of
the Board of Trustees of the Trust or by vote of a majority
of the outstanding shares of the Fund; (c) shall
automatically terminate in the event of its assignment; and
(d) may be terminated without penalty by the Adviser on
sixty days' written notice to the Trust.
8. This Agreement may be amended in accordance with the 1940
Act.
9. For the purpose of the Agreement, the terms "vote of a
majority of the outstanding shares", "affiliated person" and
"assignment" shall have their respective meanings defined in
the 1940 Act and exemptions and interpretations issued by the
Securities and Exchange Commission under the 1940 Act.
10. In the absence of willful misfeasance, bad faith or gross
negligence on the part of the Adviser, or reckless disregard
of its obligations and duties hereunder, the Adviser shall
not be subject to any liability to the Trust or the Fund, to
any shareholder of the Trust or the Fund or to any other
person, firm or organization, for any act or omission in the
course of, or connected with, rendering services hereunder.
COLONIAL TRUST VI on behalf of
COLONIAL U.S. FUND FOR GROWTH
By: __________________________
Title: Controller
COLONIAL MANAGEMENT ASSOCIATES, INC.
By: __________________________
Title: Executive Vice President
A copy of the document establishing the Trust is filed with the
Secretary of The Commonwealth of Massachusetts. This Agreement
is executed by officers not as individuals and is not binding
upon any of the Trustees, officers or shareholders of the Trust
individually but only upon the assets of the Fund.
funds/general/contract/usffgman
COLONIAL U.S. FUND FOR GROWTH
SUB-ADVISORY AGREEMENT
AGREEMENT dated as of March 27, 1995, among STATE STREET BANK AND
TRUST COMPANY, a Massachusetts trust company Sub-Adviser),
COLONIAL MANAGEMENT ASSOCIATES, INC., a Massachusetts corporation
(Manager), and COLONIAL TRUST VI, a Massachusetts business trust
(Trust).
A Management Agreement (Management Agreement) dated March 27,
1995 between the Manager and the Trust on behalf of Colonial U.S.
Fund for Growth (Fund), provides that the Manager shall manage
the investment of the Fund's assets in accordance with the Fund's
Prospectus and Statement of Additional Information (Prospectus)
and may delegate responsibilities to a sub-adviser.
1. The Sub-Adviser will manage the investment of the assets
of the Fund in accordance with the Prospectus and will
perform the other services herein set forth, subject to
the supervision of the Manager and the Board of Trustees
of the Trust.
2. In carrying out its obligations hereunder, the Sub-Adviser
shall:
(a) evaluate such economic, statistical and financial
information and undertake such investment research
as it shall believe advisable.
(b) purchase and sell securities and other investments
for the Fund in accordance with the procedures
described in the Prospectus; and
(c) provide such reports and data in hard copy and
machine readable form as are requested by the
Manager.
3. The Manager shall pay the Sub-Adviser monthly a fee at the
annual rate of 0.50% of the first $50 million of the
Fund's average daily net assets, 0.40% of the next $150
million of average daily net assets and 0.35% of average
daily net assets in excess of $200 million.
4. The Sub-Adviser shall be free to render similar services
to others so long as its services hereunder are not
impaired thereby.
5. This Agreement shall become effective as of the date of
its execution, and (a) unless otherwise terminated, shall
continue until two years from its date of execution and
from year to year thereafter so long as approved annually
in accordance with the Investment Company Act of 1940, as
amended, and the rules thereunder (1940 Act); (b) may be
terminated without penalty on sixty days' written notice
to the Sub-Adviser (i) by the Manager, (ii) by vote of the
Board of Trustees of the Trust or (iii) by vote of a
majority of the outstanding voting securities of the Fund;
(c) shall automatically terminate in the event of its
assignment; and (d) may be terminated without penalty by
the Sub-Adviser on sixty days' written notice to the
Manager and the Trust.
6. This Agreement may be amended in accordance with the 1940
Act.
7. For the purpose of this Agreement, the terms "vote of a
majority of the outstanding voting securities" and
"assignment" shall have their respective meanings defined
in the 1940 Act and exemptions and interpretations issued
by the Securities and Exchange Commission under the 1940
Act.
8. In the absence of willful misfeasance, bad faith or gross
negligence on the part of the Sub-Adviser or reckless
disregard of its obligations and duties hereunder, the
Sub-Adviser shall not be subject to any liability to the
Trust or the Fund, or to any shareholder of the Trust or
the Fund for any act or omission in the course of, or
connected with, rendering services hereunder.
COLONIAL MANAGEMENT ASSOCIATES, INC.
By
Title: Executive Vice President
COLONIAL TRUST VI
By
Title: Controller
STATE STREET BANK AND TRUST COMPANY
By
Title: Executive Vice President
A copy of the document establishing the Trust is filed with the
Secretary of The Commonwealth of Massachusetts. This Agreement
is executed by officers not as individuals and is not binding
upon any of the Trustees, officers or shareholders of the Trust
individually but only upon the assets of the Fund.
funds/general/contract/usffgsub
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Prospectus and Statements of Additional Information
constituting parts of this Post-Effective Amendment No. 7 to
the registration statement on Form N-1A (the "Registration
Statement") of our reports dated August 11, 1995, relating
to the financial statements and financial highlights
appearing in the June 30, 1995 Annual Reports to
Shareholders of Colonial Small Stock Fund and Colonial U.S.
Fund for Growth, each a series of Colonial Trust VI, which
are also incorporated by reference into the Registration
Statement. We also consent to the references to us under
the heading "The Fund's Financial History" in the
Prospectuses and under the heading "Independent Accountants"
in the Statements of Additional Information.
PRICE WATERHOUSE LLP
- ---------------------
Price Waterhouse LLP
Boston, Massachusetts
October 6, 1995
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 US FUND FOR GROWTH, CLASS A YEAR END JUN-30-1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS OF COLONIAL
US FUND FOR GROWTH, CLASS A YEAR END JUN-30-1995
</LEGEND>
<CIK> 0000883163
<NAME> COLONIAL TRUST VI
<SERIES>
<NUMBER> 1
<NAME> COLONIAL US FUND FOR GROWTH, CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 296023
<INVESTMENTS-AT-VALUE> 344259
<RECEIVABLES> 1934
<ASSETS-OTHER> 50
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 346243
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 843
<TOTAL-LIABILITIES> 843
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 93534
<SHARES-COMMON-STOCK> 9363
<SHARES-COMMON-PRIOR> 8479
<ACCUMULATED-NII-CURRENT> 32
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 12218
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 48236
<NET-ASSETS> 345400
<DIVIDEND-INCOME> 7752
<INTEREST-INCOME> 274
<OTHER-INCOME> 0
<EXPENSES-NET> 5480
<NET-INVESTMENT-INCOME> 2546
<REALIZED-GAINS-CURRENT> 13643
<APPREC-INCREASE-CURRENT> 47177
<NET-CHANGE-FROM-OPS> 63366
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1420
<DISTRIBUTIONS-OF-GAINS> 6157
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2049
<NUMBER-OF-SHARES-REDEEMED> 1779
<SHARES-REINVESTED> 614
<NET-CHANGE-IN-ASSETS> 98099
<ACCUMULATED-NII-PRIOR> 15
<ACCUMULATED-GAINS-PRIOR> (1428)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2266
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5480
<AVERAGE-NET-ASSETS> 110982
<PER-SHARE-NAV-BEGIN> 11.46
<PER-SHARE-NII> 0.165
<PER-SHARE-GAIN-APPREC> 2.530
<PER-SHARE-DIVIDEND> 0.610
<PER-SHARE-DISTRIBUTIONS> 0.735
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.26
<EXPENSE-RATIO> 1.46
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF COLONIAL US FUND FOR GROWTH, CLASS B YEAR END JUN-30-1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS OF COLONIAL
US FUND FOR GROWTH, CLASS B YEAR END JUN-30-1995.
</LEGEND>
<CIK> 0000883163
<NAME> COLONIAL TRUST VI
<SERIES>
<NUMBER> 1
<NAME> COLONIAL US FUND FOR GROWTH, CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 296023
<INVESTMENTS-AT-VALUE> 344259
<RECEIVABLES> 1934
<ASSETS-OTHER> 50
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 346243
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 843
<TOTAL-LIABILITIES> 843
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 188640
<SHARES-COMMON-STOCK> 16559
<SHARES-COMMON-PRIOR> 13171
<ACCUMULATED-NII-CURRENT> 32
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 12218
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 48236
<NET-ASSETS> 345400
<DIVIDEND-INCOME> 7752
<INTEREST-INCOME> 274
<OTHER-INCOME> 0
<EXPENSES-NET> 5480
<NET-INVESTMENT-INCOME> 2546
<REALIZED-GAINS-CURRENT> 13643
<APPREC-INCREASE-CURRENT> 47177
<NET-CHANGE-FROM-OPS> 63366
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1133
<DISTRIBUTIONS-OF-GAINS> 10279
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4431
<NUMBER-OF-SHARES-REDEEMED> 2000
<SHARES-REINVESTED> 957
<NET-CHANGE-IN-ASSETS> 98099
<ACCUMULATED-NII-PRIOR> 15
<ACCUMULATED-GAINS-PRIOR> (1428)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2266
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5480
<AVERAGE-NET-ASSETS> 190813
<PER-SHARE-NAV-BEGIN> 11.40
<PER-SHARE-NII> 0.075
<PER-SHARE-GAIN-APPREC> 2.513
<PER-SHARE-DIVIDEND> 0.073
<PER-SHARE-DISTRIBUTIONS> 0.735
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.18
<EXPENSE-RATIO> 2.21
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE>
PERFORMANCE CALCULATION
COLONIAL US FUND FOR GROWTH - CLASS A
Year Ended: 6/30/95
Inception Date: 7/1/92
<CAPTION>
Since Inception
1 Year Ended 6/30/95 7/1/92 to 6/30/95
Standard Non-Standard Standard Non-Standard
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Initial Inv. $1,000.00 $1,000.00 $1,000.00 $1,000.00
Max. Load 5.75% 5.75%
Amt. Invested $942.50 $1,000.00 $942.50 $1,000.00
Initial NAV $11.46 $11.46 $10.00 $10.00
Initial Shares 82.243 87.260 94.250 100.000
Shares From Dist. 6.495 6.890 11.309 11.997
End of Period NAV $13.26 $13.26 $13.26 $13.26
Total Return 17.67% 24.84% 39.97% 48.51%
Average Annual
Total Return 17.67% 24.84% 11.86% 14.09%
</TABLE>
PERFORMANCE CALCULATION
COLONIAL US FUND FOR GROWTH - CLASS B
Year Ended: 6/30/95
Inception Date: 7/1/92
Since Inception
1 Year Ended 6/30/95 7/1/92 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 $11.40 $11.40 $10.00 $10.00
Initial Shares 87.719 87.719 100.000 100.000
Shares From Dist. 6.319 6.319 10.024 10.024
End of Period NAV $13.18 $13.18 $13.18 $13.18
CDSC 5.00% 3.00%
Total Return 18.94% 23.94% 42.01% 45.01%
Average Annual
Total Return 18.94% 23.94% 12.40% 13.19%
<TABLE>
PERFORMANCE CALCULATION
COLONIAL US FUND FOR GROWTH - CLASS D
Year Ended: 6/30/95
Inception Date: 7/1/94
<CAPTION>
Since Inception
1 Year Ended 6/30/95 7/1/94 to 6/30/95
Standard Non-Standard Standard Non-Standard
---------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Initial Inv. $1,000.00 $1,000.00 $1,000.00 $1,000.00
Max. Load 1.00% 1.00%
Amt. Invested $990.00 $1,000.00 $990.00 $1,000.00
Initial NAV $11.46 $11.46 $11.46 $11.46
Initial Shares 86.387 87.260 86.387 87.260
Shares From Dist. 6.339 6.405 6.339 6.405
End of Period NAV $13.24 $13.24 $13.24 $13.24
CDSC 1.00% 1.00%
Total Return 21.77% 24.01% 21.77% 24.01%
Average Annual
Total Return 21.77% 24.01% 21.77% 24.01%
</TABLE>
<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 0.287 0.270 6.893 7.315
End of Period NAV $22.27 $22.27 $22.27 $22.27 $22.27 $22.27
Total Return 25.91% 33.59% 55.43% 64.83% 88.25% 99.73%
Average Annual
Total Return 25.91% 33.59% 9.22% 10.51% 7.33% 8.05%
</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 Dis 0.000 0.000 0.000 0.000
End of Period N $21.85 $21.85 $21.85 $21.85
CDSC 5.00% 3.00%
Total Return 27.67% 32.67% 64.95% 67.95%
Average Annual
Total Return 27.67% 32.67% 20.86% 21.69%
COLONIAL U.S. FUND FOR GROWTH
FUND YIELD CALCULATION
(CALENDAR MONTH-END METHOD)
30-DAY BASE PERIOD ENDED 6/30/95
a-b 6
FUND YIELD = 2 ------- + 1 - 1
cd
YIELD
a = dividends and interest earned during ---------
the month ................................ $751,232
b = expenses (exclusive of distribution fee)
accrued during the month.................. 410,125
c = average dividend shares outstanding
during the month ......................... 25,866,884
d = class A maximum offering price per share
on the last day of the month ............. $14.06
CLASS A YIELD ........................... 1.13%
=====
Class A yield/(1-Load)
ie: 1.13%/(1-.0575)=yield on NAV= 1.20%
Less: Distribution fee -0.75%
-------
CLASS B YIELD ........................... 0.45%
=====
CLASS D YIELD ........................... 0.44%
=====
COLONIAL SMALL STOCK FUND
FUND YIELD CALCULATION
(CALENDAR MONTH-END METHOD)
30-DAY BASE PERIOD ENDED 6/30/95
a - b 6
FUND YIELD = 2 ------- + 1 - 1
cd
YIELD
a = dividends and interest earned during ---------
the month ................................ $71,033
b = expenses (exclusive of distribution fee)
accrued during the month.................. 76,022
c = average dividend shares outstanding
during the month ......................... 3,080,567
d = class A maximum offering price per share
on the last day of the month ............. $23.63
CLASS A YIELD ........................... -0.08%
======
Class A yield/(1-Load)
ie: -.08%/(1-.0575)=yield on NAV= -0.08%
Less: Distribution fee -0.75%
-----
CLASS B YIELD ........................... -0.83%
======
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF COLONIAL US FUND FOR GROWTH, CLASS D YEAR END JUN-30-1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS OF COLONIAL
US FUND FOR GROWTH, CLASS D YEAR END JUN-30-1995.
</LEGEND>
<CIK> 0000883163
<NAME> COLONIAL TRUST VI
<SERIES>
<NUMBER> 1
<NAME> COLONIAL US FUND FOR GROWTH, CLASS D
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 296023
<INVESTMENTS-AT-VALUE> 344259
<RECEIVABLES> 1934
<ASSETS-OTHER> 50
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 346243
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 843
<TOTAL-LIABILITIES> 843
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2761
<SHARES-COMMON-STOCK> 229
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 32
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 12218
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 48236
<NET-ASSETS> 345400
<DIVIDEND-INCOME> 7752
<INTEREST-INCOME> 274
<OTHER-INCOME> 0
<EXPENSES-NET> 5480
<NET-INVESTMENT-INCOME> 2546
<REALIZED-GAINS-CURRENT> 13643
<APPREC-INCREASE-CURRENT> 47177
<NET-CHANGE-FROM-OPS> 63366
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 16
<DISTRIBUTIONS-OF-GAINS> 76
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 227
<NUMBER-OF-SHARES-REDEEMED> 6
<SHARES-REINVESTED> 8
<NET-CHANGE-IN-ASSETS> 98099
<ACCUMULATED-NII-PRIOR> 15
<ACCUMULATED-GAINS-PRIOR> (1428)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2266
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5480
<AVERAGE-NET-ASSETS> 2037
<PER-SHARE-NAV-BEGIN> 11.46
<PER-SHARE-NII> 0.074
<PER-SHARE-GAIN-APPREC> 2.534
<PER-SHARE-DIVIDEND> 0.093
<PER-SHARE-DISTRIBUTIONS> 0.735
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.24
<EXPENSE-RATIO> 2.21
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF COLONIAL 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
<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> 24305
<SHARES-COMMON-STOCK> 1349
<SHARES-COMMON-PRIOR> 515
<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> 1587
<NUMBER-OF-SHARES-REDEEMED> 753
<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> 17137
<PER-SHARE-NAV-BEGIN> 16.47
<PER-SHARE-NII> (0.139)
<PER-SHARE-GAIN-APPREC> 5.509
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 21.84
<EXPENSE-RATIO> 2.20
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>